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Monday, October 31, 2005

 

Social Security

Social security, since it was instituted in FDR's New Deal, was supposed to give aging generations an income that would support them in retirement. Or so people thought. Old age survivors and disability insurance for one, is definitely not what it is. It is a redistributive program that is old and outdaded. I wonder, from a constitutional perspective, if it fits under the paradigms of the protective or corrective states. I also wonder, if it's constitutional at all from the plain meaning understanding of the document.

In article 1 section 8, the constitution details the areas of spending that government has the power to tax. From what I gather from reading it, it grants the power to tax to provide for militia, the army, for tribunals, to provide for the common defense and general welfare of the United States. It does not read, "provide for the financial well being of the citizens." That section is not redistributive in the sense that social security is.

From the corrective state view of the constitution, the social security program absolutely does not make the economy more efficient. It is taking money out of the hands of people who earned it, with no security, no gaurantee that the money will even be there fifty years for now. Efficiency analysis would dictate that the social security tax should be scrapped.

The protective state holds that the interpretation of the constitution should protect individual liberty. Individual liberty would say that people should be able to make their own decisions, and not be liable for the well being of people they aren't involved with. It could sound selfish, but it isn't. It's letting the economy take care of things, letting people make their own honest decisions in a process that will improve the economy and lives all the while.

 

Social Security Reform and You

If Social Security, Medicare, and Medicaid don’t get reformed by 2040, government spending will increase to 27.1% of the GDP, compared to about 19.9% in 2003. And this is assuming that the other discretionary parts of government spending will stay at the same relative percentage of the GDP, which could turn out to be an immense understatement. The large retiring baby boom generation, along with higher life expectancy, and raising health care costs are all attributing to the problems that are expected to arise in the current Social Security system. The Projected OASDI, (old age survivors disability insurance), shows that in 2017 the Social Security program will be running a deficit, but redeeming treasury securities will compensate for the deficit until 2041, when the treasuries will be depleted. Social Security reformation is undoubtedly needed, but what if any are the clear cut answers?

In 1936 the dependency ratio, the number of retirees to the labor force, was 15%, and in 1997 it was 29%. But by the year 2030 it’s expected to be 50%. This would imply that the current tax rate to pay Social Security pensions would have to rise to 17% in 2030, compared to 12% in 1996. Is a higher continuing OASDI rate necessary for sustaining the problems we will face? It seems that could be an answer if we want to maintain Social Security benefits. Another option that has been proposed is to create personal accounts. These accounts would be run and administered by the Social Security System, and individuals could choose how to invest their funds among stock and bond mutual funds. The pensions that individuals would receive from the individual account would originate from how much they contributed and how well their investments fared. This approach would require a 1.6% increase in payroll taxes, and would raise the retirement age to 67 by the year 2011, and allow the retirement age to be raised in the future based on longevity of the population.

The advantage of a privatization scheme is that it could increase the return to Social Security payments. However the flood of new money into the stock market along with the high cost of administering the small accounts would reduce their potential net return substantially. I think we should try and increase our national savings rate because the Social Security system gives us a false illusion that the taxes we pay are going to be there for us when we get older. Obviously this is not the case, because we will not receive our paid taxes, but instead the taxes on earnings of future workers. When our time comes to collect Social Security payments, if that be in the year 2045, the payroll tax would have to be 5% more than what it is today to compensate for the higher life expectancy, higher health care costs, and a higher dependency ratio. This is not sustainable and I plan on accumulating enough wealth so I will not have to be dependent upon Social Security.


 

If Social Security Looked Like Insurance…

Our discussion in 321 of an alternate plan for what the Social Security program would look like were it run like an insurance program (and not a transfer program) included an aspect of new way of Social Security payments not being granted automatically upon reaching ‘retirement age’, but rather upon the occurrence of an adverse event. That event, in this case, would be running out of assets, and not retirement in and of itself – so that it truly is an insurance-type payment and not an entitlement program. In general, I think that this is a great idea, except…

Except for that fact that Congress has made it so that large corporations can dump their retirement obligations, thus wiping out workers’ retirement assets that they either worked their entire adult lives for, or sacrificed some of their ‘consumption today’ to invest in 401(k) plans that they anticipated having. Granted, 401(k) plans are meant to be supplemental to other retirement investments, and I bet that many savvy workers invested this way thinking that they were hedging their bets against their employer’s retirement compensation and what they anticipated getting from Social Security. And, oh yes – think that ESOP plan is safe? Think again.

The Broken Promise in the October 31, 2005 issue of Time gives a scary overview of how employees have been bilked out of their entire employee-sponsored retirement plans. These are employees that thought they were planning well for their Golden Years, so as to not be a burden to society and their loved ones. Thanks to Congress’ love of big business at the expense of the mass of citizen workers, these people are now left destitute. These would be the workers that would not have had to pull upon a Social Security insurance-type payment, but now would have been forced to draw upon this program. If there continues to be no strong laws and rules for corporations that offer retirement plans, 401(k)s, ESOPs, etc, then there will be no impetus to save through these avenues. What then would the options be? Not everyone has the wherewithal to invest in real estate, not everyone is comfortable with buying and selling on the open market.

