Incremental Change in the E.U.: A Banking Regulator

 The E.U.’s European Council, which represents the union’s state governments, agreed at the end of June in 2012 to make the federal bailout fund directly available to banks. Spanish banks had been seeking 100 billion euros. Counting the bailout funds as debt of the state rather than as bank debt would have further increased Spain’s relatively high borrowing costs. Counting the bailout funds as bank rather than state debt can be viewed as an instance of the E.U.’s “direct effect,” wherein the federal level can directly affect E.U. citizens and their private associations.  This distinguishes the E.U., by the way, as an instance of modern federalism, from the old foedus (i.e., treaty), or confederal (“alliance”) type of federalism as evinced by the American Articles of Confederation. 

The complete essay is at Essays on Two Federal Empires.

SCOTUS Decision on Obama's Healthcare Act: The States v. The Poor

The U.S. Supreme Court ruled on June 28, 2012 that the mandate in the Affordable Healthcare Act (“Obamacare”) is not constitutional under the commerce clause (i.e., Congress cannot force citizens and residents to buy health insurance). As per Scalia’s dissent, “when Congress provides that (nearly) all citizens must buy an insurance contract, it goes beyond ‘adjust[ing] by rule or method,’” which is how “to regulate” has been defined. To adjust by rule or method is not to bring the product of commerce into being, but, rather, to assume its existence.  Instead of being considered a regulation affecting commerce between the states, the core element of the Affordable Care Act of 2010 survives in the decision as a penalty under “Congress’s enumerated power to ‘lay and collect Taxes.’ (Art I, sec. 8, clause 1).” Essentially, Congress has the authority to tax people who decide to go without health insurance. From Robert’s opinion for the Court, “the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes . . . And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax” (p. 32). This reasoning essentially saved the Act.

To be sure, the Court did not allow the Affordable Care Act to survive intact. Besides invalidating the rationale for the mandate under the commerce clause, the decision holds that states can refuse to go along with the expansion of Medicaid under which more of the poor, who are not able to afford insurance for lack of income, are to be included in the program. At the time, “the Medicaid program required states to cover only certain discrete categories of needy individuals—pregnant women, children, needy families, the blind, the elderly, and the disabled.” There was no mandatory coverage for most childless adults. In the expansion, all individuals under the age of 65 with incomes below 133 percent of the federal poverty line are covered.

It can be asked whether people who cannot afford insurance at all will be able to be covered by the expanded Medicaid program, given that the decision enables states to refuse the expansion. In its decision, the Court ruled that Congress cannot withhold the existing Medicaid funds of states that refuse to go along with the change. In her statement from the bench, Ginsburg noted that "seven members of the Court . . . buy the argument that prospective withholding of anticipated funds exceeds Congress' spending power." In other words, Congress cannot use its spending power to threaten states.  In his majority opinion, Chief Justice Roberts points out that Congress can offer additional grants to states—essentially bribing them into going along with the expansion—but a state’s existing Medicaid funding cannot be threatened.

House Minority Leader Nancy Pelosi (D-Calif.) reacted to the ruling by opining that, nonetheless, the states would find the Medicaid funds hard to resist. “A big expansion of Medicaid is part of this bill, as you know, and in order to make it saleable and tactical, we have 300 percent of the benefits described in this bill paid for in Medicaid to the states those first three years of the bill. I don't think the governors will turn that down,” she said. "First of all, the people will have the need; the urgency is there. They don't have to have any matching funds. . . . I believe that once this bill is rolling and states experience the benefits of it, it will be very hard for a state to say, ‘I'm not taking 100 percent of the coverage that Medicaid would provide for these people.’ That's our thinking on the subject," she added. She did not say, however, that after 2016 the states could have to pick up as much as 10 percent of the cost of the expanded benefits. Moreover, she did not address the possibility that ideology could trump even the financial incentives. 

Indeed, some Republican Governors were already holding back from saying whether they would accept the Medicaid funds. One Republican governor, Florida's Rick Scott, didn't waste any time in coming out against the expansion on the grounds that the government of Florida could not afford the increase. "Florida will opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program," the former health care executive said. At the time, roughly 4 million of 19 million Floridians lacked health insurance. That's a bit more than 20 percent of the population. To be sure, Scott acknowledged that for three years, from 2014 to 2016, the federal government would pay all the costs of the expansion, but after that, "the burden increasingly shifts to Florida taxpayers." Of course, those taxpayers are also U.S. taxpayers, and in this capacity they would be contributing to the expansion in other states beginning in 2014, without any benefit going to themselves. 

Thinking along such lines, Jacob Lew, the White House chief of staff at the time, predicted that the "vast majority of the states will come in. For those few that are slow to come in, they're going to have to answer to people why they're turning this down and why they're letting people go without coverage." However, Republican Governors such as Scott could appeal to other priorities, especially those that are favored by voters who already have health insurance. Accordingly, Scott argued that Medicaid was "growing three and a half times as fast as Florida's general revenue," and was already taking away money needed for education. In effect, Scott was already building an electoral majority with an interest in letting 20% of the population in Florida continue without health insurance. 

