Friday, April 28, 2017

Greece on Collision Course With Creditors

Greece is in the familiar position of needing more money. It must come up with about 7 billion euros ($7.5 billion) in July 2017 for debt payments on loans from three previous bailouts. If it defaults on these payments, it will be out of the European Union.

Since the three previous bailouts have failed to provide Greece with a sustainable economy, there is great reluctance by the previous creditors to provide a fourth bailout. These creditors include the International Monetary Fund, the European Central Bank, and various European countries

Currently operating under the third bailout, which runs into 2018, Greece was expecting to receive enough of that remaining bailout money to meet its obligations for the July payments. However, the trio of inspectors who periodically review Greece's performance, found that performance unsatisfactory, which halted the payments to Greece. The IMF has taken the position that it will not participate in any further funding for Greece until there are economic reforms, particularly regarding pensions, labor laws, and broadening the tax base, that will allow Greece to reduce its debt to sustainable levels. The IMF's analysis concludes Greece's debt-to-GPD ratio, currently 179 %, is “highly unsustainable” and without the economic restructuring it recommends, that ratio will balloon to 275 % by 2060. By comparison, the European Union requires its nations to have a debt-to-gross domestic product ratio of no more than 60 percent. Economist generally consider the limit of sustainable debt to be around 80 percent.

In 2016 a paper by the European Stability Mechanism, which manages the bailout program, proposed to ease Greece's debt load by extending some maturities and locking interest rates on some loans as protection against interest rate hikes. Even so, an official ESM paper projects Greece's debt-to-GDP will be 104.9 % percent in 2060, assuming Greece fully implements the IMF-recommended reform measures —probably an extravagant expectation given its performance under previous bailouts. After 43 years Greece will still not have a sustainable economy.

Germany, by far the largest economy in the EU, was the largest contributor to the three prior Greece bailouts. But Germany has stated it will not provide further funds to Greece unless the IMF also agrees to resume lending to Greece. Moreover, Germany and the Netherlands have promised their parliaments that they won't ask for more money for Greece unless the IMF participates, too.
 
In 2015 Greece pledged to achieve a primary surplus of 3.5 % of GDP—before debt payments—in 2018 and for an unspecified number of years in the future, but the current track for Greece is for a primary surplus of just 1.5 % . Moreover, the IMF believes a primary surplus of 3.5% is wholly implausible. Few countries have ever managed such a feat—and none with such a weak political system as Greece.

Because the enormous size of Greece's debt is such an obstacle to achieving sustainability, it has been suggested that the nation needs to have some debt reduction from its creditors. That is even more unlikely than another bailout. In 2012, private investors “voluntarily” accepted losses on Greek bonds that wiped 107 billion euros off the country's debt. The public sector followed with a reduction of the economic value of the loans. No country in the world has ever received greater debt reduction, but  Greece still faces a debt problem.

Greece has had many of these crises but has always managed to survive by somehow pulling a rabbit out of a hat. Compromises were made, terms were adjusted, political leaders were changed, and when all else seemed to fail, another bailout arrived in the nick of time. But now there is little room for any of the participants to maneuver. The IMF rules state it cannot make loans to countries whose economies are unsustainable or unlikely to attain sustainability in a reasonable period. So, after proclaiming Greece's debt is “highly unsustainable” and getting worse, how can it justify another IMF loan to it? Moreover, having put its name on two failed programs, it is leery of further damaging its institutional credibility by doing so again.

Chancellor Merkel's promise not to participate in further help to Greece unless the IMF is also on board is welcomed by the German people, who are strongly against having their tax money going to Greece. In addition, Merkel has recently announced she will run for a fourth term in the forthcoming September election. So she is not about to join, much less lead the charge, to save Greece. Meanwhile, it is questionable whether the Greek government—or any Greek government—will have the political will and public support for accepting the demands of the IMF for reforms that will mean further years of even more harsh austerity for the people. The country's “fiscal and structural reforms...pension reforms, tax reforms, are only a down payment,” said the IMF's Poul Thomsen recently. He said restoring the country's pre-crisis levels of unemployment and income levels will require “deep structural reforms, many of which are not on the books yet.” The unemployment rate is currently 22 percent.

