The Task Ahead for Chief Justice Roberts

The Supreme Court issued a landmark decision known as Brown v. the Board of Education in 1954.  It overturned the 1896 Plessey v. Ferguson decision, which permitted the practice of providing separate but equal facilities in education.  The decision was a unanimous 9-0 decision. 

The decision was the most important decision of its era.  Chief Justice Warren knew that.  He had discussions with several Associate Justices who were initially opposed to the decision.  He was able to win over the opposition in order to deliver a unanimous verdict that positioned the Court squarely behind the change it made. 

Today, we have the most important issue before the Court since Gore v. Bush, and even perhaps since Brown.  The nation has been torn apart for three years over Obamacare.  The issue is now before the Court and it has witnessed the Court providing three days of oral argument on the issue.  Clearly, the Court is aware of the importance of its actions in the eyes of the nation.

The parallels to Plessey v. Ferguson will be drawn in future history books.  But I am curious about one potential parallel, and that is the role of Chief Justice Roberts. 

Late this week the Court will take its initial votes on the case it just heard.  Assuming that the mandate is struck down, as many commentators predict it will do, will the Court separate the issue from the overall bill, or will it declare the entire health care bill unconstitutional?  Within this question are several more subtle questions about Chief Justice Roberts.  How will he manage these questions behind closed doors within the Court?

Chief Justice Warren was able to persuade those fellow justices who were initially opposed to Brown to support the majority.  I presume that Chief Justice Roberts will do the same.  Democrats are poised to campaign against the Court in this year’s election if the decision comes down 5-4.   The nation will be better off if the decision to strike down the mandate comes down 6-3, 7-2, or even 9-0.   Where do the additional votes come from?  Sotomayor?  Breyer? 

Even if additional votes are available, will there be a cost?  Will the effort to sever the mandate from the overall bill be strengthened?  The Court does not do trade-offs, but there are ways to persuade.  I assume that Roberts will construct the questions that the Justices vote on in such a way to achieve maximum consensus on the core issues.  He will assign opinions in such a way to allow the maximum number of Justices to coalesce around the Court’s central positions.  What additional actions and arguments will Roberts make to his colleagues to persuade the Justices toward unanimity? 

On the other hand, can Roberts even attempt unanimity?  Are the members so entrenched in their positions that any attempt by Roberts to bring them together will fail?  Has the partisan nature of our politics reduced the role of Chief Justice? 

I do not know the answer to any of these questions.  We may not know for decades.  I just wish I were a fly on the wall in those chambers to observe all their conversations.

Obama's Oil

The most contentious current national issue is the rising cost of gasoline.   It is happening on Obama’s watch, and he is doing his best to deflect the issue.  As with most national issues, the true facts are not being discussed from podiums, and communication slight of hand is being practiced before us.

The term communication slight of hand refers to a claim by administration officials that they are doing all they can to raise supply and impact the price of gasoline.  Interior and Energy Secretaries Salazar and Chu both use the present tense to describe administration actions.  Since the process of establishing policy, executing policy, and allowing the market to follow through on that policy takes years, the key issue that should be discussed in terms of what did the administration do in that first year of office to establish a consistent policy?  If Obama wanted a low gasoline price in time for re-election, he would have had to implement a consistent policy in his first year in office.

In an article from the New York Times yesterday, it is clear that Obama took office promoting “policies to help combat global warming, including vast investments in renewable energy and a cap-and-trade system for carbon emissions that would have discouraged the use of fossil fuels.”  The article further states that only recently did the Obama administration open up lands and water to drilling, the effect of which won’t be felt for some time.  In the meantime, we are forced to listen to an administration who keeps communications in the present tense in order to obfuscate the true issue, which is what did they do three years ago to keep prices down?  The answer is nothing.

The administration is correct when it says that the price of oil is set globally.  And yes, it is based on supply and demand.  The demand side fluctuates based on the general level of the economy and user preferences for transportation.  The increased use of hybrids and alternative energy mileage cars will lower demand over time, but that time horizon will take years.  The level of reduced demand that we all want is not around the corner.   The general level of the economy also impacts demand.  As the economy was slow, worldwide demand was low.  As the worldwide economy grows, worldwide demand for oil also grows, especially in emerging markets like China and India who have rapidly expanding auto industries.  Our oil prices feel the impact of their usage as much as our own.  We knew in the last years of the Bush administration when oil reached $150 per barrel that insuring supply was paramount, but early decisions by the Obama administration ignored that reality.

The proper policy, which emphasizes all energy options, is referred to as “all of the above.”  Because the policy needs to be consistent from the beginning of a presidency to its end, the policy should be expanded to “all of the above all of the time.”

