Category Archives: Barack Obama

What We Wont Learn from the Sotomayor Confirmation Hearings

By Marc Seltzer; originally published on July 9, 2009, at politicsunlocked.com.

(Linda Greenhouse’s New York Times piece about the confirmation hearings for Elena Kagan raised the issue of whether a justice can be forthcoming in their testimony to congress.  Interestingly, Kagan has articulated her belief that the executive brach has largely unfettered authority in the areas of national security, the point that I wrote about in reference to the Sotomayor hearings.  Still, I do not see any reason for Kagan to speak openly in the upcoming confirmation hearings in light of the intense politicization of the process.  My early post is reposted below.)

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If there is one legal question that is profound and topical, the discussion of which would be deeply thought provoking and educational in the Supreme Court nomination hearings of Judge Sonia Sotomayor, it is the constitutional division of power between the different branches of government.

The power struggle between the branches is most notably implicated in the national debate over the Bush administration’s conduct of foreign policy and war.  President Bush and Vice-President Cheney asserted generally exclusive executive branch authority in the conduct of intelligence, detention of prisoners and avoidance of oversight in national security operations after 9/11.

Now that Bush and Cheney are out of power and more information is coming out about their conduct, opponents of such policies are on the attack, calling for investigation.  Only the most recent issue is whether Vice-President Cheney directed that the CIA withhold information from Congress that Congress has by law, demanded that the executive branch provide.  Other red-hot manifestations are whether the use of torture by the administration can be subject to explicit laws banning such activity, and whether the President was in fact required to brief congress regularly on its conduct of foreign policy and military action, as Congress has demanded.

Underlying this and other such conflicts is the question of constitutional authority in the different branches of government.  The President is the Commander-in-Chief.  Does this grant the President sole authority for decisions relating to national security, or is it an authority shared by the peoples’ representatives in Congress?

In the same vein, what are the limits of such Presidential authority?  Can the President authorize torture if he believes it is necessary for national defense?  If Congress requests that the President provide information on on-going military operations, can the President ignore the request if he believes that to follow it will harm the operations?

The ultimate answers to these questions cannot be known until the U.S. Supreme Court decides each issue in the context of specific facts presented in a lawsuit.  But a Supreme Court nominee could give us her reflections and a certain education.  This would be far more meaningful then the competing assertions of power by the administration and congress.  Of no more use are the pundits and professors who weigh in.  Almost universally, commentators take political positions based on desired outcomes, but give no real insight into what the Supreme Court would be likely to do.  The Supreme Court is deeply aware of its profound power and cautious about its legitimacy in asserting its authority over other branches of government – being the unelected branch.   Pundits have none of this real world caution.

Consequently, the Supreme Court tends to go to great lengths to avoid constitutional questions, instead deciding cases on smaller technical matters whenever possible.   There is nothing wrong with this judicial approach, except that it leaves many of us wondering where the bounds of legislative or executive power really are.

I, for one, have no doubt that they are not where the President and Congress say they are.

Stocks Tumble, Uncertainty Rises

By Marc Seltzer; originally published May 6, 2010, care2.com
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The U.S. stock market took a wild ride Thursday as the DOW index of stocks fell 1,000 points at its lowest and ended the trading day down 347, or more than 3%.  The economic concerns of the day centered on the turmoil in Europe as Greece needs a bailout to avoid default on its public debt.  However, the Securities and Exchange Commission (SEC) is investigating unusual trading activity to determine whether mistakes or manipulation caused a rapid drop of stock prices shortly after 2:30 p.m.

The crisis in Europe is serious.  Greeks have been rioting for several days over the economic hardships that are being imposed, as the government seeks to rein in public spending and convince European nations that it will show fiscal discipline, if given a new loan package.  Skeptics believe that even with new loans and belt tightening, Greece will eventually have to restructure its debt.

However, Greece is a small nation and its economy is only a small fraction of Europe’s economic power.  The market’s concern is that Greece’s problems might also surface in larger European economies such as Portugal, Italy or Spain.  Not unlike the U.S. bailouts to financial institutions in 2008, European governments today are stepping in to stop Greece’s failure from spreading.

