PHILADELPHIA REFLECTIONS
Musings of a Philadelphia Physician who has served the community for six decades

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History: Philadelphia and the Quaker Colonies
Philadelphia and the Quaker Colonies

Government Organization

Government Organization

Government Organization

Heads Up: Look Ahead

THE LIMITS OF GOVERNMENT. Most budgets appear balanced at the beginning of the year because projected revenue has been overestimated; those deficit budgets are balanced at the end of the year by borrowing the shortfall. The most efficient level of taxation has been experimentally shown to be around 18% of Gross Domestic Product, or GDP. That's essentially shorthand for the whole national economy. If government debts exceed the GDP, or even grow faster than the GDP does, no one will loan that government money. It's hard to escape the logic that if federal spending levels average 18% of GDP, budgets can be ignored. There's marginal error in the 18%; but there needs to be a margin of error, perhaps as much as 2%. Go back and read that short paragraph three times.

{Gross Domestic Product,}
Gross Domestic Product,

State and local governments are different; only sovereign governments can print money. State and local can be allowed to fail, and that disciplines state and local spending. Sovereigns are limited by GDP, with overall money creation linked to it, while the public makes the leap of faith that an independent Federal Reserve will match money creation to GDP. Moreover, since entitlements like Medicare and Social Security already make up most of U.S. government spending, and will soar in a few years when the baby boomers reach retirement age, demographics make Federal predictions somewhat more precise. Raising taxes is now recognized to reduce the net value of that 18% number, while infinitely rising deficits will be blocked by the bond market, first by rising interest rates, if necessary by boycott. Unless you just ignore the recession which will eventually be caused by soaring long-term interest rates, spending must be cut severely. Just about the only remedy left is to shift the cost of entitlements back to the private sector. By increasing private savings and drawing compound interest, some unknown amount of progress might be made on this problem. The retirement age must also be increased, second careers after retirement must be encouraged, the costs of retirement must be reduced -- and all other ideas must be explored, too. But one of the main arguments for increasing private savings is that all of the ideas anybody has suggested, rolled up in a ball, are questionably sufficient to finance the approaching problem. It will simply not be possible to evade a serious examination of any suggestion, including this one. Privatize. The public sector is just not big enough to handle the matter, and if you make the public sector bigger, you will destroy the whole economy. Privatize.

DON'T LOSE FAITH IN SCIENCE. It's common belief that financing Social Security is not nearly as difficult as financing Medicare, but that's just the extrapolation fallacy announcing again that trends in motion will continue forever. Medicare seems to be getting more expensive for three reasons, all temporary. The costs of dying are shifting into Medicare as the population lives longer; eventually, just about everyone will live long enough to die at Medicare's expense, and terminal care costs must then stop shifting. Second, the cost of dying is going to decline as medical research turns to the engineering costs involved, separate from heroic efforts to forestall dying. No one is suggesting euthanasia; just simplifying the issues once a final decision has been made. Third, the cost of chronic illness and disability needs both curative and engineering improvements. Take rheumatoid arthritis (RA) for example.

Thousands of people are painfully crippled every year by RA. They are treated, medicated, pensioned, operated on, and provided with complicated equipment. Suddenly, some new medications have come along which promise there will be much less further progression of RA in patients who have it; if we use them, the number of cripples will eventually decline. It has a real cost to use new medications, of course; it will cost several thousand dollars a year to offer this miracle to the rheumatoid sufferer. But when the patent protection on those miracle drugs runs out, even on the inevitably improved variants of these drugs, the cost of treatment will surely go down to a thousand or so dollars a year. Meanwhile, the backlog cost of repairing the injured joints of patients who got the disease long ago, will fade away. And the engineers will figure out how to make crutches, canes and electric go-carts out of plastic or equivalently cheap ingredients. Most of those patients who now have to be pensioned will be able to find gainful employment. Maybe, maybe, someone will figure out what causes this disease and invent a simple cure for it, but it isn't necessary to pray for miracles on that level in order to predict a major decline in the cost of managing this nasty disease. It is safe to predict that other diseases will follow the same trajectory as RA, leading eventually to a resolution of the fearful costs of Medicare. Social Security is something else; if everybody lives a longer healthier life, non-physicians are going to have to figure out how to pay for living it. Wiggle and squirm all you please; call me names, call the police.

There is no solution to the cost of increased longevity, except to raise the average age of retiring from work.

http://www.philadelphia-reflections.com/blog/839.htm


Democracy Turns Out To Be a Two-Party System

{American two-party system}
American two-party system

America's two-party system took fifty years to stumble into permanence. Regardless of the happenstances of their eventual emergence, political parties were clearly not designed into the original plan. Those few founding fathers who did think about political parties rejected them as "factionalism", something to be condemned. The true nature and advantages of a two-party system began to be truly venerated when other nations tried something quite different, which we now call Proportional Representation. PR is a fairly natural outgrowth of creating a large democracy from a collection of little tribes -- then creating surrogate political parties for them as part of the design. Guided by historical experience, it is now possible to ignore all minor differences between stable two-party democracy and multi-party democracy, except one. In a two-party system, the political dealing and vote-swapping takes place before the election, with all the players jockeying and sacrificing principle to answer a single candidate question, "Can he win?" By contrast, in a multi-party or proportionally-represented democracy, the election comes first, and only subsequently do vote-swapping and artful promises construct the ticket of candidates and the policy platform. The plain fact is the public doesn't know whom it is voting for, and often is disagreeably surprised. Furthermore, important matters remain unsettled by a multi-party election. A cabinet member of a splinter party, potentially one with negligible public support, retains the threat of resigning if things don't go his way, and his resignation may trigger a whole new national election if it breaks up the political margin of the ruling coalition. At least, a two-party system settles things for a while, and gives the public a relative rest from factional tensions.

The American system has evolved into a universal conviction, stronger than any Constitution, that two parties are quite enough. Third parties are of course tolerated because they aren't forbidden, but mostly offer a mechanism in case there is a serious wish to reconstitute one of the two major parties. The strength of third parties is to discipline the leadership of the major parties; the weakness is they threaten the unifying principle of compromise-in-order-to win. Nothing except religious fanaticism would likely induce any ambitious American politician to remain within a third party, fruitlessly frittering away his life's chances. Because of 18th Century history more than wisdom, an "established" religion is constitutionally prohibited in America; observation of the turmoils in other nations, and perhaps wisdom also, keeps it that way.

If two parties are then quite enough, is it possible only one would be better? The quickest look abroad, the briefest exposure to history, shows a one-party system is synonymous with dictatorship. Communism and fascism had only this one feature in common; in fact, China seems to be morphing from one to the other, while resolutely retaining its single ruling-party system. The paradox of this situation is that it leads to the American realization that maintaining a two-party system means that neither party must ever achieve total victory. After each national election, the electorate settles back with relief that one side won, but neither side conquered. Even academics are muffled by the system; with much to criticize, there is nothing else worth substituting.

There is one thing left to mention about the two-party system, which is that the interests and affiliations which arouse the club-like loyalties of party members seldom perfectly match the party's current campaign policy issues, and depend in high degree on habit and a formless sense of group comfort. Any schoolchild can notice, although the party candidates avoid mentioning, that policy issues move back and forth between the two parties. Whether it is tariffs, public schooling, the gold standard or a thousand other matters, the issues repeatedly shift to the other party when lack of progress or apparent betrayal offends them. The special interests seek to use the parties, and the parties regard each special interest as a bargaining chip; the gut feelings of the party membership adjust far more slowly. For maximum effectiveness, a two-party system needs the public to see itself as two warring affinity groups; for a while polarization seemed to revolve around the rich and the poor. There would always be more poor people than rich ones, as the Founding Fathers feared and the anti-Federalists sought to exploit; but now Populism can only be sustained by continuous massive immigration. The times are growing stale for the Republicans to suggest that only they have an electoral incentive to eliminate poverty, while the Democrats would secretly like to increase it. Or for the Democrats to imply they have a monopoly of sympathy for the poor. Compared with the status of the rest of the world, permanent lifetime poverty in America is growing too infrequent to dominate elections, even supplemented by fear of poverty, recollection of having once been poor, or guiltiness about never being poor. It is difficult to maintain the firmness of party members with such vague attitudes for abstruse legislative policies like banking reform or compulsory health insurance. Therefore, the search is on for large social affiliations which would more comfortably enlist loyalties for pressing specific legislative actions. At the present time, division of the working populace into the public and private sectors is being promoted as a bedrock political affiliation, but it is questionable whether that will be as successful as the public sector unions seem to hope for. Only twice in our history, during the administrations of George Washington and James Monroe, have Americans overwhelmingly agreed on core issues of religion, foreign policy, and prospects for the future. During both episodes, political parties virtually disappeared.

http://www.philadelphia-reflections.com/blog/853.htm


Term Limits, With Exceptions

{Bipartisanship}

Because of precision gerrymandering with computers, congressional incumbents now face very few serious re-election contests. Left with only a few seats in serious contention at each election, the public is dissatisfied by this reduced level of control but does not know how to strengthen it. Turning to the courts, for better rules, probably won't help. Once you fix the number of seats in Congress, give at least one seat to each state, and insist that geographically contiguous districts within a state should all contain the same number of inhabitants, there isn't much wiggle room. That's what then creates the rather strange connection between restraining gerrymandering, and imposing term limits.

Long-term incumbents in a legislative body maintain its institutional memory; their experience is a valuable thing, and recognized gifted veterans should be retained. Although a dozen states have even willingly sacrificed such advantages by imposing term limitations anyway, no one contends that all long-term incumbents are bad. We just have too many of them. The nominating process favors extremists, and they have crowded out the legislators from close districts who must be constantly mindful of current public opinion. Legislative bodies need to have a better balance between the two kinds.

So here's a proposal. Go ahead and impose a reasonable term limit, perhaps eight years. But then allow exceptions for districts which can demonstrate a plausible amount of bipartisanship. If the district in its last election had elected a governor or president of the opposite party from the incumbent congressman, or if one Senator in the state is of the opposite party, these might be reasonable grounds for permitting a district to keep re-electing its incumbent congressman. That might not be enough; perhaps a district should demonstrate two of those proofs of bipartisan spirit. But this would be a start. And a warning.

http://www.philadelphia-reflections.com/blog/828.htm


Mister Roberts

{Fidelty Building}
Fidelty Building

The Fidelity Building on Broad Street, now bearing the name of a successor bank, has its own ZIP code. It houses bank offices in one of its two towers, and a general office building in the other. The top floor, the 29th, was originally the executive suite of the bank, with executive dining rooms, and lesser dining rooms where big deals were dealt. As an economy move, the executive floor eventually became a mid-day luncheon club, and right now it houses the law library of Montgomery, McCracken and Rhoads. It carries the name of the law firm's most famous partner, Associate Justice of the United States Supreme Court, Owen Roberts. In the center of the hushed library, a single volume sits on a table, held in place by two very heavy bookends. It's the bound 1955 volume of the University of Pennsylvania Law Review, with a small green tab attached where a hundred pages of testimonials to Roberts are found. The tabbed page itself begins an essay by Felix Frankfurter, written in prose so elegant it seems like poetry. His topic is the mind of Justice Roberts at the time he switched sides in the 1936 Roosevelt Supreme Court packing episode, the famous "switch in time, which saved Nine."

Frankfurter and Roberts sat on the Supreme Court together for years, but the events in question took place before Frankfurter was appointed. Like the rest of us he has to conjecture what was in Roberts' mind. Felix Frankfurter offers two pieces of special evidence, his long personal observation of Roberts' character, and a private memo. Roberts had written in the memo that he had been ready to switch for Roosevelt before the court-packing proposal was made, but held off taking the step for several months because Justice Harlan Stone was absent for medical reasons. Stone, later elevated by Roosevelt to Chief Justice, was known to favor Roosevelt's New Deal proposals, particularly the Minimum Wage, which were central to the Constitutional question: whether the federal government had a right to go beyond regulating interstate commerce, to regulating all commerce. Frankfurter concludes that Roberts did not make the switch in response to Roosevelt's threats, because he had already decided to act before the threat was made to enlarge the court until it contained a majority in favor. Not only had Roberts decided to switch before the Presidential threat was made, he proved to be a courageous and highly moral person throughout the later years when he and Frankfurter were closely associated.

{Frank Furter}
Frank Furter

Unfortunately, Frankfurter's 1955 eulogy has not convinced historical opinion. After all, there were dozens of people on the inside of the Supreme Court and the Presidential Administration who knew Roberts better than Frankfurter did, and probably talked about nothing else for weeks. Up until the fateful decision, almost all of Roberts' close friends had been on the other side of the issue, and felt entitled to some sort of explanation if not apology. Washington is simply crawling with reporters whose job it is to search out gossip and hearsay. When an opinion emerges from such a cauldron and survives for seventy years, it has substance. The prevailing view is that Roberts felt the Judicial Branch of government was in jeapardy, and that someone must sacrifice himself in the crisis. Roosevelt had just been re-elected in a landslide, the new Congress would surely do anything he asked, the nation was in the depths of a horrendous economic depression for which Roosevelt was proposing the only conceivable Keynsean solution of increasing national liquidity through government spending. Roberts knew he would become a political pariah, but his duty seemed clear to him. It is merely a matter of phrasing whether his position was described as knuckling under to Roosevelts's threats, or throwing his body over Roosevelt's hand grenade.

With seventy years of retrospect, it all seems so pitiful. Public opinion and congressional action was in fact outraged at

http://www.philadelphia-reflections.com/images/roosevelt_1.jpg
Franklin Roosevelt

Roosevelt, landslide or no landslide. Roberts and Stone had no need to do what Roosevelt asked. Any class in economics today can marshal a respectable argument against the wisdom of minimum wage laws, every class in law school is amazed and mostly appalled by their fresh reading of the Constitution's prohibition against Congress acting outside the limits of "commerce between the several states". On the level of governments rescuing their countries from depression by expanding liquidity, the experience has been that tax cuts usually succeed in that, while government spending usually does not. Paradoxically, the one principle to survive respectably from the 1936 political revolution was the movement toward national standards for internal trade and commerce, away from Balkanization. That's too big a step to take without public debate, perhaps, and highly disruptive if it's done in a single step. But the general idea is probably a sound one.

Poor Roberts probably never even considered that aspect. He was overwhelmed in his role as a Greek tragic hero, pursuing tragic inevitability.

http://www.philadelphia-reflections.com/blog/800.htm


Rosencrantz and Gildenstern (4)

{Rosencrantz and Gildenstern are Dead}
Rosencrantz and Gildenstern are Dead

A few Broadway seasons ago, Tom Stoppard's play and movie Rosencrantz and Gildenstern are Dead described an experience, resonating with the early years of the Reagan presidential administration. If you are a small witness to palace politics, you mostly have no clue about what is actually happening. At that time, it was widely accepted among Washington gossips that the appointees who filled the Executive Office Building belonged to three hostile tribes in temporary alliance, and the Libertarian tribe was cast out. According to this recounting, the other two tribes were the Religious Right, and the Win-at-any-cost California political professionals. A more mature view of it might be that all administrations of all parties contain hard-noses who make a profession of the ruthless winning of elections. An ideological president can't win without hard-ball lieutenants, so although their presence is inevitable, what matters is how well they are controlled.

{David Stockman}
David Stockman

Ignoring these unattractive fixtures of political machinery, David Stockman seemed to symbolize a libertarian economic ideology within the Reagan White House, and Caspar Weinberger a militaristic one. When Stockman was sacrificed to power realities in Congress, the Libertarians followed the lead of William Niskanen and bitterly retreated to the neighborhood think tanks. But a few years later, Weinberger was similarly sacrificed over the Star Wars and Iran-Contra matters.These functionaries working at EOB thought they ran the country, but that most affable of men, Ronald Reagan, ran things. He seriously meant to discredit New Deal economics and to win the Cold War. To do so, he willingly sacrificed small improvements in our economic system like the Medical Savings Account, and minor enhancements of military hardware like the Strategic Defense Initiative. He would like to see these things succeed, but they would have to do it on their own, without cost to his political capital.

And so, in time, John McClaughry went back to Vermont, founded a think tank called the Ethan Allen Institute, ran unsuccessfully for governor against Howard Dean, and became Majority Leader in the Vermont Senate. Meanwhile, I devoted my efforts to selling the Medical Savings Account concept to that most reserved of audiences, the American Medical Association.

http://www.philadelphia-reflections.com/blog/787.htm


Commercial Academic Think Tank

{Stephen P./ Mullin}
Stephen P. Mullin

Stephen P. Mullin recently addressed the Right Angle Club of Philadelphia about assorted economic subjects; he is certainly qualified. He was once the only Republican in Mayor Rendell's cabinet, acting first as Finance Director and then as Commerce Director. At first he doesn't appear extroverted enough to be a politician, but quickly demonstrated that he knew the first names of more of the members of the club than the president did, so maybe he does have the innate talents of a politician. Urban political machines don't usually respond cordially to graduates of Exeter and the Wharton School of the University of Pennsylvania. A number of University professors are consultants to the firm, which offers statistical economic advice to the many law firms in town, to philanthropic organizations considering public-interest projects in the region, to government agencies faced with regulating unfamiliar activities, and very likely to anyone else willing to pay for the service of academics, statisticians and analysts. It certainly sounds like a service that governments and philanthropies need, and which the region needs to avail itself of. In a way, it is probably something the University needs, as well. A friend of mine is now retired, but at one time I commuted on the train with an academic administrator of the Wharton School, who was quite obviously disturbed by handing diplomas to students who promptly took jobs which paid those graduates more than he was paid himself. Obviously, such a system cannot persist very long without creating a brain drain, so income supplementation by commercial consulting is a necessary and valuable support for academics. There are, of course, probably some negative features as well.

{The Wharton School}
The Wharton School

It is interesting to hear from Steve how Philadelphia can be variously described. We have, for example, significantly less foreign immigration than other cities. New York, by contrast, has a net immigration of about 700,000 persons a year; such forces can quickly transform a city in a variety of ways. The bombing of West Philadelphia during the Goode Administration was news for a while, then vanished from the papers. But it had a shattering effect on Philadelphia commerce, leading to a period of 8 or 9 years when there was essentially no private investment in the city. Philadelphia indeed now needs to have its municipal bonds issued by the state bonding authority, because our own bond rating is so low the extra cost of municipal debt is a significant one. And there is the cost of invisible shifting of power to Harrisburg. An unexpected result is that sales and real estate transfer taxes escalated to make up for property taxes which then could not possibly be raised as much as inflation. Real estate was in big trouble; whether ingenious strategies like the 10-year tax abatement for new property will be successful in rescuing the real estate industry, remains to be seen. New office towers have been built, but they drain off tenants from older office buildings. We're seeing a massive conversion of older office space into residential apartments, an apparently successful maneuver. But that drains the older residential areas, which leads to -- well, who knows what it will lead to, but it could be slums.

{Mayor Michael Nutter}
Mayor Michael Nutter

The traditional hostilities between Philadelphia and its neighbors can be defined in a new way, too. For a century, Philadelphia contributed more tax money to the rest of the state than it received in state services. But in the past 20 years, Philadelphia city has become a net importer of an annual billion dollars -- from the rest of the state. Two or three billion go to the schools, which the rest of the state regards as a deplorable waste in view of the quality of the product. And yet, the most hopeful feature of the situation is the vigor and ingenuity of the attempts being made to rescue the situation. In a certain sense, Mayor Nutter is the candidate of the Wharton School. He may well have some innovative ideas, and academic places like the Wharton School will surely suggest others. It remains to be seen whether Nutter can combine idealism with sufficient ruthlessness to make the city function. Cynical oldtimers will grumble that a mayor has to employ a moderate amount of deception and corruption in order to accomplish his mission. Maybe that overstates things, but it is very certain he must be tough. He's dealing with construction unions who will certainly be tough, and whose interest in sacrificing their own agendas in order to help the schools or street crime -- always fairly small -- is even further impaired by the econometrics that 70% of them live in the suburbs. We wish our new mayor all the best, since he seems smart enough to know what needs to be done, and is definitely smart enough not to drop any bombs on houses. He's smart enough to see that extra city revenues derived from gambling might permit the lowering of wage taxes, and hence an urban business recovery. But is he tenacious enough to stay in office long enough to achieve the balanced result; or will the forces of evil simply kick him out of office before wage taxes can be lowered and gambling discontinued? He won't break his promises, but will they break them for him? Beyond being competent, a city mayor needs to be tougher than the convivial but very mean friends he needs to associate with. He must, for example, decline to run for national office, the traditional way that city machines rid themselves of pointy-headed reformers.

http://www.philadelphia-reflections.com/blog/1360.htm


Volunteerism Needs a Business Plan

{Alexis de Tocqueville}
Alexis de Tocqueville

The visiting Frenchman Alexis de Tocqueville was struck most by the volunteerism he found everywhere in the young American nation; in his view, the first reaction of 19th Century Americans to a problem was to create a volunteer organization to fix it. Benjamin Franklin, who created dozens of such initiatives, was held up as its great exemplar. But de Toqueville visited us at the beginning of the Industrial Revolution, and we are now well past that into the Information Revolution; voluteerism has noticeably declined. Not only have the great volunteer organizations like the Masons and the Red Cross suffered, but it is far more difficult to enlist the help of others to form a pick-up group to attack some issue or other. It is in that sense the general spirit of volunteerism has declined. The likely difficulty is not selfishness, but helplessness of people to control their own time.

{Calling all Volunteers}
Calling all Volunteers

When volunteer groups do assemble, they are mostly composed of self-employed people like plumbers and dentists, free to be somewhere else during "normal business hours", which although shorter than they once were, seem extended by commuting time and by chores pushed aside during workplace confinement. To some extent longer commuting distances make it physically impossible to do personal chores in the vicinity of the workplace. But constrained personal time is also related to increased control behavior by management. A successful big business has to employ strategies to get employees with cell phones to stick strictly to business while the employer is paying for their time. Now that so many women are going out to work, the family unit needs to struggle to coordinate everyone's work time so there will be some remaining opportunity to conduct family life. When a working couple shares the home tasks and baby sitting, the preempted time now extends to two working partners, and what is left is called "quality time". A probably temporary elaboration of this time competition is the need to chauffeur teenagers to their resume-enhancing activities. For the time being you don't pick a college, the college picks you, and parents desperately labor to assist their children on a career path. Quite obviously, America needs to evolve better ways of trading work at home for more flexibility in the actual workplace, and we also need to build more first-rate colleges, but those issues are not the present topic.To summarize: It's awfully hard to assemble a group of volunteers simultaneously, because employers have so successfully assembled their time. Failing to appreciate the tradeoffs inherent in commuting time is a secondary but still important factor, somehow related to the recent housing/schools mania.

Consequently, volunteer organizations increasingly tend to regard their chores as something you hire someone else to do if it proves impossible to dump them on someone who is retired or unemployed, or too timid to refuse. Even nominal volunteers are reluctant to step forward. This leads to recruitment lectures along the line that naturally you must sacrifice if you really truly believe in the goals of the dear old Whatsis Association, surely just a coercive speech pattern. That claptrap was never heard during the age of universal volunteers; volunteering was just one of those things everyone expected to do to get community activities accomplished. We're losing something important if we continue to endorse this attitude. Sometime during the first twenty-four hours in military service, for example, someone will surely advise the new recruit -- never volunteer.

For a penniless non-profit to adopt the solution of hiring staff when there is no revenue stream to pay them, is the first step toward dissolution of the organization. Essentially, the non-volunteers are ordered to contribute money if they choose to be draft-evaders, and eventually the officers and staff begin to look back at the organization members as cows to be milked. A class of people who are only making a living are substituted for those who understand and promote the goals, and it just goes downhill from there.

Instead, all volunteers really must each do some unpaid work, and the officers and directors must set an example of it. What an organization does next is crucial. Individual members, either anonymous or hoping to remain anonymous, must be approached with the suggestion they accept responsibility for a task. The wild-eyed response to this approach is quite familiar, like the lame excuse that there is no time. A counter response that I'm busier than you are, does not improve the conversation because it suggests the refuser is merely a selfish shirker. Instead, initial requests must take the following form: They should be for a simple, limited task without any obligations stretching to infinity. Almost everyone will be glad to bake a cake for a party, but almost no one will agree to be chairman of the cake-baking department, unless the boundaries of that commitment are more reliably limited than they usually are.

In modern times, any major undefined volunteer responsibility is seen as potentially leading to an unwinable conflict with gainful employment or else its ill-considered outgrowths like commuting. Since that's the basic problem, all volunteer invitations must respect the true issue and devise workable ways to circumvent it. Role models certainly help if you have any.

www.Philadelphia-Reflections.com/blog/1448.htm

http://www.philadelphia-reflections.com/blog/1448.htm


Federal Reserve Changes Its Business Model

Americans generally do not begrudge the success of neighbors; the achievement of someone else takes away nothing from me. In that spirit, we like to see developing countries rise up out of poverty. A more prosperous world is a safer one.

{Federal Reserve Bank of Philadelphia}
Philadelphia Federal Reserve

Rising international prosperity can, however, disrupt matters. When developing countries become producers, they can get inflation if they suddenly have more money than they know how to spend. Sudden wealth can come from discovering oil or gold or copper; slowly learning how to manufacture something is a safer way to prosper. Inflation and huge internal income disparities often lead to revolutions, so the wiser countries sterilize local money by exporting it. Coups and dictatorships are what happens if a developing country doesn't export its inflation; sudden wealth gives the appearance of being undeserved. Conversely, our recent dot-com and sunbelt real estate bubbles show what happens to the neighbors if developing-world inflation gets dumped on them. Eventually, of course, developing countries eventually balance their new production with new consumption, and the world settles down to a new balance. Never mind denouncing the rubbish the newly-rich decide to consume; its only problem for others lies in using up the world's resources faster. Developing countries commonly export inflation to other nations in the form of commodity inflation. The neighbors can soon have a commodity bubble on their hands; when any bubble bursts, a sharp recession can quickly follow, and after that some other kind of bubble appears. What is new and disruptive is not oil or gold or copper; it is too much money.

With luck, these disruptions consequent to a neighbor's prosperity are soon overcome by improvements in productivity. But productivity itself can create a bubble. One huge productivity windfall for America is the astonishing thirty-year extension of longevity we have experienced; in time, we will surely devise occupations for retirees more productive than thirty-year vacations. Such balancing adjustments right now seem most likely to grow out of electronic productivity, using home sites as work sites.

So in short, America must readjust like everyone else and one systematic readjustment has just surfaced at the Federal Reserve. The flood of money from China and the Persian Gulf sought an outlet in our economy, adopting the device of shifting American credit sources from banks to Wall Street ("securitization"). Cheap money once derived from bank deposits in local banks; since it now often originates abroad, it now must travel through the "carry" trade and similar innovative channels for foreign surpluses to get to Wall Street investment banks, which in turn distribute the money ("credit") to American businesses which can use it more productively than the developing countries can. Through securitization (turning loans into securities), Wall Street was able to make home mortgages directly, with only token involvement of local banks. Credit markets froze up because the new procedures had neglected to enlist local bankers in the process of checking the credit-worthiness of borrowers. So long as Wall Street can continue to find new sources of cheap money, this upheaval of finance is likely to be permanent because it is desired by both sides. Access to cheaper loans and access to safer investment harmonize the needs of the haves and the have-nots. Because in its haste this new development precipitated a banking crisis, there is some danger that Congress will over react by prohibiting securitization rather than correcting its flaws. In every participant's eyes, it's cheaper and more efficient, but new efficiency threatens old inefficiencies. This one threatens the old deposit-based banking system, and since the Fed's control of the currency is based on its control over the depository banks, it threatens the Federal Reserve. That's the real driving force behind the Fed seeking control of non-traditional credit sources; that's now where the money is.

On March 16, 2008 things came to a head with the impending collapse of Bear Stearns, a Wall Street investment bank heavily involved in Credit Derivatives. There are rumors the rescue plan implemented over a weekend had actually been devised and held ready long before then. Many imperfections now surface with experience, but at least the plan had likely been explored as thoroughly as logic without direct experience ever allows. For example, the dispersal of manufacturing around the globe favored making pieces of a product and selling them to an assembler, rather than enveloping the whole process of making a product in one giant corporation. It's cheaper, that's why they do it. But the process of buying and selling pieces to other companies greatly expanded the need for short-term credit. Therefore, it was quite unexpected that Lehman Brothers, which specialized in such short-term loans, suddenly went bankrupt for lack of quick access to capital. In the panic, it is unfortunate that Lehman apparently concealed its situation from investors. There is a danger that Congress will draw the wrong moral and somehow block the globalization of manufacture.

The Federal Reserve Act was passed by Congress in 1913, and most observers believe the Fed's inexperience in 1932 repeatedly made matters worse in that formerly greatest of all bank panics. The new plan of 2009 therefore had to step around some limitations imposed by Congress in the past, the political pressures generated by an impending presidential election, and the powerful resistance from private industries whose future was affected. The adroitness with which such a complex matter was handled over a weekend will surely become legendary, but maybe not soon. Probably because of existing legal roadblocks, three "lending facilities" were created, but a single device was at the heart of it. Instead of lending money, the Federal Reserve offered to swap securities with new non-bank managers of retail credit. The investment banks held massive security for loans which could not be sold in paralyzed markets, but could be swapped or used as security for a loan, particularly if the government stood behind the innovative transactions. Wall Street in a word had plenty of wealth, but could not turn it into money fast enough to pay its bills. So sidestepping the legal constraints, instead of giving Investment firms money as a lender of last resort, the Federal Reserve swapped Treasury Bills for the "frozen" assets held as security for mortgage loans. The securities had been "caught in a loan" as the expression goes. There isn't much difference between Treasury bills and cash, or between exchanging bonds and selling them. But the new approach could be quickly and legally accomplished, and once done, the Federal Reserve was the master of investment banks. It became effectively their lender of last resort. A great deal of advance thought must have gone into devising this readjustment to the reality that over half of loans were not backed by bank deposits, but by the securitized debt of foreigners. Regulations will ensue, hearings will be held and laws passed, but the Fed has regained control of the money supply, if it can manage to make this maneuver understandable by the public.

There was moral hazard in this; the presence of a lifeguard tempts swimmers into deeper water. It was somewhat inflationary in the midst of an inflation threat. No doubt the Federal Reserve regards these negatives as prices worth paying, and they probably are. The decisive remaining issue is not whether the initial shape of this transformation is exactly correct; it surely isn't. Just as was true in 1932, what will ultimately matter most will be whether, with this altered stance, the Fed will adjust quickly and appropriately to future difficulties. And whether politicians will even permit it to do the right thing, assuming anybody then knows what the right thing might be.

www.Philadelphia-Reflections.com/blog/1465.htm

http://www.philadelphia-reflections.com/blog/1465.htm


Securitization: Pass the Hot Potato

{Fannie Mae Corp.}
Fannie Mae Corp.

It would be pardonable to say that since securitization of home mortgages is a generally good thing, we might overlook any minor differences in approach between Fannie Mae (FNMA) and CDOs (Collateralized Debt Obligations), and let the customers decide which approach is preferred. Unfortunately, they both encompass a fatal flaw that has somehow escaped adequate notice. As mortgages pass from one holder to the next in sequence, both the buyer and seller seek to avoid the worst-risk mortgages and retain for themselves the best-risk ones. Get stuck with too many bad-risk properties, and you will go broke. When the credit markets suddenly woke up to this reality in August 2007, it was impossible to know who was holding good stuff and who was holding toxic mortgages. The markets "froze", which is to say most traders just walked away from participation until the situation clarified.

{Rising house prices}
Rising house prices

Furthermore, with existing systems this seems to be something that will inevitably happen. A small-town bank tries to sell every mortgage it originates to an aggregator, but a few mortgages just aren't salable. The small town bank might well be able to sell mortgages to people who can't afford a house, but the aggregator is wise to the world, and won't buy the worst of them, so they silt up in the hands of the originating bank. Some originating banks may be deft enough to hold on to the very best risks and sell the rest, but a lot of banks will be turned away by dealers who are smarter than they are. At every step in the chain there will be the same contest, so eventually everybody comes under suspicion. Add to this trap the irony that an environment of rising house prices simply increases the size of the defaults when the pyramid finally topples, and it may temporarily blind everyone to the risks being run, thus making it all worse. Somehow or other, the average down payment on the mortgages you hold must be larger than the average drop of house prices in a slump, else you will be transferring the risk from the homeowner to yourself. A strong case can be made that the fault in the recent crash was not predatory lending; it was failure to demand adequate down payments.

{Bear Stearns}
Bear Stearns

However you define an "adequate" down payment, it is clear that the recent rise of house prices particularly in the regions of greatest overbuilding, put a conventional 20% down payment completely out of reach of many first-home buyers. Since house prices have declined 20% and may decline 20% more, a determination of lenders not to lend more than 80% would have prevented a lot of overbuilding. If mortgage aggregators had refused to purchase mortgages that lacked an adequate down payment, the originating banks would soon have stopped issuing them. Consequently, the necessary fortitude should have been applied at the last step before securitization. It's possible to believe the people at Bear Stearns now wish they had done so.

If we then turn to the GSEs, the significant extra risk of Fannie Mae is political. Holding $5 trillion of debt more or less guaranteed by the U.S. Government, the Secretary of the Treasury repeatedly told congressional hearings that assuming its default would double the national debt. Double the national debt is what is meant by being "too big to be allowed to fail." Since this appalling situation willy-nilly relieves Fannie Mae of any worry about collapsing, the only way to force Fannie Mae to insist on adequate down payments is by Congress passing a law that they must. Congress seems to lack the political will to pass such rules in an election year, or probably any other year. The mandate for fifty years has been for Fannie Mae to make housing "affordable" and keep homeowners from losing their homes. It would be an unimaginable tragedy if Congress ran away from this dilemma, and accepted the hyper-inflation which would result from suddenly doubling the national debt. Unimaginable, but likely.

http://www.philadelphia-reflections.com/blog/1498.htm


Concessions and Agreements

{Concessions and Agreements}
Concessions and Agreements

The United States Constitution is a unique achievement, but it had significant precursors, many of which James Madison had studied at Princeton. In the days of difficult ocean travel, almost all colonies were bound by agreement to maintain loyalty to their European owners in spite of receiving latitude to govern themselves. Charters and documents defining these roles were generally written by the owners, and the colonists could pretty much take them or leave them. In the case of New Jersey in 1664, however, a very formidable lawyer and friend of the King named William Penn was drawing up agreements to his own conditions of sale, taking care that the grant of governing authority he received was favorable. Penn's relationship to the King was unusually good to say the least. He had more reason to be wary of nit-pickers in the King's administration, trying to anticipate every conceivable disappointment for some successor King.

For his part, Penn wanted to make colonial land attractive to re-sell to religious groups who had experienced harsh government oppression; he wanted no obstacles to his announcing there would be no religious oppression in New Jersey. He was offered the role of sub-king although he hastily rejected any such title, and needed to repeat the formalities of the Charter to define his role and reassure his settlers about that matter. Furthermore, he was dealing with the heirs of Carteret and Berkeley, active participants in North and South Carolina. So Penn's method of achieving basic rights was influenced by prior thinking in the Carolinas, as the thinking of John Locke secondarily influenced matters in Delaware and Pennsylvania. These ideas were incorporated in a New Jersey document called "Concessions and Agreements." The concepts were not wholly the ideas of William Penn, but he did write it, and it does contain many ideas that were uniquely his. Understandings about limits were set down, argued about, and agreed to. The owner risked money, the colonist risked his life. Neither would agree unless a reasonable bargain was struck in advance of any dispute. Furthermore, the main value of a colony was beginning to shift from trading rights to real estate rights. Carteret and Berkeley had not only been principals in both the Carolinas and the Jerseys, but had been involved in a number of such investments in Africa and the West Indies; New Jersey was just another business deal. It was conventional for documents of this type to define the method of selection of a governor, the establishment of an assembly of colonists, and some sort of council to attend to day to day affairs. In that era, few colonists would cross the ocean without a guarantee of religious freedom, at least for their own brand of religion. Standard clauses which may sound strange in today's real estate world, were then necessary because it was a transfer of not merely land, but also the terms of government. In the case of the Quaker colonies, many of these stipulations were included in the earlier charter from the King. It seems very likely that Penn hovered around and negotiated these points which he wished to have the King agree to; and then once the land was safely his, Penn repeated and expanded these stipulations with the colonists in his Concessions and Agreements . It wasn't exactly a Constitution, but it reads a lot like the one America adopted a century later.

{Proprietors House}
Proprietors House

Quakers had suffered persecution and imprisonment, and knew exactly what they feared; on the other side, it seems likely Carteret and Berkeley were less interested. So this real estate transfer document conceded almost anything the colonists wanted and the King would stand for, couched in conciliatory phrases. For example, no settler was to be molested for his conscience, and liberty was to be for all time, and for all men and Christians. Elections, by the way, must be annual, and by secret ballot. While law and order must prevail, nevertheless no man is to be imprisoned or molested except by the agreement of twelve men of the neighborhood. On the matter of slavery, no man was to be brought to the colony in bondage, save by his own consent (that is, indentured servants were to be permitted). And in what proved to be a final irony for William Penn, there was to be no imprisonment for debt. Almost all of these innovative ideas survived into the U.S. Constitution a century later, but the most innovative idea of all was to set them all down in a freely-made agreement in writing. This was not merely how a government was organized, it defined the set of conditions under which both sides agreed it would operate.

It was of course, more than that. It was a set of reassurances to settlers who had been in New Jersey before the English arrived that they, also, would be treated as equals. It was a real estate advertisement to the fearful religious dissenters back in England that it was safe to live here. And it was a reminder to future Kings and Parliaments that this is what they had promised.

The pity and a warning, is that the larger vision of a whole continent governed fairly by common consent may have been too grandiose for a little band of New Jersey Quakers, surrounded as they were by an uncomprehending world. All utopias are helpless when stronger neighbors reject the basic premise. However, it was the expansion of the pacifist concept to the much larger neighboring territory of Pennsylvania that proved to be just too much for such a small group of friends to manage by consensus, particularly when unbelieving immigrants began to outnumber them. But the essential parts of it certainly remained in the minds of delegates to the Constitutional Convention in 1787.


REFERENCES


Concessions and Agreements of New Jersey 1676: William Penn New Jersey State Library
Camden After the Fall: Decline and Renewal in a Post-Industrial City: Howard Gillette Jr.: ISBN-13: 978-0812219685 Amazon

http://www.philadelphia-reflections.com/blog/1512.htm


Vote Counting, Past and Future

{Greg Harvey}
Greg Harvey

The Right Angle Club was recently fascinated to hear Greg Harvey, a Montgomery McCracken expert on election laws, discuss the snarled Florida situation in the 2000 Presidential race, and the prospects for similar problems in upcoming elections. With the aid of retrospect, candidate Al Gore deserves much of the blame for his own loss, and the U.S. Supreme Court does seem to have terminated the uproar without affecting the final result.

