Monthly Archives: March 2009

Evaluation of Bush Administration Assertions of Executive Branch Authority

By Marc Seltzer

Recently released documents (opens in PDF) show the extent to which the Bush administration took unprecedented power unto itself, exercising unfettered executive branch authority to conduct war inside the United States as well as abroad. Despite profound moral and Constitutional red flags, the Bush administration also sought, post-September 11, to conduct national security without oversight.

Based on the assertion of the president’s “independent, nonstatutory power to take military actions, domestic as well as foreign, if he determines such actions to be necessary to respond to the terrorist attacks upon the United States on September 11,” the administration conducted warrantless domestic surveillance and orchestrated extra-judicial detention and torture of prisoners — all within a cloak of secrecy.

As regarded through the eyes of his critics, Bush’s secrecy was an abuse of power. It went far beyond what was needed to protect military or strategic advantage, even in time of war, and hid unconstitutional and unlawful acts from review. Glenn Greenwald, writing in Salon, recently offered the observation that for eight years, “our Government secretly vested itself with the power to . . . create a whole regimen of secret laws that vested tyrannical, monarchical power in the President.” Speaking at a convention earlier this month, New Yorker contributor Seymour Hersh charged that “eight or nine neoconservatives took over our country.”

However, the administration and its supporters can point to years of domestic security that followed the September 11 attacks. Secrecy was used in an aggressive effort to protect the nation from al Qaeda and in the belief that intrusion into executive branch authority could hinder those efforts.

One could reasonably conclude that the administration officials either believed they could not risk interference of the courts and Congress in their pursuit of national security, or they operated under the premise that in this area the president has supreme authority, with checks and balances neither necessary nor desirable. Secrecy also spared the administration from facing public outcry. However, by creating secret policies authorizing domestic surveillance and detention, the administration denied the public, and the other two branches of government, an opportunity to participate in significant Constitutional deliberations.

Had the attacks on U.S. soil continued in the weeks and months following September 11, it is likely that congress and the courts would have countenanced an extreme concentration of power in the hands of the president in order to defend the nation. The Constitution is a flexible document, open to interpretation in the light of various circumstances. However, as the potential threats were nullified and weeks and months of security turned into years without an attack, the justification for secrecy diminished.  This led to at least a risk of Constitutional crisis, as the executive branch acted on new interpretations of that foundational document without congressional or judicial oversight and without a clear need for such secrecy.

The terrorist attacks in New York and Washington, D.C. justified an extensive retooling of national security policies. The executive branch was responsible for developing new surveillance, detention and military policies. The government has now had time to implement new programs, not to mention conduct major foreign wars. Just as it wasn’t the same world on September 12, 2001 that it had been two days before, today it’s no longer the same world that it was on September 12, 2001. President Bush’s decisions with respect to executive branch authority, and the policies of surveillance, detention, and secrecy that resulted, are now being subject to scrutiny.  While there will undoubtedly be partisan acrimony as opponents of the Bush administration allege violations of the law, there are fundamental constitutional questions about the authority of the executive branch to act on new interpretations of the constitution without oversight that must be explored.

Mayor Geithner, Sheriff Krugman and the Only Game in Town

Originally published March 24, 2009, at


Imagine a terrible snow-storm brings a community to a standstill.  There is a grocery store, with plenty of supplies to keep the town going for a few weeks, but the power is out and the owner and staff can’t reach the store.  The townspeople are enlightened enough to realize that if everyone takes what they please, the supplies wont last and the owners will be bankrupt when they return.

Sheriff Krugman advises Mayor Geithner to open the store and charge a dollar for each item. The town will have provisions, the owner will have money, and the town council can pay the owner at a later date for losses where the sale prices were too low.  “What’s important is that we are making it happen now.”

Mayor Geithner agrees to open the store.  But he’s afraid of the effect of the $1 dollar price tag on the town’s liability for the store’s losses.  He decides to try to revive the store by getting the town involved in a public/private partnership.  “First, I want some of you to invest in the store goods,” he tells onlookers.  “Then you can sell them for a profit to the public.  You set the prices to get what you can for the goods,” he explains.  “Some of the profit will go to the store owner, some to the town and some to you.  Suppliers that can reach us will make an effort to do so and will get paid for their supplies, while we are waiting for normal conditions to return.”

