Showing posts with label states' rights. Show all posts
Showing posts with label states' rights. Show all posts

Saturday, February 5, 2011


Initiating a bold effort on February 4, 2011 at a summit of the European Council (composed of heads of the state governments) to strengthen the euro by coordinating fiscal policies among the 17 states that use the currency, the German Chancellor and French President laid down far-reaching plans to deepen economic and political integration for the group of states within the EU. From the standpoint of the US, a subset of states relatively integrated federally seems strange, though perhaps such flexibility will obviate a war between EU states in the future. In other words, Americans ought not dismiss the arrangement out of hat. This is not to say that bringing fiscal policy up to the EU level to join monetary policy will be easy, even for just seventeen states.  The particular interests of the latter must be balanced against the interest of the ECB (the EU's central bank) for some degree of fiscal coordination and accountability.

According to The New York Times, “France has long wanted the euro zone to be on a basis that made it more important and the Germans have now accepted that logic.”  Deutsche Welle reports German Chancellor Angela Merkel as saying, "We want to bring in a competitiveness pact and step by step bring about a more linear, shared growth." The New York Times reports that Merkel and Sarkozy “appeared to have reached the conclusion of many critics of the single currency who argue that the financial crisis exposed a flaw in the design of the euro by creating monetary union without either economic convergence or political union.”  However, even mentioning “political union” to the heads of the state governments is like bringing a lightening rod into a crowded elevator car during a thunderstorm. Even if monetary union is itself political and requires further political and economic integration, efforts to do so will face a strong headwind at the state level.  Whereas in the U.S. the objections of states to further political integration are typically easily dismissed by the U.S. Government unless a branch of that government acquiesces (e.g., the Federal Courts that have declared the Affordable Care Act’s health insurance mandate to be unconstitutional), such objections in the E.U. typically have the edge because of the power of E.U. state governments relative to the E.U. Government.  For one thing, whereas the U.S. state governments are no longer directly represented in the U.S. Government through the congressional Senate, the E.U. state governments sit as the European Council and the Council of Ministers.  In vital areas including taxation, approval in these “senatorial” bodies must be unanimous.  With 27 states in the EU as of 2010, each state government has enormous power in deciding whether to retain fiscal policy or shift still more sovereignty over to the E.U. (in which the state governments participate via the councils, albeit under qualified majority voting on all but the most important matters).

The criteria identified in a German policy paper that circulated before the summit meeting included items that the state governments have hitherto sought to retain for themselves. According to The New York Times, the approach proposed by France and Germany is “controversial because it touches some of the most sensitive areas of policy — like taxation and wage policy — where many nations guard their sovereignty jealously.” The items identified include abolition of state-level wage indexation systems, the creation of a common base for assessing corporate tax, the alignment of pension systems and legally binding commitments to tough fiscal policies. According to Deutsche Welle, “Germany's ideas also include raising the pensionable age depending on a country's demographics, limiting wage increases, and agreeing a common tax base for corporations.” The plans also strengthen the rescue fund for the euro zone by allowing it to lend its full, €440-billion ceiling figure, and perhaps use its funds more flexibly.  Lastly, with regard to stricter fiscal discipline, the plans also include the idea of a "debt brake" that would establish a constitutional limit on deficits—the existing limit of 3.5% of GNP having been essentially ignored even by Germany.

The proposal was greeted with criticism from governments that fear they may have to raise corporate tax rates or scrap deals that link annual wage increases to inflation. “I totally disagree with the current proposals,” Leterme of Belgium said. "There must be more economic cooperation, but member states must be left the room to carry out their own policies," Leterme affirmed. "Each member state has its own accents, its own traditions. We will not allow our social model to be undone," he added. To be sure, such diversity is part and parcel of a federal system, which is essentially “unity in diversity.”

Representing the “unity” part, Sarkozy, in reacting to the opposition from state governments including Ireland over taxation, said, “We will not let the cornerstones of this system be undermined.” Simply put, monetary union requires some fiscal coordination. He explained that the aim of the proposal was “not to impose the same thing on everyone.” The objective at the meeting, he added, was not a detailed agreement but to reach a consensus on a desire “for a pact, economic government and convergence.” Yet the proposal would go beyond a “pact” in that it would be binding on the states, and it would go beyond merely economic coordination, as greater political union would be involved. “The E.U. — but above all those countries that use the euro — wants to grow together,” Merkel said.  Such growth would be political as well as economic. “Politically,” Merkel continued, “we will grow step-by-step closer together.” Charles Grant, director of the Center for European Reform, opines, “I think we are seeing the beginning of a euro group which could become a more important organization politically as well as economically.” However, the Dutch prime minister, Mark Rutte, may well have put up a roadblock in stating, “We welcome stronger economic coordination on the basis of best practices, but we will always remain the master of our taxes, pensions and wages.”  Such tuft battles amid “states’ rights” are to be expected in a federal system that still has a place for state governments. State interests have to be accommodated, even if compromise is also needed. Ireland, for example, sees its low rate of corporate tax as one of its few weapons in the battle to revive an economy so badly battered by the crisis that it accepted a bailout last year. Estonia and Slovakia also want to protect their low tax regimes. France and Germany are not immune to the pull of their respective self-interests either, even if that pull happens to be in the direction of closer economic and political integration at the moment.  For example, France and German politicians have long complained at being undercut by the E.U. states with lower corporate tax.  Other states—particularly some of the smaller ones—view their interests as ironically better protected by E.U. institutions that are not embodied by the state governments. Such states dislike the fact that the new structure would be orchestrated by governments, rather than the bloc’s executive, the E.U. Commission European, which is seen by many smaller nations as a protector of their interests.

