Mike Konczal

Roosevelt Institute Fellow

Recent Posts by Mike Konczal

  • O Christmas Tree: Why Scalia's Dissent is More Activist Than the Roberts Decision

    Jul 3, 2012Mike Konczal

    Roberts's decision to uphold the individual mandate as a tax was based on solid and established legal arguments, but the dissent's justification for throwing the whole law out was pure radicalism.

    CHIEF JUSTICE ROBERTS: You're telling me they thought of it as a tax, they defended it on the tax power. Why didn't they say it was a tax?

    Roberts's decision to uphold the individual mandate as a tax was based on solid and established legal arguments, but the dissent's justification for throwing the whole law out was pure radicalism.

    CHIEF JUSTICE ROBERTS: You're telling me they thought of it as a tax, they defended it on the tax power. Why didn't they say it was a tax?

    GENERAL VERRILLI: They might have thought, Your Honor, that calling it a penalty as they did would make it more effective in accomplishing its objective. But it is — in the Internal Revenue Code it is collected by the IRS on April 15th. I don't think this is a situation in which you can say -
    CHIEF JUSTICE ROBERTS: Well, that's the reason. They thought it might be more effective if they called it a penalty.
    -Supreme Court arguments, March 27th, 2012 (transcript)

    Last week, the Supreme Court found in a 5-4 vote that the individual mandate survives under the taxing power instead of the Commerce Clause. Here is the decision, authored by Chief Justice Roberts. I've noticed two responses from conservatives:

    The first is that Roberts, by looking to the taxing power in the Constitution, found something liberals had never argued. Related is the argument that liberals took the constitutionality of the mandate for granted and never built out the framework necessary to argue for it, especially in the form of a tax.

    I haven't followed health care closely, but I do try to keep up with Jack Balkin's work, and he's been on the taxing power since forever ago. Here's two amicus briefs (h/t Incidental Economist for the actual brief links, who also gives them "most influential" status) that come from the team of Jack Balkin at Yale Law School and Gillian Metzger and Trevor Morrison at Columbia Law School. Their Fourth Circuit brief covers this (Argument 1: "The minimum coverage free provision is a permissible exercise of Congress's taxing power"), as does the Supreme Court brief (Argument 1: "The minimum coverage provision falls within Congress's expansive tax power and is not an impermissible direct tax").

    In "The Lawfulness of Health-Care Reform," Akhil Amar writes that Obamacare "is proper under at least six different theories, each one of which has deep roots in constitutional text and common sense." The very first one? "It is outlandish to think that [Obamacare's] provisions exceed the sweeping power that the Constitution confers upon Congress to 'lay and collect Taxes, Duties, Imposts, and Excises.'" And Andrew Koppelman, in "Bad News for Mail Robbers: The Obvious Constitutionality of Health Care Reform," noted that "Even if you somehow suppose that the health care mandate exceeds the commerce power, it would be valid anyway as an exercise of the power to tax," which is now the law of the land. These thinkers are at the forefront of elite liberal legal scholarship, and they all made this argument. It showed up in the oral arguments as well, with Roberts paying particular attention to it, as Brian Beutler of TPM caught at the time.

    The second response conservatives have is that Roberts found something Congress never intended. National Review's editors, immediately after the decision, argued that one "distinguishes, though, between construing a law charitably and rewriting it. The latter is what Chief Justice John Roberts has done." The dissent itself argues that "to say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it."

    But in terms of rewriting a bill and judicial activism, I haven't seem any conservatives deal with the "Christmas Tree" doctrine. Given that the dissenting judges found the mandate and related major parts of the bill unconstitutional, what should they do with the rest of the bill? For instance, what should be done about the student loan reform, a major and obviously constitutional provision that was included with the ACA?

