Tuesday, March 31, 2009

Running Cars, Constitutions and Metaphors into the Ground

Mark Graber

[The following is the introduction to a short essay I just sent to The Political Economy of the Good Society: A PEGS Journal. I will be happy to send the full version to anyone on request.]

Professor Sanford Levinson frequently analogizes the Constitution of the United States to a vehicle that desperately needs repairs. “[R]elying on the present Constitution.” he writes, “is similar to driving a car with very bad brakes and slick tires.” In his opinion, the Senate, Electoral College, presidential veto, lack of emergency provisions, and Article V are the constitutional equivalents of worn pads and leaky values. No rational person, Levinson asserts, would drive a car so badly flawed. Similarly, he concludes, no rational American should support governance by such an undemocratic constitution.

Much commentary on Our Undemocratic Constitution implicitly challenges the automotive metaphor. The Constitution of the United States, supporters profess, is not really as bad as Levinson would have us believe. What Levinson perceives as outdated parts are, in fact, time tested systems for preserving individual rights and maintaining social stability. Hard to amend constitutional provisions prevent transient majorities from governing in ways that oppress minorities. The presidential veto guarantees that legislation is supported by the one governing official who must run a national campaign. The Electoral College ensures that presidential campaigns are national and do not focus entirely on the needs of densely populated urban areas.

The following pages take a road less traveled. Ancient constitutional institutions in the United States are suffering from severe wear and tear. Nevertheless, American driving habits cast doubt on Levinson’s assumption that repair or replacement is the rational response to faulty cars or undemocratic constitutions. Many Americans operate vehicles with bad brakes and slick tires. Few people buy cars on an annual basis, even though next year’s model promises improved safety. These decisions to drive a comparatively unsafe car are often grounded in reasons that might justify decisions to forego repairing or replacing an analogously flawed constitution.

Servicing is rational only when persons can afford the costs, trust their mechanic or dealer, and have reason to believe performance will be substantially improved. Replacing or repairing constitutions and cars are not costless. Citizens with other pressing personal or political needs might be best off spending scare resources on food or other social issues. Constitutional and car mechanics are not perfect. Persons may conclude that the persons most likely to perform needed repairs will be more interested in lining their pockets than improving the product. Constitutions and cars may not be susceptible of long term improvement. Good faith brake and constitutional jobs may prove so temporary a fix that persons are better off using the constitutions and cars they have than attempting to obtain newer product lines.

Return to transition (and the theme of our defective Constitution)

Sandy Levinson

I received the following email from a reader of Balkinization:
During the lead-up to the election and after the election, you fulminated about the length of time between the election and the inaugeration. You pointed out, quite correctly, that Mr. Bush had the power but Mr. Obama had the country behind him. I have not yet gone back and checked, but I believe that you recommended that the period be shortened to less than a month.
[As an aside, in the small town (Cocoa Beach, Florida) in which I live, the City Commission elections are held on Tuesday and the new members take office on Thursday. A most satisfactory system indeed.]

However, having seen the problems which have befallen the new administration in terms of getting personnel chosen for the various positions and getting those persons, where necessary, confirmed by the Senate (not to mention the problems involved in getting the new personnel fitted into their offices), I wonder if you have changed your opinion on the time-lag.

It would appear that the process of preparing to take over the reins of government are simply too great to be completed in 2 1/2 months, much less one month. Further, imagine if the Senate had a Republican majority (or a Republican President and a Senate with a Democratic majority). How difficult would it be to get a reasonable team in place then?

I am curious as to whether your view has changed. I'm not sure that even with the Consititutional changes you advocate, a new president could be prepared to take over in a relatively short time.

This is obviously a fair question, and let me explain why I have not changed my mind (though I in fact believe that the problem is even more serious than originally addressed: [NOTE, PLEASE CLICK "CONTINUE READING" NOW INSTEAD OF READING FURTHER IMMEDIATELY BELOW]

The basic problem, obviously, is that the current system runs the genuine (and sometimes actualized) danger of depriving us of a genuine "government," in the sense of combining political legitimacy and legal authority, in times where we really need one. Nothing that happened between November 4 and January 20 lessened my concern. We are in the middle of the greatest economic crisis of at least the past 75 years, and we had no one truly able, in the sense I described, of speaking for the United States and being able to commit the United States to a policy. This is madness. Just consider what might have happened had we suffered a terrorist attack attributed to people living, in say, Pakistan or (considerably less likely) Iran. Indeed, the non-existence of any such attack at such an "obvious" time reinforces my fears that we may be considerably overestimating the dangers we face, though that is the topic for another posting and another thread.

So I haven't changed my mind at all with regard to the most fundamental problem. I presume that no one would draw from the present inability of the Obama Administration to place the required undersecretaries etc. in office the moral that we need to return to the "good old days" of a March 4 inauguration. Indeed, we are well beyond March 4, and I presume that only a lunatic would say that we really need, say, to wait until June 1 for the inauguration.

So we have to do two things. First, come up with an explanation for the delays in appointment and confirmation of needed people. Some of this may be Obama's fault, though recall Sen. McCain's idiotic criticism of Obama for being "arrogant' in thinking of a transition before his election. In fact, we should expect candidates to appoint their "transition teams" the day after their nominations and to be consulting with them throughout the campaign. That we don't is one of the dreadful features of our political system. But even if that rather modest reform were in place, there would still be very great problems. Begin with the fact that the president-elect has no legal authority to "nominate." All he/she can do is to announce an intention to nominate. Moreover, even if we allowed, somehow or other, a president-elect to engage in the performative legal utterance of "nominating" someone for a position, there would be the independent question of which senators, the lame-ducks or the newly elected ones, would consider the nominations. One of the other terrible features of our Constitution, about which I've changed my mind not at all, is the delay in installing newly-elected (or re-elected) senators and representatives in their office. Cocoa Beach is a fine model for the rest of the country, at least with regard to members of Congress.

Consider also a fine article published in the NYTimes by Paul Light, who knows more about such issues than anyone else in the world. He begins, altogether rightly, by questioning the increasing use by President Obama of non-comfired "czars" to handle important areas of public policy. This is just another manifestation of the "imperial presidency"--what I sometimes call "constitutional dictatorship"--that is part of our present political system. But then Light writes:
[West Virginia Sen. Robert Byrd, who complained about the "czars,"]] should also ask how the Senate has contributed to the czar-itis. The Senate has done virtually nothing, for example, to address the glacial pace of confirmations that often leads presidents to expand the White House staff as well as the number of appointees who serve without Senate approval. Although he has submitted the names of nominees to the Senate relatively quickly, President Obama will be lucky if the last of his nearly 500 full-time cabinet and subcabinet officers are confirmed by March 2010.

The confirmation process has grown slower with each passing administration and the Senate has resisted nearly every chance to accelerate it. In 2004, it rejected a long list of House-sponsored reforms that would have cut the red tape that strangles the process. It has said no to a long-overdue streamlining of the financial disclosure process and even refused to add much-needed staff to the White House Office of Presidential Personnel, which is drowning in résumés.

In repeatedly rejecting commonsense reforms, the Senate has merely strengthened the incentives that lead presidents to create policy czars in the first place. It has also encouraged the unabated growth of a de facto sub-cabinet composed of roughly 2,500 presidential “at will” appointees who serve without Senate confirmation. Most of President Obama’s cabinet secretaries, even before their confirmations, began filling their offices with chiefs of staff, deputy chiefs of staff, special assistants and confidential advisers, none of whom are accountable to the Senate....

If Mr. Byrd wants to restore Senate confirmation as the coin of the realm, he need only ask Senators John McCain, Republican of Arizona, and Russell Feingold, Democrat of Wisconsin, to reintroduce their long forgotten 1990s legislation cutting the number of at-will political appointees by a third. He should also press for an amendment to Senate rules that sets clear deadlines for bringing nominees to the floor for a vote.

Mr. Byrd should also ask the House for a copy of its 2004 reforms. At least half of the delays in the presidential appointments process appear to involve bureaucratic red tape and duplication of effort, while a quarter appear to reflect the rising and inappropriate use of personal holds by the senators to extract concessions from the president and fellow legislators.

There will always be legitimate reasons for questioning the president’s nominees as the Senate discharges its constitutional duty to give advice and consent. But before criticizing the Obama administration for overreaching, Mr. Byrd should take a harder look at his own branch of government. There is plenty of room for reform in the Senate, too.