In addition to all of the particular interests of the seventeen "eurozone" states, a common and long-term interest in matching monetary with fiscal power at the E.U. level should be recognized in the E.U..  Although the tension may seem intractable, it is simply part of the messy business of federalism, which is slow and incremental, but it is also the best political system devised to accommodate both diversity and the benefits of unity at the empire scale. The state leaders who stress the differing interstate differences have a point, but the history of European integration through the E.C. and then the E.U. afford much evidence that directives and even regulations can be assuaged by the state governments to take account of the particularities of the respective states while not necessarily relegating the common interest and accountability.  Dynamic federalism requires not only tolerance (for differences to be accommodated), but also patience, for two systems of government are active for any given territory covered by the federal system. As more power lies with the state governments than with that of the EU as a whole at least as of 2011, the challenge for Europeans in the second decade of the twenty-first century is not to let the former hijack the project such that the power stays unbalanced between the states and the federal authoriity of the union. Meanshile, the challenge for Americans is just the opposite: to decide whether to allow the U.S. to continue toward consolidation at the expense of any residual federalism.  In both cases, there is  optimality in the mean, wherein a federal balance allows for the messy tug-of-wars that characterize healthy federal systems that stay in balance. 

Sources:


Friday, February 4, 2011

The far right in Europe is different than in America. Right wing movements [such as Le Pen’s] in Europe often differ in significant ways from the right wing that’s made in the U.S.A. Put aside the usual caricature of “people in pointy hoods and the Ku Klux Klan,” Marine Le Pen says, and she still believes “the American right is much more to the right than the National Front.” She might agree with those who want to manage American frontiers more effectively and prevent massive illegal immigration, but she’s also a big believer in the state’s ability and obligation to help its people. “We feel the state should have the means to intervene,” she says. “We are very attached to public services à la française as a way to limit the inequalities among regions and among the French,” including “access for all to the same level of health care.”

Analysis:

Perhaps the American right is more far-right in terms of government, but I suspect not in terms of immigration and other issues.  For example, the euro-skeptics are much more skeptical of the EU than the state rights advocates in America are of the US. I am struck by the fact that the far right in Europe is for universal health-care. Notice that the assumption is that the states of the EU (e.g., France) should cover health-care policy.In the US, by contrast, health-care policy is assumed to properly reside with the US Government rather than with the states. Also, it seems that the wealthy “I don’t want to help others with my tax dollars—just defense” view doesn’t seem to get much political expression in the EU.

Source: http://www.newsweek.com/2010/09/05/how-marine-le-pen-is-changing-french-politics.html

A Bit of Federalism in ObamaCare

Senator Ron Wyden has written to government officials of Oregon to encourage them to “come up with innovative solutions that the Federal government has never had the flexibility or will to implement.” This is significant because he is a democrat. As long as a state covers the same number of uninsured and keeps coverage as comprehensive, the following can be waived:

1. the individual mandate to purchase insurance (i.e., what Virginia and Florida are suing over)
2. regulations about business taxes
3. federal standards for minimum benefits
4. allocation of subsidies in the insurance “exchanges.”

These are called section 1332 waivors. There is also some flexibility on medicaid--but how much flexibility do these waivors proffer? The states might be able to determine how the uninsured are to be insured. For instance, they could go single-payer. Or could they?The federal allocation of subsidies in the insurance “exchanges” can be waived, but can the “exchanges”?

There is a trade-off involved in federal standards and state waivors. If the federal standard is too high (e.g., the number of uninsured covered and the amount of minimum coverage), then not much freedom is involved in the waivors because the standards must be met regardless. Given the diversity within the Union and our system of federalism, the US Government should have been oriented to coming up with minimum standards for health-care rather than trying to make it a federal responsibility. By minimum, I mean that below which is unacceptable for a state in this union. For instance, it could be that universal health-care is a minimum if health care is to be considered an American right. The states, rather than the general government, would then be required to pass laws to implement the minimum standard in any way they preferred. They could determine the means, whether single-payer or exchanges. I’m not sure that the existing waivors, which do not begin until 2017, allow for such flexibility as would accommodate the various political ideologies of our states. Once power is grasped, it is very difficult indeed to let go of some of it.

