Saturday, May 14, 2011

Federalism and Interstate Commerce Links

1. I'm not going to bother linking all of them (just the one that bugs me!), but Andrew Sullivan has been writing a lot about Mitt Romney's attempt to present his case on health reform, and the political strategies involved. One of the earlier posts that bothers me is titled "Romney Hides Behind Federalism". It's very troubling to me that federalism is seen as a fake solution that is whipped out for expedience - that Sullivan isn't even serious about the prospect that perhaps Romney did health reform when he was governor because he thought it was a viable decision for governors to make and implement. Instead, people want to turn Romney into a closeted Obamacare advocate. I've said from the beginning that I would have liked to see three things out of health reform. Obama disappointed me on two of those things and succeeded on the third. He did well by relenting and agreeing to John McCain's initial proposal to end (or at least seriously cut back) the tax subsidies on employer provided benefits. He still had an individual mandate, which I opposed, and he also didn't provide a whole lot of flexibility for state experimentation.


2. Greg Mankiw links to an evaluation of ARRA (the stimulus) that finds a negative impact on jobs. What doest his have to do with the states and interstate commerce? Well, the study is done with state-level data and more crucially the model specification is unable to incorporate the impact of interstate commerce which is - to put it mildly - an enormous omission. One nice thing about the study is that it does attempt a sophisticated identification strategy. It uses two instruments - state sales tax intensity (to instrument the decline in state budgets - which I've always noted has been an important contractionary force that people ignore), and state highway funding formulas (which should be exogenous to the recession and are an important determinant of ARRA funding levels). I'm especially glad to see them instrument for state budget losses. But here's the problem - the only impact they can estimate is between states that received relatively more or relatively less stimulus. So if Virginia received $900,000 in stimulus and Maryland received $1,000,000 in stimulus they're going to try and identify the impact of that extra $100,000 of stimulus. Theoretically that could be fine - it'll provide a marginal effect that can be attributed to the whole package. My first (more minor) concern is that when you infuse a lot of money into an economy like this you're ultimately going to run into bottlenecks and - yes - crowding out at least on the margin and in certain areas. Is that marginal effect of the last $100,000 the same as the marginal effect of the first $700,000? Likely it's not.

That's a relatively minor concern, actually. The bigger concern is the interstate commerce point. A lot of commerce is done across state lines and that can't be accounted for with this sort of estimation strategy because the ARRA funds going to Virginia not only are not used to estimate job levels in Maryland - the job levels in Maryland are actually counted against the Virginia impact estimates. To simplify things, you can think of the model as asking "what is the effect of (VA stimulus-MD stimulus) on (VA jobs-MD jobs)". If MD stimulus positively impacts VA jobs or if VA stimulus positively impacts MD jobs, you're going to actually reduce the estimated marginal effect. I don't know if this sort of thing completely eliminates the prospect of state-level studies of fiscal multipliers, but it's certainly something that needs to be taken into account.


3. Matt Yglesias has a good treatment here of arguments against the clear English of the commerce clause that amount to "well if you can do that, what can't you do?". It's never been an especially impressive argument. Yglesias points out some obvious things you can't do, including violating other Constitutional provisions like the first amendment and rights to due process. I've noted before that you also can't violate the general welfare clause - special priveleges for the sake of private welfare skirt Constitutionality in a real way that belies these claims about "if you can do that what can't you do?". But more importantly, these arguments demonstrate a real lack of commitment to the very idea of republican virtue. The Constitution is an important document because it limits the state, thereby protecting incursions on liberty. But since when has it been the only thing standing between the state and liberty? It has always been recognized that for a republic to succeed you need a virtuous populace. You need a populace that won't pursue inappropriate uses of power (or rectify the situation when such powers are pursued).

People act as if we can't have a meaningful and successful republic if the Constitution doesn't provide the ultimate and final demarcations of power. This is an excessively myopic critique, in my mind. We want to be able to achieve public ends with the republican institutions we have set up. Half the petitions raised by Jefferson in the Declaration were complaints about George III not letting the colonial legislatures pass laws that were for the public good. Since the beginning of the republic, it has been understood that we want a government that allows us to govern ourselves - that gives us the ability to make important public investments and decisions. A nit-picking Constitution threatens that, so instead we have a Constitution with real restrictions on the state - but restrictions that are open to interpretation, and yes - deliberation. It amazes me that this very idea that things are left open to deliberation and interpretation is viewed as a threat to liberty, rather than a source of real liberty.

