Category: Politics

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Stanford Law Review Online: The Dirty Little Secret of (Estate) Tax Reform

Stanford Law Review

The Stanford Law Review Online has just published an Essay by Edward McCaffery entitled The Dirty Little Secret of (Estate) Tax Reform. Professor McCaffery argues that Congress encourages and perpetuates the cycle of special interest spending on the tax reform issue:

Spoiler alert! The dirty little secret of estate tax reform is the same as the dirty little secret about many things that transpire, or fail to transpire, inside the Beltway: it’s all about money. But no, it is not quite what you think. The secret is not that special interests give boatloads of money to politicians. Of course they do. That may well be dirty, but it is hardly secret. The dirty little secret I come to lay bare is that Congress likes it this way. Congress wants there to be special interests, small groups with high stakes in what it does or does not do. These are necessary conditions for Congress to get what it needs: money, for itself and its campaigns. Although the near certainty of getting re-elected could point to the contrary, elected officials raise more money than ever. Tax reform in general, and estate tax repeal or reform in particular, illustrate the point: Congress has shown an appetite for keeping the issue of estate tax repeal alive through a never-ending series of brinksmanship votes; it never does anything fundamental or, for that matter, principled, but rakes in cash year in and year out for just considering the matter.

He concludes:

On the estate tax, then, it is easy to predict what will happen: not much. We will not see a return to year 2000 levels, and we will not see repeal. The one cautionary note I must add is that, going back to the game, something has to happen sometime, or the parties paying Congress and lobbyists will wise up and stop paying to play. But that has not kicked in yet, decades into the story, and it may not kick in until more people read this Essay, and start to watch the watchdogs. Fat chance of that happening, too, I suppose. In the meantime, without a meaningful wealth-transfer tax (the gift and estate taxes raise a very minimal amount of revenue and may even lose money when the income tax savings of standard estate-planning techniques, such as charitable and life insurance trusts, are taken into account), one fundamental insight of the special interest model continue to obtain. Big groups with small stakes—that is, most of us—continue to pay through increasingly burdensome middle class taxes for most of what government does, including stringing along those “lucky” enough to be members of a special interest group. It’s a variant of a very old story, and it is time to stop keeping it secret.

Read the full article, The Dirty Little Secret of (Estate) Tax Reform by Edward McCaffery, at the Stanford Law Review Online.

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Justice Sutherland on Conservatism

I’m reading the only (and pretty terrible) biography of Justice George Sutherland, which was written in the 1950s.  Sutherland was a gifted writer, and in this Olympic season I thought I’d reproduce this quote describing his Burkean approach to law:

“Among the games of the ancient Greeks there was a running match in which each participant carried a lighted torch. The prize was awarded not to that one who crossed the line first, but to him who crossed the line first with his torch still burning.  It is important that we should advance, but the vital thing is not that we should simply get somewhere–anywhere–quickly, but that we should arrive at a definite goal with the torch of sanity and safety still ablaze.”

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Defining Gridlock

After playing with several ideas on gridlock for a symposium that I’m participating in this Fall, I’ve settled on more of a “first-principles” approach to the problem.  So let’s start with this:  What do people mean by gridlock?  I think that there are four possibilities.

1.  There is a national consensus about what to do but our dysfunctional political institutions prevent that consensus from being enacted.

2.  Party discipline prevents elected officials in Washington from reaching necessary compromises and then persuading voters to accept those agreements as a consensus.

3.  Our political structures are preventing a national consensus from forming.

4.  There is no consensus in the country.

My view is that the real problem is #4.  #1 is an issue (mostly about the filibuster) but only at the margins.  Trying to change #2 is probably futile, assuming that you even believe that we suffer from too much party discipline. #3 is also an issue (take gerrymandering or campaign finance regulation), but an overrated one.

