Archive for January, 2008

The Founding fathers of this longest running uninterrupted democratic republic in the world, The United States of America, understood that each of the three branches of our government left unchecked would try to be the sole driving force of this nation. Thus they gave us a system of checks and balances in our Constitution. The President is the Commander in Chief of our Armed Services, yet he needs the consent of Congress to go to war. Congress can pass bills with a majority vote of both houses, but the President can veto the bill if he doesn‘t agree with it. If the President vetoes a bill, the Congress can override his veto. Congress makes the laws and the President enforces the laws. The President negotiates treaties and the Senate ratifies treaties. The President appoints Federal Judges, Justices of the Supreme Court, Ambassadors, and other federal officials and the Senate must give its consent. The House of Representatives votes to impeach a President or the federal judiciary and the Senate tries the case. The Chief Justice of the Supreme Court presides and a two thirds Senate present must vote to convict.

If we are to literally interpret the Constitution we would find that the Judicial Branch was sort of left out of the checks and balances and was playing a minor role when the Constitution and subsequently the Bill of Rights were adopted. No where in the constitution does it say that the Judiciary can declare a law to be unconstitutional (judicial review). However, in the very early nineteenth century, the Court’s power of judicial review, as it was applied to the constitution, came to be. Under the Constitution, the judiciary’s power did extend to cases of law arising under the constitution, and just about all other activity occurring between states, the federal governments and the states, citizens of different states, between states and their citizens, foreign states and citizens of foreign states and so on.

The Judiciary did receive more power indirectly when the Bill of Rights was adopted. Citizens were now protected and became an additional check and balance to the governing of the nation. The Judiciary is where the Citizenry go to for redress against their State or the Federal government. It was not until, 1803, when Chief Justice John Marshall invoked the power of judicial review and the authority of the Supreme Court to declare a law or actions by a State or the Federal Government unconstitutional, that the Judicial Branch became an equal player in the checks and balances triad. It would appear that judicial review is the most powerful tool of the Court. Well not so fast!

A new tool used by Federal Judges in lower courts, or as the Constitution puts it – inferior courts, is to make rulings that actually through precedent change the law. Here is a case where the checks and balances have failed. A bold approach would dictate that the Executive Branch ignore the new ruling as being outside the domain of the ruling judge, and that the Congress should censure or impeach any Federal Judge who attempts to make law. The heavily partisan nature of our lawmakers lends itself to their inability to take back their right as the sole Federal law making body in the country. The Executive Branch is also at fault by not decreeing that law made by a sitting judge is not constitutional and will not be enforced (no law making without representation).

Unless these actions of the Executive and Congress take place, the checks and balances are gone. It appears that neither the Congress nor the Executive Branch have the power or desire to hold the judiciary in check. Are the “checks and balances” protection built into the Constitution broken and in need of being fixed?

Of course, the Congress and States jointly can change the Constitution, while the Executive and the Judicial Branches have no direct role in amending the Constitution. Do the Congress and the States really need to exercise this gargantuan constitutional effort required to amend the Constitution just to offset some new law made by a judge through precedent or can they just ignore the judges ruling and make him or her go back and do it again and keep doing it until the judge is no longer making law. If the judge does not want to comply, there is always that impeachment thing.

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In economics books it is called Comparative Advantage. It is the underlying key to successful trade among nations. In non-economist terms, it is what can I offer that the other guy can’t that will give me an advantage in trading so I come out on top.

When the United States was very young, we had unbelievable amounts of natural resources. As we approached the twentieth century we had a powerful work force achieved through the immigration of people looking for a better opportunity. These people were both adventurous and driven to succeed – they made a productive work force. Oh yes! we still had abundant natural resources. In the second half of the twentieth century, after the two world wars, Asia and Europe were devastated and without infrastructure, and they were in need of all things manufactured as they were rebuilding. The comparative advantage of the United States was its gargantuan manufacturing infrastructure resulting from the build up to produce for World War II, and the many technical achievements gleaned from the war arsenal. We had a customer – the world – ready to consume any and all that we could produce. In effect we not only had a comparative advantage, but also an absolute advantage – we could only prosper – we could literally phone it in. It was all about us!

By the close of the twentieth century both Asia and Europe, with the exception of the iron curtain countries and the Republic of China, had rebuilt their infrastructure, and in many cases with more up to date and productive manufacturing facilities than we had. The United States had fewer desirable / usable natural resources. Our coal reserves became unpopular and our desire to not spoil our planet kept us from fully developing our oil reserves. In the mean time, oil was becoming the key natural resource in the world for the later part of the twentieth century and the early part of the twenty first century.

In the second half of the twentieth century, we became oblivious to the world – remember it was all about us! We paid our people ever increasing wages in manufacturing, added many unproductive work rules, and taxed our companies to the point that all three events took away our comparative world trade advantage in manufacturing. We were now at a trade disadvantage – yet our appetite to consume was still feverish. During this period, it became more advantageous for our manufacturing companies to move manufacturing overseas. If they had not done so, they would not have been able to compete on the world stage and be profitable. During this period, one bright spot in our comparative advantage was our strength in technology and highly educated and well trained engineers. Our use of technology gave us a comparative advantage in productivity. We continued to utilize our comparative advantage in the trade of technology – we thought it up and it was manufactured overseas. Over the last quarter of the twentieth century and the beginning of the twenty first century, Asia caught up, only with a twist – same or better engineering with lower wages – the comparative advantage shifted in their favor. We also allowed our schools to lose their leadership in delivering a strong education from K through 12.

Today, what do we offer: restrained under utilized resources, a broken education system, uncompetitive costs on a world scale due to high wages on the remaining manufacturing jobs (auto industry), a declining infrastructure, comparatively high taxes on companies attempting world trade, and a voracious appetite to consume manufactured goods and oil from overseas? Yet our political leadership continues along as if we remained the pre-eminent holders of all things comparative trade. Our free trade agreements are good, yet we entered the trade arena with a handicap – we have no comparative advantage, so they are NOT good for us at this time. Protectionism will not work, because the nations of world can get along trading among themselves – they no longer need us.

What do we need to do?

  • Business: stop taxing our domestic businesses engaged in manufacturing, give them a financial trade advantage as they will still be paying higher wages for manufacturing workers than their world competition; remove the health insurance financial burden from business and move it to a national health insurance system; move to a consumption tax and stop taxing the businesses that need to trade to grow so they can build and offer more good paying jobs – we need to put our domestic businesses on a level playing field with the rest of the world.
  • Children: target our children by giving them all a top flight education and by challenging them with a tougher curriculum, and longer school years just as advantaged world trading nations do.
  • Energy: drill for and refine our untouched domestic oil reserves in the short term; utilize nuclear, clean coal, and solar in the mid-term; develop wind, geo-thermal, advanced solar, tidal and hydrogen fuel in the long term. We need to lower the cost to produce and transport.

If we don’t rebuild our lost comparative advantage we will never hold a free trade advantage, we will continue to become a nation of past successes and a second tier nation at that. Remember it is a world economy now and the competition is fierce.

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