Monday, December 20, 2010

Is Sarah Palin Running For First Lady?

There has been much discussion of late as to whether Sarah Palin is running for the Presidency. People have been trying to read the tea leaves by examining her book tours, her television shows, her numerous Faux interviews, and her tweeting to discern her intentions. The problem with the media analysis of Palin is that the pundits are looking at the wrong political office. Palin is not a campaign for the Presidency. Nope. The evidence is clear. She is running for the Office of First Lady.

“Preposterous,” you say, “she can't run for First Lady.” Well, of course she can. After all in 2008 she ran for Vice President, a position so far above her education, abilities, and temperament, that she would have no trouble seeing the Office of First Lady as within her grasp.

It is clear that she is running for First Lady, rather than President, because she has been waging a relentless campaign to defeat the current incumbent of that office, Michelle Obama. Everyone knows that when you are in a political campaign the very first thing you have to do is attack your opponent, bringing that person down in the eyes of the electorate. That is exactly what Palin has been doing. Why just yesterday she ridiculed Mrs. Obama’s anti-obesity campaign

While making s'mores at one point during Sunday's episode, the former Alaska governor proclaims the marshmallow and chocolate treat is "in honor of Michelle Obama, who said the other day we should not have dessert."

This is just the latest battle in Palin’s jihad against Mrs. Obama for having the temerity to suggest that there is an obesity problem in the United States and that the First Lady should use the bully pulpit of her position to encourage better eating habits among Americans, particularly America's youths. A few weeks ago Palin attacked Mrs. Obama saying,

"Instead of a government thinking that they need to take over, make decisions for us according to some politician or politician's wife's priority," Palin said, "just leave us alone, get off our back, and allow us as individuals to exercise our own God-given rights to make our own decisions, and then our country gets back on the right track."

And who can forget the famous cookie incident where

"Mama Grizzly" stopped by a school in Pennsylvania with dozens of cookies, a gesture obviously in protest to Michelle Obama's campaign for better nutrition.

"Who should be making the decisions what you eat and school choice and everything else?" Palin asked the students. "Should it be government, or should it be the parents?"

Yes, Palin has been attacking Michelle Obama relentlessly for over a year, making fun of virtually everything Mrs. Obama does. And there is only one reason for these attacks. Palin is fighting hammer and tongs to succeed Michelle Obama as the next First Lady of the United States.

Of course some people might say that you can't really run for the office of First Lady, you have to be married to the person elected President. In response Sarah would say, you don't know Palin. After all, she convinced the voters of Alaska to elect her for an eighteen month tour as governor of a state with the same population as a typical Congressional District and with about a third the population of the average Borough in the City of New York. She also convinced a grumpy old man to pluck her from obscurity and place her on his ticket as a Vice Presidential candidate. Having achieved those seemingly impossible feats surely she can find a way to become the First Lady.

The obvious question arises as to how Palin and intends to gain the office of First Lady. One answer might be that she will push her husband Todd to run for the Office of Dude of the United States (DOTUS) so that she could become First Dudess of the United States (FDOTUS). It shouldn't be hard to get Todd elected. After all Sarah had great success bringing about the election of many mama grizzlies during the 2010 congressional elections, such as Sharon Angle, Christine O’Donnell, and Carly Fiorina. With those victories behind her certainly she can switch gears and find a way to promote the snowmobiler in chief to the highest office in the land.

Those who are skeptical about this strategy believe she has a much more sinister and devious plan in mind. They think she intends to directly substitute herself for Michelle Obama at the right hand of her husband Barack. All she has to do is convince the President that Michelle is no longer an asset and is not worthy of his affections. These attacks on Michelle's public outreach are designed to show the country and the President how truly out of touch Mrs. Obama is. They reveal that Michelle is nothing more than a socialist, communist, bleeding heart, do gooding, anti-dessert, vegetarian.