Of course, if there just is no consensus in the country on major issues, there is nothing that clever lawyers can do about that without violating some basic principles of representation.  The only solution is to persuade voters.  It does happen–consider how public opinion has changed on a variety of topics.  It just takes time and effort.  Anyway, I think that will be the theme of my paper.

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Has the Obama Justice Department Reinvigorated Antitrust Enforcement?

Stanford Law Review

The Stanford Law Review Online has just published an Essay by Daniel Crane entitled Has the Obama Justice Department Reinvigorated Antitrust Enforcement?. Professor Crane assesses antitrust enforcement in the Obama and Bush administrations using several empirical measures:

The Justice Department’s recently filed antitrust case against Apple and several major book publishers over e-book pricing, which comes on the heels of the Justice Department’s successful challenge to the proposed merger of AT&T and T-Mobile, has contributed to the perception that the Obama Administration is reinvigorating antitrust enforcement from its recent stupor. As a candidate for President, then-Senator Obama criticized the Bush Administration as having the “weakest record of antitrust enforcement of any administration in the last half century” and vowed to step up enforcement. Early in the Obama Administration, Justice Department officials furthered this perception by withdrawing the Bush Administration’s report on monopolization offenses and suggesting that the fault for the financial crisis might lie at the feet of lax antitrust enforcement. Even before the AT&T and Apple cases, media reports frequently suggested that antitrust enforcement is significantly tougher under President Obama.

For better or worse, the Administration’s enforcement record does not bear out this impression. With only a few exceptions, current enforcement looks much like enforcement under the Bush Administration. Antitrust enforcement in the modern era is a technical and technocratic enterprise. Although there will be tweaks at the margin from administration to administration, the core of antitrust enforcement has been practiced in a relatively nonideological and nonpartisan way over the last several decades.

He concludes:

Two points stressed earlier should be stressed again: (1) statistical measures of antitrust enforcement are an incomplete way of understanding the overall level of enforcement; and (2) to say that the Obama Administration’s record of enforcement is not materially different than the Bush Administration’s is not to chide Obama for weak enforcement. Rather, it is to debunk the claims that antitrust enforcement is strongly dependent on politics.

This examination of the “reinvigoration” claim should not be understood as acceptance that tougher antitrust enforcement is always better. Certainly, there have been occasions when an administration would be wise to ease off the gas pedal. At present, however, there is a high degree of continuity from one administration to the next.

Read the full article, Has the Obama Justice Department Reinvigorated Antitrust Enforcement? by Daniel Crane, at the Stanford Law Review Online.

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Stanford Law Review, 64.6 (2012)

Stanford Law Review

Volume 64 • Issue 6 • June 2012

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Stanford Law Review Online: The Money Crisis

Stanford Law Review

The Stanford Law Review Online has just published an Essay by former U.S. Senator Russ Feingold entitled The Money Crisis: How Citizens United Undermines Our Elections and the Supreme Court. Senator Feingold explains how the Supreme Court decision in Citizens United threatens the integrity of our political process:

As we draw closer to the November election, it becomes clearer that this year’s contest, thanks to the Supreme Court’s 2010 Citizens United decision, will be financially dominated by big money, including, whether directly or indirectly, big money from the treasuries of corporations of all kinds. Without a significant change in how our campaign finance system regulates the influence of corporations, the American election process, and even the Supreme Court itself, face a more durable, long-term crisis of legitimacy.

[In Citizens United,] the Court was presented with a narrow question from petitioners: should the McCain-Feingold provision on electioneering communications (either thirty days before a primary election or sixty days before a general election) apply to this movie about Hillary Clinton? The movie, of course, was not running as a normal television commercial; instead, it was intended as a long-form, “on demand” special.

