Volunteerism has declined in recent years because of conflicting demands made by gainful employment. The spirit of volunteerism has not diminished, it just needs a different business plan.
Securitization of home mortgages is a generally good thing, but it has one major flaw. Unless we somehow fix it, it will fix us.
George Washington was an athlete, a soldier, and an adventurous leader. It is less appreciated that he constructed an aloof public image of himself, cloaking an activist politician, and a rather ambitious real estate developer. We got a new Constitution because he wanted a new constitution.
The rules for succession are not spelled out in the American Constitution, but what is implicit was revolutionary. Once again, credit George Washington.
The Constitution fails us when no one is certain what to do about an important issue.
(1557)
Plans are afoot to rearrange the whole focus of center-city Philadelphia, by merging the transportation network around City Hall, and changing the walking patterns. Dilworth Plaza is in the center of it all.
Asking the cause of the American Revolutionary War may be a little simplistic; civil wars pop up, all over the place, all the time. The more important question to ask, is why did this American Revolution have such a dramatic effect on the whole world?
Some builders build whole towns without houses and then sell them to custom home builders.
Robert Morris has been called all manner of names for appearing to support both England and its rebellious colonies at the same time. Some of the criticism was overwrought, and some merely seems legitimate to those who oppose parts of the U.S. Constitution. He was pretty much in the middle of a public riot, a poor time to raise sophisticated points..
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.
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
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
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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
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| 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.
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| 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
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| 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)
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| 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.
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| 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
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| 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.
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| 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.
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| 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
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| 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.
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| 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.
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| 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
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| 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.
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| 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.
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| 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
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| Concessions and Agreements |
The United States Constitution is a unique achievement, but it had precursors with influence on the thinking of the Founding Fathers. In the days of difficult ocean travel, almost all colonies were bound by some sort of agreement about how they were to maintain loyalty to their European owners in spite of receiving some latitude to govern themselves. Charters and documents defining these roles were generally written by the owners, and the colonists could take them or leave them, that's the way it was going to be. In the case of New Jersey in 1664, however, a very formidable lawyer and friend of the King named William Penn was agreeing 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 to be more wary of nit-pickers in the King's administration, trying to anticipate every conceivable disappointment of some successor King.
For his part, Penn wanted to be able to make colonial land attractive to resell to religious groups who had experienced harsh recent government oppression; he wanted no obstacles to his announcing there would be none of that in New Jersey. Although he hastily rejected any such title, he had been offered the role of sub-king, and needed to repeat the formalities of the Charter to define his role and reassure his settlers. 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, where 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 the his Concessions and Agreements .
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| 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 been 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. 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.
http://www.philadelphia-reflections.com/blog/1512.htm
Vote Counting, Past and Future
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| 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.
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| 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.
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| 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.
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| 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.
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.
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.
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."
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.
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
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| 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?
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| 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.
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| 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 New Constitution
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| 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 may have overdone the image a little, but Washington gave Weems a lot to work with and undoubtedly would have enjoyed 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.
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| 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 capital start to move to the Potomac swamps across from his Mount Vernon mansion, into a city named for him. After he retired from military command with great fanfare and farewells after the Revolution, he returned to private life on this Virginia farm. During the years after the Revolution and before the new Constitution, his attention quickly returned to building canals along the Potomac, deepening it for transportation, and connecting its headwaters over a portage in Pennsylvania to the headwaters of the Monongahela River, hence the Ohio, then the Mississippi, or up the Allegheny to the Great Lakes. He personally owned 40,000 acres along this path to the center of North America. The opportunity for a national constitutional convention grew out of a meeting with Maryland to reach an agreement about this Potomac vision, which was being blocked by commercial interests in Baltimore. Ultimately, Baltimore won the commercial race. It was the Baltimore and Ohio Railroad which captured the commerce to the west. He made deals, ultimately for Baltimore benefit, with the James River interests, to give them their share of the development of Chesapeake Bay trade. As a young man, he had acted as a surveyor for most of this region, and as a young soldier, he had explored the Indian trade to Pittsburgh, actually started the French and Indian War along this trail, later marching it again with Braddock. And all the while, Washington dreamed of the day. There were competitors; Philadelphia and New York had similar aspirations for their own rivers.
Washington at age 54 was already richer than most people need to be; a lot of this Potomac dream was 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 did not result in much 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, which was to be located across the river near Georgetown. Since that didn't work out, he later placed the nation's capital there. His had always been a somewhat bolder dream than merely to be Cincinnatus, citizen soldier returned home to his farm from the wars.
Washington did more or less gave up this Potomac ambition, but for a loftier one. During the Revolution, he suffered the deepest and most infuriating abuse of himself and his soldiers from the state legislatures, whom he grew to hate, as well as the Continental Congress representing state governments in a weak and nearly useless organization that would not feed and pay its own troops. He was a mean man to cross, but somewhere in his complex character Washington possessed the firmest and most sincere belief in the proper subservience of the military to civilian control. These conflicting feelings led to the most earnest and courteous obedience to a group of politicians he surely loathed. This could not have been hypocrisy; he respected their rank even though he suffered from their behavior. When Congress paid the troops in worthless currency they promised to redeem after the war, it became clear that either their 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 promising the troops Congress would stand by them, when he privately doubted any chance of it. Washington did not forgive or forget. This was a paltry result to achieve after eight years of war and suffering; this dishonorable system just had to be improved.