    The dissenting judges would overturn it. They'd overturn the entire bill, including the student loan provisions. But why? Here is their logic, from the dissent (my bold):

    Such [minor] provisions validate the Senate Majority Leader’s statement, “‘I don’t know if there is a senator that doesn’t have something in this bill that was important to them. . . . [And] if they don’t have something in it important to them, then it doesn’t speak well of them.  That’s what this legislation is all about: It’s the art of compromise.’ ” [Quote from New York Times article.] Often, a minor provision will be the price paid for support of a major provision.  So, if the major provision were unconstitutional, Congress would not have passed the minor one.
    The Court has not previously had occasion to consider severability in the context of an omnibus enactment like the ACA, which includes not only many provisions that are ancillary to its central provisions but also many that are entirely unrelated—hitched on because it was a quick way to get them passed despite opposition, or because their proponents could exact their enactment as the quid pro quo for their needed support. 
    When we are confronted with such a so called “Christmas tree,” a law to which many nongermane ornaments have been attached, we think the proper rule must be that when the tree no longer exists the ornaments are superfluous. We have no reliable basis for knowing which pieces of the Act would have passed on their own.

    Notice how this dissent comes up with an elaborate theory of how and why Congress passed the pieces of the bill they did, rewriting the history of how and why health care reform passed. With no previous case law, they turn to a quote from a New York Times article, of all things, to determine the constitutionality of things like student loan reform.

    And this history strikes me as ideologically predicated on a third-rate "Public Choice" criticism, which is that all the minor provisions were "quid pro quo" bribes needed to secure passage. It reads like when Scalia brought up the Cornhusker Kickback during legal arguments. So it isn't derived from case law, or a theory of the courts or the law, but on an ideological, right-wing vision of how political actors behave.

    Which is to say that the dissent took a maximal course of rewriting and assuming not only the intent but the counterfactual of congressional action and the ACA, including what it does, why it does it, and how it came to be, in their Christmas Tree doctrine. This is the very definition of judicial activism.

    If Roberts was interested in minimizing his activism and rewriting of congressional action, as well as maintaining a baseline of presuming the legitmacy and constitutionality of congressional action, wouldn't he have gone with the liberals instead of the conservative dissent?

    Now that CBS News has revealed that Roberts changed his vote from siding with the conservatives to siding with the liberals, everyone is trying to figure out why. I wonder if it is because the dissenters wouldn't back down from their Christmas Tree doctrine and Roberts called foul on its absurdity.

    Mike Konczal is a Fellow at the Roosevelt Institute.

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  • A Note on Free Market Fairness: Is "Economic Liberty" Incoherent?

    Jun 20, 2012Mike Konczal

    There's a fantastic symposium on the book Free Market Fairness going on over at the Bleeding Heart Libertarian website. Make sure to check out Sam Freeman and Elizabeth Anderson, as well as Tomasi's replies to both.

    There's a fantastic symposium on the book Free Market Fairness going on over at the Bleeding Heart Libertarian website. Make sure to check out Sam Freeman and Elizabeth Anderson, as well as Tomasi's replies to both. I'm going to add my thoughts on reading the book; note that I'm an amateur when it comes to many of these political theory debates but something strikes me as missing.

    One of the core parts of Free Market Fairness' theory of "market democracy" is enshrining economic liberty at the level of basic liberties protected by the constitution, like free speech, the right to a trial or political participation.

    In Rawls' formulation, it means that economic liberties would be protected by the first principle of justice. This is the principle that each "person has an equal claim to a fully adequate scheme of equal basic rights and liberties, which scheme is compatible with the same scheme for all." These basic liberties are “inalienable,” and “any undertakings to waive or to infringe them are void ab initio [to be treated as invalid from the outset].” Citizens cannot bargain or trade their basic liberties away.

    Many on the left point out how economic liberty isn't true liberty unless it is a fair value liberty, or a liberty that isn't just formally equal but also is substantively equal. To see examples using Rawls' framework, political equality is of the substantive variety, as it matters whether you can actually vote and participate, but religion is only formally equal, as you don't have a right to an expensive church for your personal, elaborate religious ceremonies. The left says economic liberty isn't really liberty unless there's substantive equal ability to participate in the economy.

