Of the Federal Reserve and Dreams of Success

March 23, 2022 Leave a comment

Photo by Tyler B on Unsplash

It may be easy, but I think unfair, to fault the Governors of the Federal Reserve System.  Their task is more than they can handle, and yet they are required to do it.  More accurately, I should say that their tasks are more than they can handle, and yet they are required to do them.

When the Fed was created, more than a century ago, a big concern was that it would be dominated by the financiers of New York and the politicians of Washington.  Hence, rather than a central bank, it was born as a system of a dozen regional banks, with a limited focus, to offset the liquidity risk inherent in banking.

Over time the Fed has not stayed that way.  Today, the Federal Reserve is effectively the biggest bank in the world.  Financiers in New York have an outsized influence, but the influence of the politicians in Washington may be greater.  Otherwise, how could a federal republic tolerate a handful of people at a single agency having so much sway over the daily lives and future prosperity of the individuals, families, communities, and businesses in the 50 States of the Union?  Accountability to the elected cannot long be withheld.

A great problem has been that the elected do not refrain from giving the Fed more things to do.  Its one first task has lost its focus by becoming three.  By law, the members of the Board, joined by the presidents of the 12 Fed banks, are to conduct themselves “so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”

What if they cannot succeed?  Then we fault them for failures while still pretending that they can.  We hide the goal posts in fog.  What is “maximum employment”?  Can it be today’s 62% of the adult population when we began the 21st Century at 67%?  What are “stable prices”?  Does “stable” mean that the price of food tomorrow will be the same price it is today, or is “stable” the Fed’s official goal that things will cost 2% more each year, so that my young son’s retirement will require nearly twice as much as mine does?  Then there is the third, often forgotten requirement, that interest rates be “moderate.”  For 10 years the Fed kept quiet about that legal mandate, keeping interest rates very close to zero, a huge transfer of wealth from savers to borrowers, Uncle Sam being the world’s biggest borrower.  Is it surprising that the federal government’s debt grew during those 10 years to $30 trillion and still swelling?

What is the Fed to do?  We cannot reproach its current team, because they cannot succeed.  No government agency, regardless of excellent economists and the best computers, can manage it all.  If you read the statements, they carefully admit, essentially, “we don’t know how to succeed, but the law says we have to do something, so we will try this and that and see how it goes.” Meanwhile, it has not been going so well.  To paraphrase liberally from psychiatrist Anthony Daniels, we should not be so beguiled by the dreamy tasks we have placed on the Fed that we cannot bear to lighten the load merely because it is not working.

Filed under banking, Congress, deficit spending, economics, Federal Reserve, inflation, interest rates, jobs, money Tagged with , , , , , , , ,

Of Rule by Experts and Rule by Law

February 22, 2022 Leave a comment

Photo by Adam Szuscik on Unsplash

In the 1990s I was part of a congressional delegation to Argentina, when the Argentine economy was growing strongly and steadily, and inflation was low, the currency convertible 1-for-1 with the dollar.  Trade barriers were being lowered, commerce was booming.  I recall asking Argentines what could possibly darken what seemed to be a bright future.  They were quick to reply:  “Here in Argentina we have no rule of law.  You can have no confidence in getting justice from the courts.”  Not long after, political shenanigans to reward one part of the electorate by a transfer of wealth from others threw the Argentine economy into turmoil.  Momentary good policy is a tough path to walk across bogs of inadequate legal safeguards.  Freedom has rested upon rule by law rather than rule by men.

Fundamentally, the American Revolution was an assertion of the rule of law.  Most of the Declaration of Independence is a litany of abuse by the English rulers.  The Revolution was intended to take power away from man and men and rest it upon laws and rights, soon to be secured by the world’s first written Constitution.

The Progressive Movement, which thrived over a century ago, was a retreat, aggressively stepping backwards to the rule of men as an impatient alternative to the rule of law:  the Rule of Experts.  Their new view—really a very old view dressed up in modern rhetoric—was that there are benevolent experts, to whom we can safely yield our governance, for such understand the process of modern government better than ordinary people do.

It sounds akin to the ancient theory of Divine Right of Kings, that the worldly monarchs are chosen by God and invested with greater wisdom and perspective than the average man and woman.  To their benevolent expertise and fatherly care was entrusted the governance of the rest of us.

Today’s benevolent experts are invested by their colleagues with varieties of credentials certifying their expertise.  Not very democratic, they make no secret of their impatience with the Congress and other constitutional brakes on arbitrary authority.

Just as not all men are always just, not all men are reliably wise.  The American Founders thought to address this problem by the separation of powers, dividing political authority among three branches in the Federal Government and the States.

The current regulatory program rests heavily on the notion that benevolent experts should be entrusted with authority for the big questions and increasingly smaller questions, too.  It has evolved by progressively engulfing the constitutional separation of powers, merging legislative and executive—and often judicial—authority in “independent” regulatory agencies headed by unelected officials.  The unelected federal regulator writes the details of mandatory regulations, charges violators, assesses guilt, and applies penalties.

Professedly efficient, it does not work well in practice.  First, the regulators are not dispassionate umpires, limited to calling the balls and strikes.  They are also players in the game, having their own set of particular interests and incentives that they take care of first.

Second, reliance on benevolent experts assumes what is an unproven, undemonstrated level of knowledge, insight, and forecasting skills.  Regulators are not dumber than the rest of the population, but they are no smarter either.  It is just that life is too complex and the society of the living is proving too much to be run by any designated group of humans and their computers.

A third flaw is mission creep.  Even if the tasks are too great or require too much knowledge, insight, foresight, and other skills in unachievable degree, the regulators still take them on, with each failure met with calls to increase resources and power of the agency.  

