Liberty Law Blog

Silent Cal’s 6 Simple Rules for a Confused President Obama

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Coolidge's Inaugural Address, March 24, 1925

President Coolidge’s Inaugural Address, March 4, 1925

In his new book, Why Coolidge Matters: Leadership Lessons from America’s Most Underrated President, Charles C. Johnson claims that ‘Silent Cal’ wasn’t so much silent as he was silenced. But today, thirty years since Tom Silver’s underrated book about America’s underrated thirtieth president, Coolidge and the Historians, that is changing. In addition to Johnson’s book, we also have Amity Shlaes’s new biography, Coolidge, a prequel of sorts to her bestseller, The Forgotten Man: A New History of the Great Depression. Undoubtedly, there is growing interest in Coolidge that, although somewhat delayed, is especially timely for the present. Here are six lessons for President Obama from the not-so-silent Cal Coolidge. Continue Reading →

Friday Roundup, April 26th

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Before Super PACs, McCain-Feingold, “soft money,” and the Keating 5; before Watergate, and even before Teapot Dome, there was the Michigan Senate race of 1918. . . . one of the nation’s most contested elections and earliest campaign finance “scandals. . . . Unlike the typical political saga, however, Baker presents the story not as a morality tale of honest government corrupted by big money, but rather as a cautionary story about big government regulation of honest money and the political choices of the electorate.

  • Intervention like its 1820: Featured on Liberty Fund’s Online Library of Liberty is John Taylor of Caroline’s thoughts on freedom, property, and early efforts by the feds to direct the economy.
  • So how is this representative government? They don’t read the legislation they pass, which can’t even really be called law. They don’t appropriate the money to pay for it and, apparently, exempt themselves from its consequences.

But where does the Treasury get its money? Well, to a very significant extent, it gets it from the Federal Reserve, which has so far amassed more than $1.8 trillion of Treasury debt, and keeps on buying — again at the top of the market. This all makes a most interesting triangle of government finance, as shown in Figure 1. Thinking about it, my brother, a Swiss private banker, observed, “Just about what John Law built in France in 1716-1720” — referring to the notorious paper money theorist and government banking practitioner, who inflated the infamous “Mississippi Bubble” of his day.

PollockFigure1_4-23-13.jpg

The Fed, by buying long-term MBS and long-term Treasury debt, especially by buying them at the top of the market — a top which its own purchasing pressure is intentionally creating — is concentrating massive interest rate risk on its own balance sheet. By “the Fed’s” balance sheet, we actually mean the aggregate balance sheet of the 12 Federal Reserve Banks. This consolidated balance sheet has $3.3 trillion in total assets and $55 billion in equity, for leverage of a heady 60 times and a capital ratio of a paltry 1.7 percent.

Pollock notes that the accounting rules are different for the Fed when it comes to stating its losses. So you won’t even be able to believe your lying eyes. Better stated: it made up the rules.

The Fed controls its own accounting standards and, in 2011, changed its accounting so that even with a net loss of $55 billion, its capital would still be reported as $55 billion. If it lost $100 billion, its capital would still be $55 billion. If it lost $200 or $300 billion, its capital would still be $55 billion. Get it?

If on a Winter’s Night a Drone Strike

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There is no dictum more central to Burkean prudence than the idea that one does not establish rules for the ordinary case based on the extreme one.  So why is Rand Paul, of all people, on television speculating on what the Boston marathon case might mean for a policy on the domestic use of drones?

His answer, apparently leaning more toward his presidential ambitions than his 13-hour filibuster on the topic, was that he would not have objected to the use of a drone against Dzhokhar Tsarnaev during the manhunt for the alleged Boston marathon bomber.  This is being interpreted as abandoning Paul’s general objection to the use of drones against U.S. citizens on U.S. soil. Continue Reading →

When Government Goes Into Business

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The sequester is kicking in, and the consequences are upon us: airplanes are falling out of the sky, furloughed FBI agents commiserate over donuts, sea levels keep rising. Help, however, is on the way. Increasingly, federal agencies are funding themselves from sources other than appropriations. Not a few have turned into profit centers for the Congress.

Just last week, the Federal Reserve proposed a fee schedule for its banking oversight “services,” pursuant to section 318 of Dodd-Frank and to the tune of $440 million. (That’s what the exercise supposedly costs the government. What it costs the banks and the economy, no one knows.) Not everyone is happy with the NPR—see here. Continue Reading →

More on Originalism and Same Sex Marriage: A Response to Mike Ramsey

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My position on the constitutional question of whether gay marriage is required is that there are reasonable interpretations on both sides of this issue.  One danger of such a position is that it puts one in a no win position, but – hey – you have to go where the evidence leads you.  Mike Ramsey (with arguments I mainly agree with) has been responding to critics of the argument that the 14th Amendment does require same sex marriage.  Here I want to respond to Mike’s criticisms of the arguments that I offered for why one might conclude that same sex marriage is not required.