Once phase one is over and Michelle is exposed as a political liability all Sarah needs to do is wink her eye and cast one of her come hither looks and poor defenseless Barack and he will be eating out of the palm of her hand. Of course there is the small technicality of the fact that Sarah is currently married to Todd, but that is a problem easily solved. There will be many snowmobile races on frozen lakes in Alaska this winter. Everyone knows how hazardous that sport is.

Get ready America, the mother grizzly of all battles has been joined.

Thursday, October 07, 2010

Breaking - Supreme Court Declares Minimum Wage Constitutional

Disclaimer. This news first broke in 1941. But it would be breaking news today for Joe Miller, Republican and Tea Party candidate for Senate from Alaska. Hopefully it will be of interest to others.

Joe Miller gave an interview on ABC News in which he said that the Federal minimum wage is Unconstitutional. Specifically, he said,

That is not within the scope of the powers that are given to the federal government

When asked to explain the legal basis for his conclusion he said,

"What I'd recommend that you do is go to the Constitution and look at the enumerated powers because what we have is something that we call the 10th amendment that says, look if it's not there if it's not enumerated, then it's delegated to the states," Miller said. "Everything that's not there is reserved to the states and the people."

Well, maybe not so much. In 1941 the Supreme Court, in a unanimous opinion in the case US v Darby Lumber Company upheld the Constitutionality of the Fair Labor Standards Act (FLSA), the law that established the Federal minimum wage. The FLSA also guaranteed time-and-a-half for overtime in certain jobs, and prohibited most employment of minors in "oppressive child labor."

Now Mr. Miller is entitled to the view that the minimum wage is bad policy and he may disagree with the Darby decision, but he is not entitled to the view that the law is Unconstitutional. As a guy who allegedly graduated from Yale Law School (what is it with these Yalies these days) he should know that since the decision in Marbury v Madison in 1803, it is settled law that the Supreme Court is the final arbiter on the question of whether a law is Constitutional. He can agree with or disagree with Supreme Court decision, but if the Court decides that a law is Constitutional that is the final word until such time as the Court reverses itself, which happens but rarely.

Now what about Mr. Miller's brilliant 10th Amendment insight. Did the Court ignore that issue in the Darby decision? Hardly. It was addressed straight on and ripped to shreds.

Our conclusion is unaffected by the Tenth Amendment, which provides:

"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."

The amendment states but a truism that all is retained which has not been surrendered. There is nothing in the history of its adoption to suggest that it was more than declaratory of the relationship between the national and state governments as it had been established by the Constitution before the amendment, or that its purpose was other than to allay fears that the new national government might seek to exercise powers not granted, and that the states might not be able to exercise fully their reserved powers. See e.g., II Elliot's Debates, 123, 131; III id. 450, 464, 600; IV id. 140, 149; I Annals of Congress, 432, 761, 767-768; Story, Commentaries on the Constitution, §§ 1907-1908. Bolding Added

Got that Mr. Miller and all you other tenthers, "The amendment states but a truism that all is retained which has not been surrendered."

The Court found ample basis for upholding the law in the Commerce clause of the Constitution. Here are a few select provisions in the opinion.

The power of Congress over interstate commerce "is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Constitution." Gibbons v. Ogden, supra, 22 U. S. 196. That power can neither be enlarged nor diminished by the exercise or nonexercise of state power. Kentucky Whip & Collar Co. v. Illinois Central R. Co., supra. Congress, following its own conception of public policy concerning the restrictions which may appropriately be imposed on interstate commerce, is free to exclude from the commerce articles whose use in the states for which they are destined it may conceive to be injurious to the public health, morals or welfare, even though the state has not sought to regulate their use. Reid v. Colorado, supra; Lottery Case, supra; Hipolite Egg Co. v. United States, supra; Hoke v. United States, supra.