Sheriff Krugman warned, “This is complicated and depends on strong participation.  Meanwhile the food is perishing and may not be sold and resupplied in time,” he said.  “My plan gets the goods moving now so the supplies aren’t wasted. If your plan takes time and fails we will still have to get the food to people and we wont be able to charge much for it then. Too risky, when what we need is certainty.”

The Mayor then made his best case, “Here’s what I will do.  The town will lend you all the money to invest, since you don’t have access to the bank.  If you lose money the town will insure most of your losses, using the town’s share of profits when you succeed.”  “If you take an interest in the supply and demand of these goods, we should have prices that are as close to real prices as the conditions allow,” he said.  “Thus, no awful surprises when the owner comes back.”

Many people had stopped listening or fallen asleep.  Others were clueless. But a few were guessing the price of soap, thinking of the deals they would have to make in order to move the produce before it went bad andimagining that a run on canned sardines and the like could give them a chance to save for a new car.

No one wanted to lose money, but the terms weren’t bad.  

The people turned to the wise elder, Gergen, for his opinion on whether to follow Krugman or Geithner.  “It depends on you,” Gergen said.  “If you buy into the Mayor’s plan it may work.  If it fails, we will end up with the Sheriff’s plan whether we like it or not.”

You can stop imagining now.

Immigration 2009

By Marc Seltzer; originally published on March 19, 2009 at

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No Easy Answers

The announcement that President Barack Obama will begin a public discussion of immigration reform in May will reawaken debate on a highly contentious issue.  At core, the issue pits those fiercely opposed to allowing illegal residents in the United States to convert their status to legal residency against those who, albeit with conditions, seek to legalize most of the U.S.’s estimated 12 million illegal residents.

Political Risks

If the President follows his campaign position in seeking a legislative solution that includes offering legal status to those in the country illegally, he will be investing his political capital in an extremely divisive issue at great political risk.

Prior to the 2008 election in which Democrats gained in both houses of congress, anti-illegal immigrant forces had the upper hand.  While Democratic gains make the congressional votes for reform more plausible, the economic crisis and growing unemployment will intensify concern that giving illegal residents the opportunity to obtain legal status will make already-difficult competition for jobs that much worse.

The President will have his hands full with this one and risks a political fight of an uglier, nastier and more divisive nature than even the financial turmoil has wrought.

Increasing Attention and Concern

The economic crisis and growing unemployment is likely to increase opposition to immigration generally and make compromise more difficult.  However, some commentators such as Thomas Friedman, in his NY Times column, have noted that allowing more legal immigration could bring wealthy immigrants eager to buy homes, shoring up the contracting real estate market.

Illegality is troubling, but what are the alternatives?

Illegal immigration presents the difficult combination of illegal entry into the United States, perceived competition for jobs, and use of public resources that is a too-bitter pill for many Americans.  Yet with nearly 12 million illegal immigrants residing in the United States, it is difficult to realistically imagine a solution that does not involve granting some form of legal status.

One approach would be to grant permission to work for a period of years, without giving traditional legal permanent residency, which begins a path towards citizenship.  However, advocates of a path to citizenship for illegal immigrants, recognize that people who have effectively moved to the U.S., will likely be in financial and family jeopardy if they are forced to leave after having lived for five, ten or more years in the United States.  This type of compromise has not received significant support from immigration opponents, either, who chafe at the idea of rewarding those here illegally with any form of legitimate legal status.

Reagan’s Leadership, or a matter of time?

One thing is certain, poor management of the immigration issue in the past has set up a nearly impossible predicament in the present.  Congress could have largely managed the issue by raising legal immigration quotas sufficiently to keep up with the needs of employers during the 1990s and first decade of the new century.   Instead, the demand for labor far outstripped the legal supply and the debate shifted to unrealistic proposals of effective border enforcement on the one hand and mass deportation on the other.