Obama believes that one of his key strengths is to communicate to the American people.  But this situation indicates that he sometimes relies on communication tricks such as referring to the present to persuade when the issue is what wasn’t done in the past.

Rick Santorum, Time to Exit, Stage Right

Romney’s math was presented last week to show the claim that Romney will win the nomination.  That case got even stronger after Romney’s Illinois win yesterday.  The following is an update of the numbers. 

RCP Source	Vote as of	Votes Needed	Percentage
	3/20/11	to Win	of Remaining
			Delegates
Romney	560	584	45.8%
Santorum	246	898	70.5%
Gingrich	141	1003	78.7%
Paul	66	1078	84.6%
Total Needed	1144
Total Available	2287
Romney	560	55.3%
Non-Romney	453	44.7%
Delegates to be	1274
Chosen

The delegates that Romney needs to win have been reduced from 48.1% to 45.8%.  The remaining delegates that Santorum needs to win have risen from 67.4% to 70.5%.  

RCP Source	Add CA, NJ,	Votes Needed	Percentage
	UT, & DC	to Win After	of Remaining
	to Romney	CA, NJ, UT, DC	Delegates
Romney	841	303	30.5%
Santorum	246	898	90.4%
Gingrich	141	1003	101.0%
Paul	66	1078	108.6%
Total Needed	1144
Total Available	2287
Romney	841
Non-Romney	453
Delegates	993
to be Chosen

The assumption that Romney will win a number of ‘win or take all states’ was adjusted slightly.  It is a fair assessment that Romney will win California, Utah, New Jersey, and the District of Columbia.  Adding a total of 281 delegates to Romney’s existing delegates will give him 841 votes with 303 delegates to go.  

The percentage of delegates that Romney has to win under this assumption will dip from last week’s 32.7% to this week’s 30.5% of all remaining delegates.  For Santorum, the percentage of remaining delegates will rise to over 90% to win the nomination.  With Romney winning 40% of the vote to date, it is fantasy for anyone to think that Santorum can persuade more than three-quarters of the existing Romney supporters who have yet to participate in the primary process to abandon their choice. 

The one story that the press has not been telling is the one on Romney demographics.  Romney has been winning the women and other groups that a Republican candidate needs to win.  Santorum has been winning the very conservative and evangelical vote.  For Santorum to expand his appeal, he must change his message.  But Santorum says that he does not change, and that he is the same yesterday, today, and tomorrow. He must now change his message to win.  And if he does change that message, Romney will pounce and accuse him of flip-flopping, and where have we heard that charge before?  

Santorum is backed into a corner with no good options.  The end is just a matter of time.   

Despite Alabama and Mississippi Losses, Bet on Romney

Romney has been saying that Santorum and Gingrich can’t get the Republican Presidential nomination because the delegate math does not work out for either of them.  I have been tracking the numbers, and Romney has a case. 

Using numbers from RealClearPolitics, the number of delegates that the four remaining candidates have follows with the number of delegates that each needs to win the nomination.

RCP Source Vote as of Votes Needed Percentage 3/14/12 To Win Of Remaining Delegates Romney 496 648 48.1% Santorum 236 908 67.4% Gingrich 141 1003 74.5% Paul 67 1077 80.0% Total Needed 1144 Total Available 2287 Romney 496 Non-Romney 444 Delegates To 1347    Be Chosen

The key column is that Romney needs 48.1% of the remaining delegates to win compared to 67.4% for Santorum and 74.5% for Gingrich.  It may not seem like there is a significant difference between the 48.1% and 74.5%, but there is.  

Note also that Romney has 496 delegates compared to a combined 444 delegates for his three opponents.  I have heard a lot of talk on the TV criticizing Romney for not securing the nomination after a little more than two months of primary contests.  According to the critics, Romney should have won the nomination despite the fact that only 940 delegates have been chosen when 1144 are needed for nomination.  Apparently, it is not important that Romney has more delegates than all of his opponents.  Last night was not a good night for Romney.  Of the 119 delegates at stake, he won 41, Santorum 37, Gingrich 24, and Paul 3 with 15 to be decided.

A fair assumption is that Romney will take California, where Romney leads by 20% in the last Rasmussen poll, Utah, which is predominately Mormon, New Jersey, where Governor Chris Christie has endorsed him, and at least half of the New York delegates, where the demographics favor Romney.  Remember that California, Utah, and New Jersey are ‘win and take all’ primaries.  Under these assumptions, the numbers shift heavily to Romney.