A consortium of major newspapers funded an extensive investigation of the Florida election, and were forced to agree that George W. Bush would probably have won that election no matter what. The central issue in these contests is the 35-day time limit to contesting elections. It is true that, right or wrong, the country needs to settle its elections promptly and get on with its business. Furthermore, if a national election is so close that it takes months to decide the winner, there can't be a great deal of difference between the candidates, so who cares.

{Al Gore}
Al Gore

Looking back at the 2000 election with the leisure of time and appreciable resources, it is possible to see that Al Gore might have won that election if he had made several lucky choices in contesting its result. But it seems highly unlikely that anyone in his position would have been able to identify the winning combination of choices -- within the 35 day time allowed for pursuing them. He had to guess that ballots with two candidates marked ("overballoting") would pick up more Gore votes than ballots without an indicated choice ("underballoting"); he guessed wrong. He had to decide whether challenging late ballots from absentee military was worth the unpopularity of pursuing such a technicality to the disadvantage of soldiers serving overseas. His ticket-mate Joe Lieberman urged him to avoid that touchy issue which did prove to cost him some votes he needed. The decision was one to be proud of, but is a main reason why his party faithfuls later turned rather viciously against Lieberman. A second wrong guess was to fail to go after the software mixup on invalidating the ballots of convicted felons. He might have picked up a couple thousand votes, but only if willing to have the world learn that convicted felons are overwhelmingly pro-Democratic voters. The one decision he made that makes him look rather sappy to professional pols was to challenge ballots in the districts where he was already very popular.

Vote

Vote counters and poll watchers tend to be strong political partisans, usually drawn from the local district. When votes are ambiguous, these people lean in the direction of their party. Therefore, most party insiders would know immediately; if you challenge districts, challenge the districts which favor your opponent. Choices like this do have to be made. The thirty-five day rule makes a challenger run out of enough time to look elsewhere if early guesses prove wrong. So, although it is possible in retrospect to construct for Gore a winning strategy for selective challenges, the newspaper consortium and the Supreme Court which pondered the choices before him rightly concluded he was destined to lose.

{HAVA}
HAVA

Some of these lessons are enduring ones, but future elections face unexplored difficulties. A new election law (the Help America Vote Act, or "HAVA") sought to reform the election system by prohibiting the use of punch card ballots, requiring states to use auditable vote records and provisional ballots in doubtful cases, stricter voter identification methods, and state-wide voter registration databases. In response to these record requirements, many states opted for complicated data in code, sequence-scrambled to prevent individual identification. In the event of challenge, however, deciphering these records will be time-consuming, and the potential is created for the candidate who is initially ahead to stretch out the process until the challenge effort collapses at the 35-day time limit.

Several states, including Ohio, are thought to have the potential for very close 2008 results. In that particular state there are some complicated rules about voting in the "wrong" district, that is, to be registered in one district, but attempting to vote in another. It would not seem difficult to do a little of this on purpose, either as a voter, or an election registrar. It seems unlikely that very much challenge among the three possible culprits could be accomplished within thirty five days of a contested election. So the challenger in Ohio would be faced with the same sort of impossible snap decisions that faced poor old Al Gore, surrounded by excited partisans shouting at the top of their voices.

So perhaps Greg Harvey's lawschool classmate Appellate Judge Richard Posner has a sustainable position on this. It was his judgment that the 2000 election was essentially a tie. Letting the Supreme Court decide it wasn't the worst possible choice.

www.Philadelphia-Reflections.com/blog/1515.htm

http://www.philadelphia-reflections.com/blog/1515.htm


Rescuing International Finance?

Let's begin this discussion of international finance by relating the story of how the United States solved the same problem in 1913. This wasn't a ho-hum bit of history, it set the pattern the world is now about to adopt or reject. Remember, our current lame duck President comes from Texas.

{inflation-since  1913}
inflation-since 1913

In 1913, the Federal Reserve system was created. It had various purposes, but it essentially stripped the state governments of the ability to adjust interest rates, and placed that power in Washington DC. The appointment process to the Fed board was tinkered with to achieve as much independence from politics as possible, although it was unrealistic to think politics would be totally excluded. Politicians never give up power voluntarily, but in this case they also escaped blame for the unpleasant things a central bank is occasionally called on to do, so it was a deal. The remaining uncertainty thus became the question of whether the states would yield to federal authority on interest rates, something they had consistently resisted ever since the Constitution was ratified. The first resister was Texas.

{Franklin D. Roosevelt}
Franklin D. Roosevelt

It suited the Texas economy to have lower interest rates than other states, but the fledgling Federal Reserve decreed that the nation as a whole needed higher rates. In fairly typical Texas style, Texas just lowered rates anyway. Almost immediately, nobody would deposit money in Texas banks, who were flooded with requests for loans from the rest of the country. That situation couldn't last more than a few days, so Texas capitulated, and no state has defied the Federal Reserve since then. In this little story lies the hope that a similar international banking arrangement can be devised, and announced shortly after November 15. That would probably put George W. Bush in a class with George Washington and Abraham Lincoln in the history books, his current low popularity not withstanding. For that reason alone, there is cause for concern about the newly elected incoming President. The worrisome historical model at this level lies in the refusal of newly elected Franklin D. Roosevelt to cooperate with the lame duck Herbert Hoover during a similar economic crisis of 1933. On the level of "practical" politics, Roosevelt got away with this deplorable behavior, by enacting many of Hoover's proposals six months later and taking full credit. The country was much worse off as a result, but Roosevelt nevertheless seems to have achieved enduring historical praise for his imaginative ideas. This time, one would hope that fear of the blogosphere, the London Economist and the Wall Street Journal would make such behavior politically unprofitable for either Obama or the maverick McCain. But you never know.

{Henry Paulson}
Henry Paulson

Now, to return to the present crisis. In a sense, every type of financial institution from banks to hedge funds, every nation from America to Zimbabwe, and every expert from Hank Paulson to Barney Frank -- has been tested, and occasionally failed quite visibly. People are scared, have every reason to be. But on the other hand, sound reasoning will never defeat politics and financial greed, except in a rare crisis containing obvious general danger. So, this mess represents an opportunity for the think tanks to be given a chance at leadership, just as John Maynard Keynes was listened to respectfully at Breton Woods in 1944. It was just about the last time a guru got his way without the use of financial power, or an overwhelming voter mandate. As Franklin Roosevelt is reported to have said, "I don't understand a word the man says, but we must do something."

{Barney Frank}
Barney Frank

Let's use a few examples out of a great many available. Ireland issued a guarantee for all the deposits in its banks. Immediately, money poured into Irish banks from British depositors, unsettling the British banking system. So the United Kingdom had to issue the same guarantee, and then other nations followed. America rescued Bear Stearns, Fannie Mae and AIG, and finally called a halt at Lehman Brothers. Other nations copied this approach of rescuing institutions in trouble, until the Bank of England copied the Swedish approach of 1991 of reversing this approach. If you are in a sinking lifeboat, you want to rescue the best rowers, not the weakest. But there are some small countries with big banks, like Switzerland and Iceland, where it would be impossible for a small government to rescue a huge international bank within its borders. Conversely, the Eastern European countries have essentially no local banks. In the case of Hungary, most home mortgages were held in Austrian and Swiss banks. When the flow of funds forced a devaluation of the local currency, the cost of almost every mortgage in Hungary doubled, and the national government could do nothing about it.

Let's mention what may well be the largest such factor in this international banking game, the so-called Japanese carry trade. When the overheated Japanese stock market collapsed fifteen years ago, the Ministry of Finance responded by lowering interest rates to one or two percent. Taking into account the inflation rate, Japanese banks were paying the borrower to take their money. So, the international banking community promptly responded by borrowing money in Japan at 2% and lending it out in Germany at 8%. Amounts of money in the trillions churned through this money machine. An unknowable but large amount of this money originated in China, which was trying to prevent its surpluses from provoking a revolution with inflation. The Japanese carry trade is at an end except in reverse, as money is flowing back to the now seemingly safe Japanese economy. Perhaps even a casual reader can look up from the World Series and the presidential election, to realize that absolutely everybody is scared, and possibly scared enough to do something cooperatively. It means loss of national power and sovereignty for everybody, a reconsideration of the European Common Market, and setting aside any disruptive schemes to discipline Premier Putin's behavior as a hidden by-product. As Frank Roosevelt said, we don't understand a word of it, but we must do something.

{The World Bank Logo}
The World Bank Logo

Among the small practical ideas advanced, one of the most promising is to persuade the Chinese government to float its currency. We have historically tolerated small primitive countries when they try to struggle out of poverty by artificially cheapening their currency. In China's case, and before that in Japan's, cheapening the currency in order to stimulate exports has been politely referred to as "pegging the currency to the dollar". Pegging it low, that is. But Japan and China are no longer barefoot, and aspire to become important figures in international finance. China is said to resist this proposal on the grounds that it needs 7% annual growth to prevent social unrest leading to a revolution. To some extent, this is probably just bargaining talk, and the counter proposal offered is to strengthen Oriental power within the International Monetary Fund, as part of the process of increasing the power of the now-indolent IMF. We will have to wait for November 15 to see if clever little schemes like this one will suffice for the purpose. Much depends on China's willingness to cooperate, but even more depends on the validity of blaming present messes on currency manipulation for the purpose of mercantilism. Beggar thy neighbor behavior has certainly been common; the question is whether it was the main cause.

If all those think tanks led by the Bank of England, have found the stone whose removal will start a benevolent avalanche, a second Breton Woods conference might just get us out of the soup; within two years we should be pleased with the way our cleverness restored the world to prosperity. If not, more grandiose ideas must be desperately considered. Europe must abandon all those silly five-hundred page constitutions and form a national union. In our own case, that worked for eighty years and then we had a civil war, but even a repetition of all that sounds better than what we now face. If Europe simply cannot seize the moment, it is very likely to retreat into insignificance. Under those changed circumstances, the world economy will amount to three nations: China, India and the USA. We have yet to learn whether the Chinese and particularly the Indian governments can summon up enough domestic leadership to deserve a place in international leadership. And that presently is far from certain.

http://www.philadelphia-reflections.com/blog/1531.htm


Mercantilism Dies Hard

{Mercantilism to  Americans}
Mercantilism to Americans

Whatever mercantilism was supposed to mean can be debated by captive college students; mercantilism to Americans is and was just a bad thing having to do with economics, mentioned only when the speaker is searching for an epithet. Our present understanding of the mercantilist term is that brutal government action, even war, was employed to benefit favored citizen merchants, while the economics of a whole nation of consumers was subverted toward enhancing state power. All of this rapacity was for the betterment of one nation at the expense of its neighbors, and at the expense of its colonies. The surprisingly vague but more modern term of fascism is often substituted, to denote evil uses of government to promote the interest of a combined military and industrial elite, to the general disadvantage of everyone else. Because so many opponents of mercantilism were upset about specific forms of mercantilist activity, Adam Smith is associated with the idea that mercantilism was the opposite of international free trade, and the American founding father are associated with the idea that mercantilism embodied everything we disliked about colonialism. Some prominent 18th Century leaders constructed a body of theory to defend mercantilism, and firmly established the idea that the whole approach was founded on long discredited sophistry. In recent times, the only reputable economist to defend parts of mercantilism was John Maynard Keynes, who approved of the idea of emphasizing third-world exports in order to assist developing countries into a modern economy. Whatever is the underlying idea behind this mercantilist idea that has caused so much trouble, and includes so many disconnected features?

{Industrial Revolution}
Industrial Revolution

Allow an amateur theory. In my view the fundamental misconception underlying mercantilism was the idea that economic relations between individuals and nations are a zero-sum game; what I gain must be at the expense of someone else's loss. Almost every child believes that, many or even most everyday transactions seem to confirm it, and vast multitudes of mankind believe it to the end of their days. But as part of the Industrial Revolution the counter-intuitive realization began to spread that cooperative behavior, within limits, could sometimes result in all participants becoming better off, harming no one. Perhaps it was even a universal idea. Adam Smith popularized the idea that when two parties freely participate in the free trade of a marketplace, each one can come away from the trade feeling better off; one party would rather have the goods, the other party would rather have the money, and they trade. Multiplied millions of times, the expansion of free trade would enrich whole nations, even the whole world. George Washington may not have understood all that, but he did know that England was injuring him with rules about insisting British subjects must conduct all foreign trade in British sailing vessels, must not manufacture locally, must do this, must not do that.

{John Maynard Keynes}
John Maynard Keynes

Exporting was good, importing was bad, manufacturing was to be concentrated in the mother country, consuming was to be discouraged -- what was the unifying theory behind all this? It would seem to have been the gold standard. Gold was durable, and its supply was limited. It had certain undeniable advantages, but its overall effect was to restrain industrial progress. If the economy is constantly expanding, but the supply of gold is relatively limited, the price or value of everything will go steadily down over time. In George Washington's time that was particularly irksome with regard to the value of his plantation, and his vast land holdings of Ohio land. It was also true of everything else that was reasonably durable. If everything is measured in gold, and gold is limited, then the accumulation of gold is ultimately the only way to accumulate wealth. The English nobility who were profiting from the system might not perceive it, but the colonists could perceive it in their bones. Small wonder that modern banking, economics and innovative finance took root in the American colonies. If not first, at least most vigorously. Small wonder we had a revolution men would die for, while the British were merely annoyed and mystified.

Vast areas of Asia, Africa and the Middle East are still committed to the idea that the only way to get rich is to steal from others; since everyone wants to get rich, everyone steals. Someone has reduced this idea to a simple game theory called the Prisoner's Choice. If two prisoners tattle on each other, both will be severely punished. If both prisoners refuse to testify, both will go free. If one tattles and the other remains mum, the tattler will go free and the loyal comrade will get hanged. Reduced to its simplest level in a series of repeated games, the theory states that it's better for everybody to cooperate most of the time, but you must be willing to play tit for tat if the other party cheats. Be cooperative as much as you can, but never forget to wallop a cheater, and then forgive him later so he can have a chance to play nice. Lots of people will think you are a sucker if you play nice, so unfortunately it is necessary to retaliate -- swiftly and painfully -- when someone cheats. Centuries of American history are explainable with this simple game theory.

And not just with tribesmen and Nazis. When Winston Churchill finally realized that the Bretton Woods Conference was going to mean the end of the British Empire, he was almost tearfully plaintive with his friend Frank Roosevelt, but he said he understood.

And six years later, when Churchill's protege Anthony Eden invaded Egypt over the Suez Canal, Dwight Eisenhower the hero of the Normandy Invasion that saved England, suddenly turned nasty. England would immediately abandon that invasion, or Eisenhower would foreclose on British debts and ruin them.

That was the end of British colonialism, and in a sense it was the final end of the Revolutionary War.

http://www.philadelphia-reflections.com/blog/1534.htm


George Washington Demands a Better Constitution

{Parson Weems}
Parson Weems

GEORGE Washington was a far more complex person than most people suppose, and he wanted it that way. He was born to be a tall imposing athlete, eventually a bold and dashing soldier. On top of that framework, he carefully constructed a public image of himself as aloof, selfless, inflexibly committed to keeping his word. Parson Weems the biographer may have overdone the image a little, but Washington gave Weems plenty to work with and undoubtedly would have enjoyed overhearing the stories of the cherry tree and tossing the coin across an impossibly wide Potomac. Washington had a bad temper, and could remember a grievance for life. He married up, to the richest woman in Virginia.

{Potomac River}
Potomac River

Growing up along the wide Potomac River, Washington early conceived a life-long ambition to convert the Potomac into America's main highway to the Mississippi. He did indeed live to watch the nation's new capital start to move into the Potomac swamps across from his Mount Vernon mansion, in a city named for him. For now, retiring from military command with great fanfare and farewells after the Revolution, he returned to private life on this Virginia farm. He made an important political mistake along this path, by vowing in public never to return to public life. During the years after the Revolution but before the new Constitution, his attention quickly returned to building canals along the Potomac River, deepening it for transportation, and connecting its headwaters over a portage in Pennsylvania to the headwaters of the Monongahela River -- hence to the Ohio, then the Mississippi, or up the Allegheny River to the Great Lakes. He personally owned 40,000 acres along this river path to the center of North America. The occasion for a national constitutional convention grew out of a meeting with Maryland to reach agreement about this Potomac vision, which was being blocked by commercial interests in Baltimore. Ultimately, Baltimore won the commercial race; so it was the Baltimore and Ohio Railroad which captured the early commerce to the west. Washington also made deals, ultimately to Baltimore's benefit, with the James River interests, to give them a share of the development of Chesapeake Bay trade. As a young man, George Washington had acted as a surveyor for most of this region, and as a young soldier had explored the Indian trade to Pittsburgh, actually starting the French and Indian War during this trip. He was to march it again later with Braddock's army. All the while, Washington dreamed of the day. There were competitors; Philadelphia and New York had similar aspirations for their rivers. Take a look at a globe, or Google Earth. Comparatively few of the earth's rivers drain to far western beaches. Even today, long-term victory in worldwide water transportation will likely go to one of many eastern rivers linking up with one of the few western ones. The ultimate world-wide goal has yet to be fulfilled for what continues to be the cheapest of all bulk transportation methods.

Washington at age 54 was already richer than most people need to be; a lot of this Potomac dream was a residual of boyhood ambitions enduring into middle age. In a sense, he had an ambition to make his boyhood home the future center of the universe. Although much of his stock in these real estate enterprises resulted in very little extra wealth, he demonstrated his mixture of public spirit combined with ambition by donating the stock in one of the companies to a future national university, to be located across the river near Georgetown. Since that didn't work out, he later placed the nation's capital there. He had consistently been a far bolder dreamer than Cincinnatus, humble Roman citizen soldier returning to his farm from the wars.

Washington more or less gave up this Potomac ambition for a loftier one. During the Revolution, he had suffered the most infuriating abuse of himself and his soldiers from the state legislatures. Their urgent demands for victories were seldom matched with resources. The Continental Congress representing those state governments in a weak confederation that could not feed and pay its own troops, seemed little better. He could be a mean man to cross, but perhaps with General Cromwell in mind, Washington possessed the firmest and most sincere belief in the proper subservience of military to civilian control. These conflicting feelings resulted in earnest obedience to a group of politicians he surely distrusted. This could not be described as hypocrisy; he respected their rank even though he suffered from their behavior. When Congress paid the troops in worthless currency which they promised to redeem after the war, it became clear that either lack of moral fiber or their system of governance led the states and the congress in the direction of dishonoring their debt to the soldiers. This was a dreadful system, which led to death and suffering among the loyal troops, forcing the General into the humiliating position of assuring the troops Congress would stand by them, while he privately doubted any chance of it. Washington did not easily forgive or forget. Here was a paltry outcome for eight years of war and suffering; this system of organized dishonor must be improved.

He went about achieving his goal in a way that would not occur to most people. He chose a young ambitious agent, James Madison, who had caught his attention in the Virginia legislature, in the Continental Congress, and in the negotiations with Maryland over the development of the Potomac. Washington schemed with the young man for weeks on end about ways and means, opportunities, dangers and potential enemies. Perhaps he failed to notice some ways where he and Madison fundamentally differed. Madison himself might not have recognized that his years at Princeton in the Quaker state of New Jersey had exposed him to novel ideas like separation of church and state, which were instantly appealing to the two Virginia Episcopalian religious doubters. Many people he admired, Patrick Henry in particular, wanted government to be as weak and ineffective as possible. Unfortunately, when Madison's turn later came for assuming the Presidency, he went along with reliance on diplomacy and persuasion until it almost cost America the War of 1812. Acting as Washington's agent in 1788, Madison was assigned to win over the Virginia legislature, make alliances with other states in Congress, identify friends and enemies, make deals. He performed as brilliantly as he would at the Constitutional Convention, so the basic conflict between the soldier President and his politician assistant was glossed over. As long as the original relationship held together, Washington felt it was useful to remain above and aloof, publicly wavering whether this was all a good idea, but fiercely determined to have a nation he could be proud of. There was to be a Constitutional Convention in Philadelphia, but while Washington was invited, he let it be known he was uncertain whether he should accept the invitation. What he really meant was he would preserve his political credibility for a different approach if this one failed. Considered from Madison's viewpoint however, this clearly meant Washington would dump him if things went badly. Meanwhile, the unknown young Madison on several occasions came to Mount Vernon for three days at a time to talk strategy and give the famous General all the scoop. Today, we would describe Madison as a nerd. The aristocratic Gouverneur Morris never thought much of him. Washington needed him, but there is no evidence he thought of him other than as a glorified butler. Little Madison was awkward among the ladies, a problem inconceivable to either Washington or Morris. But that little mind was surely working, all the time.

Madison was in fact a brilliant politician, a dissembler in a different way, but a severe contrast with his mentor. To begin with, he was a scholar. Both as an undergraduate at Princeton and a graduate student working directly with the great Witherspoon himself, Madison was deeply learned in the history of classical republics. He spent an extra year at Princeton, just to be able to study ancient Hebrew with Witherspoon. But he was innately skilled in the darker arts of politics. When votes were needed, he had a way of persuading three or four other members to vote for a measure, while Madison himself would then vote against it to preserve influence with opponents for later skirmishes. In fact, as matters later turned out, it becomes a little uncertain just how convinced Madison was that Washington's strong central government was a totally good idea. Before and after 1787 Madison expressed conviction that real sovereignty originated in the states, just as the Articles declared. That was a little too fancy for practical men of affairs, who were uncomfortable to discover how literal Madison was after his break with the Federalists. Twenty years younger than the General. he prospered in the image of being personally close to the titan, and he certainly enjoyed the game of politics. The new Constitution was going to be an improvement over the Articles of Confederation, but Madison did not burn for long with indignation about injustice to the troops, or disdain for nasty little politicians in the state legislatures. These were problems to be solved, not offenses to be punished. The new Constitution was a project where he could advance his career, skillfully demonstrating his prowess at negotiation and manipulation. This is not to say he did not believe in his project, but rather to suspect that he was a blank slate on which he allowed Washington to write, and later allowed others to over-write. He was eventually to modify his opinions as a result of new associations and partners, and since he succeeded Jefferson as President, it was personally useful to adjust his viewpoints to his timing. What would never change was that he was an artful politician, while Washington hated, absolutely hated, partisan politics.

This is not just an emotional division between two particular Virginia plantation owners, but an enduring thread running through all elective politics. Washington set the style for generations of citizen leaders in America. In his mind, a person of honor distinguishes himself in some way before he enters public office, so on the basis of that honorable image, presents himself to voters for public office, and naturally is elected to represent their interests. He is expected to compromise where compromise is honorable and publicly acknowledged, in order to achieve one desirable outcome in concert with other outcomes, in some ways inconsistent but still honorable in combination. He reliably will not vote for either issues or candidates in return for some personal consideration other than the worth of the issue or the candidate, with the possible exception of yielding to the clear preferences of his local district. Such a person is not a member of a political organization very long before he encounters another group of colleagues -- who regularly swap votes for personal advantage, join a group who agree to vote as a unit no matter what the merits, and recognize the frequent necessity to talk one way while secretly voting another. The first sort of politician is usually an amateur, the second type is typically a professional politician. Although it seems a violation of ethics and common public welfare, the fact is the professional vote-swapper almost always beats the sappy amateur. The response during the Eighteenth Century was for idealists to condemn and attempt to abolish partisanship and political parties. The American Constitution does not make provision for political parties and other forms of vote-swapping or even anticipate their emergence. Although Madison ignited the process in the United States, Jefferson really organized it; every recent politician except Adlai Stevenson has openly participated in a version of it. That the Constitution has still not been amended to provide for parties seems to reflect a persisting nostalgic hope that somehow we can return to Washington's stance.

Washington's conception of open representative politics was not entirely perfect, either. In order to maintain an image of impartiality, Washington and his imitators isolated themselves in a cloak, holding back their true opinions in a sphinx-like way that hampered negotiation. Unwillingness to be seen swapping votes can lead to unwillingness to compromise, and in the final analysis the difference is one of degree. However, the over-riding issue is that each representative or Senator is equal to every other one. When vote-swapping gets started, it leads to placing power over supposed equals in the hands of the more powerful manipulators, masquerading as political leaders. Ultimately, it leads to the adoption of house rules on the very first day of a session which force lesser members to surrender their votes to a speaker or minority leader or committee chairman, when the theory is that there is no such thing as a lesser member. The claim of a party-line politician is that he obeys the will of the party caucus; the reality is usually that he obeys the will of some tough, self-advancing party leader. The final reality is that most legislatures must now deal with thousands of bills per session, leading to the necessity of appointing someone to set priorities, which in turn leads to the power of party leaders over their grudging servants. These various subversions of the equal rights of elected representatives can lead to such discrediting of the system that honorable people may refuse to stand for office, leaving foxes in charge of the hen house. Benjamin Franklin, who was to play an invisibly controlling role in the impending Constitutional Convention, had his own way of coping with the political environment. "Never ask, never refuse, never resign."

http://www.philadelphia-reflections.com/blog/1538.htm


American Succession

{George Washington}
George Washington

It may seem a startling focus for a famous war hero, but one of the most important precedents George Washington wanted to establish as America's first president, was that he was determined not to die while in office. His original intention was to serve only one four-year term as president, only accepting a second term with considerable concern that it would increase his chances of dying in office. His reasons are perhaps not totally clear, since he repeatedly stated his concern that he had promised the American public that he would retire from public office when he resigned his commission as General, and was determined to seem a man of his word. While this sounds a little off-key to modern ears, it must be remembered his resignation as General had caused an international stir, even prompting King George III to exclaim that this must be the greatest man who ever lived. Washington may have sincerely thought he was following the pattern of Cincinnatus, the Roman citizen soldier who declined further public life in order to return to his farm. But in retrospect we can see that for a thousand years before Washington's military resignation it was essentially unheard of for a leader with major power to be removed by any means except death. Regardless of where he might have got the idea, Washington was consciously trying to establish a tradition of public service by those who were natural leaders, dutifully responding to the need of the nation, and stepping down when the service was completed. It was an important day for him and for the nation, when he stood before John Adams in 1796, honorably and humbly turning over supreme power to a successor who had been chosen, by others, in a lawful way. Peaceful succession is part of the original intent of the founder of the Constitution, if anything is.

Some have written that Washington was not our first president, but our eleventh if one counts those elected the presiding officers of the Continental Congress, under the Articles of Confederation. But none of them could be said to be the head of state, and absolutely none of them could be confident the public would re-elect them indefinitely. Washington was not so much aiming for a two-term limit as he was setting a pattern for returning the choice to the people after a stated term, and deploring anyone who sought unlimited power for its own sake. The office should seek the man, not the man seek the office, and even if the public got carried away by adulation, the man should in good time step aside. For over a century the two-term tradition was later unchallenged, until Franklin Roosevelt succumbed to exactly the temptations that Washington foresaw. We have seldom amended the Constitution, but after Roosevelt it was soon amended to emphasize what so many had previously considered it unnecessary to state.

{John Adams}
John Adams

The idea of a fixed term of office has had an unexpected calming effect on partisanship in America. In parliamentary systems like the British, a prime minister answers weekly questions from his opposition, with full realization that he can be dismissed from office at any moment he angers a majority into a vote of no-confidence. Under the American Constitution, a recent election mandate eats into the stated time in office, making it progressively less rewarding to evict the officer for the residual time before another election does it automatically. America does indeed have an impeachment process, but in fact it has been rarely employed. In America, if someone is elected for a specific term, it is almost certain he will serve out the full term. There are times when partisanship seems unlimited, but in fact we probably have less of it than if we encouraged partisan outcry to go on to evicting an incumbent from office.

Washington was not so successful in promoting another component of his ideal statesman. In his view, a district would naturally select the most prominent citizen available to represent the district, since that person would do it more ably than anyone else and give up the office when duty was completed; that was behind the stated ideal of republican government. Madison was for a time persuaded that such choices should be filtered a second time, with the House of Representatives electing Senators from its midst, but that failed to win approval. In the Eighteenth century the concept of professional bureaucrats and professional politicians had not yet taken hold. In its place was the fear of "ambitious" leaders, who would be held in check by a tradition of underpaying elected representatives, or even of gentlemen of means who would refuse to accept any pay for doing their duty. It proved unanswerable when ambitious men assailed this republican concept by protesting the establishment of aristocracies, oligarchies and failure of the upper class to understand the needs and anxieties of the common man. This viewpoint eventually replaced the "natural" local leaders with those who had experienced life in a log cabin, or endured the purifying experiences of other hardships. The original idea of the founders was to elect leaders who could not be bought; ambitious men could be bought. When political parties made their appearance, a new thought appeared; perhaps ambitious men could be controlled.

As the practical realities of politics in action began to surface, members of elected bodies with varying degrees of ambition and altruism sought refuge from pressures being applied to them. After all, one of the undeniable implications of the Constitution was that every single member of an elected body had just as much power and rights as every other one. Out of this tension emerged the seniority system, another unwritten rule with the power of reality forging it into an implicit rule. In time, everyone would achieve seniority at the same point in his career, and hence the procedural powers necessary to running the place could be assigned with lessened fear of improper pressure. Newcomers regularly complain about the seniority system but eventually yield to it as the least worst accommodation to necessity. But even minor imperfections will be exploited if a system endures long enough. In this case, political parties in the home states are persuaded that the fruits of seniority might be disproportionately available to them if they elect young candidates and keep them in office indefinitely. Eventually such stalwarts can rise to positions that allow them to reward the home district. This has the interesting consequence of creating political families, whose senior representative acquires the power to select his son or grandson to take his place in the rising chain of command. That's not as bad as an inherited aristocracy, perhaps, but it has several similarities.

http://www.philadelphia-reflections.com/blog/1540.htm


Designing the Convention

{Turning Colonies into States}
The Convention and the Continent

THE prevailing notion of the Constitutional Convention once depicted James Madison as seized with the idea of a merger of former colonies into a nation, subsequently selling that concept to George Washington. The General, by this account, was known to be humiliated by the way the Continental Congress mistreated his troops with worthless pay. But recent scholarship emphasizes that Washington noticed Madison in Congress becoming impassioned for raising taxes to pay the troops, was pleased, and reached out to the younger man as his agent. Madison seemed a skillful legislator; many other patriots had been disappointed with the government they had sacrificed to create, but Madison actually led protests within Congress itself. A full generation younger than the General and not at all charismatic, Madison's political effectiveness particularly attracted Washington's attention to him as a skillful manager of committees and legislatures. Washington was upset by Shay's Rebellion in western Massachusetts, which threatened to topple the Massachusetts government, but Shay's frontier disorder was only one example of general restlessness. There was a long background of repeated Indian rebellions in the southern region between Tennessee and Florida, coupled with uneasiness about what France and England were still planning to do to each other in North America. It looked to Washington as though the Articles of Confederation had left the new nation unable to maintain order along thousands of miles of western frontier. The British clearly seemed reluctant to give up their frontier forts as agreed by the Treaty of Paris, and very likely they were arming and agitating their former Indian allies. Innately rebellious Scotch-Irish, the dominant new settlers of the frontier, were threatening to set up their own government if the American one was too feeble to defend them from the Indians. The Indians for their part were coming to recognize that the former colonies were too weak to keep their promises. With the American Army scattered and nursing its grievances, the sacrifices of eight years of war looked to be in peril.

{top quote}
The Union is much older than the Constitution. It was formed, in fact, by the Articles of Association in 1774. It was matured and continued by the Declaration of Independence in 1776. It was further matured ... by the Articles of Confederation in 1778. And finally, in 1787, one of the declared objects for ordaining and establishing the Constitution was "to form a more perfect Union. {bottom quote}
A.Lincoln, First Inaugural

Even Washington's loyal friends were getting out of hand; Alexander Hamilton and Robert Morris had cooked up the Newburgh cabal, hoping to provoke a military coup -- and a monarchy. Because they surely wanted Washington to be the new King, he could not exactly hate them for it. But it was not at all what he had in mind, and they were too prominent to be ignored. So he had to turn away from his closest advisers toward someone of ability but less stature and thus more likely to be obedient. It alarmed Washington that republican government might be discredited, leaving only a choice between a King and anarchy. Particularly when he reviewed shabby behavior becoming characteristic of state legislatures, something had to be done about a system which proclaimed states to be the ultimate source of sovereignty. Washington decided to get matters started, using Madison as his agent. If things went badly he could save his own prestige for other proposals, and Madison could scarcely defy him as Hamilton surely would. Washington could not afford to lose the support of the two Morrises, and still expect to accomplish anything major. Madison had been to college and could fill in some of the details; Washington merely knew he wanted stable government and he did not, he definitely did not, want a king. Many have since asked why he renounced being King so violently; it seems likely he was projecting a public rejection of the Hamilton/Morris concept in a way that did not attack them for proposing it. It was a somewhat awkward maneuver, and to some degree it backfired and trapped him. But Madison proved a good choice for the role, and things worked out reasonably well for the first few years.

{top quote}
The powers delegated by the proposed Constitution to the Federal Government are few and defined. Those which are to remain in the State Governments are numerous and indefinite. {bottom quote}
J.Madison, Federalist#45

Madison was young, vigorous and effective; he held the wide spread perception of the Articles of Confederation as the source of the difficulty; and he was a reasonably close neighbor. He was active in Virginia politics at a time when Virginia held defensible claims to what would eventually become nine states. Negotiations for the Northwest Ordinance of 1787 would be going on while the Constitutional Convention was in session, and Virginia was central to both discussions. After conversations at Mount Vernon, a plan was devised and put into action. Washington wanted a central government, strong enough to energize the new nation, but stopping short of a monarchy or military dictatorship. There were other things to expect from a good central government, but it was not initially useful to provoke quarrels. Madison had read many books, knew about details. Between them, these two friendly schemers narrowly convinced the country to go along. As things turned out, issues set aside for later eventually destroyed the friendship between Washington and Madison. Worse still, after seventy years the poorly resolved conflict between national unity and local independence provoked a civil war. Even for a century after that, periodic re-argument of which powers needed to revert to the states, which ones needed to migrate further toward central control, continued to roil a deliberately divided governance.

{Constitutional Convention}
Constitutional Convention

For immediate purposes, the central problem for the Virginia collaborators was to persuade thirteen state legislatures to give up power for the common good. The Articles of Confederation required unanimous consent of the states for amendment. To pay lip-service to this obstacle, it would be useful to convene a small Constitutional Convention of newly-selected but eminent delegates, rather than face dozens of amendments tip-toeing through the Articles of Confederation, avoiding innumerable traps set by the more numerous Legislatures. In writing the Articles of Confederation, John Dickinson had been a loyal, skillful lawyer acting for his clients. They said Make it Perpetual, and he nearly succeeded. The chosen approach to modification was first to empower eminent leaders without political ambitions and thus, more willingness to consent to loss of power at a local level. Eventual ratification of the final result by the legislatures was definitely unavoidable, but to seek that consent at the end of a process was far preferable, because the conciliations could be offered alongside the bitter pills. Divided and quarrelsome states would be at a disadvantage in resisting a finished document which had already anticipated and defused legitimate objections, and was the handiwork of a blue-ribbon convention of prominent citizens and heroes. By this strategy, Washington and Madison took advantage of the sad fact that legislatures revert toward mediocrity, as eminent citizens experience its monotonous routine and decline to participate further in it, but will make the required effort for briefly glamorous adventures. Eminently successful citizens are somewhat over-qualified for the job, whose difficulties lesser time-servers are therefore motivated to exaggerate. To use modern parlance, framing the debate sometimes requires changing the debaters. In fact, although he had mainly initiated the movement, Washington refused to participate or endorse it publicly until he was confident the convention would be composed of the most prominent men of the nation. This venture had to be successful, or else he would save his prestige for something with more promise. Making it all work was a task for Madison and Hamilton, who would be replaced if it failed.

{John Dickinson}
John Dickinson

While details were better left hazy, the broad outline of a new proposal had to appeal to almost everyone. Since the new Constitution was intended to shift power from the states to the national government, it was vital for voting power in the national legislature to reflect districts of equal population size, selected directly by popular elections. That was what the Articles of Confederation prescribed. But no appointments by state legislatures, please. In the convention, it became evident that small states would fear being controlled by large ones through almost any arrangement at all. On the other hand small states were particularly anxious to be defended by a strong national army and navy, which requires large population size. England, France and Spain were stated to be the main fear, but small states feared big neighboring states, too. Since the Constitutional convention voted as states, small states were already in the strongest voting position they could ever expect, particularly since the Federalists at the convention needed their votes. Eventually, agreement was found for the bicameral compromise suggested by John Dickinson of Delaware, which consisted of a Senate selected and presumably voting as states, and a House of Representatives elected in proportion to population; with all bills requiring the concurrence of both houses. From the perspective of two centuries later, we can see that allowing state legislatures to redraw congressional districts gives them the power to "Gerrymander" their election outcomes, and hence restores to the populous states some of the internal Congressional power Washington and Madison were trying to take away from them. In the 21st Century, New Jersey is an example among a number of states where it can fairly be said that the decennial redistricting of congressional borders accurately predicts the congressional elections for the following ten years. The congressional seniority system then solidifies the power of local political machines over the core of Congressional politics. However, the irony emerges that Gerrymandering is impossible in the Senate, and hence legislature control over their U.S. Senators has been weak ever since the 17th Amendment established senatorial election by popular vote. That's eventually the opposite of the result originally conceded by the Constitutional Convention, but possibly in accord with the wishes of the Federalists who dominated it.

{Electoral College method for election of the President}
Electoral College Method for Election of the President

This evolving arrangement of the national legislative bodies seemed in 1787 an improvement over the system for state legislatures, because the Federalists believed larger legislatures would contain less corruption because they had more competing special interests to complain about it. There were skeptics then as now, who wished to weaken the tyranny of the majority so evident in the large states and in the British parliament. To satisfy them, power was redistributed to the executive and judicial branches, which were intentionally selected differently. Here arises the source of the Electoral College for election of the President. It gives greater weight to small states (and provokes a ruckus among large states whenever the national popular vote is close). Further balance in the bargaining was sought by lifetime appointments to the Judiciary, following selection by the President with the concurrence of the Senate. Without any anticipation in this early bargaining, an unexpectedly large executive bureaucracy promptly flourished under the control of the chief executive, lacking the republicanism so fervently sought by the founders everywhere else. This may be in harmony with the Federalist goal of removing patronage from legislature control, but Appropriations Committee chairmen have since found unofficial ways to assert pressure on the bureaucracy. It's quite an unbalanced expedient. Only in the case of the Defense department is the balancing will of the Constitutional Convention made clear: the President is commander in chief, only Congress can declare war. Although this difficult process was meant to discourage wars, it mainly discouraged the declaration of wars; other evasions emerged. From placing the command under an elected President, emerges a stronger implicit emphasis on civilian control of the military, loosely linked to the fairly meaningless legislative approval of initiating warfare. There have been more armed conflicts than "declarations" of war, but no one can say how many there might otherwise have been. And there have been no examples of a Congress rejecting a President's urging for war.