To achieve the change he desired, he went about it in a way which most people would not. 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 Madison for weeks on end about ways and means, opportunities, dangers and potential enemies. A great many people, Patrick Henry in particular, wanted the central government to be as weak and ineffective as possible. John Jay in New York, by contrast, had argued so fervently for revisions of the Constitution that he deserves some mention for originating the idea. Madison was supposed to win over the Virginia legislature, make alliances with other states in congress, identify friends and enemies, make deals. Meanwhile, Washington felt it was useful to remain above and aloof, publicly wavering whether this was all a good idea. There was to be a Constitutional Convention in Philadelphia, but while Washington was invited, he let it be known he was uncertain whether he really should accept the invitation. What he really meant was he would preserve his political credibility for a different approach if this one failed to work out. Meanwhile, young Madison on several occasions came to Mount Vernon for three days at a time to talk strategy and give the General all the scoop.
Madison was a brilliant politician, a dissembler in a different way. 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. But he was also innately skilled in the manipulative 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 really was that Washington's powerful central government was a totally good idea. 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 with any indignation about injustice to the troops, or any disdain for nasty little politicians in the state legislatures. 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 followed Jefferson as President, it became personally useful to modify his viewpoint. What would never change was that he was an artful politician, while Washington by contrast hated, absolutely hated, partisan politics.
This division is not just a difference between two Virginia plantation owners, but an enduring thread running through all elective politics. Washington set the style for generations of citizen leaders in America. In essence, a person of honor distinguishes himself in some way before he enters public office, and on the basis of that reputation plus the radiation of an honorable image, presents himself to voters for public office, is therefore 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, or follow a party line, or join a group who agree to vote as a unit no matter what the merits, and acknowledge the frequent necessity to talk one way and secretly vote 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 will almost always beat 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 started the process, Jefferson organized it and every politician except Adlai Stevenson has openly participated in a version of it. That the Constitution has 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 representative politics was not entirely perfect, either. In order to maintain an image of impartiality, Washington and his imitators isolate themselves in a cloak, holding back their true opinions in a sphinx-like way that hampers 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 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 final reality is that most legislatures must now deal with ten or twenty thousand 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 no one but professional 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, and never resign."
http://www.philadelphia-reflections.com/blog/1538.htm
American Succession
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| 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.
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| 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
CONSTITUTION I : Turning Colonies into States
The prevailing notion of the Constitutional Convention once depicted James Madison, seized with merging the former colonies into a nation, 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 many other patriots were disappointed with the government they had sacrificed to create. Madison had led protests within Congress itself. A generation younger than the General and not at all charismatic, Madison's political effectiveness first came before Washington's attention as a skillful leader of committees and legislatures. Washington was particularly upset by Shay's Rebellion in western Massachusetts, which actually threatened to topple the Massachusetts government, but Shay's frontier disorder was merely an extreme example of more 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 the British were both arming the Indians and agitating them. The innately rebellious Scotch-Irish, the main settlers of the frontier, were threatening to set up their own government if the American one was too feeble to defend them. The Indians for their part were coming to recognize that the former colonies were too weak to keep their promises. With our Army scattered and nursing its own grievances, the sacrifices of eight years of war looked to be in peril. Even Washington's loyal friends were getting out of hand. Not too much earlier, Alexander Hamilton and Robert Morris had cooked up the Newburgh cabal in the hope of provoking a military coup -- and a monarchy. It alarmed Washington that republican government itself was being discredited, leaving only a choice between a King and anarchy. Particularly when he reviewed the shabby behavior seemingly characteristic of state legislatures, something had to be done. Washington decided to set this right, using Madison as his right-hand man. Madison had been to college and could fill in some of the details; Washington only knew he wanted stable government and he did not, he did not, want a king.
Madison was young, vigorous and effective; he had the right perception about the Articles of Confederation as the source of the difficulty; and he was a reasonably close neighbor. After some protracted conversations at Mount Vernon, a plan was devised and put into action. Washington knew he wanted a stronger central government, strong enough to brush aside the quarreling state legislatures and stabilize the new nation, but not so strong as a monarchy or a military dictatorship. There were obviously many other things to be expected from a good central government, but it was not initially useful to pick quarrels about minor things. Madison had read a lot of books, knew about details. These two friendly schemers eventually convinced the country to go along. As things turned out, after a few years several of the issues set aside for later would indeed become seriously troublesome and eventually destroy the friendship between Washington and Madison. Worse still, in seventy years some even deeper issues would provoke a civil war. Even for a century after that, trouble continued to erupt, requiring periodic reconsideration of what powers needed to belong to the states, and what needed to migrate to the federal government.
