Interstate Protectionism and the Dormant Commerce Clause

All 50 states ban the direct sales of motor vehicles from manufacturers to consumers. The politics of this regrettable policy are clear: auto dealers are powerful political players in every state, while only a few states actually have manufacturing facilities. Banning direct manufacturer sales benefits dealers while hurting manufacturers and consumers.

State governments continue to insert themselves into the contractual relationships between car manufacturers and dealers, typically to the ostensible benefit of the latter. The New Hampshire Senate recently passed a bill regulating the terms and conditions of dealer contracts with manufacturers, prohibiting manufacturers from requiring dealers to alter the appearance of their showrooms, for instance. (Disturbingly, the state director of Americans for Prosperity in New Hampshire supports the bill.) The bill is actually unlikely to change any “balance of power” between automakers and auto dealers. Automakers will simply respond by vetting potential dealerships far more closely and perhaps charging higher franchise fees. The onus of this response is likely to fall more on new dealerships than on incumbents. So the real losers from the bill are going to be potential entrants into the car dealer industry and, of course, consumers.

These are not the only examples of “state protectionism,” in which state governments adopt laws meant to reduce competition from out-of-state businesses for the benefit of local incumbents. Some states still prohibit certain out-of-state direct-to-consumer wine shipments. Regulatory barriers can accomplish the same ends. States have widely varying regulations on insurance products, making regulatory compliance a huge barrier for a company trying to market a standard policy in multiple states. For a long time, major life insurance companies lobbied Congress to adopt a national life insurance regulatory regime, pre-empting state laws. They were opposed by local life insurance agents, for whom knowledge of and compliance with distinctive state regulations were a significant source of competitive advantage. In the end, no national legislation materialized, but Congress authorized the formation of an interstate compact, essentially a contract among consenting states that sets up a single insurance regulator. More than 40 states have joined the Interstate Insurance Product Regulation Commission, which regulates life insurance and annuities.

Such state protectionism potentially runs afoul of the so-called “dormant commerce clause” of the U.S. Constitution. The commerce clause allows Congress to regulate trade among the several states. By implication, then, states are presumptively prohibited from burdening interstate trade, unless authorized by Congress. Unfortunately, courts have been reluctant to scrutinize state economic regulations that have an essentially protectionist character, although especially blatant discrimination against out-of-state imports has been overturned.

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Pay Politicians More?

At Econlog, the very sharp Garett Jones makes an argument for paying politicians more:

There’s some evidence that when it comes to politician quality, you get what you pay for; Besley finds that higher pay for U.S. governors predicts governors with more experience in politics, and Ferraz and Finan look at Brazilian data and find a slower revolving door and better educated politicians in regions where politicians get better pay. But alas the egalitarian ethos in democracies makes it difficult to raise the pay of politicians.

But there’s a countervailing effect of high salaries for politicians: they increase careerism. With high salaries for politicians, you’re more likely to get candidates who give the voters what they want so that they can get (re-)elected. And one of the themes of Jones’s post is that the voters are ignorant and excessively egalitarian: we shouldn’t always give them what they want. We need politicians who are intelligent, informed, and public-spirited. High salaries get us more of the first two and less of the last.

What else does the evidence suggest? In the American states, governments that pay legislators more and generally have more professionalized legislatures have higher government spending. Neil Malhotra has found good evidence that the causal arrow goes from spending to professionalism rather than the other way around. However, his study, for all its sophistication, has some evidentiary holes, and I believe the last word has not been spoken. From my own observations of the highly deprofessionalized, low-paying ($100 a year) New Hampshire legislature, I would say that it attracts candidates who are ideologically motivated but not careerist. They deviate significantly from the views of the median voter, for good or ill.

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John Samples on the Filibuster

John Samples at the Cato Institute defends the filibuster:

Allowing majority rule to always trump minority interests would undercut the intent and structure of the Constitution, with its many protections of minorities from the tyranny of majorities.

As political scientist Gregory Koger has noted, the filibuster has been used to force Senate majorities to consider minority amendments. A majority has every reason to prevent such amendments; they often force senators in the majority to cast tough votes on controversial issues. By forcing amendments, however, the filibuster enhances accountability while expanding the scope of the debate.

While the House is organized along partisan lines, the Senate is much more individualist, partly because of the filibuster. Getting rid of the filibuster would increase the power of party leaders. Will senators represent their states better if they are more at the mercy of party leaders? In a polarized age, do we really need more partisanship in the Senate?

The current threat of filibusters requires the majority party to move toward the center, satisfying more voters. In a polarized time, the filibuster tends to make Senate actions more representative of the nation as a whole.

John is right that the filibuster makes the Senate a more consensual body and drags what the Senate passes toward the national median. He’s also right that the U.S. system of government is one of separation of powers and a large number of veto players, and the filibuster merely sharpens that feature of the system.

But all political institutions pose tradeoffs. In my last post on the topic, I noted that the filibuster has important harmful consequences for the federal judiciary and tax code. What John celebrates as the individualist character of the Senate also opens the door wider to parochial pork and lobbyist influence. If one Senator demands a “side payment” (in the form of favorable legislation) in exchange for allowing legislation to proceed smoothly, (s)he can often get it. That’s how the federal tax code became so byzantine. It’s how the “Cornhusker kickback” and “Louisiana purchase” originally got into Obamacare. Furthermore, stronger party leadership in the Senate would help clarify responsibility for policy. As it stands now, voters usually don’t know whom to blame for unpopular policies, and politicians are usually able to obfuscate responsibility because the filibuster complicates the voting record in the Senate (voting for the rule can often be more important than voting against final passage).

