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Friday, May 24, 2013

Taxes and Health Insurance: The United States Diverge Toward a Stronger Union

One of the main benefits of federalism is that it allows for both the tremendous power that can come from member states taking a united stance and cultural and related political interstate diversity. In other words, federalism is not only a means of checking governmental power by means of splitting governmental sovereignty between two systems of government—state and federal—but also a way of giving empires the advantages of both united action and diversity. In the case of the U.S., the power of uniting forces far surpasses the allowance for interstate diversity because consolidation in Congress and the White House has come to eclipse the power of the state governments. Although it is not sufficient to restore a semblance of balance between the two systems of government in the American federal system, it is nonetheless significant that “red” and “blue” states moved in different directions subsequent to the 2010 elections both in terms of tax and health-insurance policy. 

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Tuesday, May 21, 2013

Jamie Dimon Wins Stockholder Vote: Exploiting Conflicts of Interest Undercuts Fairness

Chairman of JPMorgan since 2006 and CEO a year longer, Jamie Dimon faced down a daunting stockholder vote on May 21, 2013 on whether he should be allowed to retain both roles. Despite the bank’s $6.2 billion trading loss, deeply flawed risk-management oversight, and “credibility issues” with regulators, only about 32% of the votes cast were in favor of the nonbinding resolution that the chair and CEO jobs be separated. Interestingly, not only does the chair/CEO duality have an inherent conflict of interest because part of what a board (including its chair) does is hold management (including the CE) accountable, the means by which the pro-duality side campaigned also included conflicts of interest. I cannot help but wonder whether Jamie Dimon, his immediate subordinates, the bank’s board directors and even the stockholders who altogether voted a supermajority of shares in support of Dimon’s two roles were negligent ethically in failing to even recognize the institutional conflicts of interest involving Dimon and the board. To the extent that recognition existed, permitting the conflicts to exist and in some cases knowingly exploiting more than one at a time are even more squalid than merely being oblivious to them. To the extent that structural conflicts of interest were enabled through the campaign and in the election results, JPMorgan Chase can be likened to a house of cards. This does not bode well for the financial system and broader economy to the extent that the largest American bank holds systemic risk (i.e., “too big to fail”). I look at the campaigning first, as doing so will lead us directly to the main conflict of interest that is at issue here.

 Jamie Dimon, CEO and Chair of JPMorgan Chase.  The duality of roles can benefit him both personally and institutionally. NYT

The full essay is at "JPMorgan: An Unethical Monstrosity?" and at
Institutional Conflicts of Interest, both available in print and as an ebook at Amazon.

Monday, May 20, 2013

President Obama as Chief Executive? Too Busy Leading and Legislating to Catch the IRS