The awful truth is that the United States Senate disserves us in many ways: Read Mann and Ornstein's "The Broken Branch," and there is no reason to believe that it is functioning much better under the "leadership" of Harry Reid than formerly, not least because the Senate, for example, still allows individual senators to place "holds" on nominations (the latest scandalous example apparently being attempts to block confirmation of the extraordinarily meritorious appointment of Dawn Johnson to head the OLC). Much of its awfulness comes directly from the Constitution, some, like the use of the filibuster only indirectly (i.e., the ability of each House to set its own rules, including indefensibly anti-democratic ones).

There is also the independent issue of the ever-more-onerous "vetting" that is required of any candidate for public service. A great deal of time, apparently, is expended on crazy FBI checks in which neighbors from long ago are asked to testify to the good character of a nominee.

The United States political system is truly dinosaur-like. We are increasingly in a tar pit, and there is, alas, no good reason to believe that we will escape. This is not to saya that any other country necessarily has a better system (though I believe that some do). Rather, it is to continue to hearfelt denunication of my fellow citizens for failing even to treat these questions as worthy of discussion. We are talking about radical transformation of the banking industry, of GM, etc., because of the correct perception that old structures are proving disastrous in the 21st century. But we continue to believe, insanely, that what was done in 1787 is just fine. If James Madison had dictated that GM manufacture Chevrolets, Buicks, Pontiacs, Cadillacs, and Oldsmobiles unto eternity, then Antonin Scalia and his friends would be saying that it just has to keep doing that, come what may. If you believe that approach to General Motors would be almost literally crazy, then ask yourself why "veneration" for the forms bequeathed us by Madison and his friends is any less problematic.

Incidentally, reflect on Pres. Obama's comment that it was time for the president of GM to go, in order to provide more imaginative leadership (or simply reflect on the firing of coaches and managers, sometimes in mid-season, because of their perceived inadequacies). I certainly don't have the information to know whether Obama is correct or not, but would anyone say that the present management of GM should remain even if, by stipulation, they are inadequate? Only the President of the United States is free from any similar judgments as to inadquacy short of relection (or doing us the favor of committing a criminal offense with a "smoking gun"). Perhaps it's true that "what's good for GM would be good for the US" (i.e., trying genuinely to reform a sclerotic and dinosaur-like corporation instead of feeling stuck with what we've got, come what may).

End of screed. I hope this counts as an answer to the very legitimate question posted above.

Sunday, March 29, 2009

Kirsten Gillibrand and John Yoo

Sandy Levinson

I take it that most of us would be outraged if John Yoo were named to the Senate or otherwise proposed as the (presumably Republican) candidate for the House or Senate. Why are we not equally outraged by the appointment and presumptive re-election campaign of New York Democratic Sen. Kirsten Gillibrand, who, the New York Times reports, was an avid and willing mouthpiece (other words come to mind that would be even less tactful) for the tobacco industry in the 1990s? The Times writes that "Ms. Gillibrand plays down her work as a lawyer representing Philip Morris, saying she was a junior associate with little control over the cases she was handed and limited involvement in defending the tobacco maker." This, it turns out is an out-and-out lie. Jay Bybee probably has a better claim to being de facto out of the loop on the torture memo than Ms. Gillibrand does with regard to serving an industry that has killed far more people than any of the various torturers some of us would like to see brought to bar of justice. Moreover, it is equally a lie that, as a young associate, she was forced to take the cases assigned her. According to the Times, "in an approach that was not uncommon at law firms that represented tobacco companies, lawyers at Davis Polk were permitted to decline work on the tobacco cases if they had a moral or ethical objection to the work." She apparently had no such objections.

Back to John Yoo: Whatever one thinks of his handiwork in the OLC, and like everyone else who writes for Balkinization, I am distinctly not an admirer, there can be no real doubt that Yoo was motivated by patriotism (even if it is, on occasion, the last refuge of the scoundrel). What can Gillibrand say, other than she was a thoroughly opportunistic young lawyer who, it appears correctly, perceived that her star would shine if she took the kind of work that other lawyers at Davis Polk may well have shied away from. The Times quotes "Todd Henderson, an assistant professor at the University of Chicago Law School, [who] argued that it would be unfair to assess lawyers by whom they represent. 'Nobody would want to live in a world in which lawyers are judged by the clients they take,' he said. " This is, with all due respect to Prof. Henderson, absurd, save in the limited sense that one must know more than the identity of the client before juding the lawyer. Is the lawyer, say, a public defender, who would and should certainly defend the worst axe murderer (and tobacco company) against criminal charges brought by the state. Is the lawyer so junior and vulnerable--perhaps with tons of debts--that it's simply unfair to make any judgment about what civil clients she chooses to represent? Has the lawyer chosen, as Ms. Gillibrand apparently did, to become (close to) part of a criminal conspiracy to suppress relevant evidence of her client's perjury? And so on. (I am eager to see if David Luban, one of the country's leading authorities on legal ethics, sees any merit in Prof. Henderson's argument.)

If the Democrats in New York have any self-respect (a big assumption), they will promptly find a candidate for 2010 who is, at the very least, at least as honorable as John Yoo in his/her motivations (and, one hopes, considerably more competent as as a lawyer, should the Democrats choose a lawyer).

A caveat: It is obviously true that I am basing this on the New York Times story. Perhaps it is wrong, and perhaps I will publicly apologize to Sen. Gillibrand after she gives her side of the story, with supporting documentation. But that is simply to say that the burden of proof is on her to demonstrate that the Times story is false (in the old days, she could sue for libel) and, in the absence of such proof, she should be soundly repudiated by the Democratic Party. Is it enough, incidentally, that she may have cast a vote or two in Congress against big tobacco? No, unless she offers credible evidence that it is the result of a conversion experience, perhaps based on what she saw when she was shilling for the tobacco industry, instead of just another example of rank opportunism (as with her post-appointment switch on gun control). As a model of integrity, give me John Yoo, who performed in the OLC precisely as one might have predicted from reading his pre-appointment scholarship and who has valiantly defended himself against his critics since then.

Thursday, March 26, 2009

At What Point in History Did Antonin Scalia Become A Homophobe?


Recently Barney Frank argued that Justice Antonin Scalia was a homophobe on the basis of two of Scalia's strongly worded dissenting opinions in Lawrence v. Texas and Romer v. Evans.
In those two virulent dissents, Justice Scalia denounced the court majorities not simply for finding that it was unconstitutional to discriminate based on sexual orientation in cases involving political rights and the right to private consensual sex, but he also made it clear that in his view sex discrimination is not only permitted by the Constitution but is very much in society's interest because homosexuality deserves to be treated with not only disapproval, but legal disability.

In fact, Scalia can be read more charitably to say that many Americans find homosexuality morally offensive and in a democracy, people are permitted to vote for legislation that puts those preferences into law. Judges should not interpret the Constitution to prevent majorities from expressing their moral opposition to (or disgust with) homosexuality.

But Scalia's argument from democracy and judicial restraint begs a more important question. At an earlier point in history, very similar arguments based on democracy and judicial restraint could have been made (and were made) about race or sex discrimination. For example, in the years following the ratification of the Fourteenth Amendment, the Court unanimously held in Pace v. Alabama that states could punish sex between members of different races more heavily than sex between persons of the same race. (The Court argued that the law treated both blacks and whites alike, so there was no race discrimination. The opinion, it is worth noting, was joined by Justice Harlan, who would later insist that the Constitution was colorblind.). And it held by a vote of 8-1 in Bradwell v. Illinois that women could be prevented from being lawyers. The argument for both Pace and Bradwell would be very similar to Justice Scalia's arguments in Lawrence and Romer: Whether or not some people think that such laws are wrong, unelected judges should not interpret the Constitution to prevent democratic majorities from expressing their moral attitudes about race relations and sex roles.

It is worth noting that both Pace v. Alabama and Bradwell v. Illinois are consistent with the original expected application of the Fourteenth Amendment, so that in order to hold the other way one would have to engage in a certain form of what Justice Scalia now dismissively calls "living constitutionalism." Indeed, the Supreme Court did not reverse Pace until 1967 and it did not (in effect) reverse Bradwell until the 1970's.

