Thursday, April 30, 2015

Citizens United and Campaign Finance

Paying attention to the U.S. process for choosing the American President currently underway can breed some cynicism about the process, especially when it concerns the “invisible” or “money” primaries. There is an unseemly scramble among the Republican hopefuls to court some very rich people, and Hillary Clinton has apparently warded off any serious opposition to her quest for the Democratic nomination by the amount of money she and her supporters have on hand. While there are clear differences between the two major parties, it does cause some to wonder about how much choice the American electorate has and whether certain interest groups will always have a loud voice at the table, no matter who wins. We can partially assign blame for this state of affairs at the U.S. Supreme Court, which has effectively said that not only does money talks but it can also be speech protected by the First Amendment of the U.S. Constitution.
Not surprisingly liberals have attacked the Supreme Court for its Citizens United decision, and some have even called for an amendment to the Constitution. In this case, though, talk is cheap for the Supreme Court is not likely to reverse its decision anytime soon, if ever, and an amendment to the Constitution on this subject is not likely to happen.

As for the Supreme Court, the case that the First Amendment not only applies to individuals but to groupings or associations of individuals, such as in clubs, unions, or corporations is stronger than the case that money that is given to a third party is a form of speech that cannot be limited by statute. In other words, it is one thing for an association of persons to speak, or, in the case of Citizens United, make a movie attacking a particular candidate (Hillary Clinton), but it is another to give money to a super PAC so that it can speak.
If one is to be serious about what can be done given Supreme Court decisions, rather than a continual deploring of Citizens United and asserting that corporations are not people, it would be more useful to ask who has the right to decide for corporations what they can say of a political nature. For example, publicly held corporations could be required to submit to a vote of its shareholders expenditures of a political nature in excess of some de minimus amount. Critics of this would mostly certainly argue that this would stifle political speech, which to their way of thinking would include contributions. As a practical matter, it would probably limit corporations’ political activities, but why should management be allowed to use shareholder money to engage in political speech and make contributions if that is contrary to the desires of the shareholders, who own the corporations? The general treasury of a corporation should not be a piggybank that management can use in any way it wants to, especially in matters not directly related to the business the corporation is in.

As for the conservative bogeymen, unions, which are much less powerful than they used to be, one could subject them to a parallel requirement, that they submit to their membership expenditures greater than a certain minimal amount of a political nature not directly related to their collective bargaining to a vote of their membership. Some liberals might not like that, but it would be worth it to limit corporate cash.
These ideas of course would not limit the influence of money and that of extremely wealthy individuals in our political process, but it would be a start. That ideas about what one could do in the present legal environment shaped by Supreme Court decisions are not being vigorously pursued by politicians of either political party would seem to indicate a certain level of comfort among politicians with the current system. It is particularly disconcerting to hear liberals yell about Citizens United but not advance any practical proposals.

As a final note, it was disconcerting to read recently that Mary Jo White, who is chair of the SEC, recently state before a Congressional committee that the SEC has not taken up rules requiring greater transparency about corporate political contributions because the SEC had more pressing matters to address.  On March 27, the New York Times editorialized:
“Midway into a three-and-a-half-hour congressional hearing this week featuring Mary Jo White, the chairwoman of the Securities and Exchange Commission, none of the legislators had bothered to ask if or when her agency would require that corporations disclose their political spending.
“The bipartisan silence testified to the growing importance to both parties of anonymous campaign donations. With each passing year since 2010, when the Supreme Court’s decision in Citizens United opened the floodgates to secretive political giving, politicians appear to value so-called dark money more and value disclosure of unnamed donors less. The issue was finally broached by Representative Michael Capuano, Democrat of Massachusetts. He observed that shareholders have a right to know how corporate cash is spent, and demanded to know why the S.E.C. has not required disclosure. Ms. White gave the same answer she has given since she became chairwoman in 2013 — essentially, that the agency is too busy with more important issues.”

Wednesday, April 29, 2015

PBS and Vietnam

Over the past two nights (April 27 and 28, 2015), PBS broadcasted four programs relating to the Vietnam War, marking the fortieth anniversary of the final retreat of Americans from that country when Saigon was captured by the North Vietnamese forces. The four programs are: The Draft, Dick Cavett’s Vietnam, The Day the 60’s Died, and Last Days in Vietnam.
These programs serve as a useful reminder of how tumultuous a time the late 60s and early 70s were. The current political divisions in the U.S. pale in comparison with that period. Sometimes it appears that there has been a collective amnesia about this period; losing a war as decisively as the U.S. lost in Vietnam is not a part of American history people like to dwell on. Also, it is instructive to note that those born at the time Saigon was captured by the North Vietnamese are now 40 years old and have no memory of this period. To someone of my generation, 40 is not old, but neither is it young.

By far the most interesting documentary of the four shown on PBS is Rory Kennedy’s Last Days in Vietnam. It details the chaotic departure of the last Americans form Vietnam, the chaos at the American Embassy in Saigon during the final days, and the efforts of American government officials, sometimes against official orders, to evacuate Vietnamese who worked with the Americans and were in danger. It is a fascinating history.
The least interesting, though worthy program, was the one on the draft. It reviews the history of conscription in the U.S. and presents the arguments pro and con for the draft as opposed to an all-volunteer army. It is the least interesting, since the arguments, though fairly presented, are not new to anyone who has thought about this subject.

Dick Cavett’s Vietnam reminds one not only of the turmoil of the period but also what a good late night talk show he had. He was an engaging host with more interesting guests who currently show up on the late night programs.
The documentary I have mixed feelings about but think is terrible flawed is Last Days in Vietnam. It focuses on the killings of four students and the wounding of nine by the National Guard at Kent State University on May 4, 1970. Some of the material it presents is interesting, and it is worth watching because it shows how the Vietnam War had badly divided the country.