An example is the Federal Reserve (commonly called the “Fed”), created with a specific and rather narrow purpose, to make enough funding available for the banking system in times of financial stress.  Before long, the Fed gained control of monetary policy and the practice of controlling interest rates.  Later, it was tasked with promoting maximum employment.  In 2010 the Fed’s role in supervising banks was enlarged to supervising any financial business considered to be systemically significant.  Each augmentation has drawn the Fed away from its narrow, objective task. 

This expansion of authority affects every business and every home.  The Federal Reserve is the world’s biggest rigger of interest rates.  Its prolonged policy of keeping short-term rates at or slightly above zero has resulted in penalizing all savers and those who live off of their savings, transferring trillions of dollars of wealth to borrowers, the biggest borrower being the Federal Government.

A partial but simple solution toward strengthening the rule of law and reducing exposure to the caprice of men would be returning to elected representatives the making of laws.  It is a messy process, exactly the messy process that the Founders intended to preserve freedom from the encroachment of arbitrary and oppressive government.  The regulators, which are theoretically part of the executive branch, should be limited to the duty of implementing the laws that the elected and accountable representatives make. 

If Congress were required to write the rules and mandates, and delegate only the implementation, the mandates of government would be circumscribed by the exposure of a legislative body held directly accountable for what it has wrought.  It is easy for legislators to complain about bad regulatory decisions, but too often, these are decisions that Congress never should have delegated to regulators in the first place.

Filed under bureaucracy, Congress, Constitution, Declaration of Independence, Federal Reserve, freedom, interest rates, progressives, rule of law, Supreme Court Tagged with , , , , , , , , ,

Of Majority Rule and Minority Freedom

November 23, 2021 1 Comment

Photo by Davide Ragusa on Unsplash

The majority rules, the minority be damned.  That is the heart of a democracy.  The Founders of the United States wisely chose a different course.  They recognized that popular majorities are inherently unstable, ever shifting, never constant, with little patience for the minority.  Each of us, however, is always and ever part of some minority.  The Founders sought a durable nation that would accommodate variety, so they established a republic.  More precisely, they established a democratic republic, where representatives are chosen by democratic action.

A republic works, and can only work, by respecting and accommodating one another sufficient to find agreement, which is often elusive.  A representative legislature by definition gathers delegates who have their own minds, who carry with them divergent views and interests, and who cherish rights to be respected.  From my personal experience I have observed that no one in Washington is your ally or your opponent all the time.  I find that reassuring, and occasionally surprising.

This structure accommodates several things that we hold dear.  Our republic accommodates differences of opinion, or even better said, varieties of opinion.  I have rarely been in a conversation with more than two people where all were in agreement on every point raised.  I have similarly rarely been in such a conversation where I did not benefit from the interplay of ideas.  We often can reach a consensus, but it is not consensus on all things.  A republic embraces this. 

In a republic no majority mandates our tastes.  Our republic, for example, allows for an assortment of cultures.  It had to or would never have been created.  I like to bring flags to our family reunions, symbolizing our cultural heritages, from my parents’ families to those of the new in-laws as our children have married.  With preeminence for the Stars and Stripes—reminding us of the attraction of this nation—our family unity makes enjoyment of those cultural influences an enrichment, in our clothes, in our menus, in our games and sports, in our traditions.  I see that in other families.  In much the same way, the constitutional foundation of our republic fosters a commonality upon which a cornucopia of good things thrives.

A republic requires several things that we find necessary, embedded in our Constitution.  It requires freedom of religion, free speech, private property, a market economy, separation of powers, a federal system of government, among other things.  God Himself implores freedom of religion on His earth, free hearts with devotion to be freely extended to Him and expressed in love to His children.  A market economy means that we are free to exchange our time, talents, and resources with one another, without being limited to choices that only the majority favors, hence the incredible selection of goods and services, often some only favored by a few (like my argyle socks).

The Founders understood a principle of governance also articulated in scripture:

“We have learned by sad experience that it is the nature and disposition of almost all men, as soon as they get a little authority, as they suppose, they will immediately begin to exercise unrighteous dominion.” (Doctrine and Covenants 121:39)

Best to reduce the chance, especially should one profess to represent the majority of the people.  Safer, as in our federalized republic, to divide such power.  I recall Senator Phil Gramm, for whom I worked for many years, saying how frustrated he was when first elected to Congress at how little one person could accomplish in Washington.  He added that after a while that gave him great comfort.

Filed under Congress, Constitution, democracy, federalism, free speech, God, government, markets, religious freedom, republics Tagged with , , , , , , , , ,

Of Congress and Appropriations

January 21, 2019 Leave a comment

 

Photo by Jomar on Unsplash

 

Why is Congress not legislating?  Congress is the national legislature.  The Constitution vests Congress with exclusive legislative rights.  Then why will the Members of Congress not legislate?

Among the exclusive legislative jobs for Congress is to appropriate funds for the operations of government.  This is a regular, annual task.  This must be well understood:  for Congress to fail to fund the operations of the federal government is a dereliction of duty of the highest order.  Nothing prevents the Members from doing that duty, and no one else can do it.

The President cannot legislate, least of all appropriate.  That limitation is firmly placed as a check on executive power.  The President may not write a single word of legislation, he may not appropriate one penny.  If the agencies of government are not funded, it is because Congress has failed to fund them.  No one else can fund them, and no one else can fail to fund them.  Currently, Congress has not done its job for much of the federal government, and the Members of Congress have no excuse, no justification for the failure.