For a hundred years after the 14th amendment many if not most lawyers would have agreed with the decisions in Pace and Bradwell. Today, however, few people have qualms about labeling the 19th century courts sexist and racist. Which leads me to the following question.

Suppose that someday the social movement for gay rights succeeds in convincing almost all Americans that gays should be constitutionally protected from discrimination (not merely statutorily), in the same way that almost all Americans now agree that women and blacks should constitutionally be free from state mandated discrimination. Would it be fair, in hindsight, to say that people like Justice Scalia, who believe that homosexuals do not deserve constitutional protection from discriminatory laws, are homophobes?

Justice Bradley didn't think he was a sexist when he wrote Bradwell v. Illinois. Justice Field didn't think he was a racist when he wrote Pace v. Alabama. Both believed they were defending the rights of majorities in particular states. But these opinions, and the reasoning in them, are today viewed as almost paradigmatically racist and sexist.

In a world in which Americans think that gays are protected by the Constitution, the claim that they have no constitutional rights that straights are bound to respect must increasingly look homophobic. And this is perhaps the best version of Barney Frank's argument. Frank asserts that gays have constitutional rights against discrimination, and that if most Americans don't believe this now they very soon will. That is, he claims that he is on the side of history and that Justice Scalia is fighting a rear guard action in defense of old, outmoded prejudices that will eventually give way to a different sense of what liberty and equality require. Justice Scalia may be proud that he is defending the old order, equating it with fidelity to original meaning, democracy, and judicial restraint. However, Frank responds, Americans no longer think (or soon will no longer think) that arguments based on original meaning, democracy and judicial restraint can justify discrimination against gays any more than they can justify race and sex discrimination.

Is Frank right? If he is, at what point in history did (or will) Justice Scalia become a homophobe?

Tuesday, March 24, 2009

Thank God It Was $65 Billion

Ian Ayres

Crosspost from Freakonomics:

When Bernie Madoff turned himself in, his firm owed investors $65 billion, but had only about a billion dollars on hand. Never before have we seen anything close to a $64 billion fraud. But in an important sense, the unprecedented vastness of Bernie Madoff’s fraud is a good thing.

Its sheer size guarantees that most of the money was not consumed by Madoff’s friends and family. It is exceedingly hard to consume even a billion dollars during your lifetime. You can burn through tens of millions, yes. But tens of billions, no.

In small cons, the crooks can skim off and eat up a substantial part of the investments. The blaggard Charles Ponzi diverted more than two-thirds of investments to his own use.

Madoff’s inability to eat all that he stole is good news because the social costs of the scam are much less than they might have been. It also seems that he didn’t waste investors’ money on imprudent investments. Indeed, he may have made virtually no investments, keeping the money in cash so that it could be paid out to early withdrawers.

The $64 billion must crudely fall into three different buckets. 1) some of it may have been diverted into secret bank accounts; 2) some of it is merely paper losses of claimed gains that never existed; and 3) some of it was transferred to innocent investors who chose to withdraw some or all of their gains early.

Each of these buckets has a bit of a silver lining.

First, any money that Madoff diverted into secret accounts still exists. The good news is that with hard work from the investor trustee and cooperation from the international banking community, this money can be reclaimed to compensate Madoff investors. (And Bernie’s friends and family don’t have much use for a secret $10 billion that they will never be able to spend.) The government has already moved against Madoff’s personal assets which in 2008 were estimated to be over $800 million. Money was openly paid as fees to feeder funds, who may have turned a blind eye to Madoff mischief, but are likely to have to disgorge their compensation to compensate Madoff investors.

Second, let’s consider the paper losses. They are a heartache. If I had invested $1 million with Madoff and thought it had grown to $5 million, I would be devastated to learn that I suddenly had nothing. I might have relied on that $5 million for my retirement while spending down the rest of my assets.

But from another perspective, I’ve lost a lot less than $5 million. If I hadn’t invested in Madoff, I would have ended up with less than $5 million. Indeed, the recent collapse of stock prices in some ways mitigates the harm of Madoff’s mischief even more. If I hadn’t invested with Madoff, I might very likely have invested with some other hedge fund that took a beating this last year. Maybe Madoff only made me lose half a million.

That doesn’t mean investors’ psychic and reliance costs are illusory; but it does mean, looking cash-on-cash, that the lost paper profits far exceed the losses to initial investments that investors would have experienced if they had never heard of Bernie Madoff.

And finally, let’s consider the money that was transferred to Madoff investors who withdrew some or all of their funds before the collapse. These innocents were the unwitting beneficiaries of the scam. Indeed, it is almost certainly the case that the money transferred to Madoff investors was orders of magnitude greater than the amount transferred to Madoff and his henchmen.

This means, from a social perspective, that the Madoff scheme was a huge transfer of assets among innocents. And because Madoff kept the money almost exclusively in cash, and took so little off the table for himself, it was — compared to probably any other fraud in history — an incredibly efficient transfer.

We might end up clawing back some of the Wall Street executive bonuses paid out during the past few years, but it is unlikely that the law will claw back any of the exorbitant returns earned by early-withdrawing Madoff investors. It seems kind of unfair that some Madoff investors get to walk away with a 15 percent annual return and others with a 100 percent loss. But under our legal system, in a fight among innocents, that’s usually the way the cookie crumbles.

It will be interesting to learn who got their money out early. Think for a minute about which types of investors were likely to withdraw early. To be sure, some would be retirees who needed to start living on the money (although many of these would have let it ride to give to their kids upon death without paying capital gains). You wouldn’t think that many people still saving for retirement would withdraw early; they’d want to keep riding a winner.

No, I’m thinking we will ultimately learn that some charities — especially those with smaller endowments — were most likely to withdraw their returns as they accrued to help pay current operating expenses. This is just rank speculation, but at the end of the day, nonprofit investors may have been net beneficiaries of the Madoff scam. To be sure, Madoff decimated charities that woke up one morning with no money at all. But a chance to get a 20 percent return on your money for 10 years (even if you never get your principal repaid), can be a lot more lucrative than just earning ordinary market returns.

The big picture is still one of devastation. The Madoff scam on net is likely to have done more total damage than any other fraud in world history. Even if most of the scam was a transfer among innocents, this was not a lottery that any of them signed up for. But this fraud is also exceptional because the Madoffs’ vigorish on a percentage basis was so exceptionally small.

Monday, March 23, 2009

The Presidency and The Politics of Emergency


In this bloggingheads video, Eric Posner and I discuss the politics of emergency. I explain why presidents increasingly use emergency to govern, and why presidents will increasingly be tempted to run political ponzi schemes-- moving from one emergency to the next-- from now on.

The Constitutionality of Taxing Bonuses


The short answer is that the current plans from both the House and the Senate appear to be constitutional. The House plan is here; a summary of the Senate plan is here.

There are five possible constitutional limitations that might be relevant.

There is no problem under the Due Process Clause of the Fifth Amendment because the tax is rationally related to a legitimate government interest. The government interest is (1) the avoidance of extraordinary rents to companies and their employees who are being subsidized by the government in order to keep the financial system working properly; and (2) preventing improper incentives and moral hazard in subsidized companies and their employees. Even if the tax is not well designed to achieve these goals, in the sense that other alternatives might achieve the government's purposes better, the tax substantially furthers these purposes.

There is no problem under the takings clause of the Fifth Amendment. The tax does not involve the seizure of real property or an interest in real property. The tax is regulatory and for a public purpose as stated above. Such a tax may or may not be good policy but it does not constitute a taking.

There is no problem under the Ex Post Facto clause because the tax is not a criminal sanction.

There is no problem under the Contracts Clause because the Contracts Clause binds the states, and not the federal government.

Finally, there is no problem under the Bill of Attainder Clause because the tax does not single out specific individuals for punishment; in addition it is both prospective and retrospective in application. First, the tax defines the class to which it applies to an abstractly defined group rather than naming particular individuals. It applies to persons working for enterprises that have received emergency government subsidy; it is not aimed at particular companies or specific employees. Second, the tax is for a regulatory purpose, as described above, and not for a punitive purpose. Preventing misuse of government funds, limiting bad incentives, and avoiding moral hazard are regulatory purposes, not punitive purposes. The fact that isolated members of Congress may have expressed an impermissible punitive or retributive purpose does not mean that the tax violates the Constitution if the text of the bill on its face has an overtly regulatory purpose. Third, the tax is both prospective and retrospective in its targets, which is consistent with a regulatory as opposed to a punitive purpose.