Note as well that when the House and Senate are controlled by different parties, as has often been the case, there is the same incentive for cross-party collaboration that John praises as part of the filibuster. The U.S. system already has many safeguards for minorities. Precisely for that reason, I see the filibuster as unnecessary. Since all institutions have tradeoffs, institutions that are “in a sort of middle” (with apologies to Edmund Burke) are usually more robust than those at either extreme of the majoritarian-consensus continuum.

Extreme status-quo bias might be justified if the status quo were rosy. But in the U.S., it’s not. Look at the economic freedom rankings. The U.S. is now #18 in the world, far behind countries like New Zealand, Canada, Australia, and even the United Kingdom — all English-speaking countries with parliamentary systems and few veto players. The countries with systems most like the U.S. system of separation of powers — Latin American countries like Brazil and Mexico — are well behind (Brazil is #105, Mexico is #91). The status quo in the U.S. is not very good, and we should tweak the system in favor of letting through more change.

Finally, I’d like to elaborate the bureaucracy problem more fully and illustrate its relevance to today. With the filibuster, it is difficult for legislators to constrain bureaucratic excesses, so long as 40 Senators are willing to protect the agency. Right now, the EPA is planning to regulate greenhouse gases as pollutants without explicit statutory authority. In many other instances, the EPA has overreached recently, even drawing a unanimous rebuke from the Supreme Court. But no matter how out-of-control the EPA gets, and no matter what the partisan composition of the Senate is, it will be very difficult for Congress to pass any legislation reining them in. Even if Republicans take the majority, they will be unable to prevent the EPA from regulating greenhouse gases with command-and-control mandates. A better alternative to command-and-control mandates would be a carbon tax or “clean” cap-and-trade (without the industry and consumer giveaways from the 2009 Waxman-Markey bill). But conservative Republicans will block that with all their might, no matter what the EPA does. And without that as an alternative, Democrats won’t go along with a reining in of the EPA. So instead we’re left with a Pareto-inferior outcome that no one really wants.

Now, given time, effort, and a modicum of good will, legislators can find ways around the filibuster and could probably even resolve the EPA issue mentioned above. But the filibuster increases the bargaining costs of reaching deals. In that way spatial models of legislation are imperfect. Pareto-improving deals don’t always happen when transaction costs are high enough. Look at the fiscal cliff. Look at the sequester. No one is happy with the way those are turning out. A robust political system needs safeguards for minorities, yes, but it also needs to keep bargaining costs manageable.

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End the Filibuster

Conservatives and liberals are both mad over the Senate’s mundane filibuster compromise. Liberals wanted the filibuster abolished or severely pared back, and conservatives didn’t want any reforms at all. Of course, the sides are exactly flipped from 2005, when it was Senate Republicans who threatened the “constitutional option.” Both sides are afflicted with short-termist thinking.

Abolishing the filibuster is the long-term desirable thing to do. Gaping holes in the federal judiciary and the arcane monstrosity that is the federal tax code owe their existence to the filibuster and the immense status-quo bias in the U.S. Congress. Sure, bad things would get through if the filibuster were abolished. Obamacare was only enacted because Dems briefly held a filibuster-proof majority in the Senate. But the country is now facing severe problems across the board, from taxation to debt to health care to virtually unsupervised regulatory agencies. We need radical, comprehensive policy surgery, not more insanely complex, achingly tentative, compromise procedures that allow the infections in the national political economy to fester further. Abolish the filibuster and, while we’re at it, the presidential veto (amend the Constitution).

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2011-2012 Not Good for the Regime Uncertainty Thesis

Bob Higgs has used the concept of “regime uncertainty” to explain why the Great Depression lasted so long. In brief, the argument is that FDR’s escalatingly anti-capitalist rhetoric in the mid- to late-1930s spooked investors, who were uncertain whether they would be allowed to enjoy the future fruits of their investments. Therefore, investment declined, provoking a slump in 1938 and generally prolonging the Depression.

Some have argued that the prolonged period of high unemployment and anemic growth the United States has experienced in the wake of the 2007-9 “Great Recession” is also due to regime uncertainty. They blame the Obama Administration and Democrats in Congress for fostering a regulatory environment hostile to business.

But if that explanation of poor growth in 2009-10 is right, how can it explain poor growth in 2011-12, after Republicans took the House of Representatives? Under divided government, regime uncertainty is nil. The 2011-12 Congress is on pace to be the least productive since 1947 in terms of passing laws. Libertarians say gridlock is good — well, we definitely have gridlock, so where are all the benefits?

Here’s the evidence:

The chart shows inflation-corrected personal income, excluding transfers from the government. Real personal income today still stands below its level at the start of 2008. If these figures were divided by population, they would look worse still. There has been a very weak recovery.

Why should we not blame House Republicans as much as Democrats and Obama for the bad economy?

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Briefly Noted

• Libertarianism.org – Finally! A non-technical, one-stop shop for the major ideas in the philosophical tradition of liberty. Cato Institute project.
• Governance Without a State: Policies and Politics in Areas of Limited Statehood (Columbia UP) – File under “order in anarchy.” Mostly European scholars giving somewhat different takes than you get with the UK-US “economics of anarchy” research. Nothing blindingly new to students of Olson, Ostrom, and Axelrod, and many of the contributions simply address political economy issues in developing countries, not “failed states” or “anarchies” strictly defined, but the chapters by Schuppert and Chojnacki & Branovic are worth reading.

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Boettke, Munger, Leeson, Horwitz, Coyne, Sen, Ostrom, & others on James Buchanan

The latest issue of Journal of Economic Behavior and Organization is dedicated to James Buchanan’s work. Some of the most provocative pieces here include Kliemt on Buchanan as Kantian, Leeson on why clubs have self-enforcing constitutions and governments do not, and Voigt on how to test hypotheses drawn from constitutional economics. Especially recommended for those interested in the overlap between Austrian economics and public choice.

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Do We Want Everyone Represented Equally?

