The Consumer Financial Protection Bureau Part 2 – Constitutional Questions

In Part 1, I detailed my issues with the structure of the Consumer Financial Protection Bureau (CFPB).  Obama’s recess appointment of Richard Cordray to lead the CFPB presented a good opportunity to discuss the bureau.  He also did three more recess appointments to the National Labor Relations Board (NLRB).  I didn’t explore the NLRB is the last post because it’s a whole other topic, and I deliberately abstained from the question of whether any CFPB structure is necessary to focus on the current CFPB structure.  Now that I’ve beaten the CFPB structure to death, what about Obama’s recess appointments? 

It’s yet another example of Obama’s questionable interpretations of the Constitution and another great example of the mentality that the ends justify the means.  It only took him four days into 2012 to challenge the Constitution.  To see why, a little background on recess appointments is in order. 

Recess appointments are used by the President when Congress is on recess to fill vacant seats that arise during recess like directors and judges.  So, there are two key questions here.  First, assuming Congress truly is in recess, is the President acting within his power?  Second, is Congress truly in recess?

Let’s look at the power question first before we attempt to answer the recess question.  The executive power is detailed in Article II, Section 2 of the Constitution:

“The President shall have Power to fill up all Vacancies that may happen during the

Recess of the Senate, by granting Commissions which shall expire at the End of their

next Session.”

This is clearly referring to openings that materialize during the recess, not openings that existed before the recess.  In other words, if a vacancy opens up during recess, then the President is allowed to fill it.  The language does not allow the President to fill a vacancy that was already open before Congress went to recess.  It was worded this way to prevent the executive branch from installing an appointment that Congress rejected (you’ll see Congress’ counter to this executive branch trickery a bit later).  This makes perfect sense because when the Constitution was first written, communication and travel were much slower, thereby making it impossible to quickly convene Congress from recess.  Today, Congress could probably be sufficiently assembled within a day or less.  We see the design of the checks and balances, but we also plainly see how the executive branch is undercutting the legislative branch.  

Not only do we see the President attempting to use power he doesn’t actually have, we also see is the President attempting to act out of turn.  Obama is trying to do this by saying that Congress is actually in recess when Congress says they’re in session.  Now, we need to look at Congress’ recess mechanics in the Constitution and we’ll see that Obama is wrong here, too.

Here’s where it gets fun.  In order for a house of Congress to be in recess, it has to be adjourned for more than three days for the purpose of exercising the recess appointment power.   But, wait, there’s more.  The Constitution explicitly states in Article I, Section 5, “Neither House, during the Session of Congress, shall, without the Consent of the other, adjourn for more than three days, nor to any other Place than that in which the two Houses shall be sitting.”  This means the House of Representatives has to allow the Senate to be in recess during the session and vice versa. 

The House of Representatives has withheld its consent, so the Senate is not in recess.  The Senate then withdrew any request for recess and put itself in pro forma session.  It’s basically a way the Senate can keep itself officially in session, but not really doing valuable work (as opposed to their normal state of not doing any valuable work).  Pro forma session is kind of like idling a car.  The engine’s still running, but the car’s not driving.  The car can’t idle forever, so it has to be shut down periodically to refill the gas tank before it can be turned back on.  The Senate has scheduled several pro forma sessions.  Recess, on the other hand, is more like parking the car in the garage for a few days and leaving it there without running it.  The Senate is not out of session long enough for them to be considered to be in recess.

Let’s look at some arguments from the other side, those who claim this is acceptable.  I saw an article by Gary Weiss claiming Obama was acting legally here.  The author cited Article II, Section 3 in the following manner: “He [the President] may adjourn them to such Time as he shall think proper.”  Here’s the problem.  Weiss is wrong and didn’t fully quote the relevant excerpt of the Constitution.  The full excerpt reads:

“[H]e may, on extraordinary Occasions, convene both Houses, or either of them,

and in Case of Disagreement between them, with Respect to the Time of Adjournment,

he may adjourn them to such Time as he shall think proper;”

The President may adjourn Congress if and only if there is a disagreement between the two houses of Congress regarding adjournment.  We don’t have disagreement between the two houses here.  Remember, the Senate put itself in pro-forma session after withdrawing any recess request and the House of Representatives has not requested a recess.  Thus, neither house is attempting to recess and both agree.  Again, this makes sense because it should generally fall on Congress, not the President, to determine when Congress is or is not in session.