Accordingly, the Democratic leaders in the federal government may have been overly optimistic in assuming that universal coverage in these United States would result from the law. To be sure, some of the states that had Republican governments at the time would probably "flip over" to the Democrats at some point. It would be difficult for a later Republican governor to take the expanded benefits away. Even so, Scott's ideological preference for education over an expansion in medical entitlements for the poor can be expected to be more popular in some of the American republics than in others. The U.S. itself is a veritable empire, both in terms of territory and in being a union of republics. A one-size-fits-all federal law that involves ideological preferences is thus suboptimal. In other words, it makes perfect sense that states should be free to opt out of the expansion of Medicaid (i.e., as per their respective ideological preferences). There is, however, a cost, which is borne more by some than others.

Republican Governors Rick Scott (FL), Scott Walker (WI) and Bobby Jindal (LA)

Were other states, like Louisiana and Wisconsin, to say “thanks but no thanks” to the expansion, the Affordable Care Act would fall significantly short of providing universal health insurance. In the states without the expanded Medicaid, the poor people would presumably not be able to afford individual health insurance (which does not have the required cost advantages of group plans), and yet the mandate would apply so they would be subject to the tax imposed on people who do not have health insurance. The 4 million uninsured Floridians would find themselves suddenly subject to an annual tax collected by the IRS were they unable to afford the premiums for private individual insurance. Scott may really have been putting poor Floridians in dire straits. At the very least, Congress could exempt them from the tax, even if doing so would give other states more of an incentive to balk on the expansion.

As a guiding principle, Congress should encourage rather than thwart state-choice, restricting it when necessary to preserve the Union, even as Congress also provides minimum U.S.-wide protection to the minority position in any state so the people don't fall through the cracks. To fortify federalism without leaving the most vulnerable out in the cold in terms of health-care, the Congress could establish a minimum level of sustenance as a basic human right deserved by any American citizen. Given their sovereignty retained, the fifty American republics could decide for themselves whether to go beyond the “basic common 'human' denominator.” The federal government would be directly responsible for the floor, with the states having as their own programs anything above the foundation.

Sources:

National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al., 567 U.S. Supreme Court (2012).

Alex Becker, "Obama Health Care Law: Republican Governors, Legislators Not Ready to Fully Commit," The Huffington Post, June 30, 2012. 

Robert Pear, "Republican Governor of Florida Says State Won't Expand Medicaid," The New York Times, July 2, 2012.  

Amanda Terkel, “GOP Governors Resist Implementing Obama’s Health Care Law Despite Supreme Court Ruling,” The Huffington Post, June 29, 2012. http://www.huffingtonpost.com/2012/06/29/gop-governors-obama-health-care_n_1637456.html

Citizens United Ruling Applied to States

On the basis of the supremacy clause (Art. 6, clause 2) of the U.S. Constitution, the U.S. Supreme Court ruled 5 to 4 on June 25, 2012 against Montana’s Supreme Court decision that had upheld a Montana law that stipulated that a “corporation may not make . . . an expenditure in connection with a candidate or a political committee that supports or opposes a candidate or a political party.” According to the majority on the U.S. Court, that court had already struck down a similar federal law in Citizens United by holding that “political speech does not lose First Amendment protection simply because its source is a corporation.” The Court had concluded that the federal government did not have a compelling interest in restricting that protection for corporations to prevent corruption.

Regarding the Court’s compelling state interest rationale, it is not evident that the reasoning in Citizens United that “independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption” empirically trumps the finding of the Montana Supreme Court that corporate political expenditures have led to corruption in Montana. As Justice Breyer writes in his dissent, “even if I were to accept Citizens United, this Court’s legal conclusion should not bar the Montana Supreme Court’s finding.” It is possible, in other words, that Montana’s government has a compelling interest whereas Congress does not. According to the New York Times, the “Montana Supreme Court had ruled that the state’s distinctive history and characteristics warranted a departure from the principles announced in Citizens United.” In other words, the empire-scale of the American union ought to have gone into the Court’s reasoning.

Like the E.U., the U.S. extends across a continent. Both unions are of such a scale as to be reckoned as empires in themselves (i.e., even without considering their influence abroad). Their respective comprising republics can be expected to have distinct cultures.  For example, the relationship between business and society in Montana might be very different from that which is the case in Delaware. Hence, states have different incorporation laws as well as approaches to constraining corporations.

To impose a “one size fits all” empirical assumption in terms of a government’s interest in forestalling or reducing corruption not only invites factual error, but also treats an empire as if it were merely a republic or kingdom therein. Therefore, in applying the first amendment to a particular state’s empirical circumstances, the federal Court should beware of applying the assumption of a single U.S.-wide empirical condition in lieu of the “facts on the ground.” More generally, presuming a single empirical condition across these United States can be reckoned as one of the means by which judicial (and political) consolidation has made such inroads at the expense of federalism. Over time, the further consolidating chokes the combination, which can be expected to eventually either collapse from the weight of its center or split apart from the built-up pressure of the inherent diversity of the member states.

Source:

Adam Liptak, “Supreme Court Declines to Revisit CitizensUnited,” The New York Times, June 25, 2012.  