Political scientist John Sides has contributed an interesting guest post to FiveThirtyEight, in which he reviews the evidence that social class influences the way Congresspeople vote. In particular, Congresspeople are unlikely to come from working-class backgrounds, and class seems to affect voting at the individual level. If Congress had the same mix of class backgrounds as the general American public, they would in general be slightly more liberal.

My first reaction was: I wonder how much of this reflects IQ. Intelligence makes people think like economists and also increases people’s income and probably shifts class background toward mentally intensive occupations.

My second reaction was: Assuming the result stands, do we want Congress to reflect the same background as the American public? Should everyone be represented equally? It’s not obvious to me that they ought to. I’m on record here as supporting limiting in some way the right of government employees and contractors to vote. Even if you don’t share my libertarian proclivities on public policy, however, a slightly upper-class-tilted public policy regime might be desirable for straightforward reasons of stability. In a pure democracy that is strictly responsive to the median voter, businesspeople and professionals might become alienated from democracy itself. That may sound like a bit of a stretch for the United States, but not for many countries around the world where upper-class opposition to democracy has entrenched electoral fraud, clientelism, or military supervision of civilian authority.

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Interposition: Part Nine: The Hartford Convention

Few in power find it convenient to notice inconsistencies in their own conduct. Alas, but President Madison was no exception. Federalism and decentralization exist precisely because free constitutions should not depend on the good graces of those in office, but on the checks necessary to harry them back under the law.

Seeking the financial means to carry on his war, Madison did not appreciate New England’s opposition to his measures or her refusal to lend. As the enemy bore down from the north at various points along the Canadian border, Madison attempted to impose conditions on the New England militias, not trusting them, as he did the other states, to staff and command their own forces.

In these efforts, the fourth president was roundly rebuffed by the governors and legislatures of Massachusetts, Rhode Island and Connecticut. They correctly pointed out that the Constitution reserved to each state the right of officering her state militias: The president could certainly call those units into service according to the constitutional powers that authorized Congress to declare war, but he could not reorganize those units without a state’s permission. Unable to get his way, Madison refused to mobilize New England’s forces and subsequently refused to pay any expenses for her defense.

Governor Caleb Strong of Massachusetts organized and raised his own force of some 10,000 men at a cost of 1 million dollars, which was a considerable sum in that day. Facing such staggering costs and outraged by what they considered to be the unconstitutional and dangerous manner in which their region had been treated, the New England states elected to protest in the same spirit as they had done against the embargo, but this time they went a step further: Coordinated state action.

Under the inspiration of Harrison Gray Otis and Theodore Dwight (the brother of Timothy Dwight of Yale), Connecticut, Rhode Island, Massachusetts, and several counties of New Hampshire and Vermont sent representatives to meet in Hartford Connecticut between December 15, 1814 and January 4, 1815. There they formed a list of grievances and a call for constitutional amendments, concluding with a threat to organize another convention should these proposals not be taken up by the other states in the Union.

The men who attended this gathering tried to moderate the more extreme elements calling for secession and outright resistance to the national government (see Justin Winsor, Narrative and Critical History of America, vol. VII, Houghton Mifflin, 1888, p. 321 and notes) but the prospect of a convention sent shivers through the administration. It is not difficult to see why.

In “A Short Account of the Hartford Convention to which is Added an Attested Copy of the Secret Journal of that Body” (1823), Theodore Lyman, noted that Massachusetts was quite open about her aims, and “the sense of her citizens was at that time well known, and in relation to the Hartford Convention, she adopted without delay that course of conduct, of which an eminent example had been given less than half a century before, and which, in this juncture of affairs, was especially judicious, from the vast magnitude of the subject and occasion.” (p.8) That example was Madison’s own call at the end of the Annapolis Convention for the convention that followed in Philadelphia, which of course ultimately put an end to the Articles of Confederation.

When the Hartford Convention got down to business on its second day, it considered, according to the Attested Copy of the Secret Journal, the two constitutional grounds of New England’s grievances just mentioned: “The [unconstitutional] powers claimed by the executive of the United States, to determine, conclusively, in respect to calling out the militia of the States into the service of the United States; and the dividing the United States into military districts with an officer of the army in each thereof, with discretionary authority from the executive of the United States, to call for the militia to be under the command of such officer.”

The second grievance followed immediately after: “The refusal of the executive of the United States to supply, or pay the militia of certain States…on the grounds of their not having been called out under the authority of the United States, or not having been…put under the command of the commander over the military district.” These two grievances then formed the basis of the final and more damning constitutional conclusion that the national government had failed to meet its obligation as stated in the preamble “to provide for the common defense.”

In their protest the members stood on solid textual grounds. It was true that Section Eight of the First Article gave Congress the power “To provide for organizing, arming, and disciplining, the Militia, and for governing such part of them as may be employed in the Service of the United States,” but it specifically reserved “to the states respectively the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress.”

Did this “prescribed” discipline give Madison the right to reorganize the New England militias? It might have, but only if Congress had specifically formed such a policy, and had done so equally for all parts of the Union. The fact that President Madison asserted this as a matter of executive authority, and the fact that he applied that policy unequally to some of the states and not to all of them, violated both the spirit and the letter of the fundamental law. With these arguments before them, the delegates proposed their Constitutional remedies.

They called for consideration on the part of the states for amendments that would permit the state legislatures “some arrangement whereby the States may be enable[d] to retain a portion of the taxes levied by Congress, for purposes of self defence (sic), and for reimbursement of expenses already incurred, on account of the United States.” They then proceeded to request further consideration be given to certain other constitutional issues: To restrict Congress’ power to declare war; to restrain its power “to make new States, and admit them into this Union; to limit Congress’ power to impose embargoes and restrict commerce; to prohibit a president from the same state serving two consecutive terms; and finally, and perhaps most ominously of all, to eliminate the 3/5ths provisions of the Constitution “respecting slave representation, and slave taxation.”