In a free society, we deliberate within a framework of broad restrictions on the state, and if we want to keep that free society we have to preserve the republican virtues that are required for the preservation of liberty. The Constitution is a tool, not a master. It helps us preserve liberty - it's not a free pass on deliberation or a guarantee of success or an ultimate bulwark in defense of liberty. It's like a marriage. The contract itself doesn't guarantee anything. You have to work at your goal.


  1. In my studies of English law, I have seen cases where the House of Lords decided that if the words "general" appear anywhere in any legislation or contract, the "general" part has to be ignored, or it can mean anything under the sun.

    Either way, that too is irrelevant when you consider the Myth of Rule of Law.

    It's all words on a piece of paper. It's all nonsense and means nothing. Nothing.

  2. Prateek, what you wrote is all words on a grey screen. They mean nothing. Nothing.

  3. The House of Lords trying to limit the ultimate impact of legislation that makes its way through the Parliament...

    ...a completely disinterested evaluation on their part, I'm sure!

  4. The U.S. Constitution is to Americans what the royal family is to the British. Britain stopped being a monarchy a long time ago, but it kept its kings and queens -- officially the queen remains the head of state. Likewise, he U.S. stopped being a constitutional democracy a long time ago, but it kept its constitution -- officially it still remains law of the land.

  5. How do you mean it stopped being a constitutional democracy? That seems absurd. We make judgements based on Constitutioanl limitations all the time, Lee?

    Do you mean you are a part of a small subset of people who disagrees with the consensus of constitutional law?

    That may be the case, but it's a far cry from the claim that we're not a constitutional democracy. The fact that the Constitution is contested is not the same as it being anarchonistic. The royal family is truly inconsequential. You can't say that of the United States Constitution just because it's not what some people wish it was.

  6. Daniel,

    Given that most liberals/progressives have wholeheartedly jumped into the legal realism agenda (the interesting thing being that asshats like Learned Hand, Holmes, etc. also claimed that they were being objective in the process - not pushing a clear agenda of their own which was foursquare against the the original constitutional order) Lee Kelly is correct.

    "Do you mean you are a part of a small subset of people who disagrees with the consensus of constitutional law?"

    It isn't really a "small subset," so I reject your framing of the issue that way. Whether you like it or not there is a legal counter-revolution against the 1930s volte-face on the meaning of the commerce clause, and your side is losing. The much hated notion by liberals/progressives of economic liberty is coming back into vogue, whether you like it or not.

  7. Lee Kelly,

    Thirty years ago the Yglesias' of this world didn't even have to make this sort of argument; it was just assumed that the federal government under the commerce clause could regulate any activity under the sun so long as there was "some" rational basis for such. While the rational basis standard still exists, it has been weakened by a whole bunch of carve outs since the 1980s - which have winked at the notion of "liberty of contract" without outright admitting the doctrine has returned to constitutional jurisprudence. This ought not to be very surprising; there has been a tremendous growth in the scholarly legal literature discussing how legal realism, etc. pushed an agenda which was incredibly unfair and dismissive of "liberty of contract." While courts will probably take some time to actually use the terminology again, they have begun to use the standard reasoning behind the doctrine in their rulings at both the state and federal level.

  8. Lee Kelly,

    Of course, liberty of contract never went away - the courts never abandoned a whole slew of cases based on the notion (see "Society of Sisters") - indeed, Douglas did his level best in "Griswold" to both create or recognize a "right of privacy" while not reinvigorating the dormant "liberty of contract" doctrine - but that was impossible to do. Liberals/progressives who despise the notion that people have economic liberty which the state may not touch couldn't start carving out areas of the "right of privacy" without at the same time linking such to the "liberty of contract." If I have liberty to buy condoms and the state may not regulate such, then questions arise about what else the state may not intervene in regarding what I may not purchase or how I may purchase it.