In the end, Obama’s political skill and the Democratic congressional majorities may forge a “legalization” solution, much as Ronald Reagan did in 1986.  However, the opposition will be charged, and losing control of the issue could not only lead to defeat of immigration reform, but chip away at the President’s momentum and, so far, commanding authority.  While both sides in the debate should compromise and seek to offer creative solutions to the real problems that exist, within their principles, there will be those primarily looking to use the issue against Presidential authority and to position candidates for the 2010 congressional elections.

What to expect, at least initially

President Obama will likely push for a legalization process that aims to implement legal status after the recession eases and the unemployment rate declines.  Mr. Obama is opening the debate in May, and it would not be a surprise for legislation enacted in 2009 or 2010 to provide opportunities for legal status in 2010, 2011 or 2012, when employment is predicted to increase, if the recession ends.

Any proposal is likely to impose penalties and conditions as an attempt to deal with and discourage “unlawful” entry and residence.  More today than in the past, surveillance technology at the border and electronic identification procedures in the workplace make future enforcement of immigration laws possible, although by no means guaranteed.

UPDATE: In Immigration Solutions I push towards a compromise and ask both sides if they are willing to meet half way.  Whether it was because his hands were full with health care of because the prospect for immigration reform legislation was not good, President Obama has put off immigration legislation for at least a year.  In a later post I will review what is going on in enforcement and changes that result from the economic downturn with respect to illegal immigration.

First Steps

Originally published on November 21, 2008, at


creative commons

creative commons



The nomination of Senator Hillary Rodham Clinton to be the nation’s next Secretary of State says a lot about President-elect Barack Obama.  

The nomination shows Obama’s confidence to bring a former rival into his inner circle. Throughout her presidential nomination campaign, Senator Clinton demonstrated intelligence and charisma, not to mention the popularity and good will she earned as New York’s U.S. Senator and as First Lady from 1992 to 2000.

That said, Hillary Clinton does not have universal appeal.  

According to an August 2008 Gallup survey, 72% of Republicans viewed Hillary Clinton negatively, although she was viewed favorably by 80% of Democrats and by 54% of all respondents, including independents.  Her vocal role in the health care reform campaign in 1992 was derided as arrogant or, at least, beyond the responsibility of the First Lady.  Her very presence, imbued with contemporary feminism, has always rubbed some conservatives the wrong way.  

Despite polar reactions to her in the United States, Clinton should be well received by the international community.  More than any other figure in today’s American political landscape, she symbolizes theBill Clinton presidency’s international popularity.  He was admired for his eloquence and prized for his effort to bring about negotiated solutions to international conflicts. It is not that Senator Clinton can share responsibility for her husband’s accomplishments, but that through her appointment, Obama undoubtedly sends a clear signal of the kind of international relations he seeks.

After eight difficult years of U.S. foreign policy marked by faulty intelligence and planning, abrogation of international rules, and unilateral action, many in the international community are eager for change. Obama campaigned for a return to respect for conventions and negotiation in international leadership. His campaign was followed widely with great enthusiasm throughout the world. 


With the nomination of Hillary Clinton, Obama has smartly linked with the success of the prior Democratic administration and has immediately created some international foundation.  Hillary Clinton not only brings the goodwill engendered from the Clinton Presidency, but is also failry well-known politically.  

While she was criticized by her party for her initial vote authorizing war in Iraq, in her role as Secretary of State, a voting record demonstrating the willingness to use force if diplomacy fails, is a mark of strength.  Her personal familiarity with world leaders, through extensive official travel as First Lady and Senator, should not be discounted either. Obama has chosen both an able politician and a person symbolizing engagement in multilateralism from a position of power.  He has made the most of this high level appointment.

Upon leaving the Senate, Hillary Clinton must forgo the opportunity to shepherd health care legislation through Congress.  However, Senators Baucus and Kennedy, among others, are stepping ino the lead.  

As for Republicans harboring disapproval of Hillary Clinton, she may yet win them over in the role of Secretary of State, where strength and assertiveness are viewed as assets.  