For immediate purposes, the central problem for the Virginia collaborators was to persuade thirteen state legislatures to give up power for the common good. For this, it would be useful to follow the strategy of convening a Constitutional Convention of newly-selected but eminent delegates, rather than to follow the route of amending the Articles. The amendment approach would directly involve the legislatures in all the preliminary debates and compromises, thus likely failing to surrender enough state power to make a strong nation. The chosen approach was to assemble eminent leaders without political ambitions which would make them unwilling to consent to the loss of local power. Eventual ratification of the final result by the legislatures was unavoidable, but to seek their consent at the end of the process was far preferable. The divided and quarrelsome states would be positioned at a disadvantage in resisting a finished document which had already anticipated and negotiated the main objections, and was the handiwork of a blue-ribbon convention of prominent citizens and heroes. In modern parlance, that is known as framing the debate. 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. Seeing to it that this was going to work was a task for Madison and Hamilton.
While many 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 population districts of equal size, selected directly by popular elections. No appointments by state legislatures, please. However in the convention, it became evident that small states would fear being controlled by large ones through almost any arrangement, but on the other hand small states were particularly anxious to be defended by a strong national army and navy. England, France and Spain were stated to be the main fear, but small states feared big ones, too. Since the Constitutional convention itself voted as states, small states were already in the strongest voting position they could ever expect, and 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 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 retrospectively see that accidentally allowing state legislatures to redraw congressional districts gives them the power to "Gerrymander" election outcomes, and hence restores to the states some of the power Washington and Madison were trying to take away from them. In the 21st Century, New Jersey is an example of a number of states where it can fairly be said that the decennial redistricting of congressional borders accurately predicts the congressional elections for the next ten years. However, the historical irony emerges that Gerrymandering is impossible in the Senate, and hence legislative control over Senators has been weak ever since the 17th Amendment established senatorial election by popular vote. That's eventually the opposite of the result conceded by the Convention, but in accord with the almost certain wishes of the Federalists who dominated it.
This evolving arrangement of the national legislative bodies seemed an improvement over the system for state legislatures, because the Federalists believed corruption was automatically lessened by increasing the size of the legislative body. There were skeptics then as now, and something more was desired to weaken the potential tyranny of the majority always so evident at the state level and in the British parliament. To satisfy this anxiety, some power was redistributed to the executive and judicial branches of government, which were in turn intentionally selected differently. Here is the source of the Electoral College method for election of the President, giving greater weight to the votes of small states (and provoking a ruckus whenever the national popular vote is a close one), while according lifetime appointments to the Judiciary, following selection by the President with the concurrence of the Senate. Without anticipating its emergence, an unexpectedly large bureaucracy has thus come under the control of the executive branch without much of the republicanism so fervently sought by the founders. This may be in general harmony with the Federalist goal of removing patronage from legislature control, but appropriations committee chairmen have since found unofficial ways of asserting power over the bureaucracy. Only in the case of the Defense Department is the 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 had other features. From placing the command under an elected President, emerges a more explicit emphasis on civilian control of the military, further extended by legislative approval of initiating warfare. Unfortunately, there have been many more armed conflicts than "declarations" of war.
And that's about it for what we might call the first phase of the Constitution. There was 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. Phase I of 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 must come very close to 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.
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 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. There are no details; 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 just as emphatically excluded, as is religion as an agent of government. Many failures of governments, past and present, can be traced to irresolution to summon up this degree of emphasis about a principle too absolute to need elaboration.
http://www.philadelphia-reflections.com/blog/1541.htm
Enumerated and Implied Powers
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| George Washington taking oath |
GEORGE Washington wanted a stronger central government to protect the country from enemies foreign and domestic, and he wanted it to be effective and workable; either way, he wanted a country he could be proud of. Eight years of war had taught him that to impose taxes and sacrifices in the national interest, state disunity simply had to be controlled. Following the Revolution, disorganization proved just as hurtful as in times of peace, and unfortunately even more prevalent. But by 1787 Washington also concluded the states would not surrender power unless the people insisted on it. It was up to prominent men in the Constitutional Convention to suggest a list of other advantages of Union. Tell us what good it will do to upset the Confederation. Having proposed the general shape of a central government, tell us what it can do better than the states. And then help rally public support to make the states agree to it. In this sense, blazoning "We , the People" on Philadelphia's Constitution Center is exactly right. But repeating that slogan too emphatically can suggest that the people were encouraged to modify or re-interpret the Constitution whenever they pleased. Here was a bargain that everyone involved was expected to keep. Amendment was provided for, but it was difficult. As would be said in another context, amendment was to be safe, legal, and rare.
