Sara Horowitz
Sep 5 2011
http://www.theatlantic.com/business/archive/2011/09/a-jobs-plan-for-the-post-cubicle-economy/244549
Sara Horowitz the founder of Freelancers Union, a nonprofit organization representing the interests and concerns of the independent workforce.
Just as workers left the plow for the assembly line, they are now leaving the cubicle for the coffee shop. Here's what Washington needs to know--and what it needs to do.
About 150 years ago, American workers began a profound shift from farms to factories. After suffering through poor work conditions, low pay, and no workplace protections, the workers organized and successfully helped build the framework of laws that became known as FDR's New Deal. This landmark legislation from the 1930s protected workers and supported labor unions by limiting the number of hours that could be worked and setting a baseline minimum pay. But from a larger perspective, the New Deal demonstrated that government had acknowledged the shift in the U.S. workforce, heard their voice, and created a new system in which they could thrive.
Now we find ourselves in the middle of an equally large transition: just as workers left the plow for the assembly line, they are now leaving the cubicle for the coffee shop. Welcome to the Gig Economy, where over 42 million Americans are working independently - as freelancers, part-timers, consultants, contractors, and the self-employed. They are simultaneously holding multiple jobs, working for different employers, and mastering diverse skills. They are accountants and fashion designers and website architects. And, they are completely left out of the New Deal, which protects the rest of the workforce.
If the New Deal had evolved to meet the ever-expanding U.S. workforce, then independent workers would have access to unemployment insurance, affordable health insurance, protection from discrimination, and guaranteed payment for their work. Instead, New Deal protections are stuck in the last century, and those basic needs are out of reach for one-third of the workforce. But we can't simply extend the New Deal to include all workers. Instead, the New Deal must be updated to reflect this new reality. A "new" New Deal will require creating a completely new paradigm for worker supports and building completely new systems for those supports.
The New Deal was based on linking all rights to a single job, which made sense for the Manufacturing Era. At that time, people worked for one company for a long time, so attaching protections to the job was the easiest way to cover the majority of workers. The "new" New Deal must be rooted in portability and mobility. The protections and rights must be centered on the individual, not the job, and must move with the individual from gig to gig.
Take the example of health insurance. Large companies benefit from big cost savings because existing laws allow them to group workers together in large risk pools. But as the way we work today becomes more outsourced, open, and flexible, smaller groups that share an affinity outside of work at a large company should be able to group together to share in these same cost savings. Some of health reform's proposed solutions, like creating Consumer Owned and Operated Plans (CO-OPs) are a great start in harnessing the power of smaller groups, but the savings are still tilted toward large companies, not the independent workers of the Gig Economy
Unemployment insurance is another example. If we simply plug freelancers into our unemployment system, the system would quickly go bankrupt since freelancers - who have no certainty of gigs - experience frequent periods of unemployment. Instead, we could allow freelancers to contribute to a pre-tax fund during flush times that they could draw from during lean times.
Coming together in unions is another right attached to a job and not available to independent workers, meaning they can't fully leverage their political power. By evolving this policy to allow freelancers to unionize, seemingly disparate workers would recognize their shared needs and have the ability to come together to get their needs met. (At Freelancers Union, this is what we call "new unionism," where we're bringing independent workers together to create power in politics and power in markets.)
Creating a "new" New Deal is crucial if we want to build economic security for one-third - and growing - of the workforce. Just as government acknowledged the shift from agrarian to industrial work, and thus created the New Deal, it's now time to acknowledge the shift happening today. But this isn't just about evolving our laws - it's about the changing role of government in our society. As government subsidies are declining, it's up to all of us to be entrepreneurial and together build solutions to these problems, something I'll discuss in a future column. For the workers of the Gig Economy, social media, collaborative consumption, and crowdsourcing are tools of the trade. Our "new" New Deal must follow suit and be created - collaboratively - by us.
Showing posts with label New Deal. Show all posts
Showing posts with label New Deal. Show all posts
Wednesday, September 14, 2011
Thursday, August 11, 2011
The People's Rogue: FDR vs. the Nine Old Men
Saturday 6 August 2011
Robert Wilbur, Truthout | Book Review
http://www.truth-out.org/peoples-rogue-fdr-vs-nine-old-men/1312315217
Throughout American history, Supreme Court justices have enjoyed undeserved reverence, which has allowed them, by and large, to be water boys (and girls) for the forces of money and power. The vaunted system of checks and balances is skewed in favor of the Supremes, and, inexplicably, ordinary men and women do not seem to realize that they're being rolled. The present political gridlock as a proximate result of the Supreme Court's Citizens United decision recalls the situation FDR confronted In Jeff Sheshol's new book, "Supreme Power: Franklin Roosevelt vs. the Supreme Court."
The president must have been savoring that afternoon of December 26, 1936. Tea was served, and the president entertained his attorney general with meandering reminiscences of his month-long tour through Latin America, wondering aloud which mementos to donate to the Smithsonian and which to keep in the White House. Eventually he got to the point. Go ahead, he told his A.G. Tell me what you have in mind. The A.G. began with a request: Do not laugh at me when I say that I have the solution. With this, as Shesol recounts, both men broke out laughing.
What Franklin Delano Roosevelt and Homer Cummings found so entertaining was a plan, hatched in the Justice Department, to neuter Chief Justice Charles Evans Hughes and the five other conservatives on the Supreme Court. The plan called for the kind of serious political mischief that brought out the devil in FDR. What made it all the more exciting was that the stakes could not be higher: New Dealers versus robber barons; checks and balances versus the power to govern a country on the verge of death throes.
When FDR assumed the presidency in March 1933, writes Shesol:
the cry was not "justice" but "relief." What was at stake was not simply the eventual return of prosperity. It was the survival of democracy. Could representative government, with its checks and balances, with its suspicion and fragmentation of power, respond quickly to mass hunger, unemployment, desperation, and rage? And if not, could such a system endure much longer? The experience of Germany, Italy, and Japan suggested that it could not.
Even before the very first of the hundred days, even before Roosevelt and Cummings were sworn in, New Dealers had a premonition that, sooner or later, there would be a clash between the executive branch and Hughes and his "old fossils." Anticipating this contingency - this inevitability - senator-elect William McAdoo of California proposed to Cummings a plan to pack the court and, "get the antiquated judges off the bench." Cummings liked the idea. So, according to McAdoo, did president-elect Roosevelt.
The daring experiments of the hundred days evolved with fewer cries from the political right than might have been expected, because small businessmen were hurting too, and they were inclined to give FDR a chance to assuage their pain. A chance, that is, until the New Deal came up against the traditional way of conducting business: sweatshops, long hours, measly wages, union busting, child labor, and other outrages.
It is true that the Justice Department did not scrutinize every piece of New Deal legislation with the care it would have done in ordinary times. But it is also true that the Hughes court scrutinized the same legislation with almost preternatural attention to constitutional nuance and precedent, unearthing rulings that had been forgotten for 50 years or more. So, when the Hughes court struck, it dealt FDR a body blow. First it shot down the blue eagle, symbol of the National Recovery Administration (NRA). Next, it rescinded the firing of a disruptive Republican member of the Federal Trade Commission. And for good measure, it struck down the Frazier-Lemke Farm Mortgage Moratorium Act (actually a bill pushed by rabble-rouser Huey Long, but signed by FDR anyway, and so identified with the New Deal). All three by a vote of 9 to 0, and all on the same day: Black Monday, May 27, 1935, just as the New Deal was finally getting a foothold.
At the dawn of the New Deal era, about 70 percent of judges, from the Supreme Court to night court, were Republicans, thanks to decades of GOP rule in Washington, the statehouses and municipalities. Emboldened by Black Monday, the courts picked off child labor laws, minimum wages and mortgage relief; the plaintiffs were seemingly "little people" who did not want government meddling in their affairs. The reality was that they were stooges for conservative "vigilante committees" bankrolled by the likes of Rockefeller, DuPont and Mellon. The right was on a roll, and like many on a winning streak, they did not know when to stop. On January 6, 1936, by a vote of 6 to 3, the Supreme Court put to death the Agricultural Adjustment Act (AAA), striking a devastating blow at hard-pressed farmers - and setting in motion the plan that would take Cummings to his fateful tea with FDR a year later.