This is a very sweeping view of the Constitution, which though slightly eroded by subsequent decisions is still largely intact. And here the Court discusses the motive for the law which is as valid today as when it was enacted in 1938

The motive and purpose of the present regulation are plainly to make effective the Congressional conception of public policy that interstate commerce should not be made the instrument of competition in the distribution of goods produced under substandard labor conditions, which competition is injurious to the commerce and to the states from and to which the commerce flows. The motive and purpose of a regulation of interstate commerce are matters for the legislative judgment upon the exercise of which the Constitution places no restriction, and over which the courts are given no control. McCray v. United States, 195 U. S. 27; Sonzinsky v. United States, 300 U. S. 506, 300 U. S. 513, and cases cited.

So Mr. Miller, you may want to go to a world prior to 1803, when there was no arm of government that was the final voice on the meaning of the Constitution, a world where every law was Constitutional or Unconstitutional depending on who you asked, a world in which uncertainty and gridlock could have ruled. Or you may want to go back to a world prior to 1941 when it was not clear whether the FLSA and its provisions governing the minimum wage where Constitutional. But one thing you cannot do, is claim that those issues have not been decided. I would have thought you would have learned that in your Yale Law School if not earlier in your eighth grade civics class.

Beyond Mr. Miller, and the baggers' deficiencies in civics education, there is a larger concern. Most Federal laws governing economic activities are grounded at least in part in the authorities of Congress derived from the Commerce Clause. The right and their supporters in the Supreme Court have been attacking the Commerce Clause for years. That attack can be seen in Miller's argument where he would basically say all commercial activity can only be regulated by the states. That's food, drugs, health, safety, you name it. The stakes are huge. Hardly any aspect of our lives would be unaffected if they had their way. They would take us back to the pre-Constitution days of the Articles Of Confederation. There is a special irony in their arguments since the absence of power to regulate commerce between the states was one of the principle reasons why the Articles were replaced by our current Constitution.

This is the right's way to undo a Century of progressive Federal legislation. The stakes in this and every election are high. Please encourage all your friends to vote and do what ever else you can to get out the vote.

Tuesday, August 03, 2010

Bloomberg's Moving Speech on the Mosque

Mayor Michael Bloomberg gave a very thoughtful and moving speech today in support of the Mosque near the World Trade Center site. Every once in a while he gets it right and this was one of those time. There were several themes in the speech, but I found three of them very compelling.

He talked about the struggle for religious freedom in New York in a historical context. First he discussed the struggles of Jews and Quakers,

“In the mid-1650s, the small Jewish community living in lower Manhattan petitioned Dutch governor Peter Stuyvesant for the right to build a synagogue, and they were turned down. In 1657, when Stuyvesant also prohibited Quakers from holding meetings, a group of non-Quakers in Queens signed the Flushing Remonstrance, a petition in defense of the right of Quakers and others to freely practice their religion. It was perhaps the first formal political petition for religious freedom in the American colonies, and the organizer was thrown in jail and then banished from New Amsterdam.

Then, to show that bigotry had a long reach in terms of years and religions, he discussed the anti-Catholic animosity,

“In the 1700s, even as religious freedom took hold in America, Catholics in New York were effectively prohibited from practicing their religion, and priests could be arrested. Largely as a result, the first Catholic parish in New York City was not established until the 1780s, St. Peter's on Barclay Street, which still stands just one block north of the World Trade Center site, and one block south of the proposed mosque and community center.

He explained how we as a nation have grown beyond that and why the bigotry of the past was anathema to Americans today. He specifically talked about the first responders who died on 9/11 and why denying the religious liberties of Muslims would be an insult to their sacrifice,

"On Sept. 11, 2001, thousands of first responders heroically rushed to the scene and saved tens of thousands of lives. More than 400 of those first responders did not make it out alive. In rushing into those burning buildings, not one of them asked, 'What God do you pray to?' (Bloomberg's voice cracks here a little as he gets choked up.) 'What beliefs do you hold?'

"The attack was an act of war, and our first responders defended not only our city, but our country and our constitution. We do not honor their lives by denying the very constitutional rights they died protecting. We honor their lives by defending those rights and the freedoms that the terrorists attacked.