Here are some other thoughts on the matter.  More recently, the Department of Justice (DOJ) issued a 23-page opinion found here.  I wanted to wait to do this post until I got to review this.  Basically, they’re arguing that Obama is allowed to do these recess appointments because pro forma session doesn’t sufficiently interrupt a recess.  They’re arguing that Congress is unable to perform its advise/consent function while in pro forma session.

Two things strike me here.  First, the opinion was issued after the appointments were made versus before.  Second, then-Solicitor General (and current Supreme Court Justice) Elena Kagan sent a brief from the DOJ to the Supreme Court stating, “the Senate may act to foreclose [recess appointments] by declining to recess for more than two or three days at a time over a lengthy period.”  I have not been able to find a link to the brief itself, however.  Very briefly, there's noting in their opinion that convinces me the Obama administration is acting legally.

No court has ever directly addressed this question, so we’ll have to sit back and watch the drama unfold.  I think it’ll be interesting.  My opinion remains that Obama has once again acted unconstitutionally and has put reelection politics above the rule of law in attempting these appointments, first by using the recess appointment power too broadly to cover appointments it is not intended to cover and then by attempting to use the recess appointment power when Congress is not in recess. 

Links:

Weiss article:

http://www.thestreet.com/story/11363369/1/obamas-new-years-resolution-dont-be-a-wuss.html

Department of Justice memo:

http://www.justice.gov/olc/2012/pro-forma-sessions-opinion.pdf

The GOP Primary Finally Got Interesting

And then there were four (five if you count the entertainment juggernaut that is Herman Cain/Stephen Colbert… or whatever you want to call it).  The GOP primary has finally become interesting.  We’re down to Mitt Romney, Newt Gingrich, Rick Santorum, and Ron Paul.  Obviously, with this reduction, Jon Huntsman and Rick Perry finally dropped out of the race, endorsing Romney and Gingrich, respectively. 

We also know that the Iowa results are now in doubt and seem to have gone back on declaring Romney the winner by a 0.01% margin and it’s possible that Santorum really won.  Romney’s New Hampshire victory is not in doubt.  This weekend, we move to South Carolina for an open primary in which non-Republicans can vote.  It’s hard to gauge who the open primary nature benefits, thus making it very difficult to predict one candidate winning over the others.

There will be two types voting here – ones who are picking the GOP candidate they like best (GOP and some Independents) and ones who are picking the GOP candidate that they think presents the easiest opponent for Obama (Democrats and some Independents).  In a bit, I’ll make the cases for choosing each GOP candidate to both kinds of voters.

I think Romney was really hoping Perry would stay in the race through this weekend to weaken Paul, Gingrich, and Santorum.  Now that Perry’s out, the anti-Romney camp is starting to consolidate.  Paul is his own entity rather than anti-Romney per se, so it really comes down to Santorum and Gingrich.  I think there’s really only room for one of those two in the race at this point as the anti-Romney.  I don’t see South Carolina driving either Romney or Paul from the race and I could see it driving either Gingrich or Santorum from the race, but not both.  It will depend on how the two do against each other.  If they perform comparably, I’d expect both to stick around, but if one outdoes the other, I think we’ll see a departure.

Many seem to believe that any Romney win in South Carolina effectively ends the race, but I disagree.  As far as I’ll go is to say that I think a decisive win by Romney or the race remaining a four-way makes it his race to lose.  I’m more interested to see how Gingrich and Santorum do against each other.  If the race gets down to three (Romney, Paul, and Gingrich/Santorum) following South Carolina, Romney could still lose because the anti-Romney crowd would finally coalesce around one candidate between Santorum or Gingrich. 

That’s really all I’ll say on South Carolina, and now onto the candidates.  All this is meant to be is a quick look at why both types of voters might consider each candidate.

Romney is generally viewed as the most electable, presidential, and moderate of the remaining GOP nominees, plus he has a very solid body of experience in both the private and public sectors.  I think Romney can pick up a lot of the UMMAI voters (Undecided, Moderate, Marginally Attached, and Independent; yes, I added another ‘M’ into my previous acronym).  That said, he has a lot of trouble relating to average Americans and it’s hard to figure out what Romney really believes.  He reminds me a lot of John Kerry – both are from Massachusetts, wealthy, somewhat awkward interacting with people, and appear to have a tendency to change views on issues for political expediency rather than conviction.  Personally, if I was a Team Obama strategist, there are others in the field that I’d rather face than Romney, but a match with Romney is still winnable.