Has the presidency become too big for one person? This question was salient in the 1970s, as Americans endured Nixon’s Watergate plight, Ford’s frustrations with stagflation, and Carter’s failure to free the American hostages being held in Iran. Meanwhile, none of those presidents were able to take on OPEC (an Arab Oil Cartel). Reagan’s answer was that big government, not an overwhelming office, was the problem. Leaving aside the ideological question of whether the U.S. Government had indeed grown too big (especially relative to the state governments), I contend that occupants of the White House have serially misunderstood the nature of the office. In short, the presidents have allowed their efforts in partisan leadership to crowd out being the chief executive of the executive branch. I suspect that the explanation involves a mix of self-centeredness and simply wanting to shirk the boring stuff for more exciting activities.
To preside literally means to stand before. In the Constitutional Convention in 1787, Ben Franklin referred to the proposed office as sitting “in peaceful Council … merely to preside over our civil concerns, and [to] see that our laws are duly executed” (Madison, Notes, p. 55). Referring to the first role, which I take to be that of presiding, Governeur Morris stated on July 19 in convention that the President should be “a firm guardian of the people and of the public interest” (Madison, Notes, p. 324). In this respect, the office of the American presidency is thus geared to looking over the viability of the whole, leaving the partisanship and legislating to the legislative branch. When these two are not left to the Congress (the veto being originally intended to protect the whole rather than for ideological purposes), the credibility of presiding is compromised. Further, the administrative tasks in seeing that “our laws are duly executed” are unduly delegated or simply ignored.
In presiding, the president stands for the Union, which includes protecting its system of governance at the macro level and the Union itself, whether from internal dissolution (e.g., Lincoln) or foreign invasion (e.g., FDR). The Presidential leadership that is most credible is at this “high altitude” level. Because the office is not primarily oriented to partisanship on every single issue before the Congress, partisan leadership, such as on a garden-variety issue, is ultimately bad for a president both in terms of credibility and opportunity cost (i.e., the value of tasks closer to the office  that are crowded out).
George Washington can be cited to support the thesis that the office is oriented to flying above all but the highest storm clouds. The first president had both Thomas Jefferson and James Hamilton in his cabinet.  Listening to the two men debate, the presider could discern where the national interest lay rather than risk ideological group-think oriented to using the office to push an agenda. President Jackson was oriented to the good of the whole rather than a partisan ideology when he opposed Congress funding roads entirely within a given state (Missouri) and yet sent troops to South Carolina after it passed the Nullification Acts that purported nullified federal laws that hurt the state’s interests. It is not clear if the president was a federalist or an anti-federalist, as his focus was on keeping federalism in balance because that would support the viability of the Union.
The results of a 2010 focus group reported by the New York Times indicated that Americans wanted a president who resists the temptation to engage in partisan fighting. They wanted a leader who would stand for things on which most Americans agree, such as that American society should be more civil. Such leadership is oriented to a vision of the whole that transcends partisanship. For example, Barak Obama could have run in 2008 explicitly as a multiracial (rather than black) candidate capable of personifying what America was rapidly becoming: a true melting-pot wherein multiracial persons are seen as the leading wave of the future. Taking a partisan stand on virtually every issue that come out of Congress so as to have as much as possible his way undercuts the credibility of “personification leadership” because people on the other side of a given issue will resist accepting the president as personifying anything involving themselves. In other words, Obama’s political opponents will not buy into any America that he personifies—period.
As a general principle, partisanship undercuts presiding. Paradoxically, a president wanting to maximize his influence on every issue winds up undercutting his influence that is most in line with the design and nature of his office and thus effective. In wanting so much to go his way, a president’s ego obstructs his performance on tasks that only he is in a position to accomplish. Lost in the backwash of partisan spit is not only presiding, but also executing the law as the chief executive. It is counterintuitive to conclude that a sort of presidential leadership (i.e., the partisan or ideological variety) is bad because it crowds out the more fitting administrative role. Properly understood, (presiding) leadership applies to the presidency without crowding out the administrative tasks in holding agencies accountable. Sadly, presidents typically try to get involved in as many issues as possible—hence the office appears to have grown too cumbersome for one person.
Joe Hagin, George W. Bush’s deputy chief of staff, observed while still in office that there “was much less time [under the second Bush] to catch your breath during the day.” A constant juggling of issues—from wars down to cleaning up after hurricane Katrina often taking place all at the same time—had exhausted the White House staff. “There’s only so much bandwidth in the organization,” Hagin admitted.  “Can any single person fully meet the demands of the 21st century presidency?”  Doris Goodwin has argued that the growth in the number of things expected of the president has expanded exponentially since WWII. “The President’s inner circle can become stretched by the constant number of things labeled ‘crises’ that land on his desk.” Just because the media labels some issue as a crisis in order to increase viewership does not mean that the issue measures on the “presiding” scale. Surely the Presidency, being intentionally designed as one person rather than a presidential council, was not initially intended to micromanage every issue in public discourse. The proliferation of news sources has increased the pressure on the President to weigh in on more things. Meanwhile, his administrative tasks are neglected even more.
President Obama delivered 57 speeches in October, 2010 alone; he had seven speechwriters at the time. It would be interesting were someone to analyze those speeches to see how many pass muster in terms of presiding rather than being partisan on topical issues. The opportunity costs of getting into every issue in hopes that each one will go the way he wants include not only foregone presiding opportunities but also administrative lapses in executive branch agencies that the chief executive and his immediate staff could have caught and rectified at an early stage.
In May 2013, President Obama claimed that he had learned that the IRS had been targeting conservative groups for audits “only with the rest of you.” This statement “drew criticism,” according to the Wall Street Journal, by “focusing attention on his management style and whether he has kept himself sufficiently informed about the agencies under his authority.” I suspect that the president enjoys giving partisan speeches more than overseeing many agencies. In other words, he allowed the time-expansive sort of (partisan) presidential leadership to eclipse his administrative duties. Even the American people tend to view the presidency as a leadership rather than administrative position—so the president gets away with trying to get as much as possible to come out his way, politically.
The problem can be viewed as one of self-discipline. While in the U.S. Senate, Sen. Obama did not enjoy the committee hearings, but attending them was part of his job. Whereas in the Senate his leader, Harry Reid, could hold him to task on the monotonous parts of the job, no such authority in the White House exists over a president. To do more administratively as chief executive of the executive branch agencies, Obama would have had to rely on his own self-discipline, which appears to be in short supply. In regard to the partisanship in the IRS, it could be asked why neither the president nor his White House staff had caught the problem in their administrative capacity as the conservative groups were being targeted. Perhaps the president had been too busy giving campaign speeches or negotiating with Republican legislators on legislative proposals.


Daniel Stone, “Hail to the Chiefs,” Newsweek, November 22, 2010, pp. 30-33.

Matt Bai, “Voter Disgust Isn’t Only About Issues,” The New York Times, October 6, 2010.

Peter Nicholas, “Obama’s Counsel Was Told of IRS Audit Findings Weeks Ago,” The Wall Street Journal, May 19, 2013.

James Madison, Notes in the Federal Convention of 1787. New York: Norton, 1987.