This last provision underscored a growing cultural and political divide already evident between the northern and southern states. New Englanders had always felt aggrieved to some degree by the so-called 3/5ths compromises in the Philadelphia Convention. Already by this time, they saw it as a principal driver of western expansion, and the Southern states made little bones about their desire to move the peculiar institution westward, and to form an alliance with that region in opposition to New England.

Thus the Hartford delegates sought restrictions on admitting new states as well as the elimination of the South’s use of slaves in calculating her population numbers. It is interesting to note that at this point in time, the South’s rising star, J. C. Calhoun of South Carolina, was a strong nationalist defender of the War of 1812 and a proponent of a new national bank so that the general government could more easily finance such military ventures in the future. The irony of ironies is that this situation was about to change yet again.

As reported by Theodore Dwight, the Secretary of the Hartford Convention, in his later history of that meeting, the timing of the delegates’ report to Washington could not have been worse. It arrived just as news from England of the War’s end came along with the report of Andrew Jackson’s victory in New Orleans. While the war had not gone so well for America in general, the popular sense created by this juncture produced a patriotic fervor that was ill disposed to consider of the resolves of the Hartford delegates.

The commission attempted to quietly retire back to New England, but the popular reaction, especially among Madison’s Republican Party was to revile its proceedings as radical secessionism, and the reputation of that convention has labored under such a misapprehension ever since.

Far from secessionism, however, the Hartford Convention presented yet another means of interposition through coordinated state action, and to the degree that such coordination gathered more sustained attention (even if in the negative) from the other states, to that degree it succeeded. With the war’s end, Hartford’s issues became moot, but one could easily imagine what might have developed had the exigencies of war persisted.

The next stage of development in the ideas of interposition, however, would raise the stake higher, actually attempting what Jefferson had contemplated in the Kentucky Resolves: Nullification. Interestingly, the author of this approach was our leading nationalist of the 1810s. Calhoun had been a student of Theodore Dwight’s brother about a decade earlier at Yale. Timothy Dwight shared his brothers’ attachment to the reserved rights and powers of the states. Calhoun had resisted such thinking as his student, but when the issue of tariffs touched his own state’s interests in the next decade, he began to avail himself of Dwight’s understanding, coming to a deeper appreciation of the need to constitutionally restrain centralized power, but he did so with an interesting and novel twist that would have a profound impact on the popular perception of state’s rights.

And Calhoun’s solution would prove perhaps the most difficult and cumbersome of all…

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Stability, Peace, and Poverty

The last issue of The Economist has a feature on “middle-income fragile and failed states” (MIFFs). It compares the World Bank list of countries by development level (high, middle, and low) to the OECD list of “fragile and failed states,” finding that fragile and failed states are by no means exclusively low-income:

[S]ome 15 of the 56 countries on the bank’s lower-middle income list (ie, over a quarter) also appear on the list of fragile and failed states. . . They range from Côte d’Ivoire to Yemen; the most important of them are Pakistan and Nigeria. State failure, it appears, does not necessarily go hand in hand with other human woes, such as poverty.

The article then bemoans the fact that because of their lack of absolute destitution, MIFFs often do not qualify for as much foreign aid. The unstated premise, of course, is that more foreign aid would do them good – but where is the evidence for such a claim? The article notes that the list of fragile and failed states includes both countries in “total collapse (Somalia, Chad) and those which merely contain large ungoverned spaces.”

Should governments and international institutions be aiming at making these fragile states stronger? The Economist assumes so. But might the phenomenon of middle-income fragile states instead tell us something about the comparative irrelevance of state strength, as such, for bringing people out of poverty? Admittedly, the list of MIFFs includes some countries that are non-poor purely by virtue of large mineral deposits (Nigeria, Equatorial Guinea), and these countries often feature yawning income gaps between the rent-seeking rich and the powerless destitute. But when it comes to MIFFs like Cameroon, Djibouti, Kiribati, Pakistan, Papua New Guinea, and Solomon Islands – would they really be better off if their states were more empowered? Or have the “large ungoverned spaces” served them well? As Ben Powell and Peter Leeson stress in their work on Somalia, the only way to answer those questions is by considering the alternatives that are realistically available. Liberal constitutionalism is not coming to Pakistan. So the real question is – do we want Pakistan to have a dysfunctional, powerful state or a dysfunctional, weak one? It’s not an easy question to answer, and I wish complacent journalists and aid agencies would acknowledge that.

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Do Politicians Regulate When They Can’t Spend?

Noel Johnson, Matt Mitchell, and Steve Yamarik have a new working paper answering that question in the affirmative. They look at state fiscal and regulatory policies and find that Democrats generally like to increase taxes and spending when in control of state houses and Republicans do the reverse. But when states have tough balanced-budget requirements called “no-carry rules,” Democrats and Republicans don’t differ much on fiscal policy. Instead they try to appeal to their constituencies by pursuing regulatory policies – in general, Democrats increasing regulation and Republicans cutting it. As the paper’s still in the working draft stage, they are looking for comments on it.

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Interposition: Part Eight: Federalism, Finance and The War of 1812

When tensions with England finally began to degenerate into violent altercations, first on the western frontier in such places as Tippecanoe and later along the Great Lakes, the Madison administration decided the time had come to vindicate America’s claims of offended sovereignty. Unsurprisingly, these claims also happened to coincide with popular desires to expand into the Old Northwest and Canada. Those particular voices were especially powerful in the mid Atlantic and southern states. Two of the leading voices of those regions, Henry Clay and J.C. Calhoun were united at this point in their careers, generally supporting more vigorous forms of nationalism at home and abroad.