    I'm all for that critique as far as it goes, but I think it is important to go a step further and argue that formulating economic liberty as a basic liberty is, practically speaking, incoherent.

    The Department of Stabilization

    Rawls described a stabilization branch of the state in Theory of Justice, tasked with bringing about full employment. In practice a lot of our economic debates are focused on what to do about mass unemployment in this crisis.  Let's do a quick map of economic agents in our current Great Recession and how the downturn has impacted them:

    There are workers, many of whom are unemployment, and they have sluggish wage growth and low quit rates. Incumbent managers and owners are experiencing big profits and large bargaining power over their workforce. Capital owners have benefitted from disinflationary trends. Entrepreneurs find it difficult to start new businesses amidst mass unemployment. The government could lean against all these trends by doing stimulus, but taxpayers would be on the line if it didn't work out.

    Now here's what I mean by incoherent: treating economic issues as a basic liberty tells us nothing about how to address stabilization one way or the other and substantially confuses our intuitions about how to approach the problem - which is one of tradeoffs. The first principle would only allows certain breaches of inalienable economic liberty in order to make the most extensive set of liberties, compatible with similar liberty for others. Now I understand that the regulation of basic liberties (like free speech) is problematic for Rawls, but it dissolves into nothingness here under market democracy.

    Basic liberties can't guide us, because liberty for one comes at the expense of liberty for others. Which economic liberties are we to preserve? The one of the unemployed to work, the entrepreneur to have customers, bosses to their profits or rentiers to their capital income? All of these liberties are part of the economic realities of each agent, and these are fundamentally in tension with each other. There's no way to view them as "compatible" with each other as a sufficient condition to animate decision-making.

    The only way to address them as a matter of policy is to balance them against each other according to some principle. Full employment? Price stability? Deflation and the Gold Standard? Bringing in the concept of liberty prevents the ability to discuss these in terms of tradeoffs, as the whole point of basic liberties is that groups of citizens can't have their basic liberties traded off each other.

    One could say that the only system is thus one of no stabilization. But this is a policy choice, no different than emphasizing full employment at all costs. There's nothing about mass unemployment that must contain more inalienable liberty than full employment - it is just a different set of actors who benefit. And this would look suspiciously like bringing in one set of arguments for how the economy should work and whom it should work for through the courts, rather than democratically through argument in the public sphere.

    This incoherence exists more broadly. For instance, uses of basic liberties aren't up for being traded. I can't sell you my vote, and I can't ask the government to enforce a contract where you've sold me your right to a fair trial. Yet economic transactions are all about trading off economic rights. When I sell you my labor I'm accepting serious limitations on what I can do with my labor - it now belongs to you.

    Thus economic liberty is often, at any moment, zero-sum: a more extensive liberty for the boss comes at limiting the liberty of the worker. The same for the creditor and the debtor. One of the first big "liberty of contract" cases was Pennsylvania's state court's 1886 Godcharles v. Wigeman, which struck down a state act prohibiting payment of wages in scrip. Here the benefit of the boss (and the company) came at the expense of the worker in the form of the means of payment. This may be a pareto-optimal trade when it happens - market democracy would presume that it must be by definition of it happening - but assuming I'm giving away a liberty for my ultimate long-term benefit, as well as the benefit of the economy as a whole, is way off the reservation of how we consider the other basic liberties.

    The best way to conceptualizing it is within a framework of justifying inequalities, which is what Rawls' second principle tries to do. The second principle's difference principle could be the wrong approach - we might want to maximize growth regardless of its impact on the poor - but it is the right spot on the lexical framework to approach such a question. Pushing these questions into the highest lexical position leaves us with nothing coherent to say on the matters, it disrupts our normal thinking about liberty and stops our ability to see these issues as what they fundamentally are, which is balancing private forms of power and providing rules that bend them towards the greater good of the economy. Rules that are, I'd argue, best constructed through democratic argument; but rules that are in no way clarified by referring to more abstract notions of liberty.