While the decline in Greece is in itself too small to negatively impact the U.S. economy, greater weakness in Europe could hurt U.S. export sales and overall confidence in the recovery.  On the other hand, the U.S. stock market has risen dramatically since the financial crisis abated.  It may simply have been due for a correction.

Redefining America: Constitution and Leadership 2010 – Nominee Elena Kagan

Marc Seltzer and Jessica Pieklo discuss:

The merits of a Kagan nomination to the Supreme Court (click to listen — loads in a few seconds)

Judge Sotomayor — Target of Newfound McCarthyism?

By Marc Seltzer; originally published on June 9, 2009, at care2.com

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Is it all right that Newt Gingrich called a sitting federal judge with a stellar record a “racist”?

How about Rush Limbaugh rallying the conservative base by demonizing Judge Sonia Sotomayor’s opinions as racially biased?

Isn’t this more like 50s’ McCarthyism, bullying your political enemies with politically loaded names — even when they don’t fit?

There should be no concern about Judge Sotomayor’s prospects for confirmation by the Senate. Senate Republican Jeff Sessions, top republican on the Judiciary Committee, which will conduct hearings, is a former federal prosecutor and can tell the difference between political mudslinging and a real issue about a biased judge.  Her opinions, which I will go into in my next post, are highly regarded by lawyers and judges.  Conservatives should be applauding Judge Sotomayor because she is tough, judicially restrained, and respectful of legal authority.  You will see many Republican Senators honor her extensive resume of public service, her judicial philosophy and her meticulous opinions during the hearings and confirmation process to come.

But in the lead up, before she has the opportunity to testify before the Senate, is it fair game to call her names, whether justified or not?  “Racist” is one of the ugliest terms to label an American citizen.  The spirit of the country is that “all men are created equal,” and while it is obviously an evolving picture, the ideas of equality are core beliefs in what it means to be American.

McCarthy called people “un-American.”  And some of his targets indeed held loyalties to our enemy’s political beliefs or systems.  Others did not, but were tarred just the same until, in the most famous of McCarthy’s eventual dressing downs, counselor Welch for the U.S. Army interrupted McCarthy during televised hearings: “I think I never gauged your cruelty or recklessness….Have you no sense of decency, sir, at long last? Have you left no sense of decency?.”

Gingrich’s and Limbaugh’s conservative political philosophy includes fundamental truths as did McCarthy’s, buy they suffer from the same problem as McCarthy as well:  Power corrupts.  They have such power over their followers that they can at times cross the line into injustice, indignity, and mistruth without paying for it.  This is no slight against Libertarian or Conservative political beliefs.  There are many nuggets of truth in a philosophy seeking control over government, strict constitutional interpretation, and fiscal responsibility.

But Limbaugh and Gingrich are attacking now while there is no accounting.  When the hearings come and real analysis is laid on the table, their early words will look foolish, although they will have been disavowed or revised by then.  They would not want to risk a real head to head match up of ideas on this one.

At the end of six weeks of hearings in June of 1954, Senator Stuart Symington said to McCarthy, “The American people have had a look at you for six weeks. You are not fooling anyone.”  America won the Cold War against Communism, but we didn’t do it by attacking each other for political advantage.  It was won by better ideas facilitated by honest government and real democracy.

Taking this lesson forward:  America would benefit from an education about judicial philosophy, but personal attacks, on esteemed public servants without credible justification and outside of a hearing process, lower both the level of public discourse and respect for our democratic institutions.

Are Republicans Lying About Financial Reform?

By Marc Seltzer; originally posted on April 20, 2010, at care2.com

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As the Senate moves towards consideration of financial industry reform, politics again threatens to overwhelm substance in the debate.  Conservatives have attacked Democratic legislation with the moniker “bailouts forever.”  Political writer Mark Halperin charged Republicans with “intentionally misreading the law,” echoing claims of angry Senate Dems.  Unlike with health care reform, where budget complexity defied evaluation without experts and CBO forecasts, the core principles of financial reform are fairly straight forward.

The following is what you need to know to make your own decision:

A.  Protections against risky behavior by financial institutions


1. Capital Requirements

Companies will be forced to keep more money available — “capitalization” or “capital reserves” — to protect themselves against losses so that typical companies will not be at risk of collapse in a downturn.  Sufficient capital could have eliminated the need for bailouts of financial institutions in 2008-2009.