    Many of the "liberty of contract" cases pre-figured the modern "right of privacy" cases, BTW. Many of them having dicta about limits on the state's ability to regulate family life, education, where one may live (thus undermining laws which demanded racial segregation in home purchases - in that case there was more than dicta, the Supreme Court used the "liberty of contract" case law to strike down such a law - note that it was the "progressives" on the Supreme Court which dissented against the use of the "liberty of contract" doctrine to strike down the use of state police powers regarding racial segregation).

  9. Lee Kelly,

    One thing you figure out fairly quickly is that liberals/progressives have a lot of junk history they try to bludgeon you with; never buy into it.

  10. Yes, Gene, they mean nothing.

    In every act of communication, you are the one who reads or processes a message. I could send a different message to attempt to increase the clarity of any given message. But you are -by your own initiative only- reading something, with your perceptions, your values, and your knowledge of the English language coming into play.

    Everytime somebody reads the US Constitution, they project their own values and ideas into it. The US Constitution does not have values of its own.

  11. Daniel,

    I mean that current "constitutional limitations" have little to do with the U.S. Constitution. Perhaps they never did. What few limitations remain on the U.S. Government have descended from the limits set forth by the U.S. Constitution in the same way that birds have descended from dinosaurs. There is a continuous genetic link, but to call them one and the same is misleading at best; any sensible reading of the U.S. Constitution cannot be reconciled with modern day "constitutional law."

    Maybe this isn't a bad thing. Maybe following the U.S. Constitution to the letter for all these years would have been disastrous. I don't know. I like the idea of constitutions, and the U.S. Constitution seems well written, but today it just seems like an artifact with sentimental significance to millions of people. The U.S. Constitution is like the Queen of England, a figurehead, tourist attraction, and focal point of patriotic feelings.

    I know you think the U.S. Constitution has more teeth. I don't. For me, the U.S.A. is hardly a constitutional democracy: it is a democracy, its government is limited, its people have rights, but its constitution does little to guarantee those limits and rights: the sophistic arguments of lawyers, judges, and politicians have seen to that.

  12. Gary and Lee -
    Gary, you seem to forget that I'm not as much of an enemy on liberty of contract questions as you often think I am, and reconsideration and correction of excesses of prior decades is part of the functionality of the system. A lot of those excesses came in in Civil Rights cases, and I can personally appreciate the side they erred on in those circumstances. I can also appreciate that now is the time to risk erring on the other side.

    None of this changes the fact that the Constitution is a relevant document - considerably more relevant than a figurehead royal family. It is quite vague. Erring on one side of the question is worlds apart from abandoning the document.

  13. "The US Constitution does not have values of its own."

    True. That does not mean it means nothing.

  14. Daniel,

    "Liberty of contract" was dismissed as a constitutional value and doctrine during the 1930s; FDR, etc. disliked the notion that the courts could overturn the efforts of the states (and the federal government) to regulate commerce based on the notion that parties to a contract had a substantial liberty interest in engaging in commerce as they saw fit. The disapproval of such an idea plugged into notions at the time of the Great Depression being caused by over-competition, etc. Basically it was argued, "liberty of contract" inhibited the state's ability to steer the economy, it forestalled efforts to "protect" workers and other disadvantaged classes, etc.

  15. "He still had an individual mandate, which I opposed... "

    You wanted a public option and no individual mandate? You seem to be a VERY orthodox thinker generally; do any of the Progressives you link to all of the time agree with you on this?

  16. 1. I'm orthodox?!?!?! I don't buy bullshit contrarianism and I'm pretty happy with existence and use of standard institutions like governments and markets. Does that make me "orthodox"?

    2. No - most progressives seem to be pro-mandate, don't you think? I agree with the progressive commentary insofar as I don't think it's particularly unconstitutional, but I disagree insofar as I don't think it's the best idea.

  17. Kuehn,

    1)Yes, you're pretty happy with Progressive government as it now exists and want to become part of it. How many positions have you taken publicly that wouldn't fall well within the space of average liberal intellectuals? Every post you write seems like a less- to non-juvenile version of a post that's already been written by Krugman or the Lyingest Economist Ever. Go ahead. Google some of your post topics at the Lyingest Economist Ever.

    2)Other Progressives argue that an individual mandate is required if there's to be guaranteed coverage because the system will otherwise be hopelessly gamed. How would you get people to actually pay into these pools instead of getting insurance as soon as they're sick... bankrupting the system?


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