RCP Source	Add CA, NJ,	Votes Needed	Percentage
	UT, .5 NY	To Win After	Of Remaining
	To Romney	CA, NJ, UT, .5NY	Delegates
Romney	805	339	32.7%
Santorum	236	908	87.5%
Gingrich	141	1003	96.6%
Paul	67	1077	103.8%
Total Needed	1144
Total Available	2287
Romney	805
Non-Romney	444
Delegates	1038
To be Chosen

This says that Romney has to win 32.7% of all remaining delegates to win the nomination, which is about what he won yesterday in his supposed loss.  Please note that he has 39% of the popular vote compared to 26% for Santorum, 24% for Gingrich, and 11% for Paul.  If you take Gingrich out of the equation and split his vote two-thirds to one-third in favor of Santorum, the results are still the same.  Romney gets 47% of the vote to Santorum’s 42% with Paul getting 11%. 

Let’s make an additional assumption, which is that each of us has $100 to donate to a candidate.  Would you send Romney the money when you know he will receive at least 40% of the vote when he only needs 33% of the remaining delegates after his very likely wins?  Would you give Santorum the $100 when he has only a 14% chance of securing the nomination on the same assumptions?  Would you give Gingrich the $100 at a 4% chance of success?  Or would you pocket the $100 and buy gas for your cars?

If it were me, I would pocket the money.  Romney has enough money, and both Santorum and Gingrich are not winning propositions.  It is clear that the Romney campaign is talking about the math to persuade Santorum and Gingrich contributors to save their money.

So why are Santorum and Gingrich still in the race?  Neither can win the nomination.  But they can scuttle the race and ensure an Obama victory.  George Will infers that there is a struggle in the Republican Party between practical conservatives and value conservatives, and that by abandoning this race the Party differs the fight until 2016 when the crop of potential candidates is a lot more attractive.  In essence, the Party is sabotaging the eventual nominee for some type of purity that will never develop a winnable message.  For me, a life-long Republican, I am getting tired of eating our own.  We can win this.  The math is right.  It is time to come together.

GM: An Update

When I wrote a series of blogs against the government bailout of General Motors, I never really explained the theory behind my position.  In economics, there is a separation between public and private goods.  A park is a public good.  It is built by he government for public use.  GM is a private good.  It was built by private capital for private profits. 

In the GM bailout and all through the discussion on TARP this distinction was lost.  The press never discussed the difference between a public and a private good.

GM is a private good. I love GM cars.  We have had eight of them over the years.   But GM should not have been spared the consequences of bankruptcy without government intervention, because the GM bankruptcy did not follow the normal bankruptcy procedure.  The rule for a private corporation is that reorganization under bankruptcy involving a sale of assets goes to the debtors and shareholders. 

In contrast to the normal process, the only interest group that profited from the government bailout was the union labor when this administration treated GM as a public good.  The owners of GM, namely the stockholders and bondholders, did not receive the proceeds from the dissolution of old GM that were due them.

That said, now for an update.  The government is planning to sell its remaining shares in GM, even at a loss.  The news affected the stock so much that it fell below the opening price of the original IPO shares that were put on the market a few short months ago.  The price needed in the sale of the remaining 33% of stock that the government holds is $53 and the price on Friday was almost $32. 

Also, last month GM announced a $4 billion annual profit.  Its first profit in years.  However, GM won’t have to pay tax on that profit like other corporations.   Corporations have the ability to apply past losses to current profits and reduce tax liabilities.  Normally, when a corporation goes through bankruptcy, it sacrifices this ability to carry forward past losses, but not GM.   GM can apply its past losses up to a $14 billion tax benefit.  That is lost revenue to the government during this current period of extreme deficits.  We need the money.

All of this is happening while the administration is claiming than the taxpayers are coming out ahead on the GM bailout.  I don’t see the math on that.

All of this is happening a year before the next presidential election.  Perhaps Obama wants to avoid an issue next year by selling the GM stake at a loss this year. 

Now, the final update.  One of our GM cars had built up about 109 thousand miles.  No complaints.  We loved it, but we had reached the point in a car’s life where we just didn’t know.  Would it continue to be the reliable car we knew?   Well, when the time came to answer that question, we traded.  And we traded for…a Ford.

The Evaluation: What I Learned Writing This Blog

When I began this blog, I wrote that it was an experiment.  Well, all experiments need evaluation, and it is time to evaluate this one.  Of course, I am not the best for this type of thing.  I am biased.  Let’s just talk about it anyway.

I believe that I have been true to the original principles that are discussed in the second post such as pursuing reason, which has resulted in moral good, a country of principles, laws, and faith.  But I set out to educate, and offer the reader some background on the real issues of the day.  To do this, I developed themes, and wrote long posts that explained the trade-offs inherent in the issues of the day. 