Paul is one of the intellectual founders of the Tea Party and very consistent in his views.  You definitely know what you’re getting with him.  Really, Paul is a Libertarian rather than a Republican.  He has a small yet energetic and devoted, almost fanatical, following.  I don’t think Paul has the ability to expand much beyond his TP/Libertarian base because I see his positions as too extreme for most of the UMMAI crowd.  I also believe Paul’s key issues, namely monetary policy, the Federal Reserve, and the gold standard, are a bit too complex, I guess I could say, for the election.  Paul doesn’t come across as very presidential or electable to me, either.  I would view Paul as Obama’s ideal opponent if I was in the Obama camp and evaluating from a strictly politically strategic perspective. 

Santorum is another known-entity.  He has strong blue-collar roots and, though he isn’t quite as moderate as Romney due to his social conservatism, he is noticeably more moderate than Paul or Gingrich on non-social issues.  Santorum’s biggest problems, in my view, are his social conservatism and lack of personality and presidential aura.  He’s very reminiscent of Tim Pawlenty to me on demeanor.  Santorum’s social conservatism scores points within the GOP base while it weakens his ability to draw UMMAIs.  Despite the social conservatism, I think he has broader appeal than either Gingrich or Paul because his blue-collar roots would help him pick up so-called Reagan Democrats (I think the roots help him more than the social conservatism hurts him here).  Like Romney, Santorum wouldn’t be my first pick as an Obama operative, but still winnable.

You know what you’re getting with Gingrich, too.  Whether that’s a good thing or bad thing depends on how you view his record and his character.  He’s still a popular guy within the GOP ranks (including the endorsement of Chuck Norris), but like Paul, I question how well he would appeal to UMMAIs.  Gingrich has character issues and he has a tendency to put his foot in his mouth.  On a side note, here’s an interesting read about Gingrich’s character issues.  Also, like Paul, he doesn’t come across as very presidential and is a bit on the abrasive side.  If I was on Team Obama, I would not mind facing Gingrich and would see it as very achievable.

Cain/Colbert are great entertainment and genius, pure and simple.  The satire of it all is brilliant and it’s funny stuff.  I’m thoroughly enjoying it.

So, there you have it.  That’s South Carolina and the GOP final four (or five if you count Cain/Colbert). 

UPDATE: Shortly after posting this, it was confirmed that Santorum was the real winner in Iowa, not Romney. 

Links:

http://www.foxnews.com/opinion/2012/01/20/newt-gingrichs-three-marriages-mean-might-make-strong-president-really/

A Look at the ESP Spectrums – Political Part 1

As I did with the social spectrum, I’m going to start this look at the political spectrum by copying exactly from my first post in this series.  From my previous column:

“We now move onto the global political spectrum shown in Figure 2. 

 

 

Again, we assume a government exists, thus no anarchy.  The overlap between Figures 1 and 2 is not a coincidence.  Our political structures are directly correlated to freedom and the social spectrum.” 

One form of government I didn’t capture was fascism.  The main reason for this is that fascism is, in my view, basically an unholy hybrid of the worst of both communism and fundamentalism.  One could put fascism at the extreme left or extreme right of Figure 2 and be able to reasonably justify it because, in essence, it represents a political system in which the government is god-like in power.  Said another way, I don’t view fascism as unique enough to justify its own category.  Nazi Germany is the prime example of a fascist state.

Having just addressed the missing content, it’s now time to address what’s already there.  We’ll start at the far left with communism.  This is a system of government that’s founded with the vision of a society in which everyone is equal.  The government is generally very totalitarian and domineering over the population, granting the people very limited rights.  It truly epitomizes the phrase, “Big government, small people.”  Economically, communists hate capitalism and believe it must be destroyed.  Karl Marx is the man behind it all, so this is relatively new.  It has failed (or is failing) everywhere it has been tried.  Soviet Russia is the quintessential example, but we still have communist-like states failing today in Cuba, North Korea, and Venezuela. 

