Month: November 2008

I’ve seen the advertising for this documentary but today I finally had a chance to sit down and watch a 30-minute condensed version of a movie that claims to make our national debt and unfunded liabilities more understandable. It’s called I.O.U.S.A. and was bankrolled by a fairly new group called the Peter G. Peterson Foundation. Peterson is a longtime fixture in both the financial and political worlds whose most public role was as Secretary of Commerce in the Nixon Administration.

This half-hour snippet does a good job of explaining where the liabilities come from but maybe suffers from a bit of amnesiac history. If you have the time, check it out and I’ll tell you what I think.

Oh come on. You should have known by now that I was going to tell you what I thought regardless of whether you watched or not. I’m sure the Peterson Foundation people would have enjoyed your viewership though because they do address a serious and growing problem.

However, I take exception to where much of their blame is affixed. In this segment they blame both the Reagan and Bush 43 tax cuts for rapidly growing the debt, while praising President Clinton for balancing the budget. Perhaps that’s not completely a surprise given Peterson’s work for a relatively moderate Republican President (those my age may recall the wage and price freeze Nixon implemented in an unsuccessful attempt to address inflation) and his bipartisan political donation pattern, which tends to favor the most centrist of Republicans.

My contention though is that, because these tax cuts actually increased revenue, the problem doesn’t lie with that aspect of federal finances. It’s glossed over somewhat in the short version of the movie (perhaps the full version takes a longer look at the issue) but entitlements are already accounting for a full third of our current budget and it’s claimed by 2030 the entire budget could be swallowed up by entitlements and debt service unless the revenue stream is increased. I.O.U.S.A. also states that the tax burden we face would need to double to account for the $53 trillion in unfunded liabilities we owe, most of which lies in Social Security and Medicare.

We’ve had numerous warnings about the fate of Social Security stretching back decades. Many are the Congresses who say they’ve come up with a “fix” to the problem, generally through increasing the FICA tax bite, extending the age of eligibility for full benefits, or a combination of both. The reality is that as people live longer they extend their period of receiving those checks each month, and what was originally billed as old age insurance will within a decade put out more in benefits than is taken in through payroll taxes. Needless to say, however, Social Security still is a “third rail” of politics – witness the outcry by the Democrats and their allies at the AARP earlier this decade when privatizing a small portion of worker contributions was placed on the table for discussion.

Similarly, Medicare has a large voter base who shrieks anytime they perceive a threat to the entitlements they believe are owed to them. It’s my contention that one major mistake the outgoing Bush Administration made was adding the Part D benefits to Medicare – it’s another pot of money which isn’t infinite but those who receive the benefits generally think of as something else they’re owed. With both Medicare and Social Security, the federal treasury is looted in ways the Founders would have thought to be quite unseemly. On the other hand, those who have come to depend on these programs have a point that they trusted Washington to provide these services in their old age as they’ve been promised since the day they began working and contributing.

The movie is somewhat better on issues of trade and a lack of personal savings but spends too little time in this version talking about them. The producers correctly note that much of our trade deficit comes with countries who also hold a large portion of our debt, making financial warfare a possibility. (Most noteworthy is that these creditor nations produce the oil we use and manufacture the goods we buy. Both of these were once achieved on our own shores not all that long ago, and can still be if we put our minds and policies to it.) And as we’ve all come to find out, the lack of savings and a overly consumption-based way of life may have placed Americans in an unsustainable long-term position insofar as growing the economy goes. Unfortunately, it’s quite possible that those who most benefit from the recently-passed federal bailout on a personal level are the ones who need most to learn the lessons about savings and not living beyond their means. Instead they’ll be granted yet another chance to live high on the hog by an entity who has managed to do so for most of the last several decades, one which refuses to learn that lesson itself but has the huge advantage of being able to print money.