The court-packing bill is often perceived as a legislative freak. This is not correct. By the time the Supreme Court struck down the AAA - with lower courts killing progressive legislation at every opportunity - almost all Democrats and progressives, and some enlightened Republicans, realized that something had to be done to reign in the judiciary - starting at the top. This was all the more important because two crucial bills were waiting in the wings: the Wagner Act, which gave unions the right of collective bargaining, and the jewel in the New Deal crown, Social Security. Legislators, scholars and activists had no shortage of plans in store for the courts, including numerous constitutional amendments to limit judicial review and other powers, bills to force judges into retirement at age 70 or 75, and various ingenious plans for court packing.
There is nothing in the Constitution that sets the number of Supreme Court judges at nine. Originally, there were six; for a while, there were ten; but for decades before the era of FDR, there were nine Supreme Court justices. Though several presidents had tried to pack the court with justices to their own liking, only one was successful: Ulysses S. Grant, who was able to tilt the balance in his favor by adding a single judge. It is doubtful that Roosevelt, Cummings, and their fellow plotters would ever acknowledge Grant, of all presidents, as a soul-brother in jurisprudence.
Nevertheless, the situation in the country was exigent. An amendment to the Constitution, favored by Professor Felix Frankfurter of Harvard, would take too long to pass at a time when Americans were starving. Similar considerations applied to bills that set an age limit on judges. To FDR and his eager attorney general, court packing was the quick and decisive way to go. There were, in fact, a number of court-packing schemes to choose from. The responsibility for reviewing these and putting together a bill was, incredibly, given to a young lawyer in the solicitor general's office named Warner W. Gardner, who worked closely with Cummings. The solicitor general himself avoided the pair because he found the scheme unsavory.
The 1934 midterm elections underscored FDR's popularity - and defied conventional wisdom that the president's party loses seats in the House and Senate. On the contrary, the voters swept the remaining Republicans into the Potomac, seemingly giving FDR an ironclad grip on the legislature. Cummings and Gardner had a court-packing bill ready for FDR, with the dark twist that appealed to him: starting from the premise that court dockets, from the Supreme Court on down, were so overloaded that they imposed an excessive burden on judges, and an especially heavy burden on the nine aging men of the Supreme Court, the bill increased the number of judges throughout the federal judiciary and, in particular, increased the number of Supreme Court judges to 15.
A major problem with the bill, however, was its central premise, which was false - willfully false. Court dockets were not overloaded. A second immediate problem was that FDR waited until February 5 to present his bill to Congress - an astounding blunder in timing, for FDR had allowed the members of his own party to campaign for constitutional amendments and other measures when, in fact, their party leader already had a plan that he did not see fit to share. It would certainly have been understandable if FDR had wished to keep the mechanics of such an explosive plan a secret, but, as Shesol points out, he could have spared Democrats a great deal of embarrassment with a cautionary whisper to candidates not to campaign against the Supreme Court.
The bill stirred scant enthusiasm - especially not among the members of Congress with egg on their chins, nor among many of Roosevelt's advisers. Nor - if the primitive polls of the day are to be believed - among the public at large, probably because Americans did not apprehend how sweeping this bill was. On the other hand, Americans were so programmed to believe in the sanctity of the judiciary, and especially that of the Supreme Court, that the right was quite successful in portraying this bill as a lethal attack on the Constitution itself. As Roosevelt's team sought to garner support for the bill, fellow Democrats continued to introduce constitutional amendments to rein in the court. It turned out that, when it came to the court-packing bill, Roosevelt was not as popular as the recent electoral results suggested. Roosevelt had to make a Faustian pact.
To keep his grip on the Senate, Roosevelt needed Majority Leader Joseph Robinson, to whom he had promised a Supreme Court seat when he was running for president. No one knows whether Roosevelt ever intended to keep this promise, for although Robinson seemed to be a loyal New Dealer, most New Dealers were convinced that he was a closet reactionary. Now, however, Roosevelt had to reiterate his promise: if Robinson would help the president to ratchet the Supreme Court up to 15 justices, one seat would be Robinson's.
On the Supreme Court, surprisingly, events began to break in Roosevelt's favor. In a twofold triumph for the New Deal, the court upheld the constitutionality of both Social Security and the Wagner Act, and the tide was beginning to turn also in Roosevelt's favor in lower courts across the country. Some of Roosevelt's advisers told him what seems obvious today: with the victories for Social Security and the Wagner Act, the swing votes on the court - Hughes and Owen Roberts - understood that not only the court-packing bill, but the Democratic campaign oratory of the recent election, as well as the flood of amendments and bills, boded ill for the power of the Supreme Court should it continue to overturn virtually every progressive bill that came before it. Hughes, a former governor of New York, Secretary of State, presidential candidate (and near-winner) and a masterful lawyer for moneyed interests, took the measure of the forces arrayed against him; he and Roberts knew it was time to back down. Roosevelt's more percipient aides advised him to withdraw the court-packing bill and to leave it hanging over Hughes' head like the sword of Damocles; the bill could always be revived if the court swung back to the right, and in the meantime, Roosevelt could claim a crushing victory.
The political arithmetic showed the fate of the bill on the floor of the Senate was a dead heat in the days before the vote. Without Robinson to make promises and twist arms, the bill would be history. And, just a couple of crucial days before the vote, Roosevelt lost Robinson in a way that this generally most astute of presidents could not have predicted: Robinson complained of pain in his chest and left the Senate early; the next morning his maid found him on his bedroom floor, dead, with his glasses and a copy of the Congressional Record just beyond the reach of his hand.
Now Roosevelt's aides pressed him hard to withdraw the bill. How to explain it? The fashionable explanation was - and almost certainly in most quarters still is - hubris. Shesol's explanation is more nuanced, more insightful. It is undoubtedly true that Roosevelt misconstrued the results of the midterm election, at least when it came to the court-packing bill. And it is also true that, as Shesol writes, Roosevelt had an iron will, though it generally was tempered by excellent judgment. But how unsound was that judgment of his in the present instance? Was it really correct that the court-packing bill would hang over Hughes' head like a sword? The bill was unpopular now - would it become any more popular in the months to come? And specifically, would it suddenly acquire popularity if Hughes or Roberts were to goose-step back to the right? Roosevelt may well have thought, correctly, that the bill stood its best chance of passage while his own popularity was, so it seemed, at its peak.
Roosevelt did not withdraw the bill, which was defeated by an astounding 80-20, with almost all of the nays from Democrats, because the Republicans had already been reduced to a handful. Southern Democrats voted against the bill because many of them were in the pocket of its foes, and because they feared a Roosevelt court would abolish Jim Crow and lynching. Moderates saw little reason to stir up a mares' nest so long as the Hughes court was behaving itself. Even on the left, support for the bill was weaker than one might think because of civil liberties issues. And senators of all denominations knew that the bill was predicated on a myth. Absent a national emergency, the Senate was not prepared to upset a precarious system of checks and balances for a reason that defied the facts.
None would deny that the court-packing bill delivered Roosevelt a humiliating slap in the face, but Shesol, like most historians who have written on this issue, overestimates its significance and duration. By 1937, FDR had succeeded in passing most of the signature legislation of the New Deal. Of course, Roosevelt would continue to govern, but in the domestic arena, there would be no more bills as sweeping as the Wagner Act or Social Security; subsequent legislation would be more targeted, more closely focused on less all-embracing issues. And soon after the start of his third term, FDR would become increasingly preoccupied with foreign affairs. Soon, FDR would wield more power than ever before, the failure of his court-packing scheme notwithstanding - and he would wield it more judiciously than the other two wartime presidents with whom he is compared, Lincoln and Wilson.
Shesol is surely wrong to attribute the court-packing affair to the beginning of the Democratic Party's abandonment by Southerners. Southerners controlled the key committees for decades thereafter, and the Solid South remained solid until Lyndon Johnson rammed through his civil rights legislation and Nixon welcomed the Southerners with open arms.
Shesol has written an engrossing, witty, and carefully researched history of a Supreme Court out of control and a President's fight to contain it. Shesol inclines toward the view that Hughes and his fellow conservatives had only themselves to thank; he clearly appreciates the magnitude of the economic and human catastrophe of the Great Depression. Shesol suggests that the crisis tempered Hughes and Roberts, yielding consistently more liberal verdicts. It seems more probable that FDR prevailed by brute political force, losing the battle but winning the war. Had FDR not rung the fighting juices out of these two aged reactionaries, Social Security might still be a progressive's fantasy.