Yet Chief Justice Roberts clearly wanted a much broader, sweeping outcome, and it is now clear that he manipulated the Court’s process to achieve that result. Once only a question about an “on-demand” movie, the majority in Citizens United ruled that corporations and unions could now use their general treasuries to influence elections directly. Despite giving strenuous assurances during his confirmation hearing to respect settled law, Roberts now stands responsible for the most egregious upending of judicial precedent in a generation. As now-retired Justice John Paul Stevens wrote in his dissent to the majority in Citizens United: “[F]ive Justices were unhappy with the limited nature of the case before us, so they changed the case to give themselves an opportunity to change the law.”

He concludes:

The Court has a clear opportunity. A new challenge from Montana could allow the Supreme Court to reconsider its decision in Citizens United, and at least two justices have hinted that the 2010 ruling is untenable. In granting a stay of a Montana Supreme Court decision upholding that state’s anticorruption laws, Justice Ginsburg, writing with Justice Breyer, found the pulse of the chaos Citizens United has wrought: “Montana’s experience, and experience elsewhere since this Court’s decision in Citizens United v. Federal Election Commission, make it exceedingly difficult to maintain that independent expenditures by corporations ‘do not give rise to corruption or the appearance of corruption.’”

Justice Ginsburg is correct. Today’s framework for corruption cannot stand.

Read the full article, The Money Crisis: How Citizens United Undermines Our Elections and the Supreme Court by Russ Feingold, at the Stanford Law Review Online.

Note: corrected for typos

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Consensus and the Constitution

Last week, I mentioned my proposal for a bipartisan executive as a way to defuse partisan conflict in Washington. Earlier this week, in his Ideas column in the Boston Globe, Leon Neyfakh considered the possibility of a bipartisan executive, as well as other remedies that have been proposed for the dysfunction in our national government, including Sandy Levinson’s “Undemocratic Constitution” and the “unbundled executive” of Christopher Berry and Jacob Gersen.

As Neyfakh observes, whether or not we adopt any of these proposals, our consideration of them may lead us to reforms that can make for a more effective political system. With my book, I want people to pay more attention to the connection between dysfunction in Washington and the framers’ decision in favor of a single rather than plural executive.

A bipartisan executive not only could address the problem of partisan conflict, it also would respond to the problem of the imperial presidency. The failure of external checks on presidential power makes an internal check desirable. The framers weakened legislative power by dividing it and requiring it to be shared by a House and Senate. We can rebalance power between the executive and legislative branches by dividing the executive power and requiring that it be shared.

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Gridlock as a Bilateral Monopoly Problem

I’m still tossing around ideas for the upcoming gridlock conference at Notre Dame.  One is that gridlock is the product of centralized power within Congress and the White House. Accordingly, the solution to gridlock lies in devolving power within the branches.

Here’s how I reach these conclusions.  One source of gridlock (or high transaction costs for legislation) is a plethora of veto points.  In other words, if a large number of institutions or factions must agree to get something done, accomplishment is unlikely. Another possibility, though, is that you could have a bilateral monopoly that leads to crippling transaction costs.  When there are only two parties to a negotiation, deadlock often ensues.

Bilateral monopoly is a good description of discussions between a President, who leads united Executive Branch, and one or both houses of Congress when the other party has a majority. This wasn’t always the case.  The political parties were once more heterogenous, and as a result party leaders were not the only important players.  Committee chairs or powerful moderates in Congress were often the crucial votes.  Members of the Cabinet also used to have more independence (either because they represented a rival faction of the President’s party or because that was just the practice). In recent decades, though, presidents have concentrated power in the West Wing and congressional leaders have pulled off something similar in the Senate and House.  Was this a positive change?

We cannot make the parties less homogenous (or, at least, that’s pretty hard), but we can alter the rules within the branches to weaken their respective leaderships. Doing so would open the door to more compromise and action, assuming that’s what we want.

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Removing Prosecutors from Boardrooms or from Politics

Debate has intensified concerning the role of criminal liability for organizations such as corporations, under the guise of having “prosecutors in the boardroom.” Issues include how prosecutors interact with boards in ferreting out wrongdoing and targeting employees. Topics extend to whether the terms of deferred prosecution agreements should include particular corporate governance changes.