It is worth noting that the fact that the proposed taxes are constitutional does not mean that they are necessarily good public policy.

Sunday, March 22, 2009

Who speaks for states?

Guest Blogger

Brian Galle

In the recent Stimulus Package, Congress gave states the option of turning down their billions in federal money. Like most federal dollars, the stimulus money comes with conditions attached, and for some Republican governors (mostly presidential hopefuls, it seems) those conditions appear to be too onerous to be worth the cash. But Congress also inserted a provision allowing a state legislature alone to accept the money on behalf of the state (“the state leg. clause”). On this blog, Jack Balkin has opined that the state leg. clause is probably unconstitutional, because the question of who has authority to accept conditional grants on behalf of a state is a question of purely state law. The Congressional Research Service also lately came to a similar conclusion.

I am here to offer the contrary view. I’m interested not purely in the Stimulus controversy, but more generally in the question: when it comes to accepting conditional grants, who speaks for states? Is Jack right that it’s solely up to states? Can a federal court enforce against states a condition of a grant when that grant was not accepted in the manner state law requires? And, similarly, can the court refuse to enforce a grant accepted by lawful state procedures? My view is that, except in special cases, state law is not controlling. Disclosure: I am opposed to most restrictions on conditional federal grants, for reasons that I set out here and here.

My basic assumption is that state determinations of what appear to be state law may be denied preclusive effect if they bear on significant federal interests. Take, for instance, the Michigan v. Long rule that federal law determines what is an adequate and independent state-law ground. Or, similarly, in the 2002 Lapides case, the U.S. Supreme Court held that, when states’ attorneys appear in federal court, whether a state actor has authority to waive sovereign immunity is a question of federal law. The rationale, evidently, was that the state legislature should not get to decide how to balance state sovereign immunity against federal considerations of judicial economy and fairness to litigants.

So, to flip Jack’s earlier janitor example, suppose that a state legislature determined that the effectiveness of the terms of federal-grant conditions for all citizens in the state would turn on whether the capital custodian opted to accept the conditional funds. In a challenge by other state officials to the applicability of those conditions, must the court treat the custodian's acceptance as meaningful (assuming there are no state-law principles that would also nullify it)? My argument is that it would be legitimate to refuse to give the acceptance meaning to the extent that one can articulate some federal norm for doing so.

What sorts of federal norms might there be that could justify setting aside state law? Some scholars of conditional spending, such as Professors Ernie Young & Lynn Baker, believe that such spending is inconsistent with state autonomy. They support the “clear statement rule” of Pennhurst and other cases as a way of requiring bicameralism and presentment before any conditional grant can be enacted, so that enacting the grants will be very difficult, if not as difficult as possible. By the same logic, they should also support a requirement of bicameralism and presentment at the state level before any state grant can be accepted. Otherwise, states could by their individual decisions undermine a system of federalism that benefits them all.

Or, on my account of conditional spending, additional judge-made resistance to grants is unnecessary because resistance is intrinsic to the motivations of state actors. But that may depend on the structure of state decisions. I argue that state officials’ self-serving incentives to refuse a grant or demand more money before accepting can act to preserve state autonomy. So suppose it were the case that state agency officials are those most driven to reject federal grants. (I didn’t consider that particular question in my paper, but let’s just suppose.) The rule most consistent with the spirit of the 10th amendment then should be that state agency officials get to decide on grants, because giving the decision to the legislature, by hypothesis, would reduce state autonomy overall. Indeed, in this story, federal law has to protect state populations and the federal structure against state legislatures that will enact rules giving themselves sole authority to accept grants, and accept grants too readily. Thus, no matter what rule the state selects, federalism would dictate that the rule be that only state agency officials can validly accept grants.

One might resist these claims by arguing that, once we say we can reject the janitor, federal law can also dictate any other state arrangement that would impede the acceptance of federal grants. For instance, why not quadruple the number of state legislators and require unanimity to accept grants? Or, put another way, the argument against conclusive state power to dictate the terms on which they will accept grants is a sort of federal paternalism – protecting the States from state lawmakers. Once we start down that road, where do we stop?

I am actually sympathetic to that argument, but I would argue it cannot be reconciled with the Pennhurst case and other decisions requiring that any condition on federal spending be made explicit in the federal statute. This clear-statement rule cannot be defended unless one accepts the premise that it is legitimate to impose restrictions on a state's power to undermine federalism interests. (I have set out that argument in detail in the article I mentioned earlier.) So perhaps one could agree that states have complete autonomy to set the terms of their acceptance of grants. But then I think one also has to say they should have complete autonomy to accept grants whose conditions are unclear, a freedom currently denied them under existing law.

It is true that states don't have to challenge the applicability of the unclear provisions they accept. But 15-year-olds don't have to void their voidable contracts, either. And yet as a practical matter it's very, very difficult for a 15-year-old to enter into a meaningful contract. At best, the clear statement rule reduces the value of the payment states can command for their consent, denying them the ability to make the best deal available.

Having said all that, I'm prepared to concede that we may have special reasons for trusting or distrusting the determination by certain institutions of who can accept a federal grant. On my theory or Baker & Young’s, we'd be very suspicious of Congress, who we would fear would try to make resistance too low. Thus, the state leg. clause might be a situation where my general rule could give way to special suspicion of Congress.

On the other hand, my analysis shows the inadequacy of the CRS opinion. CRS claims in its analysis that the state leg. clause is a constitionally-prohibited “conscription” of the South Carolina governor, forcing him to spend money he never accepted, but that is at best question-begging. No one would seriously argue that it is conscription when the governor and legislature together accept, pursuant to state law, conditions that bind other state officials, such as inferior executive officers. What distinguishes the two must be some analysis of whether the decision to accept funds is constitutionally acceptable, an analysis wholly absent from the CRS report.

Brian Galle is an assistant professor at Florida State University College of Law, and a visiting associate professor at Georgetown University Law Center.

Thursday, March 19, 2009

Bailout Bonus Hot Potato: Where Does the Buck Stop?

Frank Pasquale

It appears that the Dodd-Geithner drama over who bears the blame for the AIG bonuses has been resolved: Geithner's fessed up. As I noted during a past bailout blunder, Treasury's increasingly incompetent handling of troubled financial institutions reminds me of Scott Veitch's fascinating book Law and Irresponsibility. Veitch shows how law, commonly billed as a method of forcing individuals to take responsibility for their actions, too often diffuses, obfuscates, or short circuits legitimate methods of assigning credit and blame. As one reviewer puts it, "the legal regime itself is effective in generating conditions of extreme harm while creating a circumstance where there is almost no responsibility attributed to any party, including a state level actor."

As the bailout unfolds, phobia about "nationalization of the banks" results in a regime where no one appears to be in effective control of the situation. The "sanctity of contracts" becomes a catch-all shibboleth for rewarding even the most revolting greed. Late-night legislative sausage-making, dubious in even the best of circumstances, becomes a Ring of Gyges for passionately intense lobbyists. Everyone from Obama to Dodd to Shelby to Boehner can rail against the bonuses, while happily taking contributions from the Wall Street worthies they're unable or unwilling to hold accountable.

The outrage over the AIG bonuses is rooted in legitimate worry about a hapless, drifting state. The rage may eventually be quelled by sober economic analysis of the "real value" of executives and traders. But Americans now have a sick feeling that even after the repudiation of the most fatcat-friendly regime in our history, "Change We Can Believe In" has turned into continuity we can't stand. Consider Senator Ron Wyden's comment on the Dodd-Geithner contretemps:

"I pulled out all the stops," Wyden [said], "to convince the president's economic team that [an anti-bonus amendment] was vital to the White House for two reasons: 1) the president had spoken out against bonuses; 2) fury about bonuses would kneecap confidence in the president's entire economic policy."

But no one inside the president's economic team was in favor of it. As Wyden put it: "If the White House economic team had made it clear that this was important, this provision would never have been removed. I don't believe the president has been well-served on the bonus issue by his economic team."

A couple months ago, I thought that President Obama's strategic decision to defer to "safe hands" like Geithner and Summers on macroeconomic matters was wise. I even held out hope that the government would use some of its leverage over the banks to induce them to invest in our future--projects such as green energy, universal broadband, and health information technology that will be perennially neglected by investors obsessed with quarterly earnings.