However, the implication that the documentary seeks to convey is wrong. It implies that the antiwar movement lost and points to Richard Nixon’s landslide win against George McGovern in November 1972 as proof. This is a perversion of history.
The antiwar movement had a profound effect in changing public attitudes toward the war until what had been a fringe opinion became the majority view. For me, I saw the turning point at my high school graduation in 1970. The commencement speaker was Otis Chandler, the father of a classmate of mine (Norman Chandler) and the publisher of the Los Angeles Times, which did not have the reputation of being a leftist newspaper. He announced in his commencement speech that the L.A. Times would run an editorial the next day arguing that the U.S. should effectively call it quits on Vietnam. Most of my classmates and I had long before come to that conclusion and were pleased at what he said. The view that the U.S. should get out of Vietnam had become mainstream.

As Rory Kennedy’s documentary shows, when Saigon was threatened, President Ford was unable to get the Congress to appropriate any more money to try to fend the North Vietnamese from taking the capital of South Vietnam. Public opinion had turned. The Day the 60s Died ignores the significant role of the antiwar movement in changing public opinion. It is a serious flaw. We need to get history right.

Sunday, April 19, 2015

Gary Gensler – Hillary Clinton’s Move to Placate Elizabeth Warren Democrats? What the Media Gets Wrong. Social Security is a Question Mark.

This past week, Bloomberg News reported that Hillary Clinton plans to hire former CFTC Chairman Gary Gensler as CFO of her presidential campaign. Gary Gensler has been praised for his tenure at the CFTC for being a tough regulator, and media comment generally interpreted Clinton’s move as a way to placate the Elizabeth Warren Democrats, who may view Clinton as too close to Wall Street. For example, Matthew Yglesias, writing for Vox, took this line in an article headlined “Elizabeth Warren Democrats should cheer Hillary Clinton's latest big hire.”

What most of the commentary gets wrong is that Gensler’s becoming a tough regulator was a dramatic evolution on his part. While many liberals were pleasantly surprised that Gary Gensler turned out to be a tough regulator, those of us who worked on financial regulatory issues for Gensler when he was an Assistant and then Under Secretary at the Treasury Department were not surprised. For example, I wrote in February 2009 two days after Gensler’s nomination hearing: “Gensler went to great lengths to reassure the Senators that he would be a tough regulator. I see no reason not to believe him. The OTC derivatives industry will also likely not be entirely comfortable with him at the CFTC, though it is not clear at this point what the extent of his authority and influence on OTC derivatives policy issues will be.” (If you read my post, you will find that I don’t agree with everything Gensler said at his nomination hearing, though I support strong supervision and regulation of financial institutions based on good analysis of actual and potential problems.)

While at Treasury, Gensler was actively involved in another issue, Social Security reform. I know less about his thoughts on this than I do about financial regulation, since this was not an issue I worked on. However, I would note that the Bill Clinton Administration flirted with private accounts, perhaps as some sort of add-on to Social Security, and with investing some of the Social Security trust funds in equities. A January 1999 Wall Street Journal article reports:

“Treasury Assistant Secretary Gary Gensler told Congress this week that the president's proposal envisions that the Social Security funds would be invested in a very broad market index, such as the Wilshire 5000, by private money managers who would be hired by a politically independent entity akin to the Federal Reserve Board. Treasury Secretary Robert Rubin, stumping for the Clinton plan Thursday on television’s ‘Good Morning America,’ said: ‘As long as the investment function and the portfolio are totally segregated from government function, then it seems to me that what you’ve done is you've completely ... insulated [investments] from the functions of government.’” 

One of the common explanations given that President Clinton’s Social Security proposals went nowhere is the Monica Lewinski affair. But President George W. Bush also tried, with no more success. The politics of Social Security are notoriously difficult by design. The New Dealers keep winning from the grave.

Now, the politics of Social Security have changed in the Democratic Party, with Senator Elizabeth Warren and other advocating expansion, not cutting, of the program. Republicans continue to want cuts.

Hillary Clinton’s current thoughts on Social Security have yet to be revealed. Political considerations argue that probably she at least will not favor cuts and may go for some expansion funded by an increase in Social Security taxes on high income taxpayers. Gary Gensler’s current thoughts and potential “evolution” on this subject are also not known, but he is likely to keep quiet about this during the campaign. Hillary Clinton will have to say something.

As is quite obvious, there are sometimes big gaps between what candidates say and what they do when they come into office. Social Security will be a difficult issue for a potential Clinton Administration, given the stark division between the Democrats and Republicans. Any effort to “triangulate” will be very difficult to accomplish if any part of a Hillary Clinton Administration proposal on Social Security is seen as cutting benefits, especially to those in the middle class. That would mean civil war in the Democratic Party.

Finally, one suspects Gary Gensler has ambitions beyond the campaign, perhaps Secretary of the Treasury should Clinton win. In this regard, the Matthew Yglesias Vox article contained a telling sentence: “Except the Obama-Gensler relationship was so bad, Obama can't point to Gensler as an example of anything.” Assuming this is correct – the author does not reveal his sources for this statement –  Gensler, if he assumes a major role in a Clinton Administration, would be well advised to work on having good relationships with his colleagues even when there are disagreements about issues such as Social Security. Interestingly, Yglesias reverses responsibility in his next sentence: “By rebuilding the relationship, Clinton now can.” Ultimately, though, Hillary Clinton will be boss should she win in November 2016.