Socialism is basically communism-lite, and no more successful.  Look at present-day Europe.  The main reason they’re in the mess they’re in over there is because of their socialist governments (sometimes called social democracies).  The difference between socialism and communism lies mainly in the severity of the government’s tyranny inflicted on the people.  Communist governments are far more tyrannical than socialist ones, though the disregard for individual rights is still very pronounced in socialist nations.  Also, the economic systems are very different, but I’ll leave that point for my economic spectrum post.  All I’ll say for now is the communists would destroy capitalism while the socialists would try to use capitalism for their own purposes. 

Why would I leave China off?  They call themselves communists, but they’re a different kind of communist than the others.  The Chinese communists (Chicoms) take the totalitarianism of a typical communist regime, but they maintain a sort of capitalist economy.  The Chicoms are really their own category and you can’t reasonably lump them in with the Marxists and socialists.  I think the Chinese model will eventually fail them, as well, but that’s another story for another time.

And we have now arrived at our republic.  The government is functional, but not tyrannical like a communist or socialist regime.  In this government model, the people elect representatives from among themselves and these representatives do the vast majority of the voting on bills (with the occasional referendum on the ballot).  Individual rights are upheld.  Early Rome was the first republic, and the USA is a present-day republic. 

The major difference between a republic and a democracy is who votes on bills.  In a democracy, people vote on everything.  Every bill would basically be a referendum.  I’m sure you can see how this would be impractical on a large and complex scale in the 21^st century.  Imagine how much time it would take out of your day to vote on every single bill that has to get passed.  Society would grind to a halt because we’d always be voting.  “One person, one vote,” works on smaller scales.  The Greek city-state of Athens was the original democracy, but there really is no true modern day example unless you want to count Occupy Wall Street’s general assembly meetings (I don’t want to because they’re not an actual government, among other reasons).

Then, there’s the monarchy.  This is a place where a single ruler, a king or a queen or whatever, runs the show.  The level of tyranny depends almost entirely on the temperament of the ruler.  Monarchies have been around for millennia, so there are countless examples throughout time, such as the Roman Empire (yes, they had a Senate, but the emperor really ran the show).  Present-day England is a constitutional monarchy. 

I put the republic, democracy, and monarchy together because they have strong overlap.  You’ll often see a hybrid structure modeled after the Roman Empire in which you have a central figure (their emperor) and a legislature (their senate).  The two entities work together to run the government.  In the case of Rome, the emperor was far more powerful than the legislature, so the most important lesson to learn from the Roman Empire is the danger of unchecked executive power. 

The USA takes this dual-structure one step further, turning it into a three-branch government by considering the courts (judicial branch) and using an elaborate system of checks and balances.  One could make the argument that, given the steady trend of concentration of power in the executive branch in the USA over the past century or so, the USA has started to drift away from the republic and more towards a monarchy, but that’s out of scope here. 

Also, note that I could’ve put socialism in with these, too, because socialist regimes often have a similar structure, but it’s more closely related to communism than these other three, in my view.

So, what about theocratic and fundamentalist governments?  These are based on religion, but the difference lies in the degree which religion runs the show.  A fundamentalist regime is much more driven by religion than a theocracy.  In some cases, such as ancient Egypt, their pharaoh was essentially viewed as a god on Earth or has some kind of direct link to the divine.  In other cases, the ruler is considered to be ‘blessed’ by the divine and does still interface with the divine.  There’s little (theocracy) or very little (fundamentalism) separation of church and state here.

The next post in this series will break down the American political spectrum.  Obviously, to do that, I first had to do what I just did and take a more global look to show where we fit in. 

The Consumer Financial Protection Bureau Part 1 – A Flawed Structure

The fight over the Consumer Financial Protection Bureau (CFPB) has dragged on since it was first created in the Dodd-Frank Act (HR 4173 – full text here).  The GOP has been successful thus far in preventing this agency from getting off the ground, including blocking the nomination of Elizabeth Warren and Richard Cordray to lead the CFPB.  That is, until Barack Obama illegally appointed Cordray this year with a recess appointment.  He also did three illegal appointments to the National Labor Relations Board (NLRB) through the same process (the NLRB is a whole other topic).  I’ll make this a two-parter, with this post looking at the CFPB’s structure and the second post looking at the (il)legalities of Obama’s appointments.