{Constitution}
Constitution

And that's about it for what we might call the first phase of the Constitution, or the Articles. In 1787 there arose a prevalent feeling that national laws should pre-empt state laws. In view of the need to get state legislatures to ratify the document however, this was withdrawn. The Constitution was designed to take as much power away from the states as could be taken without provoking them into refusing to ratify it. Since ratification did barely squeak through after huge exertions by the Federalists, the Constitution closely approaches the tolerable limit, and cannot be criticized for going no further. Since no other voluntary federation has gone even this far in the subsequent two hundred years, the margin between what is workable and what is achievable must be very narrow. Notice, however, the considerable difference between Congress having the power to overrule any state law, and declaring that any state law which conflicts with Federal law is invalid.

The details of this government structure were spelled out in detail in Sections I through IV. However, just to be sure, Section VI sums it all up in trenchant prose:

This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding. The Senators and Representatives before mentioned, and the members of the several state legislatures, and all executive and judicial officers, both of the United States and of the several states, shall be bound by oath or affirmation, to support this Constitution; but no religious test shall ever be required as a qualification to any office or public trust under the United States.

Except for some housekeeping details, the structural Constitution ends here and can still be admired as sparse and concise. That final phrase about religious tests for office sounds like a strange afterthought, but in fact its position and lack of any possible ambiguity serve to remind the nation of grim experience that only religion has caused more problems than factionalism. Madison was particularly strong on this point, having in mind the undue influence the Anglican Church exerted as the established religion of Virginia. There are no qualifications; religion is not to have any part of government power or policy. By tradition, symbolism has not been prohibited. But government as an extension of religion is emphatically excluded, as is religion as an agency of government. Many failures of governments, past and present, can be traced to an irresolution to summon up this degree of emphasis about a principle too absolute to tolerate wordiness.

http://www.philadelphia-reflections.com/blog/1541.htm


A Gleam in Washington's Eye

{George Washington taking oath}
George Washington Taking Oath

On the eve of the Constitutional Convention, the nation was unhappy, confused, and dissatisfied; this wasn't what a victory was supposed to feel like. George Washington wanted a country to be proud of, big enough to discourage enemies, otherwise free of policing, regulation, or monarchy. Eight years of war had taught him it wasn't easy to have both liberty and discipline at the same time. Perhaps America was more unusually blessed, however, defended from invasion by oceans and wilderness, and from greed by a continent of natural resources. If order and justice could be organized, perhaps this by itself would enlist the loyalty of that mixture of classes and nationalities then flocking to our shores. Several important writers were having strong influence on the era we now call the Enlightenment; David Hume and Adam Smith in Scotland, Edward Gibbon in England, Voltaire and Diderot in France, even Catherine the Great of Russia, with a thousand others including Benjamin Franklin and Robert Morris. Although Washington probably hadn't read them, Adam Smith's The Wealth of Nations showed unvarnished new ways of looking at commerce and politics, while Gibbon's The Decline and Fall of the Roman Empire showed what could happen if idealism gets neglected. Both books were published in the portentous year of 1776, describing many difficulties, but always suggesting problems could somehow be solved. There were plenty of ideas in circulation, but there was no plan.

It must have become obvious to Washington well before the Battle of Yorktown, that the Revolutionary War would not leave us with our problems solved. There was one brief moment as the British Army was withdrawing from Philadelphia in 1778 which seemingly justified boasts our troops had licked 'em. Just after the surrender of a whole British Army at the Battle of Saratoga, the British were also retreating from Philadelphia, and the Lord North offered generous peace terms through the Earl of Carlisle. No doubt the British public was restless after the Burgoyne defeat and the French alliance with America. Because the Carlisle episode is much more familiar in England than in America, perhaps it was a feint or a maneuver to embarrass the Earl of Carlisle, or possibly just an exploration of the true state of affairs which were rumored about across a wide ocean. At any event, Gouverneur Morris was the visible American actor in this puzzling episode, but he must have been acting in concert with others. Lord North offered to give us our own elected parliament within a commonwealth; taxation with representation, no less. Morris seems to have dismissed this offer with contempt. But six more years of devastation ensued, surely convincing Washington that bitter defeat was still possible. That reality was concealed behind the graciousness of the French in allowing us to claim American troops had defeated the British at Yorktown. In fact, the preponderance of troop casualties, naval vessels and strategy had been French. The money had been mostly French as well. If that debt nearly bankrupted France, what might it have done to America?

Washington had been an outstanding athlete, soldier and farmer, but his many travels about the colonies convinced him something more than leadership was needed. And even warned him more was needed than a confederation so big others would leave it alone. National disorganization was just as bad after the Revolution as before. By 1787, Washington concluded the states just would not surrender power to a central national government unless the people forced them to give it up. Dire military predicaments were not guaranteed to transform flight into resolution. Peacetime also demonstrated another discouraging truth: meaningful improvement of the existing order meant the whole previous leadership class could be out of a job watching others make a botch of it, because unfortunately peace attracts mediocrity to political office. Prominent men in the community gathered in a Constitutional Convention recognized the advantages of Union, and peaceful ways to maintain it. But after that transient moment when the memory of war was fresh, politics could return to the mediocrities of a political class. That's not exactly what is now meant by "We, the People", but it might have to serve. In Washington's view, the voice of the people usually echoed along the lines of: Tell us what good it would do to upset the Articles of Confederation, otherwise leave them alone. If you propose the general shape of a new central government, first tell us what it can do better than the states. And then show us how to make dubious state politicians agree to it. The accents of hesitation and defeat echo.

The hideous French Revolution was soon to demonstrate how unwise it was to look for short-cuts; we needed a republic, not a stampeded democracy. George Washington was unsure just what was needed, but he knew a few basic things with certainty. America needed a bargain which everyone was expected to keep. Amendment should be provided for, but make it it difficult.

http://www.philadelphia-reflections.com/blog/1544.htm


Repairing Constitutional Defects

{Signers}
James Madison

Out of several thousand proposed ones, there have only been 27 successful amendments to the Constitution in two centuries; it's been intentionally hard to get an amendment passed. The Federalists wanted no amendment process at all; the anti Federalists wanted repeat conventions in which the whole document would be thrown on the table for reconsideration. The original document probably turned out better because of this tension; if it's hard to change, you better do it right the first time. And amendments had better be short and clear.

There will of course have to be some mid-course adjustments, most notoriously the XII Amendment, correcting drafting amateurishness which promptly led to all sorts of confusion in the election of the President and Vice-President. It was almost a Gilbert and Sullivan comedy, with the appearance of a tie vote in the 1800 Electoral College between Jefferson and Burr. Since the election campaign had been conducted with the clear intention that Burr would be the vice president on a combined ticket, what was really overlooked was the possibility that ambition would so overwhelm a candidate that he would niggle and cavil about a technicality, essentially trying to steal an election from a running-mate. When Burr later killed Jefferson's enemy Hamilton in a duel, not only was Burr twice disgraced, but the whole episode terminated expectation that gentlemen in high office could always be depended on to do the right thing. Although philosophical debate can continue whether mankind is inherently good or inherently evil, American law now proclaims a presumed innocence of the accused, while privately assuming universal frailty of everybody.

Sometimes the amendment process has been brushed aside. William Henry Harrison was the first president to die in office, making John Tyler the first vice-president to face certain ambiguities of the Constitution over exactly what had been intended. By that time, the tradition had grown that the vice-presidential candidate was usually a member of the second strongest faction within the winning party. Combining the two makes a stronger ticket but a secretly jealous one. When the contingency of presidential death in office actually happened, there were voices that the vice-president was intended to remain vice-president while assuming the extra powers and duties of the president. Rather than have a debate or a Supreme Court wrangle, Tyler settled any such question by simply making himself president, thus establishing an enduring tradition. This solution raised the nit-picker difficulty that still no official succession plan has been provided for a vacant vice-presidential post. Instead of fixing this flaw, it has been ignored. The courts rely on the precedent they have set, which can be defended as constitutionally enshrining common sense, or attacked as refusing to admit making an error.

Somewhat similar corrective themes continue through Amendments XXII (two term Presidential limit), XXV (Presidential succession), XXVII (Congressional compensation). At least when dealing with politicians, it is better to be too specific than too trusting.

The Fourteenth Amendment is clear enough in its many sentences, and noble in intent. But that intention to reverse the original Constitutional tolerance of slavery and the later injustices of Reconstruction is couched in broader language than necessary for that purpose alone. It thus weakens itself by hinting sanctimony, the inclusion of soaring principles. As the grievous wounds of the Civil War have gradually healed, Abolitionists as well as slavers now seem often to have acted with excess, and malice toward some. Others may honorably disagree with this view. Nevertheless, it is quite right to emphasize that just as undue deference should not be accorded to some, undue suspicion should not be inflicted on others.

By a series of amendments, the right to vote has been extended gradually over the centuries. Amendment XXIV (Abolition of poll taxes) probably had other motivations but has the effect of removing a restraint on the vote of poor people, Amendment XIX (Women's suffrage), XXIII (Presidential electors for the District of Columbia), and XXVI (Reducing the voting age to 18) can be characterized as removing discrimination, but also can be seen as a gradual extension of suffrage by those who already have it, to others they have mistrusted for reasons defensible and indefensible. The common goal is to achieve sufficient trust and education to make any restrictions seem unnecessary to everyone, while recognizing that continuing immigration of other cultures creates restlessness at the margins. Furthermore, poor people will outnumber rich ones for a long time to come and hence could potentially mistreat the minority. As long as only a minority of the enfranchised population at any level troubles to exercise its right to vote, the level of discomfort with this issue is enough to stimulate progress toward universal suffrage, while satisfaction with gradualism allows time to adjust to it.

Even Universal Franchise can be viewed with suspicion in a polarized political climate. Currently, a vigorous campaign for mandatory voter identification has been met with an equally vigorous denunciation as an attempt to deny the franchise to the poor. Typically, such proposals require the presentation of some government document with an identification photograph, such as a driver's license, to be presented at the voting place. The uproar this proposal has created has itself created suspicion of motive. Those who have experience with ballot-stuffing in elections refer to their common suspicions as "doing it the old-fashioned way." Citizens who make a few dollars as poll-watchers report that the traditional procedure is as follows:

At least a third of registered voters do not vote, even in a contested Presidential election, and in big-city off-year primary elections, sometimes a heavy majority do not. In the old-fashioned way, the poll watchers wait for dinner time in a sparsely-attended precinct, with no newspapers or poll-watchers of the opposite party present. The registration lists are produced, and every one who has not voted is voted for the desired candidate. The ruse is enhanced by driving in busloads of party loyalists, claiming to be the absent registered voter; and after casting their ballots, they are bussed off to another polling place to repeat the performance as often as there is time. Matching identification with the voter registration upsets this "good old way", in a manner which has nothing to do with inability to afford a driver's license, or similar lame excuses.

Amendment XVI (Income tax) may cause dissatisfaction because America has traditionally . But it really is just a mid-course adjustment in the legal system, since a court had declared income taxation to be unconstitutional, and the Constitution was simply amended to remedy that misapprehension. An implicit point, however, is that as the federal government preempts the sources of taxation for itself, the states are weakened by the need to appeal for revenue. The XVII Amendment (Direct election of Senators) rather severely curtailed the control of the states over the central government, but the XI Amendment strengthened the states by forcing the citizen of a different state to sue a state in its own court. The issue of state and federal control, so central to the original Constitution, nowadays seems to be fading in the public mind.

And finally, we are left to consider the first ten amendments, the so-called Bill of Rights. While Madison always inclined somewhat in that direction, and grew more defiantly libertarian as he got older, the situation he faced when the first Congress convened was daunting. Between final ratification and actual convening of much the same people into the first congress, the states submitted over two hundred petitions for rights to be included in the Constitution by amendment. Thomas Jefferson and Patrick Henry had been tireless in stirring up the demand for rights to protect the individual from the government. Much of this reflected the French Revolution which went on for ten years during this period, and drew on affection for France for its assistance to the struggling colonies during their rebellion against Great Britain. Others, of course, only needed to look toward George Washington, who had once heard the screams of Braddock's soldiers as they were tortured to death by the French and their Indian allies at Fort Duquesne. Washington had earlier and personally started the French and Indian War. John Adams was not pleased by torch lit mobs breaking windows in Philadelphia in sympathy with France. So, as the main leader in the new congress, Madison had the task of satisfying everybody about the Bill of Rights he had promised. It must be acknowledged that he did a masterful job. Not everybody was convinced it was a natural right of mankind to give everyone everything it might seem desirable to have. Somewhere in this arose the accepted definition of a right as something everyone would give to others, in order to have for himself. Madison was forced to search for common denominators, the maximum -- and minimum -- number of rights which everyone would agree to. It offended his constitutional craftsmanship to see Congress drowned in a rush to confer greater force than a law by saying the same thing in an amendment. Indeed, when some advocates strove to make a dubious right into a constitutional right, almost by definition it was not something everyone would agree to in order to have for himself. Madison did things in his life that may be questioned, but his achievement of condensing this hotch-potch of proposals into ten simple declarations, and then getting a raucous inexperienced congress to pass it -- is a political achievement to be marveled at. Even two centuries later, anyone who proposed opening up the Bill of Rights and recasting it in conformity with more modern understanding, would be hooted out of the room. May that ever remain the case.

Amendments IX (Non-enumerated rights) and X (Rights reserved to the states) deserve a different emphasis. Here lay the promise that the federal government had been proposed to achieve only those things a central government could achieve better; the states could do everything else. For this to be workable, the enumerated rights had to be comprehensive enough to satisfy the Federalists, and not include anything the anti-Federalists thought was improper. The anti Federalists knew very well this included everything the Federalists could possibly get the states to agree to, so the border was inevitably contentious. They got it wrong with slavery, and some of the amendments made mid-course adjustments. Boundary warfare would continue indefinitely in congress, and sometimes wars and depressions cause proponents to change positions. But the document, freely agreed to by formerly sovereign states, has endured as nothing even remotely comparable has endured.

http://www.philadelphia-reflections.com/blog/1546.htm


Constitutionality of the Monetary System

{The Constitution}
The Constitution

In noting that our Constitution has lasted for over two centuries, we assert that this simple short document has largely anticipated everything important to anticipate, including the Industrial Revolution, atomic warfare, and the Information Age, to name a few. When an occasional issue arises that is not only unmentioned in the Constitution but where no one is certain what to do, our system leaves us spiritually adrift. Such an issue is found in o0ur monetary system, where we have been wandering for two hundred years.

The founding fathers worried a great deal that popular majorities would abuse minorities, particularly in the case of the majority poor people voting themselves the property of minority rich ones, or that debtors in the majority might dishonor the rights of creditors. Although we have developed a welter of laws about debt and creditors, bankruptcy and taxation, they are if anything too specific. What is lacking is a few general words in the Constitution about the principles of credit and money. The problem now is the same as it was in 1787; we don't know what to say.

{Albert Gallatin}
Albert Gallatin

For a very long time, some very well educated people were strongly opposed to the creation of a bank, later to mean a banking system. Alexander Hamilton's proposition that a "national debt is a national treasure" was greeted with horror by several Presidents, as well as by Albert Gallatin, one of the most sophisticated financial thinkers of the time. Underlying this perplexing reaction to the simple proposal to create a bank was surely the perception that making the Federal Government into a substantial debtor creates a powerful ally to all debtors in their eternal struggle with all creditors; the outcome of such an unequal struggle would inevitably be to the disadvantage of creditors. In common parlance the word capitalist seems to imply a creditor. It took a very long time for it to become understandable that debtors, too, were essential beneficiaries of a capitalist system, but that idea still often meets with dissent. However, when millions of the world population belong to religions which prohibit the payment of interest, it should not be surprising to find many Americans who cannot get their heads around the idea that debtors and creditors need each other to an equal degree.

In the case of inflation, governments have always been somewhat favorable to debauching the currency. Naturally, a major debtor hopes to repay its debt with cheaper money. Since it has more or less always been necessary to use police powers to maintain a common currency, Kings and governments have long been in control of money, whether that means gold bars or beaded wampum. And for the same length of time, governments have been discovered bending the rules in favor of themselves. Bronze has been substituted for gold, the edges of coins have been shaved, the printing presses print paper money unrestrainedly, and the consumer price index has been manipulated to encourage inflation. Political parties have sought votes from debtors by promising to regulate banks, promote silver as a substitute for gold, disadvantage foreign competitors, inhibit or manipulate the value of currency on foreign exchanges.

{Alan Greenspan}
Alan Greenspan

For forty years we have operated without any fixed standard for money. Money for all that time has lacked any physical representation, or discipline. Money has become a computer notation. At first it was based on calculations of monetary aggregates, a bewildering concept promoted by Milton Friedman. More recently, it is entirely based on inflation targeting as promoted by Alan Greenspan. With a target of maintaining steady prices, an inflation rate of 2% is set as a specific target for the Federal Reserve. If inflation falls below that target, more money is created; if it rises above that level, less money is created. How much there is of it does not matter; it's beyond calculation. Although this simplified description fills almost any listener with doubts, it seemed vindicated by seventeen years without a notable recession. Even though events beginning in 2007 raise pretty serious doubts, it may still prove to be the best possible monetary system.

Even though this most fundamental of all commercial issues cries out for a simple principle to be stated in the Constitution so that neither populist congressmen not rapacious financiers can ruin us, it is not presently possible even to imagine what a new Constitutional amendment would, should or even could say. Meanwhile, some immense power rests in the hands of shadowy figures whom we blindly trust, for lack of a better idea about how we should select them or what we should instruct them to do.

http://www.philadelphia-reflections.com/blog/1557.htm


Field Marshal William Joseph Slim, 1st Viscount, Order of the Garter

{Field Marshall William Joseph Slim}
Field Marshall William Joseph Slim

It's impossible to be accurate about such rankings, but it must mean something when Field Marshall William Slim is the only officer of World War II to be ranked among the ten greatest generals of all time. The historian Ray Callahan recently described Slim's career to the Right Angle Club, with particular emphasis on how unlikely it was for a man of his humble beginnings even to be a Lieutenant in the British Army before World War I, how he endured pretty insufferable snubs along the way up the ladder of command, and how at the end of his career to be Chief of Staff he finally revealed that he had noticed those snubs, all right. Americans would be astonished at such class distinctions in their own army, and even raise the question how the British Army could possibly conquer the world for two hundred years with so little emphasis on merit selection of its generals.

First, the military story of Bill Slim. Before World War I, officer candidates were expected to pay for their own training, and he managed to get through a local college Officer Training course without enrolling in the college. Even that much training suddenly was in very short supply as Britain mobilized for the War, and he was commissioned with the limitation of "hostilities only" to emphasize that he was not in the "regular" Army. Working through the Mesopotamian campaign, he rose through the Indian Army, which Winston Churchill regarded as definitely second tier, with his permanent rank always lagging several levels below his "temporary", acting, rank. At one point, he received an official rebuke for advocating air power for ground support, since that was the turf of the Air Force, and on another occasion for irritating the Navy by using boats. When World War II suddenly sent Japanese forces plunging through Malaysia and Indo-China, Slim distinguished himself by keeping the defeated Indian Army intact through a 900 mile retreat into Burma, justifying his later memoir of turning Defeat Into Victory. During that demoralizing time he had ample opportunity to observe the repeated Japanese tactic of launching lightning attacks without an established supply line, intending to live on the abandoned supplies of enemies as they were outflanked or surrounded by rapid advances. Slim developed the idea that if his surrounded troops could be resupplied by air and hold out, the attacking Japanese would essentially starve to death in the jungle. One attacking Japanese army unit of 87,000 men was reduced to 13,000 survivors by the application of this strategy, and as long as the Japanese kept using their technique, Slim kept using his. One reverse variant of this use of air supply was employed by Slim in the recapture of Rangoon by himself attacking from the rear without the usual overland supply line, but resupplying by air as an approaching monsoon cut off the expected resupply by sea. After the war was over, Winston Churchill's history of the war's events contained only the briefest mention of these victories. When Slim finally met Churchill, a close election was taking place, and Churchill said he hoped the overseas ballots were cast for him. "Well, Prime Minister, I must say that no officer in my command voted for you," was the reply he got. When Churchill's successor Clement Attlee was told by Bernie Montgomery that the Chief of Staff position was promised to someone else, the terse order was, "Well, unpromise him." And Slim got the job.

{Sir Francis Drake kneeling to Queen Elizabeth}
Sir Francis Drake kneeling to Queen Elizabeth

So, Ray Callahan the historian was asked the typically American question of how ever could the British Empire conquer Napoleon or plant the British flag over most of the world, using a system that would deliberately hold back an officer of Slim's talents, snubbing and intentionally humiliating most of the nation whenever one of the lesser orders was cheeky enough to aspire to military leadership. With great patience, Callahan replied that this system of placing aristocrats in charge of the military was designed to maintain civilian control against military uprising. There might have been a time when King Arthur or King Henry V was personally in charge of the Army, but King Macbeth and General Cromwell both illustrate the disadvantages of a fully feudal system. Even before the Industrial Revolution, military skill did not translate well into the skills needed to run an industrialized country, but nevertheless provided an easy route for a power-hungry military to seize the crown. It is true that America tends to elect prominent generals to be president after each of our major wars (Washington, Jackson, Harrison, Grant, and Eisenhower) and indeed most other presidents have had some military experience. But ever since George Washington made the principle clear, there has been a prevailing imperative about maintaining civilian control of the serving military, which even the American military seem to agree with. So it is not surprising that other nations with some more bitter experiences to recall, insist on more than social pressure to maintain civilian control. Inherited wealth not only provides genetic advantages and a de-glamorized experience with power, but it tends to create its own local environment which regards power as scarcely worth striving for, power is what you have, not what you strive for, there's not a great deal to gain from overturning things. While not inordinately brilliant, hereditary aristocrats are not inordinately stupid, either; they produce their share of Wellingtons, Pattons and Macarthurs.

In the first World War, however, the British discovered a serious flaw in the aristocratic system. Most defenders of that system will stress the high morale developed within the comradeship of a 1000-man regiment, carefully selected to choose individuals who "fit in". The British Army has been described as a "loose federation of regiments", collecting the history and traditions of the British Army in a way best understood in America by noting the special fervor of the U.S. Marine Corps. There is an undeniable disadvantage, however. In a mass mobilization, following a selective mass slaughter of volunteers (90% of British Regular Army officers were casualties in World War I), there simply may not be sufficient numbers in the historic regiments to run an effective mass army. That is the implied recognition behind the creation of officers for the duration of hostilities, only; get rid of that sort when the war is over because they can become a threat to cohesiveness. Some of that concern surely runs through the steady drumbeat to take guns away from the public, Second Amendment notwithstanding, repeal that damned thing if you have to. And the converse runs through the thinking of the Second Amendment supporters; you never know when some power freak might seize control of the military. The southern half of the country leans more strongly in that direction. They remember the experience of Reconstruction, when official reins of power were in hostile hands. The Old South really likes the idea of its sons running all branches of the military at all levels. Makes a fellow more comfortable with having a strong government.

http://www.philadelphia-reflections.com/blog/1572.htm


Philadelphia City-County Consolidation of 1854

{Consolidation Map 1854}
Consolidation Map 1854

Philadelphia is still referred to as a city of neighborhoods. Prior to 1854, most of those neighborhoods were towns, boroughs, and townships, until the Act of City County Consolidation merged them all into a countywide city. It was a time of tumultuous growth, with the city population growing from 120,000 to over 500,000 between the 1850 and 1860 census. There can be little doubt that disorderly growth was disruptive for both local loyalties and the ability of the small jurisdictions to cope with their problems, making consolidation politically much more achievable. A century later, there were still two hundred farms left in the county which was otherwise completely urbanized and industrialized. For seventy five years, Philadelphia had the only major urban Republican political machine. By 1900 (and by using some carefully chosen definitions) it was possible to claim that Philadelphia was the richest city in the world, although this dizzy growth came to an abrupt end with the 1929 stock market crash, and the population of Philadelphia now shrinks every year. In answering the question whether consolidation with the suburbs was a good thing or a bad thing, it was clearly a good thing. But since Philadelphia is suffering from decline, it becomes legitimate to ask whether its political boundaries might now be too large.

{Philadelphia Map 1762}
Philadelphia Map 1762

The possible legitimacy of this suggestion is easily demonstrated by a train trip from New York to Washington. The borders of the city on both the north and the south are quickly noticed out the train window, as the place where prosperity ends and slums abruptly begin. In 1854 it was just the other way around, just as is still the case in many European cities like Paris and Madrid. But as the train gets closer to the station in the center of the city, it can also be noticed that the slums of the decaying city do not spread out from a rotten core. Center City reappears as a shining city on a hill, surrounded by a wide band of decay. The dynamic thrusting city once grew out to its political border, and then when population shrank, left a wide ring of abandonment. It had outgrown its blood supply. Prohibitively high gasoline taxes in Europe inhibit the American phenomenon of commuter suburbs. The economic advantage of cheap land overcomes the cost of building high-rise apartments upward, but there is some level of gasoline taxation which overcomes that advantage. Without meaning to impute duplicitous motives to anyone, it really is another legitimate question whether some current "green" environmental concerns might have some urban-suburban real estate competition mixed with concern about global warming. Let's skip hurriedly past that inflammatory observation, however, because the thought before us is not whether to manipulate gas taxes, but whether it might be useful to help post-industrial cities by contracting their political borders.

{Philadelphia Map 1860}
Philadelphia Map 1860

Before reaching that conclusion, however, it seems worth while to clarify the post-industrial concept. America certainly does have a rust belt of dying cities once centered on "heavy" industry which has now largely migrated abroad to underdeveloped nations. But while it is true that our national balance of trade shows weakness trying to export as much as we import, it is not true at all that we manufacture less that we once did. Rather, manufacturing productivity has increased so substantially that we actually manufacture more goods, but we do it with less manpower and less pollution, too. The productivity revolution is even more advanced in agriculture, which once was the main activity of everyone, but now employs less than 2% of the working population. This is not a quibble or a digression; it is mentioned in order to forestall any idea that cities would resume outward physical growth if only we could manipulate tariffs or monetary exchange rates or elect more protectionist politicians to Congress. Projecting demographics and economics into the far future, the physical diameters of most American cities are unlikely to widen, more likely to shrink. If other cities repeat the Philadelphia pattern, the vacant land for easy exploitation lies in the ruined band of property within the present political boundaries of cities, or if you please, between the prosperous urban center and the prosperous suburban ring.

Many American cities with populations of about 500,000 do need more room to grow, so let them do it just as Philadelphia did a century ago, by annexing suburbs. But there are other cities which have lost at least 500,000 population and thus have available low-cost low-tax land which would mostly enhance the neighborhood if existing structures were leveled to the ground. Curiously, both the shrunken urban core and the bumptious thriving suburbs could compete better for redeveloping this urban desert if the obstacles, mostly political and emotional, of the political boundary could be more easily modified. But that's also just a political problem, and not necessarily an unsolvable one.

http://www.philadelphia-reflections.com/blog/1573.htm


Unwritten Features of the Constitution

{top quote}
Considerable anger is sometimes directed toward Judges who find unintended provisions in the Constitution. On the other hand, James Madison and some other Founding Fathers were careful to design the Constitution to create outcomes that are far from explicit. {bottom quote}

In their early writings, James Madison and the Federalists who participated in drafting the Constitution repeatedly emphasized their allegiance to republican ideals, republicanism, and a republican form of government. This sounds a little odd today, since obviously they were not alluding to the present Republican and Democratic parties, which had not been created. It seems natural to us to regard a republican form of government as a gradual extension of a democratic one, when the size of the electorate grows so large it cannot be readily managed by voice votes in a town meeting, when therefore it becomes necessary to select proxies, or representatives. That description greatly underestimates the subtlety of the Founding Fathers.

{Gouverneur Robert Morris}}
Gouverneur Morris

Two centrally important members of the Convention, James Madison and Gouverneur Morris, felt especially strongly about a feature that does not occur to many others. When the voters in a particular district pick a representative, they are generally trying to choose one who will not only reflect issues of local importance, but one who will be able to persuade representatives of other districts to vote favorably. In this way, representatives tend to be selected who are taller, handsomer, more intelligent, richer, and more famous than the average person in the district being represented. Not by much, perhaps, and sometimes not at all. But as a general thing, the election of representatives tends to create a House of Representatives who are superior in certain ways to the average person being represented. When candidates and political parties engage in public combat, an impression is given that "politicians" are low characters, but that is in fact not usually true. Many factors will discourage the best candidates from participating in disagreeable contests, and many stratagems are employed in an attempt to elect the worse of two candidates. But it is seldom the case that a successful candidate is less attractive or talented than the average person in his district. Republican governments almost always are composed of more distinguished persons than average, exposed to greater temptations perhaps and subject to more detailed scrutiny.

Madison was so taken with this idea that he proposed the Senate should be made up of people drawn from the House of Representatives in a second round of voting, thereby further purifying the result. For various reasons this approach was not adopted by the Convention, but it does have a logic to it, and it clearly illustrates that Madison was looking for results not always explicitly stated. Gouverneur Morris, on the other hand, was openly enthusiastic for this outcome, because he perceived that the government would be largely concerned with the rules of commerce and therefore the selection process would likely lead to a Congress that was richer and more able in those qualities of importance to commerce. On the one hand, America would gain national advantage in the Industrial Revolution then under way, and it would anyway be highly desirable to select richer people. In his later years, Morris was given to blunt and open preference for the smart set, and is often described as a covert aristocrat. At the time of the Convention however it seems likely he was making a perfectly valid point which had escaped many of his colleagues.

{James Madison}
James Madison

Both Madison and Morris were seriously concerned about a flaw in the republican form of government. They thought it obvious there would always be more poor people than rich ones. Without some effort to rebalance things, the poor would inevitably destroy the common good by using their numerical strength to redistribute wealth from rich to poor. In doing so, everyone would be worse off, even the poor. The poor were more likely to be uneducated and thus more likely to put their own enrichment ahead of almost any other issue, using their own grievances as a justification. There was almost universal agreement among other members of the Convention, because it was well recognized that the main need for a new constitution had grown out of the egregious conduct of state legislatures under the Articles of Confederation, particularly in watering the currency with paper money, and profligate use of debt forgiveness. It would be impossible to have a prosperous country if it suffered from instability, destruction of merit incentives and respect for the property of others. If debts were capriciously forgiven, no one would lend. With paper currency printed indiscriminately, savings would be impossible.

{Political parties}
Political parties

Accordingly, the Convention set about balancing these innate tendencies as well as it could. There was general agreement that election districts with larger population size tended to produce better candidates. Not only employing the reasoning that in a larger district it would be harder to elect an unknown, insignificant person, they felt they could also see examples justifying faith that a larger number of competing internal interests would hold each other in check within the person of their elected representative. An indirect way of accomplishing this was to limit the total number of districts while also providing they be of equal population. Political parties were soon to come forward as a way of raising campaign funds, but nevertheless a person of greater means would have an advantage in a larger district, and persons of greater means could be expected to have greater talents, or would in any event be more likely to resist the pressures for redistributing the wealth of the rich. Members of the Senate were selected by the state governments (at least, as long as state assent was necessary for ratification of the Constitution), but the 17th Amendment changed that to popular election, with a clear resulting decrease of state influence and power. On the other hand, a heavy majority of Senators in the 21st Century continue to be independently wealthy, thereby still accomplishing two original objectives of the founding fathers at one stroke.

{5th Amendment}
5th Amendment

The original working concept of the Federalists was that the skills and prestige of the rich and powerful would promote the owners of property into elective office, and their power would be joined to that of judges, presidents, cabinet officers, and military officers to form an effective counterbalance to the majority voting power of the poor or others who lacked property to protect. The Federalists differed with the anti-Federalists on the source of danger to be guarded against; one group feared impetuous and ignorant greed inciting the multitude, while the other group mainly feared corruption and power-hunger among the powerful few. But both political parties acknowledged that each potential danger was realistic to some degree, and hence there was reason to hope both sides could agree to a balance of power as a sensible check on each other. True, the Fifth Amendment's "takings" clause did specifically provide for just compensation for private property seized by government under Eminent Domain, and the Eleventh Amendment protected state governments against private lawsuits in Federal court, but these seem rather feeble additions to the protections against potential tyrannies of the unpropertied majority, as soon to be seen in the revolutionaries of France. Thus an initial assessment would have to be that protection of the minority with property against legislative assault by the unpropertied majority, was only strong in the short run. But it was likely to succumb in the long run to majoritarian tyranny, as the less educated gradually learned how to use their voting power. To strengthen the balance, therefore, resort was made to limiting the voting franchise to owners of property, and specifically to freehold property, without debt. There was shrewdness to this idea, since it hints at a perception that future class divisions might not lie between rich and poor, but between creditors and debtors. The voting exclusion of females, children and slaves was surely irrelevant to the main issue, based on the 18th Century assumption that any votes from those excluded would anyway be passive, dominated by the male head of household. In any event, the limitation of voting power to freehold property owners was apparently a step too far, and did not last long.

{government abused its power}
government abused its power

It is not certain how consciously another important feature was considered. State legislatures prior to the Constitution were held in such disdain, that stripping them of the power to corrupt truly important issues was almost a universal goal. Awkwardly, a peaceful transfer of state power over the military and the currency could not be accomplished without securing the agreement of the states who had to ratify the Constitution. This was accomplished by specifying the strictly limited powers of the new Federal government, and ceding control of everything not specifically mentioned, back to the states. One by one, the functions which were vitally important were debated and defended in detail; the list was short. Everything else remained under state control. To go about things in this way had one significant advantage over complete federal control, and Madison specifically anticipated it. If a state government abused its power, the victims of that abuse could escape by relocating to a neighboring state. The potential abuse easiest to understand was a burdensome tax rate. But all of the commercial rules of the new entities called corporations were even more to the point, since rich people could move whole factories and businesses if they perceived enough grievance at home. Powerful people had ways of getting the attention of state governments, their U.S. Congressmen and Senators, and the constituents who voted for them. In New Jersey at present, 4% of the taxpayers pay 76% of state taxes; it is easy to demonstrate that the 4% are moving to other states about as fast as they can. Whether by industry or individually, the residents of a state know very well what their alternatives are in other states, and corporations can negotiate them directly. Whether to bluffing or actually moving, state politicians respond to the threat and which has considerable indirect effect at a national level. The system of checks and balances extends far beyond the words of the Constitution, and well beyond the rules of the Federal government. Its unwritten power extends beyond the control of a handful of Supreme Court justices, spatting over original intent. Its potential weakness, of course, lies in the Court's relative inability to protect what is not stated to be any of its business.

{1787 founders}
1787 founders

One final point about the unspoken cleverness of our Constitution. Some of its most important powers were either unrecognized or intentionally unmentioned by its originators, to whom we look for original intent. After two centuries, we can see as they could not, that it was not merely the first time thirteen sovereign states gave up their power voluntarily and more or less cooperatively. In two hundred or more years, it begins to look as though nobody else can even imitate it successfully. One therefore hesitates to suggest changes of any sort, for fear some unrecognized balance will become unbalanced. Madison believed that increasing size leads to better government and better candidates for office; few would dispute that our Federal government generally does a better and more professional job than the fifty states which make it up. But stop to consider the United Nations. Invested with as much enthusiasm and much more idealism than our 1787 founders, the U.N. flounders and fumbles, and after fifty years must still be assessed to be a failure. Madison would seemingly have predicted that a bigger organization would be even stronger, even electing an assembly of giants. It hasn't worked out that way, and it is impossible to define what it lacks that the American Constitution has in abundance. By itself, this is the strongest possible argument for what is called original intent, but is really just a fearful plea to -- leave it alone.

http://www.philadelphia-reflections.com/blog/1574.htm


Philadelphia City Controller

{Alan Butkovitz}
Alan Butkovitz

The Right Angle club was pleased to hear the City Controller, Alan Butkovitz, give us an insider's view of the municipal finances, but was a little startled to hear how badly the national banking crisis has affected our city. While of course the city does a lot of things, its present finances can be summarized as mainly consisting of two things: the pension system and the management of police/fire/corrections.

Mayors of this city for several decades have been following the national pattern of government to transfer its deficits to the pension funds of the employees. That has the effect of shifting the cost of present operations into the far future, and avoiding present confrontations by promising even more generous pension benefits in the future. Over time, the future gets closer and closer; to a large degree it is right now. Pension funds are largely independent organizations, supposedly receiving current contributions to be invested for future distribution. That requires an assumption about how much investment growth will be achieved in the meantime, now set by the Philadelphia Board of Pensions at 9%. That's not impossible to achieve in some medium-term intervals. But it's optimistic, even inconceivable, for long-haul investing; over periods of thirty or more years, most experts say that 4% is about all anyone gets. More to the point, 9% is particularly unachievable right now, in the present crash of national financial markets. That's bad enough, but repeated shortfalls in contributions to the fund have left it funded at 53% of the calculated requirement to pay the pensions of the future, even using the unrealistic 9% return assumption. A few years ago, Mayor Rendell worried about the underfunding and brought it up to 70% with a billion-dollar bond issue. Unfortunately, the crash in the markets has brought it right back down to 53% again. So, it's fair to say the pension fund is a couple of billion dollars short, even if you accept a 9% income accumulation -- which you probably can't, but at least it brings the pension fund to 70% funding in forty years. Call it four billion dollars short, just to be conservative, since it is presently admitted to be two billion. That isn't Mayor Nutter's fault, but it's sure his problem; and if it gets worse, it will be seen as his fault.

The other expense item of note includes 42% of the budget in the police, fire and prisons systems (education is handled separately through the school board). If you fired all those people, or they quit, we wouldn't have a city, we would have a jungle. But the Controller describes all three as terribly mismanaged, with the local police stations in a deplorable state of disrepair and degradation, bathrooms you wouldn't think of using, and so on. The fire department has only a minor number of fires to fight, perhaps four or five hundred a year, but it includes the emergency rescue services which respond to a couple hundred thousand calls a year. The rescue people report to the firemen, and there is social friction between the two, working to the disadvantage of rescue. It costs about $500 to respond to a call, and it isn't entirely satisfactory to send a fire truck to help someone with a heart attack. The Controller had a number of horror stories about administrative mismanagement in this area. As far as prisons go, everybody knows prisons are bad places, and ours are no exception. Confrontation with the unions is definitely in the future for the Mayor, and the city is going to be in pretty bad shape if he doesn't win some arguments.