While I.O.U.S.A. has a very valid point, its flaw comes in analyzing the root causes incorrectly. The federal government is shouldering its debt because those in charge of it lost sight of the proper, Constitutional role of government and decided instead to lubricate the gears of perpetual re-election and political power by taking from those who produce and giving to those who don’t. It’s not the President who creates the budget and authorizes appropriations, but Congress. Part of what irked me about their presentation of the debt in recent years is that they castigated President Reagan’s tax cuts for adding to the deficit when the Democrats in Congress wrote Reagan-era budgets, but praised Clinton’s balancing the budget when it was the most conservative series of Congresses in the last 50 years (with Newt Gingrich as Speaker) who put together those budgets.

What frightens me most about the doomsday scenario of this movie most is that those who America recently put in charge will likely do little or nothing about the root causes of the problem but instead patch it up with another Band-Aid solution, or worse yet go about business as if nothing’s wrong.

The trick for those of us on the conservative side who wish to actually reduce the size of government and tackle this ticking financial time bomb is to do so in a manner which doesn’t affect the benefits of those who receive them but slowly weans those in my generation (I’m 44) and beyond away from the line of thinking that the federal government can be a cradle-to-grave provider. Personally I’d like to see the two largest entitlement programs sunsetted but I know it’s not a political possibility until the necessary change in attitude among the public at-large occurs, a change that may not occur for another generation or two.

But change it must, otherwise the financial pain our grandchildren face may be too enormous to bear in a free society.

This was another item which I came across before the election, but was so busy with campaigning I didn’t have an opportunity to place it up. More’s the pity, perhaps I could have swung a few votes the right way.

Recently, Supreme Court Justice Clarence Thomas delivered the Wriston Lecture to the Manhattan Institute. Originally this was published in the Wall Street Journal but came to me thanks to the Americans for Limited Government group.

When John F. Kennedy said in his inaugural address, “Ask not what your country can do for you — ask what you can do for your country,” we heard his words with ears that had been conditioned to receive this message and hearts that did not resist it. We heard it surrounded by fellow citizens who had known lives of sacrifice and hardships from war, the Great Depression and segregation. All around us seemed to ingest and echo his sentiment and his words. Our country and our principles were more important than our individual wants, and by discharging our responsibilities as citizens, neighbors, and students we would make our country better. It all made sense.

Today, we live in a far different environment. My generation, the self-indulgent “me” generation, has had a profound effect on much around us. Rarely do we hear a message of sacrifice — unless it is a justification for more taxation and transfers of wealth to others. Nor do we hear from leaders or politicians the message that there is something larger and more important than the government providing for all of our needs and wants — large and small. The message today seems more like: Ask not what you can do for yourselves or your country, but what your country must do for you.

This brings to mind the question that seems more explicit in informed discussions about political theory and implicit in shallow political speeches. What is the role of government? Or more to the point, what is the role of our government? Interestingly, this is the question that our framers answered more than 200 years ago when they declared our independence and adopted our written Constitution. They established the form of government that they trusted would be best to preserve liberty and allow a free people to prosper. And that it has done for over two centuries. Of course, there were major flaws such as the issue of slavery, which would eventually lead to a civil war and casualties of fellow citizens that dwarf those of any of the wars that our country has since been involved in.

Though we have amended the Constitution, we have not changed its structure or the core of the document itself. So what has changed? That is the question that I have asked myself and my law clerks countless times during my 17 years on the court.

As I have traveled across the country, I have been astounded just how many of our fellow citizens feel strongly about their constitutional rights but have no idea what they are, or for that matter, what the Constitution says. I am not suggesting that they become Constitutional scholars — whatever that means. I am suggesting, however, that if one feels strongly about his or her rights, it does make sense to know generally what the Constitution says about them. It is at least as easy to understand as a cell phone contract — and vastly more important.

The Declaration of Independence sets out the basic underlying principle of our Constitution. “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed . . . .”