But Mr. Madison had let the charter of the first Bank of the United States expire in 1811, and when he turned to finance his war he had of necessity to turn to state banking institutions. These entities were comprised of various private and state banks who were generally quite willing to buy American treasury securities. There was one region, however, that was not quite so willing: the New England states and the banks that operated under their approval.

Already rocked by years of embargo, New Englanders were poised to suffer even more outrages in open war. Popular sentiment ran high against the conflict, and when the treasury presented its notes for sale to New England banks they received a cool reception. The vast majority of such paper was consequently sold to the south and west. Indeed, needing to purchase supplies in the north, the national government found this a particularly galling impediment. To remedy the situation, Madison’s administration not only borrowed from existing banks in the mid-Atlantic states, it actively promoted new ones, even over the existing laws of those states that had tended to restrict private unchartered banks.

From 1811 to 1815 the number of banks more than doubled, from 117 to 247, 35 of which were unincorporated. The result was a massive increase in circulating paper money–nearly three times the amount in circulation at the start of the war. Treasury certificates were used as, and encouraged to be considered backing for notes in the same fashion as gold or silver. But one difficulty was not anticipated. When the District of Columbia was burned by British marines on August 24, 1814, it quickly became apparent that certificates on the U.S. government might not be such a sound investment.

Runs the banks that very month demonstrated the insolvency of most of the new institutions, and in opposition to various state laws, the national government encouraged the mid-Atlantic and southern states to ignore or restrict bankruptcy proceedings against their offending banks, but allowed those very institutions to pursue such proceedings against their own debtors. All this was done, no less, while they continued to make new loans, adding yet even more to the already general inflation.

Only one region did not experience suspension of payments or bank runs: New England. For once in over six years, the New England states could boast a small economic indicator in their favor. In Federalist 10, Madison had argued that federalism might serve to insulate local evils from becoming universal, national ones. In this case, the evils of expansionism had been halted at the gates of Massachusetts, and New England’s representatives left little doubt about their sentiments in this regard.

In words that would later come back to him, a young Daniel Webster, then a representative of New Hampshire, declared in Congress on December 9, 1814, that the “operation of measures unconstitutional and illegal ought to be prevented by a resort to other measures which are both constitutional and legal. It will be the solemn duty of the State Governments to protect their own authority over their own militia, and to interpose between their citizens and arbitrary power. These are among the objects for which the State Governments exist, and their highest obligations bind them to the preservation of their own rights and the liberties of their people.”

Would it be too much to suspect that Webster both knew and approved of the New York statement of ratification? But even if he hadn’t, and that seems dubious, the words demonstrate just how deeply the sense of the states as checks to central power was engrained in the American mind. At this point in time, Webster was no Jeffersonian. He was a New England Federalist, and the home states were listening. On to Hartford.

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Multiple Voting in Elections

At a recent Institute for Humane Studies conference, I had a bit of a debate with Bryan Caplan about the potential popularity of this proposal. In conjunction with this poll, which admittedly suffers from serious self-selection bias, I have another poll running on a non-political site. We’ll check back in a few days and see what the results show.

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Interposition: Part Seven: The Embargo and Noncooperation

With the war in Europe between France and England intensifying, Americans found their rights as neutral traders regularly violated by both French and British navies, and French and British port restrictions further limited American opportunities for commerce. To make matters worse, on numerous occasions, English vessels had boarded American ships and “impressed” many of their crews into service as if they were British subjects. Such disregard for American sovereignty and rights was taken hard by the public, but America’s naval capacities were far from adequate to enforce a due respect on the high seas. Yet doing nothing was not a popular option.

President Jefferson attempted to draw a lesson from our colonial past and impose an embargo of American trade. The hope was that such an embargo would inconvenience European commerce to such a degree as to bring the powers, especially Britain, to that level of respect which American arms were insufficient to obtain. In 1807, the Embargo Act was imposed, interdicting all vessels from entering or exiting American ports. Trade was the life blood of New England, however, and the Embargo hit them especially hard. As weeks moved to months and months to a year, the suffering in the port cities became nearly unbearable. Numerous calls for lifting the interdiction were heard, but none of the offending powers seemed even remotely ready to bargain. Unwilling to surrender the point of honor or to risk outright war, Jefferson’s administration remained steadfast in its policy.

At a certain point, the states began to question not only the efficacy of the measure, but its justice. Should not the risks of trade be borne by the traders themselves? Why a general restriction? If families and communities are ruined, is this not an indication of a policy gone too far? Indeed, so far that it might conflict with a vital principle of constitutional government? The national authority was to engage in defensive action in support of the states and their communities, not in their strangulation. If it could not live up to its military obligations, this was no excuse for an imposition of a total ban on trade, a power not contemplated in the original design.

In the earliest resolutions of Massachusetts, Connecticut, and Rhode Island the hue and cry was again heard. Massachusetts’ legislature, as Thomas Woods noted in his collection of sources, sought only formal political means, and counseled patience on the part of its citizenry as it pursued these avenues of redress. Rhode Island observed that it was “the duty of this general Assembly, while cautious not to infringe upon the constitution and delegated powers and rights of the General Government, to be vigilant in guarding from usurpation and violation, those powers and rights which the good people of this state have expressly reserved to themselves…” Here were the states as Sentinels calling out their warning.

But Connecticut, first through its governor and then its legislature went further still, openly and officially “declining to designate persons to carry into effect, by the aid of military power, the act of the United States, enforcing the Embargo.” And “that the persons holding executive offices under this state, are restrained by the duties which they owe this State, from affording any official aid or cooperation in the execution of the act aforesaid.”

This action went the further step of embracing the idea of non-cooperation, and its precedent went back to colonial legislatures that had refused to cooperate with the enforcement of the Imperial Stamp Act. No force would be applied directly to interdicting federal officials, but no cooperation would be accorded them either. They could do their work on their own, but in the absence of active assistance or support from state institutions, they would find that task far more difficult. No power of the federal government could compel action on the part of the states in this regard.