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| We The People |
Two small sections, Eight and Nine of Article One, list the separations of state and national sovereignties in very sparing language. The states must avoid using their sovereignty to gain advantage over each other. Defense of the coasts against piracy, and a general postal system are a Federal responsibility. As are open borders between the states, both physical and economic, promoting trade to the advantage of everyone. Uniformity of weights and measures, patents and copyrights, currency and coinage, bankruptcy and naturalization rules permit everyone to aspire to wider and easier markets. Uniform rights unite the various subcultures, so a general prohibition was declared of ex post facto laws and suspension of habeas corpus, degrading the currency, injuring the sanctity of contracts (or by implication injuring all the centuries of legal consensus known as the common law). Everyone knew state legislatures had either ignored or flouted these principles; state interference in these particulars was therefore expressly prohibited. Desirable federal powers were stated in a positive way, and limited to what was stated. However, because there remained doubters even after the Constitution was put into action, the Tenth Amendment was soon added to restate the point:
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.
There were plenty of other negative ways to put all this, but the Constitution said no more than absolutely necessary. Certain powers were essential for a functioning national government, while some few powers would be destructive if the component states exercised them. The framers might have said but did not say: Look at what has happened among the little countries of Europe; that might also happen to us. As Adam Smith had recently warned, avoid economic discriminations against foreigners which are lumped under the heading of Mercantilism; in other words, avoid the use of government power to favor local businesses against competitors outside the political boundaries who therefore have no local influence. Let the several states avoid the expense and nuisance of different coinages, tariffs, licenses and cartels. The inability to assemble parts of manufactures in different jurisdictions, using different rules and regulations, mainly designed to increase prices for the general mass of consumers for the benefit of a few politically well-placed producers, who should enjoy such advantages only if they earn them. In some ways these negative arguments had the greatest persuasive force, because almost everyone could think of some injury inflicted by similar laws. In 1787 it was only recently that our whole nation had suffered from the mercantile rules of Great Britain, who was supposedly a partner with the colonies. Exhortations with this sort of specificity were excluded from the document. Private publications like the Federalist Papers could be more explicit because they were not official parts of the agreement, and thus could be more easily reshaped by the courts. Those who today confine Original Intent to specifics are treading on soft ground.
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| the Constitutional Convention |
It was hard to know where to stop with these arguments. A promise was being made that the nation would prosper with expansions of scale, and in fact it soon did. It was also foreseen that expansion of the right of the federal government to tax would automatically constrict the ability of the states to do so, and in time the state legislatures have been reduced to begging for federal funds. [At the same time, it seems inconceivable that the Constitutional Convention would have condoned the present discordance between the several states in what federal taxes they pay compared with what federal benefits they receive.] The states' inability to levy troops and declare wars has indeed reduced local power to intervene to block hostilities not of local concern. There have been occasions to fear that plebiscites for personal freedom may have sometimes impaired the nation's ability to defend itself. Local gasoline and cigarette tax wars occasionally spring up to exploit differences in state taxation, but in general there remains comparatively little mercantilism at a state level. But regional differences have correspondingly grown, along with the sense of local powerlessness to resist it. The Civil War is only the largest example of a general trend of shifting conflicts into those gaps of jurisdiction unimagined by the framers. Section Eight arguments all rode on the rising tide of the Industrial Revolution; they proved in general to depict correct predictions. But they also persuaded 600,000 young men to die, for or against the Union itself.
http://www.philadelphia-reflections.com/blog/1544.htm
Constitution III, Amendments, Afterthoughts and Rights
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| James Madison |
Out of nearly 12,000 proposed, there have only been 27 successful amendments to the Constitution in two centuries; it's intentionally hard to get one passed. The Federalists wanted no amendment process at all; the anti Federalists wanted repeat conventions in which everything would be on the table for reconsideration. The original document was probably better because of this tension; if it will be hard to change, you had better get it right the first time. And it had better be short and spare. Try to avoid bees in your bonnet.
There will of course have to be some mid-course adjustments, most notoriously the XII Amendment correction of a drafting oversight which had created 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 are depended on to do the right thing. Although philosophical debate continues whether mankind is inherently good or inherently evil, American law assumes that while innocence is presumed, frailty is universal.
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 on 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, therefore, there were voices that the vice-president was intended to remain vice-president but assume 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 difficulty that no succession plan had been provided for the vacant vice-presidential post.
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.
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
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| 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.
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| 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.
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| 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
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| 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.
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| 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
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| 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.
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| 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.
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| 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
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.
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.
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.
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.
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.
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.
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
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| 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
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| 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.
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| 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.
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| 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.
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| 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
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| 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.
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| 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
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| 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. 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, were possibly just as bad. 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 which 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.
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| Free Quaker Meeting House |
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, 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 eventually everyone was going to achieve the same conviction as the Sermon on the Mount. The founders of Quakerism took a chance, here. To assume the same outcome, you would have to assume everyone started with the same instincts and talents; even 21st Century America would have 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. No, that was an arrogant claim. The 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, it was as good as you were going to get.
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.
http://www.philadelphia-reflections.com/blog/1706.htm
Grand Union
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| 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 North 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.
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| "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, they 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 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:
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| 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
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| 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.
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| 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.
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| 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
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| 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.
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| 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.
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| 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.
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| 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.
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| 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.
http://www.philadelphia-reflections.com/blog/1761.htm
William Penn and the Corporate Model
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.
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
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| 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."
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| 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.
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| 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?