I thought about these posts for long periods of time.  What I found is that the long posts, though purposeful and rich in information, were not read that much.  There are ways to gain readership such as making the posts smaller, and making points more succinct with less information.   Also, discussing popular people and subjects attracts more readers.   I once put together a post on Barrack Obama and Christine O’Donnell and the readership tripled. 

People who know blogging say that context, information, proper foundation to an argument don’t attract readers.  Well, the style will change not because I want to attract readers, which I do, but because I don’t have the time I once had to spend on writing posts.  Therefore, I will try to be more succinct and efficient in making my points.

But the real lesson that I have taken away from this exercise is about the quality of our political debate.   Neither side really listens to the other, and most enlightening, each side has its own facts.  We are shouting at each other and no one is listening. 

If we don’t have common facts that all sides accept, how can we reason together?  The common path will never come. If we listened we would agree on a common set of facts on any issue. 

I also place responsibility for some of our uncommon facts on our press.  If some of the press takes sides and chooses facts different from the broadcaster on the next channel, and the other channel does the same, then the press has failed to educate, which is a responsibility that really can only be achieved as long as independence, fairness and objectivity reign as the standards of the press.  When I started this blog my thought was that it was okay to listen to any side as long as I was confident that I could filter out the bias.  Now I believe it is necessary to listen to both sides and filter out the bias.  Without both sides, one will never have the whole story.

That leaves the politicians.  I learned that they do not know enough on any issue, especially economics.  In fact, politicians know frightenly little about economics.  Economics is an incomplete science.  There are many flavors of macro theorists, and it seems that each political side picks and chooses its flavor of the month, then takes their advice, and, like magic, we have bad public policy.  Lately, it seems like we swing from one bad economic policy to another.  And we have no one to blame but ourselves.   We vote for politicians who talk a good game, but under a good cross-examination, don’t really have a clue.

Tax Compact – My Take

Here is my take on a tax compact and the four questions from the November 13 post.

Who should pay an income tax and who should be exempt from it?  My take is that anyone who is not classified as officially poor should be obligated to pay income tax.  This is about 85% of our population.  Compared to the 85% of the non-poor, only 68% of Americans actually paid US income tax in 2006.  My belief is that anytime the Government wants to expand services, then everyone who can pay an income tax should feel some part of the pain whether that pain is 1% or 40%.  In my view, this is necessary to maintain a responsible working social and electoral structure.  All classes will bear their share of the burden.

How much tax is too little?  None.  I don’t know if the minimum tax should be 1% or more, but I would settle for a minimum tax of 1%.  

How much tax is too much?  I believe that no one, no matter how rich, should pay more than 50% of his or her income as a tax.  That is a total income tax and that includes both Federal, state, and local.  In California, the maximum tax is 10.3%.  If the liberals ever succeed in setting the maximum tax at 39.6% or higher, then the highest combined income tax would be 49.9%.  Now that would work with me if that is all there was, but there’s more.

The reason why 50% of income should be the maximum combined income tax is that economic freedom was part of our revolution from the British, and that pursuing economic self-interest in the Adam Smith sense is central to that freedom.  If anyone spends one hour of any day making more money for the Government then for him or herself, then we are in tyranny.  That is why I believe in a maximum tax rate.

If Republicans are going to argue that 39.6% is too much tax and 35% isn’t, then they need a better explanation then “class warfare”.  No one even knows what that means.  They also need to justify it on a basis other than the Laffer Curve, which was discussed in the previous post.  It cannot be used to prove 35% will produce more tax revenue than 39.6%. 

There is a case to be made that small business owners would use the 4.6% difference hiring more workers and generating more overall government revenues.  However, conservatives are not proving the point with data.  The data is there.  Go find the data and make the point.

Okay, so 39.6% fits, except that when Social Security taxes are added, which I consider an income tax.  It is becoming a pure transfer tax from the younger generations to the older ones.   It can no longer be considered an investment.  It is simply, correctly, and honorably, a response to a promise from one generation to another that should not be broken. 

If we add Obama’s 39.6% to Social Security’s 7.65% and California’s 10.3%, then the total rate climbs to 57.55%.  This is 7.65% into the tyrannical range for income taxes.  Some would point out that Social Security taxes max out at $106,800 a year.  Well, as suggested in a previous post, the ceiling should be lifted to convert Social Security from a regressive tax to a flat tax, a move that would go a long way to solving its funding problem.

All of these changes would result in a maximum Federal Income Tax of 32%.  That would be a just tax………..unless the Fed’s challenged California to get its fiscal house in order and lower its maximum tax rate in order for the Fed’s to raise its maximum tax. Let’s see, California would respond that the Federal government should take back some of the responsibilities it has passed down to the states to fund, and it would go on from there.  It would be two behemoths pushing each other around, similar to watching sumo wrestling in Japan.  Now, that would be interesting.