And here New England’s civil society operated in yet a further way to exert force against the centralized exercise of power, again, much like what had happened in earlier colonial protests. While not directly engaged in administering smuggling, the governments of New England gave tacit affirmation of private actions through their resolutions. New England’s merchants were long practiced in the arts of running goods around imperial restrictions. Now they would do the same with respect to national ones. And the general government found its resources stretched to the breaking point.

Remarkably, Jefferson himself later reflected on this opposition of local authorities. He recalled this episode as a powerful illustration of why local governance is so critically important to the maintenance of a free society! No longer president, he could reflect with some approval on the nature of the opposition he had then faced.

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Is There Such a Thing as a “Libertarian” Electoral System?

In a few hours, polls open in the United Kingdom for local and devolved elections and for a referendum on moving to a new electoral system, Instant Runoff Voting, which Brits and Aussies insist on calling, undescriptively, “alternative vote” (AV). This referendum came about as a demand of the Liberal Democrats, who held the balance of power in the hung parliament elected last year. The Conservatives agreed to hold the referendum but have campaigned against it. The Lib Dems, for their part, prefer proportional representation with multi-member constituencies, but decided AV was better than nothing. (Lib Dem leader and deputy prime minister Nick Clegg is on record as having called AV a “miserable little compromise.”) The Labour Party is split on the reform.

Indeed, AV has many flaws. Compared to the plurality, single-member-district system used in the US, UK, and Canada currently (sometimes called, somewhat inaccurately, “first past the post”), it should at least get rid of the wasted vote problem, in which voters decide to vote for the lesser of two evils because their favored candidate cannot win. But it does so at the price of removing small third parties’ blackmail power. For instance, in the US a Libertarian would have no chance of winning, arguably even if AV were the electoral system. But at least under the current system, a Libertarian candidate can take away votes from a Republican (usually, but not always, Libertarians siphon more votes from Republicans than Democrats) and cause the Republican to lose a tight race. Therefore, Republicans at least occasionally have to pay lip service to Libertarian causes to keep those votes.

Within the UK context, AV would essentially mean a “permanent progressive majority” for the foreseeable future, since

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Interposition: Part Four: New York and the First Act of Interposition

New York was Hamilton’s great project. So closely divided was the state, that at various moments, he despaired of its coming into the union.

At one point the Antifederalists offered a compromise. They would support a conditional ratification dependent on the passage of certain key amendments, including the all important construction of delegated and reserved powers, or what eventually would become the Tenth Amendment. Hamilton wrote Madison for his opinion of the proposed compromise, and the response was unyielding: New York could “not be received on that plan.” It must be, Madison elaborated, “an adoption in toto, and forever.” Hamilton read the letter aloud to the Convention and it is reputed to have steeled the nerves of the Federalists for resistance. Rather than read, “on condition,” New York’s statement of ratification was amended to say, “in confidence.” The statement ran thus:

“Under these impressions, and declaring that the rights aforesaid cannot be abridged or violated, and that the explanations aforesaid are consistent with the said Constitution, and in confidence that the amendments which shall have been proposed to the said Constitution will receive an early and mature consideration, — We, the said delegates, in the name and in the behalf of the people of the state of New York, do, by these presents, assent to and ratify the said Constitution.” (Emphasis added)

In his America’s Constitution, A Biography (2005) p. 38, Ahkil Reed Amar concludes that this wording cinched the case against conditional ratification based upon powers reserved to the people of the states. Amar’s particular aim was to put any idea of legal secession to rest, but he also went on to implicate other forms of interposition as well.

Not so fast.

Amar stopped his reading at a point altogether too convenient for his thesis. Here is what the rest of the paragraph said:

“In full confidence, nevertheless, that, until a convention shall be called and convened for proposing amendments to the said Constitution, the militia of this state will not be continued in service out of this state for a longer term than six weeks, without the consent of the legislature thereof; that the Congress will not make or alter any regulation in this state, respecting the times, places, and manner, of holding elections for senators or representatives, unless the legislature of this state shall neglect or refuse to make laws or regulations for the purpose, or from any circumstance be incapable of making the same; and that, in those cases, such power will only be exercised until the legislature of this state shall make provision in the premises; that no excise will be imposed on any article of the growth, production, or manufacture of the United States, or any of them, within this state, ardent spirits excepted; and the Congress will not lay direct taxes within this state, but when the moneys arising from the impost and excise shall be insufficient for the public exigencies, nor then, until Congress shall first have made a requisition upon this state to assess, levy, and pay, the amount of such requisition, made agreeably to the census fixed in the said Constitution, in such way and manner as the legislature of this state shall judge best; but that in such case, if the state shall neglect or refuse to pay its proportion, pursuant to such requisition, then the Congress may assess and levy this state’s proportion, together with interest, at the rate of six per centum per annum, from the time at which the same was required to be paid.”

Here the representatives of the people of the state of New York fairly put the new government on notice in no uncertain terms that they reserved certain powers to their own legislature.

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Are Americans Underrepresented?

One overlooked electoral reform to decrease the power of special interests in the U.S. political process would be to expand the size of the U.S. House quite significantly, so that legislators cater to much smaller electorates. (More radically, state partition could also be promoted to expand the size of the Senate.) Accordingly, I thought today’s Daily Chart from the Economist was telling:

Of the world’s 22 most populous countries, the U.S. has the second-most people per national legislator.

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Interposition:Part Two: Publius and the Federal Check to National Power

Among the defenders of the Constitution, a great deal was said about the states as a check to the power of the national government that informed the first ideas about interposition. 