The Democrats have been complaining about GOP obstructionism and creating the perception that the GOP just wants to stick it to Obama.  They’re trying to make the GOP look like they don’t care about protecting consumers and the GOP is just trying to protect “Wall Street”.  In essence, they’ve made the GOP appear as though they oppose any CFPB structure rather than the current CFPB structure.  The Democrats, to this point, appear largely unwilling to discuss structural issues with the CFPB.  They don’t even appear to care why the GOP is opposing it.

The GOP contends there are significant structural flaws in the CFPB that render it largely unaccountable to the American people that must be addressed first.  Such structural issues include the fact that the organization would be lead by a single director for a five-year term and the fact that the CFPB would get its funding from the Federal Reserve Board rather than congressional appropriations.  Remember, many agencies are led by multi-member boards of directors and are funded through the congressional appropriations process, both of which provide vital checks and balances to reduce abuses. 

I think the GOP makes some very valid points, but the Democrats are winning the public relations battle.  The GOP has done a terrible job of articulating their reasons for opposing the CFPB’s structure and have allowed the Democrats to control the discussion.  That’s a problem because the valid points the GOP is raising are being lost.  Let’s leave aside the issue of whether a CFPB is necessary (it probably is in some form because people do not have the financial savvy and responsibility/accountability that they should have, but this is a whole other topic) and examine the structure of the current CFPB. 

The current structure of the CFPB basically means that one person would be able to make sweeping decisions effecting the lives of millions of Americans and thousands of businesses with zero accountability, as the legislative branch would have no real oversight and even the executive branch would have very limited oversight.  The single-director structure is the most troubling part.  I can understand the need to have the CFPB insulated from political considerations to a degree, like the Supreme Court and Federal Reserve are.  However, the Supreme Court and Federal Reserve (and even the aforementioned NLRB) are made up of multiple members with appointments by the White House and confirmations by the Senate.  Creating such a powerful organization headed by only one person is an unacceptable concentration of government power.  It needs to be run by a board of at least five members like we see elsewhere in the executive branch.  Even Elizabeth Warren’s original idea for the CFPB revolved around a five-person board. 

Addressing this now is just prudent governance.  It’s much easier to address problems with a bill before it’s fully implemented than after.  I know it’s not the government’s typical mode of operation to try to address problems proactively.  I know they prefer to do so reactively (usually only after what was a minor issue turned into a major or even catastrophic problem due to inaction or, even worse, government policies that exacerbate the condition).  Besides, it’s not as though legislation is a one-and-done kind of deal.  We do have the ability to pass bills that amend or repeal other bills that were previously passed – like we just did with the two-month payroll tax cut extension. 

The bottom line is the CFPB has vital structural flaws that must be addressed first.  It never should have been structured with a single director and we have the opportunity now to change it to a multi-member board.  These issues were present in the original law and should have been dealt with then, but they were not.  They must be dealt with now before someone is appointed to lead the bureau.  Obama and the Democrats are putting politics above prudent governance by being unwilling to address these issues.

Links:

Full text of Dodd-Frank Wall Street Reform and Consumer Protection Act

http://thomas.loc.gov/cgi-bin/query/z?c111:h4173:

Album Review - Daughtry’s “Break The Spell”

I bet you were thinking my first post of 2012 would be either a look-back at 2011, a look-ahead to 2012, or maybe something about current events like the escalating tensions between Iran or the GOP Iowa caucus or Obama’s recess appointments.  Nope, guess again.  I’m still in vacation mode and not feeling like getting back into the current events quagmire quite yet.  There’s plenty of time for all that stuff.  I’m starting 2012 with an album review of Daughtry’s “Break The Spell” and it’s a bit longer than my normal album review because of some extra stuff upfront, but it’s the usual formula of artist/album introduction followed by the album overall, song-by-song, and wrap-up. 

Yes, this is the Chris Daughtry of American Idol fame, the one who somehow didn’t win Season 5 (as with Adam Lambert coming up just short in Season 8, I still have no idea what America was thinking, but not winning the show is probably going to be good for both of them).  After placing 4^th and turning down an invitation to become the new lead singer of Fuel, Daughtry formed his own band and they just released their third album called “Break The Spell.”  It came out in late November and was a Christmas gift. 