That's the expense side of the municipal budget; the revenue side is equally gloomy. The offhand comment was that real estate taxes could double without bringing the pension system under control for twenty years. If our taxes are significantly higher than neighboring cities, or even just the same as in cities with superior uniformed services, it will be hard to attract and hold business taxpayers, causing municipal finance to spiral downward. Along the course of this patter-song it isn't exactly reassuring to learn that it now takes the City 21 days to process a check, and that absenteeism in some departments runs to 20%. We've heard a lot of denunciation of Mayors Giuliani and Bloomberg in New York, but their absenteeism runs 3% because investigators are sent to the house of an absentee, who is subject to court martial if he isn't home.

Somewhere in this nightmare lurks the hidden migration of the unionized workers. Starting with Mayor Rizzo or even earlier, the uniformed services were the main political support of the Democrat political machine. Quietly, they have moved out to the suburbs where the schools are better and the taxes are lower, and it is now said that 70% of union workers live (and vote) outside the city limits. The unions talk tough, bluffing through the uncertainty when their membership can no longer provide the votes to be so fearsome. To some degree, their weakening political power is augmented by using their pension funds to provide construction loans for new commercial real estate. Some of that political clout is used up by the need to get zoning variances and tax abatements for the projects. A lot of these power shifts are hard to assess from the outside, but a trend is clear.

The controller didn't mention it, but the city is not only a pension investor in bonds, but also an issuer. Interest rates are about as low as they can get while the Federal funds rate is nearly zero, so there is only one direction they can go in the future -- sooner or later they will go up. By the iron law of bond financing, the value of the underlying principle will then go down. That could provide an opportunity to buy them back at lower prices, or it could break the city's financial back financing higher interest payments. However, for the pension fund side of things, exactly the opposite is true. Maybe Hizzoner can tap-dance around these dangers and opportunities, but most mayors would have trouble pronouncing the words.

It's part of the job description for the controller to be a pessimist. But the most you can make of this mournful dirge is to hope he is completely wrong.

http://www.philadelphia-reflections.com/blog/1591.htm


Macroeconomics of The 2007 Collapse

Sudden wealth creation, whether from the discovery of gold or oil, the conversion of poverty into useful cheap labor, or the sudden abundance of cheap credit, is of course a good thing. Sudden wealth creation can be compared with a stone thrown into a pond, causing a splash, and ripples, but leaving a somewhat higher water level after things calm down. The globalization of trade and finance in the past fifty years has caused 150 such disturbances, mostly confined to a primative developing country and its neighbors. Only the 2007 disruption has been large enough to upset the biggest economies. It remains to be seen whether disorder to the whole world will result in revised world monetary arrangement. One hopes so, but national currencies, tightly controlled by local governments, have been successful in the past in confining the damage. This time, the challenge is to breach the dykes somewhat, without letting destructive tidal waves sweep past them. Many will resist this idea, claiming instead it would be better to have higher dykes.

It is the suddenness of new wealth creation in a particular region which upsets existing currency arrangements. Large economies "float" their currencies in response to the fluxes of trade, smaller economies can be permitted to "peg" their currencies to larger ones, with only infrequent readjustments. Even the floating nations "cheat" a little, in response to the political needs of the governing party, or to stimulate or depress their economies as locally thought best. All politicians in all countries therefore fear a strictly honest floating system, and their negotiations about revising the present system will surely be guilty of finding loopholes for each other; the search for flexible floating will therefore claim to seek an arrangement which is "workable".

In thousands of years of governments, they have invariably sought ways to substitute inflated currency for unpopular taxes. The heart of any international payment system is to find ways to resist local inflation strategems. Aside from using gunboats, only two methods have proven successful. The most time-honored is to link currencies to gold or other precious substances, which has the main handicap of inflexibility in response to economic fluctuations. After breaking the link to gold in 1971, central banks regulated the supply of national currency in response to national inflation, so-called "inflation targeting". It worked far better than many feared, apparently allowing twenty years without a recession. It remains to be investigated whether the substitution of foreign currency defeated the system, and therefore whether the system can be repaired by improving the precision of universal floating, or tightening the obedience to targets, or both. These mildest of measures involve a certain surrender of national sovereignty; stronger methods would require even more draconian external force. The worse it gets, the more likely it could be enforced only by military threat. Even the Roman Empire required gold and precious metals to enforce a world currency. The use of the International Monetary Fund (IMF) implies attempts to dominate the politics of the IMF. So it comes to the same thing: this crisis will have to get a lot worse, maybe with some rioting and revolutions, before we can expect anything more satisfactory than a rickety negotiated international arrangement, riddled with embarassing "earmarks". Economic recovery will be slow and gradual, unless this arrangement is better, or social upheavals worse, than would presently appear likely.

http://www.philadelphia-reflections.com/blog/1596.htm


Veterans Hospital

{Philadelphia VA Medical Center Home}
Philadelphia VA Medical Center Home

At a recent meeting of the Right Angle Club, Stephen C. Bennett an administrator, and Alix Esposito a social worker, kindly addressed the club about the Veterans Hospital where they work. The federal government pushes its mass produced products into every city, but gradually a local flavor starts to creep in; how this process works is illustrated by the fact that Steve's grandfather Claude was once the manager of the Bellevue Stratford Hotel. The VA hospital may be a piece of Washington D.C. planted on Philadelphia soil, but Philadelphia will surely absorb it with the passage of enough time. The VA was once a part of the Veterans Administration, but now it is a part of Department of Veterans Affairs, run by a cabinet Secretary, no less. It's the second largest department of the federal government, and since the only bigger department is the Department of Defense, the combination of the two shows you how far we have come from the nation's original opposition to "standing armies". The fact that these two components of our war machine are separate, on the other hand, surely symbolizes some hidden tensions between our regular armed forces and the American Legion, or the hidden frictions between two congressional committees, or else some other mystery of bureaucratic politics.

The Veterans Administration was founded in 1930, the Philadelphia VA Hospital was built in 1950. Originally, it was designated as a Deans Hospital, signifying the intention to confer prestige and lessen friction with the medical schools. Originally, Philadelphia's VA was affiliated with several medical schools, but in time its proximity to the University of Pennsylvania led to the elimination of ties with other schools. Although the bed capacity is growing in reaction to America's successive wars, its open wards converted after 1960 to more semi-private style, and its focus of medical activity shifting with changes in medical science, the VA remains isolated from the rest of the city and the rest of Philadelphia medicine. Part of this is physical; the hospital is confined by the University of Pennsylvania, the parking complex next to the Amtrak line, and the Woodland Cemetery, so there is little room to grow. And comparatively little commonality with the neighbors. There are 2000 employees and a $30 million budget, marooned in a sea of automobile traffic going elsewhere in a big hurry, too big to ignore but too small to influence the local culture.

{Vietnam War}
Vietnam War

The patients are distinctly different from those you find in other hospitals. There is a great deal of chronic mental disorder, a heavy influence of alcohol and substance abuse and rehabilitation, and even some residential apartments for patients. On a national level, between a third and a half of homeless people are veterans, but for some reason in Philadelphia, only a tenth of the homeless are veterans. During the Vietnam War, the system of draft avoidance through educational exemptions resulted in that generation of veterans coming from an unusual concentration of low income and low educational subgroups. The system of government pensions and promotions tend to retain employees in the system for a lifetime. It's true that informal transfer arrangements allow a certain amount of migration to Florida (in the winter), or Maine (in the summer), or California (to see what LaLa land is all about), but those who do this stay within the VA system. Consequently, the interchange of ideas and techniques that professionals carry with them between hospitals is curtailed, confined somewhat to variations within the VA system, conforming to its social norms. An archipelago, although not exactly a gulag archipelago.

{Veteran}
Veteran

But by far the greatest source of distinctiveness in the VA hospitals comes from the byzantine eligibility standards for the patients. The reimbursement systems of Medicare, private insurance -- which more or less copy each other -- changed around 1988 in a way that more or less eliminated psychiatric inpatient care in the community, especially if it lasts more than a month. The VA, on the other hand, was forced by circumstances to increase its attention to this area. Consequently, all social workers everywhere inquire immediately whether an addict or a schizophrenic might be a veteran. A differential sorting process quickly gets under way, with the VA as the preferred place to send such patients if at all possible. Non-veteran victims of the same conditions tend to have a worsened time of it, because the pressure on state and local governments to make some provision, has been relieved.

{Walter Reed Hospital}
Walter Reed Hospital

At the other extreme, the social elite of the armed forces are not admitted, either. President Eisenhower was unquestionably a veteran, but he had his famous hospitalizations at Walter Reed Hospital. There's an income limit for VA admission, which automatically cuts off 20-year veterans above a certain rank, possibly major. And there are overlapping disability classifications for military hospitals and veterans facilities, with considerable latitude available to uniformed boards of three serving officers, only one of whom is a physician. The result is a general perception that if you have any influence at all, you can generally avoid the VA and be treated in a military hospital, probably in a VIP unit. Good for them; I'd take advantage of it if I had a chance, too. But by siphoning off the top brass, a lot of pressure to improve quality is removed as well. If a VA hospital had eight or ten Admirals and Generals as patients, with academy classmates coming to visit, it's safe to assume that courtesy, orderliness and cleanliness would instantly improve. And take it from me, the quality of care would improve, as well.

http://www.philadelphia-reflections.com/blog/1598.htm


Second Mortgages Want to Be First

{Chrysler Logo}
Chrysler Logo

In a bankruptcy proceeding, there has long been a traditional conflict between the holders of first mortgages and the holders of second mortgages. It goes like this: since the holder of a first mortgage gets paid first, his incentive is to hurry up the process and get the money. The holder of a second mortgage, however, only gets paid what is left, so this party will normally wish to stall proceedings in the hope the market will improve and give the second mortgage a better payout. Normally, this sort of predictable dispute is covered by contracts, and in any event most banks hold both kinds of mortgages and are neutral about what is just and fair. In the current banking crisis, however, the major banks have developed an incentive to favor the second mortgage, so they have a new view of what is just and fair. Four of the largest banks hold a total of $440 billion of second mortgages, but have very few first mortgages because they were sold off in the securitization process. The banks mostly retained the function of servicing first mortgages, however, so they now have quite a conflict of interest.

Something like this seems to be going on with the resolution of the Detroit auto makers, with the difference that politicians tend to favor the interest of the auto workers in the bankruptcies because there are more voters to be influenced. And in the case of the auto companies, there are stockholders who will be wiped out by a bankruptcy unless the liquidation of the company assets produces enough cash to satisfy the creditors, secured and unsecured. After all, stockholders aren't creditors at all; they are owners of the company. No matter how things turn out, however, the secured creditors would normally have first call on whatever is salvaged. So, it's one class of secured creditor against another, or else it is the secured creditors against the "stakeholders", employees or any other unsecured creditor. If the government intervenes, there is the additional issue of the Fifth Amendment of the Constitution, which prohibits government from the "taking" of private property without just compensation. Representative Conyers of Michigan, whose political allegiance is not in doubt, has introduced legislation to prohibit lawsuits in these matters. So now, the prospect grows of a constitutional clash between Congress and the Supreme Court, over the Constitutionality of such a law which denies due process. So that gets us into the fourteenth amendment, too. If we look beyond the technicalities, the looming clash is between President Obama and Chief Justice Roberts. One of them wants to take money from secured creditors and make it available to someone with more political clout; and the other surely wants to preserve the sanctity of contracts, the rights of property holders, due process, and the right of the Supreme Court to declare contrary laws to be unconstitutional.

Unless someone backs off, the situation would seem to be as monumental as Franklin Roosevelt's Supreme Court-packing proposal. Because -- there is every reason to anticipate a 5-4 vote by the Supreme Court, a 5-3 vote if Justice Souter is not replaced by that time, and strenuous efforts to alter the balance.

http://www.philadelphia-reflections.com/blog/1631.htm


Milton Friedman on Capitalism

http://www.philadelphia-reflections.com/blog/1673.htm


Fixing the Financial Mess

Two years after August 2007, it remains uncertain whether we know enough about how the great financial disaster came about. There may be other shoes to fall on the floor, announcing unexpected dimensions of our problem. In particular, the recovery may be brief, followed by a resumption of downward trends we had hoped were finally behind us. That seems to have happened in 1937. If it happens again in 2010, what seemed like a three-year recession may prove to have been a twelve-year one, with early successes exposed as mere flashes in the pan.

Nevertheless, politicians are searching for answers to give the public; no one wants to delay solutions if they exist. Analyses can be revised if new information appears. Presently attractive approaches can be divided into three categories: International, Regulatory, and Goal-focused.

{Martin Wolfe}
Martin Wolfe

International monetary diplomacy. There is fairly uniform agreement that a major source of instability came from the unprecedented transformation of third-world countries into economic powerhouses. As many as a hundred million people were raised up from poverty in less than a generation; there was inevitable commotion in the world's economy as a result of a fundamentally very good thing. The British economist Martin Wolfe is the chief spokesman for the view that there was almost nothing the Americans could do about the upheaval, although the Chinese government made it much worse by pegging its currency too low. This line of analysis leads to the proposal of world monetary diplomacy, offering the Chinese greater influence in the International Monetary Fund in return for floating their currency, and negotiating a greater role for the IMF in world finance.

Regulatory restructuring. With or without the creation of a new international monetary order, others feel that individual nations must create internal regulatory barriers to prevent the ebbs and flows of international currency from circumventing local laws, upsetting local stability. The problems daunting this approach are two: many nations will fail to respond adequately, with consequences which could overwhelm those nations who institute responsible reforms. And second, the recent pace of financial innovation has been so rapid that regulation is easily circumvented. Draconian controls would surely lead to a loss of local competitiveness, and disadvantaged local captives would soon rebel. Urgently needed regulation and effective regulation often prove to be two different things.

Goal-focused adjustment. In recent decades, considerable success resulted from forcing the system to produce a certain desired outcome, essentially ignoring the myriad intermediate adjustments. Inflation targeting has come to be a description of stable prices forcibly maintained by one technical method (also called inflation targeting in a narrow sense). It lets the economy produce its own responses, and if necessary lets academics produce their own explanations. Unfortunately, this approach in time translates into Congress announcing there shall be no inflation, and the Federal Reserve responds, lo, there is no inflation. Since Congress has very little idea what is involved in this process of waving Merlin's wand, transparency, financial innovation and reduced transaction costs can suffer unduly before the underlying dynamics reach the surface of public awareness. In short, there are too many hidden steps between public awareness and the feed-backs which modulate the policy. One of those steps is apt to be blatant denial that policy had a given adverse effect.

http://www.philadelphia-reflections.com/blog/1674.htm


Robert Barclay Justifies Quaker Meetings

{Robert Barclay}
Robert Barclay

As part of the dissidence and Civil War of 17th Century England, Robert Barclay the Scotsman emerged with a point of view which was structured and reasoned in detail. What was almost unique was his reduction of it to a handful of pithy "Sound Bites". Coupled with membership in a prominent family, these abilities made him a particular friend of James, Duke of York, later King. Barclay became a Quaker at an early age.

The whole point of the Reformation was revulsion against corrupt Catholic clergy, shielded behind some impossibly convoluted legalisms of doctrine. But for the governing establishment any reform was going too far if it led to anarchy and chaos; combating disorder was then in many ways the central mission of the Catholic faith. The establishment did recognize that public revolt against universal micromanagement led to the scaffold for Kings who insisted on it. But in their view the need for law and order still demanded some legitimacy, if not organized law. The Ranters, who paraded about stark naked and lived in ways resembling the hippies of the 1960s, were beyond the pale. Quakers, who professed no formal doctrine except silent meditation, might be possibly just as threatening. After all, silent meditation could lead you anywhere including regicide. But the Quakers at least were quiet about it.

George Fox the founder of Quakerism, had already provided one basis for containing fears of anarchy, by organizing local monthly meetings for worship within regional quarterly meetings; quarterly meetings in turn were within an overall framework of a yearly meeting. Occasional monthly meetings might develop a consensus for wild and antisocial behavior, indeed often did so, but would have to persuade the quarterly meetings whose members naturally outnumbered them. In extreme cases, the whole religion assembled in a yearly meeting. The innate conservatism of the meek would usually silence the extremism of the rebellious few. Very few kings would deny they could go no further toward despotism themselves, without the public behind them. The Quaker problem was to demonstrate what their consensus really was.

{Free Quaker Meeting House}
Free Quaker Meeting House
Barclay recognized and, framing the matter in Quaker terms, drove to the heart of this matter. Why have a Quaker meetinghouse at all? If the purpose is to meditate in silence, why not do that at home or in a cave?

Essentially, the answer emeged that any religion which renounced a priesthood, which even renounced having a written doctrine, still needed some sort of institutional memory. If every Quaker began with a clean slate, to develop his own organized set of moral principles, then most of them would never get very far. Even if they did, they would have no time left for milking cows and weaving cloth. Single silent meditation was inefficient, particularly if you had faith that everyone was eventually going to arrive at the same convictions as the Sermon on the Mount. The founders of Quakerism took a chance, here. To assume the same outcome, you have to assume everyone starts with the same instincts and talents; even 21st Century America has private doubts about that one. Feudal England would have rejected it contemptuously. Carried to an extreme, it was a claim that everyone was as good a philosopher as Jesus of Nazareth, as good a person, as much a Son of God. That seemed like an arrogant claim. A more humble claim was that collectively, listening respectfully to one another in a gathered meeting, the whole world would over time reach the same truths as the Creator. If not, that still was as about as close as you were going to get to an oral memory, slowly building on the insights of the past.

Like all the early Quakers, Robert Barclay spent some time in jail. He did visit America in 1681, but it is doubtful if he spent any time here while he was Governor of East Jersey, from 1682 to 1688. The King insisted on his appointment, because he seemed the most reasonable man among the most reasonable sect of dissenters, and therefore the rebel he chose to deal with.

http://www.philadelphia-reflections.com/blog/1706.htm


Grand Union

{Grand Union Flag}
Grand Union Flag

THERE are a number of supermarkets in Philadelphia called Grand Union Stores, but the grocery conglomerate was founded in 1872. That Union was the Northern side in The American Civil War, and it is reported that life-sized replicas of Abraham Lincoln were once a common feature in the stores. Much earlier than that, the Grand Union was a term that meant the first American national flag, adopted in 1775, and created by a Philadelphia milliner, Margaret Manny. It was, however, quite similar to the flag of the British East India Company, and the Grand Union they were both talking about was the Union of England and Scotland of 1707. The jack of the Grand Union flag, soon to be replaced with a ring of thirteen stars, represented the crosses of England and Scotland, superimposed. When Northern Ireland joined the United Kingdom, the cross of Ireland was superimposed, to give the present form of the Union Jack. In 1775, considerable colonial sentiment still hoped that hostilities would achieve a status for America along the lines of the other members of the United Kingdom.

{Betsey Ross Flag}
"Betsy Ross" Flag

Although the number of stripes in the national flag briefly increased to fifteen at the time of admission of Kentucky and Vermont, stripes soon reverted to thirteen to symbolize the original thirteen states. After that single exception, only the stars in the jack increased to match the number of current states.

The early use of the Grand Union Flag is in some dispute, but it may possibly have been used by George Washington in the various battles around Boston and Charlestown. It was most certainly flown by John Paul Jones on his ship the Alfred . Because of its resemblance to the flag of the nation we were fighting to overthrow, it is understandable that there would soon be a desire to change it. That is what happened in 1777, although just who first had the idea is still open to dispute and myth making.

America has had three flag acts:

{Star Spangled Banner 15 Stars}
After Vt, Ky, 15 Stars, 15 Stripes

The Flag Act of June 14, 1777 was passed by the Second Continental Congress (under the Articles of Confederation, of course. June 14 is now called Flag Day.) "Resolved, That the flag of the United States be made of thirteen stripes, alternate red and white; that the union be thirteen stars, white in a blue field, representing a new Constellation."

The Flag Act of January 13, 1794 (1 Stat. 341) An Act making an alteration in the Flag of the United States. Be it enacted by the Senate and House of Representatives of the United States of America in Congress Assembled, That from and after the first day of May, Anno Domini, one thousand seven hundred and ninety-five, the flag of the United States, be fifteen stripes alternate red and white. That the Union be fifteen stars, white in a blue field.

The Flag Act of April 4, 1818 (3 Stat. 415) An Act to establish the flag of the United States. Be it enacted by the Senate and House of Representatives of the United States of America, in Congress Assembled, That from and after the fourth day of July next, the flag of the United States be thirteen horizontal stripes, alternate red and white: that the union be twenty stars, white in a blue field. And be it further enacted, That on the admission of every new state into the Union, one star be added to the union of the flag; and that such addition shall take effect of the fourth day of July then next succeeding such admission.

http://www.philadelphia-reflections.com/blog/1700.htm


States Rights Confront Civil War

{Dr. Randall Miller}
Dr. Randall Miller

Dr. Randall Miller of St. Joseph's University recently gave the Union League an interesting insight into the non-military upheavals of America by Congress during the Civil War. (Parenthetically, Dr. Miller is the author of Encyclopedia of Greater Philadelphia, which may give him still greater prominence in these columns when it reaches print.) Lincoln and the military get most of the headlines, but the greatest nation-building activities were products of the Congress, not Abraham Lincoln directly; the President was too busy directing the war to take much lead in other matters. The Republican Party of that time was freshly created, still strong in its idealism around elements of the party platform which really meant something to them. Although Senators John Sherman of Ohio and William P. Fessenden of Maine are remembered by history, most of the activity was conducted by members of the Congress who had reached seniority in committees, and hence mostly had died off by the end of the War. It seems like one of history's great unfairnesses that a remarkable transformation of the nation was accomplished by people who are now largely unknown.

So Lincoln gets much of the credit by default, and the idealism and grand plans are lost in the current view that the Civil War was about liberating the slaves. That was of course part of it, but the Civil War was in fact mostly fought about the Union, and the Whig principles essential to nation-building. And the transformation was the vision of party policians in offices which we currently regard as being filled by party hacks in safe seats. That wasn't the case at all; these visionaries knew where they wanted the country to go, and cleverly designed a set of programs to make it happen. Lincoln wanted to win the war; these men wanted to have a new nation emerge, after the war.

Civil War

It almost goes without saying that a Civil War over the secession of rebellious state governments from a Union created by the Constitution was going to weaken state power -- and strengthen Federal control -- if the Unionists won the war. That's what the Republicans wanted, and what the Southerners feared. But, strangely, both sides harbored warm feelings for the Constitution, wanting to preserve much of its essence. The Republicans therefore realized that many of the laws which were essential for winning the war, would lose their popularity and hence their force, once victory had been achieved. Reconstruction of the South, for example, was going to be unsustainable as soon as the huge Union Army was demobilized. The liberated slaves were unlikely to migrate to the western wilderness, and so the problems of racial readjustment were going to remain Southern problems for decades to come, without an army of occupation to maintain stability, law and order. In fact, it was largely Southern whites who migrated to the far West, leaving the situation even more unstable back in the old confederacy. How was a brave new nation to emerge from this mess?

War measures did help. There was no Federal currency until the War, and so a national system of greenbacks and war bonds helped to unify a vast and far flung continent. The National Banks, fought over and feared for nearly a century, simply had to be created; all of these national rather than local symbols strengthened the national feeling. Putting 10% tax on state bonds was a pretty good indication that the congressional Republicans knew where they were driving things. The telegraph was of great value to wartime communication; it helped create a virtual community, with national news taking the place of local news.

Up until the Civil War, the main source of Federal income was derived from the sale of land; the new nation had a lot more land than gold. After the war, the nation found itself with taxation as the main source of income. The income tax was a step too far, of course, and it was repealed; but a system of national currency organized a system of national taxes which persisted. The country still had plenty of raw land, but it was distributed by giving it to railroads in return for national transportation, and to land-grant colleges in return for greater uniformity of culture. Notice the hand of Congress, however. This land was to be surveyed land, not the land between this rock and that creek. Surveyors since the time of William Penn and George Washington were the agents of orderliness, law, and peaceful settlement of disputes. To that extent, surveyors broke up the reliance on local clans and territoriality; peace instead of conquest. The leaders of the North, the Republicans in congress and the cabinet knew what they wanted; it was that the sacrifices of the war would find a reward in the peace that would follow, and that reward would be a new nation.

Notice carefully the second section of the Thirteenth Amendment. The first section freed the slaves. The second section gave to the Federal government the charge of enforcing that liberty. The crafters of words and designers of rules, knew exactly where they wanted to go.

{The Constitution}
The Constitution

They did their work so well, that it begins to look as though the next few decades will display a crisis, created by going too far, too fast. In all these idealistic schemes, the state government is the enemy. State governments would interfere with Reconstruction; state governments would interfere with land grants, and misuse their undisputed control of local law enforcement. State governments would introduce little strategems for restoring the power to tax and control, and to govern. State governments would slowly remember that the Constitution conferred only a few limited powers on the Federal government, and reserved all other powers to the states. The Constitution would never have achieved ratification without this explicit provision in the XII Amendment. And so, step by step, we have achieved some sort of goal by making the state governments into the weakest, most ineffectual, and yes the most corrupt parts of our national system. California, New York, New Jersey, and Michigan lead the way into what seems a certain disaster of enlisting municipal employees into political machines of the worst sort, and bankrupting the states that permit it. Massachusetts, Rhode Island, Maryland and West Virginia are not far behind.

Fanatics could persuade themselves that a solution readily lies in simply going all the way and eliminating state governments. But to do so would destroy James Madison's brilliant insight. The states place a limit on unlimited power from whatever source by offering the citizens a choice: if things get too bad, just move to a nearby state.

http://www.philadelphia-reflections.com/blog/1740.htm


Re-Doing Dilworth Plaza

{Richard Maimon}
Richard Maimon

Richard Maimon recently visited the Right Angle Club to tell us all about the architectural plans afoot to consolidate the underground transportation network underneath City Hall, change the patterns of foot traffic, open up the views, and draw the visitors to the expanded convention center into the city itself. All of this is to be accomplished by paving over Dilworth Plaza and planting it with grass, along with an extensive fountain installation which can be used for winter ice skating. In the course of creating an entrance hub for Septa, the Broad Street and Market subways, walkways are rearranged and -- it is hoped -- the foot traffic around City Hall will shift around to make it a real city center. It's a very expensive dream because of all the overlapping transportation tunnels hidden under the largest and heaviest stone building in America, leading to a great deal of expensive construction work that doesn't show.

{interior view of north}
interior view of concourse north_

Dilworth Plaza is currently almost completely deserted, so its conversion will not be much mourned. However, the mixture of contemporary transportation entrances with the neo-classical architectural style of City Hall will probably meet resistance, and there is concern that excessive foot traffic could convert a grassy park into a mud puddle, while a large open-air lake could become a public rest-room for the homeless if the designers aren't careful. To some extent, the public forces to be resisted in the design will be self-policing if the anticipated foot traffic is at the anticipated level, but overwhelmed if the project is too successful, or left to deteriorate if it fails to succeed. And it's all too expensive to do twice; the designers have to get it right the first time.

{Section Pavilions}
Section Pavilions

So, it all comes down to money. Construction costs are less during a recession; but raising money is easier during a boom economy. High hopes are raised for a Democratic governor to be able to persuade a Democratic president to divert stimulus money our way. High hopes are raised for a former Mayor's ability to divert state funds to our part of the state. In other words, it all depends on Governor Rendell, now that Senator Specter has navigated himself off the Appropriations Chairmanship. In our system of government, public works projects have to be placed somewhere, so the best system is to rotate the goodies in an informal way. This rotation in turn depends on a geographical rotation of the top political officers, since they can claim that it is "Philadelphia's turn". So, the grim reality is that only two Philadelphia mayors in history have become governors of the state, with the rather bitter result that Philadelphia has been neglected in the siting of the available public projects for a very long time. Digby Baltzell long preached that it was our own fault, for being too non-aggressive. But most of the rest of us, particularly those who have wrangled with the upstate legislature, blame the situation on narrow-minded opposition from those who have worked the gerrymandering game for a couple of centuries.

http://www.philadelphia-reflections.com/blog/1755.htm


The Proprietor, Himself

Richard Dunn, who with his wife Mary Maples Dunn stand as the two core authorities on the life of William Penn, merely smiles when asked to describe what Penn was really all about. What we need is to have one good biography emerge, but it isn't easy to guess what it will say. For the present, let's just sketch a few paradoxes which somehow need threading together.

In the first place, the wealth of William Penn can only be described as prodigious. His father had played a central role in restoring the Stuart monarchs, and in the course of it had conquered for the Crown the enormously valuable property of the Island of Jamaica. For these efforts, the father had been rewarded with extensive properties in Ireland, and a highly influential position at Court. To all of this was overgenerously added as a debt repayment, the American territories which have now become the states of Delaware, New Jersey and Pennsylvania. Actual ownership of some of this was shared with others, but all of it was quite effectively controlled by young William. No one else stands even close as the largest private landholder in American history. But to appreciate the immensity of his wealth, it should be understood that he treated this property as a sort of hobby. Over the course of his lifetime, the colonies lost money, and Penn subsidized them rather seriously from his other assets.

At the same time, Penn lived vastly beyond his income in ordinary ways, becoming heavily indebted, eventually going to debtor's prison. It probably was not necessary; his sons renounced Quakerism and made a profit on the colonies after they inherited them. Although he could display remarkable organizational talent, particularly in the organization of New Jersey, his management was mostly slack, his judgment of agents often proved too trusting, and he permitted himself to be exploited by poorly-designed contracts to his eventual financial ruin. Even that might not have been serious; he displayed a towering legal mind in the devising of the doctrine of jury nullification and was the winner in a great many lawsuits. He even demonstrated he was capable of winning dubious lawsuits, soundly defeating Lord Baltimore in a border dispute over Maryland which others have said showed Baltimore had the stronger case. We know he had influence at Court, and such legal victories suggest he might on occasion have taken full advantage of it.

{Gulielma Maria Springett}
Gulielma Maria Springett Penn

From the sound of things, some have concluded Penn was so rich and powerful he grew careless about his own best interests, which essentially needed very little defense. In particular, he gave this impression to his fellow Quakers, who concluded he did not need nor likely would stoop to collecting what he was owed in taxes and property sales. This cavalier attitude encouraged the early Quaker merchants to follow their own advantage without shame, and as it happened with great vigor. The Constitutions he devised for the colonies are frequently cited as the brilliant cornerstones of fairness and stability, ultimately the models for much of our present Constitution. Penn really was sincere in wanting to provide a better life for the working people than they could have at home in England. But in the Seventeenth Century, the modest role he devised for the Proprietor commanded little respect, and was not one his aggressive clients would have chosen for themselves in his position. Perhaps the most generous description of their passive aggression would be that he taught power and governance to be the collective possession of the whole Quaker meeting, so the leaders of the meeting simply took him at his word. For their part, there can be little doubt of their commercial talents; trade and industry immediately thrived in the colony. However, sharp, aggressive trade and commerce were not things a gentleman would himself want to associate with.

Unfortunately, the historical records of the early colonies are not good; for the most part, we have to surmise the struggles and frictions between a rich, financially careless, and sincerely earnest theologian in his contention with a group of poorly educated strivers who had been told he regarded each of them to be his equal. As the saying goes, he was rich beyond denying. And therefore, he was probably arrogant beyond his own ability to see it as a flaw.

Equal before the law, perhaps, and equal in the prayers of First-day Meeting. But everything about his upbringing, his social circle in London, and his staggering wealth suggested that even a saint would have trouble believing, deep in his heart, that these were truly his equals. And even if perchance he did believe it, they would not have believed it for a moment, had their positions been reversed. Penn certainly acted as though he believed in religious freedom, serene in the idea that if every person earnestly thought hard about ethical issues, everyone would eventually reach about the same conclusion. The elders of the meeting, however, behaved in ways which suggested they would personally prefer non-Quakers to settle somewhere else, and given half a chance would create Quakerism as an established church. There seemed to be those who felt that Friend William was perhaps a little too trusting. And anyway there were some obvious paradoxes. William Penn kept personal slaves.

{Hannah Callowhill Penn}
Hannah Callowhill Penn

With two wives, William Penn had thirteen childrem. Among them was considerable diversity of opinion, along with the same tendency to rebellion found in any two generations. Early illnesses and chance led to the emergence of those children who renounced Quakerism, and showed no shame at all about wanting to have money in order to spend it recklessly. One would have supposed that a man of Penn's intellectual stature would have been able to control his family better, but his own reckless youth had been so extreme that he had few arguments available when, as seems virtually certain, rebellious children defended themselves by reminding him of his own indiscretions. William Penn displayed absolutely no sense of humor; a touch of it would have been useful in mastering a family and friends who were undoubtedly having a little trouble knowing what to make of this apparition in their midst. Some equally pompous Pennsylvania merchants might have had difficulty denying that in their passive aggression, they occasionally resembled the spoiled brats with whom he found he had ample family association.


REFERENCES


Remember William Penn, 1644-1944: A Tercentenary Memorial : Edward Martin: ISBN-13: 978-1258369934 Amazon

http://www.philadelphia-reflections.com/blog/1761.htm


William Penn and the Corporate Model

{William Penn}
William Penn

The Proprietorship of West Jersey is pretty much unchallenged as the oldest surviving stockholder corporation in America. A number of points could be made about this creation, but an essential one is that Penn had very few existing models to work from. Nowadays, there are thousands of corporations in existence all over the world, many of them started by men of very little education or notable intelligence. Now that the subject has been mentioned, I can confess that I started three of them, myself. As I recall, it required only an hour's visit to a lawyer's office, for an agreed fee of $500 for each one of them, and after a two-week delay, I was said to be in business.

By contrast, consider Penn's problem. He had to conceive of the idea, and decide to go forward with it in spite of probably having almost no association with any other corporation, and probably without any assistance from any lawyer who had useful experience. While it is unlikely that he designed the modern corporation, or even contributed many useful design ideas, it is also likely he was so unaware of the known features of corporate design that he was nearly in the position of re-inventing this wheel if he expected it to succeed.

{Samuel Johnson}
Samuel Johnson

Nowadays, a lot of entrepreneurs are in a similar state of innocence about corporate structure, but the models exist and the rules have been made and tested. An hour's conference with an accountant and a lawyer is all that is needed to avoid a million pitfalls, simply setting out on a well-trodden path. A modern businessman may go to business school and emerge with the complaint that he was not taught anything very useful, but that is far from the case. An entrepreneur doesn't need to know much about accounting, or corporate law, or tax law, or personnel management. But he does need to know that he needs the services of an accountant, a lawyer, a tax expert and an office manager. These experts exist, and provide their services as a reliable package. Back in the Seventeenth century, those professions didn't exist, and it was scarcely common knowledge that the corporation couldn't function without a number of working parts. The skill of supervision, some concept of how to find and manage capable subordinate leaders, how much to pay them, all fell to the pioneer to discover. In Penn's case, he had to have a reliable organization in order to manage, even to police, the day-to-day complexities of a staff of people going about their duties, while he went about his own. His personal chores included making personal arrangements with the King of England to acquire what has become three states: New Jersey, Pennsylvania and Delaware; it required negotiations with the Indians, and with New York, Maryland and Virginia about their disputes with him. He had to organize the Assembly, deal with the major stockholders, and worry about wars and uprisings three thousand miles away.

As Samuel Johnson observed about a dog walking on two hind legs, the remarkable thing was not that he did it well, but that he did it at all.

http://www.philadelphia-reflections.com/blog/1762.htm


SEPTA's Long Term Planning

{Septa}
Septa

Byron S. Comati, the Director of Strategic Planning and Analysis for SEPTA (Southeastern Pennsylvania Transportation Authority), kindly gave the Right Angle Club an inside look at the hopes and plans of SEPTA for the near (five-year) future. Students of large organizations favor a five or six-year planning cycle as both short enough to be realistic, and long enough to expect to see tangible response. If plans continuously readjust to fit the five-year horizon, the concept is that the organization will move forward on these steppingstones, even accounting for set-backs, disappointments and surprises. Furthermore, a serious level of continuous planning puts an organization in a position to react when funding opportunities arise, such as the sudden demand of the Obama Administration that economic stimulus proposals be "shovel ready."

{The Silverline V}
The Silverline V

So, SEPTA is currently promoting five major expansions, based on the emerging success of an earlier plan, the Silverliner V. Silverliner is a set of 120 shiny new cars, built in Korea on the model of electrical multiple units, which are expected in Spring 2011 to replace 73 cars or units which were built in 1963. Obviously, 120 are more expensive than 73, but they are more flexible as well. And less wasteful; most commuters are familiar with the model of three seats abreast which unfortunately conflict with the social preferences of the public, tending to make the car seem crowded even though it is a third empty. When a misjudgment like this is made, it takes fifty years to replace it with something better. For example, there's currently a movement toward "Green construction", which is acknowledged to be "a little bit more expensive". The actual costs and savings of green construction have yet to become firmly agreed on, so there's an advantage to being conservative about what's new and trendy in things that take fifty years to wear out.

{Septa Regional Map}
Septa Regional Map

Four of SEPTA's five major proposed projects are in the Pennsylvania suburbs. New Jersey has its own transportation authority, and Philadelphia is thus left to struggle with the much higher costs of urban reconstruction assigned to its declining industrial population. And left unmentioned is the six hundred pound gorilla of the transportation costs of new casinos. A great many people are violently opposed to legalized gambling, and even more upset by the idea of crime emerging in the neighborhoods of gambling enterprises. Even the politicians who enacted this legislation are uncomfortable to see the rather large expenditures which will eat into the net revenue from this development. Nevertheless, if you are running a transportation system, you have an obligation to plan for every large shift in transportation patterns, no matter what you might think of the wisdom of the venture. The alternative is to face an inevitable storm of criticism if casinos come about, but without any preparation having been made for the transportation consequences. At present, the public transportation plan for the casinos is to organize a light rail line along the Delaware waterfront, connecting to the rest of the city through a spur line west up Market Street; it may go to 30th Street Station, or it may stop at City Hall. That sounds a lot like the present Market-Frankford line, so expect some resistance when the cost estimates are revealed. Because all merchants want to have the station stops near them, and almost no residents want a lot of casino foot-traffic near their homes and schools, expect an outcry from those directions, as well. It would be nice to integrate this activity with something which would revive the river wards, but it seems a long stretch to connect with Wilmington on the south, or Trenton on the north.

The planned expansions in the suburban Pennsylvania counties will probably encounter less controversy, although it is the sorry fate of all transportation officials to endure some hostility and criticism for any changes whatever. Generally speaking, the four extensions follow a similar pattern of building along old or abandoned rail lines, following rather than leading the population migrations of the past. When you are organizing mass transit, there is a need to foresee with some certainty that there will be a net increase in commuters in the region under consideration. The one and two passenger automobile is a much more flexible instrument for adjusting to the growth of new development, schools, retail, and industry. Once the region has become established, there is room for an argument that transportation in larger bulk is cheaper, cleaner or whatever.