Finally, he put the issue in the larger context of our core Constitutional values, explaining why the World Trade Center area must always be a reflection of those values and a beacon to the world of the principles we hold dear,

“This nation was founded on the principle that the government must never choose between religions or favor one over another. The World Trade Center site will forever hold a special place in our city, in our hearts. But we would be untrue to the best part of ourselves and who we are as New Yorkers and Americans if we said no to a mosque in lower Manhattan.

“Let us not forget that Muslims were among those murdered on 9/11, and that our Muslim neighbors grieved with us as New Yorkers and as Americans. We would betray our values and play into our enemies' hands if we were to treat Muslims differently than anyone else. In fact, to cave to popular sentiment would be to hand a victory to the terrorists, and we should not stand for that.

In taking this position, Bloomberg also seems to have positioned himself against Sarah Palin and Osama Bin Laden. According to Jeffery Goldberg of the Atlantic

The Cordoba Initiative, which is headed by an imam named Feisal Abdul Rauf, is an enemy of al Qaeda, no less than Rudolph Giuliani and the Anti-Defamation League are enemies of al Qaeda. Bin Laden would sooner dispatch a truck bomb to destroy the Cordoba Initiative's proposed community center than he would attack the ADL, for the simple reason that Osama's most dire enemies are Muslims.

Bin Ladin's lunacy is well known but one has to wonder why Sarah Palin agrees with his fundamentalist bigotry.

It is time for those who sow hate and intolerance, those who have no understanding of our core Constitutional principles, to be quiet. They have spewed their vitriol long enough. We must not stand for it any more, on this issue or any other.

Tuesday, May 25, 2010

Frogmen, Dammit! Send In The Frogmen.

The Obama administration and British Petroleum have been stumbling around in the dark, clueless as to what to do with the Gulf leak. And the amazing thing was the solution was right at hand. Last Thursday on Hardball, Chris Matthews explained that the solution was simple. Send in the frogmen.

MATTHEWS: Well, that‘s what I‘m asking about. Is the problem getting a submarine to get—can we use our fleet of submarines to go down there and get men, frogmen, down there with torches and begin to close up that—that hole in that pipe? What is the problem, getting there? Is it the transportation to the bottom of the sea, a mile down, or is it the technology of closing that hole?

You see. It's so simple. Just get our Navy boys down there a mile below the surface with some wrenches, and blow torches and maybe some chewing gum and bungee cords and stop that damn leak.

On the Friday edition of Hardball Matthews went a bit further saying that if Captain Nemo could do it why can't we.

MATTHEWS: He says—he stands by and hectors them, but they‘re the ones responsible for fixing—I don‘t know why all the submarines in our fleet aren‘t down there. It would seem to me that Captain Nemo back in the 19th century in fiction would have been able to get down there and fix it with soldering irons and blow torches and filling up that pipe, or with cement or gravel or whatever it takes to put on top of that, just start dumping it there with our big tankers. I don‘t know why we‘re not doing it. We‘re counting on one company, a British company, to solve a problem that‘s been created in our back yard, and I don‘t quite get it.

Matthews statements demonstrate clearly the idiocy of conflating fantasy with reality and having strongly held opinions in a fact free mind. Furthermore they are evidence of the very arrogance that got us into this mess in the first place.

There are no easy fixes to an oil leak one mile beneath the surface of the ocean. If there were, it would have been implemented. But the sad truth is that the oil companies deluded themselves into thinking they could drill safely at those depths, with a faith in their technological prowess that has now been demonstrated to be a crumbling edifice of self deceit and hubris. Not to be outdone, the federal government, suffering through decades of a deregulatory environment, bought in to the concept that drilling was safe and well within our technological abilities.

But what would be comical if it were not so pathetic is the incessant blabbing we hear from pundits in the media screaming at the tops of their lungs "why isn't Obama doing more." Top among these was David Gergen who regurgitated a five-point plan this morning as if it was passed to him on some stone tablets. Well the simple fact is that all five points involve steps that the Obama administration has already taken ,as pointed out by citizen K.. There is no magic potion, there is no silver bullet.