Congressional Ethics: Investing on Insider Info

To what extent should members of Congress be permitted to adjust their investment portfolios in line with general information on the economy gained as part of their legislative work? Whereas insider trading refers to information that is not available to the public on a particular company, the trades at issue as the U.S. headed toward a possible financial crisis pertained to diversified portfolios.

To take one example, John Boehner (R-Ohio), who would become the Speaker of the House after the 2010 Congressional elections, met U.S. Treasury Secretary Henry Paulson for breakfast on January 23, 2008. According to the Washington Post, “Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment. Boehner is one of 34 members of Congress who took steps to recast their financial portfolios  . . . after phone calls or meetings with Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms. The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials.”

The paper points out that the financial moves by the members of Congress were permitted at the time under congressional ethics rules.  Some ethics experts suggested that lawmakers should refrain from taking actions in their financial portfolios when they might know more than the public. In my view, we can assume that lawmakers will know more than the general public on matters relevant to investment decisions; the question is whether those decisions ought to be placed in blind trusts.

Lawmakers are going to know more than the public; merely sitting through hours of hearings will accomplish that. Indeed, part of the rationale for having a representative rather than a direct democracy is that representatives can be in a position to be better informed on the economy because lawmaking is at least in principle their full-time endeavor while they are in office. Essentially, the electorate delegates the popular sovereignty to the representative to focus on the lawmaking role.

Furthermore, human nature being what it is, we cannot but expect the lawmakers to have protected their investments by reducing the level of risk after learning that the U.S. economy could go over the cliff on account of being over-leveraged on subprime mortgages and over-securitized on them plus the related securitized insurance swaps. Adjusting their portfolios based on “insider information” on an upcoming stimulus plan is based on more particular information and thus more problematic even though it is not on a particular company. Regardless of the specificity of the information, however, any private gain from the public service is rightly generally regarded not only as unfair, but also inappropriate and unseemly.

At the very least, for lawmakers to use even the inevitable information they have on the general condition of the economy for private gain detracts from the notion that public service is a duty rather than an opportunity to enrich oneself. In this regard, having citizen lawmakers are preferable to careerists. However, even doing one stint in the U.S. House of Representatives could be financially lucrative, so even with term limits, the question of whether lawmakers should be able to adjust their investment portfolios would be relevant.

Although it is undoubtedly impossible to stop virtually any private benefit from accruing to members of Congress, their management of their own wealth should be separated from their public service where possible. The instrument of a blind trust makes this possible in the case of investments, assuming that direct and indirect communication with the managers of the trusts is preempted effectively. The trusts could even be mandated for several years after the lawmaker vacates public office.

More generally, the opportunistic orientation evinced by several lawmakers in January 2008 suggests that they may have viewed their respective offices less as stemming from a sense of a duty oriented to public service than as being an opportunity for personal gain. Rather than electing citizens who yearn for the office, perhaps we ought to seek out those who have reservations in place of ambition, yet would serve out of a sense of duty if called. In other words, whoever in the two parties gets people to run for the offices ought to be suspicious of people whose sense of duty seems all too comfortable and convenient to come out a sense of obligation. In other words, if it is easy to convince someone to run, then he or she probably is not the best person for public service.

Source:

Kimberly Kindy, “Lawmakers Reworked Financial PortfoliosAfter Talks with Fed, Treasury Officials,” The Washington Post, June 24, 2012. 

Corporate Hacks Dominate at Mr. Jefferson’s University

The University of Virginia was thrown into a bit of an uproar in June 2012 after the university's president, Teresa Sullivan, “a 62-year-old eminent scholar of labor-force demography whose appointment drew national attention in 2010, was forced out during a closed-door session of the Board of Visitors in which no official vote was taken. The June 10 announcement that she would resign blindsided Sullivan and ignited wide outrage and protests,” according to the Associated Press. This controversy showcases the contemporary “corporatizing” tendency that has been taking place in university governance more generally. For non-academics to trump scholars on matters touching on academic policy is at the very least counter-productive (if not illogical). In this essay, I discuss Sullivan’s ouster at Virginia in order to advance the proposition that faculty senates rather than boards of corporate managers should have the final say on policy at colleges and universities. At public universities, only a legislature or president should be able to over-rule a faculty (assuming there is a very significant proportion of public funding).

Regarding the controversy at the University of Virginia, the Associated Press reported that, “(f)or her part, Rector Helen Dragas publicly disclosed Thursday more detailed reasoning behind Sullivan’s ouster.” She “did acknowledge that the board mishandled Sullivan’s removal, and apologized. ‘In my view we did the right thing, the wrong way,’ Dragas said.” Her “six-page statement said Sullivan wasn’t acting quickly enough to address financial pressures facing higher education, the role of online learning, changes in the health care environment, the increased student-faculty ratio, fundraising, and other strategic challenges. The university lacks long-range plans on several of those fronts, it added. ‘No matter how you feel about our actions, these challenges represent some very high hurdles that stand in the way of our university’s path to continued success in the coming decade, and they are going to remain front and center for the next board and the next president over the coming years,’ the statement said.”