The Norristown extension follows the existing but underused rail connections to Reading. Route US 422 opened up the region formerly serving the anthracite industry, but now the clamor is rising that US 422 is impossibly crowded and needs to be supplemented with mass transit.

The Quakertown extension follows the rail route abandoned in 1980 to Bethlehem and Allentown, although extension is only planned as far as Shelly, PA.

The Norristown high speed extension responds to the almost total lack of public transportation to the King of Prussia shopping center, and will possibly replace the light rail connection to downtown Philadelphia.

And the Paoli extension follows the mainline Amtrak rails as far as Coatesville.

All of these expansions can expect to be greeted with huzzas by developers, land speculators and newsmedia, but resistance will inevitably be as fierce as it always is. Local business always fears an expansion of its competitors; the feeling is stronger in the suburbs than the city, but local business always resists and local politicians always follow their lead. To some extent, the suburbs have a point, since radial extensions are usually much cheaper to build than lateral or circumferential transportation media; bus routes are the favored pioneers in connecting one suburb with another. Therefore, the tendency in these present plans remains typical by threatening the suburbs with a need to travel toward the center hub, then take a reverse branch back in the general direction of where they started, in order to go a short distance to a shopping center or school system. The two main river systems around Philadelphia interfere with the construction of big "X" routes from the far distance in one direction to the far distance in the opposite direction. Euclidian geometry makes the circumferential route elongate as the square of the radius. And jealousies between the politicians in three states create rally foci for the special local interests which feel injured. Since it seems to be an established fact that the proportional contribution to mass transportation by the surrounding suburbs of Philadelphia is traditionally (and considerably) lower than the national average, a political reconciliation might do more for the finances of SEPTA than any federal stimulus package could do. For such reconciliation, a few lateral connections in the net might pacify the suburbs enough to justify extra cost. Unfortunately, the main source of unjustified cost in regional mass transit is the high wage and benefit levels of the employees, a situation inherited from the old days when commuter rail was part of the stockholder-owned regional railroads. Just as featherbedding was the main cause of the destruction of the mainline railroads, health and pension benefits threaten the life of mass transit. In the old days, local governments acted as a megaphone for union demands. So the railroads just gave the commuter system to the local governments, and let them wrestle with the unions themselves. Since the survival of the urban region depends on conquering this financial drain, the problem must be gradually worn down. But it has been remarkable how long the region has been willing to flirt with bankruptcy rather than bite this bullet.

If anything, this friction threatens to get worse. In 2009, for the first time, a majority of union members in America -- work for government, the one industry which thinks it cannot be destroyed by losing money. True, SEPTA is not exactly a government function, but it has enough in common with a government department to arouse suburban voters, who regularly refer to it as an arm of the urban political machine. SEPTA isn't too big to fail, but there exists little doubt that government at some level would probably try to bail it out if it did.

http://www.philadelphia-reflections.com/blog/1766.htm


Go to Delaware, Elephants?

{Dead Elephant}
Dead Elephant

No one is supposed to know where elephants go to die, but if they are smart as people say they are, my suggestion is to search for dead elephants in the state of Delaware. Most taxes, and estate taxes in particular, are considerably lower, there. At least this was the message Christopher J. Topolewski, Esq. conveyed to the Right Angle Club recently. His firm, West Capital Management, has prepared a table comparing the taxes in the three states that come together at the southeast corner of Pennsylvania, which for residents of the Philadelphia area are within easy commuting distance of each other. Although Delaware has a marriage penalty (one couple is taxed more than the sum of two singles), it has no estate tax at all, no sales tax, and a property tax rate only half that of Pennsylvania, only a quarter of that in New Jersey. For residents of New Jersey there is almost no tax which is not lower in Delaware, because but ex-Pennsylvanians would then have to be careful to die or cohabit, since ordinary income tax and capital gains taxes are higher in Delaware than Pennsylvania. If you must die (and who doesn't?), go die in Delaware.

This was a situation specifically contemplated as a way to discipline greedy state governments, by James Madison when he was formulating the U. S. Constitution. And there is evidence it is working. By happenstance I once encountered an official of New Jersey taxation, who told me that 43% of New Jersey taxes are paid by 1% of the population. And that 1% was moving out of the state as fast as it could. If it does, the other 99% of New Jersey residents will find their taxes rising by 43%. West Capital reports that taxation as a percent of income is 1.23% in Delaware, 3.46% in Pennsylvania, and 5.82% in New Jersey, suggesting that a selective flight of the 1% would raise the state taxes of everyone else by 43%, and thus make state taxation as a percent of lowered average income rise to roughly 20%. Relating total income to total tax revenues would be an even better way to detect hidden indirect taxes, such as overtaxing utilities in the knowledge it will be passed on to the consumer. I recently discovered that a few years ago, the Legislature got tired of hearing complaints about local taxes, so they transferred half of the local taxes to the state tax. That's pretty much like taking it from one pocket and putting it into another, because now all the hubub is about state taxes. Armed with even partial information, it becomes easier to understand why New Jersey would evict a governor who had been Co-chairman of Goldman Sachs, during a financial crisis. If a financial whiz can't change this, maybe it requires a meat ax.

This is a time of growing restlessness about public spending, and Tea Party revolts are likely to accelerate during the remaining nine months before the next election. Conjecture is growing about a coming deadlock between a Republican Congress and a Democratic President, lasting at least two more years. What might emerge from a strong third party congressional delegation is too arcane to discuss. But at least the Republicans who leave can console themselves they are selectively raising the taxes of Democrats.

It seems almost inconceivable that professional politicians would demonstrate such a forest of tin ears as to let this happen, but the rest of Mr. Topolewski's talk just heated up the fire. His long-scheduled talk was designed to give guidance about the new estate tax laws, but he found himself confounding his audience with the news that there are no new estate tax laws; in fact, there will be no estate tax laws at all after this year unless they emerge from the congressional gridlock we already have. Which apparently will be followed by a gridlock we can scarcely imagine. Imagine asking your lawyer to write a will which straddles the contingencies that there will be no law, that there might be a continuation of the present one, or there might be some new law of quite uncertain wording. One of the suggestions offered is to allow your executor the discretion to accept or disclaim certain hypothetical provisions.

And that brings up an old story. William Penn was the largest private land owner in the history of America, possibly the whole world. He had a trusted agent, who gave him an enormous pile of papers to sign. A busy rich man like Penn is regularly confronted with a discouragingly large number of routine legal documents to sign. So, Penn signed them all, not noticing that one of the various papers in the pile gave the entire state of Pennsylvania -- to his agent. The outcome of the ensuing uproar was that Penn spent six years in debtors prison.

http://www.philadelphia-reflections.com/blog/1776.htm


Unalienable Rights Before 1776

{Proprietors of West Jersey}
Proprietors of West Jersey

In 1976, the bicentennial birthday celebration of the Declaration of Independence contained two major exhibits of its conceptual origins. Mr. H. Ross Perot of Texas loaned his copy of the 1215 Magna Carta, and the Proprietors of West Jersey loaned their 1677 original of William Penn's Concessions and Agreements to the colonists of New Jersey. The purpose of the exhibit was to emphasize the historical origins of the concepts within the Declaration, but even the language of the Concessions is remarkably similar, quite evidently lifted by Jefferson when he was writing. On one point, Penn had the better of Jefferson; he correctly wrote about inalienable rights, while somehow Jefferson gave us unalienable ones.

{William Penn}
William Penn

The matter came up recently at a Socrates meeting of the Right Angle Club, where at least one member felt there was no such thing as a natural right, while others wavered. In discussing the rights which the Creator, William Penn and/or Thomas Jefferson may have given us, the various contexts must be held in mind. At the time of declaring our intention to sever relations with Britain's King, there was no Constitution to refer to as a source, and it was impolitic to assert the rights had been given by English kings, like King John. Therefore, the language cleverly short-cuts around the divine right of kings to make a direct connection between the Creator and the colonists. William Penn on the other hand, was a real estate promoter, offering enticements and assurances to prospective colonists who were naturally fearful of risking their lives in sailboats, only to face the possible tyranny of a vassal king who might be even worse than the anointed one. Not only did Penn renounce any suggestion of a Royal role for himself, but went to considerable length describing the legally binding concessions and agreements he was offering. The right of trial by jury, for example, became a right to be punished only by a jury of twelve of one's neighbors. He wasn't talking to lawyers, he was making important distinctions very clear to laymen. These were not rights given by a Divinity who could be trusted, nor something which grew out of Mother Nature. They were the personal promises of William Penn, in personal legal jeopardy of the English courts if he reneged on them. He even had a ready answer for those who discovered religious language in legal documents -- the Quaker belief that, occasional appearances to the contrary notwithstanding, There is That of God, in every man.

{H. Ross Perot}
H. Ross Perot

As a small side light of the Concessions document, it had long been housed in the little brick hut on Main Street in Burlington NJ, where the Proprietors of West Jersey keep their treasures. The obscurity of these papers was probably their best protection, but the risk of displaying them in Philadelphia at the centennial brought out the need to insure them, hence to appraise their value. The figure of four million dollars was kicked around. Ross Perot might have felt comfortable with this sort of expense as the natural cost of being a rare book collector, but it seemed highly unnatural to Quakers. Sometime afterward, the Surveyor General, William Taylor, was awakened by a call from Burlington neighbors that someone was trying to break in the roof to steal contents of the Proprietorship building. The burglars were unaware that underneath the shingles, the roof was actually made of concrete a foot thick. So the perps were frustrated in their aims, but Bill Taylor was greatly troubled by the implications, actually unable to sleep at night worrying about what was in his custody. So, in time the State of New Jersey constructed a suitable archives building, and the valuable documents were transferred up to Trenton. Time will tell what the Soprano State does with such a valuable possession, but at least the Quakers can now sleep at night.

http://www.philadelphia-reflections.com/blog/1801.htm


Inalienable Rights Before the Magna Carta

{Hammurabi}
Hammurabi

One of the central attractions of Roman citizenship was the set of rights afforded the citizens, and definitely not afforded to other people. St. Paul made good use of the rights of a Roman citizen, available to those who could announce civis Romani sum . These were, however, the gift of the Roman Senate, which for a long time Emperors feared to tamper with.

Chip Kelly of the Right Angle Club points out that Hammurabi intended the right of a tooth for a tooth and an eye for an eye as a limitation of rights. If someone offended you or your family, you were definitely not entitled to overreact by massacring his whole tribe, but limited to exact equality of the punishment to fit the crime. An eye for an eye, tooth for a tooth -- and no more.

Somewhere, there may be a reasoned argument for natural rights or divine rights, but outside the French Revolution it is a little hard to find anything but legal rights, as consistent rights which society in general has decided to give you. That's somehow related to the concept of extending those rights to everyone, which everyone would want to have for himself. Anything more restricted than that is not a human right, it is political favoritism.


REFERENCES


Magna Charta: PartI Romance Part II Pedigrees Amazon

http://www.philadelphia-reflections.com/blog/1802.htm


Three Revolutions at Once, Maybe Four

{Tea Party Sticker}
Tea Party Sticker

The rise of the Tea Party movement in 2010 reopens a lifetime question in my mind. What was the American Revolutionary War all about; surely, a tax on tea isn't outrageous enough to go to war over, is it? It only aggravates curiosity to learn this particular law passed by the British Parliament, actually lowered the price of tea.

A somewhat different importance for the 21st Century is, of all the dozens or even hundreds of little civil wars that have popped up in the past two centuries, this American one seems to have had the biggest impact on the thoughts and behavior of the civilized world. The French Revolution comes close, but we meant to speak of persuasive influence on serious minds, not merely bloodiness and lasting grievance. Here are three suggestions, maybe four.

In retrospect, we can see the outlines of three major revolutions, coming together at the end of the 18th Century. The first is the Industrial Revolution, which had its beginnings in England around the city of Manchester. That was a region of major Quaker concentration, many of whom migrated to William Penn's social experiment in seeing what peace could do. The Industrial Revolution flourished in Great Britain far more readily than in France, and in a sense more than in America. But of the three major countries, America had the largest amount of unsettled land, and the greatest natural resources of the three major countries. America was able to think bigger and broader, necessarily requiring broad support from an immigrant population. Diversity was often later to prove a mixed blessing, but in the Industrial Revolution it was vital.

{French Style}
Dissent, French Style

The second major revolution taking place at that time concerned the place of property in the life of every citizen. Up until that time, the King owned all the land and could redistribute it to suit his political needs. What critically mattered was not who formerly owned the land, but rather what was the latest King's latest word on who owned it right now. The American system gravitated to the notion that when the King or any other owner sold the land, it was no longer his; we now think that's quite self-evident. Each successive owner can sell it to his neighbor or bequeath it to his heirs, and at that moment it is no longer his, either. This idea of private property spread throughout the world, but in America it was a clean sweep. Adopting the rather brutal rough justice of the frontier, the Indian prior ownership just didn't count. They had sided with the British in our revolution, and were insistently resistant to assimilation. And anyway, Pope Nicholas in the 13th Century had established the notion of first discovery, which applied to Christians, only, and so Indians didn't count. Fair or unfair, this was going to be the way it was, from that point forward from 1787 when the Constitution was enacted. The longer the situation lasted, the more unlikely it became that it would ever change. America had so much land and so little coinage, that land itself became a sort of monetary standard. The particular American advantage was there was so much land that early settlers and landed gentry could not monopolize it; from meaning land at first, property soon meant any valuable possession. No King, particularly not George III, was going to take this away from the whole population on this side of the Atlantic. England could do as it pleased with its land and its King. If we needed Independence to preserve a general right to hold private property, plenty of men were willing to die to achieve it. And the whole Western world soon followed our example.

The third revolution was the one you read about, Lexington and Concord, Bunker Hill and the Tea Act. That whole chain of events chronicles how America came to be Independent, but somehow fails to explain why we wanted Independence. The Industrial and the Property revolutions explain it better, but such theorizing would certainly mystify the Revolutionaries themselves.

And finally, one begins to wonder if we aren't toying with a reversion to the ideas underlying monarchy when we examine some currently widespread views. There's a notion going about that everybody owns everything, which if carried to an extreme means no one owns anything. When you can notice people who live on the 70th floor of a Manhattan apartment building, proclaiming a right to tell Alaskans whether or not they can drill for oil, you behold this monarchy of the many. And when you see prosperous educated adults shouting at rallies, you can see Alaskans for example want to tell New Yorkers to mind their own business. This land, they seem to say, isn't everybody's at all, it is mine.

It never really was entirely the King's, either. The King was a single person, sometimes a rather brutal one who wasn't likely to tolerate advice from his subjects. At times of crisis, somebody has to make a decision, any decision, and act on it. But most of the time, kings seemed to be in the position of that Czar. The one who said, "I don't rule Russia. Ten thousand clerks rule Russia."

http://www.philadelphia-reflections.com/blog/1803.htm


Pennsylvania Likes Private Property Private

{William Penn Holding his Charter}
William Penn Holding his Charter

William Penn was the largest private landowner in America, maybe the whole world. He owned all of Pennsylvania, with the states of Delaware and New Jersey sort of thrown in. Although he and his descendants tried actively to sell off his real estate from 1684 to 1783, they still held an unsold three fifths of it at the conclusion of the Revolutionary War, which they were forced to sell to the state for about fifteen cents per acre. This bit of history partly explains both the strong feeling this is private, not communal, land despite the existence of 2.3 million acres of state forest system, which is affirmed right alongside the rather inconsistent feeling that raw land is somehow inexhaustible. Early settlers regarded the center of the state as poor farm land, particularly when compared with soil found in Lancaster and Dauphin Counties, or anticipated by settlers going to Ohio and Southern Illinois. A complimentary description is that glaciers descended to about the middle of Pennsylvania, denuding the northern half of topsoil which was then dumped on the southern part as the glaciers receded. Even today, farmers tend to avoid the northern region if they can, reciting the ancient advice from their fathers that "Only a Mennonite can make a go of it, around there."

So, lumbering had a century-long flurry in Central Pennsylvania, exhausting the trees and moving on. But that only related to the top layer of soil; beneath it lay anthracite in the East, and bituminous coal in Western Pennsylvania, supporting the steel industries of the two ends of the state with exuberant railroad development. Even today worldwide, hauling coal is the chief money-maker for railroads. The resulting availability of rail transport promotes the location of heavy industry near coal regions; the 20th Century decline of coal demand ultimately hurried the decline of heavy industry in the state by impairing the railroads.

Beneath all this lie the aquifers, porous caverns of fresh water. And beneath that, largely unsuspected for two centuries, lie the sedementary deposits of a huge inland sea, compressed into petroleum which evaporates into natural gas. All of this is held by huge deposits of semi-porous shale rock, now mostly 8000 feet deep, stretching from Canada to Texas and called the Marcellus shale formation. If it can be economically recovered, there is more natural gas than in Arabia, and there is a similar formation along the near side of the Rocky Mountains in Colorado, stretching up to the Athabasca tar sands in Canada. There is another similar formation in France underneath Paris. No doubt, we will find the whole world has similar huge deposits for which the main problem has always been: how do you get it out?

There's another question, of course, of who owns it. Those who clearly do not own it maintain that everyone owns it. In the western world, most particularly in America, it is our firm belief that if you live on top of it, you own it. Since it is expensive to extract, quarrels like this are usually settled by purchasing mineral rights from the surface owner, who generally could not possibly extract it by himself. Those who assert they have a conflicting right to it because it belongs to everyone, can expect belligerent resistance. At the present time when America faces a critical fifteen year period of dwindling oil supply, ultimately relieved by perfecting alternative energy sources, there is too little time to achieve consensus for any other governance theory. The problem which could possibly gain enough traction to interfere, is the issue of potential damage to others which might result from the extraction of this subsurface treasure. Because of the apparent urgency of decision to extract or go elsewhere to extract, the best we can hope for is some fairly rough justice.

http://www.philadelphia-reflections.com/blog/1815.htm


Original Intent and the Miranda Decision

{Ernesto Arturo Miranda}
Ernesto Arturo Miranda

At the lunch table of the Franklin Inn Club recently, the Monday Morning Quarterbacks listened to a debate about Guantanamo Bay, prisoner torture and police brutality; all of which centered on the Supreme Court decision known as Miranda v Arizona. Ernesto Arturo Miranda was convicted without being warned of his right to remain silent, sentenced to 20 to 30 years in prison in 1966. Eventually, the U.S. Supreme Court, with Chief Justice Earl Warren writing a 5-4 decision, overturned the conviction, because Miranda had not been officially warned of his right to remain silent. The case was retried and Miranda was convicted and imprisoned on the basis of other evidence that included no confession.

An important fact about this case was that Congress soon wrote legislation making the reading of "Miranda Rights" unnecessary, but the Supreme Court then declared in the Dickerson case that Congress had no right to overturn a Constitutional right. Some of the subsequent fury about the Miranda case concerned the legal box it came in, with empowering the Supreme Court to create a new right that is not found in the written Constitution. Worse still, declaring it was not even subject to any other challenge by the other branches of government. In the view of some, this was a judicial power grab in a class with Marbury v Madison.

Several lawyers were at the lunch table on Camac Street, seemingly in agreement that Miranda was a good thing because the core of it was not to forbid unwarned interrogation, but rather a desirable refinement of court procedure to prohibit the introduction of such evidence into a trial. The lawyers pointed out the majority of criminal cases simply skirt this sort of evidence, use other sorts of evidence, and the criminals are routinely sent or not sent to jail without much influence from the Miranda issue. Indeed, Miranda himself was subsequently imprisoned on the basis of evidence which excluded his confession. What's all the fuss about?

And then, the agitated non-lawyers at the lunch table proceeded to display how deeper issues have overtaken this little rule of procedure. This Miranda principle prevents police brutality. Answer: It does not; it only prevents the use of testimony obtained by brutality from being introduced at trial. Secondly, Miranda contains an exception for issues of immediate public safety. Answer: What difference does that make, as long as the authorities refrain from using the confession in court? The chances are good that a person visibly endangering public safety is going to be punished without a confession. Further, the detailed procedures within Miranda encourage fugitives to discard evidence before they are officially arrested in the prescribed way. Answer: If the police officer sees guns or illicit drugs being thrown on the ground, do you think he needs a confession? Well, what about Guantanamo Bay? Answer: What about it? We understand the prisoners are there mainly to obtain information about the conspiracy abroad and to keep them from rejoining it. The alternative would likely be their execution, either by our capturing troops, or by vengeful co-conspirators they had incriminated.

Somehow, this cross-fire seemed unsatisfying. The Miranda decision was made by a 5-4 majority, meaning a switch of a single vote would have reversed the outcome. The private discussions of the justices are secret, but it seems likely that some Justices were swayed by this edict viewed as a simple improvement in court procedure rather than a constitutional upheaval; Justices with that viewpoint feel they know the original intent and approve of it. Others are apprehensive the decision has already migrated from original intent, in an alarming way. Everyone who watches much crime television, and even many police officials feel that Miranda intends for all suspects to be tried on the basis of total isolation from interrogation from start to finish. More reasoned observers are alarmed that the process of discrediting all interrogation will lead to an ongoing disregard of the opinion of lawyers about court procedure, essentially the process of allowing public misunderstanding to overturn legal standards. Chief Justice William Renquist, no less, poured gasoline on this anxiety by declaring that Miranda has "become part of our culture".

What seems to be on display is the mechanism by which Constitutional interpretation drifts from original intent. Not so much a matter of "Judicial Activism" which is "legislating from the bench", it is becoming a matter of non-lawyers confusing and stirring up the crowds until the Justices simply give up the argument. Drift is one thing; virtual bonfires and virtual torch-light parades are quite another.

http://www.philadelphia-reflections.com/blog/1817.htm


Selling Entire Towns

{Jason Duckworth}
Jason Duckworth

Recently, Jason Duckworth of Arcadia Land Company entertained the Right Angle Club with a description of his business. Most people who build a house engage an architect and builder, never giving a thought to who might have designed the streets, laid the sewers, strung out the power and telephone lines, arranged the zoning and otherwise designed the town their house is in. But evidently it is a very common practice for a different sort of builder to do that sort of wholesale infrastructure work -- privatizing municipal government, so to speak. A great deal of what such a wholesale builder does involves wrestling with existing local government in one way or another, getting permits and all that. In a sense, the existing power structure is giving away some of its authority, and does so very cautiously. Sometimes that involves suing somebody or getting sued by somebody. Perhaps even greater braking-power on unwelcome change is that the wholesale builder is in debt until the last few plots are sold, and realizes his profit on stragglers. Since it often happens that the last few plots are the least desirable ones, this is a risky business. Big risks must be balanced by big profit potential, and one of the risks of this sort of privatization is that too much consideration may be given to the players at the front end, the farmer who sells the land and the builder who must keep costs down, at the expense of the long rage interests of the people who eventually live in the new town. Top-down decision making is much more efficient, but its price is decreased responsiveness to citizen preferences.

{For Sale}
For Sale

As it happens, Arcadia specializes in towns designed to look like those built in the late 19th Century. Close together, front door near the sidewalks, front porches for summer evenings. To enhance the feeling of being in an older village, Arcadia specifies certain rules for the architecture, to make it seem like Narberth or, well, Haddonfield. Until recently, suburban design emphasized larger plots of land, and few sidewalks, with streets often ending in cul-de-sacs instead of perpendicular cross-streets in the form of squares. The "new urbanism" appealed to those who were seeking greater privacy, revolving around the idea that if you wanted anything you drove your car to get it. Three-car garages were common, groceries came from distant shopping centers. There are still plenty of new towns built like that today, but Arcadia appeals to those who want to be close to their neighbors, want to meet them at the local small stores scattered among the houses. In the 19th Century, this sort of town design was oriented around a factory or market-place; since now there are seldom factories to orient around, the appeal is to two-income families who want to live in an environment of similar-minded contemporaries. The whole community is much more pedestrian oriented, much less attached to multiple automobiles.

Since Mr. Duckworth mentioned Haddonfield, where I live, I have to comment that the success of living in a town with older houses depends a great deal on the existence of a willing, capable yeomanry. Older houses, constantly at risk of needing emergency maintenance, need available plumbers, roofers, carpenters and handy-men of all sorts. Because it is hard to tell a good one from a bad one until too late, this yeomanry has to be linked together invisibly in a network of pride in the quality of each other's work and willingness to refer customers within a network that sustains that pride. A tradesman who is a newcomer to the community has to prove himself, first to his customers, and almost more importantly to his fellow tradesmen. If you happen to pick a bad one, good workmen in other trades are apt to seem mysteriously reluctant to deal with you as a customer, because you too are somewhat on trial. Maybe you don't pay your bills, or maybe you are picky and quarrelsome. In this way, the whole community is linked together in a hidden community of trust. Over time, the whole town develops certain recognizable social characteristics that a brand-new town doesn't yet need. If that time arrives without a network of reliable tradesmen, the town soon deteriorates, house prices fall, people move away.

{Fannie Mae}
Fannie Mae

It's curious that the residents of such a town are a breed apart from the merchants in the nearby merchant strip. If the merchants of a town live in that same town, there is much less conflict. More commonly, however, the merchants rent their commercial space and commute from distant places. That disenfranchises them from voting on school taxes and local ordinances, and creates a merchantile mentality as contrasted with a resident community, dominated by high school students. One group wants lower taxes, the other group wants to get their kids into Harvard. One group wants space for customer parking, the other group is opposed to asphalt lots. And in particular, the residents want to avoid garish storefronts and abandoned strip malls. Since the only group which has influence on both sides of this friction are the local real estate agents and landlords, their behavior is critical to the image of the town. When real estate interests are not residents of the town it is ominous, and they are well advised to remember that the sellers of houses are the ones who choose a real estate agent for a house turn-over. There's more to this dynamic than just that, but it's a good place to begin your analysis. Suburban real estate interests are constantly tempted to get into local politics, but politicians are the umpires in this game, and it soon becomes bad for their business if real estate agents potentially put their thumb on the scales.

{FHA Seal}
FHA Seal

All politics is local, but all real estate is not entirely local. The present intrusion of the Federal Government into what is normally a purely local issue, has become more pointed in the present real estate recession. Almost all mortgages are packaged and sensitized by "Fannie Mae and Freddy Mac". By overpaying for the mortgages they package, these two federal agencies are subsidizing the banks they buy the mortgages from. Or, that is half of the subsidy. The other half is the Federal Reserve, which presently lends money to banks at essentially zero interest. Acquiring free money from the "Fed", while selling mortgages to Fannie Mae at above-market rates, the federal government supports the banks at both ends. And that's not quite all; there is something called the FHA, Federal Housing Authority, which guarantees mortgages. Essentially an insurance policy, the FHA guarantee is issued for a cost to home buyers who meet standards set by Congress (for which, read Barney Frank and Chris Dodd). Although houses during the boom were selling for 18 times estimated rental value, they are now selling for 15 times rental. FHA will insure such risks, but the banks won't lend more than the normal proportion, which is 12 times rental. Consequently, almost all mortgages are FHA insured, while the federal administration storms with fury that the banks "won't lend". And indeed it begins to look as though banks will never issue uninsured mortgages until home prices fall another 25%. If home real estate prices do decline to a normal 12 times rental, a lot of people (i.e. voters) will be unhappy, and not just homeowners who bought at higher prices. The market is fairly screaming that you should sell your house and rent, but so far at least, these federal subsidies seem to be holding prices up. When normal pricing arrives, the recession is just about over, but it certainly won't feel that way if you are a seller.

http://www.philadelphia-reflections.com/blog/1819.htm


Selection of Constitutional Rights for the Bill of Rights

{Thomas Jefferson}
Thomas Jefferson

When the First Congress convened in 1789, it confronted more than a hundred proposed amendments to the Constitution, largely stirred up by supporters of Thomas Jefferson who feared any strong government would be too similar to the monarchy we had just discarded. Essentially, Congress dumped these noisy dissatisfactions into the lap of James Madison who had largely constructed the Constitution, constituting a committee with Madison as its chairman. The first ten amendments emerged together as a package, enabling trade-offs and compromises; all subsequent amendments have been taken up individually, one by one. Since members of the First Congress and the Constitutional Convention were largely the same people, much of the durability of the Constitution can be traced to them. And therefore, the tendency of the nation to feel its way into a new idea, sometimes retreating, sometimes plunging ahead, has migrated into the Supreme Court. This result was probably accidental, but nevertheless the power of the Supreme Court was greatly strengthened by default; it alone can tip-toe out of a Constitutional tangle created by momentary impulses.

After winnowing out duplicates and half-baked ideas, Madison's committee condensed the wildly disparate proposals into ten amendments, supposedly limited to ten by alluding to Ten Commandments which were sufficient for Moses. Three main principles emerged. The Constitution should be parsimonious in granting divine, or natural, rights, because what Nature's God had granted was hard to tell but what the judiciary could enforce had limits. But thirdly, granting even these few self-evident rights to slaves might tear the Union apart.

{James Madison}
James Madison

So Madison's committee narrowed the legally enforceable human rights to a handful, selecting only those so self-evident they could withstand the tensions of enforcing them. When contemplating the problem of extending mandated rights to slaves, however, there was no obvious solution at all. That made it easier to limit the Federal Government to enforcing a handful of enumerated powers, leaving all unspecified matters to the state legislatures to enforce if they could. The boundary might shift with time, but without saying so, the Bill of Rights kept the Union out of the one main foreseeable problem, of slavery. Unmentioned conflict between universal rights and slavery defaulted to the individual states, or to whomever, but definitely not to the Federal Government.

That tap-dance held together for nearly a century, and then it didn't and we had a Civil War. During all that time, the balance of power was steadily shifting from the confederated states to the centralized federal government, and after the Civil War it shifted still more. However, the southern confederation may have been defeated, but it was not exactly reconciled, nor were the former slaves exactly equalized. Their current drift toward entitled dependency was particularly unexpected.

{Robert E. Lee}
Robert E. Lee

Many post-war expedients were tested to heal these wounds, some of them useful and some, like forcible Reconstruction, disruptive. Two expedients opened new wounds and distracted the country for a century. The first was intentional weakening of the quality and effectiveness of state governments, to the point where it can now be asserted that state government is the weakest part of our whole government structure. Those who prized universality and efficiency, or who sought greater international power, regarded state legislatures as a hindrance; just look who got us into a Civil War. Consequently, corruption and ineffectiveness were privately tolerated in state legislatures, because discrediting state governments made them easier to ignore. Repairing the resulting imbalance in our overall system is now growing to be one of our greatest problems. Almost no one remembers this was the price of a ratified Constitution, so increasingly that excuse is futile. In fact, in the thirty-seven more recent states to be admitted to the Union, it is not even accurate.

The second response to a sluggish equalization of racial rights was invented by Madison himself. He felt that the ability to migrate from one state to another would discipline any temptation of a state to mis-behave. If your state taxes you unfairly, move. If your state government gets too corrupt, first try to throw the rascals out, but in the last extremity, go somewhere else. This concept has worked magnificently in maintaining national interest rates with appropriate local modifications, and we are about to learn whether it will adequately restrain the half dozen states who have pushed the limits of taxes and borrowing. In the case of former slaves, massive out-migration took a century to happen and then it happened all at once, just after World War II. Wave after wave of slave descendants from the rural South, got on buses and came to the heart of Northern cities. Overwhelming the ability of weakened local governments to cope, city institutions disintegrated, particularly the public school and justice systems. The consequence is continuing disarray in Washington DC, Baltimore, Detroit -- and Philadelphia -- together with a host of smaller cities like Reading, Newark, Paterson, Wilkes-Barre and many others, in all of which the unsustainable wave of immigrants added to local industrial and civic problems which had other causes. So now we have two new problems, weakened state government and disruptive migrations, which in other circumstances tended to mitigate each other, but now increasingly make each other worse. Someone must take hold of the issue that applying Madison's concept of competitive states has created a strong state disincentive to deal with poverty.

{Lyndon Johnson}
Lyndon Johnson

It took a century for Madison's scheme to break down into war, and Lyndon Johnson was surely quite right to feel a century was long enough to tolerate the disunity of the Civil War. If he could not make people love one another, at least he could enforce the law. State governments were not doing it, so he whipped the Congress into taking it on as a Federal duty, by passing the Civil Rights Act. Half a century has passed with some progress, but surely not an end to the disunity. State governments have been further weakened, but mass migrations have calmed down. In another half century, the slavery issue and its consequences may fully subside. Meanwhile, the reaction of extending federal power continues, now threatening to extend to the medical profession, the finance industry, the automobile industry, and the Internet. Our Constitution continues to survive more or less intact into its third century, and we grow increasingly wary of tinkering with it as we watch most other nations fail to achieve its essential quality. Which is, it survives. Aside from the Bill of Rights and some technical tweaks, there have only been five amendments of any substance. Meanwhile, new federal statutes and regulations grow by a hundred ponderous volumes a year.

http://www.philadelphia-reflections.com/blog/1820.htm


Restoring the Gold Standard by Levering Judges' Salaries

{Gold Inflation}
Gold Inflation

Generally speaking, creditors hate inflation and favor a gold standard because they fear debtors -- who outnumber them at the polls -- will dishonor their debts by inflating the currency. And debtors generally are rather serene about the risk of inflation, for the same reason in reverse. Since governments are almost invariably debtors, the combination of government and debtors on the side of promoting inflation represents a dishearteningly strong force for creditors to combat. It is plain for everyone to see that inflation has been steadily moving ahead. But it is something for everyone to ponder that leaving creditors with only one recourse is almost certain to translate that particular recourse into action. Creditors will raise interest rates in anticipation of inflation, and the economy will suffer for debtors as well as everyone else.

So, hard-money advocates like the Paul family of Texas have been rather nonplussed to discover that Federal Judges have handed them in 2010 a very effective weapon they had long overlooked. It should be no surprise that it came from that direction; judges are long accustomed to looking backward to the historical origins of the laws they are charged with interpreting. In this case, the defining statement is found in the Declaration of Independence.

Parenthetically, conservatives are reluctant to include the Declaration in an explanation of the Constitution, since it is plainly true the Constitution was written to correct the weaknesses of the Articles of Confederation, which was much more closely defined by the circumstances of the Declaration. The almost immediate response to any such logical jump over the Constitution, particularly those of Abraham Lincoln, is to thump the maxim that The Declaration of Independence is not Law. And it isn't; it's just in this case it makes a concise statement of a major reason we were offended by the King of England:

"He has made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries."

Note the operative phrase dependent on his will alone , which takes us back to the Magna Carta, where even the King must obey the Law. If judges are the umpires, it isn't in accord with deeply felt British culture that the King could force the umpires to favor his wishes in their official decisions, by threatening punishment on their persons. No, a thousand times no. Anyone can see that.

Furthermore, the determination of underlying intent is so difficult to prove, and so easy to deny, that it is scarcely mentioned in debate. If two motives seem possible, the other party will assert the high-sounding one and deny the ulterior one. The offended party will instinctively suspect the reverse, and will brush aside any protestations to the contrary. Since that is bound to happen, please skip the preliminaries and get on with the evidence. So it is in this case; any reduction in judge's salary is treated like an attempt to influence official decisions. The Administration maintains a reduction of Federal judge salaries is necessary for budgetary reasons. Please don't insult my intelligence that way. You aren't allowed to reduce the salaries of judges for any reason.

From this rather easy position to take, it is only a short step to say that refusing to raise judge salaries during an inflation is a reduction of salary in real terms, after adjusting for inflation. Your paper money is phoney; I want to preserve my purchasing power. Your refusal to adjust for inflation is even more clearly a salary reduction, since the link to gold was severed during the Nixon and Johnson administrations. We are not on anything remotely resembling a gold standard; we are on a monetary standard which is by law adjusted to inflation, and just about nothing else. Hubert Humphrey may have thought he was creating a loophole by mandating concern with unemployment, but just try to convince the judges of the Supreme Court of that one.

And so, it seems predictable that Judge Beer of the Eastern District of Louisiana, and his fellow judges, will achieve an effective gold standard for Federal Judges if they have the fortitude to tough it out. After that it gets harder, Congressman Paul. You have to push the concept that what is fair for Federal Judges is fair for everyone else. You should assume that judges will vote in their own favor, and therefore reasonably assume that the public will vote in its own favor, too. If that be treason, said Patrick Henry, make the most of it.

http://www.philadelphia-reflections.com/blog/1838.htm


Political Parties, Absent and Unmentionable

{King George III}
King George III

BECAUSE America had recently revolted to rid itself of King George III, the Constitutional framers of 1787 sought to construct a government forever free from one-man rule. Inefficiency could be accepted but central dictatorial power, never. It is unrealistic however to expect a wind-up toy to keep working forever, and our Constitution creates the same worry. After two centuries, some chinks have appeared.

{Founding Fathers}
Founding Fathers

Political parties existed in 18th Century England and Europe, but the American founding fathers seem not to have worried about them much. Within ten years of Constitutional ratification, however, Thomas Jefferson had created a really partisan party which naturally provoked the creation of its partisan opposite. James Madison was slowly won over to the idea this was inevitable, but George Washington never budged. Although they were once firm friends, when Madison's partisan position became clear to him, Washington essentially never spoke to him again. Andrew Jackson, with the guidance of Martin van Buren carried the partisan idea much further toward its modern characteristics, but it was the two Roosevelts who most fully tested the U.S. Supreme Court's tolerance for concentrating new powers in the Presidency, and Obama who recognized that the quickest way to strengthen the Presidency was to weaken the Legislative branch.

Dramatic episodes of this history are not central to present concerns, which focuses more on the largely unnoticed accumulations of small changes which bring us to our present position. Wars and economic crises induced several presidents, nearly as many Republicans as Democrats, to encourage migrations of power advantage which never quite returned to baseline after each crisis. Primary among these migrations was the erosion of the original assumption of perfect equality among individual members of Congress. A new member of Congress today may tell his constituents he will represent them ably, but when he arrives for work he is figuratively given an office in the basement, and allowed to sit on empty packing cases. This is not accidental; the slights are intentional warnings from the true masters of power to bumptious new egotists, they will get nothing in their new environment unless they earn it. Not a bad idea? This schoolyard bullying is a very bad idea. If your elected representative is less powerful, you are less powerful.