Making the Grade

Along with banks, foreclosures, and jobs, education stands as a key focus of President Barack Obama’s vision for restoring prosperity in America. To address the immediate crisis, the president emphasized that he would direct public funds to banks, shovel-ready infrastructure, and state budgets, including funding for teacher’s jobs. In the long run, though, public investment in education will be even more central to reinstating American prosperity and leadership among nations.

Obama’s recently passed Economic Recovery and Reinvestment Act of 2009 allocated one hundred billion dollars in aid to education, including substantial investment in building new schools and shoring up resources like student loan and grant programs. Beyond the funding, what is Obama’s education philosophy?

The president’s education agenda is not so much a radical break from the past as it is a radical commitment of resources to support publicly funded education. Obama’s program embraces the standardized testing imposed by the Bush administration, but seeks to add funding to improve and support programs envisioned, but not budgeted for, in Bush’s No Child Left Behind legislation.

While the Bush administration sought to move toward competition among schools through support for private school vouchers as a way out of problems in public schooling, the Obama administration seeks to invest in and better manage the public system.

The President’s agenda is outlined on the administration’s website. The plan for grades K-12 includes the following steps:

• Reform No Child Left Behind

• Support High-Quality Schools and Close Low-Performing Charter Schools

• Make Math and Science Education a National Priority

• Address the Dropout Crisis

• Expand High-Quality After school Opportunities

• Support College Outreach Programs

• Support College Credit Initiatives

• Support English Language Learners

• Recruit Teachers

• Prepare Teachers

• Retain Teachers

• Reward Teachers

The hundred billion stimulus dollars earmarked for education will likely prove only a down payment on these goals, but Obama’s belief seems to be that education prepares the work force for the kind of business, academic, government, and creative leadership that will be necessary to compete in the global market place.

In Obama’s recent address to Congress, he received a standing ovation when he said his goal was to have a greater percentage of students graduating college in the United States in 2020 than anywhere else in the world. This would be a notable accomplishment, as American schools have lost the edge in certain key areas during the past twenty-five years. Math and reading scores among twelfth-graders have slipped appreciably, and the percentage of black and Latino students who fail to graduate from high school continues to dismay.

Obama has appointed Arne Duncan, formerly Superintendent of the Chicago School District, as his Secretary of Education. With one hundred billion dollars to spend and a chief executive commited to prioritizing American education going forward, one anticipates that Duncun will be an important voice in domestic policy in the coming years.

Health Care on the Horizon

Originally published November 17, 2008

President-elect Barack Obama made health care reform a central tenant of his campaign. The fact that so many Americans are not covered and that coverage is so costly for those who are, brought the public together behind Obama’s call for change.

Recent polls confirm a substantial consensus for government action on health care.

Ninety-two percent of Obama supporters, 88 percent of undecided voters, and 57 percent of McCain supporters in an August 2008 poll, recognized that the government bears some responsibility for the health care of its citizens. This may not be a call for nationalized health care as was toyed with during the Clinton administration, but it does signal government involvement in a health care solution will be welcomed. 69 percent of respondents also said the government was “doing a poor job” ensuring basic health care needs are met.

Obama’s proposals, voiced prominently during the campaign, call for federal regulation of insurers and public spending to help uninsured Americans obtain coverage. Keys to any new legislation are likely to be mandatory coverage for pre-existing conditions, tax credits for small businesses that insure their employees, fees for large corporations who don’t, coverage of all children and subsidies for those that need help with premiums.

Obama estimated the costs of reform to be $50-65 billion and suggested that a repeal of Bush tax cuts for upper income Americans would offset increased spending in the federal budget.

The real question now is what shape health care reform will take in light of the financial crisis. President-elect Obama has put economic recovery at the top of his agenda and hinted that other issues will be considered in this light.

The concern on health care reform is that tax increases for the wealthy and for some businesses could negatively impact economic growth. With economic indicators bleak, and all eyes on fiscal stimulus, the country can ill-afford to burden any segment of the economy.

Health care policy experts are speculating on a limited phase-in of reforms, with insurance for children touted as a first step. Longtime advocates for reform, such as Senator Ted Kennedy, are preparing draft legislation in time for inauguration day on January 20th, 2009.