Madison’s contention in Federalist 39 is well-known. Our union was to be “partly federal and partly national.” Among the premier federal attributes were such provisions as the equal representation of the states in the Senate by senators appointed through state legislatures, portions of the Electoral College, portions of the amendment process, and the very means of ratification through conventions of the sovereign peoples of the various states.

This last attribute is often not given the attention that is due to it, but James Madison made this point repeatedly in other venues as well. He noted it in various letters and in the state ratification convention in Virginia. It is a major part of the argument against the notion put forward by his critics that the Constitution would establish a consolidating government.

Here is what Madison’s Publius said: “[T]his assent and ratification is to be given by the people, not as individuals composing one entire nation, but as composing the distinct and independent states to which they respectively belong. It is to be the assent and ratification of the several states, derived from the supreme authority in each state…the authority of the people themselves. The act, therefore, establishing the constitution, will not be a national, but a federal act.”

This point was repeated again in Virginia’s ratifying convention. The reason was to assure the Constitution’s critics that the sovereign power of the people of the states was not being usurped. If a simple national majority, he reasoned, were all that was required to form the union, then the majority of all the people of America could bind Virginia or Rhode Island even if they had voted in the negative. This was not the case he assured his opponents.

But beyond ratification, did this conception of sovereign power have any other constitutional implications for the states? What exactly is the relationship between the people of the states and the national government? What if there is a dispute between them? This is where Publius becomes more ambiguous, and it is from here that much of the controversy concerning Madison himself originates.

In the same essay, Madison went on to argue that national supremacy meant that a national tribunal must determine the legitimacy of national laws, at least “so long as they are objects of lawful government.” Setting aside for a moment what is meant by “lawful,” he asserted, “It is true, that in controversies relating to the boundary between the two jurisdictions [state and national], the tribunal which is ultimately to decide is to be established under the general government.” This is necessary, he believed in order “to prevent an appeal to the sword, and a dissolution of the compact.” Really?

Where then resides the hoped for check to centralization? Here it rests on the impartiality of the judges of the court, for whom “all the usual and most effectual precautions are taken to secure this impartiality.” The difficulty is that the very contest presumes an illegality. A state would not contest a national act unless it thought the act to be unlawful; that is to say, not permitted by the Constitution. Is it then reasonable to conclude that they will rely upon the judgment of a national court?

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Interposition: Part One: An Essential Purpose of the States

A rumble can be heard emanating from assemblies and governor’s mansions across these fruited plains. It is a sound reminiscent of by-gone days that echo down through centuries of constitutional thought. Prompted by everything from unfunded Congressional mandates to the new omnibus healthcare bill, (See here and here) these reverberations strike cords of distant legal memory that are, for most of us, only imperfectly recalled.

For many, talk of state’s rights, interposition, and even nullification brings forth unsavory recollections of illiberal and tyrannical state and local institutions of chattel slavery, Jim Crow and the color bar. That association is understandable given the prevailing interpretation presented in classrooms, but very unfortunate if we stop there.

One of the most essential roles of states in any federal system is to act as counterweights to centralization. For this reason all power is not assigned to the national authority. In the original constitutional design of the American federation, what was not given was reserved to the states or to the people thereof, and it is from this perspective that the check to central power, the bite of Federalism, was to be derived in its most essential forms.

The idea of states as checks to national concentration pushes the bounds of constitutionalism, but it was understood that however approached, and by whatever means undertaken, this role was not to be pursued for light or transient reasons.

The idea of interposition took many forms. It could embrace official expressions of disapproval by the legislature or governor of a state. It might entail simple, non-cooperation with federal authorities, such as a refusal to enforce a federal law, or acknowledge a mandate. Or, it might take the form of an unofficial understanding on the part of local groups and institutions, usually operating under the tacit approval of the state, not to comply with federal measures.  In its most extreme form, interposition could assert the right to interdict the enforcement of an offending provision through an act of outright nullification. How far a state might go in pursuit of this last line of interposing itself is a question of some delicacy.

Preventing by official policy or action the enforcement of a federal measure stresses the limits of constitutionality. If either of the contending powers moves from peaceful toleration or acquiescence to violence, the episode takes us from the realm of the legal to the revolutionary. For this reason, nullification has always been the most dangerous and the most controversial form of interposition.

The basis for the authority of all these options, however, remains rooted in the constitutional ideal itself. It was not the product of a mean or unnecessary political expediency. On the contrary, the idea of interposition was an attempt to sort out a vital constitutional principle and was first articulated, not to defend slavery, but to support free speech, free trade, peace and the liberty of fugitive slaves.

Federalism in all its various forms can be an instrument for good as well as ill. Like any political order, its quality is determined by the people who compose it. To really understand why the states are again making noises of interposition, we need to understand something of the history of our federal structure of government. The reason new life is breathed into old thoughts has everything to do with what rests at the center of our political existence.

Why do we have states? Lincoln made the claim that the Union preceded the states. What he could not say, however, was that the federal government as constituted in 1787 preceded them, because clearly it had not. The main thrust of Lincoln’s reasoning was that the Revolution and the move for independence began as a united effort. The implications of that claim are still debated and one need only recall the exchanges between Mel Bradford and Harry Jaffa on this point. What is certain, however, is that the federal government did not create the states. What then is the role of states in our federal order?

The authors and advocates of the Constitution, whatever they may have thought privately, were not free to assert any desired construction, but had to contend for the support of the peoples of their various former colonies. They needed to address directly the concerns of liberty that had animated the move to independence, and more specifically they had to allay the fears raised by their critics, the Antifederalists. In this way, whatever hidden motives might have existed, it is the stated intentions of the Federalist advocates that must bear legal weight.

Among the primary objects of the Revolution was to secure the liberty of the colonies to determine the disposition of their own properties, free from arbitrary imperial commands. American anxieties of the late eighteenth century grew in direct proportion to the growth of imperial designs by King and Parliament.