{Houses of Congress}
Houses of Congress

Partisan politics begins with vote-swapping, evolves into a system of concentrating the votes of the members into the hands of party leaders, and ultimately creates the potential for declaring betrayal if the member votes his own mind in defiance of the leader. The rules of the "body" are adopted within moments of the first opening gavel, but they took centuries to evolve and will only significantly change direction on those few occasions when newcomers overpower the old timers, and only then if some rebel among the old timers takes the considerable trouble to help organize them. In the vast majority of cases, after adoption the opportunity to change the rules is then effectively lost for two years. Even the Senate, with six-year staggered terms, has argued that it is a "continuing body" and need not reconsider its rules except in the face of a serious uprising on some particular point. Both houses of Congress place great weight on seniority, for the very good purpose of training unfamiliar newcomers in obscure topics, and for the very bad purpose of concentrating power in "safe" districts where party leaders are able to exercise iron control of the nominating process. Those invisible bosses back home in the district, able to control nominations in safe districts, are the real powers in Congress. They indirectly control the offices and chairmanships which accumulate seniority in Congress; anyone who desires to control Congress must control the local political bosses, few of whom ever stand for election to any office if they can avoid it. In most states, the number of safe districts is a function of controlling the gerrymandering process, which takes place every ten years after a census. Therefore, in most states it is possible to predict the politics of the whole state for a decade, by merely knowing the outcome of the redistricting. The rules for selecting members of the redistricting committee in the state legislatures are quite arcane and almost unbelievably subtle. An inquiring newsman who tries to compile a fifty-state table of the redistricting rules would spend several months doing it, and miss the essential points in a significant number of cases. The newspapers who attempt to pry out the facts of gerrymandering are easily gulled into the misleading belief that a good district is one which is round and compact, leading to a front-page picture showing all districts to be the same physical size. In fact, a good district is one where both parties have a reasonable chance to win, depending for a change, on the quality of their nominee.

So that's how the "Will of Congress" is supposed to work; but the process recently has been far less commendable, and in fact calls into dispute the whole idea of balance of power between the three branches of government. We here concentrate on the Health Reform Bill ("Obamacare") and the Financial Reform Bill ("Dodd-Frank"), which send the same procedural message even though they differ widely in their central topic. At the moment, neither of these important pieces of legislation has been fully subject to judicial review, so the U.S. Supreme Court has not yet encumbered itself with stare decisis of its own creation.

{hree  branches of government}
Three branches of government

In both cases, bills of several thousand pages each were first written by persons who if not unknown, are largely unidentified. It is thus not yet possible to determine whether the authors were affiliated with the Executive Branch or the Legislative one; it is not even possible to be sure they were either elected or appointed to their positions. From all appearances, however, they met and organized their work fairly exclusively within the oversight of the Executive Branch. Some weighty members of the majority party in Congress must have had some involvement, but it seems a near certainty that no members of the minority party were included, and even comparatively few members of highly contested districts, the so-called "Blue Dogs" of the majority party. It seems safe to conjecture that a substantial number either represent special interest affiliates, or else party faithful from safe districts with seniority. The construction of the massive legislation was conducted in such secrecy that even the sympathetic members of the press were excluded, and it would not be surprising to learn that no person alive had read the whole bill carefully before it was "sent" to Congress. It's fair to surmise that no member of Congress except a few limited members of the power elite of the majority party were allowed to read more than scattered fragments of the pending legislation in time to make meaningful changes.

The next step was probably more carefully managed. No matter who wrote it or what it said, a majority of the relevant committees of both houses of Congress had to sign their names as responsible for approving it. Because of the relatively new phenomenon of live national televising of committee procedure, the nation was treated to the sight of congressmen of both parties howling that they were only given a single day to read several thousand pages of previously secret material -- before being forced to sign approval of it by application of unmentioned pressures enabled by the rules of "the body". When party members in contested districts protested that they would be dis-elected for doing so, it does not take much imagination to surmise that they were offered various appointive offices within the bureaucracy as a consolation. As it turned out, the legislation was only passed narrowly on a straight-party vote, so there can be a considerable possibility of its likely failure if the corruptions of politics had been set aside, with members voting on the merits. Nevertheless, since this degree of political hammering did result in a straight-party vote, it leaves the minority party free to overturn the legislation when it can. The prospect of preventing an overturn in succeeding congresses seems to be premised on "fixing" flaws in the legislation through the issuance of regulations before elections can open the way to overturn of the underlying authorization. Legislative overturn, however, is very likely to encounter filibuster in the Senate, which presently requires 40 votes. Even that conventional pathway is booby-trapped in the case of the Dodd-Frank Law. The Economist magazine of London assigned a reporter to read the entire act, and relates that almost every page of it mandates that the Executive Branch ("The Secretary shall") must take rather vague instructions to write regulations five or ten times as long as the Congressional authorization, giving the specifics of the law. The prospect looms of vast numbers of regulations with the force of law but written by the executive branch, emerging long after the Supreme Court considers the central points, years after the authorizing congressmen have had a chance to read it, and well after the public has rendered final judgement with a presidential election. The underlying principle of this legislation is the hope that it will later seem too disruptive to change a law, even though most of it was never considered by the public or its representatives.

{Bill become a Law}
Bill become a Law

The "regulatory process" takes place entirely within the Executive branch. Congress passes what it terms "enabling" legislation, containing language to the effect that the Cabinet Secretary shall investigate as needed, decide as needed, and implement as needed, such regulations as shall be needed to carry out the "Will" of Congress. Since the regulations for two-thousand page bills will almost certainly run to twenty thousand pages of regulations with the force of law, the enabling committee of Congress will be confronted with an impossible task of oversight, and thus will offer few objections. The Appropriations Committees of Congress, on the other hand, are charged with reviewing every government program every year, and have the power to throttle what they disapprove of, by the simple mechanism of cutting off the program's funds. Members of the coveted Appropriations Committees are appointed by seniority, come from safe districts, and are attracted to the work by the associated ability to bestow plums on their home districts. By the nature of their appointment process, unworried by the folks back home but entirely beholden to the party bosses, they have the latitude to throttle anything the leadership of their party wants to throttle badly enough. The outcome of such take-no-prisoners warfare is not likely to improve the welfare of the nation, and therefore it is rare that partisan politics are allowed to go so far.

The three branches of government have become unbalanced. These bills were almost entirely written outside of the Legislative branch, and the ensuing regulations will be written in the Executive branch. The founding fathers certainly never envisioned that sweeping modification will be made in the medical industry and the financial industry, against the wishes of these industries, and in any event without convincing proof that the public is in favor. This is what is fundamentally wrong about taking such important decisions out of the hands of Congress; it threatens to put the public at odds with its government.

{Justice George Sutherland}
Justice George Sutherland

There is no need to go further than this, harsher words will only inflame the reaction further than necessary to justify a pull-back. And yet, the Supreme Court would do us a mercy if it doused these flames; the Supreme Court needs a legal pretext. May we suggest that Justice George Sutherland, who sat on the court seventy years ago, may have sensed the direction of things, short of using a particular word. Justice Sutherland recognized that although it is impractical to waver from the principle that ignorance of the law is no excuse, it is entirely possible for a person of ordinary understanding to read a law in its entirety and still be confused as to its intent. He thus created a legal principle that a law may be void if it is too vague to be understood. In particular, a common criminal may be even less able to make a serious analysis. Therefore, at least in criminal cases, a law may well be void for vagueness. In this case, we are not speaking of criminals as defendants, or civil cases of alleged damage of one party by a defendant. Here, it is the law itself which gives offense by its vagueness, and Congress which created the vagueness is the defendant. Since we have just gone to considerable length to describe the manner in which Congress is possibly the main victim, this situation may be one of the few remaining ones where a Court of Equity is needed. That is, an obvious wrong needs to be corrected, but no statute seems to cover the matter. The Supreme Court might give some thought to convening itself as a special Court of Equity, on the special point of whether this legislation is void for vagueness.

We indicated earlier that one word was missing in this bill of particulars. That would be needed, to expand the charge to void for intentional vagueness, an assessment which is unflinchingly direct. It suggests that somewhere in at least this year's contentious processes, either the Executive Branch or the officers of the congressional majority party , or both, intended to achieve the latitude of imprecision, that is, to do as it pleased. Anyone who supposes the general run of congressmen voluntarily surrendered such latitude in the Health and Finance legislation, has not been watching much television. Given the present vast quantity of annually proposed legislation, roughly 25,000 bills each session, the passage of a small amount of vague legislation might only justify voiding individual laws, whereas an undue amount of it might additionally justify a reprimand. However, engineering laws which are deliberately vague, might rise to the level of impeachment.

http://www.philadelphia-reflections.com/blog/1883.htm


Addressing the Flaws of Republics

{James Madison}
James Madison

EVERYONE might profit from reading Plato on the subject of republics, not to mention reading James Madison. Both The Republic and The Federalist were conjuring republics they proposed, not ones they had experienced. After Madison did get hands-on experience he had such radical changes of opinion his friend George Washington essentially never spoke to him again. Not only in republics of course, does reality prove different from founding theory. It might seem more measured to say of republics that two centuries of their reality proves to be such an extension of theory, it effectively departs from it. In essence, the republican idea is to limit the voters to one periodic review of their representative's term of office overall, not in ongoing picky detail which would hamper him. This definition contrasts republics with democracies, and implies the reason to favor republics. The elected representative is given full power to act during his term in office, but must eventually face the voters for an accounting at the fixed time for re-election. Plato and Madison were right about extending latitude to one's chosen representative, but they failed to predict how effectively that latitude might be stolen by the legislative body itself, and controlled by rules and leadership which skirt ratification by the general public outside their chamber, in any district. The Romans, of course, did know what they were talking about, but history has tended to ascribe Roman difficulties -- assassinations, for example -- to flaws in Roman character rather than in construction of the Roman Republic. After describing some problems history has revealed about our own system, this essay is written to propose a solution. A second essay follows, to defend that solution.

Joseph L Bristow

The differences between House and Senate in the original U.S. Constitution were three, but since the Seventeenth Amendment in 1913, there are now only two. Originally, Senators were selected by the states they came from, mostly by the legislatures. A century of experience demonstrated the result was cronyism, members of the legislature using senatorial appointments as bargaining chips and for the most part limiting the choice to one of their own members. The provision probably did attract a higher grade of legislator overall, encouraging those primarily ambitious to be U.S. senators to have a try-out in the minor leagues first. It did give the State government serious power to punish a U.S. senator who failed to please the home state. And this selection process made it simpler and cheaper to run for the job as U.S. senator. This feature encouraged candidates with competing career choices, otherwise discouraged by the expense and unpleasantness of candidacy, to step forward. But by 1913 all this was seen as a way for cronyism to dominate the process, swapping appointments for favors, or even more tangible bribes. From the distance of another century it can be seen that the steadily declining power of state legislatures was matched by a declining quality of their elected membership, leading to a rising level of sordidness in their foibles. Hapless amateurs were largely supplanted by career politicians. After the Civil War "states rights" stirred up memories of secession and led to deliberate weakening of the states' role. Whatever the reasoning, the mentality of Progressivism was sweeping the country in 1913, and popular election of senators was deemed a Good Thing, swept in to general satisfaction. Doubt about whether it all made as much difference as claimed lies in the reality that from 1913 to 2010, one quarter (182) of all Senators have first arrived in the Senate through appointment by a Governor to fill an unexpired vacancy. Many of these vacancies have of course been contrived for the purpose.

The relative power of a senator and a representative lies in the size of the population who vote for them, and the frequency with which they must endure that unpleasantness. Members of the House are elected for two years and members of the Senate are elected for six; the voting constituency of 100 Senators is generally much larger than that of 532 Representatives, so because the population grows faster than the number of states, the representation discrepancy also grows. The frequency of running for reelection seems to be so irksome that whenever a senate seat falls vacant, some sitting Congressman from that state is almost certain to try to switch. Of course it is true that with only a quarter as many senators as congressmen, the power of each vote is weightier. To the extent that committee memberships represent special insider power, a senator does belong to more committees, but is more severely stretched to attend them all. Each senator's vote does have greater scarcity value, but a Representative who tends to business is more likely to know what he is talking about, hence better able to be influential in the committees where most matters are really decided. The limits of merit promotion in both houses of congress lies in the differing power of various committees, while the favor of appointment remains within the iron control of caucus leadership. In public, senators seem generally more polished and experienced in public persuasion. The persuasion that counts however is of gaining the respect of colleagues in your own legislative body, always restrained by the power of leadership to coerce conformity. Public persuasiveness by contrast is often little more than glibness, reflecting greater experience with dodging an issue to conceal a lack of depth in it. Almost all senators aspire to the presidency, although few achieve it. No Congressman has been elected President since Warren Harding; indeed, few Congressmen even dare to seek nomination. The appointment of Gerald Ford was a special situation. However, it is worth pondering that during the early days of the republic, the House of Representatives was considered much more prestigious than the Senate, and that curiosity continues to raise an important question just why it is now reversed.

{George Washington}
George Washington

The differences in prestige between the House and the Senate cannot be ascribed to the comparatively minor differences in their Constitutional definition, the size of their district and the frequency of election. Otherwise, we could immediately improve the quality of congressmen by reducing the limit of their number and frequency of re-election, which scarcely anyone has proposed. The more likely source of the problem can be found in the differing rules of procedure which each body has adopted; and reaffirms at the opening of each term. Various strategies of committee assignment and seniority have adapted to the reality that newly elected politicians rarely have any skills other than the ability to get elected. But almost everyone can learn, given enough time being exposed to a topic. A seniority system can occasionally lead to someone who is hopeless, gradually floating into a position where he can do great harm. Provision must be made for graceful exceptions to the seniority rule, usually by excluding a member from important committees until he has demonstrated some competence, less often by later dropping someone who has age- or alcohol-diminished faculties. Underlying this approach is a contempt bred of experience for the wisdom of the voters, back there in the district, whereas the leaders of the fraternity can protect the nation by judiciously devised rules. Sometimes it is unfortunately necessary to be a little hard boiled.

{Martin Van Buren}
Martin Van Buren

So far so good. When Jefferson and Martin Van Buren invented political parties, the bodies of Congress responded by inventing caucuses. George Washington was not a learned man, but he knew he hated this system. James Madison probably feared political parties more than he hated them, so he incurred Washington's permanent displeasure by getting good at manipulating what he saw as the winning strategy. Van Buren's fate was more ironic; after inventing many of the unpleasant little strategies of modern politics, he was defeated by William Henry Harrison in the "log cabin" election of 1840. Harrison hadn't been born in a log cabin at all, he was born in a Virginia mansion, hee, hee, hee. George Washington wouldn't have chuckled at that one, he would have been livid.

{Henry Clay}
Henry Clay

Party caucuses have only one central feature, which is vote-swapping. Many of the strategies of this unattractive behavior were outlined in elegant detail by Pliny the Younger, in the Roman Senate, and James Madison the student of government had sought to avoid them. When he decided it was hopeless, he joined them and got good at it. In retrospect, the premier example of vote-swapping was the trade which Madison and Hamilton made, placing the nation's capital in Virginia/Maryland instead of Philadelphia, in return for federally redeeming the Revolutionary debts for all 13 states, when Virginians had already paid theirs off. Philadelphia had essentially nothing to say about it. Pliny had cautioned and subsequent practitioners have followed the advice to cover your tracks by swapping votes for an issue seemingly unrelated to the one in dispute. That's about all there is to vote-swapping, find out what the guy wants badly enough, and trade him something for it. It follows that it's wise to give off the appearance that you don't want much of anything. A corollary is that political caucuses try to conduct even innocent or public-spirited discussions in secret, making public only what is expedient to be made public. And a further corollary: some members of a caucus are from totally "safe" districts. Occasionally their votes can safely be traded for something the opposing party wants but the caucus feels necessary to claim to oppose. When a caucus wants something badly enough to trade it for something else, but is three or four votes short, the opposing caucus may trade the four votes from safe districts while violently denouncing the dirty turncoats. All this is known as party loyalty. When things are particularly tough, party loyalty can be enforced by finding out what you want badly, and taking it away from you. When these whips are applied to you, a grievance develops. Fine, what do you want to trade in return for vengeance? Many of these refinements seem to come, not from Rome, but from Sicily.

As was stated at the beginning, the purpose of this essay is not to rail at Congressional corruption, but to counteract it to some degree. Since the worst features of this system require secrecy and public duplicity to be effective, the best remedy is sunshine. Not about what Roosevelt did in his third term, but about what your local congressman might do next week, and his fear you will find out. His fear that a blogger will tip off the local newspaper or radio station, encouraging someone else with ambition to file for election against you. And his fear that when he asks someone for a campaign contribution, that person will bring up the topic in question. His fear that the local political boss will decide he can't win.

{Boxing Politcians}
Boxing Politcians

This was more or less the system which the founding fathers, James Madison chief among them, envisioned for this shining city on a hill. And which two centuries of rather clever schemers have gradually eroded. The highly desirable feature of a republic is that the elected person is free to represent his own interpretation of what is best for his district or, failing that, what is best for the nation. The elected representative is encouraged to risk defeat in the next election, if in his judgment what is good for the district is bad for the nation. But he is not a suicide bomber, if his vote will make little difference in the outcome he can be forgiven for taking cover. One would wish that fewer of them would speak one way and vote in the opposite direction, but that can be forgiven if someone back home in the district is keeping score and letting others know of it. The fundamental principle of a republic as distinguished from a pure democracy is that a representative, while free to act during his term in offfice, remains obliged to face the voters at the appointed time. Our system has come to exaggerate the actual extent of freedom to use judgment, because the freedom has been stolen by party leaders through the application of schemes too devious to detail. But the freedom is fundamentally a good thing. What has come to be so lacking is the idea of facing an informed electorate in making a choice between you and an informed opponent. The public, it must be feared, doesn't know beans.

And so the proposal for fixing this mess is difficult, but it can be stated simply. The recent economic boom created nearly a thousand billionaires; maybe four hundred would be a number that would escape challenge. If only fifty of them would endow think tanks in all fifty state capitals, and the fifty-first would endow an organization dedicated to making their research available to the public, then perhaps another fifty would be prompted to create a second think tank in each state capital on the opposite political side. Two polarized think tanks in each state capital, just imagine it. As things now stand, it would be a sufficient first step if that happened in only one state, and the rest of the country could watch what happens.

http://www.philadelphia-reflections.com/blog/1976.htm


Washington's Circular Letters

{Washington's Circular Letters}
Washington's Circular Letters

ONCE Cornwallis surrendered to Washington at Yorktown in 1781, there emerged the usual reluctance of troops on both sides to get killed for a dispute that was already settled. The British monarchy had ample experience with wars, and fully expected to exploit this trait of exhausted soldiers at the end of one. It was clear to the British the colonies could neither be reconciled nor forcibly subdued. What was not clear was how much national advantage might still be extracted from a peace conference. Bluffs and intransigence might still achieve what bayonets could not. Seasoned diplomats are accustomed to such manipulation, but the new American nation only had Benjamin Franklin grown equal to it, representing Pennsylvania and Massachusetts with the British Ministry for several years. Beyond that, however, a particularly American trait was emerging to quit the game before the last card is played. During the Nineteenth century, anticipating and resisting that irresolute temptation came to be called, Character.

The American Revolutionary Army was seldom well-fed, never well armed. Hardly anyone expected a war lasting eight years, or the British regulars to be so mean and effective. Major General Benedict Arnold had seemed like our perfect soldier, but turned traitor while in charge of a major defense position at West Point, New York. Conditions for wives and children at home were bad. And the Congress in Philadelphia was willing to inflate the currency, hold back soldiers' pay, pinch pennies on supplies. Other colonies frequently promised to send more soldiers than they actually supplied. Not that they were proud of themselves; they skulked. Surely, some state legislatures and representatives were better than others, but they are almost impossible to identify, now. They all must have been somewhat complicit, or we would have heard more of them denouncing each other. It must have been supremely painful for Washington to receive promises of troops and supplies that he privately doubted, and then to be obliged to assure his troops help was forthcoming. Inevitable disillusionment discredited him more than the Governors who put him in that position. The British troops surely shared their enemy's reluctance to get killed for war that was over. They partied and roistered in New York, but who knows what general in London might suddenly order an attack on Washington at Newburgh, just to make overall British defeat seem less humiliating.

{Head Quarters Newburgh NY}
Headquarters, Newburgh NY

During sixteen months of this agony, Washington wrote many letters to state Governors, keeping them informed while asking for their help. The custodians of the Headquarters museum proudly show the various tables and chairs for his aides to translate French and Spanish, to make thirteen copies of just about everything, and careful files of all correspondence. Washington was an organized person, they say, or else his chief of staff was organized. Someone like Alexander Hamilton, perhaps. Out of all this headquarters communication system gradually emerged the system of Circulars. The General was in a position to see huge deficiencies in the government system for which he dedicated his life, and apparently grew haunted by the idea that all this suffering would be for nothing if the government which emerged was anything like what he was now seeing. His Circulars to the governors began to take on the style of outlining what kind of government the United States ought to have. It must for example, acquire federal power; the states must turn over more of their own power to the decisions of a single executive. It must pay its debts; a mighty nation does not chisel its creditors. It must suppress the inclination to squabble and think the worst of one another. It must, in his phrase, be virtuous.

Two emphatic views of the new country emerged from Washington's time in Newburgh. The inability of the government to pay its soldiers, suffering or no suffering, was particularly agonizing. And the close call he had with threatened mutiny made it much worse. Robert Morris had run out of tricks and instructed him the central issue was for the Federal government to be able to levy taxes for servicing the debt, which would make it possible to borrow still more through leverage. Washington never forgot this episode, and at several points during his later presidency it guided him well. The other episode which made a lasting impression was to some degree his own fault. He was so impassioned in his hatred of monarchy that his closest friends, Hamilton and the two Morrises -- who had never seen much to criticize in a monarchy -- essentially gave up on trying to persuade him, and took the side of General Gates the hero of Saratoga in a planned mutiny. Washington put it down with nothing but the power of his personality and a little play-acting with his bifocals, but he almost lost the confrontation in an instant. Washington had many close calls with death on the battlefield, but these two near-defeats pretty much shaped the rest of his life as our first President. Indeed these two hatreds, of debt and monarchy, continue to characterize many Americans to a degree that others would describe as unreasonable.

And then he made a mistake. As a way of proving his lack of personal motive, he announced in advance he would be leaving public service forever. Today, every lame duck knows that's a bad idea, even when you mean it. And while he may have sincerely thought he meant it at the time, events show he really didn't. Although he probably didn't want to be indispensable, circumstances made him so. He discovered how little he knew of the technical details of government, and thus how much he needed James Madison's help. Washington lacked skill in managing finance; having depended on Robert Morris throughout the war, he needed Alexander Hamilton at least to handle a peaceful economy. But there was no running away from the central issue; he would be forced to recognize how much he overshadowed anyone else in demeanor, and so, how unlikely it was that anyone else could bully others into cooperating. He was a great-souled person, in Aristotle's phrase. Franklin alone perhaps understood and privately doubted that even Washington could pull it off. Washington's Circulars were driving him straight toward seeking the Presidency he widely proclaimed he did not want and would not accept. And thereby he threatened the one thing in life he prized more than any other: his word of honor to keep his promises.

http://www.philadelphia-reflections.com/blog/1997.htm


Regulation Precision: Not Entirely a Good Idea

{top quote}
Without proof of special damages or reference to extrinsic circumstances {bottom quote}
"Per Se"

Lawyers have a word for it, as people do for most things they handle frequently. Ordinary citizens are mostly baffled by the term "per se violation", and even more put off by "rule of reason". If the reader is a lawyer, these terms are clear enough but the average person requires some explanation. It's supplied next, before proceeding to the point, which is that per se is a mixed blessing.

When the Constitution was adopted in 1787, we had no laws, but we had courts and crimes. To some extent, the problem was addressed by adopting English Common Law as a default. Until Congress got around to writing statutes on the subject, common law would have to do. Roughly speaking, the amount of statutory law written by Congress began to occupy as much shelf space as common law during the Civil War. Since that time, the volumes of statutory law have come to exceed the volumes of common law by a great deal. But the result has one over-riding principle: the entire legal code of the nation was examined in detail and re-written as a uniquely American product.

In a sense, to state the principles of law was just the first step. Statutory law generally stated what was forbidden or punishable in a general way, defined it, and left it to judge and jury to determine if the facts of a case fit the meaning of the statute. When such generalities prevailed, decisions were based on the "totality of the circumstances", using the "rule of reason". This approach left a great deal to the discretion of the judge, and created the opportunity for "loopholes" . Judges in a huge modern nation are not uniformly of the same level of education or skill, and cultural differences cause variation in what they would generally accept as reasonableness. So, appeals are made possible to courts of appeal; if courts of appeal differ on the same point, the matter is resolved by the Supreme Court. Legislatures and Congress are then free to clarify the issue, but unless they do, rulings of the appeals system have the force of law. Not everyone was happy with the outcomes of this rough-and-ready system of approximated justice.

{law books}
law books

Their reaction took two forms: regulations, and "per se" laws. Through regulations, the executive branch acquired the ability to interpret Congress's statute, and implement it in specific ways and circumstances. The result of a staggering proliferation ( a hundred thousand pages a year) of regulations with the force of law, originating in the executive branch, is the growing feeling that legislation is slipping away from the legislative branch in a manner not intended by the Constitution. To this, Congress responds with laws of far greater specificity, per se laws. For example, instead of passing a law prohibiting monopoly, Congress might specify the allowable percentage of customers a company might have within a specific market area. Per se laws and per se regulations greatly reduce the latitude a local judge has to examine the totality of circumstances, using the rule of reason. As one loophole after another gets closed, the number of pages of codified law is vastly increased. The typical state legislature now deals with about ten thousand bills a year, and the U.S. Congress deals with twenty-five thousand. Although the resulting law may be clearer when you do locate it, the nation has a much harder time finding what the law says. By attempting to create more stability and certainty about the laws, this process -- even making allowances for computer searching -- has greatly increased public uncertainty about what the law does say and what it intends, because it is impossible to carry around a general idea of what the law says. Elements in a system confused by a vast history of specific decisions by Congress are less to be pitied however, than the plight of Congress itself wallowing in an endless prospect of newly proposed legislation.

{top quote}
which prohibits "every contract, combination or conspiracy, in restraint of trade {bottom quote}
Rule of Reason

Much is to be lamented in the present situation. It's hard to say whether we strive for micromanagement because we have lost trust in judges, or whether we trust them less because we have less need to trust. To the extent that judges represent the collective will of society, an increasing hunger for diversity of opinion leads to less trust in the system, and a desire to narrow judge's power of discretion. The increasing volume of litigation is wasteful of resources but here again, it is hard to know whether increasing the lawyer supply provokes legislation, or whether we just train more lawyers to cope with it. It is somewhat idle to tabulate the proportion of legislation which breaks new ground, and how much converts rules of reason into lists of per se violations and requirements. But a very substantial proportion of this legislative blizzard is of the per se nature, closing little loopholes, specifying endless contingencies. If the Law were a computer, massive micro-programming would steadily improve the performance; in this case, it seems to be breaking it down. The most disheartening feature of the present legal trajectory is that it does not appear to be reaching for equilibrium; breakdown seems to be its only end-point. Neither the regulatory process nor the legislative one contains an adequate mechanism for reducing the number of laws, one which can address the growth of them. Repeated waves of "Reform" have made little impact, consolidations of the code periodically plod along step by step, while the supply of per se laws keeps rollin' along. The nation almost seems to have decided just to wait until something breaks.

http://www.philadelphia-reflections.com/blog/2010.htm


Adrift With The Living Constitution

{Senator Joe Setak}
Senator Joe Sestak

Former Congressman Joe Sestak visited the Franklin Inn Club recently, describing his experiences with the Tea Party movement. Since Senator Patrick Toomey, the man who defeated him in the 2010 election, is mostly a Libertarian, and Senator Arlen Specter who also lost has switched parties twice, all three candidates in the Pennsylvania senatorial election displayed major independence from party dominance, although in different ways. Ordinarily, gerrymandering and political machine politics result in a great many "safe" seats, where a representative or a Senator has more to fear from rivals in his own party than from his opposition in the other party; this year, things seem to be changing in our area. Pennsylvania is somehow in the vanguard of a major national shift in party politics, although it is unclear whether a third party is about to emerge, or whether the nature of the two party system is about to change in some other way.

For his part, Joe Sestak (formerly D. Representative from Delaware County) had won the Democratic senatorial nomination against the wishes of the party leaders, who had previously promised the nomination to incumbent Senator Specter in reward for Specter's switching from the Republican to Democratic party. For Vice-Admiral Sestak, USN (ret.) it naturally stings a little that he won the nomination without leadership support, but still came reasonably close to winning the general election without much enthusiasm within his party. He clearly believes he would have beaten Toomey if the party leaders had supported him. It rather looks as though the Democratic party leadership would rather lose the election to the Republicans than lose control of nominations, which are their real source of power. Controlling nominations is largely a process of persuading unwelcome contenders to drop out of the contest. Sestak is therefore making a large number of thank-you visits after the election, and clearly has his ears open for signs of what the wandering electorate might think of his future candidacy.

{Senator Patrick Toomey}
Senator Patrick Toomey

America clearly prefers a two-party system to both the dictatorial tendencies of a one-party system, as well as to European multi-party arrangements, such as run-offs or coalitions. A two-party system blunts the edges of extreme partisanship, eventually moving toward moderate candidates in the middle, in order to win a winner-take-all election. Therefore, our winner-take-all rules are the enforcement mechanism for a two-party system. Our deals and bargains are made in advance of the election, where the public can express an opinion. In multi-party systems the deals are made after the election where the public can't see what's going on, and such arrangements are historically unstable, sometimes resulting in a victory by a minority fringe with violently unpopular policies. In our system, a new third-party mainly serves as a mechanism for breaking up one of the major parties, to reformulate it as a two-party system with different composition. Proportional representation is defended by European politicians as something which promotes "fairness". Unfortunately, it's pretty hard to find anything in politics anywhere which is sincerely devoted to fairness.

Going far back in history one of the great theorists of legislative politics was the Roman Senator Pliny the Younger, who wrote books in Latin about how to manipulate a voting system. For him, parties were only temporary working arrangements about individual issues, a situation where he recommended "insincere voting" as a method for winning a vote even if you lacked a majority in favor of it. Over the centuries, other forms of party coalitions have emerged in nations attempting to make democracy workable. Indeed, a "republic" itself can be seen as a mechanism devised for retaining popular control in an electorate grown too large for the chaos and unworkability of pure town hall democracy. A republic is a democracy which has been somewhat modified to make it workable. Our founding fathers knew this from personal experience, and never really considered pure democracy even in the Eighteenth century.

{Senator Specter}
Senator Specter

The two main actors in shaping the American Republic were George Washington and James Madison. Madison was young, scholarly and largely unknown; Washington was old, famous, and insecure about his lack of academic political education. Both of them knew very well that if Washington really wanted something he was going to have it; what mainly restrained him was fear of looking foolish. But he hated partisanship and conniving, partly as a result of having been the victim of General Mifflin and the Conway Cabal. Washington hated political parties and anything resembling them; Madison was young and uncertain, and briefly surrendered the point. It took about two years of real-life governing for Madison to conclude that political parties were absolutely essential to getting something accomplished. In this he experienced for the first time those unwelcome "pressures from the home state", with Thomas Jefferson determined to thwart Alexander Hamilton, and Patrick Henry thundering and denouncing any hesitation in going for the jugular vein of opponents. Madison was deeply concerned with making his new nation a success, and eventually joined Jefferson in the Virginia policy of opposing banks, cities and manufacturing. When Washington saw that Madison was committed to this course, he never spoke to him again. For Washington, honesty was always the best policy, and personal honor is never regained once it is lost. The compromise of 1790 was particularly vexing to their relationship, when Washington's honor and personal finances were used as bargaining chips for moving the nation's capital opposite Mount Vernon on the Potomac River, in return for placating Hamilton and Robert Morris with the assumption of state revolutionary war debts.

Henry Clay 1811

Legislative partisan politics took a violent turn in 1811, when 34-year old Henry Clay was elected to his first term as member of the House of Representatives. The Senate was less prestigious than the House in those days, and Clay had spent his time as a senator studying the landscape of the House, before he made his big move upward. Up until that moment, the role of Speaker was that of mediator and administrator of the rules, partisanship was considered a shameful thing in a Speaker. Young Clay was elected Speaker on the first day of the first session after he moved to the House as a member. Seniority was brushed aside, and this newcomer took over. It takes only a moment's reflection to surmise that a lot of politics had taken place before the House convened. Not only that, but Clay immediately added the power of the Speaker to appoint committee chairmen, to the invisible powers of majority leader. The office of majority leader had not yet been created, but it was not long in emerging that anyone who could assemble enough votes for Speaker was also able to make highly partisan choices for Committee Chairs. Eventually, the seniority system was imposed in part as a reaction to perceived abuses of Speaker power. It is worth a digression to reflect on the role of any seniority system, which as it is clearly seen in labor-management industrial relations, serves to deprive management of promotion power, usually substituting seniority for selection by merit. In the case of the Speaker, the seniority system catapults the power of the Speaker over that of every member of his caucus. To rise in a seniority system for committee chairmen, a member must first be appointed to a desirable committee -- by the Speaker, or by his instructed favorites on the appointment committee. It puts in the hands of the Speaker or his agents the power to humiliate a member by ignoring his seniority; the other members know immediately what that means. To understand the power of this threat, reflect on Woodrow Wilson's famous observation that "Congress in committee, is Congress at work."

Soon after Henry Clay made his dramatic moves, Martin van Buren extended the idea of partisan party politics to the actual election of Congressmen. Much of the whoopla and deceptiveness of subsequent campaigns was invented by Andrew Jackson's vice president. And that included their own deal, in which van Buren worked for Jackson's election in return for a promise that he would be the successor President. After that came the election of 1848, in which William Henry Harrison was elected as a man born in a log cabin. When, in fact he had been born in one of the largest mansions in Virginia. That had been approximately George Washington's residence description, too, but it is hard to see Old Stone Face lowering himself to accept any office unless it was offered unanimously.

Compare that with the campaign financing episode which created the urban political machine. The Philadelphia traction king Wm. L. Elkins was narrowly concerned with building street car lines along with his business associate P.A.B. Widener; Widener had been a city politician before he got into street cars. One or the other of these two approached the Mayor of Philadelphia with the complaint that it interfered with building street car lines to have to bribe every bartender on every street corner. So he made a proposal. It wasn't the money that bothered him, because he could just raise trolley fares to cover it, it was the protracted delays. So, how would it be if the trolley company just delivered a big lump-sum bribe to the mayor. That would give enormous political power to the party boss through the power to distribute or withhold the boodle to party workers. And it would save the trolley company lots of time, while not costing any more than the "retail graft" system. Since then, just about every urban political machine in the country has been largely financed through the macing of utilities.

The downward trend of serial modifications to the Philadelphia Constitution of 1787, should be clear enough without further illustration. If the Tea Parties aren't mad about it, they should be. More likely, however, they are mainly mad about the modern pinacle of sly tinkerings, plainly displayed on TV during the enactment of the Obama Health Bill. The point was repeated for emphasis in the Dodd-Frank financial bill, in case it is ever claimed to have been accidental. In both cases, 2000 page bills were prepared out of sight, and thrust before the Congress with orders to enact them in four hours. If that's representative government, perhaps we ought to go back to having a King.

http://www.philadelphia-reflections.com/blog/2097.htm


Anatomy of an Urban Political Machine

{One Big Family}
One Big Family

The Franklin Inn Club meets every Monday morning to discuss the news, and recently it discussed the upcoming local political campaign. The discussion went on for fifteen minutes before a newcomer asked if we were talking about the primary or the general election. The question was met with broad smiles all around, because of course we were talking about the primary. Voter registration is 6:1 in favor of the Democrats in Philadelphia, so the general election is just a required formality. The election, that is, consists only of the Democrat primary; election of the Democrat nominee in the general election is a foregone conclusion. Someone idly remarked on the number of politicians who are blood relatives of other politicians, someone else said that was true of union officers, too. So, skipping from the inside baseball of the election, we took a little time to discuss the anatomy of an urban political machine.

The first step in consolidating control of a city by a political machine is to eliminate the issue of the general election by making the other party's chances seem hopeless. That converts an election which typically turns out 40% of the voters into an exclusively primary election, turning out 20% of the voters, or even less in an off-year. In some "safe" districts a winner needs far less than 10% of the eligible vote to win.

The second step is to run as a prominent member of a local ethnic or religious group, preferably the largest of such groups within the district. If possible, election is almost assured by being the sole candidate associated with the largest ethnic group. Here's where family connections work for you. If your father held the same seat, or some other family member had been prominent in the district, it helps assure everybody that you are really an ethnic member, and not just someone whose name sounds as though it would be. Your relative will know who is important in locally local politics, the members of large families, or people known to be the "go-to guy".

Assembling all that, the final step is to get everyone else who is a member of the ethnic group to drop out of the primary, and to encourage other ethnic groups to field as many candidates as possible, splitting up their vote. Getting other members of your religious group to drop out, consists of having your relative approach them and tell them to wait their turn. The implicit promise underneath that advice is probably next to worthless, unless it is specific and witnessed, and the other fellow's ability to deliver it is credible. If all else fails, the resistant opponent is muscled in some way, verbally at first, and then increasingly threatening. The consequence of this ethnic/religious influence is more involvement in government by clergy than is healthy for either one of them. Now, that's about all there is to achieving permanent incumbency, but the minority party should be mentioned, as well as the flow of money.

{the Parking Authority}
the Parking Authority

It quite often happens that the minority party in the big city, hopeless in its own election chances, finds itself with a Governor and/or Legislature of their party. The patronage of state jobs becomes available to the foot soldiers who have no chance of local election. Much of the wrangling within state legislatures revolves around whether appointive patronage jobs should be lodged in state agencies, or local ones; at the moment, the Parking Authority and the Port Authorities figure prominently as jobs for which a local Republican could aspire. The coin of this trade is maintaining influence in the state nominating process, and paying off with increased voter turn-out in elections which have no local effect but may be important at the state or national level. Since party dominance at state and national levels changes frequently, the local machine finds it useful to continue this system. Where they have nothing to lose in local elections, they may even encourage it.

Money is the mother's milk of politics. Except for safe districts no one can get elected without it. And various degrees of corruption provide money to be "spread around" the clubhouse, sometimes to induce people to drop out of primary races, sometimes to console "sacrifice" candidates who run hopeless campaigns just to make the party look good, and sometimes just to enrich the undeserving. The politically connected parts of the legal profession participate a good deal in the flow of funds, sometimes in order to get government legal work, sometimes to obtain judgeships, sometimes to launder the money for clients. One particularly lurid story circulates that professional sports teams are expected to make seven-figure contributions in return for lavish new stadium construction, from which they in turn are able to generate various sorts of compensating revenue.

But, as the old story goes, if you eat lunch with a tiger, the tiger eats last.

http://www.philadelphia-reflections.com/blog/2114.htm


Constitutional Liberty

WITH British troops in the process of disembarking at New Brunswick, apparently intent on hanging rebels, Robert Morris and John Dickinson annoyed everybody by refusing to sign the Declaration of Independence. Both were fully engaged in the Revolution after the fighting finally got started, and Morris signed up in August, 1776. Dickinson had some further reasons of his own, but Morris explained his position quite succinctly. He didn't mind being a British subject, he didn't want a new King, what he wanted was Constitutional Liberty. There is no record of his being directly confronted about this later, and thus no detailed explanation. But whatever did he mean?