The new president is all about pragmatism, so he will undoubtedly consider any potential harm to the economy before taking action. However, there is reason to expect progress on health care.

Obama has spoken passionately about health care from the very beginning of his campaign and has stated how crucial it is to improving the lives of middle class Americans. His own mother faced “preexisting illness” denial-of-coverage issues for treatment of her terminal ovarian cancer.

This President will begin his term with a substantial electoral victory, strong majorities in the Senate and House of Representatives, and public opinion in support of government action.

This is a mandate for change and the power to see it through.

Changing Global Priorities

Our new foreign policy must prize cooperation over competition.

Barack Obama took office fifty-one days ago, assuming the presidency during a crucial time for American foreign policy. Instability in key areas is on the rise, and the economic contractions around the world are likely to bring unrest, violence, and change to a degree previously thought impossible.

The United States may be tempted to face the nations of the world with the same preferences and policies as before. A different party is in power now, but aside from his position on the war in Iraq, President Obama has not yet voiced foreign-policy positions that differ substantially from those of the preceding administration.

He should.

George W. Bush singled out North Korea, Iran, and Iraq as evildoers early in his presidency. He approached each nation differently, taking regime change to Iraq, sanctions to Iran, and bilateral negotiations to North Korea. Each of these nations had taken positions troubling to American interests. The Bush administration’s actions, most dramatically in Iraq, can be debated and the results evaluated for their long-term effectiveness. But in recent years, the geopolitical landscape in which those three nations stood out as dangers is all but gone.

Today Pakistan looks more precarious than Iran, Iraq, or North Korea ever could have. As Pakistan transitioned toward more democracy in October 2008, it also became less stable. It has always tolerated militants operating within its borders. Recently, a large area in the country’s northern region, known as the Swat Valley, has become a haven for Taliban, giving them opportunities to fundraise, organize, and plan operations in Afghanistan and beyond. The Pakistani government has agreed to bring the entire region under Sharia, the Islamic system of religious law, in a concession to local leaders, and officials have claimed to be negotiating with moderate elements of the populace in order to undermine radical groups.

For now, the United States must decide how to handle events in Pakistan as they affect our goals in Afghanistan. But in the long run, the United States will have to face the fact that Pakistan itself could descend into civil war, state-sanctioned radicalism, or general and indefinite instability. Pakistan is a substantial nuclear power; fringe elements of its population have already, on numerous occasions, exported terrible violence to neighboring India and Afghanistan. The danger of militant possession of nuclear weapons must be mitigated and planned for.

The U.S. has also regarded China and Russia with too much distrust. The corruption and authoritarianism of these nations runs against the fundamental principles of open, democratic society; individual liberties are compromised in both countries, and there is nothing that we would recognize as a free press. Like the United States, these nations have issues of security, but theirs are more dire and occur closer to home — China has North Korea on its border; Russia faces insurgent activity in Chechnya and Dagestan.

Now is the time for mutual cooperation and assistance. The recent skirmish between Chinese and American vessels would not have happened between friendly nations. More can be done diplomatically to find points of agreement, so that these three great powers can be allowed to focus their collective resources on international problem-solving, not rivalry.

Both China and Russia have loosely followed our free-market model, although their economies are informed by far too much authoritarian power from the state. Neither country is a threat to our national security or that of our allies, in the long run. Indeed, it seems reasonable to expect that coöperation between China, Russia, and the West will continue to bring gradual reform to those nations, as it has in the past. China’s government is far more open and its leadership far more accountable today than it was twenty years ago. The forthcoming diplomatic era must be one of accord and common ground, not withdrawal and alienation.

Closing Guantanamo Bay

Originally published on February 9, 2009, at

Photo: Puerto Rico National Guard troops pack it in after a year's deployment at Guantanamo; The National Guard; licensed under creative commons

Photo: Puerto Rico National Guard troops pack it in after a year's deployment at Guantanamo; creative commons

President Barack Obama has signaled that the U.S. military will close Guantanamo Bay detention camp within one year.  The prison has become a divisive symbol of the controversial handling of enemy combatants by the Bush administration’s War on Terror. 