The President can make recommendations to Congress, he can ask for appropriations.  Congress can heed or disregard such recommendations and requests entirely at its discretion.  They have no effect except as Congress chooses.

Some might say, but what about the President’s veto?  Can he not refuse to sign an appropriation, and send the bill back to Congress?  Indeed he can.  He may send it back, but he cannot change it, he cannot add or remove a single word.  Congress can decide whether to change the legislation, do nothing, or vote to override the veto.  Those decisions are entirely in the hands of the legislators.

It is no excuse for legislators to say that they cannot find sufficient agreement whether to override a veto or even to pass a law.  Whose fault is that?  True representative legislatures (not the rubber stamps of communist dictatorships) have always had the difficult job of dealing with disagreement.  That is why we have legislatures with numerous members.  It is expected that there will be varying points of view.  The legislators’ responsibility is to resolve these differences sufficient to pass necessary laws.

Appropriations for government operations are necessary laws.  They are also among the most malleable of questions.  When the consideration is money for government projects, there is a compromise to be found.  We will not pass anything is not an acceptable option.  It is legislative failure.

Presidents may say that they will veto a bill that does not meet certain standards.  That is a President’s prerogative, but the Constitution is careful to make it a surmountable obstacle.  The Members of Congress, working through the legislative process, may either find a sufficient majority to pass a law that the President will not veto or a sufficient unity of view that will allow them to override the veto.  Doing nothing until the President changes his view is dereliction.

Presidents have had vetoes overridden.  Franklin Delano Roosevelt, a Democrat, vetoed 635 Acts of Congress passed by strong majorities of fellow Democrats.  Congress overrode several of those.  Ronald Reagan vetoed 78 Acts of Congress, several of which were overridden.

Most often, a significant number of Members will sympathize with the President’s view.  That calls for legislative efforts to find a formula reasonable enough that the President does not reasonably veto it.  That is what the national legislature traditionally does and is expected to do.  That is what this Congress has so far failed to do.  That failure is entirely the fault of the Members of Congress.

Filed under Congress, Constitution, duty, Franklin D. Roosevelt, government, Ronald Reagan Tagged with , , , ,

Of Presidents and Training for the Job, 2015

March 22, 2015 Leave a comment

More and more I have been struggling for the words to express my concern over the frightening incompetence of the current President of the United States. Barack Obama’s economic blunders deepened and prolonged the recession and bequeathed to us the most anemic recovery of modern times. Most of us have been seriously harmed by those policies, some more than others. Unfortunately, the extent of his economic errors are obscured by the benighted economic management in Europe, which amazingly is managing even to underperform ours.

President Obama’s politics have yielded the opposite of what he publicly promised: division in place of unity, secrecy and deception in place of open government, exclusion of those who disagree with him in place of inclusive embrace of open debate, privilege for the few in place of opportunity for the many, racial bigotry for political gain in place of a “post racial” society, rule by breaking laws and ignoring the Constitution in place of rule of law. I am sure that you could easily lengthen the list. Again, these perfidies have been to some degree obscured by congressional Democrat leaders far too willing to compromise their duties of office and the rights of the legislative branch of government, all to cover up and support the Obama Administration’s outrages on the nation and the political institutions of the Republic.

Most frightful of all, however, is President Obama’s dangerously bungling foreign policy. No friend of the United States is safe from this Administration’s blunders. Vladimir Putin, the boss of a second rate economic and military power—albeit one with a formidable nuclear arsenal—has been able to engage in 19th Century military adventures of invasion, conquest, and territorial acquisition against little more than vacuous bully talk from Obama, the emptiness of which has produced similarly pitiful responses from the leading Powers of Western Europe, derision from Moscow, and fear among America’s friends only recently escaped from the Soviet Union. China commits aggression against India and the Philippines, threatens Japan, and toys with close relations with Russia to isolate the United States, while openly engaging in cyber attacks on the U.S. government and American industry. Islamist barbarians increasingly brutalize Muslims, Jews, Christians, and humanists alike, undeterred by inchoate responses from Obama, who asserts leadership while failing to lead, other than with his transparent policies of pusillanimity and indecision. American allies in the Middle East feel abandoned or betrayed, while enemies are emboldened; the best counter strategy that Barack Obama is able to envision is a plan that might delay but will not prevent the nuclear arming of the mullahs of Iran—committed to the incineration of Israel, the more Jews killed the better. Each day seems to extend the list of foreign policy failures.

While considering the consequences of an amateur in the Oval Office, I came across a brief note I wrote during the 2008 presidential campaign. It might be immodest for me to point out how correct my warnings proved. I can make no claims to perspicacity, as all of this was rather obvious. No self congratulations are in order. It is too dangerous a world to trust the Presidency of the United States to one whose inexperience is only matched by his hubris. This is what I penned August 25, 2008, just before Barack Obama received the nomination of the Democrats:

There are some jobs you just cannot safely do without proper training and experience. Flying an airplane is one that comes to mind. Driving a bus is another. I would put being President of the United States in the Twenty-First Century on the list, too.

President of the United States was a tough job in the days of George Washington. It was even a challenge in the days of Millard Fillmore. It has not become any easier in recent years, and next year it will be a very big job. Considering the global responsibilities of the United States, with several irresponsible oil-drunk regimes threatening peace and freedom (ours and other’s) around the world, can we afford to enroll our new President in a foreign policy on-the-job-training program?

Economically as well, there is little room for error. So far we have gone through a year and a half of the housing market bust without falling into a recession. But our economic growth is anemic. A small false step or two can put us into a full-blown economic decline, exploding banking and financial markets that will then take years to recover. It is important that economic policy next year be led by someone who understands economic growth and how to promote it. The formula for growth—low taxes and steady prices—is well known to those who have learned the lesson; we do not need a novice who does not have enough experience to know that you cannot tax and spend your way to prosperity. We cannot afford his experiments with our jobs and livelihood.