{Iliad and the Odyssey}
Iliad and the Odyssey

Morris was of course very bright, even brilliant as a businessman. He had an astonishing memory for detail, and was capable of holding his own counsel. He was a person of great daring, and prodigious amounts of work. But there is very little evidence that he thought it was useful to be mysterious, or deep. So why not take him at his word, which was essentially that what mattered in a government was whether it kept its promises and allowed its citizens all possible Liberty. It did not matter whether the government had a king, or seldom mattered much who that king was. What mattered was whether it kept its promises, and for that a Constitution is useful. There is no great pleasure in being capricious and arbitrary, so a king who leaves the citizens alone is mostly the best you can ask for. It does, however, help considerably if the rules are fair, clear, and binding. Beyond that, it is unwise to go about toppling governments in the vain hope that a new one is somehow better than the old one. This is putting words into his mouth, to be sure. What he did say was he saw no advantage to getting a new government when what we wanted was Constitutional Liberty. Eleven years later, he was a personal friend of just about everyone with the power to design a new government. Washington lived in his house, or in one next door. Ben Franklin was a business partner. Gouverneur Morris was his lawyer and partner. Just about everybody else who mattered was meeting with him in secrecy for months at a time, in the Pennsylvania Statehouse. And so on.

An essential part of this puzzle of Morris' role could be that the American Constitution was very close to unique in being written out as a document, like a commercial contract. The British Constitution was unwritten at the time, and continues to be unwritten today. Many other members of the British Commonwealth operate without a written constitution. And in fact, what passed as constitutions for thousands of years have been unwritten; it was the written American one which was the novelty, not the other way around. It may stretch matters a little to describe the Iliad and the Odyssey as constitutions, but they do in fact describe the system of governance of the Ancient Greeks, clarifying many axioms of their culture for which they were willing to fight and die. We are able to understand the rules for Greeks to live by from reading Homer, almost surely better than we understand the rules of American culture by reading The Federalist Papers. Modern students of geometry, for another example, are taught that all the rules of Euclidian geometry are based on a few axioms stated at its beginning. Change one of those axioms, and you make mathematics unrecognizable. Even Newton's Principia are now seen by mathematicians to be rules which apply only to our universe for certain. There may exist many other universes to which they do not apply. Axioms are themselves mostly regarded as unprovable assumptions. A Constitution therefore is regarded in modern times to be much the same thing as a set of mathematical axioms. With one new exception: they are written out on a piece of paper for all to see and agree to -- just like a commercial contract. It would not be surprising to discover that America's great merchant trader, Robert Morris, was horrified at the idea of depending on Vestal Virgins or Judges, or Kings, for their recollection of what the contract says. It therefore seems quite natural for a maritime merchant to be agitated by having the rules of British society depend on what King George III chose to emphasize or ignore. Write it down, negotiate it, then tell us what you want so we can agree to it; that's a proper way to define Constitutional Liberty and limit disputes. International maritime trade could not be conducted in any other way, because sea captains who feel abused in a foreign port can abruptly up-anchor and sail away, never to return to that port again until or unless local rules are clarified.

Unless someone discovers some relevant documents in a trunk in the attic, that's about the best conjecture to be made about the American novelty of a written constitution, and its transformative effect on the legal system of all other nations which have one. It would still be nice to know, for certain, whose idea it was.

http://www.philadelphia-reflections.com/blog/2115.htm


Power of the Purse

{Liberty Bond}
Liberty Bond

In 1917, Congress passed a law, quite possibly not understanding its full implications. From the founding of the republic until that time, Congress had approved the exact amount of each bond issue as enacted, neither more nor less. With the First Liberty Bond Act of 1917, however, Congress began to allow the administration to issue bonds as it pleased, up to some specified debt limit. Periodically since that time, as the amount in circulation approaches the debt limit, Congress raises the limit. No doubt this procedural change seemed like legislative streamlining, making it unnecessary for Congress to interrupt other activities to respond to a debt level which creeps up on its own time schedule. The overall effect of this change was significantly different however, and probably unintentionally.

If the authorized debt limit is raised by large enough steps, it effectively amounts to Congress turning over debt decisions to the executive branch. Conversely, raising the limit only a small amount soon triggers a repeat request, which by routine becomes so inconsequential that Congress stops paying attention to it. Regardless of the size of the block grant, bulk authorization of blocks of debt results in the power of debt creation shifting toward the President. That was not what the Constitutional Convention intended.

{Founding Fathers}
Founding Fathers

The Founding Fathers remembered taxation as one of the main issues of the revolt from England. Whether by King or President they had no intention of permitting the Executive to tax as he pleased; the issue traced back to the Magna Charta. Nor would they permit unlimited federal borrowing to generate escape hatches which would soon enough transform into higher taxes. Taxes therefore must originate in the House of Representatives, and bond issues were approved one by one. Following the 1917 liberalization it required only fifty years before unrestrained bond limits reached a point where future national debt obligations loomed beyond easy ability to pay them off. If they were ever pronounced unpayable by the international bond market, interest rates would rise, and eventually federal bonds would become unsalable. With Greeece, Portugal and Ireland already flirting with bankruptcy, the approaching danger seems quite understandable to the voting public.

{Constitutional Convention}
Constitutional Convention

The issue is constrained by another barrier. The Fourteenth Amendment to the Constittution, Section Four, forbids dishonoring "the validity of the public debt of the United States, authorized by law." Enacted after the Civil War, this Amendment was intended to prevent future states or congresses from reversing the Reconstruction Acts, but it has the additional effect of preventing future Congresses from dishonoring interest and debt repayments on existing debt. The present Congress therefore retains the latitude to prohibit issuance of additional debt, but is forbidden from dishonoring existing debt.

This seems like a good principle to re-emphasize, entirely disregarding the merits of the TARP, the Dodd/Frank Act, or Obamacare. Indeed, restating the Constitutional intent for Congress to be chiefly responsible for taxes and debts, seems like a very good thing to do, quite regardless of whether present national debt limits ought to be raised. The 1917 Act was a mistake, probably an unconstitutional one, and should be reversed. Holding conferences in the White House about whether to issue debt raises uncertainty about whose duty it is. The responsibility belongs to the House of Representatives, and should stay there.

http://www.philadelphia-reflections.com/blog/2138.htm


Father of the Bureaucracy

{Robert Morris}
Robert Morris

UNDER the Articles of Confederation, America had a President who presided, but there was no executive branch for him to do anything administrative. The day to day business of the nation was conducted by committees of Congress, who mainly contracted out the actual work. Evidently, Robert Morris the businessman had observed this system with displeasure, because it only took him a few days to replace it with departmental employees, reporting to him. The affairs of the nation were evidently in such disarray that there is scarcely any recorded resistance to this astonishing re-arrangement, probably viewed as only one of a series of brisk actions by this foremost businessman of the nation, acting in an emergency and to some extent using his own money. Furthermore, the immediate administrative improvement was apparently so obvious to everyone that the system continued after Morris left office, and was absorbed into the 1787 Constitution without much recorded debate. Without dissent, as we say, the bureaucracy had been created. As the press of business steadily increased the bureaucracy, from a handful of employees to many millions of them, a fourth branch of government was created without any Constitutional mission statement, not one single word. Following directions set by early America's preeminent no-nonsense businessman, control of the bureaucracy was placed within the Executive branch, in time largely located within the District of Columbia, and governed by rules made by the Civil Service Commission. Sometimes this fourth and largest branch of government skirts dangerously close to encouraging insubordination to their politically appointed superiors.

For some reason, the State Department is particularly suspected of such "Yes, Minister" behavior. Increasingly, government subcontractors are relied upon ("privatization"), as growth of public sector work forces a return to the subcontractor approach of two centuries earlier; such subcontractors increasingly find the bureaucracy assumes the role of a second Board of Directors. And for the same reason as before: the work of the central government keeps increasing. At a state and local level, an uncomfortable amount of political funding can be traced to utilities and other corporations who have been awarded legal monopolies, uncomfortably like the mercantilism which our colonist ancestors had found so repugnant to deal with. In the 21st Century we are finally approaching the point where we can foresee the number of people working for some level of government becoming greater than the number of voting citizens, and therefore able to control their income and the nature of their work. When the bureaucracy begins to exert political election power over its elected superiors, elected politicians are almost certain to rebel at what they will surely see as going a step too far. However, on the topic of salary and work environment, they are likely to become allies. Public discontent is already echoed in the growing political movement to limit or shrink the size of government; it would be well to examine and pilot test alternative options, before this one gets us into trouble.

In retrospect, this was one of many features of creating the three branches of government where broader implications went unnoticed in 1787. The British government had three branches, King, Parliament and Judiciary. To create a government consisting of a President, a Congress, and a Judiciary did not then seem like much of a departure. However, the Revolution deposed the King and made the people sovereign. When the real implications of that breezy slogan had to be translated into legislative language serious implications emerged, unexpected then, and now hard to change.

http://www.philadelphia-reflections.com/blog/2168.htm


Reconsidering All Our Laws

{Common Law}
Common Law

A KING who conquers a new country theoretically gains the chance to revise all its laws. However thousands of years of experience demonstrate that those who are good at wielding the sword seldom have much interest in, or aptitude for, devising a legal code. Napoleon seems to have been an exception, and Alexander the Great was tutored by Aristotle, but most conquerers have been illiterate in the law. Therefore, earlier conquerors merely extended their native laws into additional territory, or else left the whole business to a permanent priesthood of judges. In this way, an independent judiciary could survive unless, like Thomas a Becket or Thomas More, it grew stubborn about thwarting the wishes of the King. The concept of citizen rights more or less defined feasible limits to what the King was allowed to do. British law went still further, distinguishing between rights of the people and rights of the sovereign. It identified those few things even a King was not allowed to do, as well as those many things he alone must be able to do in order to govern. The latter were collectively called the King's Prerogative. Today, we would call it a job description.

{U.S. Codes}
U.S. Codes

Along those lines, the English Civil War had been fought, briefly transferring the power of Prerogative to Parliament, and incidentally clarifying some disadvantages of doing so. Americans, after fighting an eight-year Revolutionary War to be rid of a particular king, had developed a sentiment for eliminating all kings entirely. However, the memory of the English Civil War and subsequent abuses by the Cromwell Parliament restrained that impulse. The alternative idea grew of transferring sovereignty to the people, to be translated into action by their elected representatives in the Legislative branch. Although such sovereignty would be unlimited, the intermediate steps taken by the Legislature could be deliberately slowed down, and particularly worrisome actions might be tangled up in complicated steps of legal process by a vocal minority. Such a complicated system required an umpire, which Chief Justice John Marshall eventually positioned the Supreme Court to be. Conducting elections every two years was a simple way to allow the people to restrain its agents from misbehavior of a more general sort. Since George Washington was confidently expected to be the first President, it was left to him to devise protections against presidential abuse, since he had notoriously and repeatedly expressed his intense dislike of kings. In modern times this system of checks and balances has only been severely tested once, in 1937. Immediately after winning a landslide re-election in 1936, Franklin Roosevelt nevertheless was slapped down hard by public outcry forcing Congress to thwart his Supreme Court-packing scheme.

{Sir Francis Bacon}
Sir Francis Bacon

Such subtle, complicated ideas cannot be implemented by writing 6000 words on a piece of paper, and they certainly cannot withstand two hundred fifty years of subsequent nit-picking by dissenters, no matter how carefully crafted the 6000 words may have been. The complexity of the political system it describes would long ago have fallen apart without a million little accommodations and revisions, just as every other nation's constitution has done during that same period of time. And that fine-tuning process was made possible by starting with a more or less blank slate, with thousands of lawyers and legislators debating every particle of common law for more than a century. In 1787 it was decided to adopt English common law as a default position, and to invite a host of legislative bodies to debate and replace any part of it with a "statute". It was a laborious process. Measured by pages of law books, the volume of statutes only grew to equal the volume of common law by the time of the Civil War. The English common law was certainly a good place to start, having been created by Sir Francis Bacon two hundred years earlier as the legal equivalent of the Scientific Method; based on real, adversarily contested case decisions, a hypothesis was created, then tested, revised, and tested again. By actual count, one state legislature only enacted three statutes in the year before the Constitution was ratified; all its other activity was concerned with adjudicating disputes within the boundaries of existing common law. But when the Constitution suddenly rearranged the balances of power in 1787, almost every sentence of common law had to be regarded as potentially requiring modification to reflect the new Constitutional rearrangements. During the first half century there existed great enthusiasm for almost all of the new Constitution except those parts which affected slavery, the fine-tuning was almost universally intended to strengthen it or repair some oversight. If it failed in some way, adversaries were quick to point out the flaws. In short, every lawyer in the nation was involved to some degree for a century in the process of re-writing the English common law for American purposes, in American circumstances, for the grander purpose of strengthening the American commonwealth.

{Federal Registry}
Federal Registry

And everyone knows what happened next. The state legislatures who considered it normal to pass fewer than a dozen laws in a year, started passing fifteen hundred in a year, and kept it up for many years. Today, almost every state legislature considers more than a thousand bills, and passes two or three hundred. Since the colonial legislatures passed few laws and spent most of its time adjudicating disputes about existing law, the character of the law changed as it gradually gave up adjudicating, stopped being like a court. The tendency of early law was to state principles to guide the judges. In recent times, our over-lawyered system specifies all imaginable conditions and exceptions in excruciating detail, so that our laws tend less and less to speak of "reasonable amounts" and more and more to define drunken driving, for example, in milligrams per deciliter of the defendant's blood. We have better measuring devices, so we measure. But who can deny that a legislature accustomed to making judgments itself, will more confidently rely upon the good judgment of courts, than a legislature which spends its time going to committee meetings to consider the testimony of experts, often never visiting a courtroom?

Our lawyers, who once enlisted the efforts of the entire profession for a century into refining the English common law into the American statutory law, are to be encouraged to extend equal effort into the process of turning off the faucet. Or possibly, having done such a good job at this assignment, seek another line of work?

http://www.philadelphia-reflections.com/blog/2169.htm


Corporations: Property, but also Immortal Persons

{Proprietor House}
Proprietor House

The Proprietorship of West Jersey is the oldest stockholder corporation in America. Devised by William Penn it has been doing business in Burlington, New Jersey since 1676. The Proprietorship of East Jersey may possibly have been created slightly earlier by William Penn, but recently dissolved itself, thus leaving a clear path for West Jersey to claim to be the oldest. For a hundred years before 1776, corporations were devised by the King through royal charters, and for a century after 1776 most state legislatures passed individual laws to create each corporation, one by one. Consequently, there were a great many variations in the powers and scope of older corporations, with heavy emphasis on the purpose to which the business was limited. Eventually, so many corporations were created that a body of law called the Uniform Law of Corporations simplified the task of incorporation for the legislatures. The Proprietorships of East and West Jersey would now probably be described as real estate investment trusts (REIT), but the Uniform laws now tend to diminish the emphasis on corporate purpose. It is now common to have a corporation proclaim the ability "to do whatever it is legal to do."

{Lady Justice}
Lady Justice

Many voices have been raised in opposition to corporations, largely claiming unfairness for a large and established corporation to compete with newcomers, especially small newcomers striving for the same line of business. Because of its immortality, a stockholder corporation can achieve dominance no individual could hope for, while because of its multi-stockholder ownership, it can generally raise larger amounts of capital. Moreover, because of its size and durability a corporation can become more efficient and offer the public lower prices and higher quality. As much as anything else, a corporation can generally hire more employees and pay them higher wages; as even the unions admit, corporations create jobs, jobs, jobs. No doubt, state legislatures are attracted by the tax revenue derived from major corporations, but the quickest way to stimulate the economy has repeatedly been found to grow out of lowering corporation taxes. Since there is scarcely any purpose to creating a for-profit corporation unless it eventually pays its stockholders some kind of dividend, all corporation taxes have the handicap of double-taxation for a fixed amount of business. The Republic of Ireland recently lowered its corporate tax rate severely and triggered so much new corporate activity that it inflated and destabilized its whole economy. The result was a dangerous economic crisis, but politicians privately and world-wide silently derived only one real conclusion: lower your corporate taxes if you are looking to stimulate jobs, jobs, jobs.

The corporate model of business thus looks pretty safe, in spite of envious criticism, and is what most people mean when they speak of capitalism. The Constitution had the intention of extracting Interstate Commerce for the Federal Government and leaving the regulation of every other business to state legislatures. The Roosevelt Supreme Court-Packing dispute of 1936 twisted the meaning of Interstate Commerce to mean almost all commerce, but Congress wasted no time specifically exempting the "Business of Insurance" from federal regulation and returning it to the state legislatures in the 1945 McCarran-Fergusson Act. Although the matter remains one of some dispute, it is roughly correct to say that all commerce is federally regulated, except insurance. The corporation is nevertheless usually a creation of some legislature, and legislators have wide latitude in regulating them. To illustrate, in the early days of banking corporation, the Bank of Hartford was delayed in receiving incorporation by strong legislative suggestion that a closed stockholder list would result in refusal to incorporate them, whereas opening up the list to new stockholders might result in rapid approval. The implication was strong: the legislators wanted some cheap or free stock as a condition of incorporation. The following year, 250 banks were incorporated, and the year after that, over 400 more. Macing of incorporation applicants by politicians was sharpened to a fine point in Pennsylvania in the late 19th Century, when legislatures accorded monopoly status to public utility corporations, withholding it from competitors. It is now a textbook statement that the funding of substantially all municipal political machines is derived from voluntary contributions by utilities with politically granted monopolies, who are consequently indifferent to the retail prices of their products.

{John Marshall}
John Marshall

So there is still room for public concern and vigilance, and both the courts and the Constitution protect but restrain corporations. In the early 19th Century when public opinion was becoming firmer about incorporation, it was contended they should be treated as persons, possibly resembling real persons more closely by imposing a finite life span on their charters. Although corporation entities are still to some degree treated like individuals, the legal doctrine prevailed that they are in fact contracts between the state and the stockholders. The paradox is thus defended that although legislatures can create corporations, they cannot dissolve them! After all, a contract is an agreement between two parties, and it requires both parties to agree to dissolve the agreement. And then, the final uncertainty was removed by John Marshall. The U.S. Supreme Court in the Dartmouth College case applied Article I, section 10 of the Constitution. That section provides that state governments may not pass any law impairing the obligation of contracts. The Supreme Court decision written by Marshall made it clear that this provision of Constitution eliminated any distinctiveness between a contract involving a state and a contract involving two citizens. There had been a growing feeling that private property was not to be disturbed by state power, and this linkage to Article 1 affirmed that point and finally settled matters. Shares of company stock were property, protected from state legislatures as belonging to the owner and not to the state in any sense. All the while that this quality of property was established, certain features of the corporation as a person endured. Most of the attention to this point arose after the Civil War, when the mixture of concepts ( a slave was a person who was also private property) more or less applied to the institution of slavery as well. More recently, potential muddles have been created by limiting campaign contributions of corporations, thus impairing their right to free speech in the role of a person. It even appears to be true that some of the 1886 precedents were created by an error of a court reporter. The dominant precedent in operation here, would appear to a layman as, "If it ain't broke, don't fix it." Additional centuries including a Civil War thus encrusted conditions and traditions onto the hybrid idea of a corporation which now allow it to stand on its own feet, more or less free at last.

The legal profession can certainly be congratulated for constructing two institutions which include the majority of working Americans -- the corporation and the civil service -- without the slightest mention of either one in the Constitution. Although everything seems to be reasonably comfortable, and no one is actively proposing substitutes, it is uncomfortable to hear so much dissension about original intent of the Framers, when so much of American Law traces its history to events and institutions which the Framers never imagined. Constitutional Law, both within and without original intent, will soon be dwarfed in effect by non-constitutional accretions to it. Sooner or later, the advocates of some undefined cause could find it in their interest to challenge the Judicial system for what has been allowed to happen. Expediency has triumphed. We started with nothing but the common law (defined as law created by judicial decision), and we are slowly returning to that condition under a different name, misleadingly called statutes.

http://www.philadelphia-reflections.com/blog/2170.htm


The Third Pennamite War (1784)

{Wyoming massacre}
Wyoming massacre

And so, after the Revolution was finally over, there was a third war between Pennsylvanians and the Connecticut born settlers of the Wyoming Valley. This time, the disputes were focused on, not the land grants of King Charles but the 1771 land sales by Penn family, most of which conflicted with land sales to the Connecticut settlers by the Susquehanna Company. The Connecticut settlers felt they had paid for the land in good faith, and had certainly suffered to defend it against the common enemy. The Pennsylvanians were composed of speculators (mostly in Philadelphia) and settlers (mostly Scotch-Irish from Lancaster County). Between them, these two groups easily controlled the votes in the Pennsylvania Assembly, leading to some outrageous political behavior which conferred legal justification on disgraceful vigilante behavior. For example, once the American Revolution was finally over (1783) the Decision of Trenton had given clear control to Pennsylvania, so its Assembly appointed two ruffians named Patterson and Armstrong to be commissioners in the Wyoming Valley. These two promptly gave the settlers six months to leave the land, and using a slight show of resistance as sufficient pretext, burned the buildings and scattered the inhabitants, killing a number of them. One of the weaknesses of the Articles of Confederation was thus promptly demonstrated, as well as the ensuing importance of a little-understood provision of the new (1787) Constitution . No state may now interfere in the provisions of private contracts. Those with nostalgia for states rights must overcome a heavy burden of history about what state legislatures were capable of doing in this and similar matters, in the days before the federal government was empowered to stop it.

{prospect rock}
prospect rock

A flood soon wiped out most of the landmarks in the Wyoming Valley, and it had to be resurveyed. Patterson, whose official letters to the Assembly denounced the Connecticut settlers as bandits, perjurers, ruffians, and a despicable herd, boasted that he had restored, to what he called his constituents, "the chief part of all the lands". The scattered settlers nevertheless began to trickle back to the Valley, and Patterson had several of them whipped with ramrods. As the settlers became more numerous, Armstrong marched a small army up from Lancaster. He pledged to the settlers on his honor as a gentleman that if both sides disarmed, he would restore order. As soon as the Connecticut group had surrendered their weapons, they were imprisoned; Patterson's soldiers were not disarmed at all, and assisted the process of marching the Connecticut settlers, chained together, to prison in Easton and Sunbury. To its everlasting credit, the decent element of Pennsylvania were incensed by this disgraceful behavior; the prisoners somehow mysteriously were allowed to escape, and the Assembly was cowed by the general outrage into recalling Patterson and Armstrong. Finally, the indignation spread to New York and Massachusetts, where a strong movement developed to carve out a new state in Pennsylvania's Northeast, to put a stop to dissension which threatened the unity of the whole nation. That was a credible threat, and the Pennsylvania Assembly appeared to back down, giving titles to the settlers in what was called the "Confirming Act of 1787". Unfortunately, in what has since become almost a tradition in the Pennsylvania legislature, the law was intentionally unconstitutional. Among other things, it gave some settlers land in compensation that belonged to other settlers, violating the provision in the new Constitution against "private takings", once again displaying the superiority of the Constitution over the Articles of Confederation. It is quite clear that the legislators knew very well that after a protracted period of litigation, the courts would eventually strike this provision down, so it was safe to offer it as a compromise and take credit for being reasonable.

It is useful to remember that the Pennsylvania legislature and the Founding Fathers were meeting in the same building at 6th and Chestnut Streets, sometimes at the same moment. Books really need to be written to dramatize the contrast between the motivations and behavior of the sly, duplicitous Assembly, and the other group of men living in nearby rooming houses who had pledged their lives and sacred honor to establish and preserve democracy. To remember this curious contrast is to help understand Benjamin Franklin's disdainful remarks about parliaments and legislatures in general, not merely this one of which he had once been Majority Leader. The deliberations of the Constitutional Convention were kept secret, allowing Franklin the latitude to point out the serious weaknesses of real-life parliamentary process, and supplying hideous examples, just next door, of what he was talking about.

http://www.philadelphia-reflections.com/blog/689.htm


The Revolution is Over, Every Man for Himself

{Charles Dickensons}
Charles Dickens

A DOZEN episodes from American revolutionary times might be called pivotal, but a single debate in the Pennsylvania Legislature seems to have begun our political parties in their present form. Two debaters, their topic, and its consequences all rise to dramatic, even operatic, heights. In another place, we intend to explore the clashing philosophies of the Eighteenth century, with Hegel and Hume at the apex, but two quotations from Adam Smith are more intelligible. Charles Dickens nearly ran away with the topic in his novel A Tale of Two Cities, but Charles Brockton Brown and Hugh Henry Brackenridge were local authors, Pennsylvanians present at the scene. John Adams and Thomas Jefferson debated for decades about which of them was the main protagonist. But all of that is background for one operatic scene at Independence Hall, where the real David and Goliath were William Findlay and Robert Morris.

{Robert Morris}
Robert Morris

Robert Morris, it must be remembered, was probably the richest man in America, a signer of the Articles of Confederation, the Declaration of Independence, and the Constitution. He was one of three men, including Ben Franklin and George Washington, about whom it could be said: the Revolution could not have been won without them. Morris essentially invented American banking, founded the first bank, the Pennsylvania Bank, invented investment banking, corporate conglomerates, American maritime insurance, and dozens of financial innovations. His merchant house probably had 150 ships sunk by the enemy. George Washington lived in his house for years. Today, he is mostly remembered for going bankrupt at the end of a busy life.

{William Findlay}
William Findlay

William Findlay, on the other hand, was a Scotch-Irish frontiersman with a flamboyant white hat, elected by others like him from the Pittsburgh area to promote inflation through state-issued debt paper, so as to finance land speculation in the West. He had no education to speak of, no accomplishments to mention. He made no secret of his self-interest in land speculation, and therefore no secret of his opposition to rechartering the Bank of North America, which Morris had founded for the purpose of restraining inflation and speculation. Findlay wanted the bank to disappear, get out of his way, and he boldly denounced Morris for his self-interest in promoting a bank where he owned stock. He utterly denied that Morris had any motive other than the profit he would make for the bank, so in his opinion they were equal in self-interest. Let's vote.

Prior to that time, Findlay had politically defeated Hugh Brackenridge, using the two strong arguments that Brackenridge had gone to Princeton, and written poetry; how could such a person possibly represent the hard-boiled self-interest of frontier constituents?

{Hugh Brackenridge}
Hugh Brackenridge

Morris was positively apoplectic at this sneering at everything he stood for. As for the country's lack of trust in a man who had risked everything to save it, well, what has he done for us, lately? America had lately thrown off the King, but what it had really discarded was aristocracy. Every man was as good as every other man, and each had one vote. Under aristocratic ideals, a man was born, married and educated in a leadership class, expected to be utterly disinterested in his votes and actions, scrupulous to avoid any involvement in trade and commerce, where temptations of self-interest were abundant. Washington never accepted any salary for his years of service and even agonized for months when he was awarded stock in a canal company, wanting neither to seem ungrateful nor to make private profit. John Hancock, who came pretty close to having as much wealth as Morris, gave up his business when he was made Governor of Massachusetts. Benjamin Franklin was only accepted into public life when he retired from the printing business, to live the life of a gentleman. That's how it was, everywhere; every nation had a king, and depended on rich aristocrats to supply the leadership for war and public life. But, now, America had become a republic where every man was equal. Morris, and the Federalists he represented, wanted to turn the clock back to an era that would never return.

Goaded too far, Morris impulsively resigned his business interests, to prove he had the nation's interest at heart in opposing inflation. It didn't help. Findlay won the vote, and the Bank of North America was closed. America was ashamed of how it behaved after the Revolution, but not ashamed enough to change.


REFERENCES


Robert Morris: Financier of the American Revolution: Robert Morris: Charles Rappleye: ISBN-10: 1416570926 Amazon

http://www.philadelphia-reflections.com/blog/2178.htm


Bonds--Do They Have A Future?

{Gold Standard}
Relic of the Past?

EVER since we finally went off the gold standard completely during the Nixon Administration, the Federal Reserve has adjusted our money supply to create a fairly steady 2% inflation. If inflation is ever less than 2%, the Fed puts more money into circulation. Since many bonds are paying less than a 2% dividend, everybody who buys and holds them at par will lose money in "real" terms. That is, everyone who buys bonds when they are issued and sells them when they mature, will lose spending power. Since they fluctuate in the meantime, it is possible for a trader to buy them when they are undervalued by the market. That trader will possibly make money, but only because someone else lost money. Something like that occurred during the recent financial crash bailout, when interest rates declined from 3% to less than 2%, but were repurchased by the Fed as "Quantitative Easing", effectively giving speculators a 33% profit at government expense. But that doesn't happen often, and just guess who ultimately lost the money the speculators made. There is also that daunting question: when the time comes for the Federal Reserve to disgorge them, just who is going to buy all these cheapened bonds? In Japan, bonds paid a dividend of less than the rate of inflation for more than a decade; it's hard to think of a reason why the same thing could not happen in America. So it's also hard to imagine a reason why buy-and-hold investors should not abandon bonds, perhaps suddenly all at once, at some unknown time in the future. At that point, many of them will resolve never to try that, again. The whole idea is troubling.

It's particularly troubling in view of the lack of success, so far, of TIPS. These vehicles are new; perhaps the algorithm is set to ignore minor inflation and will over-respond to more major inflation, ultimately rewarding those who buy them. But at least so far, they are a disappointment. Furthermore, TIPS are quite cleverly designed to be inflation-protected, while unfortunately inflation usually does not follow a straight line but is volatile, or saw-toothed; the jury is still out. The jury better hurry up, because all investors look for net income after expenses, which include brokerage costs, taxes, and inflation. A long-term bond might have to pay a dividend approaching 4%, just to emerge with the same net value it started with; after five years of 4%, you could be 20% behind. And yet, the bond market with or without inflation protection is far larger than the stock market, and compares in size with all other kinds of market. Who buys them, especially in these huge quantities?

Somebody must maintain statistics which answer this question, but as a guess, the main buyers are insurance companies, endowments, annuities, hedge funds, banks. And foreigners, of course, to whom our follies seem trivial compared with their own. The great argument for bonds is safety of principal, and although safety is in question anywhere there is inflation, when the topic is cash flow, safety is definitely an issue. Cash shortages are what cause bankruptcies, which are mainly useful in providing time to liquidate underlying wealth to pay restless creditors. The management of a non-profit organization must meet its payroll out of cash flow, so non-profits protect themselves from dissolution by having a regular flow of nominally secure bond dividends. Income from donations and contributions can be particularly weak during times of economic stress. Since most for-profit organizations also experience variable periods of time without profits, their situation does not differ greatly from nonprofits. That's particularly true when a for-profit organization has a vocal, activist stockholder group, who will protest fiercely if the management retains abundant cash. For such a predicament, holding bonds creates safety by some definition. The price of that safety is the long-term average loss on the bond portfolio; the company's alternative losses are whatever it takes to maintain a stable work force during unstable times. The business school assessment of this trade off is that bond losses can usually be passed through to the customers as a business cost, while layoffs and strikes may not be.

To restate the characteristics of willing bond purchasers, they are governments and corporations who have no common stock issuance alternatives, but regularly face a need to have money available for payroll. They also include borrowers and lenders at nominal interest rates like banks and insurance companies, who can afford to ignore inflation because their own liabilities are in nominal dollars, or come due at a date certain. And then, there are a host of beneficiaries of special-interest bond provisions, like "Flower bonds", state and municipal governments, foreign aid, student aid, etc. As an overall statement, natural bond buyers are those who either do not possess a steady equity (common stock) alternative to offer investors, or else are shielded in some way from the inflation and tax costs of buying bonds. Speculators and traders are excluded from the discussion, because fixed-income trading is a zero-sum game, something you should teach your children to avoid. Other than these special niche opportunities, bonds should be regarded by the ordinary investor as trading opportunities when interest rates get too high, which is roughly every fifteen years or so.

Things in the bond market were not always so bad; Robert Morris, Jr. was a genius for devising this market in 1784. But the equity market was then not so well developed, life expectancies were shorter, and a minimum 2% inflation was not guaranteed by the Federal Reserve. The income tax had not been invented. It was possible to enjoy the promised benefits of lending in those days, for decades or even lifetimes. It was much harder to find investments of superior performance, without getting involved in business management. Meanwhile, the bond market just got huger and huger. Modifying or dismantling it in logical ways would have enormous disruptive effects. So enormous, the Congress has just adopted the stance called "kicking the can down the road", which is a debt you never seriously intend to repay.

Are we waiting for the bond market, the bond vigilantes, or speculators to find some vital vulnerable flaw, and topple it all into the ashcan of history? Or is there some better plan that no one has mentioned?

http://www.philadelphia-reflections.com/blog/2195.htm


How Could We Improve State Legislatures?

NEARLY every student of government agrees, state government is the weakest part of the American system. Almost every academic or federal congressman, at least, seems to hold that belief, while almost any lawyer would prefer to have his case in Federal court rather than before a state judge. Although the followers of Thomas Jefferson kept the nation in an uproar for forty years pursuing his notion of government identical with the will of the people, the public opinion he prized nevertheless remains scornful of state government. Such scorn by itself can undermine legislative quality, creating a destructive cycle.

{Small Town}
Small Town

Students of government point to instability and unpredictability as main features of concern about state government. The legal profession values a central principle, called stare decisis: Leave the Law Alone. Stability, or order is desired so highly that dictatorship, corruption and poverty may be tolerated in order to achieve it. Conversely, inability to predict what is coming next is highly destabilizing, a sign of amateurism at the controls. Any decision is better than no decision, even a bad decision is better than no decision. The public hesitates to act in the face of indecisive governance, and dynamism drains from the environment. Most of the time it doesn't make much difference what a rule says as long as it is emphatic and prompt. And it's usually the case that bad decisions are quickly reversed. Test it yourself: how much difference does it make whether a one-way street runs East, or West? But it would make a considerable difference if almost any street changed Eastward to Westward to Eastward again, several times capriciously. Suppose someone did make a bad mistake: Eastward to Westward and back to Eastward again. Everyone can now see that Westward was a dumb idea, you bonehead. It will be a very long time before anyone tries that, again.

A second general characteristic of state government is to be located in a small remote town. The capital of Michigan is in Lansing, not Detroit. In New York it is in Albany, not New York City, and in Pennsylvania it moved from Philadelphia to Harrisburg. Even in little Delaware it is in Dover, in Maryland it is in Annapolis rather than Baltimore. And so through most of the fifty states, we see the same pattern. No doubt it could be argued: getting away from big-city bosses and political machines is a positive, and stretching a network of highways through the open countryside to the new capital is a source of real estate development for the state. But it definitely creates weakness of the governing system to locate it in towns that have little newspaper coverage, no think tanks, few universities, and even poor airports, school systems, museums and civil society. These are generally one-industry towns, where the children of the bureaucracy all go to school with each other, along with the offspring of lobbyists. Voices in the past have been raised against the development of a ruling class, as might have been seen in Potsdam outside of Berlin and similar political suburbs. But we have just as surely developed a bureaucratic subclass in Bethesda, Maryland and Alexandria, Virginia. No doubt there are many other similar clusters, in other states. Where the children of bureaucrats are clustered in the schools near the Washington Post and the National Journal it can be argued they know the inside game of politics as well as the children of Boston know the inside baseball of the Red Sox, and there is a certain value to developing such a political artisan class. But in the vast majority of the country, the dominant problem is that the voters of the state have not the faintest idea of how their state government is functioning. The children of bureaucrats may still learn at the dinner table how to adopt "Yes, Minister" behavior or how to find lifetime bureaucratic jobs with accidentally high fringe benefits. The big flaw is the rest of the state does not realize the smallest part of how prevalent such behavior is in the capital. If the politician who is caught in a scandal is largely unknown to the general public, it is an advantage to the political class. With less notoriety, there is less scandal, possibly even lighter punishment from judges he has been involved in appointing. Rising above this sort of sorry behavior, the quality of legislation is surely diminished when there is diminished fame for doing a good job, diminished scorn for incompetence. To a certain extent, this pressure for mediocrity is augmented by the reduced importance of the subject material. The federal government is involved in foreign policy and monetary issues Constitutionally forbidden to the state legislature. Even at the bottom of the hierarchy of public notice, the activities of mayors and city councils have a more direct effect of the lives of the local voter than state government does, with importance shaved off at both the top and the bottom. Such activities really can possibly afford to be relegated to some rural small town with nothing to do except play poker and drink in the bar of the local hotel; it's a question which is cause, which is effect. The Constitution provides that the Federal government shall be limited to a dozen specified activities, while everything else is governed by the states. Unfortunately, two hundred years of chipping away at the wall separating two governments of limited powers have left the states with little scope to govern anything substantive except the insurance industry. That does not prevent most state governments from considering more than two thousand bills a session, but these are matters of little import, boring, boring.

{Big City}
Big City

The Progressive Movement of the early Twentieth century saw much the same problems, being handled by much the same sort of people; but they over-reacted to it. Like most reform movements, the Progressives wanted to make a big splash and then go home. A century later, it is difficult to assess how outrageously corrupt the Senatorial process may or may not have been at that time in the past. Somehow, the public became convinced the U.S. Senate was a terribly rotten organization because of the terribly rotten selection system for U.S. Senators. Consequently, the Seventeenth Amendment passed with little fanfare, taking the selection process away from "the states" and giving it to a statewide popular election. In states with large urban political machines, this change meant giving the nominating process to big-city bosses, taking it away from the legislatures. That is definitely a distinction without much difference. Most big-city political bosses are content to select obedient hacks for nomination to the legislature, but this is the source of most rotten boroughs, gerrymandering, corruption and mediocrity. In the areas of rural machine politics, the boss himself is more commonly attracted to the appointive legislative jobs. In New Jersey, the election law prohibits more than small campaign contributions to legislators, but permits unlimited contributions to the county boss. Either way, the progressive reform of 1913 has not had much progressive effect. One thing is very certain. When the method of selection of the state's U.S. Senator is left to the legislature, the resulting Senator is pretty certain to be a current member of the Legislature. And in the instant you aspire to being U.S. Senator, it becomes very clear you will greatly enhance your chances if you first run for the legislature. There were once likely to be half a dozen senatorial aspirants within the Legislature at any one time, so there was an appreciable improvement in the quality of the Legislatures. True, there was probably more grand-standing and maybe even vote-swapping in return for assistance on the Senatorial seat selection. But there was also much more attention paid in return to the state's interests, by the U.S. Senate. The state's voice on the national scene was considerably louder. The value of a legislative seat, and the later experience it provided, were much enhanced by possessing the power of selecting a U.S. Senator..