The mood of the album is very up and down, as evidenced by a swing from extreme lows in “Gone Too Soon” to highs in “Louder Than Ever”.  Using those two songs, we also see the album moves through time to explore both alternative timelines as well as the actual timeline (past, present, and future).  Even a couple song titles like “Renegade” and “Crazy” take us back in time because it’s hard not to think of the Styx and Aerosmith songs of the same names, though this is probably unintentional.  There are also numerous references to cars or driving/moving, so it’s not just about traveling through time, but also space.  Motion seems to be the general theme, be it through time or space or on the happiness/sadness spectrum.  Also, quite a few of the songs focus on love.

This is a very interesting album in that there’s a little something for everybody and, even though it feels like it’s all over the place in a few ways, it comes together.  It’s a bit lighter and slower in sound than their previous albums overall while still having some higher-energy songs.  Indeed, you can hear elements from throughout the past literally 50 years of rock music on this album (fifty is not a typo), which fits with that time and space traveling feel. 

And, now we go song to song.

“Renegade” is a great start and, like previous albums, they storm right out of the gate and, though not my favorite song on the album, still solid nevertheless.  It’s important to start strong, otherwise listeners will tune out (it’s probably not as much of an issue in this era of cherry-picking songs over the interwebs instead of buying the whole album – or buying the whole CD in the case of dinosaurs like me). 

“Crawling Back To You” slows down at the start and then picks back up hard into the chorus.  Like the previous song, it’s not my favorite and still solid.  It’s a good radio track that showcases Daughtry’s broad musical and vocal talents quite nicely.  They did well here at melding the mood of the music and lyrics, literally creating a crawl-like sound in the main verses.

“Outta My Head” is, for me, one of the weaker songs on the album.  It just didn’t click for me.  That said, I will credit them for trying something new and creative while shaking up the sound.  One of the worst mistakes musicians can make is to create an entire album of all similar-sounding songs.  An album without diversity bores the listener and makes the songs blur together.  This is generally not an issue for Daughtry and isn’t here, either.  

“Start Of Something Good” slows us down and it’s one of my favorites on the album, more than making up for the previous tune.  It hits the motion theme and touches on the crossroads.  It resonates by balancing the general and specific, thereby allowing listeners to tailor the song to their own experiences. 

“Crazy”’ is another one that doesn’t click for me.  It’s sandwiched between two good songs and does a good job of reaccelerating the sound following the previous song.  It has a good and catchy sound to it, but it doesn’t resonate with me like some others do.

“Break The Spell” is a fun one.  Similar to “Crawling Back To You,” the music is crafted very carefully to create a certain vibe, here slightly mystical, magical, or spellbound.  Also, the (at times) fast and hard pace echoes the energy one would use to try to resist a spell and the frustration at being unable to do so. 

“We’re Not Gonna Fall” is a motivational and uplifting song.  It’s simultaneously determined and light in sound.  The song reminds me of something we would hear while watching a more inspirational show such as “The Biggest Loser”.

“Gone Too Soon” is a haunting song wondering about what might have been after the loss of a child (likely unborn or very young, but that’s speculation on my part).  Obviously, it’s not exactly a happy song, as it’s the low and the alternative timeline I mentioned earlier.  It’s a powerful song, easily one of my favorites on the album. 

“Losing My Mind” speeds things up a bit again and continues the travel theme, this time meeting a woman on a train.  I found this one particularly catchy mainly because of the, “One part angel and one part danger” lyric.  It’s a fun one, too.  This one isn’t quite in the top tier with my favorites on the album, but it’s close.

“Rescue Me” slows it back down somewhat and it’s another timeline song, but this is more of a crossroads song than a reflection.  It’s one of the weaker songs on the album, in my opinion.  As with “Crazy,” it’s sandwiched between two good songs.

“Louder Than Ever” is another of my favorites and kicks the tempo back up into the finish as a song on the radio recalls the energy of young love.  If the last song was a crossroad, this one is definitely a reflection.  I like the pace and the energy of this song, plus the lyrics resonate.  The upbeat tempo fits very well with the energy of youth.

“Spaceship” is a solid end to the album and a natural follow-up to the previous song.  It’s a stark contrast to the light and slow endings for both of their previous albums.  It’s also a very uplifting song about hope for the future and wonder about what else is out there. 

Here’s the bottom line.  If you liked either/both of Daughtry’s first two albums and/or you’re a fan of some of the no-frills rock we’ve heard over the past literally half-century, you’ll probably like this one. 