Robert Wilbur did research in biological psychiatry for many years. He also writes for popular magazines and newsletters. He is active in progressive politics, especially opposition to the Middle East wars and capital punishment, and fighting for animal rights.
Robert Wilbur, Truthout | Book Review
http://www.truth-out.org/peoples-rogue-fdr-vs-nine-old-men/1312315217
Throughout American history, Supreme Court justices have enjoyed undeserved reverence, which has allowed them, by and large, to be water boys (and girls) for the forces of money and power. The vaunted system of checks and balances is skewed in favor of the Supremes, and, inexplicably, ordinary men and women do not seem to realize that they're being rolled. The present political gridlock as a proximate result of the Supreme Court's Citizens United decision recalls the situation FDR confronted In Jeff Sheshol's new book, "Supreme Power: Franklin Roosevelt vs. the Supreme Court."
The president must have been savoring that afternoon of December 26, 1936. Tea was served, and the president entertained his attorney general with meandering reminiscences of his month-long tour through Latin America, wondering aloud which mementos to donate to the Smithsonian and which to keep in the White House. Eventually he got to the point. Go ahead, he told his A.G. Tell me what you have in mind. The A.G. began with a request: Do not laugh at me when I say that I have the solution. With this, as Shesol recounts, both men broke out laughing.
What Franklin Delano Roosevelt and Homer Cummings found so entertaining was a plan, hatched in the Justice Department, to neuter Chief Justice Charles Evans Hughes and the five other conservatives on the Supreme Court. The plan called for the kind of serious political mischief that brought out the devil in FDR. What made it all the more exciting was that the stakes could not be higher: New Dealers versus robber barons; checks and balances versus the power to govern a country on the verge of death throes.
When FDR assumed the presidency in March 1933, writes Shesol:
the cry was not "justice" but "relief." What was at stake was not simply the eventual return of prosperity. It was the survival of democracy. Could representative government, with its checks and balances, with its suspicion and fragmentation of power, respond quickly to mass hunger, unemployment, desperation, and rage? And if not, could such a system endure much longer? The experience of Germany, Italy, and Japan suggested that it could not.
Even before the very first of the hundred days, even before Roosevelt and Cummings were sworn in, New Dealers had a premonition that, sooner or later, there would be a clash between the executive branch and Hughes and his "old fossils." Anticipating this contingency - this inevitability - senator-elect William McAdoo of California proposed to Cummings a plan to pack the court and, "get the antiquated judges off the bench." Cummings liked the idea. So, according to McAdoo, did president-elect Roosevelt.
The daring experiments of the hundred days evolved with fewer cries from the political right than might have been expected, because small businessmen were hurting too, and they were inclined to give FDR a chance to assuage their pain. A chance, that is, until the New Deal came up against the traditional way of conducting business: sweatshops, long hours, measly wages, union busting, child labor, and other outrages.
It is true that the Justice Department did not scrutinize every piece of New Deal legislation with the care it would have done in ordinary times. But it is also true that the Hughes court scrutinized the same legislation with almost preternatural attention to constitutional nuance and precedent, unearthing rulings that had been forgotten for 50 years or more. So, when the Hughes court struck, it dealt FDR a body blow. First it shot down the blue eagle, symbol of the National Recovery Administration (NRA). Next, it rescinded the firing of a disruptive Republican member of the Federal Trade Commission. And for good measure, it struck down the Frazier-Lemke Farm Mortgage Moratorium Act (actually a bill pushed by rabble-rouser Huey Long, but signed by FDR anyway, and so identified with the New Deal). All three by a vote of 9 to 0, and all on the same day: Black Monday, May 27, 1935, just as the New Deal was finally getting a foothold.
At the dawn of the New Deal era, about 70 percent of judges, from the Supreme Court to night court, were Republicans, thanks to decades of GOP rule in Washington, the statehouses and municipalities. Emboldened by Black Monday, the courts picked off child labor laws, minimum wages and mortgage relief; the plaintiffs were seemingly "little people" who did not want government meddling in their affairs. The reality was that they were stooges for conservative "vigilante committees" bankrolled by the likes of Rockefeller, DuPont and Mellon. The right was on a roll, and like many on a winning streak, they did not know when to stop. On January 6, 1936, by a vote of 6 to 3, the Supreme Court put to death the Agricultural Adjustment Act (AAA), striking a devastating blow at hard-pressed farmers - and setting in motion the plan that would take Cummings to his fateful tea with FDR a year later.
The court-packing bill is often perceived as a legislative freak. This is not correct. By the time the Supreme Court struck down the AAA - with lower courts killing progressive legislation at every opportunity - almost all Democrats and progressives, and some enlightened Republicans, realized that something had to be done to reign in the judiciary - starting at the top. This was all the more important because two crucial bills were waiting in the wings: the Wagner Act, which gave unions the right of collective bargaining, and the jewel in the New Deal crown, Social Security. Legislators, scholars and activists had no shortage of plans in store for the courts, including numerous constitutional amendments to limit judicial review and other powers, bills to force judges into retirement at age 70 or 75, and various ingenious plans for court packing.
There is nothing in the Constitution that sets the number of Supreme Court judges at nine. Originally, there were six; for a while, there were ten; but for decades before the era of FDR, there were nine Supreme Court justices. Though several presidents had tried to pack the court with justices to their own liking, only one was successful: Ulysses S. Grant, who was able to tilt the balance in his favor by adding a single judge. It is doubtful that Roosevelt, Cummings, and their fellow plotters would ever acknowledge Grant, of all presidents, as a soul-brother in jurisprudence.
Nevertheless, the situation in the country was exigent. An amendment to the Constitution, favored by Professor Felix Frankfurter of Harvard, would take too long to pass at a time when Americans were starving. Similar considerations applied to bills that set an age limit on judges. To FDR and his eager attorney general, court packing was the quick and decisive way to go. There were, in fact, a number of court-packing schemes to choose from. The responsibility for reviewing these and putting together a bill was, incredibly, given to a young lawyer in the solicitor general's office named Warner W. Gardner, who worked closely with Cummings. The solicitor general himself avoided the pair because he found the scheme unsavory.
The 1934 midterm elections underscored FDR's popularity - and defied conventional wisdom that the president's party loses seats in the House and Senate. On the contrary, the voters swept the remaining Republicans into the Potomac, seemingly giving FDR an ironclad grip on the legislature. Cummings and Gardner had a court-packing bill ready for FDR, with the dark twist that appealed to him: starting from the premise that court dockets, from the Supreme Court on down, were so overloaded that they imposed an excessive burden on judges, and an especially heavy burden on the nine aging men of the Supreme Court, the bill increased the number of judges throughout the federal judiciary and, in particular, increased the number of Supreme Court judges to 15.
A major problem with the bill, however, was its central premise, which was false - willfully false. Court dockets were not overloaded. A second immediate problem was that FDR waited until February 5 to present his bill to Congress - an astounding blunder in timing, for FDR had allowed the members of his own party to campaign for constitutional amendments and other measures when, in fact, their party leader already had a plan that he did not see fit to share. It would certainly have been understandable if FDR had wished to keep the mechanics of such an explosive plan a secret, but, as Shesol points out, he could have spared Democrats a great deal of embarrassment with a cautionary whisper to candidates not to campaign against the Supreme Court.
The bill stirred scant enthusiasm - especially not among the members of Congress with egg on their chins, nor among many of Roosevelt's advisers. Nor - if the primitive polls of the day are to be believed - among the public at large, probably because Americans did not apprehend how sweeping this bill was. On the other hand, Americans were so programmed to believe in the sanctity of the judiciary, and especially that of the Supreme Court, that the right was quite successful in portraying this bill as a lethal attack on the Constitution itself. As Roosevelt's team sought to garner support for the bill, fellow Democrats continued to introduce constitutional amendments to rein in the court. It turned out that, when it came to the court-packing bill, Roosevelt was not as popular as the recent electoral results suggested. Roosevelt had to make a Faustian pact.
To keep his grip on the Senate, Roosevelt needed Majority Leader Joseph Robinson, to whom he had promised a Supreme Court seat when he was running for president. No one knows whether Roosevelt ever intended to keep this promise, for although Robinson seemed to be a loyal New Dealer, most New Dealers were convinced that he was a closet reactionary. Now, however, Roosevelt had to reiterate his promise: if Robinson would help the president to ratchet the Supreme Court up to 15 justices, one seat would be Robinson's.