The framers structured the Constitution to assure that our national government be by the consent of the people. To do this, they limited its powers. The national government was to be strong enough to protect us from each other and from foreign enemies, but not so strong as to tyrannize us. So, the framers structured the Constitution to limit the powers of the national government. Its powers were specifically enumerated; it was divided into three co-equal branches; and the powers not given to the national government remained with the states and the people. The relationship between the two political branches (the executive and the legislative) was to be somewhat contentious providing checks and balances, while frequent elections would assure some measure of accountability. And, the often divergent interests of the states and the national government provided further protection of liberty behind the shield of federalism. The third branch, and least dangerous branch, was not similarly constrained or hobbled.

Since Marbury v. Madison the federal judiciary has assumed the role of the interpreter and, now, final arbiter of our Constitution. But, what rules must judges follow in doing so? What informs, guides and limits our interpretation of the admittedly broad provisions of the Constitution? And, more directly, what restrains us from imposing our personal views and policy preferences on our fellow citizens under the guise of Constitutional interpretation?

To assure the independence of federal judges, the framers provided us with life tenure and an irreducible salary — though inflation has found a way around the latter. This independence, in turn, was to assure our neutrality and impartiality, which are at the very core of judging — and being a judge. Yet, this independence can also insulate a judge from accountability for venturing beyond the proper role of a judge. But, what exactly is the proper role of a judge? We must understand that before we can praise or criticize a judge. In every endeavor from economics to games there is some way to measure performance.

As important as our Constitution is, there is no one accepted way of interpreting it. Indeed, for some commentators, it seems that if they like or prefer a particular policy or conduct, then it must be constitutional; while the policies that they do not prefer or like are unconstitutional. Obviously, this approach cannot be right. But, it certainly is at the center of the process of selecting judges. It goes something like this. If a judge does not think that abortion is best as a matter of policy or personal opinion, then the thought is that he or she will find it unconstitutional; while the judge who thinks it is good policy will find it constitutional. Those who think this way often seem to believe that since this is the way they themselves think, everyone must be doing the same thing. In this sense, legal realism morphs into legal cynicism. Certainly this is no way to run a railroad, not to mention interpret the Constitution. . . .

Let me put it this way; there are really only two ways to interpret the Constitution — try to discern as best we can what the framers intended or make it up. No matter how ingenious, imaginative or artfully put, unless interpretive methodologies are tied to the original intent of the framers, they have no more basis in the Constitution than the latest football scores. To be sure, even the most conscientious effort to adhere to the original intent of the framers of our Constitution is flawed, as all methodologies and human institutions are; but at least originalism has the advantage of being legitimate and, I might add, impartial.

As with Thomas, I tend to favor original intent as in what’s actually written there. It shouldn’t be a secret that there’s a pocket-sized copy of the Constitution and Declaration of Independence on my desk, one which I refer to on a regular basis. Justice Thomas also succinctly describes the problem with many of the appointees which have come from Democratic administrations and certainly will be advanced by Barack Obama – rather than judging cases on what is in the Constitution already, they’ll short-circuit the ratification process for new amendments and indeed “make it up.” It’s why we have decisions like Roe v. Wade and the ficticious “right to privacy.”

Obviously a body made up of just nine people, even if they’re the brightest among us, are going to have all the frailties of humanity. Sometimes one who is thought to exhibit a good judicial temperment turns out to be a poor choice – President Eisenhower famously kicked himself figuratively for two of the Supreme Court selections he made during his term. More often than not, the judiciary is about politics just as much as anywhere else.

However, it’s interesting to note that few justices who were appointed by liberal to center-left Presidents ever turned out to be remotely close to originalists while some picked by conservative to center-right administrations strayed far away into the realm of activist judge. With it being nearly a certainty that some of the activists on the Supreme Court will leave the bench through retirement or death in the next four years, it would be amusing to see an Obama pick shift in the direction that the conservative stalwarts Thomas, Roberts, Alito, and Scalia have remained for the most part since their ascension to the Supreme Court. However, I’m not holding my breath awaiting that result.