That is why it is breathtaking that a major political party is on the verge of nominating for President someone so inexperienced as Barack Obama. I am unable to recall a single nominee for President, by any major party, less prepared for the office than Barack Obama. Really, there is the challenge for you. Name a nominee—Republican, Democrat, Whig, Federalist—less prepared than Obama.

Barack Obama likes to liken himself to Abraham Lincoln. I cannot claim to have known Abraham Lincoln or assert that he was a friend of mine, but I do say, Barack Obama is no Abraham Lincoln. Even liberal exaggerations of Obama’s undistinguished career cannot make it compare favorably with the long and grueling life experiences that schooled Lincoln for the White House.

In short, Obama does not have the training for the job. It may be that the Democrats’ talent pool is so thin that he will be nominated. But the job of President is too important—to all of us—to be extended to someone so unready.

Filed under banking, Barack Obama, bubbles, China, Congress, Constitution, deficit spending, economic depression, economic growth, elections, European Union, hubris, inflation, interest rates, international relations, Iran, Islamists, Israel, jobs, law, Middle East, national security, politics, racism, recession, rule of law, Russia, Soviet Union, taxes, Ukraine Tagged with , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Of Compromises and Congresses

January 7, 2015 3 Comments

The beginning days of 2015 have brought the convening of a new American Congress. It is fair to say that expectations and skepticism are high.

Both are merited. Our Constitution was inaugurated with high expectations, not that the end to all problems was at the door but that the means were available to deal effectively with the problems of government for the new nation. The people who wrote the Constitution and those involved with implementing it (many the same people) were also deeply skeptical of government, including the one that they had just created. Memorable and personal experiences had shaped their skepticism. For that reason, the adoption of the Constitution had been a close thing, the opposition coming chiefly from those who thought that it imposed too much government on the people. There may have been some contemporary views that the proposed national government would be too weak and light, but I have not found any examples.

No surprise, then, that an early use of the new Constitution was to adopt the Bill of Rights—a set of fundamental rights to protect individual people from their government. If this new government were really self-government (a misconception reflected today in such bromides as, “Don’t worry about the national debt, we owe it to ourselves,” and “we should not fear the government because we are the government,” as well as much similar foolishness), then these first ten amendments would all be unnecessary. They have since proven to be very necessary, sometimes breached by our government, but more often employed to preserve and protect us from government offense.

Much as with the convening of the First Congress in 1789, the 114th Congress convenes after a troubled period of bad government. Hopes and wishes abound that errors can be corrected, freedoms restored, troubles addressed. As then, so today patience is in order.

A great virtue of our Constitution, an intentional feature, is that no one person can do much, for good or ill, in the federal government. It takes a lot of people cooperating together to get things done. Both Houses of Congress, usually with significant majorities, must agree to identical—word for word identical—legislation for it to be sent to the President, who must agree enough to add his signature to make it law. And then the President and his colleagues in the executive branch must actually execute the law, which as we are seeing with this President is no sure thing, despite a solemn oath to do so.

All of that coming together of many people, with varying ideas and backgrounds and interests, seldom happens quickly. For a people who do not need a lot of laws and direction from government to know how to live their lives, that is a fact to be celebrated. As the Founders envisioned, making law requires compromise and accommodation of the many interests of the many who compose our great nation. That takes time, as it should.

It is a mistake to banish the use of compromise from republican government. Those who would eschew compromise in our Republic would doom us to the fate of the Roman Republic. The members of the Roman Senate lost the ability or willingness to compromise. In so doing, they were doomed to inaction—not just slow deliberation—in the face of crisis, followed by reliance upon dictators, whom they fancied they could limit if not control. They sometimes chose wise men, sometimes they trusted their liberties to demagogues, invested with nearly unilateral authority for an entire year. The Republic and Roman freedom regressively devolved into the rule of the Caesars.

I understand the impatience that many have with compromise, people who would wish bold and decisive action in response to the would-be Caesar currently in the White House. To these I would say, do not despair of the strength of the Constitution, even as the chief executive seeks to violate it. In such times strengthening the Constitution and reinforcement of its checks and balances are the orders of the day, not further erosion of accommodation and compromise that have held our nation together (even through a Civil War) for two hundred years and more. It is true that some compromises are bad; despotisms or anarchies are not much good.

One of the most important compromises involves idealism and realism. American legislation requires a marriage of idealism and realism. Idealism can offer the vision of a free and prosperous nation and the inspiration to action to protect and promote our liberties. Realism, when operating in the light of idealism, focuses our work on what can be achieved now, without exhausting our energies and resources on quixotic quests that may do little more than tear the national fabric. Realism would teach that much of the policy errors of years will take years to unravel. With idealism and realism together, we can know what can and should be done today to make things better and get national policy moving in the right direction.

While a realistic view of the doable is essential to good legislating in a Congress of free men and women, the key and fundamental principles of our idealism help us discern a good compromise—one that makes things better and enables further progress—from a compromise that walks us closer to the abyss. President Reagan made many compromises, but he had a vision and knew where he was going, each compromise uniting our nation for more prosperity, greater freedom, and stronger security.

We should rejoice that no one in the Republic by himself can bring about much change, however well meaning. That virtue of our Constitution is why it has taken many steps and many mistakes to come to the many calamities our nation now confronts. In the same way, because of this Constitution, it will take seemingly many steps along the way to optimal answers. Every reason to be about the work and not tire of it.