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| 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, 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. 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. Relating total income to total tax revenues would be the best way to detect hidden indirect taxes, such as overtaxing utility bills in the knowledge it will be passed on to the consumer. Armed with even partial information, it becomes easier to understand why New Jersey would depose 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, lasting at least two more years. What might emerge from a strong third party congressional delegation is too arcane to discuss.
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 contingency that there will be no law, that there will be a continuation of the present one, or will be a 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
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| Proprietors of West Jersey |
In 1976, the bicentennial birthday celebration of the Declaration of Independence contained two major exhibits of its historical 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.
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| 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 -- There is That of God, in every man.
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| 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
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| 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.
http://www.philadelphia-reflections.com/blog/1802.htm
Three Revolutions at Once, Maybe Four
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| 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.
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| 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
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| 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
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| 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
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| 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.
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| 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.
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| 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.
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| 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
Conflict Within the Bill of Rights
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| 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 a strong central 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 written the Constitution, constituting a committee with Madison as its chairman. The first ten amendments thus emerged together as a package, enabling trade-offs and compromises between them; all subsequent amendments have been taken up individually, one by one. Since 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 ability of the nation to feel its way into a new idea, sometimes retreating and sometimes plunging ahead, has migrated into the hands of 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 duplicates and half-baked ideas were winnowed out, Madison's committee boiled down the wildly disparate proposals into ten amendments, supposedly limited to ten by alluding to Ten Commandments which seemed sufficiently comprehensive to Moses, and presumably to God. Two main principles emerged. The first was that 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. And secondly, granting even these few self-evident rights to slaves would likely tear the Union apart.
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| James Madison |
So, Madison's committee narrowed the legally enforceable definition of human rights to a handful, trying to select those which were so self-evident they could withstand the tension on those charged with enforcing them. When contemplating the problem of extending mandated rights to slaves, however, there was no obvious solution at all. The evasion agreed upon was to limit the Federal Government to enforcing a handful of enumerated powers, while leaving all unspecified matters to the state legislatures. The boundary might shift with time, but without saying so, the Bill of Rights kept the Union out of the main foreseeable trouble. The unmentioned conflict between universal rights and slavery defaulted to the individual states, or whoever, 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 of 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 some more. However, the southern confederation may have been defeated, but it was not exactly reconciled, nor were the former slaves exactly equalized.
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| 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 control. Repairing the resulting imbalance in our overall system is now growing to be one of our greatest problems.
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 in this case made each other worse.
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| 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 dissentions and disunity of enduring that 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 and there has been 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 extension of federal power continues, now threatening to extend to the medical profession, the finance industry, the automobile industry, and the Internet. But 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 many other nations fail to achieve its essential quality. Which is, it survives.
http://www.philadelphia-reflections.com/blog/1820.htm
Restoring the Gold Standard by Levering Judges' Salaries
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
Checks and Balances (??)
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| 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 dictatorial central power, never. Pursuing many good ideas then turned out to be surprisingly more productive than marching single file, so the nation rallied behind the governing document which laid out what the plan is, and has loved it ever since. It is unrealistic however to expect a wind-up toy to keep working forever, and the Constitution is no different. After two centuries, some chinks have appeared, and in particular the recent behavior of the 111th Congress has revived some old worries about authoritarian leadership.
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| Founding Fathers |
Political parties existed in 18th Century England and Europe, but the founding fathers seem not to have worried about them much. Within ten years, however, Thomas Jefferson had created a really partisan party which provoked the creation of its partisan opposite. James Madison was slowly won over, but George Washington never budged. Although they were 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, and then Franklin Roosevelt attempted to centralize government considerably more than the U.S. Supreme Court would permit. Because the issue of states rights versus federal power was often mixed with the more primary issue of individual personal and economic liberty, Abraham Lincoln, Theodore Roosevelt, John Kennedy and Lyndon Johnson must be included among the leaders who moved the original standards of personal freedom considerably back toward a position that George III might have accepted. Fine points of this history are not important to the present concern, which focuses more on the accumulated small changes which bring us to our present position. Wars and economic crises induced several presidents, nearly as many Republicans as Democrats, to consent to a migration 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 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; every hotel in the country treats new arrivals with greater deference. Rather, the slight is an intentional warning from the true masters of power to bumptious new egotists, that they will get nothing in the new environment unless they earn it. Not a bad idea? This schoolyard bullying is a very bad idea.
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| Houses of Congress |
Partisan politics begins with vote-swapping, and evolves into a system of bestowing the votes of the members on their party leaders, and ultimately amounts to 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 leader among the old timers takes the considerable trouble to 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 reason of training unfamiliar newcomers in obscure topics, and for the very bad reason of concentrating power in "safe" districts where political parties are able to exercise iron control of the nominating primaries. 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 results of the redistricting. The rules for selecting the 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.
So that's how the "Will of Congress" is supposed to work; the recent process can be far less laudatory, and in fact calls into question the whole idea of balance of power between the three branches of government. We here concentrate on the Health Reform Bill and the Financial Reform Bill, 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 subject to judicial review, so the U.S> Supreme Court is not yet encumbered with stare decisis of its own creation.