Mike focused on one small part of my post addressing the issue whether sexual orientation is like race.  Rather than get into this issue – perhaps I will in the future – I want to note that Mike fails to address the basic question as to how we identify what moral rules are sufficient for justifying the law drawing a distinction under the 14th Amendment.  This is a potentially independent reason for not requiring gay marriage.  I had noted that at the time of the Amendment traditional moral rules would have been deemed to be a sufficient basis for a law to draw a distinction.  (Under one theory, a law that drew a distinction based on traditional morality would not be seen as class legislation.) Continue Reading →

States on Drugs and the Net

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Any federal system will have to live with frictional losses and transaction costs, on account of the difficulty of deciding out what belongs to which state and who can tax or regulate what to whom. We decide to bear those costs because they are outweighed, or so we hope, by the benefits of competition (relative to a fully nationalized system). There remains the task of figuring out and enforcing rules that will minimize the friction and make competition thrive. We are lousy at that—not because the right rules are terribly complicated, but because they would do what they’re supposed to do: discipline government at all levels.

Yesterdays’ Wall Street Journal has two pieces that illustrate the point: an article on state lawsuits over the marketing of pharmaceutical drugs, and another on Senate action on internet sales taxes. There’s also an op-ed by eBay CEO John Donahoe on the subject. Continue Reading →

“The Big Bang Theory” Meets Its Maker

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“The Big Bang Theory” is a highly popular tv sitcom focusing on the love and social lives of young Caltech scientists and their glowingly attractive next-door neighbor, part-time actress and Cheesecake Factory waitress Penny. Now nearing the end of its sixth season, the show would appear to garner its popularity from its depiction of the resolute nerdiness of its brilliant theoretical physicist and engineer characters and their helplessness before the earthy Penny. Their personal lives are shallow at best, obsessed with comic book heroes and Star Trek characters.[i] Continue Reading →

Advance PR: New Book

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So I have a new book(let) out. It’s called The Constitution: Understanding America’s Founding Document (American Enterprise Institute/Rowman & Littlefield, 2013).  I wouldn’t hold it out as a scholarly accomplishment; it’s not meant to be. The book is part of AEI’s well-conceived Values & Capitalism Project, which (among other things) publishes short, understandable books, targeted primarily at an audience of college students, that address matters of public concern—economics, social policy, American history and exceptionalism, etc. The Project has produced several terrific books. (My personal favorite is Alex Pollock’s Boom and Bust, containing much wisdom and insight on financial cycles.) Now this.

Predictably, The Constitution riffs on some of the themes of The Upside Down Constitution. On that account, my beloved daughter (a college senior who kindly reviewed the manuscript for suitability) suggested “Dad for Dummies” as a title, along with a yellow cover. But that’s not quite fair. Flipping through the text now, it actually strikes me as quite demanding, at least for folks who don’t live and breathe ConLaw.  Plus, given its overview-ish purpose, the booklet covers additional topics, from judicial review to slavery to the administrative state.

Over the comings weeks, AEI will put its considerable marketing muscle and prowess behind the product. (There’ll even be an animated video.) Still, I’m doing my small part. Get The Constitution from Amazon or AEI, and take a look: it might be useful to students entrusted to your care and instruction.

Assuming, without adequate foundation, that you trust the author.

A World Without Chevron

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Let me complete my set of posts on Chevron by explaining what legal doctrine would look like without Chevron.  Chevron was justified in part based on the view that the prior doctrine was a mess because it left no guidance as to whether deference would be given to an administrative agency in any specific case.  That Chevron has turned into a doctrine with tremendous uncertainty is both ironic and another reason not to like it.

There are two possible doctrines that would replace Chevron.  The first is simply not to confer deference on an agency unless there is a clear indication from Congress that such deference was intended.  Thus, if Congress specifically provided for such deference then the courts should confer it.

An example of this comes from the Fair Labor Standards Act, which exempted “outside salesman” from the overtime provisions of the Act.  Significantly, Congress did not definte the term outside salesman, but delegated authority to the Department of Labor to issue regulations “from time to time” to “define and delimit” the term.  Congress here was clearly allowing the agency to determine the scope of the term.  But in the absent of such an explicit provision one would not infer any deference for the agency. Continue Reading →

A Constitution for All Seasons

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If Senators John McCain, Lindsey Graham and Kelly Ayotte as well as Rep. Peter King are unwilling to grant Dzhokhar Tsarnaev a presumption of innocence in the Boston marathon bombing, perhaps they might be willing to start the debate surrounding the terms of his detention with a presumption in favor of the Constitution instead: namely, that our founding document, cumbersome protections and all, is sturdy enough to protect the nation even in cases of the most heinous and outrageous acts and the gravest enduring dangers.  Continue Reading →