Social Security Tax (Interim) Post-Mortem

The government has agreed to a two-month extension to the payroll tax rate.  It is to be funded by increasing fees at Fannie Mae and Freddie Mac.  I’m going to be very blunt here.  Though this is better than no deal, I hate this deal and I think everyone is a loser, with the biggest loser being the American people.  Even though the Democrats can claim victory for this little battle, it’s hard for me to call them winners.  Instead, I’m inclined to say they simply loss less than the GOP.  I’ll come back to that in a bit. 

One of the worst details in this deal is that it sets a very dangerous precedent of the government plundering Fannie and Freddie for funds.  Sure, maybe it’s not an entirely new precedent considering how they’ve already plundered the Social Security Trust Fund (SSTF) and replaced it with Treasury notes, but Fannie and Freddie are new targets as far as I know.  The politicians claim that this is a one-time thing, but we should not believe them if history is any indication.  They’ll do it again sometime, possibly as soon as February.  The increased fees at Fannie and Freddie will be an even further headwind for housing, but hopefully they will only be in effect these two months.  Housing doesn’t need more and/or stronger headwinds.  It trouble enough to begin with and it’s a major albatross on the economy.  I suppose there are worse sources to fund this from, but not by much.

The fact that it’s only two months bugs me, too.  They just wanted to be able to go home for the holidays, but they shouldn't have ended up in this rush at the end.  One of my arguments advocating a one-year (ideally longer) extension is so that we won’t have to fight the battle again and create that sour mood that saps confidence in both our personal financial situations and our government.  I was hoping we’d be able to move onto other issues, but that’s not the case.  This just gives the government another chance to screw it up, which worries me.  This risk and sour mood are the core of my rationale for viewing the American people as the biggest loser.  Suffice it to say, I’m not looking forward to this fight again next year.

I still favor a multi-year extension and reduction in the personal payroll tax rate.  I’d like to see it get taken down to 3.1% and locked in for multiple years.  I’d also like to see it expanded to businesses.  I think locking it in for several years and expanding it further would turn it into even stronger economic stimulus.  Yes, I know that would worsen Social Security’s already weakened state.  For me personally as a guy under 30, I write off any money I put into Social Security from my paycheck as a 100% loss, whether it comes from me or my employer, so I also view this as a chance to reduce my losses in addition to economic stimulus (I’m just being honest about my financial interests).  I don’t think my vision will happen since they can’t even agree on a one-year extension of the current rate, but I can hope, right?

Onto the politics.  As I said above, I think both parties are losers, but the Democrats are less of one for now.  The Democrats can high-five themselves all they want now for winning this battle on the issue, but if history is any indication, I would not be surprised to see them find a way to lose the war in February because they’re good at inventing ways to lose.  They dug in and held their ground with a bipartisan compromise.  They’re right to high-five themselves, but they would be foolish to get complacent here.

The GOP may be divided, or it may be more motivated not to give ground next year.  We’ll know better about that next year, but I think the latter is more likely than the former.  The GOP was the clear loser here not just because they caved, but because they didn’t do a good job of making the argument that we should just do a one-year extension now.  They also didn’t do themselves any favors with the funding they proposed.  Interestingly enough, the Democrats were able to outflank the GOP on the right here, which doesn’t often happen. 

I’m still sticking with my prior prediction that a one-year deal gets done, meaning we get this through all of 2012.  My expectation remains a straight extension versus an expansion.  I’m wrong for now, but I think I’ll be right in the end.  We’ll see in a couple months. 

A Look at How Peaceful Occupy Wall Street is and the Escalation of Tactics

It’s a very simple question.  Just how peaceful is Occupy Wall Street (OWS)?  Before we start, let’s level-set some words.  ‘Peaceful’ is not equivalent to ‘lawful’ and there are multiple antonyms to ‘peaceful’, including both ‘violent’ and ‘disturbed’.  Supporters claim they are a fully peaceful group exercising their 1^st Amendment rights and non-violent civil disobedience (see here for a great write-up about the limits of the 1^st Amendment; hint – 1^st Amendment rights are not absolute and do not allow infringement on the rights of others).  Opponents claim they are a violent, disruptive, and lawless mob that has no regard for the rights of others including property rights.  I suspect that one of the disconnects in the argument for/against OWS’s peacefulness is whether it’s in relation to violence or disturbance.  Supporters seem to think in terms of only the former while opponents seem to think in terms of both.  In other words, supporters believe OWS can be simultaneously peaceful and disruptive while opponents disagree.

