The Real Danger of Washington Politics

The Tax Day Tea Parties started out as a grass roots protest against ill advised government spending fueled by the likes of Bob Basso and Rick Santelli.  (Basso has another youtube video (below) ).  These peaceful protests were co-opted by some right wingers and derided by left wingers, but it does not appear that Congress has heard it.  More protests are needed.

Interestingly, the real danger of Washington ignoring the protests is the ultimate dissolution of our Nation.  The subtle suggestions of secession were stated in the tea party protests.  The Dallas Morning Herald noted that Texas Governor Rick Perry raised the secession theme in his speech before a Texas tea party.

An animated Perry told the crowd at Austin City Hall — one of three tea parties he was attending across the state — that officials in Washington have abandoned the country's founding principles of limited government. He said the federal government is strangling Americans with taxation, spending and debt.

Perry repeated his running theme that Texas' economy is in relatively good shape compared with other states and with the "federal budget mess." Many in the crowd held signs deriding President Barack Obama and the $786 billion federal economic stimulus package.

Perry called his supporters patriots. Later, answering news reporters' questions, Perry suggested Texans might at some point get so fed up they would want to secede from the union, though he said he sees no reason why Texas should do that.

"There's a lot of different scenarios," Perry said. "We've got a great union. There's absolutely no reason to dissolve it. But if Washington continues to thumb their nose at the American people, you know, who knows what might come out of that. But Texas is a very unique place, and we're a pretty independent lot to boot."

Certainly, seccession is an unlikely scenario, but it remains a real possibility if Washington fails to act and remains unresponsive to the people that put them in office.  Here is Bob Basso as Thomas Paine in his latest video:

$4 Trillion and Nothing to Show for It.

Congress, without debate or investigation of any sort, blindly approved bailout after bailout.  $4 Trillion dollars of your hard earned dollars have gone to the financial rescue of banksters.  Now, after committing to spend all that money, your non-representative representatives heard a report from an oversight panel that told Congress the bailout plan was ill conceived and isn't working. 

The Congressional Oversight Panel, approved after Congress voted without little debate on allowing Treasury to have $700 billion of TARP fund.  The panel is chaired by Elizabeth Warren, a Harvard Law School professor.  The findings (Executive Summary found here) point out that there are three general approaches to crises: 1) liquidation of troubled institutions (as was done in the 1980's S&L crisis); 2) reorganization of the institutions using conservatorships (as was done with Continental Illinois and Sweden in the 1990's); or 3) Subsidization (as was done with Japan during its lost decade).  The report noted that the total spent on subsidization to date exceeds $4 Trillion Dollars.

The liquidation option, while the best choice is politically difficult, but provides certainty to the markets, prevents unending subsidies, and results in a quicker resolution to the crisis.  Our elected officials chose not to liquidate the insolvent banks.  It worked during the S&L crisis.  Reorganization involves replacing management and selling off bad assets, but it taxes government resources and results in politicization of the business.  Our non-representative representatives chose not to reorganize and replace management.  It sort of worked with Continental Illinois.  Subsidization involves endless commitment of taxpayer resources, hides true value and delays economic recovery.  It didn't work with Japan, but this is how our government chose to spend our money - without debate or fact finding.  

We know the path our elected officials chose - a path doomed to failure from the beginning.  The only way subsidization could work is if the crisis was short and shallow.  In other words, if the crisis was limited to just a temporary dip in housing prices that caused a short term liquidity issue, subsidization might have worked.  We all know from history that real estate crises are never short term.  Despite receiving calls and letter at the rate of 300 against the bailout to every one in favor, and despite having a cadre of economists telling Congress that the bailout was a bad idea, Congress went ahead with its plan.  Now we know it won't work. 

What are you going to do about it?  It is never to late to exercise your constitutional right to let your elected officials know how you feel.  Send the tea bags.  Write the letters.  Go onto the websites and send email messages.  There are plenty of ways to express yourself.  Remember - if you don't tell your representative, who will?

