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Real Federalism Part 3

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built for those kinds of contingencies. I don't underestimate America's mobility and entrepreneurial spirit, but I think those energies are unlikely to be directed towards restoring political competition. They're more likely and more profitably directed towards escaping the system. I think no sensible citizen will invest much hope in the absurd intergovernmental effort to leave no child behind. The sensible course here is to leave every child behind except one's own, and to escape to the safety of a private school. And what is fair for parents is fair for investors when public offerings are over regulated as they now are. Do a private offering. And I think private exit will continue to produce a better world, but not a more constitutional world. Nor for that matter a better world on the many issues where exit is impossible or excessively costly. We can't escape the American liability system. We can't escape the tax obligations that come along with federal funding programs. On those issues one has to hope that we come to our collective senses, and to some recognition of the Madisonian premises. Those premises of course continue to resonate I think, but they don't translate into the political program. What's the transmission build? I think for better or worse it has to be the Supreme Court, because that's the institution that's best at aggregating diffuse sentiments, because all the other institutions are doing just fine, thank you, under our current inverted system. And because the Supreme Court is after all the institution that's supposed to protect and enforce the Constitution. Now considering the Rehnquist Court's record on matters of individual rights, it may seem absurd to suggest that the justices should enforce anything at all. In particular anything they believe to be in the Constitution. But I think in fact the sustained refusal to enforce structural constitutional safeguards is as illegitimate as the invention of nonexistent constitutional rights and peace. I'll give you one final example. Justice Ginsburg is a leading exponent of the now distressingly common judicial practice of citing international human rights conventions, some of which we have signed but not ratified, in support of new found rights against state impositions on women, racial minorities, or homosexuals. Yet when the state of California taxed the worldwide income of coporations that lose money on their California corporations, Justice Ginsburg sustained that practice in derogation of a United States written British tax treaty that we actually did ratify. So even as the states must bow to ethereal human rights aspirations, California may exercise its sovereign powers extra territorially, even to the ends of the Earth. The unifying theme behind these in Congress, but equally unconstitutional and anti-constitutional positions is our inverted federalism. If one may nonetheless hope for judicial reversal at some future time, that is because, I hope, I think the intellectual ground may be shifting. The sitting justices all completed their formal education and for the most part their intellectual trajectory before the application of economic scholarship and public choice models in lee of problems, including constitutional problems in broad intellectual acceptance. And that I submit may, or hope come to make a big difference. With the judicial airs of the New Deal, liberal or conservative regurgitate Justice Brandeis' encomium to state experimentation. Jurors informed by more modern scholarship. Again liberal or conservative are bound to understand that price controls, the actual subject of New State Ice are among the very few things with which we really don't have to experiment because we know that they're always inefficient. Where the sitting justices invade power, some of them invade passionly against common law adjudication because they fear that their colleagues might use that to fabricate new rights. Modern scholars have moved on to examining the conditions under which constitutional common law is or is not efficiency enhancing. I have confidence in these economic models and their force not so much because they are better economics than the antediluvian drivel of the New Deal. Although that is true. My confidence rather rests on the fact that the modern economic models are largely refinements in formalizations of the Madisonian framework, from Madison's premise of faction as the basic problem of Democratic governments, a path leads straight to Mancur Olson, James Buchanan, and Frank Easterbrook, who to our collective good fortune is already a federal judge. Madisonian's utilitarian calculus, the real welfare of the great body of the people is the basis of the law and economics school in its various shades, from Richard Epstein to Richard Posner, another federal judge come to think of it. Let political economists go to town on the basic elements of optimal constitutional design and the beast looks suspiciously like the Constitution that we once had. I think it would be a big mistake to put too much, too big a bet on this intellectual shift of reform idea that must rely on a single and severely frayed transmission belt, namely the federal judiciary to throw an enormously complicated and resilient system into reverse is manifesting in very deep trouble. But then again new ideas may after all have consequences even if, and in