The United States government, including its military, is not in the oil drilling business. It does not have the capacity using its own machinery and personnel to fix this leak. We can debate whether it should have had that capacity and whether funds should be spent to develop that capacity in the future, but as of today it simply doesn't exist. The government has equipment that can be helpful in dealing with this type of catastrophe but that is all. For now, we must rely on the oil companies to stop the leaks. And as far as the cleanup and mitigation of the spill, no effort should be spared but we should have no illusions. Only a small fraction of that oil will ever be contained or removed. The damage will be profound and will only be lessened by Mother Nature and the passing of time.

But go ahead Chris, keep dreaming of Captain Nemo and frogmen. But I have one suggestion. It might be best to keep those thoughts to yourself. in the words of Abraham Lincoln,

Better to remain silent and be thought a fool than to speak out and remove all doubt.

Monday, May 17, 2010

Clarence Thomas Smacked Down Like Never Before

While JUSTICE THOMAS would apparently not rule out a death sentence for a $50 theft by a 7-year-old . . ., the Court wisely rejects his static approach to the law. Standards of decency have evolved since 1980. They will never stop doing so.

Today, the Supreme Court held, for the first time, that the Constitution prohibited sentencing a juvenile to life imprisonment without the possibility of parole for a non-homicide case. In Graham v Florida, the Court established this new rule which, for the first time, extends the special treatment of juveniles to non-capital cases. The majority opinion was written by Kennedy, with Stevens, Ginsburg, Breyer, and Sotomayor concurring. Justice Roberts, agreed that it was unconstitutional to impose that sentence on the juvenile defendant in the case, but would not have created a rule that would apply to all other juveniles in all other cases.

There are many noteworthy aspects to this decision that will have a large effect on Eight Amendment cases moving forward. But no less striking is the concurring opinion of Justices Stevens, Ginsburg and Sotomayor that contains the quotation above. It is one of the most biting and sarcastic smackdowns of a Justice one will ever read in a Supreme Court opinion. The concurring opinion is very short and is set forth in full below.


In his dissenting opinion, JUSTICE THOMAS argues that today’s holding is not entirely consistent with the controlling opinions in (citations omitted). Given that “evolving standards of decency” have played a central role in our Eighth Amendment jurisprudence for at least a century, (Citation omitted), this argument suggests the dissenting opinions in those cases more accurately describe the law today than does JUSTICE THOMAS’ rigid interpretation of the Amendment. Society changes. Knowledge accumulates. We learn, sometimes, from our mistakes. Punishments that did not seem cruel and unusual at one time may, in the light of reason and experience, be found cruel and unusual at a later time; unless we are to abandon the moral commit- ment embodied in the Eighth Amendment, proportionality review must never become effectively obsolete, post, at 8–9, and n. 2.

While JUSTICE THOMAS would apparently not rule out a death sentence for a $50 theft by a 7-year-old . . ., the Court wisely rejects his static approach to the law. Standards of decency have evolved since 1980. They will never stop doing so.

The disrespect that Justices Stevens, Ginsburg and Sotomayor showed for Thomas is completely warranted by the absurdity of his opinion. His mind is so lacking in ability that it is unable to comprehend that acceptable standards of conduct and behavior can evolve over time. One would have to read his whole dissent to get the full flavor of Thomas' crimped thought processes but here is an example

The Court ignores entirely the threshold inquiry of whether subjecting juvenile offenders to adult penalties was one of the “modes or acts of punishment that had been considered cruel and unusual at the time that the Bill of Rights was adopted.” Ford v. Wainwright, 477 U. S. 399, 405 (1986). As the Court has noted in the past, however, the evidence is clear that, at the time of the Founding, “the common law set a rebuttable presumption of incapacity to commit any felony at the age of 14, and theoretically permitted [even] capital punishment to be imposed on a person as young as age 7.” Stanford v. Kentucky, 492 U. S. 361, 368 (1989) (citing 4 W. Blackstone, Commentaries *23–*24; 1 M. Hale, Pleas of the Crown 24–29 (1800)). It thus seems exceedingly unlikely that the imposition of a life-without-parole sentence on a person of Graham’s age would run afoul of those standards.