 For her part, Sullivan countered by saying, “Sweeping action may be gratifying and may create the aura of strong leadership, but its unintended consequences may lead to costs that are too high to bear.” Moreover, “Corporate-style, top-down leadership does not work in a great university,” she said. “Sustained change with buy-in does work.” The subtext here is that scholars don’t behave like corporate managers. Running a college is more like herding cats than managing by memo. Not being scholars themselves, the board and its chair at Virginia missed this vital distinction. According to the New York Times, “(m)any public university presidents, past and present, said that those on the boards of the leading universities — typically business executives without much experience in academia — do not always understand the complexities of leading a large research university, and the degree to which a president can succeed only by persuading. ‘Everybody thinks university presidents are hierarchical and top-down,” said Donna E. Shalala, president of the University of Miami . . . ‘But we are not corporate chieftains, and we cannot rule from the sky. We are more like tugboat captains, trying to get our ships aligned and pulling them in the right direction.’ The great research universities, she said, have achieved their dominant position in the world through shared faculty governance, and leaving faculty both academic and research freedom.” Such freedom does not compute from a corporate mindset. Whereas military-style “orders” are commonplace in the business world, scholars bristle at the prospect of a colleague barking out commands. "In the end," according to the Times, "the fundamental disagreement at the University of Virginia concerned the approach to change that the president should take — either incremental, with buy-in from each of the constituencies, or more radical, imposed from the top." That is, the ways of academic clashed with an interlarded corporate approach.

Indeed, the board at Virginia came from a very different world than that of years in a doctoral program followed by still more years working toward tenure. "Political contributions to our governors have become more important factors in the selection of our board members," said John Casteen III, who served as President of UVA for the 20 years prior to Sullivan's appointment. According to the Huffington Post, The UVA Board of Visitors included “a real estate developer, a coal company magnate, a Wall Street professional, a top lawyer for General Electric, a nursing home executive, [and] a beer distribution entrepreneur.” Lest it be presumed that the lawyer (or a physician) could substitute for a scholar, neither the first degree in law nor the first degree in medicine constitutes a doctorate. 

Accordingly, the board's motivation may have been rather pedestrian, or corporate (think of Fuld at Lehman Bros or Coyne at Bear Stearns), without due respect for the academic values and traditions particularly dear to the scholars who teach at the university. The Huffington Post reports that emails between the Rector and Vice-Rector “indicate that much of their motivation to remove Sullivan stemmed from three media articles, rather than professional or academic literature. One, a New York Times column by David Brooks, lauded online courses, as did a Wall Street Journal editorial, and an article in the Chronicle of Higher Education.” In one email, the Vice Rector even suggests that providing a “modicum of candor” might be prudent. I smell a rat. 

The secrecy of the board’s decision alone—without even a formal vote being taken (and given the failure of the Rector to adequately explain her “board’s” decision after the fact to the faculty senate meeting behind closed doors)—suggests that the real reason could have had more to do with personalities than policy. However, if “philosophical differences” were at issue as Sullivan suggests in her public statement after her firing, I submit that it is scholars rather than political donors from the business world and that of the professions who have the wherewithal to make judgments regarding academic matters, as in determining whether (and how much) to expand on-line courses. According to the New York Times, Dragas had been "especially concerned about pushing ahead in online learning." Sullivan warned that online education was no panacea — and indeed, was “surprisingly expensive, has limited revenue potential and unless carefully managed can undermine the quality of instruction.” Scholars such as Sullivan are in a much better position to judge the academic suitability of such courses than is a beer distributor, a business executive, or a physician.

Pedagogy as well as learning can take a real hit if technology is relied on too much, especially at the doctoral level where the in-person aspect of seminars has real academic value. To assess that value, one must have experienced it oneself, rather than merely read about it online. Regarding the for-profit colleges that offer “on-line doctorates,” I worry that the doctoral degree itself is being rarified rather than protected. I have met students in such programs who somehow claim to know all about the alternative that they are missing. Of course, they are perfectly able to dismiss its academic value without even a suspicion that they could be wrong about something they have never experienced. Such a mark of closed ignorance among “doctoral students” is itself a red flag concerning where “higher education” in America is headed. 

In the case of on-line courses, the application to freshman and sophomore lecture classes is one thing, whereas the application to doctoral seminars is quite another. My point is that scholars who have lectured in large lecture halls and taught small graduate seminars are in a unique position (i.e., superior to non-academics on a university's board) to discern this vital difference. That a beer distributor would sit in judgment over a professor's judgment on such a matter is a bit like wandering down the rabbit hole only to expect things to be the same. To a scholar, the presumptuous entitlement of such overarching ignorance can only be emetic, not to mention downright insulting.

Generally speaking with respect to the academic and corporate worlds, what is of value in academic terms does not necessarily translate into financial terms (or value). A visiting scholar at a university who does research, for example, is likely a “zero budget item” (i.e., not paid by the university), yet he or she is of high academic status by virtue of having earned a doctorate (and perhaps even published a book, by which I don't mean one filled with simplistic bullet-points and overly-complex organizational diagrams).