On the Supreme Court, surprisingly, events began to break in Roosevelt's favor. In a twofold triumph for the New Deal, the court upheld the constitutionality of both Social Security and the Wagner Act, and the tide was beginning to turn also in Roosevelt's favor in lower courts across the country. Some of Roosevelt's advisers told him what seems obvious today: with the victories for Social Security and the Wagner Act, the swing votes on the court - Hughes and Owen Roberts - understood that not only the court-packing bill, but the Democratic campaign oratory of the recent election, as well as the flood of amendments and bills, boded ill for the power of the Supreme Court should it continue to overturn virtually every progressive bill that came before it. Hughes, a former governor of New York, Secretary of State, presidential candidate (and near-winner) and a masterful lawyer for moneyed interests, took the measure of the forces arrayed against him; he and Roberts knew it was time to back down. Roosevelt's more percipient aides advised him to withdraw the court-packing bill and to leave it hanging over Hughes' head like the sword of Damocles; the bill could always be revived if the court swung back to the right, and in the meantime, Roosevelt could claim a crushing victory.
The political arithmetic showed the fate of the bill on the floor of the Senate was a dead heat in the days before the vote. Without Robinson to make promises and twist arms, the bill would be history. And, just a couple of crucial days before the vote, Roosevelt lost Robinson in a way that this generally most astute of presidents could not have predicted: Robinson complained of pain in his chest and left the Senate early; the next morning his maid found him on his bedroom floor, dead, with his glasses and a copy of the Congressional Record just beyond the reach of his hand.
Now Roosevelt's aides pressed him hard to withdraw the bill. How to explain it? The fashionable explanation was - and almost certainly in most quarters still is - hubris. Shesol's explanation is more nuanced, more insightful. It is undoubtedly true that Roosevelt misconstrued the results of the midterm election, at least when it came to the court-packing bill. And it is also true that, as Shesol writes, Roosevelt had an iron will, though it generally was tempered by excellent judgment. But how unsound was that judgment of his in the present instance? Was it really correct that the court-packing bill would hang over Hughes' head like a sword? The bill was unpopular now - would it become any more popular in the months to come? And specifically, would it suddenly acquire popularity if Hughes or Roberts were to goose-step back to the right? Roosevelt may well have thought, correctly, that the bill stood its best chance of passage while his own popularity was, so it seemed, at its peak.
Roosevelt did not withdraw the bill, which was defeated by an astounding 80-20, with almost all of the nays from Democrats, because the Republicans had already been reduced to a handful. Southern Democrats voted against the bill because many of them were in the pocket of its foes, and because they feared a Roosevelt court would abolish Jim Crow and lynching. Moderates saw little reason to stir up a mares' nest so long as the Hughes court was behaving itself. Even on the left, support for the bill was weaker than one might think because of civil liberties issues. And senators of all denominations knew that the bill was predicated on a myth. Absent a national emergency, the Senate was not prepared to upset a precarious system of checks and balances for a reason that defied the facts.
None would deny that the court-packing bill delivered Roosevelt a humiliating slap in the face, but Shesol, like most historians who have written on this issue, overestimates its significance and duration. By 1937, FDR had succeeded in passing most of the signature legislation of the New Deal. Of course, Roosevelt would continue to govern, but in the domestic arena, there would be no more bills as sweeping as the Wagner Act or Social Security; subsequent legislation would be more targeted, more closely focused on less all-embracing issues. And soon after the start of his third term, FDR would become increasingly preoccupied with foreign affairs. Soon, FDR would wield more power than ever before, the failure of his court-packing scheme notwithstanding - and he would wield it more judiciously than the other two wartime presidents with whom he is compared, Lincoln and Wilson.
Shesol is surely wrong to attribute the court-packing affair to the beginning of the Democratic Party's abandonment by Southerners. Southerners controlled the key committees for decades thereafter, and the Solid South remained solid until Lyndon Johnson rammed through his civil rights legislation and Nixon welcomed the Southerners with open arms.
Shesol has written an engrossing, witty, and carefully researched history of a Supreme Court out of control and a President's fight to contain it. Shesol inclines toward the view that Hughes and his fellow conservatives had only themselves to thank; he clearly appreciates the magnitude of the economic and human catastrophe of the Great Depression. Shesol suggests that the crisis tempered Hughes and Roberts, yielding consistently more liberal verdicts. It seems more probable that FDR prevailed by brute political force, losing the battle but winning the war. Had FDR not rung the fighting juices out of these two aged reactionaries, Social Security might still be a progressive's fantasy.
Robert Wilbur did research in biological psychiatry for many years. He also writes for popular magazines and newsletters. He is active in progressive politics, especially opposition to the Middle East wars and capital punishment, and fighting for animal rights.
Friday, July 29, 2011
The US Constitution Makes Default Illegal
The US Constitution Makes Default Illegal
What a Real President Would Do
August 1, 2011
Webster G. Tarpley, Ph.D.
TARPLEY.net
http://tarpley.net/2011/07/27/a-real-president-would-call-default-unconstitutional
My fellow Americans:
I speak to you tonight in an hour of grave danger to our nation. As you know, within the next few hours our government is in danger of failing to make payments of interest and principal which the United States Treasury has contracted to make. In technical terms, we are not far away from beginning to default on payments associated with those US Treasury securities which represent the public debt of the United States. As part of the same crisis, there is now a threat to over 70 million checks which your government issues every month — payments which go to recipients of Social Security, to providers of health services under the Medicare program, to Medicaid beneficiaries, to our active-duty and retired military personnel, to our defense contractors, to our government employees — in short, to everyone who receives a benefit from the federal government, who works for the federal government, or who does business with the federal government.
Default Means National Bankruptcy and World Chaos
A default of this kind means nothing less than national bankruptcy. Default is the essence of chaos and anarchy. It is a peril which we have successfully avoided during our entire existence as a nation, through a terrible civil war and the two world wars of the past century.
The United States dollar continues to play the role of the world reserve currency. This means that the central banks on every continent have chosen to maintain large portions of their reserves in the form of US Treasury securities. This role has been slightly diminished in recent years, but it is substantially intact. For the US government to default on payments through the US Treasury would therefore provoke a radical devaluation of the central bank reserves of the entire globe, wiping out some central banks and leaving others critically weakened. This might lead to massive dumping of US Treasury securities, leading to a general world panic to which no asset class would remain immune. We might see a dramatic decline of the dollar. This would represent the disintegration of the current world financial system, and a breakdown crisis of economic activity of unthinkable proportions. This might happen immediately, or it might require months or even years to explode in its full fury. In any case, it would put the United States on the road to national decline.
If you recall how financial markets seized up and ceased to function in the terrible days of September and October 2008, you have some inkling of the kind of catastrophic market climate that would be unleashed by the national bankruptcy of the United States. Borrowing, credit, mortgages, car financing, credit cards, and the like would not just require astronomical interest rates; many kinds of lending would disappear altogether. Millions more jobs would be lost.
The Public Credit is an Asset for All Americans and for the World
The United States Treasury securities market, with its $1 trillion per day of turnover, represents a unique national asset for our country. It is a signal achievement of the American System of Political Economy founded by Alexander Hamilton. It is the broadest, deepest, and most liquid market in the world. It is capable of absorbing trillions of dollars of securities and turning them into cash within a few hours – a capability unique on this planet. Despite how indignant we all are about the abuses of Wall Street, it would be extremely unwise to permit the Treasury securities market to be wrecked by ideological fanatics. All the more so since the Treasury market is unique in the world, and its extinction would leave no currency whatsoever in a position to function as the reserve medium of the world. This would have terrible implications for world trade and investment.
In short, our Treasury securities are the bedrock of all economic activity in this planet, and the common interest of humanity is well served by avoiding their chaotic insolvency.
The “Tea Party Caucus”: Right-wing Anarchists Funded by Malefactors of Great Wealth
Why, many Americans may wonder, should this crisis exist today? Here it is useless to talk in euphemisms in order to appear conciliatory; it is now necessary to call things by their names. As a result of the current world economic and financial depression which began in 2007-2008, the extreme right wing of the Republican Party, now calling itself the Tea Party, has been energized and revitalized. They have also begun to receive large amounts of political funding, including from a sinister individual who is reported to be the richest man in New York City. These are the malefactors of great wealth about whom presidents of both parties have been warning you for over a century. The goal of these opulent backers of the so-called Tea Party is to eliminate taxation and regulation upon themselves and their private business interests, many of which are in direct conflict with the public good. The impact of this Tea Party on public opinion has been magnified out of all proportion by the collusion of corrupt media cartels; in reality, the supporters of the so-called Tea Party do not exceed about 15% of our population.