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| 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. 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 seems quite 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 both houses of Congress had to sign their names as responsible for approving it. Because of the relatively new phenomenon of national televising of the whole 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 disciplines 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 little doubt of its impending failure if the corruptions of politics could have 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.
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| 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 badly enough to throttle. 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.
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| 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 a single word. Justice Sutherland recognized that although it is impractical to waver from the principle that ignorance of the law is no excuse, it is often 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 well be 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, and it only makes the injury worse by allowing the Executive Branch to diminish the vagueness (through corrective regulation) in its own preferred direction.
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 assessmment 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 surrendeed 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
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| James Madison |
Everyone might profit from reading Plato on the subject of republics, not to mention reading James Madison. But 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 good 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.
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| 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 legislatures of the states they came from. 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.
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| 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.
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| 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.
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| 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.
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| 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
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| Washington's Circular Letters |
Once Cornwallis surrendered to Washington at Yorktown, there emerged the usual reluctance of troops on both sides to get killed for a cause that was already settled. The British monarchy had experience with wars, and fully expected to exploit this trait of exhausted soldiers at the end of a long war. The colonies could neither be reconciled nor forcibly subdued, that was clear enough. What was not clear was how much national advantage might still be extracted from a peace conference, by bluffs and intransigence. Diplomats are long 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. More than that, however, it seems to be a peculiarly American trait to quit before the last card is played. During the Nineteenth century, resisting that 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 brave and effective. Benedict Arnold had seemed like a perfect soldier, but had turned traitor at West Point. 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. Individual 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 it is almost impossible to identify them. They all must have been somewhat complicit, or we would have heard of 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 to assure his troops help was forthcoming. The inevitable disillusionment discredited him more than the Governors who put him in that position. The British troops surely shared the reluctance to get killed for war that was over. They partied and roistered in New York, but who knows what general in London might order a sudden attack on Washington at Newburgh, just to make overall defeat seem less humiliating.
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| 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 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 each other.
And then he made a mistake. As a way of proving his sincerity, his lack of personal motive, he announced in advance that he was 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 mean it. 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 at least needed Alexander Hamilton to handle a peaceful economy. But there was no running away from it; he discovered how much he overshadowed anyone else in demeanor, and so, how no one else would be able to persuade the others to cooperate. Franklin perhaps knew 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 threatening 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 Good Idea
 Without proof of special damages or reference to extrinsic circumstances 
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| Per Se |
Lawyers have a word for it, as they 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.
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| 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.
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which prohibits "every contract, combination … or conspiracy, in restraint of trade
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| 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
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| 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.
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| 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.
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| 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.
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| 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
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| 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.
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| 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
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| Richard Henry Lee |
Something can of course be learned by asking a man's friends, but descriptions given by his enemies are usually briefer. The Lee family of Westmoreland County Virginia were bitter enemies of Robert Morris the Financier of the Revolution, and they surely said unfair things about him. Morris paid as little attention to the Lees as possible, but for generations the Lees had been neighbors of the Washingtons, and could not be brushed aside. Furthermore, they were close to the center of Thomas Jefferson's anti-Federalist party. So insights into the Lee family probably illuminate the main disputes before, during, and after the Revolution. They even illuminate the mixed character of George Washington, who was sometimes exceptional by Virginia standards. Nevertheless, there was the same quality of heedless idealism to be found in Samuel Adams of Massachusetts and Patrick Henry of Virginia which goes beyond the ability of two-feet-on-the-ground revolutionaries like Robert Morris and Benjamin Franklin to understand, or even abide; this conflict runs throughout the history of the American founding. It seemed to baffle even those who switched positions, like James Madison going in one direction, and Thomas Paine, going the other. So, although it therefore cannot be an inborn character, it must quickly acquire very deep roots.
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| Arthur Lee |
Arthur Lee and his brothers William and Richard Henry Lee of Virginia, were passionate rebels of the Patrick Henry ("Give me liberty or give me death") sort, conducting lifelong attacks on Robert Morris. Highborn Tidewater aristocrats, they were ancestors of Virginia's revered General Robert E. Lee. Arthur had even attended Eton College and later studied medicine in England. The Lee brothers started attacking Robert Morris well before his famous abstention from the critical 1776 vote on independence. It's much too easy to shrug the Lees off as landed aristocrats who disdained self-made men, or as passionate Jacobins who hated rich people, or maybe just narrow-minded nuts. Out of their often inaccurate attacks emerges an outline of what a lot of other people thought about Robert Morris. Many of these polar mind-sets outline the main divisions of political strife in America right up to the present. For present purposes, let's try to understand why Morris might risk his substantial fortune in underground smuggling before the war, and then dedicate his huge energies to winning the war -- while at the same time, not only refuse to agree to the Declaration of Independence (he did finally sign it in August 1776), but speak out in public opposition to independence. What explains Morris' apparent double-talk?