Filed under America, anarchy, Congress, Constitution, elections, freedom, government, law, national security, patience, perseverance, politics, republics, rights, Rome, Ronald Reagan, tyranny Tagged with , , , , , , , , , , , , , , , ,

Of Presidents and Derelicts

November 20, 2014 Leave a comment

Barack Obama is no fan of the Constitution. He has been known to criticize it for its focus on limiting government, for telling governments what they can and cannot do. He prefers a Constitution that focuses more on telling governments what they should do, at least telling governments to do what he would like, including seeing to the “redistribution of wealth,” or what he calls elsewhere “redistributive change.”

Of course, that is a mischaracterization. Not a mischaracterization of Obama’s views but of what the Constitution says. It does limit government, but it also gives government specific responsibilities and the power to exercise those responsibilities. Article I, Section 8 provides a very clear list of the federal government’s duties. It is noteworthy that those enumerated responsibilities and powers are in the Article that establishes the Congress. The list includes such things as providing for the common defense, borrowing and paying government debts, regulating foreign and interstate commerce, establishing standards for weights and measures, and so forth.

There are plenty of other provisions that limit the powers of the government and how it operates. The Constitution is a balance of governmental duties within a structure intended carefully to limit the government. As a limited government our Republic has prospered. It has struggled either when its duties were neglected (as in the days of President Buchanan, who did nothing while he watched state after state rebel from the Union) or when the limitations have been eroded (as we have witnessed through much of the twentieth century and in the first 14 years of the twenty-first).

The President has specific powers and duties, too, nearly all of which are carefully linked with the role of the Congress. For example, while the President does not make the laws—Article I, Section 1 gives “All legislative Powers” exclusively to the Congress—the President is authorized to make proposals to Congress and has the authority to veto legislation (but not change it) that Congress has approved. Once an act of Congress becomes law, the President then has the explicit obligation to, “take Care that the Laws be fully executed” (Article II, Section 3).

Note the words, “fully executed”. The President takes an oath to fulfill those duties, and nowhere in oath or Constitution is the President authorized to execute the laws only as much as he likes or agrees with them. Once something has become a law, the President may not set aside this or that part of the law or decide that he will only enforce the law so far. His obligation is to take Care that the laws are fully executed.

Average Americans may not like this or that provision of law, but we are not at liberty to ignore any law that applies to us just because we do not like it. The President is not exempt from that common responsibility of all citizens, either. As the chief government executive, who sought to hold his high office of public responsibility, he is even more obligated not only to obey the laws but to execute them, fully. The President may not make the laws, he may not amend the laws, he may not change the laws, and he may not disregard the laws. His duty is to execute the laws, and when he does not he is derelict in his duties.

This is all in accordance with the important division of labor, the separation of powers that the Founders put into the very structure of the Constitution to combat the tendency of all humans to abuse power once it comes into their hands. By dividing the power of government among three separate but coequal branches, dividing legislative power even further between House and Senate, and yet again separating government power between federal and state governments, the Founders went to clear and elaborate lengths to create checks and balances.

Under the American system of government no branch, no person, no group of people in government, are to be able to do very much on their own without getting the other elements of government to go along. Where they are not able to agree, where there is no consensus, for the safety of our freedoms government is prevented by constitutional law from moving forward unless substantial consensus among the different branches can be reached. Those checks and balances again and again, throughout the more than two centuries of our Constitution, have forced the very human people in government to revisit their differences and come to terms with one another, however much they may disagree and be disagreeable. There is safety for you and me in that. And it helps keep our Union together, repeatedly forcing our leaders (and the parts of the nation that they represent and whose authority they exercise) to work with one another, like it or not.

Recently, President Obama has expressed impatience with the Constitution’s checks and balances. After all, he personally, in and of himself, embodies an entire branch of government. The other branches, Congress and the courts, have many different people with a messy variety of ideas. President Obama complains that Congress cannot decide what it wants to do as quickly as he can. In his view, why wait?

By design, Congress of course has something of a multiple personality. It is a gathering of elected representatives, reflecting the diversity of views among the people of the nation. Appropriately, it takes time to build a consensus that accommodates those views, as it should. But President Obama cannot wait. He sees the need to accommodate no ideas other than his own. He has decided that on this issue or that—today it is immigration laws—there is a limit, defined by himself, as to how much time Congress can take to consider things. When time is up, he, the executive branch, will take the matter into his own hands, and pretend to the authority to do it.

His tool of choice today is to abjure his duty to execute the laws fully and instead to execute them partially, just to the extent and manner that suit his own desires, as he engages in another round of redistributive change. That he is endeavoring to violate rather than execute our national, founding law, and his constitutional oath of office, apparently does not trouble him. It is the Constitution itself that troubles him.

But from where does he think he gets his authority to do anything. When he breaks the Constitution, does he not break his very authority to act in the office that the Constitution created?

Filed under Barack Obama, Civil War, Congress, Constitution, courts, duty, federalism, freedom, government, House of Representatives, immigration, law, republics, rule of law, Senate, tyranny Tagged with , , , , , , , , , , , , , , ,

Of Majorities and Modesty

November 18, 2014 Leave a comment

Perhaps with some weeks enough dust has settled to allow a few reactions to the recent American elections, with more perspective than can be gathered from listening to reporters interviewing reporters. I will offer views that focus mostly on the results of the congressional elections, drawing upon experience from more than two decades of work in the Senate.

I do not, however, wish to minimize the importance of the elections for governors and state legislatures. In fact, I suspect that the next President of the United States will more than likely be a current or former governor than a Washington politico. Most Presidents, historically, have come from the state governments, which I find encouraging for our federal system. Moreover, judging from what we have seen, former Senators do not seem to make very good Presidents. I cannot name one to whom we can look with admiration for what he accomplished in the White House. There seems to be too much Washington blindness in them to govern effectively for our whole nation.

