And the Fun Continues

Another trillion dollars gone from the stock market. Where's the bailout? Who's going to accept responsibility for the bailout not working? I'll take a bet on this: President Bush, being the stand-up guy that he is, will get on the tube and admit the bailout didn't work before the Democrats (the problem is, what's he gonna say next?). The Democrats' reply message will be something like, "Well, yeah, it didn't work, but it's not our fault. It's the fault of overpaid CEOs, deep systemic problems in the financial system, and unscruplous lenders." They will not admit that their policy fix didn't work.

*

I got into a bit of a philosophical discussion with a friend today about government, human nature, and the American Constitution. We both agreed (approximately) on the following:

• The current system is geared toward people skilled at getting and staying elected, not necessarily governing.
• Power and resources (money) are concentrating into fewer and fewer hands.
• Human nature tends to reach for more and more power.
• The Constitution, understanding human nature, was established to limit the ability of individuals to seize power.
• Unfortunately, the Constitution was established by an aristocracy of honorable men of similar social standing who created a government that assumed future generations of men like them would continue to run it. This process lasted as long as the Founding Fathers lived. Political leaders since then have spent the last 200 years or so undoing the careful structures the Founders erected to prevent centralized power.
• The items above are not good for the Republic.

Why does this concentration of power and the direction of the Constitution matter?

Senators used to be elected by the legislatures of the states they represented. This ensured that said Senators would be more responsive to the interests of their states rather than some national party or constituency. The 17th Amendment undid this part of the structure. With more-or-less independent Senators, accountable only to their own attitudes, it became easier for lobbyists to focus on two people instead of multiple people in state legislatures.

Federal regulations and Supreme Court rulings also have done their part to reduce the power of the 10th Amendment...

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

...taking power away from the states.

And then there's the military. The National Security Act of 1947, changed the nature of the President's relationship to the armed forces. Prior to 1947, the President had control of the Department of the Navy, which handled seaborne and limited Marine engagements, while the Congress had control of deploying the Army, since it was assumed that the Army would only be deployed in the event of full-scale war. The 1947 Act put all armed forces under the Department of Defense, and the Department under the President.

The War Powers Act and the All-Volunteer Force, which were passed in 1973 as a means of preventing "another Vietnam," actually allowed Presidents to send American armed forces to more places without a declaration of war. The War Powers Act still allows the President to deploy U.S. forces for up to 60 days without consulting Congress and without a draft.

Understand that I have the highest respect for the U.S. Armed Forces. I couldn't cut it, doing what they're doing, and I salute them for doing it. But here's the problem with an all-volunteer force: politically, it is much easier to send professional soldiers than draftees. Again, the Constitution's system was set up the way it was on purpose. It was fine for the Navy to be under the control of the President because any engagements it participated in were necessarily limited. It was supposed to take a declaration of war before deploying the Army.

So anyway, now we've got social engineering, military, homeland security, regulatory, taxation, legislative, news media, and judicial powers concentrated in Washington. Thus a horde of lobbyists can more easily descend on one city and influence policy there rather than disperse to the 50 states and hope for the best. It's a matter for serious thinking for all voters, since both parties have contributed to this centralization, though most of that centralization can be traced to a party I haven't voted for.

And I, by grousing about sticking to the forms of the Constitution, am considered a right-wing nut job. Frightening.

The Current Financial Mess, Again Reconsidered

I spent some time today emailing back and forth with a couple folks, trying to assimilate the reality of the bailout. Father Dan explained to me the downside of the Leahy Doctrine (which states, "Better a sin of omission than a sin of commission"). And Bush actually did a fair job of explaining the situation in the financial sector to me:

• Banks were encouraged (or forced, if you believe talk radio) to offer loans to high-risk borrowers.
• These high-risk mortgages were packaged as financial funds and traded on the market. Because many of the mortgage-backed instruments were bought and backed by Freddie Mac and Fannie Mae, there was unusual and unwarranted confidence in their solvency.
• Bank executives made bonuses hand over fist by making money through continually growing assest based on these mortgage-based instruments, among other things.
• Cornerstone number one was pulled out when housing supply exceeded demand.
• Cornerstone number two was pulled when the high-risk borrowers (as some analysts in Freddie Mac and Fannie Mae warned) defaulted, undermining the solvency of the assets based on those mortgage-based instruments.
• To stave off further losses, banks have tightened up credit, refusing to loan out more money.
• This slows down the ability of private individuals and businesses to borrow money to expand, make purchases, or obtain lines of credit or other loans.