Below is a video introduction to the oversight panel's report.  Enjoy,

SOTUS

Congress and Obama Knew About AIG Bonuses

One thing that has been, and is still, a certainty is that when any government politician says something we know the opposite is true.  The furor over the AIG bonuses is a prime example.   (see AIG Bonus Firestorm Misdirection - Updated and AIG Bonus Firestorm Misdirects Attention Away From CDS Payments for prior discussion.)  We now know that President Obama knew about the amount of the AIG bonuses on Thursday March 12 - several days before his "impromptu" expression of outrage.  

The real outrage, however, is that we now learn that Obama's treasury secretary, Timothy Geitner, not only knew about the bonuses in advance, but with Connecticut Senator Christopher Dodd's assistance, inserted a provision in the $400+ billion spending bill that preserved AIG's bonuses.  In a New York Times article on the fallout affecting Senator Dodd, Geitner takes the blame for protecting the bonuses:

On Thursday, Treasury Secretary Timothy F. Geithner came to Mr. Dodd’s defense, saying in an interview with CNN that his staff had raised concerns about whether the legislation limiting executive compensation “was vulnerable to legal challenge.”

Dodd - the chair of the Senate Banking Committee and person responsible for the portion of the legislation providing the loophole, was not forthcoming about his involvement.  The NYT article went on

This week’s uproar was triggered largely by Mr. Dodd himself, when he provided conflicting answers about the provision that allowed the bonuses at A.I.G. According to the Center for Responsive Politics, the company’s employees, political action committees and subsidiaries have made campaign contributions of nearly $300,000 to Mr. Dodd since 1989.

Initially, Mr. Dodd said he did not know how the loophole got into the legislation that sought to crack down on executive compensation. But then in an interview Wednesday with CNN, he acknowledged that his staff helped write the revisions after receiving a request from the Treasury Department.

Aside from the asinine attempts at covering up what was done, the question we should be asking is why did NONE of the 534 other elected officials raise any concern about this provision?  The answer is pretty clear - the $787 Billion stimulus bill was rushed through Congress, and the controlling parties would not let a full debate come to the floor.  Provisions were  inserted in backroom meetings and both houses were given a mere 24 hours to pass the bill.  No debate was allowed.  That, my friends is not how democracy is supposed to work.

The reason this happened is that our elected Senators and Representatives failed to perform their job.  It is their job to represent us and debate the legislation.  I am very skeptical whether any of the 435 Representatives or 100 Senators even read the full bill before it was voted upon.  America, we were cheated.  Our elected officials are no better than the greedy bastards that took the bailout money and lined their own pockets.  In fact, it is worse.  It is nothing short of a breach of trust.  

We need and deserve better representation.  Ask your congressman why he or she voted for a stimulus bill that allowed recipients of federal money to pay huge bonuses?  Listen to what they say and ask them if they personally read the 1000 page bill before they voted on it.  If they told you they did, they are lying.  If they admit they did not, ask them to step down.  It is time that we either throw all the bums out of Congress.  At the very least, we need to make sure that our representatives are effective and that we have a voice.  Consider insisting on our Constitutional right to have one representative for every 30,000 inhabitants (see, Taxation With Representation Is Not So Good Either.)   With more members of Congress, we the people will have more control and the elected officials, individually, will be less powerful, albeit collectively we will all be more powerful.  If none of the 535 members had the foresight or fortitude to question the $787 Billion dollar spending bill, then maybe, just maybe increasing the size of the representatives to 2500 would produce one or two who would stand up for what is right.  It is time to act now before it is too late.

Sen. Buris and the 17th Amendment

The calls for the resignation of Roland Burris, the controversial junior Senator from the State of Illinois, keep mounting.  The controversy surrounds how he was appointed by now impeached Governor Rod Blagovjevich and whether there were any improper payments made for the appointment to the Senate seat vacated by President Obama.  Aside from whether anything improper was done, there is some unease over  a Governor under the threat of impeachment making a vacancy appointment.  Senator Russ Feingold even introduced legislation to begin the process to amend the Constitution to prohibit filling vacancies other than by appointment.   Before we go there, maybe we need to rethink why we have Senators and how they are selected.