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| Robert Morris Signature |
The explanation I choose to accept is that Robert Morris' real feelings were too sophisticated for this particular crisis, reaching clearer expression in his later activities promoting the Articles of Confederation and its revision the United States Constitution. A man given to terse one-liners, Morris said in December 1775 that he joined his fellow Americans in striving for "Constitutional Liberty" but could not join them in promoting independence.
Morris was never explicit about what would achieve Liberty without Independence; possibly something like the independent Irish parliament which English Whigs then supported, or the Scottish local parliament which exists today. Both of them link a single King to a commonwealth. At the time, no one was interested in the political philosophy of a shipping merchant.
But today we are in a position to see no member nation of the British Commonwealth has a written constitution; written constitutions are a comparatively recent innovation and not necessarily an essential one. The American Constitution today continues to argue about original intent and living documents, so it is still possible to prefer the wisdom of a benign King to written constitutions. The British goal seems to be to infuse overarching principles of government so deeply into citizen minds that such principles overwhelm any written commandments, however vague all that may sound to outsiders who prefer to niggle over documents. Not in America, of course, because an immigrant nation like ours cannot grow cultural roots sufficiently deep in a few generations, and must have written rules. Great Britain's recent difficulties with immigrants from the Commonwealth may well reassert the limits of unwritten constitutions; constant questioning of the written American constitution by more recent immigrant groups may become a part of the British life, too.
The Articles of Confederation were written by the eminent lawyer John Dickinson, said to be the man closest to sharing Robert Morris' political philosophy. However, for five years the Articles were un ratified, and Morris began to believe this lack of ratification was the reason the states were so resistant to taxation. So Dickinson gets credit for writing the Articles, but Morris must be seen as their father. Believing the lack of federal taxation was the main difficulty, and blaming the unratified Articles as the reason for it, our businessman man-of-action pushed them through. Unfortunately, with the Articles it didn't work because the taxation problem still remained, so Morris turned his immense energies toward replacing the Articles with something which would work. It does not twist American history a great deal to believe that Robert Morris, Jr. was one of the main driving forces behind both the Articles of Confederation, and the Constitution of the United States. He was neither a lawyer nor a political scientist, and therefore was quite indifferent to who got credit for the documents. As Ronald Reagan was to discover two centuries later, that's one of the best ways to get anything done.
Morris could read; he knew the Articles didn't endorse Federal taxation. But he was apparently convinced an unwritten constitution always contains the latitude to do what simply has to be done; anything else amounts to shooting yourself in the foot. After the Battle of Trenton, when Morris became President of the United States for three months in everything except name, he still blamed his troubles on the inability to levy taxes, which in turn was due to failure of the states to ratify those Articles. So sensible a man as John Dickinson would never assume overly strict interpretation was intended; obviously, a state must confiscate private property when otherwise it cannot survive. After five years of state inaction, Morris abruptly pushed the Articles through to ratification. But he was wrong, it didn't help. When he finally grasped that the explicit limitations on taxation were intentional, intended to override any implicit power in the Articles whatever, he promptly threw his weight behind John Jay, George Washington and James Madison to support a new Constitutional Convention setting it right, especially the national government's ability to levy taxes. Since Washington had by then become his best friend, who actually lived next door in Morris' Market Street house for years, there is not much paper trail of this interaction between these old friends. Once he got his tax mandate at the Convention however, Morris had hardly anything further to say. His frenetic later activity immediately after the Constitution was enacted can almost surely be attributed to lifelong habits of a negotiator, avoiding mention of anything which might distract from his main goal, in this case of ratifying the Congressional right to levy federal taxes, but not abandoning subordinate goals for a moment. What the Lees hated about Morris therefore cannot be easily explained, but certainly one feature of it was his ability to hold his cards. The Lees didn't hold their cards, they flourished them. In their eyes, no gentleman would do anything else.
The incidents of June, 1776 place the Lees in a more favorable light if they are seen as urging instinctive decisions by popular mandate, essentially favoring an unwritten British Constitutional arrangement. The Lees believed the place of a gentleman was at the head of a troop, daring the rest to follow their lead. The British had blockaded Boston, passed the Prohibitory Acts, fought naval battles in the Delaware River in May of that year. A huge British fleet had landed in New York harbor, and the agitated colonists were about to declare war. At the very moment of crisis, that rich Philadelphia merchant had refused to vote for independence. The Virginia tobacco planters were dancing a war dance in a city known for its pacifist Quakers, while their neighbor George Washington was conducting an actual war with the British. It was then revealed that Robert Morris had been participating in a gunpowder smuggling operation known as the Secret Committee, and Morris had made considerable profits from it. While many of his friends defended Morris, it was pretty easy to go wild with indignation about trusting him to sit on a secret espionage committee, unwatched. The very least that could be done was to appoint Arthur Lee, already a member of the Continental Congress, to that Secret Committee to sound the alarm if anything looked funny. The ironic fact seems to be that Morris and the Lees were passionately committed to the same unwritten approach to government, primarily based on trust in personal character, otherwise defined as fidelity to an unwritten tribal code. If you are the right sort of person, you will be with us; if you are not with us, you must not be the right sort of person. Unfortunately, a nation of immigrants may not survive if it adopts such notions.