But these hopes are fading as a neo-feudal reality begins to emerge. Whatever their failures, however reviled they are by the public, the potentates at our leading banks appear to believe themselves entitled by divine right to determine what projects get credit and which are denied. Rather than assert the people's prerogative to demand investment that builds a better future for us all, our putatively progressive Treasury Department contorts itself to resist the "nationalization" label--even as conservatarians like Lindsey Graham and Alan Greenspan consider it. Like the Rubin-ites who rolled over Robert Reich and Brooksley Born in the Clinton administration to prevent derivatives regulation, these "centrist" Democrats are pushing the Obama administration into a hollow establishment "consensus" that commands the respect of few outside the Beltway Bubble, Greenwich, and the Upper East Side. For these worthies, we are impertinent even to ask about the long-secret destinations of the AIG money.

We live in "a world in which, according to 2006 statistics, one percent of the world’s adults own forty percent of all global assets[,] [t]he richest ten percent own eighty-five percent, while the poorest half own less than one percent." We should not be surprised when those in that glittering top percentile pull out all the stops to preserve and intensify those inequalities. But we are still inevitably disappointed by an administration that promised so much, and appears more at drift than mastering the financialization that has brought the nation to the brink of ruin. That's the kernel of truth and sorrow at the core of public outrage over AIG.

But there is still hope for redemption. Even a once-ardent fan of inequality like Judge Richard Posner can change with the times to acknowledge the problems caused by extremes of wealth:

[C]onsideration should be given to steeply increasing the marginal income tax rate of persons who have very high incomes. Such incomes typically contain a good deal of economic rent (that is, income above what the person could obtain in his next best employment), and taxing economic rents is, in principle anyway (I will explain this qualification shortly), highly efficient because it has minimal substitution effect.

I hope Judge Posner will join me in applauding the US House of Representatives' vote for a 90% tax on the lucre of bailout bonus recipients.

Unfortunately, according to the NYT, "Members of both parties raised doubt about whether the legislation could survive a court challenge, saying it was tantamount to a retroactive 'bill of attainder,' which is banned by the Constitution." Haven't they heard of United States v. Carlton, where the Supreme Court noted that it "repeatedly has upheld retroactive tax legislation," explaining that as long as "the retroactive application of a statute is supported by a legitimate legislative purpose furthered by rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches"? Perhaps they're just projecting the revealed political preferences of our many horsemen.

Cross Posted and Updated from Concurring Opinions.

A Coasean Sign

Ian Ayres

Crosspost from Freakonomics:

Last fall, I spoke at an SPSS conference in Las Vegas. As I was heading home, I saw a sign on a convenience store (right next to Bally’s) that made me do a double-take. I got so interested that after a couple of blocks, I convinced my driver to turn around and let me go back to take these pictures:


In case it is difficult for you to read, the convenience store seems to have renamed itself “We Have 22 Years Left On Our Lease.”


When I asked the driver, he told me that more than a year ago, the landowner and the tenant had a big legal dispute. The landowner had tried to sell the property “out from under the lease” for another use. The tenant who runs the convenience store had taken the landlord to court and had succeeded in getting an injunction blocking the sale and enforcing the 22-year lease. (Mini bleg: Is this true? Do readers have any details on the dispute?)

From the street, there is strong visual evidence that a quickie mart is not the “highest and best use” for this property. It is surrounded by high-rise hotels and is just off the Vegas main drag.

The court decision enforcing the leasehold doesn’t mean, however, that the property will be used inefficiently for 22 years. It just means that the landlord needs to buy out the tenant’s interest. Such a deal would be an example of the Coase Theorem at work. Ronald Coase was the first to see that the decisions of courts and legislators might have less to do with how resources are allocated and more to do with who had to bribe whom to do what was jointly efficient. (You can find Levitt’s description of the theorem and examples of when it sometimes fails here.) Unless both the tenant and the landlord agree, the property will be misused for more than 20 years.

The interesting question is: How much should the landlord pay?

This is the perfect kind of question for corporate finance students to kick around in Excel, and so as one of the questions for my quantitative corporate finance final, I asked them to help complete this post.

I asked them to make the following assumptions:

The Las Vegas real estate market is now in a severe slump. But imagine that the current and future value of the property, if it is unencumbered by the lease, is $5 million. The convenience store owner is currently making $600 a month as a net profit on the store after all expenses (including $3,500 monthly lease payment to the landlord). To keep the problem simple, assume that there is no inflation, no expected growth in either the tenant profits or in the rental payments, and that the risk-adjusted market interest rate on both the store profit and on the lease payments is an annual interest rate of 6 percent (effective yield, not APR). Finally imagine that the landlord and the store owner have equal bargaining power, in the sense that they will split any gains of trade from cutting a deal.

(Let me be clear, these assumptions are not intended to be realistic. I was trying to craft one question that could be answered in Excel in three hours. I doubt that, even in the best of times, the property was worth $5 million. And in all likelihood, the lease payments may be subject to an escalator clause that increases them overtime.)

You can play too. What’s the bargaining range — the range of dollar amounts that landlord could potentially pay today to bring the parties to the table — for a potential buyout deal? And what percent of $5 million does the landlord need to offer, given his “equal bargaining power” as described above?

In a world with equal bargaining power, who would get the lion’s share of this land bonanza: the landlord, who after all owns the land, or the tenant, who can legally gum up the works for year? Twenty-two years is an awfully long time.

I’ll spare you the Excel spreadsheet, but here is a sketch of an answer. The landlord would need to pay the tenant, at a minimum, about $90,000 — because the present value of the tenant’s expected store profits is about this amount. Even a landlord who could make a take-it-or-leave-it offer would be ill-advised to offer less than this. And at most, the landlord should be willing to pay $3.1 million. Since the present value of the landlord’s expected profit from the lease together with the present value of selling the land when the lease ends is about $1.9 million, the landlord would be loathe to pay a lease buyout fee that would leave her with less net on the table.

A successful buyout raises their combined payouts by about $3 million (from $2 million to $5 million). If they split these gains of trade, then the tenant must be paid her minimum of about $90,000 plus half the gains of trade of about $1.5 million, which is very roughly about one-third of the $5 million.

So in the real world, why didn’t they cut a deal? We’d need to get rid of these hypothetical numbers and know a lot more about the offers and counteroffers. But the sign is, well, a powerful sign that the Coase theorem in this instance did not hold.

By the way, I was back in Las Vegas last week and the sign is still there — although it now says “We have 21 years left on our lease.” A Blackjack lease.

Pragmatism Versus Ideology in the Law of Terrorism

Rick Pildes

Last Friday, the Obama administration announced its most important decision on detention policy since it declared, right after the inauguration, to close Guantanamo within a year. The new President’s approach, represented in Friday’s court filing, is going to be pragmatic, not ideological. In its pragmatism, there will be elements of continuity with the prior administration. But in its rejection of unconstrained Presidential powers and embrace of international law, there will be a dramatic break with the ideology of the past eight years.

Federal court orders required the Obama administration to define on Friday who it is going to consider an “enemy combatant.” This must be done in order to judge whether any particular individual still held at Guantanamo can continue to be detained for the time being, although the administration would remain free to try, release, or transfer that person instead. The question of how much power, if any, the President has to detain individuals accused of participating in acts of terrorism raises profound questions of power and liberty under the Constitution, as well as issues concerning the relationship of the Constitution to international law.

Friday’s court filing reveals a new administration that no longer envisions a President of unilateral, unbounded power. Nor does it refuse to look to international law as a source of guidance and constraint in determining who may be detained in the terrorism context. Thus, in the first noteworthy break with the past, Friday’s court filings indicate that President Obama is not going to rely on any claims of inherent or unilateral Presidential power to justify detention. Instead, he acknowledges his power is derivative: he has such power because Congress has chosen to give him that power. The Supreme Court has held that the Authorization for the Use of Military Force (AUMF), which Congress passed in the wake of 9-11, grants the President this power to detain. President Obama has now represented that he will detain only within the scope that this law grants.

