Wednesday, October 29, 2008

Full Court Shuffle

Concern about federal court appointees has reached a crackling pitch.

In his recent op-ed, Stephen Calabresi warns against an Obama presidency that could, he says, shift federal courts dramatically to the left. But that's not the whole story.

He begins by noting that while Reagan appointed 8 judges to the D.C. Court of Appeals, George W. Bush was able to appoint only four. That's true. But it's no loss of conservative influence, given that Clinton appointed only two.

In the past 30 years, that court has received a dozen Republican appointees and only two Democratic ones, both older judges likely to retire soon. The existing two vacancies, plus replacement of at most four older Republican retirees, is hardly going to swing the conservative tilt of the past 30 years.

Calabresi also overlooks that of the 13 courts of appeal, only one has a majority of Democratic appointed judges. George W. Bush bragged about appointing more than
 a third of federal appeal judges now serving. When he began his time in office, a majority of federal judges were already Republican appointees.

Yes, I know the above the link is to the New York Times, which conservatives like to trash. But I'm citing it for factual reference, not opinion. If you feel the Times is wrong about the above facts - that George W. Bush actually did not speak with pride about his large number of appointments, or that most appellate courts actually have more Democratic appointees - feel free to speak up.

In truth, it's extremely rare for any of the major papers to have their facts wrong, whether the Wall Street Journal or the New York Times. What's common is to get only part of the story, and that's what the Calabresi offered in his op-ed.

He even went so far as to imply that Obama could tip the balance of the Supreme Court, noting the advanced age of several justices. But he doesn't cite them by name, a convenient oversight when you realize that by far the oldest justice is the most liberal, John Paul Stevens (age 88). If Obama replaces him with a liberal, the court balance changes not one bit.

The next oldest: liberal Ruth Ginsburg, age 75. The only other Democratic appointee on the court, Stephen Breyer, is 70. (The recent slew of 5-4 decisions include a fourth 'liberal' vote from David Souter, a Reagan appointee. He's 69.) Kennedy and Scalia are 72, though in such health that very few expect either of them to retire soon.

How old are the most recent Republican appointees? Clarence Thomas, 60; Samuel Alito, 58; and Chief Justice John Roberts, 53.

The plain truth is that a McCain win could dramatically alter the balance of the courts by pushing it to the right, while an Obama win can only check the swing, not reverse it.

Calabresi's colleague, David McIntosh, the other co-founder of the Federalist Society, is more complete in his assessment, saying that the nation's appeals courts were more conservative "than certainly any other time in my life."

So call a spade a spade: what an Obama win really risks is bringing the federal appeals courts a little closer to the Reagan era.

Saturday, October 4, 2008

A Mighty Brief History of Bailouts

The forgotten bailout of my post of Sept 30th  is just the most recent in a long line of government interventions.

Here are the three largest bailouts of the past,  (financial figures from a related Wall Street Journal article), and it's easy to see a pattern: they work.

At least they do if done early, with substantial support. They don't seem to fail even when large - look at the incredible credit extended by the RTC - but they do need to happen quickly enough to restore confidence.

-       The S&L Crisis

It cost $124 billion, but an FDIC historian notes, “Perhaps a measure of the Resolution Trust Corporation’s success is that little more than a decade after it closed, this agency that provoked so much debate is now largely forgotten.” 


-       Mortgage defaults of the Great Depression

By 1933, a thousand Americans a day were losing their homes to the bank. Creation of the Home Owners’ Loan Corporation handled 1.9 million applicants, about half of whom had monthly incomes below $150.

 One in ten Americans eventually secured aid from the agency, and since there was no secondary market for securitized mortgages, the agency had to hold the loans for the full terms.

 When it closed in 1951, 80% of borrowers had paid off their loans on time or early, and it even earned a small profit.

 Economist Alan Blinder has cited it as a model to be considered today.


-       The Panic of 1792

When the federal government assumed obligations that states owed from the Revolutionary War, it added $18 million to a domestic debt of $65 million, held in debt securities attractive to speculators. 

One speculator in particular cornered the market on government 6% bonds, so-called Sixes, and then prompted a selling frenzy that led to a 25% drop in value. 

Working without a historical blueprint, Alexander Hamilton engineered an innovate response. The Treasury borrowed money from banks and used to buy the bonds, lifting the market price. He also told banks to accept the bonds as collateral for loans, with the government guaranteeing their worth.

 The financial system stabilized quickly, and not a single bank faired for fifteen years, a remarkable outcome for such an unproven strategy, says economic historian Robert Wright. He named his son Alexander Hamilton Was Wright.


San Francisco Gets Health Care Backwards

Who needs health care coverage?

People without it,  and preferably those least able to afford it. That's what makes San Francisco's recent moves on health care all the more perplexing.

When the city fought in court to charge businesses for employee health care coverage, it turned the whole program upside-down, placing the burden on those at the bottom of the economic ladder.

No, not businesses, who are only the most visible contributors. I'm talking about employees, especially the ones in need of health care.

They'll be hit hard by the foolish flat-rate payment to the city. The nearly $2/hr charge is minor only for those with large salaries. For the poorest employees, it's a significant portion, more than 20% of San Francisco's substantial ($9.36/hr) minimum wage.

 The employees at your nearest retail store, and the dishwasher at your favorite restaurant, the gal who stocks the shelves at the corner grocery and the guy who hangs your dry-cleaning -  they're all earning minimum wage, and now each of their employers sees labor costs leap 20 percent.

Guess what happens to the price of milk at the corner store.

And to the cost of your dry cleaning, and your meals out, and everything else you buy. Those price increases may not matter much to the wealthiest, who already have health care, but they will to the very people who need the new  coverage.

Yes, businesses with fewer than 20 employees are exempt, but that hardly helps. They often need health care options anyway - I do, at my own business - and companies just over the limit face a terrible set of choices. Any company with 30 employees that sees its labor costs leap has got to consider layoffs, and that's the worst kind of coverage of all.

Far better is the Massachusetts plan: spread the cost through all participants, subsidize for the poorest, and make sure the burden doesn't break the very people you're trying to help.