Neo-Feudalism
Thanks to the economic royalists who support them, a Tea Party contingent numbering almost 90 members has entered the House of Representatives. Many are political novices. Many of them sincerely believe in the strange and un-American foreign doctrines of the Austrian school, according to which government is an unnecessary evil which needs to be abolished. It is entirely proper to see them as a species of right wing anarchist. The market, by contrast, they fetishize as infallible, and deserving of unbridled free reign over all the human affairs. They want a market without a government, something which has not existed in human affairs since the transition from the Old Stone Age to the Neolithic age, when the state emerged. The free market with no role whatsoever for government went out with Alley Oop the cave man, and it is not likely to return.
And all too often, the market of which they speak turns out not to be free, but rather dominated by predatory cartels, monopolies, and oligopolies. They are devoted to the causes of deregulation, privatization, the abolition of trade unions, more privileges for the wealthy, and a race to the bottom among the states. The world for which they are striving resembles perhaps nothing so much as feudalism as seen in Europe after the fall of the Roman Empire – and, like that anarchic chaos, it can only be described as A New Dark Age.
Most especially, these right wing anarchists of the Tea Party hate the social safety net which incorporates the precious economic rights for which the struggles of the American people won recognition during the New Deal and the Great Society. I am referring of course to Social Security, Medicare, Medicaid, unemployment insurance, the Head Start Program, the WIC program of high-protein meals for expectant mothers and infants, and many more. I am also referring to the right to collective bargaining for wage earners in the public and private sectors alike, and other features of a humane modern society.
Their reasons for this view read like a catalogue of the seven deadly sins, with pride, greed, rage, and envy in the lead. To these we must add class hatred, and also racism, since many of them are obsessed with the idea that their taxes are being spent to help minority groups.
New Deal America Repudiates the Tea Party
The problem faced by the Tea Party Republicans is that two thirds to three quarters of the American people warmly support the social safety net created by the New Deal and the Great Society. A recent poll has also shown that fully 80% of Americans want tax rates on the super-rich to be increased. Despite so many years of radio ranting, venal professors, and merciless sloganeering by politicians, the American people continue to repudiate the ideological platform of the so-called Tea Party. There is no hope their program could ever get passed.
Out of their despair that their ideological goals could ever be met through the democratic process, these wealthy individuals and their anarchist following have evolved a diabolical strategy. Their strategy is extortion. It is an attempt to place the United States government under duress. It is an attempt to mutilate, alter, and denature our Constitution through unconstitutional means.
It is nothing short of an illegal coup d’etat.
The Tea Party cloaks themselves in public as the greatest admirers of the U.S. Constitution. But in one concrete instance after another, we find that the Tea Party is at war with the Constitution.
The Tea Party Hates the Constitution in Practice
Our Constitution speaks not once but twice about the general welfare. To the Tea Party, this is anathema, since they believe that government should serve the wealthy few.
In terms of the issue at hand, Article I, Section 8 of the Constitution specifies that the Congress shall have the power “To borrow money on the credit of the United States.”
This is once again anathema to the Tea Party. In such a fundamental provision as this, enacted in response to the bitter lessons of ungovernability taught by the Articles of Confederation interlude, the Tea Party faction sets itself above the wisdom of the founders. The Tea Party would rewrite this provision to read that the Congress shall NOT have the power to borrow money on the credit of the United States, and the framers be damned.
This is what they admit when they demand their so-called balanced budget amendment. Such an amendment would destroy the finely wrought mechanism of the separation of powers and its accompanying checks and balances, which have served us so well over the centuries. But it is also a subterfuge, since the Tea Party knows very well that this amendment has no chance of being approved by the Congress, nor by the states. Rather, it has included in their litany of cut, cap, and balance purely as a deal-breaker, to make absolutely sure that no possible settlement can be forthcoming in the time available. They are determined to make all negotiations fail.
The Tea Party Goal is to Bankrupt the United States
The goal of the Tea Party faction of Congress is nothing less than the national bankruptcy of the United States, procured by forcing our default on the contractual and legal obligations of this government. They regard default and bankruptcy as positive goods, and indeed as indispensable steps on the path to the free market utopia they fondly imagine. Their reasoning is that, once the United States has gone bankrupt, it will henceforth be either prohibitively expensive or totally impossible for the Treasury to sell its bonds on the world financial markets. Therefore, payments on Social Security, Medicare, Medicaid, and other programs will have to be cut – not by law, but by the brute force of having no money.
This they do in wartime, with some 160,000 troops in the field, many of them fighting determined enemies on the other side of the world.
They claim they want predictabilty to allow businesses to create jobs, yet they court the greatest chaos and instability our nation has ever faced in our financial affairs – insolvency.
These same Tea Party ideologues, still feigning a concern about the American people, have already sponsored legislation which would give foreign creditors — the Chinese, the Japanese, the Saudis, and others — top priority in payments made by the federal government, ahead of our military personnel. According to these bills, we can be sure that Americans whose lives depend on Social Security, Medicare, and Medicaid will be dead last when disbursements are made. We can perhaps now see the real dimensions of the sinister plan with which we are confronted. By driving this government into bankruptcy, the Tea Party hopes to roll back the Constitution by wrecking the Congressional ability to borrow money as a practical matter, while at the same time destroying the entitlement programs which the most extreme Republicans have hated since the time of Franklin D. Roosevelt.
And not just Tea Party fanatics endorse this strategy. Indeed, it has the sympathy of rich elitists of all political stripes, including the academic and foundation left, who welcome the effort to strip away the economic rights of the American people.
Default Spells Genocide Against the American People
This is a policy which threatens the very lives of millions of Americans. It raises the specter of genocide against our own people. And I have not become President of the United States to preside over genocide against Americans.
I am not motivated by any ambition for the aggrandizement of the powers of the presidency. I have negotiated in good faith for months. The other side has not. I have offered reasonable concessions. Indeed, I have waited until now, when the clock reads five minutes to twelve, constantly hoping that the legislative process in Congress would yield an acceptable result. But now, with the specter of national bankruptcy in full view, and no reasonable outcome forthcoming, it is my responsibility to act. Since I sit in the seat that belonged to Washington and Lincoln and Roosevelt, it is my hope that my actions may be worthy of their heritage.
In a Conflict Among Statutes, the Constitution Decides
I am faced first of all with a conflict among statutes passed by Congress. On the one hand there is the debt ceiling law, which states that the Total Public Debt Outstanding of the United States of America shall not exceed $14.294 trillion. Since our public debt reached that level on May 16, this statute could be interpreted as barring any further auctions of United States treasury bills, notes, and bonds. And if we cannot borrow money in this way, since our current income is inadequate to meet all our obligations, we are headed for default, bankruptcy, and, worst of all, social chaos.
But this is not the only statute in the US Code. There are also other statutes to which I must pay attention. All public expenditure of the United States government, as you know, is carried out by law — by a law called the federal budget, which specifies what amounts are to be spent and on what. Every expenditure has to go through the Congress not once but twice — it must be authorized, and then it must be appropriated, and each of these requires the consent of the two houses of Congress and the signature of the president. I am now confronted with a series of expenditures which the current Fiscal Year 2011 budget, passed by Congress and signed into law by me, requires me to make. This includes the entire vast array of social safety net, defense, transportation, health, regulation, inspection, government employment, and other activities which I outlined above. I am under legal compulsion to make these expenditures.
Concerning Treasury securities outstanding, each one of these is an explicit contract that the United States government will pay specific sums of interest and principal at specified dates. Respect from the sanctity of contracts also requires me to make every one of these payments, without exception.
This is therefore my situation: on the one hand, the debt ceiling forbids me to borrow. On the other hand, the federal budget and the implied contracts represented by entitlements and Treasury securities require me to pay. Since tax revenue, partly because of recent and misguided legislation, is not adequate to make all of these payments, something has to give.