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  • Should the Federal Reserve Go into the Muni Market?

    Jun 18, 2012Mike Konczal

    It seems likely that the Federal Reserve will provide additional easing in reponse to a declining economic environment when it meets later this week. But what form will this easing take? Tim Duy does the Lord's work in trying to read the tea leaves here. He ultimately concludes that nobody has any idea, and that this is a major communications failure on the part of the Federal Reserve.

    It seems likely that the Federal Reserve will provide additional easing in reponse to a declining economic environment when it meets later this week. But what form will this easing take? Tim Duy does the Lord's work in trying to read the tea leaves here. He ultimately concludes that nobody has any idea, and that this is a major communications failure on the part of the Federal Reserve. "We really have no idea what the Fed is going to do or why they are going to do it.  Reasonable analysis ranges from nothing to massive quantitative easing."

    Cardiff Garcia of FT Alphaville also tries to make sense of the possibilities, including discussing this decision tree (why aren't there more decision trees on blogs?) from Credit Suisse:

    That's a pretty good list of ideas; Garcia has more, including a chart with pros/cons of each option.

    What else could it do? Here's a suggestion Richard Clayton, the Research Director of Change To Win, emailed me after my interview with Joe Gagnon, that I haven't seen as part of the discussion:

    One question that Gannon doesn’t deal with directly: under Section 14 b 1 the Fed has the authority to purchase any obligation of a state or local government of 6 months maturity or less. This provision seems clearly to permit a mass refinancing of state and local government debt at the current 6 month interest rate (very close to 0), which would save state and local gov’ts approximately $75 billion a year (going by the flow of funds #s for state and local interest payments). Moreover, since state and local govts do the bulk of infrastructure investing, the fed could create a program to fully fund such investment through purchases of newly issued 6 month bonds, for projects that meet criteria the Fed sets out (such as being approved by a small committee of civil engineers appointed by the regional fed branches for that purpose). Finally, under section 24 of the Act, the fed can buy from national banks loans to finance residential construction, which in effect would give the fed the ability to spur new multi-family construction (sorely needed, as evinced by rising rents) by enabling lending banks to effectively sell the loans off their books.

    Should we be pushing the Federal Reserve to purchase from the muni market, buying short-term state or local government debt? Asking around, a big practical issue is how much to buy from each state, but the Federal Reserve could come up with a solution. If the estimate is correct, that $75 billion would make a major difference to weak state and local budgets, which is a major form of austerity and a major check to recovery during this Great Recession. Clayton's other suggestion is similar to buying MBS, which has a high probability of going through in the flowchart above. The mortgage rate is low but could be much lower, and the Federal Reserve can make that happen.
    But I haven't heard this discussed much. What is your take - should the Federal Reserve purchase short-term state and local government debt?
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  • Twilight of the Elites Review Up, Plus Weekend Links

    Jun 15, 2012Mike Konczal

    I have a review of Chris Hayes' excellent new book, Twilight of the Elites, now online at Dissent Magazine.  Check it out here.

    More links:

    Elise Foley has the best writeup of the policy behind President Obama's important executive order surrounding the Dream Act.

    I have a review of Chris Hayes' excellent new book, Twilight of the Elites, now online at Dissent Magazine.  Check it out here.

    More links:

    Elise Foley has the best writeup of the policy behind President Obama's important executive order surrounding the Dream Act.

    JW Mason at Slackwire tries to find the method in the ECB's madness. Great stuff.

    The Prison Law Blog is sadly ending (though archives will be available online); long live the new project Evolving Standards of Decency.

    Monica Potts big American Prospect story on poverty, reported after living in Kentucky for several months.

    Fantastic Elizabeth Anderson Bleeding Heart Libertarian post on economic freedom. I should reread her "What is the Point of Equality?"