I am straying to an election yet to come, though. Back to this year’s results, I will begin with the view that we should expect, with the media-scorned Republicans holding the majority in both House and Senate, that the finger of blame for all problems—real or imagined—will be pointed at “Congress.” Disputes between legislative and executive branches will tend to be cast as exposing the nation to great danger as a result of congressional intransigence and/or “politics,” as if no real issues of policy—no questions of life, freedom, or wealth—are involved.

It is happening already. In one bizarre report I heard this week on a major network “news” report, some Amtrak railroad drawbridge in the northeast is over a hundred years old and prone to getting stuck when it opens to let ships pass. Amtrak wants a billion dollars or so to fix it, but, as the “news” story would have it, Republicans in the new Congress “are not looking for ways to spend money.” That was the story. Note the nothing new here. The bridge has been around for a hundred years and did not suddenly become prone to malfunction this November. But the election has now made it a story; a problem is arising, not because the President or the Democrats in Congress for several years did not seek to fix it, but because the new Republican majorities are not interested in spending money. The bridge is not the problem in the story, the Republicans are. Expect more of this kind of media “news.”

Second observation: in recent decades Congress has increasingly surrendered more and more authority to the executive branch, including to the regulatory agencies. The Senate, under the misleadership of Majority Leader Harry Read, has given up even more power and authority (perhaps in another post I will expound on lessons from the Senate of Rome, which by avoiding decisions paved the way for the Caesars—who were all too ready to make decisions). The Democrats retain full control of the executive branch. No small thing. In the remaining two years of the Obama Administration look for more aggressive activity from the White House and the regulators as they test just what they can try by regulation and regulatory fiat, without any detours to Capitol Hill. To quote Jacob Marley’s ghost, “Much!”

When it comes to big Republican plans to make major changes, the quidnuncs will be fed explanations of the thinness of the Republican majorities, along with the “responsibility” of Republicans to share power with Democrats that the Democrats failed to win at the ballot box. When it comes to work that needs to be done, the repeated common wisdom will be that the Republicans have the majority, so nothing should stop them from getting on with the job. There will be little mention that the President can veto what Congress passes, and that Democrats in the Senate will likely filibuster anything that the White House threatens to veto, saving the President the trouble—and political risk.

Yet, there are things that the Republicans, even with working but not overwhelming majorities in Congress, will be able to do. Most important, they get to set the agenda. They get to decide what issues will be debated, what hearings will be held, what will be put to a vote, even when they may not have the votes to break Democrat opposition in the Senate. It will be some relief that instead of the familiar series of proposals to curb liberties, raise taxes, or stifle economic growth and opportunity, the agenda will tend toward ideas of freedom and prosperity, though actual accomplishments will of necessity be modest against the strong opposition of the President and his media allies. I will take modest improvements over the calamitous policy fails of the past several years.

Filed under Barack Obama, bureaucracy, Congress, economic growth, elections, federalism, freedom, government, House of Representatives, media, politics, prosperity, Rome, Senate, taxes, Washington Tagged with , , , , , , , , , , , , , , ,

Of Elections and Sports

November 3, 2014 Leave a comment

Shortly before the 2012 election I offered an observation about sports and elections, and how one is not like the other. That message may continue to have relevance today.

It is early Fall. That means that we are nearing the end of the regular season of baseball, and the New York Yankees are on course to make the playoffs and another run for the World Series title, number 28. Their chances look good this year, if they can keep their players from injury and the bullpen resumes pitching up to its abilities.

Others are following football. Already the Washington Redskins have gone from having a lock on getting into the Super Bowl, after winning their first game, to being nearly mathematically eliminated from the playoffs by losing their next two. As they say in baseball, though with less justification in pro-football, it’s a long season. And speaking of the Redskins, it has been said that you can tell that someone has been in Washington too long when he begins cheering for the Redskins. Let that rest on your own taste and experience.

Basketball fans know that in just a few weeks, practice begins for college hoops. The college basketball season will terminate several months later in the greatest sporting event that the United States has to offer, March Madness! I don’t know when or whether the professional basketball season ever ends. I suppose it does.

Somewhere someone is playing soccer, where some team is leading another by the insurmountable score of 1-0. But I think that we may be in the only few weeks of the year when there are no hockey games—even as the NHL is haunted again by more labor-management strife.

At his school my son is running on a cross country team, the Trinity Tempest. The motto of the team is not but should be, “Tempest Fugit.” Instead, it seems to be something like, “Pass the weak, hurdle the dead.” Nice so far as it goes. Classical Latin would be better, it seems to me, but I am not a runner and have no say.

Yes, there is much sporting excitement and many sports in the Fall. Elections, however, are not one of them. Electing the leaders of our government, who will wield control over life and death, freedom and slavery, prosperity and poverty, is not a sport. Self-government is one of the most serious activities of life for those who cherish their liberty. Those who do not will eventually vote away their freedom, as we have seen in places like Venezuela, Ecuador, and Bolivia in recent years, and before that in places like Germany of the 1930s.

Of course, you would never know that from the public discourse on television, radio, in newspapers and other media outlets. Presidential, gubernatorial, and congressional races are treated as if they all were games, with little at stake other than whether your favorite team wins. Issues are trivialized, if mentioned at all. The trivializers have even assigned team colors, one side “Red” and another “Blue.” The most important issue in the media after a debate is “who won?” rather than, “what did we learn about what a candidate believes and what he would do if elected?” Points are awarded by press experts for style, poise, rhetoric, and gotcha lines. Panels of talking heads award scores as if they were judges at a figure skating competition.