The Antifederalists are often called the old revolutionaries as much for their actual age as for their adherence to older ideas about colonial liberties. The list of such advocates is long and venerable: Brutus, Federal Farmer, Cato and Centinel. My favorite, however, is one not so generally recognized, but to my mind, gave the reasons for decentralization and the existence of states most succinctly and eloquently: Maryland Farmer. He took a long range perspective based on some very ancient precedents.

Edward Gibbon’s first volume of The Decline and Fall of the Roman Empire came out in 1776, and like other important works of its time, Americans were eager to read it. By the time of the Constitution, Maryland Farmer had imbibed its central lessons and recognized how closely its themes complimented American experience. He disputed the charge often heard that the states, if not united under one supreme head, would soon be at each others throats. No, he said, citing Gibbon, real terror is to be found where there is no hope of escape, no exit.

Anticipating the role of competing jurisdictions, Maryland Farmer cautioned against rejecting the Articles of Confederation, observing that “In small independent States contiguous to each other, the people run away and leave despotism to wreak its vengeance on itself; and thus it is that moderation becomes with them the law of self preservation.”

The referenced passages of Gibbon illustrated that understanding nicely. Noting the ease with which a person onerous to power could escape in the Europe of his day to the safety of a rival state, Gibbon pointed to the very different reality of the ancient empire: Rome, he observed, came to fill the world, “and when that empire fell into the hands of a single person, the world became a safe and dreary prison for his enemies.”

Maryland Farmer took that point to heart and asked Americans, who had just fought a war to resist the imperial designs of England, was it all simply to consolidate power in your own hands? He hoped not.

So strong were these sentiments in favor of decentralization, Federalists had no choice but to address them. Some of the most eloquent passages of the Federalist Papers were set out with the explicit aim of refuting the consolidationist claims of the nature of the Constitution. Indeed, more than one of those pieces by Publius was penned by that arch purveyor of centralized authority himself, Alexander Hamilton. In the next part we will examine how Publius attempted to negotiate the question of a federal check to national power, and look at the roots of interposition as they were presented by the supporters of the Constitution.

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Interposition: The Teeth of Federalism: Introduction

The first of a series will begin tomorrow, the Ides of March (the 15^th), an appropriate time to initiate an investigation of interposition and federalism in America. On that date in 44 B.C., Julius Caesar was slain for his offences against the Roman Republic. It was a futile act of desperation. The empire was not defeated, but the event remained a symbol for millennia of resistance to tyranny and concentrated power. This series will attempt to investigate the spirit of that resistance as it relates to our federal system of states as counter or makeweights to centralization through the instrument of interposition: what is its history and constitutional forms, and whither should it go now?

 In a recent spate of books, attention has been given to the place of the states in our federal union. More particularly, the subject of nullification has been the focus of Thomas Woods’ latest works, one of which is specifically by that name. In that book, Woods delves into certain key aspects of America’s constitutional history, but quickly focuses on what is a fairly specific subset of a much larger category of constitutional ideas embraced by the term, interposition.

Interposition is where a state or other organs of local governance and/or civil society attempt to intercede between the people and an act of the federal government that is deemed unjust or unconstitutional. This can take many forms, moving from the merely declaratory and/or uncooperative to the more extreme modes of obstruction or even interdiction. Nullification occupies the last of these categories. It is the outer edge of the continuum. It attempts to provide legal grounding for a state to directly obstruct enforcement of an offending federal measure, and is of all the instruments available to a state or people, the most dangerous and problematic.

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Arab States Cursed by Oil?

At Hit & Run, Ron Bailey expresses a surprisingly confident explanation of Arab countries’ economic and political woes: oil. Yes, the resource curse is back in the news. But as longtime readers of Pileus know, recent research suggests that the resource curse may be a myth. To the extent that oil wealth explains poor economic performance, it only seems to do so contingent on other factors, such as the ownership of the resources. State oil companies are notorious failures, while private ownership of the means of extraction is associated with better growth.

Bailey points out that Saudi Arabia’s GDP is lower today than it was in 1981. True enough. But it doesn’t follow that oil has hurt Saudi Arabia’s economy. Oil prices were very high in 1981 but declined substantially in 2009 and 2010. Of course petrostates have lower GDP when oil prices are low. Just think about it for a moment: if Saudi Arabia had no oil, would it be even half as wealthy as it is? Of course not! Oil is no economic curse to Saudi Arabia. But might it be a political curse? Again, once the counterfactual is properly conceptualized, it seems unlikely. If Saudi Arabia were simply just another low-income, intensely religious country in southwest Asia, the predicted probability that the country would be democratic or at all liberal (in the Freedom House sense) would be tiny.

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Will New Hampshire Be the First State to Abolish First-Past-the-Post?

A bill to adopt approval voting has been filed in the N.H. House, and one of the co-sponsors is a member of the relevant committee. The bill would establish approval voting for all state offices and presidential primaries. Approval voting is an electoral system for single-winner elections that allows voters to cast not more than one vote for as many candidates as they like and selects the top vote-getter. Steven Brams and other political scientists have endorsed the system as an alternative to plurality rule (or “first-past-the-post”) because a) approval voting is more likely than plurality to select a Condorcet winner when there is one, b) approval voting tends to favor candidates with even temperament and broad ideological appeal, and c) approval voting is more likely than plurality to permit victories by independent and third-party candidates. (However, approval voting is much less likely to ensure representation for political minorities than is a multi-winner, proportional electoral system.) I see approval voting as a good option for inevitably single-winner elections like gubernatorial races and possibly also when it is desirable to keep districts very small and “close to home,” as the massive N.H. House of Representatives does. However, the N.H. Senate has highly artificial districts, and statewide party-list proportional representation seems like a more logical system for that body. Nevertheless, all efforts at bringing electoral reform to the fore of debate are to be welcomed.

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