2.  Leverage Restrictions
Financial companies will be limited in how much money they borrow and put at risk. Many institutions make money by investing and taking risk with borrowed funds.  This extends their gains in boom times, but threatens overwhelming losses in a bust.  Private companies are still allowed to place their bets, even risky bets, but they cannot do so using such high percentages of borrowed funds, creating a risk of nonpayment when their investments go bad.

Capital and Leverage rules are the key to protecting the economy from a 2008-style crisis. No longer would the great extent of irresponsible risk be tolerated.  With each individual company taking less risk, a severe downturn in the economy could drive some financial entities out of business, but would not threaten the entire financial industry and thus require government assistance.

Watch out for “too big to fail” arguments from the Left (“break up the banks”) or Right (“endless bailouts”). Canada has five of the largest banks in the world and none faltered.  Canada’s financial institutions are regulated with the same type of serious oversight included in current US proposals.  Capital requirements for Canadian banks were held at 7 percent going into this crisis, while the global average was closer to 4 percent. Canada’s chief financial regulator, OSFI Superintendent Julie Dickson, remarked in November 2008, “We have seen how strong capital cushions in Canada have paid off to the benefit of our institutions and overall financial system.” (My comparison of the U.S. administration’s proposals with the Canadian regulatory system)

The point is, capital, leverage and risk management are more important than size.  In fact, no one financial institution in the US was too big to fail as far as the effect on jobs, small business loans or the stock market.  The problem was that many separate but co-dependent entities were unable to handle a downturn and would have failed within a period of months, if not for government intervention.  Early in the Great Depression 5000 banks failed.  Making each bank smaller is irrelevant, if they all fail.

B.  Specifically dealing with failing companies.

1.  Closing companies down — “FDIC Resolution Authority”
The administration’s proposal is to use the FDIC (Federal Depository Insurance Corporation), which currently closes banks that are failing, to close all financial institutions, when they fall below financial operating requirements.  The FDIC is highly regarded for efficient and effective “weekend” bank closures.  FDIC agents take over Friday at 5:00 p.m., and Monday the bank is open for customers, but under FDIC supervision.  The FDIC locates a new buyer quickly and gets out of the way once new management takes over.  Previously, there was no law permitting FDIC action on failing financial institutions that were not technically chartered banks.  Thus, Bear Sterns, Lehman Brothers, Citi, etc., could not have been closed by the FDIC.

The alternative approach, proposed by critics of the FDIC model, is to allow failing financial institutions that are not banks to file for bankruptcy.  Advocates say that bankruptcy courts have more expertise than the FDIC at large complicated business structures.  However, bankruptcy does allow the management to continue through the failure and to propose corrective plans, using the bankruptcy court to deal with creditors.

In the 2008-2009 crisis, insurer AIG would have had to file bankruptcy, if the federal government did not bail it out.  In bankruptcy, AIG and its management would still have aimed to protect their own interests, despite the anticipated international catastrophe of its own making. (Many financial institutions had used AIG to insure themselves against losses; AIG’s collapse would have led to additional major collapses worldwide)

According to the proposed “FDIC resolution authority” model, the financial institution will be taken over and immediately managed by experts with the public’s interest in mind.  Presumably, the bankruptcy model would also protect the larger financial system, since higher capital and leverage standards, discussed above, would serve to lower the amount of damage that any one institution could cause in failure. However, the FDIC, as a banking regulator, has expertise in the financial system, while bankruptcy courts handle competing public and private interests in all types of businesses, and may not always have a view to protecting financial stability.  Remember, the purpose of the new law is to stop poor decision-making of a few entities from impacting the entire industry and the wider economy.

2.  Industry-Financed Disaster Fund
The Senate legislation plans for the financial institutions to contribute to a fund to be used if needed in closing companies.  The 50 billion dollar fund would shield taxpayers from having to pay for any costs incurred by failing financial institutions.  While the new law intends to avoid bailouts altogether, by making financial institutions less risky, more self-sufficient, and by closing them before they create systemic damage, it provides that any bailouts that do occur will be paid from a fund created with private financial company fees.