It is obvious that, when two or more statutes conflict, we need to look to the Constitution itself for guidance as to which one will apply. Given the extraordinary attention which the Constitution gives the concept of the general welfare, this guiding principle needs always to be kept in mind. Beyond this, our founding document contains two especially relevant provisions. On the one hand, we find that it is Congress which has the power to borrow money. But on the other hand we also have the 14th amendment, section 4 which states:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
In other words, this country is not allowed to default. Default is unconstitutional. Default is illegal. Default is a federal crime.
This is not an option which I can choose to exercise or ignore. It is not something I can invoke or not invoke. This is the Constitution talking. This provision binds me, and ought to bind the opposition in Congress, since they too have sworn to uphold the Constitution.
The Debt Ceiling is Unconstitutional and Must Be Disregarded
This provision places upon the President the responsibility to guarantee the timely payment of all United States debt obligations, regardless of attempts to the contrary that might come from other organs of government, including Congress or, for that matter, the courts. These words make me the ultimate guarantor of the solvency of the United States, especially under emergency conditions in which other branches of government have failed to do this. I am the last backstop. The buck stops here.
By contrast, the Constitution nowhere makes any reference to a debt limit. In fact, the first debt limit was instituted in 1917, less than a hundred years ago. Somehow we got through our first century and a quarter of national life, conquered the frontier, won the Civil War, and created the world’s greatest industrial power without any need for a debt ceiling.
In my considered judgment, and in the light of Amendment 14, Section 4, of the U.S. Constitution, a statutory debt ceiling is therefore unconstitutional. And all competent constitutional jurisprudence agrees that the president must not be bound by legislation which the courts are likely to find unconstitutional. This is all the more true in the present acute crisis.
Accordingly, I have issued an executive order directing the Secretary of the Treasury to resume Treasury auctions today, August 1, 2011, with a view to maintaining the uninterrupted ability of the United States to meet all of its financial obligations, budget and debt, foreign and domestic, without exception. The full faith and credit of our country will be maintained.
I cordially invite the Congress to approve and validate this decision ex post facto.
If your child is in Head Start, it will remain open. If you rely on Social Security, this means you will get your check. If your life depends on Medicare, you can rest assured that your doctors and hospitals will be paid on time so that they can continue their useful activity. If you are living in a nursing home and require Medicaid, those payments will also be available. If you are a member of the military, or a government employee of any kind, you will receive your salary on time. If you are a private firm doing business as a contractor with the government of the United States, you will be able to meet your payroll. If you are carrying out medical research or other scientific research funded by a US government grant, you can be assured that this support will not be interrupted. If you are a person or institution or government anywhere in the world who has purchased United States Treasury securities, you will be paid every penny, on time. If you want to buy a United States Savings Bond or cash one in, you can go ahead and do it.
Those intent on bankrupting the government of the United States and pitching our country into chaos may attempt to reverse this decision in the courts. I have directed the Solicitor General of the United States to prepare to refute their arguments. Since our constitutional position is strong, I have no doubt that we will prevail.
Some will say that the debt ceiling has been around for almost a century, and that so many precedents should not be overturned. That kind of thinking would leave us in bondage to judicial monstrosities like Plessy v. Ferguson, which validated racial segregation, or the infamous Dred Scott decision, which said that skin color was the basis for denying people rights given by God and natural law, and recognized by the Constitution. It will not be the first time we have fixed what turned out to be a terrible mistake.
Others in the House of Representatives bent on driving our nation into default have already announced their intention of impeaching me over this issue. I welcome their attack and the opportunity it will give to further clarify these great issues of the American public.
They will try to impeach me for what I am doing to save the public credit of the United States. In my view, I would truly deserve impeachment were I to refrain from taking this timely action. The President must take care that the laws be faithfully enforced, and this includes the federal budget and the commitments embodied in our entitlements programs and in the solvency of our Treasury securities.
I look forward to next year’s elections, which I expect will be largely fought over this issue and the larger questions which it raises.
Some have raised the question of the debt ratings agencies, and of their future evaluation of the United States public debt in the light of these events. I take this opportunity to announce that the Attorney General, the Department of Justice, and the FBI, acting under my direction, have initiated a comprehensive investigation of corruption and malfeasance which has been alleged against these ratings agencies in connection with their failure to provide timely warning to investors who had purchased certain toxic derivative securities in 2007-2008. We are also studying the legal means of depriving these ratings agencies of the extraordinary and quasi-governmental authority they exercise because of laws and regulations which limit certain forms of public and private investment to securities which have received favorable ratings from these agencies. To this end, we are cooperating with the authorities in Italy and other countries who have also undertaken aggressive investigations of the corruption of these ratings agencies.
The Department of Justice is also investigating reports that members of Congress have entered into criminal conspiracies with bankers and hedge fund operators for the purpose of selling Treasury securities short in the context of the current crisis, and linked this to the votes they cast. The Attorney General has promised to report on this issue at the earliest possible date.
For my part, I do not intend to sell America short. Historically, those who have bet against the United States have not prevailed, nor will they prevail today.
My great predecessor, Franklin D. Roosevelt, delivered his first inaugural address on a morning in March 1933 when every bank in our country had been forced to close its doors because of panic runs, and the economic heart of the nation had stopped beating. In the face of that emergency, the defiant rallying figure of FDR promised action with these words:
It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.
Roosevelt spoke these words at a time when a new Congress had failed for almost three months to do anything meaningful to fight the Great Depression and the banking panic which were ravaging the land in those years. Some at that time had concluded that our form of government was unworkable in a modern crisis, and they were looking abroad for new models of totalitarianism. We must always realize that any system of government which cannot solve the most urgent, life and death problems of the everyday life of the people is not long for this world. It risks being swept aside. If democracy brings chaos, that may be the end of democracy. In this sense, the future our democratic representative government depends on our solvency.
It is in this spirit that I am dealing with the current crisis. I remind you all that, while avoiding national bankruptcy and default in the short-term is absolutely indispensable, this will not by itself solve the majority of our economic problems. The world will remain gripped by an economic and financial depression of incalculable proportions. We will still have some 30 million unemployed in our country. We will still witness American families thrown on the street by fraudulent foreclosures. We will require a comprehensive economic recovery program, supplemented by significant domestic reforms, and capped by a new world monetary system, to put the current world depression behind us.
It is, however, my hope that, by rebuffing those political forces seeking to drive our country into bankruptcy and chaos, we have gained the time necessary to address these issues of economic recovery and financial reform free from the climate of blackmail, extortion, and shakedown.
In the meantime, America will be open for business, today, tomorrow, and every day. Equally important, we can be confident in the ability of our constitutional system to protect the general welfare and the public interest from the machinations of small cliques of fanatics, wealthy though they may be.
I ask for your support. Thank you.
What a Real President Would Do
August 1, 2011
Webster G. Tarpley, Ph.D.
TARPLEY.net
http://tarpley.net/2011/07/27/a-real-president-would-call-default-unconstitutional
My fellow Americans:
I speak to you tonight in an hour of grave danger to our nation. As you know, within the next few hours our government is in danger of failing to make payments of interest and principal which the United States Treasury has contracted to make. In technical terms, we are not far away from beginning to default on payments associated with those US Treasury securities which represent the public debt of the United States. As part of the same crisis, there is now a threat to over 70 million checks which your government issues every month — payments which go to recipients of Social Security, to providers of health services under the Medicare program, to Medicaid beneficiaries, to our active-duty and retired military personnel, to our defense contractors, to our government employees — in short, to everyone who receives a benefit from the federal government, who works for the federal government, or who does business with the federal government.
Default Means National Bankruptcy and World Chaos
A default of this kind means nothing less than national bankruptcy. Default is the essence of chaos and anarchy. It is a peril which we have successfully avoided during our entire existence as a nation, through a terrible civil war and the two world wars of the past century.
The United States dollar continues to play the role of the world reserve currency. This means that the central banks on every continent have chosen to maintain large portions of their reserves in the form of US Treasury securities. This role has been slightly diminished in recent years, but it is substantially intact. For the US government to default on payments through the US Treasury would therefore provoke a radical devaluation of the central bank reserves of the entire globe, wiping out some central banks and leaving others critically weakened. This might lead to massive dumping of US Treasury securities, leading to a general world panic to which no asset class would remain immune. We might see a dramatic decline of the dollar. This would represent the disintegration of the current world financial system, and a breakdown crisis of economic activity of unthinkable proportions. This might happen immediately, or it might require months or even years to explode in its full fury. In any case, it would put the United States on the road to national decline.