So if the founders thought it was OK, it's fine by Thomas. That would of course include whipping people, putting them in stocks, and, Thomas' favorite,

capital punishment for offenses ranging from “ ‘run[ning] away with . . . goods or merchandise to the value of fifty dollars, . .

One last note. Scalia and Alito signed on to Thomas's dissenting opinion but even Alito could not agree with that portion of Thomas' opinion. Hope springs eternal.

Monday, May 10, 2010

The original Constitution was flawed, and not just because of the slavery provisions.

Republican National Committee Chairman Michael Steele and some of his fellow travelers are trying to suggest that Supreme Court nominee Elana Kagan is not qualified to serve on the high court because in a 1993 law review article she wrote that the Constitution as originally enacted was defective.

Steele's criticism has been widely ridiculed because anyone with the least understanding of the issue knows that Kagan was pointing out that the original Constitution not only endorsed slavery but also provided for slaves to be counted as three-fifths of a white person for purposes of Congressional apportionment. Additionally, Kagan's article was written in honor of the then recently deceased Justice Thurgood Marshall who had made the same point in a speech in 1987 at a commemoration of the 200th anniversary of the Constitution. For this reason alone, Kagan's criticism of the original Constitution is unassailable.

But that criticism of the Constitution is manifestly valid for another reason — the original Constitution did not include the Bill of Rights, those first ten amendments that guarantee our liberties.

It is hard to imagine anyone thinking that a Constitution without the following provisions was not defective:

Amendment I

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Amendment II

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

Amendment III

No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.

Amendment IV

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Amendment V

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Amendment VI

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

Amendment VII

In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.

Amendment VIII

Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

Amendment IX

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Amendment X

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

And yet that appears to be the position of that noted Constitutional scholar Michael Steele. Or maybe his education stopped before his first American history class. For whatever reason he doesn't know that the Constitution as originally adopted by the Constitutional Convention on September 17, 1787 and as ratified on June 21, 1788 was considered flawed by many of the framers because it did not include a bill of rights. That flaw almost kept the Constitution from being ratified.

During the drafting of the constitution there had been considerable debate as to whether or not to include specific provisions guaranteeing the rights of citizens. A proposal was made to include such provisions but it was defeated by the Constitutional convention. The issue was not whether individual rights should be guaranteed, but whether including such provisions in the Constitution was appropriate. Many framers thought that the existing bills of rights in each state had would be sufficient to protect the citizenry. There was also concern that if the Constitution enumerated certain specific protected rights that would suggest that other rights not mentioned would not be protected. The debate surrounding this issue was one of the dividing lines between the Federalists who favored adoption of the Constitution and the anti-Federalists who opposed its adoption.

After the first five states ratified the constitution, the absence of a Bill of Rights became a real stumbling block in Massachusetts. Some members of the Massachusetts Legislature opposed ratification on this ground alone and others said that the state's ratification should be contingent upon adoption of a Bill of Rights. A compromise was reached whereby Massachusetts ratified the Constitution but with strong recommendations for the adoption of a Bill of Rights. That same posture was taken by four more states. As a result, when the first Congress met on March 4, 1789 James Madison proceeded to draft a list of 10 amendments patterned on the Virginia's Declaration of Rights. These amendments which came to be known as the Bill of Rights were ratified by three fourths of the states on December 15, 1791.

To recap for the benefit of Mr. Steele, the first ten amendments to the Constitution were not enacted until three years after the Constitution was ratified and four years after it was adopted by the Constitutional Convention.

There is a special irony in Mr. Steele and his Republican cohorts ignoring this obvious deficiency in the original Constitution - the original Constitution did not contain their two favorite provisions.