To a business practitioner or professional (i.e., a lawyer, CPA, or physician), such academic status sans salary does not translate, and thus is of no value. In fact, the value would be negative, given the presumed opportunity cost (i.e., the money that could otherwise be earned by being bored in a mindless corporate cubicle). Lets be clear: that something has no value in corporate or business terms does not mean that it has no value. Even if a society allows its business sector to set societal norms, the realm of knowledge (i.e., scientia) is not so pliable, at least in principle. Perhaps the same could be said of the religious realm. How much value in business terms can be attributed to the Kingdom of God, for instance?

Showing its true colors, the “corporate” board at the University of Virginia evinced an utter lack of respect for the university's scholars by refusing even to provide the faculty senate with an explanation with a “modicum of candor.” To reduce scholars to a modern employee-classification (which is a given at least at for-profit "universities") ignores the academic status of scholars in academia. That is, it ignores the qualitative differences that distinguish faculty, staff, and students at a college or university.

Some staff try to get around basic clusters (i.e., faculty, staff, and students) by referring to themselves as "academic staff." To be sure, librarians are not exactly kitchen help, but neither do librarians hold a doctoral degree (e.g., the DBA, Ph.D., D.Sci.M., J.S.D., or Ed.D.). Hence, even the very laudable (and valuable) librarians working in academic libraries cannot be counted as colleagues with the scholars.

At one large research university at least, a significant number of graduate students in doctoral programs in the liberal arts claim to be colleagues with their professors because those students teach too. They refer to the "undergrads" there as the students. "I'm not a student; I'm a graduate student" is the sort of illogical claim made as if with impunity by some of the more arrogant usurpers. Their teaching, by the way, is typically limited to discussion sections of their professors' lecture classes.

Lest there be any confusion, graduate students are not colleagues with their professors. That this rather basic academic point is denied or ignored when convenient is just another indication that modern academia is under threat even from within its ranks. The fact that university governance boards increasingly rely on people from outside academia suggests that academic mores and standards will not be protected even from the encroaching decadence within universities.

Referring to Sullivan's firing, a program officer at the American Association of University Professors laid out the basic flaw that has been allowed to fester in university governance. "More and more boards come from non-academic backgrounds, and one consequence of that is a lack of appreciation for and understanding of the academic enterprise,” said Robert Kreiser. He told the Huffington Post that "the UVA debacle is only the most extreme example of an ongoing phenomenon in which those ‘who don't appreciate what higher education is about and who are more concerned about corporate interests and corporate considerations’ come to govern academia.” Both the hegemony of corporate interests (and values) in corporate governance and the tacit lack of respect in the business sector (and American society more generally) for the vocation of the scholar should be (but sadly are not) recognized as red flags. At the very least, the priority belies any interest in the higher education of generations to come (i.e., your children).

Therefore, we should return to the classical notion that a faculty of scholars ought to have the final say in the running of a college or university. At the very least, a version of the business judgment rule in corporate governance (wherein managerial judgment on business matters trumps stockholder votes) should apply to a faculty's academic judgment trumping decisions of a non-academic board (and even a legislature or president in the case of a public university).

The university as an institution has been around, at least in the West, since the High Middle Age. Aquinas, for example, taught at the university in Paris. Applying a corporate mindset (or governance structure) on top of such a seasoned institution is bound to cause problems. I would not blame the professors at the University of Virginia were they more than just a bit annoyed at being relegated on their own turf, or campus (which literally means “field” in Latin), by people in the "real world." This expression itself is highly insulting, as it conveys a judgment of utter dismissiveness regarding the world of academia. The message is that the pursuit of knowledge is in itself inherently irrelevant (e.g., of "the Ivory Tower"). Let’s be clear: wanting to get something useful out of a university does not necessarily involve respect for its sui generis (i.e., unique) ways and values. Furthermore, to filter knowledge according to its contemporary usefulness and display the results as if a poll on power-point slides vastly misconstrues even what knowledge is. To presume to govern the enterprise from such an “understanding” is at the very least audacious, not to mention disrespectful and even reckless.

It is time, in other words, to return academia to the men and women who know and respect it on its own terms (i.e., rather than trying to turn it into a different beast). This is the real lesson coming out of the tussle at Mr. Jefferson’s university, where truth, at least in pinciple, is to be pursued no matter where it leads. Business managers and even the folks in the professional caste do not have this faith. They are thus utterly unsuited in their presumptive entitlement to govern academia as if business trumps knowledge. In other words, there should be some check within academia on the infiltration of the subverted societal values. What's good for GM is not necessarily good for the classroom. 

Fides de scientia: Lux et Veritas must be nurtured, pursued, and protected as ends in themselves, rather than squandered for sordid lucre or subjected to petty politics.

Sources:

Zach Carter and Jason Linkins, “Teresa Sullivan University of Virginia Ouster Led by Politcal DonorsLacking Academic Experience,” The Huffington Post, June 21, 2012.

Associated Press, “University of Virginia Board to Meet to Consider Reinstating President; RectorDefends Ouster,” The Washington Post, June 21, 2012. 

Tamar Lewin, "Public Universities See Familiar Fight at Virginia," The New York Times, June 25, 2012.