President Obama has shifted responsibility for the remaining 245 Gitmo prisoners from the Defense Department to the Justice Department.  Newly appointed Attorney General for the United States, Eric Holder, Jr., will take responsibility for determining whether those prisoners will be given civil or military trials, transferred to foreign countries or released.

The outlines of the President’s new policy on detention will be filled in in coming months, but certain things are clear.

The President has forbidden the use of torture against detainees in American custody.  “The United States will not torture,” the President stated.  

This policy includes prisoners under CIA control, and while extraordinary renditions will be allowed to continue during the Obama administration review of policy, the CIA will not be allowed to transfer prisoners to any country where they will be subject to torture.  

Outgoing CIA chief Michael Hayden sent a message to staff at the agency stating that the new policy would be carried out, “without exception, carve-out or loophole.”

Holder’s justice department has begun review of enemy combatant court cases beyond Guantanamo Bay, such as that of Ali Al-Marri, held at a military brig in North Carolina.  Al-Marri has appealed to the United States Supreme Court for review of the Defense Department’s decision to imprison him without trial.  Al-Marri was living in the United States as a legal resident at the time of his arrest, giving him a stronger position to seek a trial than, say, an enemy combatant captured by coalition forces in Afghanistan.

However, the Obama administration sought a postponement of hearing by the Supreme Court.  Al-Marri “is clearly a dangerous individual,” Obama has said. “We have asked for a delay in going before the Supreme Court to properly review the evidence against him.”  

The Bush administration had also decided to close the Guantanamo Bay facility, but ran into difficulty finding new places to house the remaining detainees.  Bush policy was to hold enemy combatants without trial or transfer them to foreign countries for incarceration.

However, the U. S. Supreme Court has ruled that all Guantanamo detainees are entitled to habeas corpus, or, the right to petition a federal court for review of the decision to imprison them.

Recently, a federal court in Washington D.C. ordered five Algerian detainees to be released for lack of sufficient evidence against them.  Other detainees have been caught in legal limbo because the United States would like to release them to their native China, but are constrained by the probability that they will be subject to ill treatment or execution if returned, because of their opposition to the Chinese regime.

The Obama administration will also deal with the question of detainees held in U.S. military custody abroad, such as those held at the Bagram base in Afghanistan.

These prisoners were captured in military operations and are thus more like traditional enemy combatants, but some have been held for as long as eight years and there is still no end in sight for conflict in Afghanistan.

From a policy perspective, Obama’s intent to increase U.S. troops and coalition commitments in Afghanistan soon, will likely result in more enemy combatant prisoners, going forward.

Hillary Clinton Threads a Needle

Originally published on February 24, 2009 at




Hillary Clinton met with diplomatic officials and heads of state in China, Korea, Japan and Indonesia and did not hesitate to jump into a wide range of key issues on her first official trip as Secretary of State.  Ms. Clinton prioritized her discussions around North Korean nuclear disarmament, the world financial crisis and laying groundwork for cooperation on climate change.  Clinton did not push the issue of human rights in meetings with Chinese leaders, emphasizing the growing importance given to cooperation on economic and environmental issues.     The most immediate challenge was to establish the Obama administration’s position on North Korean nuclear disarmament by encouraging U.S. allies to reinvest in firm bilateral negotiations and by signaling to the North Korean government that cooperation will bring rewards.
North Korean leader Kim Jong Il has pressed back hard against efforts by both the administrations of George Bush and Bill Clinton to obtain denuclearization. North Korea has claimed to need the weapons defensively, accusing South Korea and the United States of intending an attack. North Korea has also tested both nuclear weapons and long-range missiles, boasting of its power to retaliate for any attack against it.
Secretary of State Clinton’s task was to entice North Korea to participate in negotiations towards completing disarmament.  However, she clearly needed to warn the communist nation that it would suffer further isolation and harsh treatment in the region if it failed to cooperate and that the United States stood with its allies in the six party talks. “North Korea is not going to get a different relationship with the United States while insulting and refusing dialogue with the Republic of Korea. . . . The Republic of Korea’s achievement of democracy and prosperity stands in stark contrast to the tyranny and poverty in the North,” Clinton said

Negotiations have in the past also included offering the North Koreans foreign aid in exchange for their cooperation, but have never concluded a lasting agreement.  Secretary of State Clinton said before her trip that the United States is willing to normalize relations with North Korea in return for disarmament. 