Amendment II

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

Amendment X

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

Imagine that. According to Mr Steele a Constitution without the right to bear arms would be a perfect document. And that document would not be in the least defective if it was silent on the rights reserved to the states and the people. Oh yes. The document would also be perfect if people could own slaves and if slaves counted as three-fifths of a white man for purposes of Congressional representation.

Tuesday, March 16, 2010

Who Is Our Biggest Creditor? Hint: It's Not Japan or China

There has been debate lately about foreign countries holding our national debt, and particularly whether China or Japan is our largest creditor. The numbers seem large for sure. As of January 1, 2010, China owned $889 Billion and Japan owned $765 Billion of our $12.6 Trillion national debt. But guess what? In the world of national debt holders those countries are mere pikers.

As of January 1, 2010, Social Security taxpayers owned $2.54 Trillion of that debt, more than Japan and China combined. And even those much reviled Federal Employees owned $780 billion of the debt. In fact, of our $12.6 Trillion national debt, over one-third, $4.5 Trillion, is actually inter-governmental borrowings and most of that is borrowed from trust funds like Social Security which have an accumulation of excess tax payments.

A list of these funds and their current account balances can be seen on pages 24 and 25 of this Treasury report.

So why is it that over a third of our national debt is not owed to people who invested in treasury securities but rather to people who have been overpaying taxes and fees to the government for many years? The answer is simple. The United States government has been under collecting income taxes for decades and has been masking the size of the deficit by borrowing money from people who pay Social Security taxes, Medicare taxes, Railroad retirement withholding, federal employee retirement withholding and myriad other taxes and fees .

Now the theory behind what has happened to Social Security and the other trust funds is not bad. For instance Social Security used to be a pay-as-you-go system, where tax payments were received and almost immediately paid out to beneficiaries. Since such a system is not fiscally prudent, in 1983 the program was amended to increase the amount of Social Security taxes paid and lengthen their retirement date in order to develop a reserve of funds they would be available to provide to beneficiaries in the future when the baby boomers retired.

It was fiscally responsible. But this is where the twist comes in. What was the government to do with all this excess money, which as discussed above has now grown to $2.54 trillion. Well, it could invest that money in the stock market, or it could invest it in overseas bonds, or it could simply lend the money to the Treasury and thereby reduce the amount of public borrowing the Treasury would have to do in years when we were running a deficit.

Of course, Congress chose the last option, since that is by far the most prudent. It would not be feasible for the federal government to invest Social Security funds in the stock market without incurring real or imaginary criticism for manipulating stock prices. Moreover, it would not be responsible to do so since Social Security is the safety net for retirees, the guarantee that no matter what else happens to their other investments they will always have a benefit that can be counted on. Similarly it would make no sense to invest in the bonds of other countries rather than our own.

Consequently, every time the treasury took in more Social Security or other trust fund taxes than were to be paid out that year it borrowed those excess amounts. Each trust fund was issued a certificate every time this borrowing took place that show the amount borrowed and the interest rate that would be paid on the instrument.

All of this makes tremendous sense as long as the Congress and, for that matter, the people who pay income taxes, remember that this money has to be repaid. But we never hear discussion of that. Rather, when the Federal government runs huge deficits, all we hear is that we needed to enact "entitlement" reform. What are they saying when they talk about entitlement reform? They are definitely not talking about increasing income taxes to pay back Social Security taxpayers for all the money that has been borrowed. No, they talk about increasing Social Security taxes again or delaying the retirement age again.

According to the 2009 Social Security Trustee's Report, Social Security taxpayers will continue to pay into the Social Security trust fund more each year than is withdrawn from the fund until approximately 2016. (Due to the recession, that will not be the case this year, but excess payments should resume next year.) It should be noted that the 2009 trustees report contained projections that were more pessimistic than in prior years. This is particularly noteworthy because, as a general rule, the trustees have been very conservative in their projections. Their analyses are based on estimates of population growth, inflation, gross domestic product, interest rates, and other factors that influence the amount of money coming in to the Social Security trust fund as well as the amount of money being paid out. Historically they have always made their projections based on very conservative analysis. This is illustrated by the fact that the current projection that the trust fund will not be exhausted until 2037 is almost 2 decades later than the 2018 projection that was made when the 1984 changes were enacted.