So, again, what's the solution, if it isn't a $700B bail-out? We could, perhaps, address the individual problems rather than pay out huge sums of money:

• Executive compensation: This could be solved via the private sector, by tying bonuses and stock options to short-term and long-term performance. If you allow the government to set a ceiling on executive pay, then you're empowering them to set the wages for everyone. Maybe you. Do you want someone in Washington declaring that people in your particular profession will no longer be allowed to make more than X dollars per year?
• Tight money: The Fed could keep interest rates low to ease "tight money" policies by banks. This does not require action by the U.S. Congress.
• High-risk lending: Allow banks to tighten up requirements on borrowers, do background checks (God knows I got a thorough one) for people pursuing first-time mortgages, or eliminate interest-only, zero-down loans. This is a matter of reducing government regulations, not increasing them, while allowing the private sector to increase businesses' borrowing requirements. This is starting to happen already. Though it'll make car buying a little tougher, it'd still be easier to deal with than government actions would.
• Mortgage-based instruments: How many of these things are there? Again, what can the private sector do to prevent banks from investing in these types of things? This is a matter of corporate governance, not government action.
• Market corrections: If the market is reacting to a fall in housing prices due to increased supply, this is a normal market function. Gasoline prices are going up because of an increase in demand without a concurrent increase in supply. The government's "solution" for this is to try to force consumers to reduce their demand by cutting back their energy use, lifestyles, or economic activities rather than allow oil companies to increase supply, which would dramatically reduce the price. Obviously people in Washington understand supply and demand when they chose to. Rather than interfere with the market, why not just leave it alone?
• Individual responsibility: What could be done on an individual level to punish the guilty without spreading the misery? I don't know on this; I can't even guess. And I fail to understand the congressional Democrats' demand that people who defaulted on their mortgages be allowed to keep their homes. I fully expected that, if I didn't make my apartment/house/condo payments, I would get thrown out of my home. However, I do make the payments, do maintain my credit rating, and stay in my home. Why can't defaults be enforced, rather than rewarded?

*

I spent my drive home this evening screaming at the radio, especially when Bush said that "Democratic capitalism is the greatest system that has ever been created," and I replied incredulously, "Then why try to fix it with socialism?!??" Sigh.

*

Let this be a lesson to my Republican brethren: a "neo-conservative" is someone who, if they are willing to go overseas and remake other nations' societies, are just as willing to remake the society back home. A conservative wouldn't try either.

Truthiness

Apparently the joys of Google bombing have rendered Steven Colbert the "greatest living American." This brought to mind one of his favorite neologisms:

http://www.merriam-webster.com/info/06words.htm

1. truthiness (noun)
1. "truth that comes from the gut, not books" (Stephen Colbert, Comedy Central's "The Colbert Report," October 2005)2 : "the quality of preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true" (American Dialect Society, January 2006)

Colbert applied this to George W. Bush, but this could just as easily refer to the attitudes of his political opponents, like Dan Rather, who believed that his story about Bush's National Guard service was true, even if the evidence he relied on was made up.

In the political silly season, it might also equate to the impassioned beliefs of people who don't vote as I do. Okay, really quick: imagine that a Republican senator with two years of experience in that body and a history of voting the straight Republican/conservative line wanted to run for president. What would the media be saying about him? Or imagine that the wife of a former Republican president, with no experience in elected office but eight years as First Lady, declared herself "ready on day one" to be president. The jokes in the news rooms would be told for decades. However, change the (R) after the names of these two hypotheticals to a (D), and we have unquestioned belief, seriousness, and praise. Unbefrickingly believeable.