A measured assessment of the effects of the Seventeenth Amendment is long overdue. My own view is that ripping the selection process away from the state legislatures and substituting a second popularly elected national legislative house, was both an over-reaction and a careless gesture without much improvement. Because vested interests have been created, it is now nearly useless to ask the present Congress to study the matter. We have to hope that some rich private citizen will see the need for a serious study of these issues, and both fund the effort as well as leave it alone. If it gets captured by ideologues, it will require a second study, or maybe even a third.

http://www.philadelphia-reflections.com/blog/2216.htm


Two Friends Create the Articles of Confederation

{Letters of a Pennsylvania Farmer}

JOHN Dickinson had been highly critical of England's treatment of its colonies. As early as 1768 he had written a book called Letters of a Pennsylvania Farmer which is credited with strongly influencing the colonies in the direction of resistance to the British Ministry. When it came time to write the Articles of Confederation, Dickinson was the lawyer selected for the task. His good friend Robert Morris had been less outspoken in opposition to the Ministry's behavior, quite possibly because he was adept at finding work-arounds for his own personal business problems. But possibly he was merely maintaining an ambiguous negotiating posture, since in a hotly contested election with this as the main issue, Morris was elected by both sides in the argument. When July 4, 1776 forced the issue both Dickinson and Morris had refused to sign the Declaration, but within a few months both of them were actively fighting for the Rebellion. The truest test of their evolving attitudes might have emerged when Lord North sent the Earl of Carlisle as an emissary after Burgoyne's defeat at Saratoga, offering peace with a sort of commonwealth status for the colonies. Not much is written about this curious episode, leaving it unclear whether the British were serious, and even if they were, whether the Americans understood the offer as serious. On the surface, the British offer conceded taxation with representation as the rebellion had been demanding. But it was rejected by Gouverneur Morris acting for -- whom, remains unclear. It seems possible the British were exploring the true feelings of people like Dickinson and Robert Morris, but were disappointed. The earlier treatment of Ireland after it had agreed to a similar half-hearted autonomy did leave British sincerity in legitimate doubt.

{The thirteen colonies}
Thirteen

The thirteen colonies had united to fight the British King, but many of them were reluctant to unite for any other time or purpose. Rhode Island was perhaps the extreme example of this view of what Independence was supposed to mean, but the feeling existed to some degree in many colonies. Concern for the power of this feeling of tentativeness may have contributed an important reason the Articles placed heavy emphasis on declaring the document to represent a perpetual arrangement. Recognition of the weakness of this intent may have been an important reason why George Washington was later willing to sweep the issue aside, even though he of all people was most concerned to avoid the appearance of acting like an arbitrary king. For these and other reasons mainly revolving around state boundary disputes, the Articles remained unratified for years. Finally, in 1781 Robert Morris became convinced that failure to ratify was encouraging the states not to cooperate, and successfully pushed ratification through its steps. At that time, Morris was effectively running the country, even providing his own credit and funds to do it. People were reluctant to oppose his wishes, but they were also unwilling to provide the taxes, supplies and troops that Morris imagined were being blocked by failure to ratify. Ratification of the Articles accomplished very little except to convince Morris: the Articles were flawed and must be replaced with something conferring more central power.

{Constitutional Convention in 1787}
The Goal: 1787

Little is known about the evolution of Constitutional thought in Morris' mind between 1781 and the Constitutional Convention in 1787, although a great deal is known about his other numerous activities. It is clear however, that his experience with the recalcitrant Pennsylvania Legislature had been dismal, while he came to see the one insurmountable flaw in the current Federal government was its inability to levy taxes and consequently, to service national debt. The states were able to levy taxes under the Articles, but erratic in doing so, resorting to paper money inflation at the first sign of tax resistance. In Morris' view the key to effective government was to reverse the situation; let the national government tax, let the states spend. The key to such rearrangement would be to permit the national government to spend on a very limited list of vital purposes, but bedazzle the states with a substantially unlimited shopping list if they thought they could afford it. As the accounts to pay for the Revolutionary War totalled up, it was apparent that the National Government had twice as much debt as the states. Therefore it would at most, need twice the state taxing power to service such a debt; presumably wars would be infrequent and it would be less than that. Pay this one off, and potentially the need for future federal spending would be small. Indeed, under the presidency of James Monroe the national debt was completely paid off, although briefly. It was almost as if Robert Morris and his pupil Alexander Hamilton had a crystal ball.

{The Wealth of Nations in 1776}
Decline and Fall, Anyone?

Robert Morris was brilliant and had six years to fashion his strategy; but he also had some help. For one thing, George Washington lived next door much of that time. By then, almost no one dared confront Washington. Adam Smith had written his book The Wealth of Nations in 1776, and Morris gave this extraordinary work as presents to his friends. Morris had corresponded with Necker, the genius financier of France, and through his good friend Benjamin Franklin, gathered insights from the rather advanced British national finance. And James Madison brought in scholarship about politics and statecraft accumulated by Witherspoon, Hume and the Scottish enlightenment. The year 1776 was a remarkable moment for new ideas. In that year, Edward Gibbon also published the first volume of The History of the Decline and Fall of the Roman Empire. The warning behind that important book had an important impact on the minds of important thinkers of the era, too.

Once you grasped all the central ideas, in this environment the resulting strategy almost worked itself out.

http://www.philadelphia-reflections.com/blog/2226.htm


What Is the Purpose of a National Constitution?

13th Century Magna Carta

NATIONAL constitutions are mainly an outgrowth of the 18th Century Enlightenment, even though similar features are to be found among ancient legal codes. Those who trace the origins of the American constitution to the 13th Century Magna Carta will usually point to a central sentence of clause 39:

No free man shall be arrested, or imprisoned, or deprived of his property, or outlawed, or exiled, or in any way destroyed, nor shall we go against him or send against him, unless by legal judgement of his peers, or by the law of the land.

American Constitution

That's a pretty good beginning, a good example of a needed legal principle, but unrecognizeable as what we would today call a Constitution. It states what a government may not do, but does not define the nature of a government which does the job best. Nor do even the many Enlightenment philosophers of government take that final step of outlining where their notions should take us, until the American Constitution had been written and defended in the Federalist papers. Nowhere among the writings of Montesquieu (The Spirit of the Laws, 1748), Catherine the Great (Nakaz, Instructions to the All-Russian Legislative Commission, 1767), Diderot (Observations About Nakaz, 1774), James Madison (1787), John Dickinson(1763) or Gouverneur Morris(1787) can there be found much tightly described definition of a constitution. Certainly there is no definition within the writings of Adam Smith, if we look for rule-making among Enlightenment thinkers whose ideas were influential on the 1787 Philadelphia document. The American constitution was the product of many minds, before and after 1787. The outlines of its final form converged, and emerged, from the Constitutional Convention of the summer of 1787, with Gouverneur Morris as the penman of record. To him we certainly owe its succinctness, which is a main source of affection for the document. That probably understates matters; in his diary of the secret meetings, James Madison records that Gouverneur Morris rose to speak about 170 times, more than any other delegate. Lots of thought and debate; ultimately, few words.

{William Bingham class=}
Sir Francis Bacon

The Elizabethan Sir Francis Bacon has the greatest claim on devising a theory of law and law-making in the Anglosphere tradition. But his elegant modification of Galileo's scientific method, the English Common Law, is more a methodology for creating good laws than an outline of a nation's legal principles. Anyway, tracing the American Constitution back to an underlying British one tends to stumble when the British Constitution fails to meet a definition which would include our own. The British Constitution is said to be "unwritten" to the degree it is a consensus of revered documents. It can be amended by Parliament at will, has a variable history of defining just who is covered by it, and in order to define constitutional principles seems to rely on sentences extracted from difficult context. If the two constitutions had been written and compared at the same time, one would say the British had sacrificed coherence out of respect for tradition. In fairness, some features of the American constitution are also perhaps unnecessary for every constitution, but by surviving as the oldest constitution of the modern form, have become its model. That would be:

A set of principles governing the legitimacy of a nation's laws, and firmly standing above them. It defines its own domain, geographically and by membership of a defined citizenry. Except as otherwise defined, it supersedes all other governance within its domain. It defines and defends its own origins. It includes a description of how to amend it, which is intentionally infrequent and difficult. It goes on to outline the structure of the laws it regulates, with subtle modifications made to channel the type of power structure which will govern.

In the American case, history and culture generated several other instabilities so central they justified heightening the difficulty to amend them to a Constitutional level, thus conferring undisputed dominance over competing principles of governance. That would be:

A separation of government powers weakened all potentially offending branches of government, and thus enhanced citizen liberty. A separation of church from state, for like purpose. A right of citizens to bear arms, to strengthen citizens' defense against internal or external attack, and perhaps also warning that revolt must be possible, even endorsed, as some final extremity of protection for citizen sovereignty.

{William Bingham class=}
Russia's Catherine the Great

It enhances our comprehension to contrast the outcomes of competing 18th Century implementations of the Constitution idea. Russia's Catherine the Great proposed a constitution steeped in the traditions of the Enlightenment, but ultimately designed to define and strengthen the role of the monarch. Denis Diderot her French protege recoiled at this viewpoint, substituting other views resembling those of Jean Jacob Rousseau. He opened Observations About Nakaz his commentary to the Queen, with the following declaration:

There is no true sovereign except the nation; there can be no true legislator except the people. Whether looking back to the English Civil War, or forward to future disputes between the Executive and Legislative branches, it makes clear the Legislative branch was dominant, with the Executive branch acting as its agent.

{William Bingham class=}
Denis Diderot

With this ringing warcry, the French model nevertheless ushered in the extremes of the Terror, the Guillotine, and the Napoleonic conquests. The consequences of the French constitution undermined world confidence in the benevolence of public opinion, at least deeply confounding those for whom democratic rule was not totally discredited. Once more new life was breathed into allegiance for the monarchy, military rule, and dictatorship. Public opinion, it seemed, was not either invariably benign or comfortably far-seeing. The noble savage, mankind naked of tainted civilization, was not necessarily wise or worthy of trust. Edward Gibbons, the 1776 author of The Decline and Fall of the Roman Empire was pointing out where it all might lead, if we completely believed in the collective goodness of the human condition. At the least, the failure of the French Revolution complimented the viewpoint of the Scottish philosopher, Adam Smith, who also in 1776 emphatically urged a switch in that reliance toward a sense of enlightened self-interest, as follows:

It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.

{William Bingham class=}
Terror, the Guillotine,

It is not surprising that Diderot rejected the Leibniz view of things that "All is for the best, in this best of all possible worlds." And, in view of his dependence on Catherine, not surprising he did not publish his rejection of it until 1823. Thomas Jefferson was in France as ambassador during the time of the American Constitutional Convention, fearing to confront George Washington; and likewise keeping his conflicting views private for several years. Eventually they surfaced in the creation of an anti-Federalist political party along with the conflicts which kept the new nation in a turmoil for the following forty years. It is surely a testimony to the strength of the Constitution's design that the country was able to shift between such extreme governing philosophies but still hold together without changing the governing statement of purpose. Indeed, it is plausible to contend that our two political parties still continuously debate the useful tension between these two differing opinions.

http://www.philadelphia-reflections.com/blog/2231.htm


Sanctity of Contracts

{Constitution}
Constitution

THERE is little doubt many state legislatures behaved in a capricious and high-handed way in the twenty years prior to the 1787 Constitution. Outrage at this behavior was one of the important stimulants to writing the Constitution, as well as putting public pressure on state legislatures to ratify it in 1788. Section 10 of Article 1 is devoted to limitations on state behavior deemed to be generally offensive or otherwise contrary to national interest. Among the comparatively short list of absolute prohibitions is found "No state shall......,pass any law.....impairing the obligation of contracts, or grant any title of nobility." This section condemns certain behavior as indefensible, but does not specify the Federal government to be similarly limited, along with the states. However, the government which was established was one of limited federal powers. Unless a power was specifically granted to the Federal government, the Tenth Amendment announces it belongs to the states, or, as the Ninth Amendment would have it, to the people. There seemed no need to limit the scope of a power which could not exist. The Tenth and final Amendment in the Bill of Rights ended the 1791 Constitution with the words:

X. The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the States respectively, or to the people.

A modern capsulation might be: the Federal Government is no more empowered to impair the sanctity of contracts, than it is to grant titles of nobility.

The Framers of the Constitution were inexperienced in the habits of a republic, or they might have anticipated the general tendency of those who are empowered to enforce the law, to flout it in their own behavior. Around the smallest courthouse in the nation, one need not be surprised to find the Sheriff or other local worthies, parking their cars in illegal spots without fear of punishment. It is not just state legislatures who are tempted to disobey the laws they pass, but a general tendency of all authority to do so. It requires a local citizenry with a very short fuse, displaying instant hostility to the first sign of this sort of swaggering, to keep their local newspapers from filling up with scandal stories in the weeks before an election. Many of these stories are politically motivated, of course, but it must be admitted that in a naughty world, they are necessary.

{top quote}

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress. No State shall, without the Consent of Congress, lay any duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.

{bottom quote}
Article One, Section 10
Perhaps the framers did anticipate that the new government they created would behave in a self-exempting way; certainly the Eighteenth century antiFederalist party carried that expectation so far they opposed creating much government at all, and the modern Tea Party definitely looks for smaller government. No doubt, neither of them will ever be shocked to find courthouse employees parking illegally near the courthouse, but they restrain their irritation to use it for larger targets.

A 21st Century illustration is found in a letter sent to current beneficiaries of Social Security, reducing their monthly check by twenty or more percent in some cases, and in other cases just a few dollars. The notice says that this deduction is based on IRS reports of the individual's income, using material supplied by the Internal Revenue Service, thereby triggering an additional side question about the right of the government to use supposedly private information to impair the obligation of the Social Security contract. Setting the privacy issue aside, what is illustrated is an even more discouraging violation of the expectations for fair dealing. This is a privacy right which might have been enforced by excruciating repetition of the time-consuming requirement of manual specification. Now that computers are more common, what formerly needed no specification, now perhaps begins to need it, since endless repetition is now so tediously conventional.

Governments casually violate the sanctity of contracts when it is self-serving to do so, and presumably it can be shown that they neglect to violate, or even punish those who violate, whenever such violations are to the advantage of anyone else. It has been said that this matter has been adjudicated in favor of the government in the past, thus creating a precedent, stare decisis, so to speak. Whatever the logic of such precedents, growing Constitutional literacy among the public is going to demand that the matter be re-argued. That is to say, it is comparatively easy to imagine growing knowledge about the Constitution among the citizens, while it will never be easy to expect the public to puzzle through the steps in a judicial chain which explicates how the reverse is now a superior view. Therefore, the demand for re-argument should be a growing one.

http://www.philadelphia-reflections.com/blog/2377.htm


Implicit Powers of the Federal Government

{James Madison}
James Madison

The two highest achievements of James Madison, had been and still remain, the writing of the Bill of Rights, and acting as close collaborator with George Washington in fleshing out the role of the President in the new government. The Ninth and Tenth Amendments made it clear that the federal government was to be constrained to a limited and enumerated set of powers, while all other activities belonged to the states. This was already clear enough in the main text of the Constitution, which Madison also dominated after close consultation with Washington before the Constitutional Convention. So he had battled and successfully negotiated one matter twice, before the most powerful and distinguished assemblies in the nation. As to the second matter, circumstances had promoted a shy young bookworm into the role of preceptor to the most famous man in America. In the earliest days of the new republic, certainly during the first year of it, Washington and Madison worked closely together in defining the role of the Presidency.

{George Washington}
George Washington

During the first weeks of that exploratory period, Washington induced Congress to create a cabinet and the first four cabinet positions, even though the Constitution did not mention cabinets. It all was explained as an "implicit power", inherently necessary for the functioning of the Executive branch. Soon afterward, Alexander Hamilton as Secretary of the Treasury proposed the creation of a national bank. Madison and his lifelong friend Thomas Jefferson were bitterly opposed, using the argument that creating banks was not one of the enumerated powers granted by the Constitution. Hamilton's reply was that creating a bank was an "implicit power", since it was necessary for running the federal government. Of course, Hamilton and Jefferson both had other unspoken motives for their position: for and against promoting urban vs. rural power, for and against industrialization of the national economy, and dominating the states in matters of currency and financial leadership. It empowered a national rather than a confederated economy.

{Alexander Hamilton}
Alexander Hamilton

For Madison, the legalism probably carried considerably more weight than it did for Jefferson and Hamilton, because it demonstrated the enduring consequences of being vague about the boundaries of any constitutional restriction. If this loophole got firmly established, it might reduce the whole federal system to a laughingstock. In order to promote the "general welfare", anything at all could be called an implicit power, and both separation of powers and enumerating federal powers would soon become quaint flourishes. The whole Constitution might fall apart in endless debates. On a personal level, Madison's highest achievements would have to be supplanted by something more practical. Besides which, Madison was a Virginian, a rich slave-holding farmer, and a young politician, seemingly on the verge of a promising career which might easily lead to the presidency for himself. Hamilton his most visible opponent, was already proposing a tax on whiskey which would almost surely antagonize farmers to the west, and assuming the Revolutionary debts of the states was equally divisive.

{Mt. Vernon}
Mt. Vernon

As matters eventually worked out, the main disputants made ostensible constitutional arguments, while the real political dispute would be settled by a political deal struck at a dinner. It traded relocation of the national capital to Virginia, for assumption of the debts of all states (when Virginia had already paid off its debt.) Location of the capitol opposite George Washington's home at Mt. Vernon also took care of difficulties coming from that direction. By the time the uproar about this arrangement subsided, the precedent for settling the inherent conflict between enforcing Constitutional limitations versus enlarging their boundaries, had been set. The most opportune time for stricter interpretation was fading while the most likely advocates of it were restrained by their own example. The negotiation was a little unseemly, and probably encouraged similar decisions to migrate to a less conflicted body, which eventually John Marshall would define as the U.S. Supreme Court.

http://www.philadelphia-reflections.com/blog/2414.htm


John Marshall Decides Three Cases

{Chief Justice John Marshall}
Chief Justice John Marshall

John Marshall, taking sixteen years to do it, transformed the Constitution internally into the cornerstone of the Rule of Law, making the legal profession its guardian. Nine respected justices now essentially hold lifetime appointments as bodyguards of the structure Marshall designed, with all lawyers acting as lesser officers. Nevertheless, four personal things are important to remember. Marshall had been a Revolutionary soldier, he wrote a five-volume biography of George Washington, he positively hated his first cousin Thomas Jefferson. And his thirty-five year tenure as the third Chief Justice of the U.S. Supreme Court coincided with some of the dirtiest national politics the nation has ever seen. Marshall's enthronement of Chief Justice control of the federal courts was tolerated because it promoted them both to national power. And when this tough politician had earned the loyalty of both the court system and the legal profession to himself, he transformed the image of the Constitution from a contract between the states into an American Bible for the Rule of Law. Incidentally, he could beat anyone at horse shoes, a game requiring a winner to be both strong and precise. Much of his achievement grows out of three pivotal Supreme Court cases, which today might just at well be regarded as amendments to the Constitution.

{top quote}
In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the supreme Court shall have appellate Jurisdiction {bottom quote}
Article 3, Section 2.3

Marbury v Madison (1803). The first of Marshall's three cornerstone cases involved the Chief Justice himself. After being defeated for reelection to the Presidency in 1800 by Thomas Jefferson, President John Adams hastened to fill up remaining judicial vacancies before Jefferson his successor could be inaugurated, in a maneuver described as "appointing midnight judges". In a sense, Marshall's appointment as Chief Justice had also been in anticipation of the coming eviction of Federalist office holders, so he was himself more or less a midnight judge, destined to become by many years the last Federalist to survive in office. In any event, he was Adams' Secretary of State, soon to be replaced by James Madison, who would then assume the duty to deliver judicial appointment papers to new judges. Marshall was an impassioned Federalist, bitter about the defeat of his party, nursing personal hatred for Jefferson after years of family differences. To say he had a conflict of interest is not only to brush hurriedly by the issue, but also to dramatize what loose judicial standards prevailed at the beginning of his three-decade tenure as Chief Justice.

Appointment papers for the midnight judges were completed and lying on the desk of the Secretary of State, when the Presidency changed hands from Adams to Jefferson. Had he known what was coming, Secretary of State Marshall would surely have hastened to deliver the papers, but he had not done so. His successor as Secretary of State, James Madison, on the orders from Jefferson, refused to do it, so Marbury sued for a writ of mandamus, or order from a court to deliver the documents. By this time, Marshall was in a new role of presiding over the Supreme Court, fearful to attack Jefferson head on, but nevertheless eager to command the most humiliating obedience from him. Using the technicality (actually, the plain language of the Constitution) that the request was made to the wrong court, mandamus was rejected by Marshall. However, he went on to say in a judicial aside (obiter dictum) that if the writ request had come to the U.S. Supreme Court properly , the Court would have approved it. Thus, in one dazzling maneuver at the beginning of his term, Marshall simultaneously asserted the Court's right to review Presidential and Legislative actions, reproved Jefferson for his ignorant conduct, and boxed him into submission by seemingly letting him win a minor case, but one he could be sure would soon have been followed by major ones if the President somehow evaded this decision. Furthermore, he dazzled the legal profession with this tap-dance, guaranteeing their applause by greatly enhancing the status of judges within the Republic, especially compared with the President. And, it should be mentioned, he suppressed public outcry by performing this set of actions in full public view, cloaked within incomprehensible legal garments. The public could see he had done something important, which only lawyers would completely understand. Marshall plainly began his term by demonstrating the full meaning of the rule of law, and his own position astride that law. The main point was that when ordinary judges include offhand commentary in a decision, it might be ignored. But when the Chief Justice of the United States speaking for the majority of his court, makes a legal observation, it would be a brave lawyer indeed who would bring an action in conflict with it. And as for the President and Legislature, Marbury v Madison had also just brushed them aside. It was all done properly, using civil language but deadly logic.

{The United Nations}
The United States

Martin v Hunter's Lessee (1816). This case might be a little more understandable if retitled as "The Heirs of Lord Fairfax v Fairfax County, Virginia". A Virginia law permitting seizure of Tory property, written decades before the Constitution, asserted its precedence to Federal Law, and therefore its precedence over Federal Law. (To this day, Virginia never quite forgets it was once the largest, richest state, founded nearly two centuries before the Constitution.) Like Marbury v Madison, the case is clouded by Marshall's personal involvement, since the Chief Justice had signed a contract with Martin to buy the land himself. This impairment to the case's claim to legal cornerstone status is not entirely annulled by Marshall recusing himself, turning authorship of the opinion over to his faithful disciple Justice Story. Furthermore, judicial establishment of the principle that an international Treaty (in this case, the Jay Treaty) takes precedence over an Act of Congress is one the nation may still some day come to regret, if movements for "International human rights" and "universal international law" continue to gain popular traction. Such movements are numerous, including international law for the conduct of wars, and the universal Law of the Sea.

The United Nations might now be more of a force if they had not stumbled over the franchise of hundreds of nations, each given an equal vote. To expect the major nations of the Security Council to obey the single-vote mandates of dozens of small African nations is to agree in advance that the UN must be disregarded. Nevertheless, Martin v Hunter's Lessee did eliminate an escape route from Supreme Court domestic domination which might have proved troublesome in Civil War nullification disputes, or in legal cases for which national uniformity is important. On appeal, the Supreme Court finally declared its absolute supremacy over State courts as a general matter, clarifying a number of legal loose threads which had been keeping the precedence issue alive.

McCullough v Maryland 1819) The facts of this case seem considerably simpler than Marshall's long and thundering opinion of them. Indeed, the opinion sounds more like an oration on the meaning of the Constitution, or an enraged obiter dictum , than a terse opinion that the State of Maryland's legislature had passed an unconstitutional law. His remarks are indeed an exposition on the general thrust of the Constitution, foreshadowing many disputes leading up to the Civil War. In effect it began to make it clear to the slave states that their states-rights viewpoints might conceivably be upheld on a battlefield, but never in a Courtroom. It is thus an opinion which every law student should read several times, and every citizen would profit from reading at least once. At Gettysburg Abraham Lincoln was to restate the principles in concise, even poetic, language. But long before that, Marshall had stood upon a legal mountain, declaiming them in thundering detail.

{top quote}
The Congress shall have power---To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof. {bottom quote}
Article 1, Section 8, clause 18

The United States Congress had chartered the Second Bank of the United States in 1816, which then established a Baltimore branch in 1818. There was a national financial panic in 1818, which probably hastened local bank lobbyists to the Maryland Legislature, looking for relief from unwanted federal competition. Maryland passed a law imposing a fairly high state tax on the operations of the new federal bank. McCullough, the cashier of the federal branch bank, refused to pay the tax. On appeal, McCullough maintained the tax was unconstitutional, and the U.S. Supreme Court upheld him, ordering the opinions of the Maryland courts to be reversed. John Marshall wrote the opinion, and took the occasion to set forth his views on constitutionality. Point by point, by point.

What it meant, the old Federalist in a sense intoned, was the states had lost power at the Constitutional Convention, and were not going to get it back. The founding fathers, and George Washington in particular, had been uneasy about accusations they had gone beyond their mandate in even calling the Philadelphia Convention. The Articles of Confederation had declared its own provisions to be "perpetual", and the states had previously bound themselves to that. True, the Confederation Congress had authorized a study of how to improve the Articles, but it had never gone so far as to suggest the Philadelphia Convention toss them out.

When the Philadelphia Convention was finishing up its work, Gouverneur Morris had written a preamble beginning with "We the People" in order to assert that its authorization came from the people and not from the governments directly confederated under the Articles, which was true. The ratification process was carefully steered into language which asked for ratification by the people, acting by states, and from which elected state officers were excluded. The state ratification conventions heard considerable concern about legitimacy voiced by those who probably really disapproved of one feature or another. But overall it was more importantly true that the people at the ratification conventions gradually grew intrigued by the mechanics of self-rule, and appreciative of the depth of thought they could see the founders had displayed. By the time the necessary number of states had ratified, public enthusiasm was genuine, while the opposition was squelched into silence or else indirection of speech. Legitimate opposition was acknowledged by specifying that ratification was conditional upon adoption of a Bill of Rights. Finally, after the new government was subsequently tested by wars and near-wars, pratfalls and triumphs interspersed, the opposition was not only widely judged to have had its say, but its own chance to stumble. After nearly three decades of this, Marshall seems to have decided it was time to lay down the law. All of that is behind us, he said in effect state governments have knuckled under, and the Constitution is indeed triumphant. It was time to snuff out the grumbling and the scheming, and to declare invalid any future attempts at evasion.

Constitutional compromise had confined federal power to a few defined activities and whatever else was proper and necessary within those powers. It did not limit Congress to "absolutely" necessary and "absolutely" proper actions which might heedlessly confine such limited powers to awkward and inefficient behavior. Rather, the Constitution identified areas of power where the two types of government were best suited, expecting them to do their best without hampering each other with turf battles. If Congress decided that banks, or chartered corporations, were desirable means of promoting commerce which had been left unspecified in the Constitution, states could not for that reason alone interfere with federal use of them. States could charter any corporations and banks they pleased, and the federal government could do the same, but only if necessary and proper. There were many other features left unspecified, proper enough for the states to do, but which the federal government might also do -- when necessary and proper to implement its enumerated powers. It was, in short, improper for states to interfere with what was desirable for the national government to do, unless the Constitution prohibited it. And the U.S. Supreme Court would be there to decide close cases.

In particular, the states were not to undermine the federal government in the legitimate pursuit of its enumerated powers. Of the strategies available, taxation was particularly vexing, since the difference between a fair tax and a burdensome one can be a matter of opinion. Ultimately, the power to tax is the power to destroy, and it would be better not to have the states taxing the national government in its operations, like issuing currency. Exception might be made for traditional state activities like taxing the bank's real estate. But if the states can tax currency operations, they can set any price, taxing anything if they set about to undermine legitimate Federal activities; such hampering was not contemplated at the Philadelphia Convention, and it will not be tolerated by the courts. Legislatures whose sovereignty ends at their state borders, have no right to tax the entire nation which extends beyond those borders. And since state courts must follow state interests and state constitutions, their rulings are subordinate to those of the federal courts, as well.

With the one possible exception of international treaties, all government entities which might challenge the Supreme Court had by now had their noses rubbed in subordination to it. John Marshall went a step further. He even invented a new way to fashion laws which no one at all could challenge: as long as he spoke for the majority, the asides and comments of the Chief Justice in his obiter dicta had become a sort of supreme law.

http://www.philadelphia-reflections.com/blog/2424.htm


George Mason and Triumvirates

{George Mason}
George Mason

George Mason was George Washington's neighbor in Virginia, a good friend and important contributor to the Constitutional Convention, once he got there. There was every reason to think he would be an enthusiastic supporter of the document, but at the end of the Convention, he refused to sign it. Various explanations for his behavior have been offered, but one that might be considered is that he offered a proposal to have the President be replaced by three people, one from the North, one from the South, and one to be drawn from the middle colonies. He was pretty passionate about his idea for a triumvirate, so passionate it rises to the level of a passible explanation for his refusing to sign.

We have not yet been able to define the Power of the Executive; and however moderately some Gentlemen may talk or think upon the subject, I believe there is a general Tendency to a strong Executive and I am inclined to think a strong Executive necessary. If Strong and extensive Power are vested in the Executive, and that Executive consists only of the one Person, the Government will of course degenerate, (for I will call it degeneracy) into a Monarchy-- A Government sop contrary to the Genius of the People, that they will reject even the Appearance of it. I consider the federal Government as in some Measure dissolved by the Meeting of this Convention. Are there no Dangers to be apprehended from procrastinating the time between the breaking up of this Assembly and the adoption of a new System of Government. I dread the Interval. If it should not be brought to an issue in the Course of the first Year, the Consequences may be fatal. Has not the different Parts of this extensive Government, the several States of which it is composed a Right to expect an equal Participation in the Executive, as the best Means of securing an equal Attention to their Interests. Should an Insurrection, a Rebellion or Invasion happen in New Hampshire naturally ascribe any Delay in defending them to such a Circumstance and so vice versa. If the Executive is vested in three Persons, one chosen from the Northern, one from the middle, and one from the Southern States, will it not contribute to quiet the Minds of the People, and convince them that there will be proper attention paid to their respective Concerns? Will not three Men so chosen bring with them, into Office, a more perfect and extensive Knowledge of the real Interests of this great Union? Will not such a Model of Appointment be the most effectual means of preventing Cabals and Intrigues between the Legislature and the Candidates for this Office, especially with those Candidates who from their local Situation, near the seat of the federal Government, will have the greatest Temptations and the greatest Opportunities. Will it not be the most effectual Means of checking and counteracting the aspiring Views of dangerous and ambitious Men, and consequently the best Security for the Stability and Duration of our Government upon the invaluable Principles of Liberty? These Sir, are some of my Motives for preferring an Executive Consisting of three Persons rather than one

{Marc Antony, Lepidus, and Octavius Caesar}
Marc Antony, Lepidus, and Octavius Caesar

The Constitutional Convention has been described as being strongly influenced by the Senate of ancient Rome, and Shakespeare's depiction of it was very popular in the colonies. It therefore seems strange that Mason would be so strongly attracted to a form of government which attended the dissolution of the Roman Senate, and the long reign of Emperors which followed it. The first triumvirate lasted only five years and consisted of Julius Caesar, Pompey and Cassus. With Caesar's move toward the throne, this particular triumvirate did not come out to what would have been the American colonist wishes. The second triumvirate also only lasted five years, consisting of Marc Antony, Lepidus, and Octavius Caesar. Shakespeare tells us in no uncertain terms that did not work out. In both cases, two of the three went to war with each other, but first disposed jointly of the third. Mason does not mention the Roman examples, perhaps because they posed inconvenient outcomes. Perhaps this tobacco farmer was not sufficiently learned about Rome, but it is also possible that he was thinking of the three centuries of Roman history where there was a succession of Emperors, mostly bad ones. During that period, Rome was really ruled by many triumvirates with subordinate absolute powers, specifically denominated. Essentially this was an organized aristocracy and it supposedly worked pretty well. And perhaps George Mason just secretly disliked Washington, or feared tendencies he was close enough to know about. Or maybe six other things. We certainly can be sure the rest of the convention knew some Roman history, and definitely did not want to see either a King or an Aristocracy. No matter how gentle and persuasive, one of their esteemed colleagues might be about it.

http://www.philadelphia-reflections.com/blog/2483.htm


Minimum Wage Fangdoodle

Governor Chris Christie

The November, 2013 elections have been widely accepted to be a spectacular win for New Jersey Governor Chris Christie, suddenly making him a presidential front-runner for 2016. The only other significant election was a close win in the Virginia gubernatorial race for a fund-raising crony of Bill Clinton over the Attorney General who started the Supreme Court Case over Obamacare. In the view of the newsmedia, there were only two elections in this off-year -- a landslide in New Jersey, and a dead heat in Virginia, for Governor.

Well, as a matter of fact, there was also an election in New Jersey for all of the members of the legislature, which means that I was running against the Democratic majority leader in the 6th Legislative District. I got 19,000 votes, but I needed more to win. At least in my family, it was a big event, particularly since no one else in New Jersey contributed a dime to my campaign, and while Governor Christie may have whispered a few encouraging words to me, there was no evidence of his assistance. But you can forget about that, too, because this election was really about the minimum wage.

The first inkling I got that something was up was receiving a sample ballot, three days before the election, where there was a referendum question about the minimum wage that no one had told me about, although it could scarcely have been a secret to get it on the ballot. And secondly, on election day there was scarcely any evidence of campaigning for Democrat candidates except for a few yard signs, but literally dozens of campaign workers poured into the subway stations, handing out great volumes of campaign literature about the minimum wage. Even that went past me unnoticed, because who in the world would vote for a proposal which would increase unemployment during a severe recession? When I expressed the same sentiment to my Democratic friends, I was surprised to discover they all knew about it in advance. In retrospect, that was a fairly good indication that the Internet had selectively urged support of this proposition to the party faithful, but had not said one word in campaigning for it. It won endorsement by a heavy margin, as things soon turned out. What's worse, what had been endorsed by referendum had been to amend the constitution to this effect, automatically indexing it to the cost of living. It's going to be pretty hard to reverse that, since all constitutions have been written to make it very hard to amend them.

Paul Krugman

In the week after election, I notice that several other states have been considering raising the minimum wage. An article appeared on the editorial page of the New York Times arguing that research showed there was no evidence that raising the minimum wage caused unemployment, and a few days later, Paul Krugman had a learned column on the Times editorial page to the effect that smart people all knew there was no reason to expect unemployment from raising the minimum wage, and only the hopelessly ignorant rubes would imagine there was reason to think so. Having spent some time with editorial writers, it seemed pretty evident to me that there was a nationally coordinated effort to convert this into a truism, accepted so widely it would be futile to argue against it. When it is also possible to see the existence of a campaign to impose a maximum wage (and not merely in Switzerland, where it was defeated on a ballot), the trajectory of a rising minimum wage meeting a falling maximum wage easily led to conjectures that what was really afoot was a campaign to take wages out of the marketplace. Or was that really the goal?

Ben Bernanke

For months, the Federal Reserve Chairman has been emphasizing that the Fed must obey two mandates: to maintain price stability and to minimize unemployment. Meanwhile, the dirty little secret among economists has been that unemployment is the main obstacle to inflation in the face of a massive enlargement of the money supply. Unemployment is currently at 7.1% and falling, while the Fed has lifted the veil of "transparency" to reveal it made a promise in double-speak to start selling some of the bonds it issued to combat the recession, when unemployment reaches 6.5%. As time has gone on, Mr. Bernanke has seemed to back away from that promise. He is not so sure that unemployment is a good measure of unemployment, other measures may be a better measure of what we are driving at. He never meant to start selling bonds when unemployment reached 6.5%, he only meant that he might reduce the number he planned to buy. He never meant to make a promise, he only was being transparent about the current thinking of the Board. And anyway, Janet Yellen will take over his job in a month, so you can't very well bind your successor to do anything at all. What's this tap-dancing all about?

Well it simply won't do, to suggest that the Federal Reserve isn't as independent of politics as it pretends to be. But everyone noticed that the stock market had a bad fainting spell when he suggested a few months ago that the Board had been discussing the matter; just imagine what it would do if he actually made a promise to act, let alone actually taking an action. By itself, such an announcement would probably send interest rates on a rise toward normal levels. The stock market mostly anticipates the future, so it would jump ahead of whatever action was taken. Since the United States is now the largest debtor on earth, a rise of interest rates would immediately add huge amounts to the current deficit and the projected national debt. The stock market would almost surely drop, possibly severely, in response to such commotion in the debt markets. And the national economy would certainly feel the deflationary effect of such activity in the financial markets, sending markets even lower. Fear of such a reaction would surely persist longer than the real need for monetary easing, making the resultant inflation even worse than it had to be.

{top quote}
Is it possible the Obama Administration prefers a little extra unemployment, to risking a stock market crash before a coming election? {bottom quote}
Minimum Wage Uproar
And so comes the rumination that perhaps raising the minimum wage has some merit, after all. Under the peculiar circumstances of looming inflation with high unemployment, with the economy unresponsive to huge monetary expansion, with the banks refusing to lend until the economy is deleveraged, perhaps the minimum wage can be raised, briefly and temporarily, without increasing unemployment. Perhaps, that is, the "research" published recently is not the product of some Administration poodle, but actually shows a true effect. Perhaps it remains true that if you raise the price of something (wages), you will get less of it (employment). But any businessman faced with this situation, has a choice. He can either hire fewer hamburger flippers, or he can raise the price of hamburgers. Which one he will choose will depend on whether he has streamlined the efficiency of his workforce as much as he can, or whether he has already raised prices as much as the market will bear. That is, whether there is more "elasticity" in prices, or labor, at that particular moment. And it seems entirely possible that nearing the end of a recession, and the end of monetary expansion, wages may be the more elastic of the two. And so raising the minimum wage may have a counter-intuitive effect of preventing unemployment from falling further, or else he can sustain profitability by raising prices. At some later time, it is equally likely that price resistance may be stronger, and the full force of a mandatory wage increase would again result in increased unemployment. The tricky part would be to guess the proper timing of the end of QE3, using blunted signals. Could it be even remotely possible that the Obama Administration prefers a little extra unemployment, rather than risk precipitating a stock market crash just before a coming election? It's easy to believe the President would go to the stake rather than admit such a thing.

In an era of desperate experimentation with the simultaneous solutions of several problems at once, perhaps the best conservative response to this caper is to seek ways to relax its inflexibility. The political process, particularly the amendment of state constitutions, is a lengthy and cumbersome impediment to agile management of the economy. It is fairly unlikely that a secret springing of a referendum trap can be repeated. The greater risk is that we will know what should be done, but become unable to do it quickly.

http://www.philadelphia-reflections.com/blog/2583.htm



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