Really, it depends on how much emphasis you are willing to put on the actions of the worst in the crowd.  I’m generally an advocate of not demonizing a big group based on the actions of a small number of problematic people and I recognize that many OWS protesters are of the non-violent variety, but that does not mean we can simply overlook the bad actors, who have become too egregious and too numerous to ignore.  I’d like to do that here from a couple different perspectives.

I follow @OccupyArrests on Twitter as my source for OWS arrest information and they are currently showing over 5,600 arrests since this whole thing started about three months ago.  Their numbers are higher than my own informal tracking, but I suspect this is because people are actually actively giving them more accurate information than what I’m able to find and they’re clearly spending more time tracking it than I can.  Because of that, they’re doing a better job picking up accurate numbers and the smaller incidents than I am, so I defer to them.

Their numbers show that, while a good portion of the arrests occurred in high-profile incidents in which hundreds, were arrested, such as the Brooklyn Bridge, Oakland riots, and big demonstrations from California, Chicago, and Boston, most of the arrests stem from smaller incidents.  Unsurprisingly, there are far more numerous smaller incidents in which the arrest count remained in single digits or the teens.  The big incidents account for maybe a quarter or a third of the arrests to this point. 

It’s one thing to look at arrest numbers, but we need to go a bit deeper than that, and we start to see an escalation.  Early in the movement, within say the first few weeks, there were really no single incidents that were making headlines aside from the Brooklyn Bridge.  Of course, we’ve seen pictures of off-the-wall stuff like defecation onto a burning American flag and a police car, but these were (relatively) benign actions.

As a couple weeks more passed, we started to see some pretty robust vandalism, which was sometimes followed by a note or even further graffiti stating that said act of vandalism was not approved by the General Assembly.  I somehow doubt that makes the victim feel any better because they’re still out the cost to repair the damage, and if OWS really wants to make it right, they’ll pay for the damage instead of using the money to buy TV commercials.  But, I digress.

Within the past few weeks or so, we’ve seen the escalation continue because now we’ve had multiple reports of sexual assaults.  That situation even prompted some groups to create woman-only areas and formalize procedures for dealing with troublemakers.  Also, there have been multiple drug overdose incidents, gunshot incidents, and even a Molotov cocktail. 

More recently, several OWS camps have been broken down due to public health, fire hazard, and law enforcement concerns.  This was sometimes done in the middle of the night to minimize the number of people in the camp and minimize their ability to coordinate resistance, such as in NYC.  In the days following the camp breakdowns, we’ve even seen injuries inflicted on both protesters and law enforcement as tensions rise. 

But, wait, there’s more.  OWS has even been responsible for some rioting and is actively attempting to disrupt commerce by occupying several seaports.  This is a noteworthy escalation because it has a more global impact.  Camping out in a city is really just an inconvenience for that city’s residents and visitors.  Blocking ports, however, is disruptive throughout the business chain as delivery schedules are thrown off.  When delivery schedules are thrown off, payment schedules are often impacted, creating problems with things like cash flow and inventory management.  As with the victims of vandalism above, I somehow doubt the entities losing money due to the port disruptions are very happy about this, be they workers or businesses.  These are the ports of the 100%, not the 1%. 

As if trying to shut down ports wasn’t enough for one week, OWS escalated things further still over this past weekend when OWS attempted to take over a vacant lot owned by the Trinity Church.  Essentially, OWS figured that since the church wasn’t using it, they could take it. 

As incidents like these stack up, the narrative of a peaceful OWS, whether in relation to violence or disruption, is very much challenged.  If they want their movement to be successful, they need to quickly slow and reverse this escalation.  They also need to shake what I see as a blatant disregard for collateral damage and the rights of others, as evidenced by the sexual assaults, violence, occupations, vandalism, rioting, port disruptions, and attempts to take over a church’s property.  OWS is trying to get the general populations’ attention and rouse them into pressuring their elected officials.  However, I don’t think the little attention they’re receiving now is good attention and OWS is running the risk that the people will not push lawmakers to address OWS’s issues, but OWS itself.

Links:

http://revmagdalen.blogspot.com/2011/12/occupy-wall-street-1st-amendment-is-not.html