Should industry-financed bailouts be allowed? Imagine, for example, that a financial institution failure would cause a functioning private hospital to be shut down for a week while it sought new financing from another bank.  In that case, not because of a threat to the wider economy, but because of other public purposes, short-term bailout financing, using the institution-financed fund, might be deemed appropriate, at no cost to the tax payer.

The reason that Congress is rejecting the idea of outlawing any possibility of bailouts, is that it is possible that public purposes will be served by having a bailout option.  What is different here is that the government will not be forced into bailout because the new capital and leverage requirements will protect the wider economy.  Thus, Republican claims that bailouts using public funds will continue, do not take into account the fact that new capital and leverage requirements are the primary defense against systemic risk.  It is not by pledging, even through legislation, to avoid bailouts that we will be protected.  It is by stopping companies from taking so much risk that the entire system is put in danger of collapse.

C.  Consumer Protection

Fundamental consumer protections already exist to keep financial institutions from stealing or mismanaging their customers assets.  However, as the Madoff scandal illustrates, the government is not always effective in policing.  In addition, in the real estate market, many homebuyers obtained mortgages without fully comprehending the terms and consequences.  The new law aims to provide additional protection for consumers.  Krugman: Looters in Loafers

The financial industry is strongly against the consumer protection provisions, partly because they do not know how aggressive the new body will be in regulating business practices.  (Auto-finance example)  The current proposal puts a new consumer-protection agency under the authority of the Federal Reserve.  As the Federal Reserve traditionally regulates banks and manages monetary policy, including the interest rates that banks are charged to borrow funds for their business operations, the issue for the new consumer protection regulator will be how independent it remains from Fed regulators with different goals, and determining what level of protection balances business objectives with consumer rights.

These are the core ideas behind the administration’s plan, as spearheaded by Treasury Secretary Timothy Geithner and now incorporated into Democratic legislation.  As Congressional leaders posture about whether to support or oppose the plan and why, decide for yourself what’s politics and what’s substance.

More by Marc Seltzer:  Hate that Obama’s Near the Middle, Think Again!
Questioning Conventional Wisdom

Will Republicans return to power in November?  Listen to Marc Seltzer and Jessica Pieklo discuss political prospects at Redefining America:  Constitution and Leadership 2010

April 22, 2010 UPDATE: NY Times updates Dems efforts to push forward in the Senate and Republican opposition.

Comment at NPR Planet Money about the Ugly Comment Trail There

Second comment on:

Experts Say Bills Won’t End ‘Too Big To Fail’

As to the comment trail here, I want to say that I respect the earnest Conservative vision of free-market capitalism and small-government individualism, but those who call President Obama a Socialist or Maoist simply illustrate their lack of education about the historical references they make and undermine the credibility of political arguments for libertarianism and against Progressive or Democratic-party principles. Obama, viewed reasonably, is no different than most Presidents who have attempted to solve problems of their time.

The differences between practical Republican and practical Democratic platforms, on the role of government and its financing, are not so different as they are made out to be in the public debate. There are differences and there are merits to Conservative and Liberal positions, but the key is to learn about the real distinctions and make the best choices among them. Instead, the current anti-Obama hatred is parroted from talking points for partisan political purposes, without getting the analysis, or as I say, even the terms, correct. It’s a shame, because good policy is a mix of Libertarian, Conservative, liberal, bureaucratic ideas put to practical use to meet specific real world challenges. http://wp.me/pm5qY-ig

Hate That Obama’s Near the Middle? Think Again

(Photo:  Obama speaking in Europe, where his views are well received and highly regarded)

By Marc Seltzer; originally published on April 13, 2010, at care2.com

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Contrary to all the talk of disenchantment with the state of the nation, there is reason to be optimistic that President Obama is leading the government in exactly the right direction.  While his critics voice disappointment and outrage, calling on Mr. Obama to govern to the left and to the right, President Obama governs by judgment, not ideology.  This will always disappoint ideologues who see the world through conservative or liberal glasses, but do critics have credible political ideas behind them?