this case because they are actually quite old. Thank you. [APPLAUSE] All right. Well the floor is open. Do any students want to begin with questions? Yes, Michael Watson. [STUDENT ASKING QUESTION] I knew that would come back to haunt me at some point. I think at some level it doesn't really matter whether the underlying impulse of passion here is economic or not. I think the logic of choice and people sorting themselves and exercising their exit rights is equally powerful. There's one limitation to that, and it's this. Some of the constituencies were factions then, you mentioned. Go to issues that have to deal with the very, very fundamental premises of citizenship. Stuff where we can't just say, "That's just a matter of your individual preference. That's just your choice." Right? So where we have to have some central norm. Now with respect to a whole lot of issues, and to give you an example in case this sounds totally abstract, one of them is abortion. And on both sides there are people who say, "No. This is so fundamental we can't have a choice on this." Right? Look. Where exactly do you draw the line? Where is the point where you say no? At this point in time, at this level, we cut off choice and we can't but have one central rule? I don't know. I think there are hard, I mean there are a lot of very, very difficult issues and questions, and whether any one of these issues should fall into the, "No, we don't allow you to choose" category, or the "We're all better off," if we support themselves or at least leave that option open. I don't want to give an either or answer. I'll say this much. I would be very, very skeptical before putting any issue into the sort of "this has to be one rule" category. Above and beyond what's already in the Constitution. And the reason why I would be very, very skeptical, one of the reasons is that the choice logic just strikes me as so eminently powerful in so many ways. And the second thing I'd say is fine. Let's all agree. There are a lot of very difficult debates on the margin, on that particular margin, but there is no reason to let those special cases overwhelm the general vision. Michael do you want to follow up? No? Yes, Steve Teals. Sorry, let's do another student. Catherine. Sorry Steve I'll get to you next. Steve always has a question so I'll let somebody else. [STUDENT ASKING A QUESTION] Look it's a terrific, terrific question, and there is an undeniable tension there. And the tension is this. The more you stamp your foot and say, "Let's have competition," on any number of margins and in any kind of domains, the counter argument is always, "Wait a minute, that really at the other end constrains effective participation." There's no denying that tension. I'll say a few words about why I'm not particularly impressed or terribly concerned about the tension, but it is there. To give you the international equivalent, and it is the precise equivalent of your question. There are a lot of ways in which domestic constituencies now are much more constrained in a globalized world economy. Then once upon a time they were. In fact the anti-globalization movements argument is precisely the global trade under open border conditions, constrains domestic democracy. We are no longer free to have this law or that law, or to protect or supply, or to do this or the other thing, or to protect our jobs, because people move. Because we believe constraint and we build, pay a price. Why is that price bad to pay? Well the anti-globalizers say, "Look, the most mobile factor of production will dictate the terms." The most mobile factor of production happens to be capital. That's a totally contingent and accidental fact. Why should we have our domestic priorities dictated by the sheer fact that capital can move at the push of a button? And so our domestic arrangements are unduly constrained by all these open borders, by this more competitive international environment, and the same argument plays itself out, and in fact did play itself out in precisely those terms in the years leading up to the New Deal. Here is why I'm skeptical about the force of that argument. I mean the argument has undeniable force. Here's why I'm skeptical. And here's where I would add a qualification. The argument would impress me if the domestic political discourse were just that. If it were a discourse, something out of your environments. Or something that at least sort of vaguely resembles sort of a working democracy. Everywhere I look people are deeply, deeply dissatisfied with their domestic political institutions. You look at the public opinion polls. Do you trust your government to do the right thing? 2/3 of the people say no. In Western Europe it's now up to 70%. Why is that? Well one of the reasons why that is so is that people perceive and I think they perceive rightly is that domestic politics will be now called participation is in fact driven by interest group demands. It's very sort of entrenched, rigid politics. If that is the problem, then it might be then in fact exposing that kind of an entrenched interest group apparatus to extone competition might in fact be a good thing. It's corrective and it might in fact give people, ordinary people who otherwise not have chance against these interests a chance. It doesn't make it automatically better, but it is at least a constraint on the system. And so the tension that I mentioned earlier between sort of open borders and competition on one hand and domestic, democratic traditions