Saving the E.U.: Beyond the Squabbles

During the G-20 meeting in Mexico in June 2012, the E.U.’s financial mess was front and center. Francois Hollande wanted the European Central Bank to issue euro bonds and be able to loan directly to banks and to the European bailout funds. In general, he wanted the E.U.’s bank to operate more like the United States’ Federal Reserve—that is, as a lender of last resort (though the Fed could not issue debt to guarantee state debt). In response, Ms. Merkel contended that those proposals must come after more state sovereignty is shifted to the federal level. Shared debt can work only if there is shared decision-making over budgets, taxes and pensions, she said. As Joschka Fischer, a former German foreign minister and Green party stalwart, said, “You can’t mutualize the debt without mutualizing sovereignty; you can’t have the financial benefits of a state without having one.” And yet, the E.U. already had substantial (but not sufficient) governmental sovereignty.

          France's Francois Hollande and Germany's Angela Merkel at the G20 Summit.      AP

The full essay is at Essays on the E.U. Political Economy, available at Amazon. 

Egypt’s Generals: “Boundary Issues”

In a letter to Bishop Mandell Creighton in 1887, John Acton (1834-1902) wrote, “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” This line could be applied to Egypt’s ruling generals both just before and after the presidential election in June 2012.

Days before the election—perhaps in anticipation of a victory by the opposition party—the generals and their allies in the court dissolved the legislature, which after the legislative election had been controlled by the opposition. As if this affront to democracy was not enough, the generals announced that they, rather than the opposition party’s presidential victor, who had received 51.7% of the vote, would appoint the president’s chief of staff. In a sense, this affront is more shocking than the generals' dissolution of the legislature or emasculation of the powers of the presidency because of the sheer presumptuousness in appointing someone else's chief of staff. That is generally recognized as an internal matter to a president.

The generals are like a roommate who thinks nothing of moving one’s personal toiletries in the bathroom (such things are generally known to be personal) or taking and eating one's food from the refrigerator. In other words, the generals had what can be called “boundary issues.” Days after the election, the Generals’ strategy was clear: “Say one thing and do another.” General Assar claimed in a news conference days after the election, “we will give the president of the republic his complete powers.” And yet, the New York Times reported soon thereafter that under the generals' plan, Morsi, the new president, would "assume an office stripped of almost all authority." For example, the new president would not have jurisdiction over the military or its budget, not to mention even his own chief of staff . The aggrandizing generals preserved “broad powers for themselves over matters including defense, national security and perhaps some broad economic issues,” according to Mona el-Ghobashy, an Egyptian political scientist.

What the Egyptians needed was a Teddy Roosevelt of sorts: a man of the bully pulpit who was not afraid to go up against the monopoly trusts of his day (which is why New York bosses had gotten him out of the governorship and into the "safe" (i.e., vacuous) vice presidency). Weeks after being elected, Morsi showed TR-like guts in recalling the parliament that the top generals had dissolved. “He has been waiting to make a decision to prove he is president of a republic,” Gamal Eid, a prominent human rights lawyer, observed.

Lest Morsi be accused of ignoring the ruling of an admittedly-politicized constitutional court, Eid adds that the president’s decree “abolishes an executive order, and it is not related to the constitutional court. It negates the decision of the military council.” He added, “If the choice is between the decree of an elected president and a military council with questionable legitimacy, then we choose the elected president.” Adding to its legitimacy vis à vis the court, Morsi’s decree came with a time limit: the Parliament could serve only until a new constitution could be completed, followed by fresh legislative elections within 60 days. Even though this caveat acknowledged the court’s demand for a new Parliament, the decree nonetheless instantly prompted the generals to call an "emergency meeting" to “discuss the situation.”

Morsi deserves considerable credit for doing what he could rightly have expected to result in opposition (and even an attack) from the generals’ council, whose continued authority was questionable at best, given the generals’ pledge on assuming power to dissolve their council upon the inauguration of the president. The entitlement presumed by the “emergency meeting” is itself pathological, as the response assumes a sort of default authority, which could only be artificial. At the very least, the response evinces an obsessive-compulsive sort of  “control issues.”

I would not blame Morsi one bit were he afraid of the generals as he stepped off the reservation. Regarding the generals’ psychology, to gut an office of power is an underhanded (not to mention selfish) way of not recognizing the democratic legitimacy of an election that does not go one’s way. That is to say, the childishness evinces a selfishness that does not play well with others. To presume the authority to appoint someone else's chief of staff is beyond bad table manners; it is low class and even passive aggressive. The move is essentially a coup by pen, even if it is tacitly backed up by the threat of guns. Apparently it is difficult for some to let go of power even as promised, especially when that power is absolute. I don't foresee the generals playing well with Morsi, as his democratic legitimacy means that their continued grasp on power was something considerably less than absolute, at least in terms of legitimacy.

The lesson for us as a species is perhaps the following: a people should be very careful in deciding who is to hold “the precious ring” even just temporarily, as a caretaker, for, as Lord Acton wrote, the allure of the ring is strangely much more nepharious than meets the eye. Furthermore, this case demonstrates just how important it is for a government to have a constitution. The competing claims of Morsi, the court, and the generals’ council could find no common basis without one. Put another way, how could the constitutional court have a basis of legitimacy in interpreting a constitution without one? Without a constitution, Morsi was free to negate the court’s usurpation. Even were a constitution extant, it would be beyond the reach of the judiciary to declare another branch null and void. Most crucially, a constitution maintains and protects the viability itself of the basic institutions of government—this is the basic constitutional function that is up for grabs in the absence of a constitution. 

