Monthly Archives: August 2015

Another Example of Central Government Intrusion

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…into the States’ internal affairs. This one is via The New York Times and a piece Matt Apuzzo has there [emphasis added].

Burlington, WA, was a small city fighting what seemed like a local lawsuit. Three poor people said that their public lawyers were too overworked to adequately represent them in municipal court cases. The dispute went mostly unnoticed for two years, until the Obama administration became involved.

Unannounced, the Justice Department filed documents in the case and told the [Federal] judge that he had broad authority to demand changes in Burlington and nearby Mount Vernon. The judge quickly agreed and ordered the cities to hire a new public defense supervisor. He also said he would monitor their legal aid program for three years.

That the local case was being heard by a Federal judge isn’t the problem here; it’s that a coequal branch of the central government acceded to the demands of the Executive Branch and let DoJ prejudice the judge’s handling of the case.

That’s had far-reaching consequences:

Recently…the Justice Department has filed statements of interest in cases involving legal aid in New York, transgender students in Michigan, juvenile prisoners in solitary detention in California, and people who take videos of police officers in Baltimore. The government has weighed in on employment discrimination claims brought by transgender plaintiffs and a lawsuit over the right of blind people with service dogs to be able to use Uber, a car-sharing service.

DoJ has even less interest in these matters in what’s supposed to be a federal political structure, emphasized by the 10th Amendment (and in no small degree by the 9th Amendment), than does the Federal judiciary. These all are local matters, legitimately determined by institutions internal to the States involved. That such handling might (likely will) result in 50 different solutions to seemingly similar problems is part of the strength of a federal political arrangement. In the end, these seemingly similar problems are not that similar: they differ critically simply by their existence in widely differing political and social environments: those different States.

The Federal judiciary has lost sight of this. By acceding so blithely to Executive Branch intrusions, both branches are actively satisfying John Jay’s goal: reducing the States to the same relationship to the central government as counties have relative to their States, that of serving merely as districts to facilitate enforcement of the central government’s requirements.

There are Iron Curtains, and there are iron curtains.

The Fed’s Error

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Many observers have called for the FOMC to tighten monetary policy by raising interest rates in the near term. But such a course would create profound economic risks for the US economy. Why would a near-term tightening of monetary policy be so problematic? Because given the prevailing economic conditions, higher interest rates would push the economy away from the FOMC’s economic goals, not toward them.

On the contrary. If the Fed’s target inflation rate for satisfying its statutorily imposed mandate of price stability is 2%, inflation rate is and has been since the Panic of 2008 substantially lower, and Fed-suppressed interest rates are artificially low—in the zero-to-not-much-more range—and have been over substantially the same time frame and longer, then the thing to do is to raise interest rates allow interest rates to float to levels historically consistent with an inflation rate of 2%.

After all, rising interest rates is intrinsically inflationary, and the Fed has (quite properly IMNSHO) said 2% inflation is the stable price inflation, not substantially less than 2%.

Continued interference in the free market, whether by the elected government or by the Federal Reserve Bank, is not just ineffective, it’s actively counterproductive.

A Hot Hand

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As economic managers, Chinese leaders have been in a league of their own for the past quarter century.

They’re the product of a bureaucratic system that, at its best, weeds out underperformers, rewards achievement and prizes experience. By the time they reach the very top, most leaders have run provinces the size of whole countries. Their image of competence has been reassuring at home—and acknowledged abroad—at times of crisis. And they’ve delivered success: China’s economy grew faster, and for longer, than any in history.

That’s how Andrew Browne opened his recent piece in The Wall Street Journal. Then he added,

Now, as growth slows sharply and markets fear more bad news, the stewards of the world’s second-largest economy appear to be losing some of their golden touch.

No. There are some misapprehensions here. One is tacitly acknowledged, apparently without recognition, by Browne:

According to international economists who have been briefed at a high level in Beijing, it became clear that regulators didn’t have a clear picture of huge money flows from the banking system to the stock market that were inflating a bubble.

That’s just it: central planners never have a clear picture of huge money flows, whether from the banking system to the stock market (which is puny, in any event, relative to the PRC’s economy when it’s compared with, say, the DAX, or FTSE, or NYSE, or…), or to any place else, or from any place else. Central planners have no clear picture of any aspect of the economy they’re pleased to mess with regulate.

The PRC’s economy, though, grew faster and longer than any in history? It grew from very deep depths, a bottomed-out baseline that featured frequent famines and mass starvations, backyard iron mills, and the like. And it grew on the largest population in history. Against that basement-level baseline and that population on which to erect an economy, a high schooler learning to spell economics could have “regulated” the thing in that kind of growth.

The PRC’s economy, though, grew faster and longer than any in history? It grew from those depths in an era of unprecedented free trade and globalized and entangled economies. The PRC’s cheap labor, coupled with easy shipping and already developed manufacturing techniques coming in from outside the PRC potentiated the growth.

That bureaucratic system that has weeded out underperformers and rewarded achievement and experience—brought to the top guys who’ve run provinces the size of whole countries? Define “achievement” and “experience.” These guys have achieved a lot in the political game, in the game of rising to the top of economies, and of doing so where the cost of money—actual budgeting—has never been a factor. These guys have not achieved overmuch in business, much less in economics; their experience here is…low.

No, as any poker player can recognize, the PRC was just the guy at the table who got to play a hot hand. Now the PRC’s economy has grown up a lot, the stakes have gotten larger and more complex, and the Chinese central planners, like all central planners, have gotten in over their heads, and their lucky streak has played out.

Justice and the Obama Administration

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Richard Fernandez, in his Belmont Club piece, cited Ross Douthat of the New York Times:

Ross Douthat, writing in ruefully writes “I simply do not believe that the Obama Justice Department is going to indict the former secretary of state and Democratic front-runner for mishandling classified information, even if the offenses involved would have sunk a lesser figure’s career or landed her in jail.” The observation is almost tantamount to arguing that the rule of law no longer exists; that the political class can literally do whatever it wants. What is worse, he argues the electorate has accepted it, a point he makes in the succeeding paragraph.

I think Douthat is right; that’s the level of integrity all of the members of President Barack Obama’s administration—every single one of them—has demonstrated these last nearly seven years. I disagree, though, with Fernandez’ characterization of the situation.

The electorate plainly hasn’t accepted it, or at least that part of the electorate farther right than an Elizabeth Warren. That’s why Hillary Clinton’s poll numbers keep falling on questions of integrity, does she lie, did she mishandle classified information, even whether she’s qualified to be President.

Also, absent a preemptive pardon by Obama—which I wouldn’t put past him—the statute of limitations on the crimes Clinton (may have) committed won’t run out before the next President, and a new set of leaders for the DoJ, get installed. At that point, the charges can, and likely will be, filed and the trials held.

The cynic in me suggests an alternate scenario: the Obama DoJ might, at a suitable time, file a trivial charge and hold a show trial in an attempt to protect Clinton from serious charges from actual wrong-doing. The show trial wouldn’t protect her in any legal sense, but it could well provide enough of a distraction to achieve protection. And it might not. There are more bulldogs like Congressman Trey Gowdy (R, SC) than there are lapdogs like Eric Holder or Loretta Lynch or James Cole or Sally Yates or John Carlin.