Will Greece avoid disaster one more time by somehow pulling one more rabbit out of a hat? It seems unlikely, but we shall know fairly soon.

Friday, March 31, 2017

A New Way to Pick Supreme Court Justices

President Trump's nomination of Neil Gorsuch to the U.S. Supreme Court has brought to the fore a troublesome feature of our federal government, namely the selection of Supreme Court justices. The problem developed from the Senate's failure to approve the nomination of Robert Bork to the Court thirty years ago.

James Robertson, now a retired district judge, led a team of lawyers to oppose President Reagan's nomination of Bork to the Court. Recently he wrote, “I regret my part in what I now regard as a terrible political mistake... the treatment of Bork touched off a Thirty Years’ War on judicial appointments. We have politicized the judicial confirmation process far beyond historical norms and undermined public confidence in the judiciary.”

There is no question that Bork was highly qualified. Ralph E. Shaffer, a professor emeritus of history, wrote that during the Senate hearing for Bork's confirmation,

Americans were tuned to television and radio broadcasts of the most enlightening judicial give and take this country has ever witnessed." Bork met “each senators’ challenging questions with the brilliance of the law professor and attorney that he was.  When the questioning of Bork ended, observers and participants, whether for or against the nominee, expressed amazement at the high level of discourse that had just taken place....

Orrin Hatch, still on the judiciary committee thirty years later, told Bork,...that his analysis of how our charter works was unequaled by any commentator or television program.  Former Attorney General William Rogers called the proceedings an adult education class of the highest order, 'one that ought to be required reading for law students.'  To fellow Republican Alan Simpson the hearings were like a return to law school, with the sharpest kids in class debating the nation’s sharpest law professor. Patrick Leahy, who also serves on the Gorsuch committee, saw the Bork hearings as a graduate seminar in constitutional law. The country reveled in an intellectual feast. That had never happened before.

What made Bork’s interrogation so different from any other was the depth of questions and the forthright answers.... Via television and radio the nation enrolled in Rogers’ adult education class as Bork explained in detail ...[He] tackled every issue the committee raised...and presented a conservative analysis of the ninth and tenth amendments.”

But the Senate refused to confirm Bork's nomination. Why? Because he was a conservative. Democrats in the Senate wanted a liberal, or at least a nominee who was less conservative than Bork. Previously there had been, for the most part, a tendency in the Senate to go along with a president's judicial choices, regardless of whether conservative or liberal, so long at the nominee was qualified. The feeling was that a president who had won election should have the right to nominate judicial candidates of his own political persuasion. The republicans even provided Senate votes for Obama's supreme court nominees Sotomayor and Kagan. But—while it is uncertain at this point whether they will be able to defeat the Corsuch nomination—the democrats hope to do so, and Senator Chuck Schumer, senate minority leader, has said he will lead the drive for that effect. 

Antonin Scalia, whose death created the Court vacancy Gorsuch hopes to fill, believed the Constitution should be interpreted according to the meaning of words and phrases as they were understood in the times they were written. He scoffed at liberals who believed in a so-called “living” Constitution that changes with the times. Last year Gorsuch echoed Bork's idea of “originalism” in interpreting the Constitution when he wrote courts must “apply the law as it is, focusing backward, not forward, and looking to the text, structure and history to decide what a reasonable reader at the time of the events in question would have understood the law to be — not to decide cases based on their own moral convictions or policy consequences they believe might serve society best.”

Gorsuch's words on this are very much in keeping with the view of Thomas Jefferson, who wrote:
“On every question of construction [of the Constitution] let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning my be squeezed out of the text, or invented against it, conform to the probable one in which it was passed.”

If the words of the Constitution do not mean what they meant when that document was written, then we don't have a constitution; we have a fake constitution, into which the justices can insert their own personal convictions or ideology to replace the original meaning of the words. This brings us to the fundamental problem of how we can select judges to conform to the Constitution rather than distort it or ignore it. To accomplish this, we need to take politics out of the process of selecting supreme court justices.