Sources:

David Kirkpatrick, “After Victory, Egypt Islamists Seek to ChallengeMilitary,” The New York Times, June 18, 2012.

David Kirkpatrick, "Morsi Is Winner of Egyptian Presidency," The New York Times, June 24, 2012.

Hamza Hendawi, "Morsi Orders Dissolved Parliament Return, Defies Military Leaders," The Huffington Post, July 8, 2012.

Kareen Fahim and Mayy El Sheikh, “Egypt’s President Orders Return ofParliament,” The New York Times, July 8, 2012. 

Greek Austerity Win at E.U.’s Loss?

According to one director of a public-debt consulting firm in the E.U., “In the realm of investor perceptions, Spain has crossed the Rubicon from solvency to insolvency.” A day after Europeans in the state of Greece had given a narrow victory to parties in favor of maintaining the austerity program there, investors’ concern regarding the viability of the euro pushed the yield on Spanish 10-year bonds as high as 7.2 percent—a level that Spain’s economy minister, Luis de Guindos, claimed is unsustainable in the long term.

The full essay is in Essays on the E.U. Political Economy, available at Amazon.

France’s Hollande: Standing Above His Party’s Legislative Victory

In the 2012 election of the E.U. state of France's legislative Assembly following the election of Francois Hollande to replace the deeply unpopular Sarkozy, “the Socialist Party won 280 seats and two allied parties won another 34, giving the parliamentary bloc 314 seats — considerably more than the 289 needed for a majority in the National Assembly. The Greens, who are part of the government, have another 17 seats, while the far left won 10. Former President Nicolas Sarkozy’s center-right Union for a Popular Movement won 194 seats and its allies another 35 seats, bring the total to 229 seats, a sharp drop from 304.” The typical analysis ensuing from this result concerned the added strength that Hollande would have in pushing the E.U. toward balancing austerity with stimulus spending. The Prime Minister, Jean-Marc Ayrault, said the government would work to fix public finances and reduce unemployment. “The goal is to shift Europe toward growth and protect the euro zone from speculation,” he said. “The task before us is immense.” At least the Socialist Party would not have to deal with other parties on the left that are less pro-E.U., as the Socialists had established an absolute majority in the state’s Assembly.  However, the Socialists did not have the three-fifths majority needed to make changes to the state constitution, such as shifting more governmental sovereignty to the E.U. (federal) level. At the time, the E.U. was at a precarious place in not having enough sovereignty to safeguard the euro.

Interestingly, during the evening of June 17^th as the election results came in, Hollande stayed out of the media spotlight. It was the prime minister, Jean-Marc Ayraunt who spoke for the Socialist Party. He spoke along with the leaders of the other parties and several candidates (both winners and losers). Hollande’s absence was notable because it suggests that it might not be wise for a figurehead to be perceived as being too partisan; unlike party leaders in a legislative body, a governor or president represents the republic as a whole, and thus the public (rather than partisan) good. Hollande was smart to spend the evening preparing for (or travelling to) the G-20 meeting en Mexique le lendemain. Standing apart from the temptation to publically celebrate the victory of his party, he put himself in the future position of being able to credibly claim that agreeing to shift more sovereignty to the federal level is en l’intéressé de la France. In other words, resisting the temptation to engage in partisan displays can translate into political capital that a figurehead can use to facilitate a shift in the constitutional design of governance. Moves on this scale are fitting for a figurehead who is oriented to the big-picture rather than to trying to win on every issue.

Source: 

Steven Erlanger, “Socialists’ Victory in France Buttresses Hollande’s Power,” The New York Times, June 17, 2012. 

JP Morgan Chase on the NY Fed's Board

The New York Fed allows private bankers to sit on its board, even while it crafts bank policy and puts together financial industry bailouts. "There's a conflict of interest here. You serve two masters. You can't draw this extraordinary salary from JPMorgan Chase and, at the same time, say, 'Oh, I'm out here acting in the public interest.' You can't do both." So said Elizabeth Warren, who came up with the idea that became the Consumer Financial Protection Bureau as part of the Dodd-Frank Financial Reform Act of 2010. Referring to Jamie Dimon, the CEO of JP Morgan who presided over a $2 billion trading loss, she added, "He says he wants to take responsibility. Then show some responsibility. Show you get it. Putting Wall Street bankers on the Federal Reserve Board is like finding the guys who torched the entire town and putting them on the fire advisory board. It makes no sense." 

The full essay is at "JPMorgan: An Unethical Monstrosity?"

Same-Sex Marriage in the States of Washington and Britain

Reporting on the objections of the Church of England and the Roman Catholic Church to David Cameron’s “contentious plan to legalize same-sex marriage” in the E.U. state of Britain, the New York Times unwittingly followed the European tendency to compare a state in the E.U. with the entire U.S. rather than to a state therein. “In some ways,” the Times contended, the debate in the E.U. state “mirrors arguments in the United States swirling around President Obama’s support for same-sex marriage.” Actually, Obama’s support was not at the time very relevant even in the U.S., as the “action” was occurring in particular states (as in the case of the E.U.).