If you recall how financial markets seized up and ceased to function in the terrible days of September and October 2008, you have some inkling of the kind of catastrophic market climate that would be unleashed by the national bankruptcy of the United States. Borrowing, credit, mortgages, car financing, credit cards, and the like would not just require astronomical interest rates; many kinds of lending would disappear altogether. Millions more jobs would be lost.
The Public Credit is an Asset for All Americans and for the World
The United States Treasury securities market, with its $1 trillion per day of turnover, represents a unique national asset for our country. It is a signal achievement of the American System of Political Economy founded by Alexander Hamilton. It is the broadest, deepest, and most liquid market in the world. It is capable of absorbing trillions of dollars of securities and turning them into cash within a few hours – a capability unique on this planet. Despite how indignant we all are about the abuses of Wall Street, it would be extremely unwise to permit the Treasury securities market to be wrecked by ideological fanatics. All the more so since the Treasury market is unique in the world, and its extinction would leave no currency whatsoever in a position to function as the reserve medium of the world. This would have terrible implications for world trade and investment.
In short, our Treasury securities are the bedrock of all economic activity in this planet, and the common interest of humanity is well served by avoiding their chaotic insolvency.
The “Tea Party Caucus”: Right-wing Anarchists Funded by Malefactors of Great Wealth
Why, many Americans may wonder, should this crisis exist today? Here it is useless to talk in euphemisms in order to appear conciliatory; it is now necessary to call things by their names. As a result of the current world economic and financial depression which began in 2007-2008, the extreme right wing of the Republican Party, now calling itself the Tea Party, has been energized and revitalized. They have also begun to receive large amounts of political funding, including from a sinister individual who is reported to be the richest man in New York City. These are the malefactors of great wealth about whom presidents of both parties have been warning you for over a century. The goal of these opulent backers of the so-called Tea Party is to eliminate taxation and regulation upon themselves and their private business interests, many of which are in direct conflict with the public good. The impact of this Tea Party on public opinion has been magnified out of all proportion by the collusion of corrupt media cartels; in reality, the supporters of the so-called Tea Party do not exceed about 15% of our population.
Neo-Feudalism
Thanks to the economic royalists who support them, a Tea Party contingent numbering almost 90 members has entered the House of Representatives. Many are political novices. Many of them sincerely believe in the strange and un-American foreign doctrines of the Austrian school, according to which government is an unnecessary evil which needs to be abolished. It is entirely proper to see them as a species of right wing anarchist. The market, by contrast, they fetishize as infallible, and deserving of unbridled free reign over all the human affairs. They want a market without a government, something which has not existed in human affairs since the transition from the Old Stone Age to the Neolithic age, when the state emerged. The free market with no role whatsoever for government went out with Alley Oop the cave man, and it is not likely to return.
And all too often, the market of which they speak turns out not to be free, but rather dominated by predatory cartels, monopolies, and oligopolies. They are devoted to the causes of deregulation, privatization, the abolition of trade unions, more privileges for the wealthy, and a race to the bottom among the states. The world for which they are striving resembles perhaps nothing so much as feudalism as seen in Europe after the fall of the Roman Empire – and, like that anarchic chaos, it can only be described as A New Dark Age.
Most especially, these right wing anarchists of the Tea Party hate the social safety net which incorporates the precious economic rights for which the struggles of the American people won recognition during the New Deal and the Great Society. I am referring of course to Social Security, Medicare, Medicaid, unemployment insurance, the Head Start Program, the WIC program of high-protein meals for expectant mothers and infants, and many more. I am also referring to the right to collective bargaining for wage earners in the public and private sectors alike, and other features of a humane modern society.
Their reasons for this view read like a catalogue of the seven deadly sins, with pride, greed, rage, and envy in the lead. To these we must add class hatred, and also racism, since many of them are obsessed with the idea that their taxes are being spent to help minority groups.
New Deal America Repudiates the Tea Party
The problem faced by the Tea Party Republicans is that two thirds to three quarters of the American people warmly support the social safety net created by the New Deal and the Great Society. A recent poll has also shown that fully 80% of Americans want tax rates on the super-rich to be increased. Despite so many years of radio ranting, venal professors, and merciless sloganeering by politicians, the American people continue to repudiate the ideological platform of the so-called Tea Party. There is no hope their program could ever get passed.
Out of their despair that their ideological goals could ever be met through the democratic process, these wealthy individuals and their anarchist following have evolved a diabolical strategy. Their strategy is extortion. It is an attempt to place the United States government under duress. It is an attempt to mutilate, alter, and denature our Constitution through unconstitutional means.
It is nothing short of an illegal coup d’etat.
The Tea Party cloaks themselves in public as the greatest admirers of the U.S. Constitution. But in one concrete instance after another, we find that the Tea Party is at war with the Constitution.
The Tea Party Hates the Constitution in Practice
Our Constitution speaks not once but twice about the general welfare. To the Tea Party, this is anathema, since they believe that government should serve the wealthy few.
In terms of the issue at hand, Article I, Section 8 of the Constitution specifies that the Congress shall have the power “To borrow money on the credit of the United States.”
This is once again anathema to the Tea Party. In such a fundamental provision as this, enacted in response to the bitter lessons of ungovernability taught by the Articles of Confederation interlude, the Tea Party faction sets itself above the wisdom of the founders. The Tea Party would rewrite this provision to read that the Congress shall NOT have the power to borrow money on the credit of the United States, and the framers be damned.
This is what they admit when they demand their so-called balanced budget amendment. Such an amendment would destroy the finely wrought mechanism of the separation of powers and its accompanying checks and balances, which have served us so well over the centuries. But it is also a subterfuge, since the Tea Party knows very well that this amendment has no chance of being approved by the Congress, nor by the states. Rather, it has included in their litany of cut, cap, and balance purely as a deal-breaker, to make absolutely sure that no possible settlement can be forthcoming in the time available. They are determined to make all negotiations fail.
The Tea Party Goal is to Bankrupt the United States
The goal of the Tea Party faction of Congress is nothing less than the national bankruptcy of the United States, procured by forcing our default on the contractual and legal obligations of this government. They regard default and bankruptcy as positive goods, and indeed as indispensable steps on the path to the free market utopia they fondly imagine. Their reasoning is that, once the United States has gone bankrupt, it will henceforth be either prohibitively expensive or totally impossible for the Treasury to sell its bonds on the world financial markets. Therefore, payments on Social Security, Medicare, Medicaid, and other programs will have to be cut – not by law, but by the brute force of having no money.
This they do in wartime, with some 160,000 troops in the field, many of them fighting determined enemies on the other side of the world.
They claim they want predictabilty to allow businesses to create jobs, yet they court the greatest chaos and instability our nation has ever faced in our financial affairs – insolvency.
These same Tea Party ideologues, still feigning a concern about the American people, have already sponsored legislation which would give foreign creditors — the Chinese, the Japanese, the Saudis, and others — top priority in payments made by the federal government, ahead of our military personnel. According to these bills, we can be sure that Americans whose lives depend on Social Security, Medicare, and Medicaid will be dead last when disbursements are made. We can perhaps now see the real dimensions of the sinister plan with which we are confronted. By driving this government into bankruptcy, the Tea Party hopes to roll back the Constitution by wrecking the Congressional ability to borrow money as a practical matter, while at the same time destroying the entitlement programs which the most extreme Republicans have hated since the time of Franklin D. Roosevelt.
And not just Tea Party fanatics endorse this strategy. Indeed, it has the sympathy of rich elitists of all political stripes, including the academic and foundation left, who welcome the effort to strip away the economic rights of the American people.
Default Spells Genocide Against the American People
This is a policy which threatens the very lives of millions of Americans. It raises the specter of genocide against our own people. And I have not become President of the United States to preside over genocide against Americans.
I am not motivated by any ambition for the aggrandizement of the powers of the presidency. I have negotiated in good faith for months. The other side has not. I have offered reasonable concessions. Indeed, I have waited until now, when the clock reads five minutes to twelve, constantly hoping that the legislative process in Congress would yield an acceptable result. But now, with the specter of national bankruptcy in full view, and no reasonable outcome forthcoming, it is my responsibility to act. Since I sit in the seat that belonged to Washington and Lincoln and Roosevelt, it is my hope that my actions may be worthy of their heritage.