The Lees had expressed disruptive views of Morris in the past; but they were exactly the sort of clan likely to confront scoundrels whenever facts called for it, and sometimes even when they didn't. The underlying conflicts, fiercely advocating both a strong centralized government and a loose decentralized one but not defining either, continue to run through American politics until the present. Whether Morris ever acknowledged it or not, he ended up on the side of defined contracts, as opposed to a Code of Honor. But he spent his life as a man of his word, because in business your word is your bond; if you are any good, you won't need to cheat. If our Tower of Compromises is to endure, its limits of such agreement must be few, but they must somehow be strictly understood.
http://www.philadelphia-reflections.com/blog/2115.htm
Power of the Purse
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| 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.
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| Founding Fathers |
The Founding Fathers remembered taxation as one of the main issues of the rebellion 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.
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| 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
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| 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
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| 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.
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| 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.
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| 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.
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| 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
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| 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."
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| 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.
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| 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)
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| 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.
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| 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
Morris Quits His Business
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| Charles Dickens |
There are a dozen episodes from American revolutionary times which might be called pivotal, but a single debate in the Pennsylvania Legislature seems to have started our political parties in their present form. The 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 to ordinary readers. 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 good enough and they were 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 material for that operatic scene at Independence Hall, where the real David and Goliath were William Findlay and Robert Morris.
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| 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 that the Revolution could not have been won without them. He essentially invented American banking, had 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.
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| 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, and 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 he owned stock in. He utterly denied that Morris had any motive other than the profit he would make for the bank, so 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 he possibly represent the hard-boiled self-interest of his frontier constituents?
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| 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 have you 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 a 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 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.
http://www.philadelphia-reflections.com/blog/2178.htm
Bonds--Do They Have A Future?
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| 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 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 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 current inflation rate 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. But the jury better hurry up, because investors are looking 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 any other kind 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. The great argument for bonds is safety of principal, and although safety is in question anywhere there is inflation, whenever 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. Since most for-profit organizations also experience variable periods of time without profits, the situation is not greatly different from permanently nonprofit. That's particularly true if the 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; conversely, the net loss is the cost the company could afford to pay the activists to go away.
To restate the characteristics of the willing bond purchasers, they are governments and nonprofit entities, who have no common stock revenue alternatives, but regularly face a need to raise money. 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 an equity (common stock) alternative to offer, or else are shielded in some way from 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 teach your children to avoid.
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 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, we have just adopted the stance of kicking the can down the road.
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 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.
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 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 this government 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.
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.
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 very 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
John Dickinson had been active in resistance to England's treatment of its colonies, and as early as 1768 had written a book called Letters of a Pennsylvania Farmer which is credited with strongly influencing the colonies in the direction of resistance. When it came time to write the Articles of Confederation, Dickinson was the lawyer selected for the task. His good friend Robert Morris was less outspoken in opposition to the British Ministry's behavior, quite possibly because he was adept in finding work-arounds for his own personal business interests. And possibly he was trying to maintain a neutral negotiating posture, since in a hotly contested election with this as the main issue, he was elected by both sides in the argument. When July 4, 1776 forced the issue, both Dickinson and Morris refused to sign the Declaration, but within a few months, both of them were actively fighting for the Rebellion.
The thirteen colonies 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 may have contributed an important reason the Articles placed heavy emphasis on declaring them to be perpetual. Recognition 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 a dictator. For this and other reasons, the Articles remained unratified for years. Finally, in 1781 Robert Morris became convinced that failure to ratify was encouraging a failure to cooperate, and successfully pushed ratification through the steps. At that time, Morris was effectively running the country, even providing his own credit and funds to do it. People were unwilling to oppose his wishes, but they were also unwilling to provide the taxes, supplies and troops that Morris thought 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.
Little is known for certain about the evolution of 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 Pennsylvania Legislature had been dismal, while he came to see the flaw in the current Federal government was its inability to raise taxes and consequently, to service national debt. The states were able to levy taxes under the Articles, but erratic. The key to effective government was to reverse the situation; let the national government tax, and let the states spend. The key to such a negotiation would be to limit the national government to spending on a very limited list of vital purposes, but bedazzle the states with a substantially unlimited list. As the accounts to pay for the Revolutionary War were totalled up, it was apparent that the National Government had twice as much debt as the states. It would need twice the taxing power to service such a debt, but presumably wars would be infrequent. 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.
Robert Morris was brilliant, and he had six years to fashion his strategy; he also had some help. For one thing, George Washington lived next door for 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 the book as presents to his friends. Morris had corresponded with Necker, the genius financier of France, and through his good friend Benjamin Franklin, got insights from the rather advanced British national finance. And James Madison brought the scholarship about politics and statecraft accumulated by Witherspoon, Hume and the Scottish enlightenment.
Once you grasped the central idea, in this environment the strategy almost worked itself out.
http://www.philadelphia-reflections.com/blog/2226.htm