At the outset, a few things need to be set straight.  First, the biggest thing President Obama has done since taking office is not health care reform.  (Complete Story)

Our discussion of current issues continues here:

Redefining America:  Constitution and Leadership 2010

Podcast, April 12, 2010 (Click to hear)

With the November congressional elections in mind, we discuss the Democrats’ efforts to regain momentum after the passage of health care reform legislation and Republicans’ attempt to champion a rally against the incumbent majority government.

Republican Calls for Repeal Invite Deficit Scrutiny and Skepticism

By Marc Seltzer; originally published on March 29, 2010 at care2.com

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Reform is Bitter Medicine

One aspect of President Obama’s health care reform legislation that has not received enough serious discussion is deficit reduction.  Despite claims that the legislation expands government, the non-partisan Congressional Budget Office (CBO) says that it will reduce the deficit by a significant amount over the next twenty years.

This has not stopped Republicans, such as Lindsey Graham, from announcing a campaign to “repeal and replace” the legislation.  What the Republicans have not said, is whether they would increase the deficit by such repeal, or find a way to match or improve upon the projected $130+ billion dollars in deficit reduction over first ten years and more than a trillion dollars in projected saving by 2030 contained in the Obama plan.  (Atul Gawande in the New Yorker gives some context)

It’s not hard to create popular legislation if it gives benefits that it does not pay for.  Remember that President Bush’s Medicare Prescription Drug benefit was popular, but was also a giveaway, increasing the deficit.  The harder part is to create legislation that lowers the deficit, without losing support among constituents, who like the idea of deficit reduction, but don’t want to see their own benefits taken away.

No matter what happens in November, President Obama would surely veto any attempts to repeal health care reform.  He may be open to improving upon current legislation, but he has promoted the “PayGo” (from pay-as-you-go) rule, which requires that new legislation not raise the deficit.  “PayGo” requires cuts in spending or increases in taxes to offset any new program spending.  “PayGo” led to surpluses in the Clinton presidency, and will again, so long as it is followed.  However, Republicans have no credibility on fiscal discipline.  They may run for office on a repeal platform, but will they propose alternatives to health care reform that cut the deficit?

Remember, repealing the current law would, in itself, raise the deficit, since Obama’s new legislation substantially lowers the deficit.

Republicans’ most appealing political argument, superficially, at least, against Obama’s health care reform, is that it takes money from Medicare.  Republicans claim it will bankrupt Medicare and hurt senior care.  Democrats refute these claims, arguing that the elimination of waste, fraud and abuse and the establishment of an independent panel to review Medicare spending will lower costs without cutting the quality of senior’s care.

An ongoing disagreement over doctor reimbursement rates may be another difficult challenge or an opportunity for creative problem solving, when it resurfaces in coming months or years.

It is no surprise that Republicans have come down on the side of spending more, and reassuring constituents, rather than bold action and fiscal responsibility.  But if Republicans are going to have any relevant part in the health-care debate going forward, they must be willing to offer potentially unpopular proposals that the CBO agrees will cut the deficit.  So far, Republicans have shown no appetite for the politically difficult task of cutting spending, not in Medicare, not in Social Security, and not in Defense.

President Obama has taken criticism for his stimulus spending.  But this was one-time emergency spending to stave off economic crisis, and the benefit of a rebounding economy should include increased tax revenues and a lowering of the deficit over time.  The President has since made it clear that he came to Washington to make the tough decisions, including long-term deficit reduction.  His health care reform triumph follows through on that promise.

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For more on health care reform:  You’ve Got to Hand it To Them:  Obama, Pelosi and Reid.

You’ve Got to Hand it to Them: Obama, Pelosi and Reid

By Marc Seltzer; originally published on March 22, 2010, at care2.com

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Watching the proceedings in the House of Representatives tonight, I came away with an appreciation of just how strong the Democratic leadership is.  We all knew that Barack Obama had discipline in the way his presidential campaign never faltered.  He kept his eye on the prize and didn’t sweat the small stuff.  But the first year in office raised questions about how much political capital he had lost because of the economic downturn and the unpopularity of the government’s response.  Republicans refused to break ranks.  Democrats were split.  Then came Scott Brown.  How much would the President be able to accomplish?

Click here for the rest of the story.