It is all more than beside the point. It corrupts the process. Rather than true debates, in which candidates have enough time to declare and explain their views and policies on important issues, media celebrities offer trick questions, to which the future President of the United States is given two, three, or sometimes even five minutes to respond as he or she fishes for a soundbite to make it into the 60-second news recap (most of which will again be focused on, “who won?”). Based on this silly exercise, viewers are encouraged to text in (for a small fee) their vote—not for who would be the best office holder—but for who was the winner of the night’s contest.

We should expect and demand better. Through modern revelation we have been given a set of standards. You do not have to be a believer in revelation to recognize the wisdom of the counsel:

Wherefore, honest men and wise men should be sought for diligently, and good men and wise men ye should observe to uphold; otherwise, whatsoever is less than these cometh of evil. (Doctrine and Covenants 98:10)

Our task as voters interested in preserving our rights and freedoms is too seek out diligently the honest, the good, and the wise. Anything less is evil. In an election, in a campaign, in a debate, I want to discover who is the honest, the good, and the wise, and I am little interest in style points.

That takes careful and diligent effort, for among the honest, the good, and the wise, are the liars, the false, and the foolish intent on deceiving. These latter like to hide in the noise of the sporting contest and often seek to divert attention to the things that little matter, the stray word, the high school prank. We need to keep our focus on a diligent search for the honest, the good, and the wise. With persistent effort, we can find them.

In self-government, we are the players. The issue is life, liberty, and the pursuit of happiness, decidedly not a game. But if we follow these standards and apply them diligently, then in the end We the People will be the winners.

(First published September 26, 2012)

Filed under Congress, Constitution, deception, demagoguery, elections, freedom, government, media, politics, revelation, rights, Senate, slavery, sports Tagged with , , , , , , , , , , , ,

Of the Rule of Law and the Separation of Powers

March 27, 2014 2 Comments

In the 1990s I was part of a congressional delegation to Argentina. At that time the Argentine economy was growing strongly and steadily, inflation was low, the currency was pegged to the dollar, convertible 1-for-1. Trade barriers were being lowered, commerce was booming. I recall asking Argentines what could possibly darken what seemed to be a very bright future. They were quick to reply: “Here in Argentina we have no rule of law. You can have no confidence in getting justice from the courts.”

That reminded me of Washington Irving’s observation on a European judge, from his famous work, The Alhambra:

It could not be denied, however, that he set a high value upon justice, for he sold it at its weight in gold.

Not long after that visit, the politics of income redistribution and confiscation threw the Argentine economy into turmoil, where it has remained.

I recently spoke with an economist friend of mine, who was waxing eloquent about the attractive monetary and tax policies in Bulgaria. I remarked that this would probably invite foreign investment. He replied, “No, there is no rule of law there.”

The point is that good economic policy cannot long survive inadequate legal safeguards. Many businesses that made major investments in China, attracted by a market of a billion people, have learned that the lack of a reliable legal and justice system in China has undermined much of the business value they thought to find. A similar story has been holding back investment and economic development in Russia.

Bringing that home, I would venture that concern for changing rules (or even lack of rules)—the substitution of arbitrary bureaucratic powers in Washington over objective rule of law—has been inhibiting more robust investment in the United States, a major cause for our current anemic economic recovery.

An ancient king in the Western Hemisphere, named Mosiah, warned, “because all men are not just it is not expedient that ye should have a king or kings to rule over you.” (Mosiah 29:16) Because men are not consistently just, freedom has historically rested upon rule by law rather than rule by men.

Fundamentally, that was the very reason for the American Revolution. Our revolution was based on the rule of law, an assertion of the rule of law, a response to violations of the rule of law by the English king and parliament. Most of the Declaration of Independence is a lengthy litany of violations of law by the English rulers. The Revolution was designed to take power away from man and men and rest it upon laws and rights, soon to be secured by a written supreme law embodied in the Constitution. Any erosion in the force and effect of the Constitution is an erosion of the rule of law and of the freedoms that rely upon law for their defense.

The Progressive Movement that thrived about a century ago, and found a major advocate in the federal government in President Woodrow Wilson, aggressively proposed an alternative to the rule of law. This program was the Rule of Experts. Their new view—and it really was a very old view though they dressed it up in modern-sounding rhetoric—was that there are Benign People, Experts, who know the process of modern government better than most people do, to whom we can safely yield governing authorities.

It sounds akin to the ancient theory of Divine Right of Kings, that the monarchs of the world are chosen by God and endowed with greater wisdom and perspective than the average man and woman. To their benign expertise and fatherly care was to be entrusted the governance of the rest of us.

The modern Rule of Experts people have much the same view, that these experts were endowed by their universities and other sources of expertise with ability far above that of most, and it would be wise to trust ourselves to their benign care. Not very democratic, and in fact these Benign Experts make no secret of their impatience with the Congress and other constitutional brakes on arbitrary authority.

As King Mosiah wisely pointed out that men are not always just, it is also appropriate to recognize that putting men in government does not make them any more reliably wise than the rest of us. The American Founders thought to address this problem by dividing political power among not only three branches in the Federal Government but also by embracing the federal system of dividing government with the States.

The current regulatory structure and program of the United States rest heavily on the idea that Benign Experts should be entrusted with authority for many of the big questions facing Americans and for many of the much smaller questions, too. That is certainly the structure of the Dodd-Frank Act, to offer one recent, prominent example among many.