Assuming the current Trustee projections are correct, beginning in 2016 Social Security tax receipts will not be enough to make payments to beneficiaries and the Social Security program will have to start redeeming those instruments that were issued by the Treasury. Based on current projections ongoing tax payments plus bond redemptions should be enough to make full payments to Social Security recipients through 2037. At that point there would have to be a 24% reduction in Social Security payments for a period of years before the fund would return to balance. Remember, though, that would not be a reduction from the level of payments made today, but rather the higher inflation adjusted payments that would be made in 2037. The fact that there could be a problem beginning in 2037 may suggest that some minor changes should be made to the Social Security program today to ward off that eventuality. However, before we address the 2037 problem we need to address the 2010 problem.

It should be noted that many Republicans, who have been opposed to Social Security since its inception, continue to lie about Social Security. For instance, Jane Norton, no relation thankfully, who is running for to become a Senator from Colorado, recently called Social Security a ponzi scheme,

"With regard to Social Security, it has turned into a Ponzi scheme. The money that people pay into it should be there for when they are ready to retire."

Well, nothing could be further than the truth, but I guess poor Jane would never let fundamental facts get in the way of her anti-government crusade. Sadly, though, she is not alone. Most people have no idea that Social Security taxpayers have been building a nest egg. It is income taxpayers who have been underpaying taxes.

Some may ask, "well aren't Social Security taxpayers and income taxpayers the same?" The answer is that while there is some overlap they are not the same. Social Security taxes are only paid on wages and they are only paid on wages below $106,800. Moreover, Social Security taxes are paid on wages without regard to the number of dependents you have or whether you are earning the minimum wage. In contrast income taxes are reduced based on the number of dependents you have and the amount of income you earn. In addition all of your income over $106,800 and, more importantly all of your income subject to capital gains taxes is exempt from Social Security taxes. That means the richest Americans pay tiny fraction of their income in Social Security taxes, while the working classes pay a substantial amount.

In fact, the amount of Social Security taxes paid by wage earners is much higher than they realize. The amount of Social Security taxes deducted from your wages is 6.2% and there is an additional 1.45% deducted for Medicare. What most people don't recognize is that your employer matches those amounts. That means a total of 12.4% of your wages is paid for Social Security and 2.9% for Medicare. Most economists agree that if the employer did not have to pay his portion of Social Security or Medicare taxes, those amounts would be added to the employees wages. That is why the real tax rate wage earners pay for Social Security and Medicare is twice what they think it is.

But the wealthy in our society such as the top 400 income earners, don't have to worry about any of this because virtually all of their income comes from capital gains, not wages. Consequently, they pay very little in Social Security taxes as a percentage of their overall income. Additionally, their income tax rate is generally the capital gains tax rate of 15%, which is less than half the top tax rate of 35% paid on wages. That is why the universe of Social Security taxpayers and income taxpayers is very different both in terms of who is in each group and what overall percentage of their income they pay in taxes.

Whenever I hear someone who claims to be concerned about fiscal responsibility that we need entitlement reform but not a word about the income tax deficit, I can do little but shake my head. Approaching our nations fiscal problems that way is akin to a man whose house is on fire and who also has a crack in his basement. Rather than put the fire out, he decides to address the long-term problem by shoring up his foundation. That makes no sense for the homeowner and it makes even less sense for the federal government.

It is time to increase collections of income taxes in order that our tax structure will generate enough to redeemed the Treasury instruments that had been issued to the Social Security and other trust fund programs as needed to pay the beneficiaries of those programs. Only after the Congress and the people have shown the political will to do that should we go after the much longer term problem with Social Security.