    A Boston Review interview with Michael Lind on his new book.

    Dark times, take comfort in the small victories. Here's a victory from Occupy Minnesota on foreclosure activism, keeping the mother of an activist in her home.

    Marcy Wheeler gives an overview of David Dayen's foreclosure fraud panel from Netroots Nation. I got a chance to talk with Neil Barofsky the night before; I'm really looking forward to his new book about the bailouts and the Obama administration.

    I love when you can see how much the Roots enjoy being in geeky Jimmy Fallon skits, like everyone singing Call Me Maybe with Carly Rae Jepsen while playing elementary school musical instruments. Also Fallon is having the best time too - I need to watch this show more often, great vibe:


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  • The Rent(al Income as a Percentage of GDP) Is Too Damn High, and Households Severely Burdened with Housing Costs

    Jun 15, 2012Mike Konczal

    Here's a great graph from Mike Norman Economics:

    Here's a great graph from Mike Norman Economics:

    Rental Income is "Rental Income of Persons with Capital Consumption Adjustment" (which you can find in FRED here). What's that? According to the BEA: "It consists of the net income from the rental of tenant-occupied housing by persons, the imputed net income from the housing services of owner-occupied housing, and the royalty income of persons from patents, copyrights, and rights to natural resources."

    And, starting in the late 1980s it skyrockets as a percentage of our economy. It declines in the mid-2000s (the BEA explains why here), but is returning with a vengance. (Update: This data includes imputed rents homeowners pay themselves, and that is driving a lot of the increase, and we should emphasize that it makes straightforward analysis more complicated.)

    But we are concerned with this impact on real people. What does the rental market look like on the ground, especially for people with high rents? The Joint Center for Housing Studies of Harvard University just released their 2012 State of the Nation's Housing.

    (Aside: do we have too many houses? Study: "Given that the number of new homes added in 2002–11 was lower than in any other ten-year period since the early 1970s, it is difficult to argue that overbuilding is dragging down the housing market. Instead, the excess housing supply largely reflects the sharp slowdown in average annual household growth in 2007–11 to just 568,000—less than half the pace in the first half of the 2000s or even the 1.15 million averaged in the late 1990s." This household formation drop is due to the unemployment crisis and "a sharp drop in immigration." There are some good charts that explain this.)

    For the purposes of our rentier economy, I want to look at something they emphasize: people burdened by housing expenses. They find that, from 2007 to 2010, there was an increase of 2.3 million households paying more than half of their income for housing (what they define as "severly burdened"); that brings it to a total of 20.2 million. That is no doubt impacted by the unemployment crisis, but this is a longer-term trend too. There was an increase of 4.1 million people paying more than half their income for housing from 2001-2007:

    That 20.2 million severly burdened households are equal to 18 percent of all households. 27 percent of renters fall into this severly burdened category, with homeowners roughly half that number.

    Who falls into this category? Older people are vunerable, with a rise from 12 percent to 16 percent of 55-64 year olds falling into the severly burdened category from 2007 to 2010. Metropolian areas, especially core cities, are places where this is prevalent. It impacts poorer people the most, with over 60 percent of those making less than $15,000 in this category, and 30 percent of those making between $15 and $30 thousand dollars a year as well. It's negatively correlated with education, with those with a college degree having the lowest rates - so this isn't a matter of young college graduates overpaying to live in a nice city.

    Indeed It is worth noting that poor families with children paying more than fifty percent of their income on housing spend less on other essentials. "Among families with children in the bottom expenditure quartile, those with severe housing cost burdens spend about three-fifths as much on food, half as much on clothes, and two-fifths as much on healthcare as those living in affordable housing." No doubt some of these cost burdened households love living where they do, save on transportation and don't mind the spending; others are spending much less on food for their children because they need to spend so much to keep a roof over their heads.

    This is what it looks like when working people get squeezed by rents.


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