This approach is consistent with the position that President Barack Obama took during the presidential campaign, stating that he would not hesitate to talk to foreign nations in an effort to reach compromise, even those whose positions the United States rejects.  However, Secretary Clinton was threading a needle in giving substantial incentive for North Korea to comply and yet speaking out on behalf of ally South Korea in unity against the North’s nuclear saber-rattling.

Nationalization: Cutting Losses and Creating Solutions

A debate rages on different plains about rescue of the banking industry and real estate market.  That is a clean way of putting it.  Not the debate–the debate is pretty clean.  But the notion that it is just the banks and homeowners who are at risk is pretty sanitary. 

Without banks there is no substantial financing of business activity.  We could reinvent financing, especially since the Internet was not around when the current banking system was begun, but it would take years to reach anything like national capacity.  In the meantime, now, falling business activity continues a downward spiral of unemployment, business failures, investment losses, and postponed planning and recovery.

With no finance and no confidence, there can be no real estate market.  There is only deterioration in values and losses in investment.  Forward business activity and healthy market forces require confidence in the future. 

Hence, the nationalization debate.

If the government takes over weak segments of the banking system, it can, at a cost, make them stable institutions of the recovery economy.  They can loan money without fear of failing for lack of sufficient loan reserves.  Similarly, the government could buy up and hold real property at discounted prices throughout the United States.  This would eliminate the concern that numerous properties sit in default with no payments made on the mortgages and with no interested buyers.  The government is used to owning land in America–it owns much of what is not developed or used.  Add to that a fraction of the housing stock, to be resold later, and you have a more stable marketplace for the remaining property.  (You would have to create a formula such as automatic purchase of all homes in foreclosure at a set percentage discount for a six month period).

Why not nationalize one or both fractions of the marketplace?  Certainly this is not an efficient method of setting prices and running financial and real estate markets.  It would be a really bad idea if you had a functioning marketplace because like the communist economies, it would lead to poor allocation of resources, lack of private incentive and declining productivity.  But, should we be holding out for efficiency, when the very functioning of the system is so broken down?

It must be particularly hard for the Obama administration to look towards nationalization as an option.  The first African American president is hardly a financial liberal or political radical.  He taught at the University of Chicago, a free-market powerhouse.  He was not, so far as I know, part of the “Chicago School” of conservative economics, but neither was he ever noted as a liberal economic standout.  His centrist, free market, choices for Treasury department and economic advisors confirm this.  

What’s the solution?  How about giving a group of responsible Republicans the challenge of crafting and selling the temporary-nationalization plan?  Cherry-pick them in advance so they are willing, at least, to do what is needed.  Despite all our anti-politician rhetoric, there are many among them who are in an of themselves, profiles in courage. 

Rather than indulging in battle over whose party it is, and what it stands for, why not take on the problems of the day and solve some?  

We are clearly at a point of great uncertainty.  The recovery may come as the bottom of the market is reached according to market forces or it may not.  The stimulus spending and tax cuts may aid the recovery or they may not.  But the hole in the plan needs to be repaired, one way or another.

There is a significant, whether that’s one percent or more, risk of more devastation to business activity and investment value.  At some point, rather than aiming for a refined solution, you need to aim to protect yourself from the risk of catastrophe.  Protection from disaster is different than planning for optimal results.  We should, at least someone should, be advancing ideas on that level.

When the countries of the former Soviet Union endured its collapse and economic crisis in the 1990s, industrial production, standards of living, and life expectancy declined deeply.  Painful as it was, within a few years, conditions improved.  We might learn from these experiences as well as from other nations that have had to nationalize collapsing industries, and our own savings and loan crisis in the 1980s.  In each of these cases privatization was eventually successful, so we should not worry about a slippery slope towards socialism or the communist domino effect.  The real risk in those directions comes only if the United States is unable to pull itself up by its bootstraps and demonstrate a viable system.