Charles Calomiris, of the Columbia University business school, described the theory of the Dodd-Frank Act and related regulations this way:

The implicit theory behind these sorts of initiatives, to the extent that there is a theory, is that the recent crisis happened because regulatory standards were not quite complex enough, because the extensive discretionary authority of bank supervisors was not great enough, and because rules and regulations prohibiting or discouraging specific practices were not sufficiently extensive.
(Charles W. Calomiris, “Meaningful Banking Reform and Why it Is so Unlikely,” VoxEU, January 8, 2013)

This program of federal regulation has been imposed increasingly in contravention of the basic constitutional principle of separation of powers, by merging legislative, executive, and judicial authority in “independent” regulatory agencies. The unelected federal regulator today decides the details and specifics of binding mandates, identifies violators of those regulations, assesses guilt, and applies penalties.

Taken together our current regulatory system, by merging rather than maintaining the separation of powers of the Constitution, is eroding the rule of law. It is returning us to the age old practice of rule by men, with all of the potential for abuse of rights and freedoms, abuses that fill up most of the sadder pages of human history.

During the debate over the creation of the new financial consumer Bureau, Senate Banking Committee Chairman Dodd boasted that with this new agency people would no longer have to come to Congress for the enactment of new consumer laws. The Bureau would take care of all that.

There are serious operational flaws—too often overlooked—in the program of governance by Benign Experts. First, the regulators are not dispassionate umpires, limited to calling the balls and strikes. These umpires are also players in the game, the federal agencies each having their own set of particular interests and incentives that they take care of first.

Second, reliance on Benign Experts assumes an unproven, undemonstrated level of knowledge, insight, and forecasting skills. AEI President Arthur Brooks, in his book, The Battle, provides one of many examples of this flaw:

Federal Reserve economists were still forecasting significant positive growth and moderate unemployment in May and June 2008. They believed that economic growth in 2009 would be 2.4 percent, and unemployment would be 5.5 percent. What we experienced instead was negative growth, double-digit unemployment, and the destruction of at least $50 trillion in worldwide wealth. No one can get the numbers exactly right, to be sure. But getting them this much wrong certainly lends a whole new meaning to the expression ‘margin of error.’
(Arthur C. Brooks, The Battle, p.46)

It is not that regulators are dumber than the rest of the population, but they are no smarter either. The regulatory problems are increasingly too great for any designated group of humans to solve.

Third flaw, mission creep: power attracts power. Even if the tasks are too great, require too much knowledge, insight, foresight, and other skills in unachievable degree, the regulators still take them on, especially if the task increases the reach and influence of the agency.

I offer two examples from an example-rich environment.

Basel III capital rules started from a simple idea, that banks all around the world should be subject to the same capital standards. Capital (the financial cushion a bank carries against losses) is one of the three key elements of sound banking, the other two being liquidity and earnings. These international rules did not remain simple. Developed by an international team of experts from around the world, who labored on them for years, the rules number hundreds of pages, affecting the entire financial structure and business model of a bank, any bank. Congress was not involved and has no particular role in approving the rules. When exposed to public review they attracted thousands of comment letters expressing dismay that they are a bad fit for the U.S. economy. In the end, though, the regulators can go ahead with what they alone think is best.

A second example would be the Federal Reserve. One hundred years ago this year the Fed was created with a specific, identifiable, and rather narrow purpose, to provide liquidity for the banking system in times of financial stress. Before long, the Federal Reserve gained control of monetary policy and built up the practice of controlling interest rates. Later, it was given the task of promoting maximum employment. Under Dodd-Frank the Federal Reserve’s role in supervising banks and bank holding companies was expanded to supervising any financial business considered to be significant for financial stability. Each of these powers has drawn the Federal Reserve away from its narrow, objective task, to broad fields of subjective authority.

Perversely, this expansion of authority into more judgmental areas is eroding the independence of the Federal Reserve, making it yet one more political player in Washington, with responsibilities that far exceed human ability to fulfill, but which reach to every business and every home. The Fed’s prolonged policy of keeping short-term interest rates at or about zero has penalized all who save and live off of their savings, transferring trillions of dollars from savers to borrowers, the biggest borrower being the Federal Government, a policy decided by a small group of Washington experts.

I offer a partial but simple solution to point us back toward strengthening the rule of law and reducing our exposure to the rule of man and men, however expert they might be. Return the lawmaking and the policy decisions to the elected representatives. It is a messy process, but exactly the messy process that the Founders intended to preserve freedom from the encroachment of arbitrary and oppressive government. The regulators, which are theoretically part of the executive branch, should be left with the duty of implementing the laws and policy decisions that the elected and accountable representatives make.

If Congress were required to write the rules and mandates and delegate to the executive agencies only the execution, the mandates of government would be circumscribed by the limitations of a legislative body forced to be directly accountable for what it has wrought. It is easy for legislators to complain about bad regulatory decisions, when all too often these are decisions that Congress never should have delegated to regulators in the first place.

We would still have laws and regulations, but the laws might be more direct and specific, and perhaps fewer and surely smaller. We would probably not have Dodd-Frank Acts that number thousands of pages read by no congressman or Senator, containing a cacophony of half-baked ideas and multiple solutions to the same problem, all left for the regulators to sort out.

And legislators might recall this caution, from Thomas Paine:

Laws difficult to be executed cannot be generally good.
(Thomas Paine, The Rights of Man)

(First published February 17, 2013)

Filed under Argentina, banking, bureaucracy, Congress, Constitution, Dodd-Frank Act, Federal Reserve, federalism, freedom, government, interest rates, knowledge, law, progressives, rights, rule of law, Russia, statism, systemic risk, tyranny, Woodrow Wilson

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