Second, and perhaps even more dramatic, President Obama states that he will interpret the scope of this detention power consistent with “the laws of war.” The laws of war are the rules and norms that have been developed internationally (with the United States having played a leading role, starting with the Civil War) for determining who can be detained, tried, and killed during times of armed conflicts. The laws of war were developed before the context of modern terrorism; because of that fact, the prior administration argued that the laws of war had little relevance – and posed few potential constraints – on how the United States government conducted its campaign against Al Queda and associated groups.

In marked contrast, the Obama administration continues to look to the laws of war and international law as a source of “permission and obligation” in defining the boundaries of the administration’s power to detain. The most striking aspect of the Obama’s administration position, in fact, is the pervasive role that the laws of war – the international tradition of governmental authority and its limits during wartime – play in the President’s conception of the boundaries on his power. The Obama administration recognizes, as did the Bush administration, that the traditional laws of war were not developed for the context of modern terrorism. But instead of then concluding that those laws are irrelevant, and hence furthering the specter of an unconstrained President, the new President argues that courts should draw on the traditional laws of war for principles and analogies; Obama argues that those laws should be adapted to be applied sensibly in today’s context of terrorism, but not ignored. Here, too, the new administration is following and building on the lead of the Supreme Court. Thus, the overall vision is that of a Presidency acting in concert with domestic legislation, international law, and the Supreme Court’s decisions.

Indeed, the Obama administration told the court on Friday that it wants to get rid of the term “enemy combatant” altogether. That term has been an irritant in international relations and among some international lawyers, because it is not a term formally recognized in international law. Instead, by limiting any continuing detentions to those that would otherwise be permissibly detained by the laws of war, the Obama administration seeks to reduce anxieties that had been generated by a novel legal category that generated perhaps unwarranted fears. I suspect this move might be only a semantic one, but it shows the new administration’s sensitivity toward minimizing unnecessary sources of friction with foreign allies. But in offering a vision of a legally constrained Presidency, and in signaling respect for international law, President Obama has shifted the ideological foundation of the United States’ legal approach to terrorism.

At the same time, President Obama has maintained elements of the underlying pragmatism that characterized President Bush’s approach. In not closing Guantanamo immediately, and in thereby defending continued detention of at least some individuals there for the time being, President Obama is not abandoning immediately all tools other than conventional law enforcement and criminal prosecution for dealing with modern terrorism. That pragmatism is also reflected in his recognition that, if the President is going to defend the need for policies like detention, he will have to defend and implement those policies in ways that ensure such exceptional powers are subject to essential legal constraints.

Friday’s decision applies only to those already held at Guantanamo and is a necessarily temporizing one. The Obama administration has created an interagency review process to determine whether the President should continue to use detention as a tool, either for newly captured individuals or for those currently held at Guantanomo. Should the President assert any power to detain in the future, I believe the administration should acknowledge the desirability of some form of judicial oversight over the process, whether or not judicial review is legally required. If detention is to be used, judicial oversight in some form will ensure greater transparency and provide a check on the risks associated with a unilateral executive control over the detention decision. Instead of fighting battles over whether the courts are formally entitled to any oversight role, the pragmatism of Friday’s decision would be furthered by recognizing that detention will always remain, rightly, controversial – whether or not the President formally has the legal power to detain. For that reason, a President who accepts some judicial oversight over detention will provide much greater reassurance against abuse of the detention power.

Faced with the complex challenges of post 9-11 law and policy, the Bush administration would have had its hands full simply trying to decide how to adapt various laws and policies to deal with the unique nature of modern terror threats. But that administration chose to fight a two-front war. Instead of simply arguing that 9-11 required law to adapt in pragmatic ways to the specific nature of modern terrorist threats, that administration also sought to wage an ideological battle over the relationship between the President and Congress, as well as the United States and international law. But those ideological battles were not necessary to sustain most of the pragmatic policies that emerged to battle modern terrorism. The Obama administration now looks willing to leave those ideological battles behind and focus only on the pragmatic task of how to fight terrorism effectively.

Tuesday, March 17, 2009

Why There Must Be A Criminal Investigation of the Bush Administration

Brian Tamanaha

There is a lot of debate about what the rule of law means. But everyone agrees, at a minimum, that it means the government is bound by the law, and that government officials are accountable to the law. The essence of the rule of law is that no one is above the law.

An already substantial and growing body of credible evidence (the latest here) suggests that high level officials in the Bush Administration directed actions that involved a violation of domestic and international laws prohibting torture. The International Committee of the Red Cross has concluded that we have tortured prisoners. Dick Cheney and John Yoo have openly stated that the Bush Administration ordered that selected prisoners be waterboarded. The CIA has destroyed 92 hours of tapes of interrogations.

This is all well known. Yet people who assert that there should be a criminal investigation of the Bush Administration are shouted down by the right, painted as leftist political extremists out for revenge. Even many liberals shy away from the prospect of a criminal investigation, opting instead for a truth commission, out of fear that the inevitable political backlash will destroy the Obama Administration.

Until recently, I was one of the latter, with no stomach for pursuing criminal actions against the Bush Administration. A criminal investigation into these matters strikes me as equivalent to walking to the lip of a volcanic crater ominously frothing with lava. There is a real possibility that our past President, Vice-President, Secretary of Defense, Director of the CIA, Secretary of State, Attorney General, and OLC lawyers, among others, engaged in criminal actions. Only a fanatic would embrace the prospect of opening this up to possible prosecution.

Now it appears we have no choice about the matter--not, anyway, if we are committed to the rule of law. Nixon's Watergate, Reagan's Iran-Contra, and Clinton's perjury, were all criminally investigated for this reason.

The only discernible difference here is that the illegal conduct at the highest levels of government, if proven true, might be worse in degree and extent than other recent examples. But that is an affirmative reason to investigate, not a reason to take a pass.

Those who suggest that such an investigation would be political have matters exactly upside-down: given the ample credible evidence that the law has been violated, it would be political to decide to not conduct a criminal investigation.

To avoid the appearance of politics, the criminal investigation should be run outside the Department of Justice (as in the case of Scooter Libby), and the prosecutor appointed to manage it should be a Republican. Many career prosecutors are committed to upholding the law.

This is gut check time for America and our commitment to the rule of law.

Monday, March 16, 2009

"every legal avenue"

Sandy Levinson

The New York Times reports that President Barack Obama has called on the Secretary of the Treasury to "pursue every legal avenue" to prevent the payment of bonuses by AIG to the architects of the world financial crisis we are now in. This suggests that lawyers will be asked to pore over existing legal materials and statutes to find out if they can be prevented (or if the Merrill Lynch bonuses can be recaptured).

But why isn't the "legal avenue" broad enough to drive a Mack truck through? Congress could pass an act literally in the next week stating that a) no contracts between banks or other financial entities receiving any federal bailout money and their employees relating to bonuses be implemented; and b) that all bonuses received by employees of banks and other financial entities receiving any federal bailout money since, say, Dec. 1, 2008 (this would apply to Merrill Lynch just fine) be taxed at the rate of 100%. If a state did the former, there would be a Contract Clause problem. But the Contract Clause prohibiting the "impairment" of contracts applies, textually, only to state governments, not to the national government.

I have run these suggestions by the "conlawprof" list, and no one (yet) has registered a constitutional objection. So why isn't President Obama or a relevant Senator or Representative taking the lead on such populist (and popular) legislation that would deprive the pigs of their ill-gotten (though not at the time illegal) gains? Why should we believe for a New York minute that the federal government has its hands tied with regard to the bonuses? Perhaps it would be bad policy (though I'm not sure why), but that has nothing at all to do with its constitutionality.

UPDATE: Anyone interested in this issue should log onto Glenn Greenwald's discussion, which certainly blows the whistle on the Administration's claims, led by Larry Summers, that adherence to contracts is sacred within the US. Why is President Obama allowing his Administration to appear like a Gulliver tied up by the Lilliputians? Are we really a paper tiger when faced with the pigs at the trough at the late Merrill Lynch and the all too alive AIG? If he can't stand up to them.....

UPDATE II: Today's NYTimes includes a column by Andrew Ross Sorkin defending paying the bonuses basically on the grounds of sanctity of contract and the potential instability of the government's putting all employment contracts at risk. I don't think much of this argument, especially given Greenwald's emphasis that no one seems to care about forcing labor unions to renegotiate contracts etc. But it's a well-written piece that's worth reading.