Heard about less often in this debate is the role of politics in prosecutorial decision-making. True, the relative appeal of “prosecutors in the boardroom” may not depend on whether any given prosecutor’s incentives include aspirations for higher office.  But there are many instances in which it is clear that prosecutorial political ambitions are tied to prosecutorial excesses: Eliot Spitzer is perhaps the poster child for this problem.

As a result, when scholars of corporate governance or corporate criminal liability debate the role of prosecutors in the boardroom, it may be worth paying specific attention to tools that can reduce the role of politics in prosecutorial conduct.  After all, a sense of proportion can be promoted by neutralizing the political incentives prosecutors sometimes have.

States with elected attorneys general—the vast majority today, including Spitzer’s New York—could follow the lead of the few with laws discouraging prosecutors from engaging in political activity. The chief alternatives are barring an attorney general from running for higher office while serving as the state’s chief prosecutor (called “resign-to-run” laws) or requiring an attorney general to wait two to four years after leaving that office to run for a higher one (a “cooling-off period” approach).

Opponents of such restrictions object that these impair the officials’ rights of free speech and impinge on democratic traditions allowing the electorate to choose from among a broad field of candidates. But resign-to-run laws meet those objections, putting the prosecutor to a simple choice, and even the cooling-off period is a modest eligibility limitation, not adding qualifications to run for office. The restrictions are common in codes of judicial ethics which have been upheld against constitutional challenge; they are modest compared to those contained in more sweeping federal legislation such as the Hatch Act, which prohibits federal and state employees from running for elected office.

Are these points valid? Should corporate/criminal law scholars look at the role of politics in prosecutions; is that role a significant factor in the risk of prosecutorial excess; are such laws helpful to address that factor; are the laws legitimate?

 

Why Do We Lack the Infrastructure that We Need?

Brett Frischmann’s book is a summa of infrastructural theory. Its tone and content approach the catechetical, patiently instructing the reader in each dimension and application of his work. It applies classic economic theory of transport networks and environmental resources to information age dilemmas. It thus takes its place among the liberal “big idea” books of today’s leading Internet scholars (including Benkler’s Wealth of Networks, van Schewick’s Internet Architecture and Innovation, Wu’s Master Switch, Zittrain’s Future of the Internet,and Lessig’s Code.) So careful is its drafting, and so myriad its qualifications and nuances, that is likely consistent with 95% of the policies (and perhaps theories) endorsed in those compelling books. And yet the US almost certainly won’t make the necessary investments in roads, basic research, and other general-purpose inputs that Frischmann promotes. Why is that?

Lawrence Lessig’s career suggests an answer. He presciently “re-marked” on Frischmann’s project in a Minnesota Law Review article. But after a decade at the cutting edge of Internet law, Lessig switched direction entirely. He committed himself to cleaning up the Augean stables of influence on Capitol Hill. He knew that even best academic research would have no practical impact in a corrupted political sphere.

Were Lessig to succeed, I have little doubt that the political system would be more open to ideas like Frischmann’s. Consider, for instance, the moral imperative and economic good sense of public investment in an era of insufficient aggregate demand and near-record-low interest rates:

The cost of borrowing to fund infrastructure projects, [as Economic Policy Institute analyst Ethan Pollack] points out, has hit record “low levels.” And the private construction companies that do infrastructure work remain desperate for contracts. They’re asking for less to do infrastructure work. “In other words,” says Pollack, “we’re getting much more bang for our buck than we usually do.”

And if we spend those bucks on infrastructure, we would also be creating badly needed jobs that could help juice up the economy. Notes Pollack: “This isn’t win-win, this is win-win-win-win.” Yet our political system seems totally incapable of seizing this “win-win-win-win” moment. What explains this incapacity? Center for American Progress analysts David Madland and Nick Bunker, see inequality as the prime culprit.

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