Before 1913, the Constitution provided that Senators were appointed by the legislatures of the states.  Governors could only fill vacancies when the legislature was not in session.  The reason Senators were appointed by state legislatures was because the Senate was supposed to represent the states themselves - remember we are in a government of dual sovereignty where states have (or at least had until 1913) a voice in the federal government.  Because they represented the states, they reported to the legislature, and at least for some time were subject to recall by the legislature.  The system made perfect sence in 1789.  There was no direct federal tax on citizens, but there were levies on the States, and the States were responsible for raising the revenue (and most of the federal revenue was originally thought to have come from duties and imposts).  Since the state legislatures had to pay the bills of the Federal government, they should have a voice that reported to them.  After all, the Constitution gave representation to the people through a representative for every 30,000 people (see Taxation with Representation is Not So Good Either).  

Well, all of that changed in 1913 when the 17th Amendment was adopted.  The 17th Amendment changed the rules and required that Senators be elected by the people of the state - thereby disenfranchising the States.  Not coincidentally, 1913 was also the year that the Constitution was amended to make it clear that the federal government could directly tax the income of citizens.  Essentially, the States were left as virtually powerless administrative units with no effective representation.  We all have heard complaints of unfunded federal mandates placed on the states.  It is unlikely that those laws would have passed if the Senators were representing the States as opposed to a mass of people.  

There are many good reasons to have the election of our Senators directly by the people, but we need to recognize that doing so evicerates our States' influence in the federal government.  It is a lot easier to consolidate power when you have to be ousted by millions of voters, than by a few dozen legislators.  Senators are beholden to no one but their own conscience.  Remember that all politics are local, and we have influence more influence over local actions than we do distant governments.  We have more influence if our representatives were elected by 30,000 rather than by over 700,000.  

Feingold's Amendment has facial appeal, but it is inconsistent with the original intent of a full partnership between State and Federal Governments and the People they represent.  Certainly, our Country is much larger than it was in the 18th and 19th centuries and modern conveniences have made many conventions obsolete.  If we are rethinking how we elect Senators and Representatives, it is time we rethought how many we elect as well.  

My proposal is to have 3 Senators from each State - one appointed by the Governor, one by the legislature, and one elected at large by the people of the state.  All would be subject to recall by the same method they were appointed or elected.  In terms of the House, we need to increase the number so we decrease how many people are in each congressional district.  We need representatives of the people to be responsive.  My suggestion - limit the size of congressional districts to 150,000 inhabitants, which would result in a congress of about 2,000 members.  A large body to be sure, but not unworkable given the size of our Country and the issues we have before us.  Indeed, with modern technology, the need to be present full time in Washington is limited.  Representatives could spend more time in their districts and learn what the people really want.

Obama's Plan to Limit Deficit Spending

Obama is out to prove that he is a fiscal conservative now!  In another yeah, right move, Obama proposes across the board spending cuts in an effort to reduce the budget deficit.  As of October 2008, we had a budget deficit of $455 Billion Dollars.  After 5 months of bailouts/stimulus/wasteful spending, the deficit is heading towards $2 Trillion Dollars.  Obama wants to cut that deficit in half - so we have a $1 Trillion Dollar annual deficit by 2013 when Obama is ready to leave office.

The problem with the plan is that it is still deficit spending.  The US Government is addicted to spending beyond their means, just like our fellow neighbors have been addicted to credit.  This can't go on.  Every year since 1957, our national debt has grown.  Right now, the national debt is over $10 Trillion Dollars.  That means that every deficit increases the debt burden of our government.  Interest on the national debt is over $451 Billion Dollars each year.  Debt is 400%  of annual revenue - some 70% of GDP.  Cutting the deficit in half still means increasing the burden of this debt.  We can't afford it anymore.  It is no coincidence that Hillary Clinton's first trip as Secretary of State was to China - the largest debt holder of US obligations.  