No More Debate About Whether We Tortured

Brian Tamanaha

This article by Mark Danner in the New York Review of Books ends the debate over whether we tortured.

Danner's article is based upon a report by the International Committee of the Red Cross, which interviewed prisoners. The report explicitly concludes that we "tortured" a number of prisoners. But don't take the ICRC's word for it. Read the extensive accounts by the prisoners of their treatment and decide for yourself (although they were kept in isolation, their accounts substantially coincide).

Grotesque is the word that comes to mind to describe our treatment of these fellow humans--from administering bouts of suffocation, to extreme cold, to forced standing in chains for hours on end with their hands above their heads, to terrible beatings.

As the discussion moves forward, let us at least drop further hypocrisy and doublespeak (A soon to be infamous Bush statement made directly to the American people and the world: "The United States does not torture. It's against the law, and it's against our values.")

In plain terms, this is what happened: Bush Administration officials, with crucial assistance from top Justice Department lawyers, ordered that prisoners be tortured because they collectively thought it was necessary.

Torture was and is illegal under domestic and international law (never mind morality). Now the questions revolve around what can or should be done about it.

But please, no more pretense--no more phony debates about whether our "alternative procedures" amounted to "torture."


Mark Graber

Judges and Unjust Laws: Common Law Constitutionalism and the Foundations of Judicial Review presents a well-written, well-researched argument that common law judicial review has historically existed alongside of constitutional judicial review in the United States and that common law judicial review continues playing a central role in English jurisprudence as well. Professor Douglas Edlin of Dickinson College convincingly argues that two forms of judicial review existed at the time Marbury v. Madison (1803) was decided. The first, constitutional review, is well known and consisted of justices determining whether state and federal laws were consistent with newly adopted constitutional texts. The second, common law review, is less well known and consisted of justices determining whether state and federal laws were consistent with common law principles (or certain fundamental principles of justice). This is an extremely important distinction and conclusion, one that helps clarifies a number of puzzles about early American judicial practice. Scholars have noted that many early judicial decisions striking down state and federal laws rely on both constitutional and non-constitutional sources. The standard explanation for this is that late eighteenth century justices were ambivalent about the legitimate sources of constitutional review. They had not yet determined what sources could be used when declaring laws unconstitutional. Professor Edlin offers a better explanation, one I think is far more consistent with the surviving texts. Justices at the time Marbury was decided employed both constitutional and non-constitutional sources when striking down federal laws because they had both constitutional and non-constitutional (common law) grounds for striking down laws. American judges in the late eighteenth and early nineteenth centuries were not feeling their way to the entirely unprecedented practice of constitutional review. They were adopting a new practice, constitutional review, along side of an inherited practice, common law review.

The argument for common law review is well made. Professor Edlin relies on the right sources. His work places particular emphasis on Bonham’s Case and a series of early South Carolina decisions striking down state laws. Judges and Unjust Laws offers convincing interpretations of those sources. Professor Edlin’s analysis of Bonham is particularly good. Juxtaposing Lord Coke’s decision in that case with Coke’s other activities at the time makes clear that the decision was not simply a matter of statutory interpretation, but some form of judicial review. I think his reading of the early state judicial review cases is also correct. As he points out, the language in the relevant opinions is more about fundamental legal principles than constitutional text. South Carolinian justices were not going to transfer Blackacre from A to B, and they believed the roots of this prohibition were more common law than constitutional. More generally, Professor Edlin is clearly well read in the early common law and constitutional sources. Even experts who disagree with some of his conclusions will learn a good deal from the work.

I confess to being convinced that Professor Edlin has demonstrated a common law obligation to improve the law. Bonham does not speak of that obligation and neither do the early state and federal cases that he cites. Rather, these cases speak of time-honored common law principles that the justices are upholding. The law, in this view, is not being improved. Rather, the justices are preventing backsliding or corruption. To be fair, Professor Edlin does present a few cases in which the justices assert that the common law works itself pure, and this is a theme in common law judging. See especially Lord Mansfield s influential decisions on this score. Still, particularly in cases in which statutes are voided on common law grounds, the judicial emphasis seems to be on holding legislation up to existing common law principles rather than in improving the principles themselves.

Regardless of this quibbles, persons who read Judges and Unjust Laws will find themselves much smarter having encountered an interesting and original mind. If the role of the philosopher, as E.B. White suggested, is to add to the number of ideas available to human beings, Professor Edlin has more than done is scholarly duty.

Friday, March 13, 2009

A Foucauldian View of Law School Rankings

Frank Pasquale

Sociologists Michael Sauder and Wendy Nelson Espeland (NE&S) recently published an insightful article on the disciplinary function of law school rankings. They apply both Foucauldian and organizational theory to "unpack the power and influence of rankings as a peculiar type of environmental pressure." They conclude:

[that r]ankings simultaneously seduce and coerce, and . . . [the fact that] this complex interplay of co-optation and resistance is conducted in the bland language of numbers makes it all the more compelling. At schools with improving rankings, even critics may find it hard to avoid a flush of pride, along with relief and anxiety about next year. The allure of rankings may be subtle, but it shapes resistance while securing the engagement of critics and supporters alike.

NE&S document several responses to the culture of rankings. Given some recent work I've been doing on trade secret protection for ranking algorithms, I found their description of a dialectical "gaming/surveillance" dynamic particularly interesting:

“Gaming” is one example of how resistance extends discipline by restructuring relations both among law schools and between law schools and the rankings. We define gaming as cynical efforts to manipulate the rankings data without addressing the underlying condition that is the target of measurement. [For example,] some schools encourage underqualified applicants to apply to boost their selectivity statistics, “skim” top students from other local schools to keep entering first-year cohorts small[, etc].

Such gaming strategies prompted USN to change its methodology and reporting, develop more explicit rules about how to measure rankings criteria, and monitor information more closely. The result, predictably, is a more precise and stringent discipline and more ingenious forms of gaming.

NE&S's work also suggests a reason why there are so many dean searches presently. A law school dean is under great pressure to improve her or his school's ranking, but "administrators’ ability to manage them is limited. Work that demands responsibility without control is especially stressful."

NE&S deserve commendation for their exhaustive empirical work:
Along with open-ended interviews of law school personnel (described below), we conducted 92 brief interviews with prospective law students, visited seven law schools, observed and participated in professional meetings and conferences, analyzed 15 years of admissions and yield statistics (Sauder and Lancaster 2006), monitored online bulletin boards for prospective law students weekly for an entire admissions cycle, and analyzed the content of Web sites, newspaper stories, and organizational documents (including strategic plans, marketing plans, promotional brochures, and internal memoranda). To identify distinctive effects on law schools, we interviewed 35 business and dental school administrators (Sauder and Espeland 2006) and reanalyzed evidence from two other research projects. . .

While law school rankings may seem insignificant in the grand scheme of things, I think they are well woth studying for their implications in many other realms of life. I used scholarship on the topic to critique the practices of search engines in my piece Rankings, Reductionism, and Responsibility. McKenzie Wark's fascinating book Gamer Theory (published both by Harv. U.P. and online here) extrapolates the condition of video gaming to the world at large:

The whole of life appears as a vast accumulation of commodities and spectacles, of things wrapped in images and images sold as things. But how are these images and things organized, and what role do they call for anyone and everyone to adopt towards them? . . .

Everything has value only when ranked against another; everyone has value only when ranked against another. . . The real world appears as a video arcadia divided into many and varied games. Work is a rat race. Politics is a horse race. The economy is a casino. . . . Games are no longer a pastime, outside or alongside of life. They are now the very form of life, and death, and time, itself. . . . You are a gamer whether you like it or not, now that we all live in a gamespace that is everywhere and nowhere.

As network power accumulates behind certain ranking systems, platforms, languages, and methodologies, individuals are both "forced and free" to accept them. The collective freedom manifest in coordination and political action could perhaps enable us to develop a rankings system that better accommodated the diversity of law school aims and missions. But it's a safer bet that the disciplinary powers now shaping law schools will eventually reach down to shape the careers of lawyers themselves. Doctors appear much better able to influence the rankings systems developing in their field than lawyers have been.

Cross-posted at Concurring Opinions.

The Stewart-Cramer interview and the predicament of journalism


Jon Stewart's interview of Jim Cramer last night was a remarkable example of what contemporary journalism isn't.