and principle on the other is not quite as straightforward as it might seem. And I think in a lot of ways you could argue and I would forcefully argue or try to argue with what force I don't know, but I would try to argue that competition among governments may in fact do a whole lot to improve democratic decision making within domestic jurisdictions. And that that is true internationally as well as nationally here at home. But it's a terrific question. Okay good. Well then the floor is open. We'll start with... [STUDENT ASKING QUESTION] [LAUGHTER] The reason why I'm just standing here is that I'm sort of arguing with myself and what level of argument I answer that sort of very, very thick question. Let me sort of take a few limited cuts at it. I think my most general answer would be this. First, I do believe that the Constitution makes sense, any kind of sense, only against the very powerful background assumption of private orders and that those have to make sense, and if that doesn't make sense at all then forget the Constitution. Nothing makes sense. So that means that there are certain biases built in to the system against redistribution. You start. That has to be part of the system and that's the only way in which I can make any sense of the Constitution whatsoever. Any kind of constitution for that matter. The Constitution that deserves something. Now the question is how powerful is that constraint and how dogmatic do you want to be about the formal groups? And in that regard I think that our Constitution in fact allows a whole wide range of results. So for example, to bring this down to Earth. Do I think that there's anything at all in the Constitution that would bar the federal government from running a Medicaid program? No I don't. If they want to run it let them run it, but what I insist on is let them run it on their own accord. And I think that the way in which it is currently set up is if not quite unconstitutional, very nearly so. And regardless of whether it's constitutional or unconstitutional in a formal sense it's really a bad way in which it's currently set up. So and I would give an analogous answer to many, many questions with respect to sort of policies that have practical distributive results. There are ways of skinning that cat. You can achieve almost any result that you want under the existing Constitution. Can I interrupt there for a minute? What would you understand the delegated powers to be that would, of the exercise in running a Medicare system, a Medicaid system, even if it were one that you thought passed Constitutional law. They just spent on the general welfare and I think that's broad enough. So long as they do it on their own. I mean so long as it's been literally their money that they spend. I understand that people can give different answers, and people have traditionally different answers, and even James Madison himself at various points of his career gave a different answer to that question. I wouldn't be, as Dr. Nair called it, sick about that, I wouldn't want to be. All I want to be is, I mean what I think would be achieved, if you're formalistic about the federalism limitations here and leaving the states in or out of the staff. If the federal government really has to raise the money, all of the money for Medicare. Higher its own bureaucrats to administer that gargantuan system, I think we would all have very different intuitions about the program. We would all be much more adult about it and say, "Look, would we actually spend, do we really want a system on auto pilot," which is what we have, and I don't think we would. I mean we wouldn't try to say, "Look there's certain worthwhile things that we ought to do here as a grown up country," but we want to make those decisions. And we want to hold the politicians who make those decisions to account. And let it all be on the budget and let it complete with other budget priorities from wars to the environment to everything else. None of that is in the system as it currently exists, and so you would in that sense make it if you were a formalist of the Greiger kind, you would make it harder to achieve those kinds of things. But you don't want a system that prohibits, that bars those kinds of things exempt, because the way I look at a constitution is as follows. Is coordination there? And all you want to do is you want to be wide open with respect to the ends that you can achieve, and recently that includes the distributive results you want to achieve. All you want to do is you want to balance the system so that the equilibrium results or within some kind of range that generally perceived as fair and reasonably and tolerably efficient. That's what you want to do. That's all the Constitution can do. So there are some extreme results that you and I could easily come up with that, no, the Constitution would not, I mean if it were taken seriously, would not permit under any circumstances. There you see the condition. But again, I don't think you have to be a libertarian in substance to buy into the kind of sort of formalist constraints that I would like to see. Okay now let's try to get two or three more questions in before we have to close. Yes, you sir. [STUDENT ASKING QUESTION]

Video Details

Duration: 24 minutes
Country: United States
Language: English
Director: Central Washington University
Views: 55
Posted by: atrctech on Dec 30, 2011

Real Federalism Part 3
Transcribed by Gianna

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