We cannot effectively return to prosperity until our balance sheet is in order.  It is foolhardy to think we can inflate ourselves out of this debt without bankrupting everyone.  Instead of trying to cut the deficit in half President Obama, eliminate deficit spending now.  Amortize the national debt so it is repaid within 20 years so our children can prosper.  Households are taking steps to reduce their balance sheet; why can't my government do the same.   Thomas Jefferson, a man who understood how government should work, cautioned that  

"It is incumbent on every generation to pay its own debts as it goes."

 That is something that has been lost on us.  If we don't address our debt burden Mr. Obama, our Country may be lost.

Taxation With Representation Is Not So Good Either

Taxation without representation was the outcry that rallied our nation into rebellion.  With good reason the people of the colonies were outraged.  King George and the Parliament were unresponsive to the needs of the colonists and viewed them as nothing more than a source of revenue.  As noble as our forefather’s intentions were when we formed this great nation, we have drifted so far afield that it is hard to distinguish our form of government from King George’s government from which we rebelled.  Our representative in Congress – the so called “elected officials” – have spent the last century consolidating their power and weakening the effectiveness of our representation.  Today, most if not all the Senators and Representatives are beholden not to the people who elected them, but to the special interests and lobbyists who finance their campaigns.  More importantly, and this is the root of the problem, our representation to the federal government is diluted every year.

 To understand the problem we need to look at the founders’ vision of what a representative democracy would look like.  What better place to look than the Constitution itself.  Article I, Section 2 provides, in relevant part:

 The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative

 Read that again.  One representative for every 30,000 inhabitants.  The average size of today’s Congressional district is about 650,000, and the size ranges from a low of 495,000 to a high of over 900,000.  So much for one person, one vote!  The Founding Fathers envisioned that the number of representatives would increase every year in proportion to the population.  While 30,000 may be too small a number (which would result in a Congress of over 10,000 representatives), there is no question that 435 representatives – a number fixed by Congress in 1911, is wholly inadequate to provide effective and responsive representation today.  Interestingly, the Bill of Rights (the first 10 amendments to the Constitution) originally had 12 articles, the first of which gradually increased the size of the House of Representatives to one representative to not more than 50,000 persons.  The framers of the Constitution recognized that the size of the House should increase with the population.  In fact, until Congress usurped the power from the people and fixed the number of representatives, the size of congress increased every 10 years.  By 1911, there was approximately 1 representative for every 175,000 people.   

 There are many reasons for fixing (not apportioning) the number of representatives based on population.  One of the most important is to enable the citizens to have themselves represented by someone who is responsive to their interests.  While there would be many more members of congress, the primary result would be representatives that are more responsive to their population.  Lobbyists and special interests would have a much more difficult time influencing legislation.  Campaigns would be more democratic, as it would lower the entry barriers to running for office.  It is much easier (less costly and less time consuming) to campaign for the votes for 50,000 than it is to campaign for the votes of 700,000.  There would almost assuredly be a less homogeneous view of opinions, and perhaps more than just 2 political parties.  A more diversified representative population would likely result in more consideration put into spending bills.  It is easy to tax the masses who you don’t know, but difficult to escape scrutiny if the number of people you represent is only the size of a couple towns that you live in. 

 Ineffective representation results in an unresponsive government that taxes its citizens.  There are many benefits to increasing the size of the House (which decreases the representative to population ratio and increases the individual influence), but not all can be addressed at this time in this blog post, so I will leave now and raise other topics later.  (Some of the other topics that can help regain power to the people relate to the method of taxation (repeal the Federal income tax and other direct taxes, and make the US Government tax the states in proportion to the population; Repeal the 16^th amendment and require that Senators be appointed by the State Legislatures; explicitly repeal the power of the Federal Reserve to appropriate funds without specific congressional approval.)  Just imagine a government that does not engage in wasteful spending that only benefits one powerful politician's district, or where taxation and appropriation are truly debated.  It is a lot harder to convince 6000 people to pull the wool over America's eyes than it is 435!