Many journalists probably wish they could do something like Stewart did, although perhaps a bit toned down: sit a subject in a chair and have at him with arguments, video clips, and righteous indignation in the name of The People until the interviewee produces a weak and compliant mea culpa.

But one shouldn't take too much from the actual exchange between the two men: In an important sense, the outcome was rigged from the start. Stewart was aggressive, perhaps overly so, and Cramer was surprisingly passive and and even apologetic; he took most of Stewart's criticisms without doing much in the way of fighting back. Had someone like Karl Rove sat in the chair opposite Stewart, the interview would not have gone the same.

The reason we don't see interviews like this on television is first, that interviewees don't sit there and take accusations of this type-- they fight back, spin, obfuscate, or change the subject; and second, that if a contemporary reporter started laying into a subject the way Stewart laid into Cramer, no one would ever agree to an interview with that reporter again. It was a rare combination of circumstances that led Cramer to agree to sit still and listen to Stewart engage in his j'accuse.

What is important about the interview, however, is that both Stewart and Cramer are playing journalistic roles. Stewart is a comedian who does journalism through comedy; Cramer is a financial journalist who does journalism through entertainment. They are two sides of the same coin. One is interviewing the other, and what they are talking about is journalism itself. That is why the exchange is significant.

Stewart the comedian as journalist criticized Cramer the financial journalist as entertainer for being a bad journalist-- for sucking up to and being coopted by the people he should be covering, for failing to ask these people tough questions, for failing to treat their answers with appropriate skepticism, for failing to do independent investigation to discover the problems in the U.S. economy and the misbehavior of financial elites. Stewart criticized Cramer and his network CNBC, above all, for allowing sycophancy and a desire for ratings to overcome journalistic judgment so that CNBC had essentially become a cheerleader for a financial bubble and thus had encouraged millions of ordinary Americans to invest in ways that caused them to lose much of their savings later on.

This explains some of Cramer's passivity: he thinks of himself as more than an entertainer-- he thinks of himself as an expert and financial journalist who is entertaining. Stewart called him a bad journalist, even a corrupt journalist, who had sided with financial elites over the ordinary citizens he was supposed to inform, and Cramer was not able to mount a defense of his professionalism.

We should congratulate Jon Stewart for outstanding television, and for an absorbing interview that raised really important issues. In this sense, he is doing great journalism. But we should not assume that regular journalists could simply imitate his mannerisms and his aggressive questioning tactics and turn journalism around. Their subjects will not behave like Jim Cramer, a journalist, did. Professional journalists must abandon the bad habits of contemporary journalism, and the sycophancy, corruption, and complicity that come with them; but to do that, they also have to find some way to free themselves from much larger social and economic forces that lead to co-optation.

Thursday, March 12, 2009

Want A Politically Viable Gas Tax? Make It Voluntary

Ian Ayres

Crosspost from Freakonomics:

Like Greg Mankiw, I think it’s a no-brainer that we should raise the gas tax. But it’s incredibly difficult to muster the political will to impose a traditional tax. (Witness California’s inability to increase the state gas tax by a measly 12 cents.)

Last year, Robert Samuelson (and a host of others) proposed a contingent tax that only kicks in when the price of oil drops — say, below $4 a gallon. I’m concerned that contingent taxes of this kind would just give OPEC an incentive to keep the price of oil just above the kick-in price. (Thomas Merrill and David Schizer have a detailed analysis of how the tax could work, why it wouldn’t enrich OPEC, and how the revenues could be rebated to the public to keep the tax revenue neutral.)

Proponents of a price floor originally hoped that the plan would be more palatable because it was basically a “tax more tomorrow” idea. But the idea was a lot more appealing before the recent drop in pricing — because now voters would see an immediate increase in their pump price. To be sure, after the fact you’re promised to get a lump-sum rebate (which, crucially, is not tied to individual consumption). But future (speculative?) payments are likely to loom small in the public consciousness.

Barry Nalebuff and I have just published in Forbes
a different way to make a gas tax more appealing. We suggest that the federal government whip up patriotic support for “independence bonds” that would pay you a lump sum of cash today if you agree to pay the government in the future an extra tax for every gallon of gas that you use:

The government would offer a $500 advance tax rebate each year for every car you choose to sign up for the tax. In return, you would commit to pay an extra $1 for each gallon of gas you buy. The actual tax paid would be based on miles driven and fuel economy. Thus a Chevy Impala rated at 19 m.p.g. would be charged $5.26 each 100 miles, while a Prius rated at 46 m.p.g. would be charged $2.17 per 100 miles.

For cars with average fuel efficiency (22.4 m.p.g.), you’d break even if you drove 11,200 miles a year. People who already drive their cars less or who drive fuel-efficient cars would be particularly likely to opt for the independence bonds. But even these folks would have a strong economic incentive to reduce their driving.

Readers of this blog will recognize this idea as another commitment contract (see also here and here) that people can opt in to to improve their incentives to reduce gas consumption. Indeed, people could enter into something very close to these commitments on my beloved I can imagine a day where an enterprising referee offers to give cash up front if car owners will promise to pay the referee for every mile driven (or possibly every mile driven above some pre-specified amount) in the coming year.

You’d be wrong, however, if you inferred that we came to this idea because of our work with commitment contracts. Instead, we dreamed it up by applying the “flipping tool.”

Barry Nalebuff and I love flipping ideas. In our book Why Not? we give dozens of examples of how existing ideas can be made better by flipping things around. For example, it would be easier to peel bananas if we flipped them around. If you look closely at this picture, an expert in banana peeling shows you how it should be done:


The flipping tool is how we came to the idea of a voluntary tax. Usually there are multiple dimensions of an existing idea that can be flipped. Consider these:

1) What’s the opposite of a rebate or refund?

It’s a “pre-bate” or “pre-fund.” Instead of giving taxpayers back the money after the fact, it makes a lot more sense from a behavioral perspective (and just a downright trust perspective) for the government to give them the money before the fact of the tax.

2) What’s the opposite of a war bond?

It’s an independence bond. As we wrote in Forbes:

Voluntary taxation seems like an oxymoron. No sane person would ever volunteer to be subjected to a tax. Yet about half the cost of World War II was financed by voluntary purchases of war bonds, which had a sort of tax built in because they paid below-market returns. Buying them was the patriotic thing to do. Bond rallies with stars like Rita Hayworth and Bette Davis generated mass support for “the greatest investment on earth.”

Because the plan is optional, high-mileage drivers and businesses that can’t afford the extra cost would be unlikely to sign up. But the history of war bonds suggests that, if marketed properly, independence bonds might be appealing to a large swath of Americans. Cars that were committed to conservation would also be eligible to display decals showing their patriotism in the fight for energy independence. The decals might also authorize use of highway lanes now reserved for buses and car-poolers.

People who claimed the rebate would need to have their odometers checked once a year to calculate the amount of tax owed. It’s fairly hard to roll back an electronic odometer. Odometer readings would be particularly easy in the 33 states that have federally required periodic vehicle inspections.

With war bonds, people paid the government money up front and were paid money from the government after the fact. Our independence bond flips the order of the cash flows.

3) What’s the opposite of G.M. offering to buy down the price of your gas if you pay them more for a new car today?

It’s lowering the price of buying a car, if you’ll agree to pay more for gas in the future. As we noted in Forbes:

In the spring of 2008, Chrysler promised to subsidize the price of gas to $2.99 a gallon for a year for anyone who bought one of its cars. Back in 2006 Hummer and G.M. promised that you wouldn’t pay more than $1.99 a gallon for a year. These promotions tapped into the same demand for lower gas prices that fueled Hillary Clinton’s and John McCain’s proposals for a summer gas-tax holiday. The problem with all these plans is that they subsidized people to drive more.

Conservation bonds are just the reverse: Participants are paid today for accepting higher gas prices in the future. A company like Toyota might even offer to match the government offer: Prius owners could get a $1,000 rebate if they promise to pay Toyota an extra 2.2 cents for every mile driven. While car companies might use conservation rebates to attract green customers, a call by our leaders to voluntarily embrace credible conservation would engage an even larger number of Americans.

4) And finally, what’s the opposite of a mandatory tax?

Of course, for me, it’s a voluntary tax. Unlike death, a gas tax for conservation purposes doesn’t need to be unavoidable.

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