Source: Wyden Defects on ObamaCare, WSJ, September 3, 2010, p. A16.

Thursday, February 3, 2011

On the US Supreme Court being the decider of last resort, Madison’s Report of 1800 reads in part, “this resort must necessarily be deemed the last in relation to the authorities of the other departments of the government; not in relation to the rights of the parties to the constitutional compact, from which the judicial as well as the other departments hold their delegated trusts.”  The government being referred to is the US Government—that is, the federal, or general, government. The parties to the compact are the states.  So the theory here is that the US Supreme Court can have its say after the US President and the Congress, but not as binding on the States.  John Breckinridge, who sponsored the Kentucky Resolutions in the Kentucky House, wrote, “Who are the judiciary? Who are they, but a part of the servants of the people created by the Federal compact?” (James J. Kilpatrick, The Sovereign States: Notes of a Citizen of Virginia (Chicago: Henry Regnery, 1957), 75) The Federal Courts are part of the US Government that was created by the states, so those courts can’t be the final deciders with respect to the states.

Historically, nullification of US Law by a State has been urged by some (such as by South Carolina in 1831). In his book, Nullification, Thomas Woods argues that the VA and Kentucky Resolutions of 1798, the Report of 1800, and the Kentucky Resolutions of 1799 hold that the federal government had been created when sovereign states granted it a few enumerated powers. Also, should the federal (general) government exercise a power it had not been delegated, the states ought to interpose. The Virginia Resolutions of 1798 read in part, “the powers of the federal government, as resulting from the compact, to which the states are parties.” The Kentucky Resolutions of 1799 read in part, “that the general government is the exclusive judge of the extent of the powers delegated to it, stop nothing short of despotism; since the discretion of those who administer the government, and not the constitution, would be the measure of their powers: That the several states who formed that instrument, being sovereign and independent, have the unquestionable right to judge of its infraction; and that a nullification, by those sovereignties, of all unauthorized acts done under colour of that instrument, is the rightful remedy” (Woods, p. 50).

It seems to me that there is indeed a conflict of interest in having the US Supreme Court be the umpire of conflicts between the federal and state governments.  However, nullification presumes that the states did not cede part of their sovereignty.  In other words, were nullification to be allowed, there would be no compact, as any state could exempt itself from any federal law it didn’t like under the claim that the law exceeds the enumerated powers. The states are semi-sovereign, so there must be a means of holding them against their will. I contend that the final decider of contests between the US Government and any of the states should be composed of judges selected from the state supreme courts. That way, the conflict of interest would be eliminated and an individual state could still be held against its will. In other words, we need not succumb to either the hegemony of the US Supreme Court whose members are selected and paid by the US Government, or to the destructive effects of nullification on the federal compact itself.

Source: Thomas Woods, Nullification: How to Resist Tyranny in the 21st Century (Regency, 2010).

The stance of Sen. Jim DeMint (SC-R) in 2010 is emblematic of the ambiguity in the goals of the Republican legislators. DeMint can be taken as being primarily oriented to restoring the balance of federalism by having the federal government do less and the State governments more, at least in terms of domestic policy.  This could bring the General Government back to its enumerated powers.  Time magazine maintains that DeMint’s real target is “a radical downsizing of the federal government.”  This includes “turning education policy over to the states and gradually dismantling safety-net programs like Social Security and Medicare.” Yet the senator may not be assuming that the State governments would then create various degrees of “safety-net.”  That is, his agenda could be to get government out of the business of providing basic needs to those who might otherwise not survive.  That is, he might be rejecting life as a right that is to be protected by government. For instance, DeMint cites “creeping socialism in the U.S.” and he has set out to “shrink government.” He “was incensed by what he considered a growing public reliance on government largesse for things like housing, food and income, which to him was creating dependency and stifling free enterprise.” The senator’s ideal here is distinct from his goal of downsizing the federal government because the latter goal implies a shift rather than necessarily a reduction. It is precisely on this point that the Republican party has been too ambiguous.  Too often, the two goals have been conflated, as if restoring federalism means a reduction in government. It is possible that restoring social programs at the State level could result in more government.  As Massachusetts demonstrates, the States may well be better able to enact universal health-care. However, in federalism one size does not fit all; States such as Texas and Oklahoma would doubtless have approaches to health-care that rely less on government.

Source: Michael Crowley and Jay Newton-Small, “Leading the Rebel Brigade,” Time, November 29, 2010, pp. 34-37.

 

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