In a Conflict Among Statutes, the Constitution Decides
I am faced first of all with a conflict among statutes passed by Congress. On the one hand there is the debt ceiling law, which states that the Total Public Debt Outstanding of the United States of America shall not exceed $14.294 trillion. Since our public debt reached that level on May 16, this statute could be interpreted as barring any further auctions of United States treasury bills, notes, and bonds. And if we cannot borrow money in this way, since our current income is inadequate to meet all our obligations, we are headed for default, bankruptcy, and, worst of all, social chaos.
But this is not the only statute in the US Code. There are also other statutes to which I must pay attention. All public expenditure of the United States government, as you know, is carried out by law — by a law called the federal budget, which specifies what amounts are to be spent and on what. Every expenditure has to go through the Congress not once but twice — it must be authorized, and then it must be appropriated, and each of these requires the consent of the two houses of Congress and the signature of the president. I am now confronted with a series of expenditures which the current Fiscal Year 2011 budget, passed by Congress and signed into law by me, requires me to make. This includes the entire vast array of social safety net, defense, transportation, health, regulation, inspection, government employment, and other activities which I outlined above. I am under legal compulsion to make these expenditures.
Concerning Treasury securities outstanding, each one of these is an explicit contract that the United States government will pay specific sums of interest and principal at specified dates. Respect from the sanctity of contracts also requires me to make every one of these payments, without exception.
This is therefore my situation: on the one hand, the debt ceiling forbids me to borrow. On the other hand, the federal budget and the implied contracts represented by entitlements and Treasury securities require me to pay. Since tax revenue, partly because of recent and misguided legislation, is not adequate to make all of these payments, something has to give.
It is obvious that, when two or more statutes conflict, we need to look to the Constitution itself for guidance as to which one will apply. Given the extraordinary attention which the Constitution gives the concept of the general welfare, this guiding principle needs always to be kept in mind. Beyond this, our founding document contains two especially relevant provisions. On the one hand, we find that it is Congress which has the power to borrow money. But on the other hand we also have the 14th amendment, section 4 which states:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
In other words, this country is not allowed to default. Default is unconstitutional. Default is illegal. Default is a federal crime.
This is not an option which I can choose to exercise or ignore. It is not something I can invoke or not invoke. This is the Constitution talking. This provision binds me, and ought to bind the opposition in Congress, since they too have sworn to uphold the Constitution.
The Debt Ceiling is Unconstitutional and Must Be Disregarded
This provision places upon the President the responsibility to guarantee the timely payment of all United States debt obligations, regardless of attempts to the contrary that might come from other organs of government, including Congress or, for that matter, the courts. These words make me the ultimate guarantor of the solvency of the United States, especially under emergency conditions in which other branches of government have failed to do this. I am the last backstop. The buck stops here.
By contrast, the Constitution nowhere makes any reference to a debt limit. In fact, the first debt limit was instituted in 1917, less than a hundred years ago. Somehow we got through our first century and a quarter of national life, conquered the frontier, won the Civil War, and created the world’s greatest industrial power without any need for a debt ceiling.
In my considered judgment, and in the light of Amendment 14, Section 4, of the U.S. Constitution, a statutory debt ceiling is therefore unconstitutional. And all competent constitutional jurisprudence agrees that the president must not be bound by legislation which the courts are likely to find unconstitutional. This is all the more true in the present acute crisis.
Accordingly, I have issued an executive order directing the Secretary of the Treasury to resume Treasury auctions today, August 1, 2011, with a view to maintaining the uninterrupted ability of the United States to meet all of its financial obligations, budget and debt, foreign and domestic, without exception. The full faith and credit of our country will be maintained.
I cordially invite the Congress to approve and validate this decision ex post facto.
If your child is in Head Start, it will remain open. If you rely on Social Security, this means you will get your check. If your life depends on Medicare, you can rest assured that your doctors and hospitals will be paid on time so that they can continue their useful activity. If you are living in a nursing home and require Medicaid, those payments will also be available. If you are a member of the military, or a government employee of any kind, you will receive your salary on time. If you are a private firm doing business as a contractor with the government of the United States, you will be able to meet your payroll. If you are carrying out medical research or other scientific research funded by a US government grant, you can be assured that this support will not be interrupted. If you are a person or institution or government anywhere in the world who has purchased United States Treasury securities, you will be paid every penny, on time. If you want to buy a United States Savings Bond or cash one in, you can go ahead and do it.
Those intent on bankrupting the government of the United States and pitching our country into chaos may attempt to reverse this decision in the courts. I have directed the Solicitor General of the United States to prepare to refute their arguments. Since our constitutional position is strong, I have no doubt that we will prevail.
Some will say that the debt ceiling has been around for almost a century, and that so many precedents should not be overturned. That kind of thinking would leave us in bondage to judicial monstrosities like Plessy v. Ferguson, which validated racial segregation, or the infamous Dred Scott decision, which said that skin color was the basis for denying people rights given by God and natural law, and recognized by the Constitution. It will not be the first time we have fixed what turned out to be a terrible mistake.
Others in the House of Representatives bent on driving our nation into default have already announced their intention of impeaching me over this issue. I welcome their attack and the opportunity it will give to further clarify these great issues of the American public.
They will try to impeach me for what I am doing to save the public credit of the United States. In my view, I would truly deserve impeachment were I to refrain from taking this timely action. The President must take care that the laws be faithfully enforced, and this includes the federal budget and the commitments embodied in our entitlements programs and in the solvency of our Treasury securities.
I look forward to next year’s elections, which I expect will be largely fought over this issue and the larger questions which it raises.
Some have raised the question of the debt ratings agencies, and of their future evaluation of the United States public debt in the light of these events. I take this opportunity to announce that the Attorney General, the Department of Justice, and the FBI, acting under my direction, have initiated a comprehensive investigation of corruption and malfeasance which has been alleged against these ratings agencies in connection with their failure to provide timely warning to investors who had purchased certain toxic derivative securities in 2007-2008. We are also studying the legal means of depriving these ratings agencies of the extraordinary and quasi-governmental authority they exercise because of laws and regulations which limit certain forms of public and private investment to securities which have received favorable ratings from these agencies. To this end, we are cooperating with the authorities in Italy and other countries who have also undertaken aggressive investigations of the corruption of these ratings agencies.
The Department of Justice is also investigating reports that members of Congress have entered into criminal conspiracies with bankers and hedge fund operators for the purpose of selling Treasury securities short in the context of the current crisis, and linked this to the votes they cast. The Attorney General has promised to report on this issue at the earliest possible date.
For my part, I do not intend to sell America short. Historically, those who have bet against the United States have not prevailed, nor will they prevail today.
My great predecessor, Franklin D. Roosevelt, delivered his first inaugural address on a morning in March 1933 when every bank in our country had been forced to close its doors because of panic runs, and the economic heart of the nation had stopped beating. In the face of that emergency, the defiant rallying figure of FDR promised action with these words:
It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.
Roosevelt spoke these words at a time when a new Congress had failed for almost three months to do anything meaningful to fight the Great Depression and the banking panic which were ravaging the land in those years. Some at that time had concluded that our form of government was unworkable in a modern crisis, and they were looking abroad for new models of totalitarianism. We must always realize that any system of government which cannot solve the most urgent, life and death problems of the everyday life of the people is not long for this world. It risks being swept aside. If democracy brings chaos, that may be the end of democracy. In this sense, the future our democratic representative government depends on our solvency.
It is in this spirit that I am dealing with the current crisis. I remind you all that, while avoiding national bankruptcy and default in the short-term is absolutely indispensable, this will not by itself solve the majority of our economic problems. The world will remain gripped by an economic and financial depression of incalculable proportions. We will still have some 30 million unemployed in our country. We will still witness American families thrown on the street by fraudulent foreclosures. We will require a comprehensive economic recovery program, supplemented by significant domestic reforms, and capped by a new world monetary system, to put the current world depression behind us.
It is, however, my hope that, by rebuffing those political forces seeking to drive our country into bankruptcy and chaos, we have gained the time necessary to address these issues of economic recovery and financial reform free from the climate of blackmail, extortion, and shakedown.
In the meantime, America will be open for business, today, tomorrow, and every day. Equally important, we can be confident in the ability of our constitutional system to protect the general welfare and the public interest from the machinations of small cliques of fanatics, wealthy though they may be.
I ask for your support. Thank you.
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