At the time the Constitution was written, there were no political parties, so the Framers couldn't foresee the problem of political partisanship undermining the Constitution. That document has very little to say about the process of selecting judges, only that the president “shall nominate, and by and with the advice and consent of the Senate, shall...appoint judges of the Supreme Court.”

Here is what I propose for a constitutional amendment to take partisan politics out of appointments to the Supreme Court.

When a vacancy occurs on the Court, the presiding judges of the highest court of each state and the chief judge in each of the thirteen U.S. Circuit Courts of Appeal shall within 30 days submit the names of two persons considered qualified for the vacancy on the high court, at least one of whom is not from the designator's home state or circuit court which he represents. The names of those chosen persons shall be submitted to the chief judge of the Superior Court of the District of Columbia. That judge shall then rank the submitted names according to the number of votes they have received, noting the names of those who have made the selections, and then convey this list to the judges so that they may verify the accuracy of their submissions as well as those of the other judges participating.

The president shall then nominate for the Supreme Court vacancy one of the top five persons on the list. If the Senate does not confirm this nominee, the president is then obligated to select another name from the top five. If the Senate fails similarly to confirm all five top names on the list, the procedure shall be repeated for the next five names on the list. If those five likewise are refused confirmation, the president shall then nominate the next name on the list, which shall be considered confirmed by the Senate unless a tie exists in the eleventh place. In the event of a tie of two or more persons in the eleventh place, the eldest shall be chosen and deemed to be confirmed. In the event that the list consists of fewer than eleven names, if the Senate fails to confirm all preceding names down to and including the next-to-last name on the list, the final name on the list shall be considered nominated and confirmed. For example, if the list contains only seven names and the first six all fail to win confirmation from the Senate, the seventh name on the list shall be considered nominated and confirmed.

The state chief judges and appeals court chief judges in this procedure are allowed to include their own names. It would be simpler not to allow their own names here, but these are highly knowledgeable, experienced individuals who have risen to the top of their court system and their opinions deserve to be included. This is part of the reason for allowing them to name two individuals, rather than only one and preventing them including themselves.

Another reason for having the state chief judges and appeals court judges contribute two names is that it allows a larger number of people to be considered, some of whom might well be in the top ten in the larger count—and would make very good members of the Supreme Court—but would be eliminated in the smaller count of only one name per state chief judge or appeals court chief judge. (Fifty states plus 13 appeals courts would mean 63 names on the District of Columbia list on the basis of one supplied by each chief judge, compared to twice that number if they are allowed two names.)

Still another reason for allotting two names per judge is the following. If judges are allowed to name only one and the results show one individual to be extremely popular, getting let's say, 48 of the 63 votes and the second-place finisher getting, say, 14 votes, that leaves only one vote left for all other candidates. That would make the system unworkable because there wouldn't be even 5 names on the list from which the president must make a choice. But if there are 126 possibilities for names, there will be no problem if one person gets 50 because there will still be 76 places for other names. In fact, if an individual got every vote possible, the most he would get would be 63, because no chief judge could name him twice. Each judge must submit two names for the list.

There is one other possibility which is extremely unlikely to ever occur but should be guarded against just in case. This is a situation in which the list contains a large number, say for example, 31 names getting only a single vote. This could happen in one of two ways. One, if 31 of the chief judges vote for themselves but receive no other votes. Two, if 31 of the chief judges vote for an individual other than themselves who gets no votes from any other chief judge. The whole system should not be thrown askew by a large number of names with extremely low support. Accordingly, any name on the list not supported by more than five state or appeals court chief judges should be eliminated from further consideration.

Finally, here is the oath that Supreme Court justices must take before they proceed to execute the duties of their new office:

"I, _________, do solemnly swear (or affirm) that I will administer justice without respect to persons, and do equal right to the poor and to the rich, and that I will faithfully and impartially discharge and perform all the duties incumbent upon me as _________ under the Constitution and laws of the United States.  So help me God."

I suggest this be changed as indicated in red:

"I, _________, do solemnly swear (or affirm) that I will administer justice without respect to persons, and do equal right to the poor and to the rich, and that I will faithfully and impartially discharge and perform all the duties incumbent upon me as _________ under the Constitution according to the meaning of its words as commonly understood at the time the Constitution was written and laws of the United States.  So help me God.