 

On the of the Times’ report, the Huffington Post reported that the U.S. state of Washington would have a referendum on gay marriage on the ballot in November, 2012. In total, 247,331 Washingtonians signed the petition, passing the minimum of 120,577 needed. Gov. Chris Gregoire, David Cameron’s counterpart, had signed a bill into law the previous February legalizing same-sex marriage. Essentially, the referendum moved the matter from representative to direct democracy. Were a “one-size-fits-all” decision to be reached for the entire U.S., justices rather than an electorate would be the decision-makers. While possibly giving the rights of a minority a “leg up” on majority rule, moving the issue from the people of Washington to apply one decision on the U.S. as a whole was not a given at the time.

Therefore, to relate the thrashing out going on at the time in Britain (and France) to Obama’s campaign stance on the issue rather than to what was going on in the American republics evinces something more than just a category mistake (i.e., treating a state in the E.U. as equivalent to the entire U.S. rather than to a state therein). The dynamic at the level of the E.U. and U.S. is different than that which occurs in a state. Democracy being relatively fort (strong) at the state-level, the juridical protection of the rights of the individual may paradoxically be stronger at the empire-level. Iowa is a notable counter-example, however, on account of the action of the Iowa Supreme Court legalizing same-sex marriage. Perhaps it could be said that majority rule is stronger at the state level and thus more in balance with judicial decision. If so, the E.U. principle of subsidiarity and the U.S. principle of residual sovereignty (marriage being in the realm of the states’ sovereignty though equal protection being a relevant U.S.-level juridical principle) should not be relegated in a race to a central state at the empire-level. At the same time, the U.S. and E.U. need enough power to maintain themselves. Treating a state in the E.U. as if it were equivalent to the entire U.S. (i.e., essentially another E.U. within the E.U.) distorts or ignores these dynamics of federalism.

Sources:

Alan Cowell, “ChurchesChallenge British Government Over Same-Sex Marriage,” The New York Times, June 12, 2012. 

Chris Gentiviso, “Referendum 74, Washington State Anti-GayMarriage Measure, Qualifies for Ballot,” The Huffington Post, June 12, 2012. 

Property Taxes: Property at Risk

Thirty years after Californians shrank their property taxes by passing Proposition 13, the same question faced the people of North Dakota as they voted on whether to eliminate their property taxes entirely. In an interesting twist, the debate on the tax incorporated a human-rights dimension that is rarely brought into debates in the American republics.

In addition to pointing to the budget surplus enjoyed by the Government of North Dakota at the time as well as to the unpredictableness of the tax and its inconsistencies, the proponents of a constitutional amendment to prohibit a property tax argued that it is contrary to the concept of property ownership. Beyond property rights, however, the advocates pointed to a human right to shelter irrespective of wealth or income. “I would like to be able to know that my home, no matter what happens to my income or my life, is not going to be taken away from me because I can’t pay a tax,” said Susan Beehler, a member of the group that was pushing for the amendment. The American republics are as it were joined at the hip, so it is no surprise that, Jim Cox, a representative in the Pennsylvania legislature’s lower chamber chimed in by declaring, “No tax should have the power to leave you homeless.” The implication is that having a home is a human right that even a government ought not be able to take away.

There is reason for concern as long as one’s house is subject to one’s wealth. For one thing, a large part of one’s net worth is in the equity-value of one’s house—such value being subject to the wax and wane of the market. According to the Federal Reserve, the medium amount of home equity dropped to $75,000 from $110,000 in 2007 (adjusted for inflation). More generally, the economic crisis of 2008 left the medium American family in 2010 with no more wealth than in the early 1990s. Medium family income fell to $45,800 in 2010 from $49,600 in 2007 (adjusted for inflation). With less of a cushion, should a homeowner lose his or her job, less home equity would translate into more difficulty in getting a loan (or being cut off from even being able to borrow to survive a brief period of unemployment). 

Therefore, housing viewed as not just a property-right, but moreover as a human right (i.e., not to be homeless), is incompatible with the precariousness that goes with treating one’s house as not only a commodity subject to market forces, but also a significant part of one’s wealth. A vicious circle can be engaged that leaves one as though drowning in a whirlpool without a life-preserver.  If nothing should have the power to leave one homeless, our concept of housing must go even beyond our concept of private property to be based in a doctrine of human rights—a concept rather foreign in North America. Paradoxically, a constitutional amendment that would remove one’s house from the government’s (as well as any private company’s or bank’s) grasp would proffer citizens more security (and thus happiness) than even a full-fledged notion of private property (rights), for the right of property—unlike a constitutional amendment—depends on government and is thus subject to eminent domain. To be sure, a competitive market is well-suited to distributing non-necessity commodities, but human rights trumps even economic efficiency (or its ideology). I find it odd that this notion is so foreign in the American states, while it is almost taken for granted in the European states.

Sources:

Monica Davey, “North Dakota Considers Eliminating Property Tax,” The New York Times, June 11, 2012. 

Binyamin Appelbaum, “Family Net Worth Drops to Level of Early ‘90s, Fed Says,” The New York Times, June 11, 2012.