In light of what employers are currently permitted to perpetrate against their own employees, I think that there had better be some serious financial education of our youth well before any changes to Social Security are made.

 

Could we learn something from india?

The Economist writes that the Indian economy has grown at around 7% or better for the past two years, and that it will in the future as well. It reads that Manmohan Singh, India's prime minister became every economist's darling when "tariffs were slashed, exchange controls scrapped, the licence raj that strangled business in red tape was largely abolished." His ease up on government regulation led to growth that the economist says, "tended to benefit everyone and harm no one." India definitely still has trouble, and it's democratic government gives it some advantage over china as far as being able to change things. Singh, when he was the finance minister deregulated industry to stimulate growth, and the magic of the invisible hand of economics went to work, increasing growth.

This India example is a classic example of how pareto improvements can be made to economies, as well as the economic health of a country. Lower taxes benefit growth. There is a quote in the magazine explaining the hard road ahead of India to sustain this growth. It states that the problems India is encountering "is a reminder of just how powerfully politics can constrain economics."

So, maybe we should lower taxes in America to increase growth and efficiency. Lower taxes would give more money to the people who are earning it in the U.S. More money in their hands would let them make their own decisions that would ideally put them on a higher indifference curve, and find a more efficient allocation of resources. This could be very useful considering that 50% of people in the U.S. don't pay income taxes, and the upper echelon of income earners find as many tax deductions and other advantages that they can. Economically speaking, if the government stopped taxing to pay for goods and services that aren't "public" in the economic sense, and gave people more money, there would be more incentive for growth, for development, for new products. This would enable people to achieve as much benefit as possible while stimulating the economy.

 

The Myth of "Strict Construction"

The seventeenth of September is Constitution Day, in recognition of the 218th anniversary of that venerable document's signing by our nation's Founders. Of course, most of the federal judiciary pays no homage to that date. They are preoccupied rewriting the so-called "Living Constitution," amending it by judicial dictate rather than its prescribed method in Article V.

For the first 150 years, our Constitution stood as our Founders, and more importantly, "the people," intended, as is, in accordance with its original intent. Prior to the reign of Franklin D. Roosevelt, the courts were still largely populated with originalists, who properly rendered legal interpretation based on construction of the Constitution's "original intent." However, FDR grossly exceeded the Constitutional limits upon the authority of his office and that of the legislature in his folly to end The Great Depression. FDR's extra-constitutional exploits opened the door for the judiciary to follow the same path: To read into the Constitution what was necessary to make it conform to the demands of the prevailing political will.

In the decades that followed, the notion of a "Living Constitution," one subject to all manner of judicial interpretation, took hold in the federal courts. Judicial activists, those who legislate from the bench by issuing rulings based on their personal interpretation of the Constitution, or at the behest of likeminded special-interest constituencies, were nominated for the federal bench and confirmed in droves.

Consequently, we now have a Constitution in exile, it has become a little more than a straw man as the courts have become increasingly politicised. In recent decisions, judicial activists on the Supreme Court have cited "national consensus" and "international law" as factors in their decisions.

The Federalist Papers, as the definitive explication of our Constitution's original intent, clearly define original intent in regards to Constitutional interpretation. In Federalist No. 78, Alexander Hamilton writes, "the judicial branch may truly be said to have neither FORCE nor WILL, but merely judgment...liberty can have nothing to fear from the judiciary alone, but would have everything to fear from its union with either of the other departments." In Federalist No. 81 Hamilton notes, "there is not a syllable in the Constitution which directly empowers the national courts to construe the laws according to the spirit of the Constitution."

George Washington advised, "The basis of our political systems is the right of the people to make and to alter their Constitutions of Government. But the Constitution which at any time exists, 'till changed by an explicit and authentic act of the whole People is sacredly obligatory upon all."
Today, 218 years later, Justice Antonin Scalia says of judicial activism, "As long as judges tinker with the Constitution to 'do what the people want,' instead of what the document actually commands, politicians who pick and confirm new federal judges will naturally want only those who agree with them politically."

While the words "conservative" and "liberal" are ubiquitously used to describe Republicans and Democrats respectively, these words properly should describe whether one advocates for the conservation of our Constitution, as originally intended, or its liberal interpretation by judicial activists. Does one want to conserve Constitutional limits on the central government, or liberate those limits?Our Constitution was written and ratified "in order secure the Blessings of Liberty to us and our Posterity" as set forth in the Declaration of Independence "endowed by their Creator." It established a Republic intended to reflect the consent of the governed, a nation of laws, not men. At the close of the Constitutional Convention in Philadelphia, Benjamin Franklin was asked if the delegates formed "a republic or a monarchy." He responded, "A republic if you can keep it." We have all but lost it.

 

Inherence Tax

The life cycle of a human: Birth – Death. What is the dash? The dash represents the person’s life. A person could do so many things with that dash, but what happens to the wealth accumulated after the person dies? The wealth and assets are to be transferred to the individual’s heirs. Yet, before the heirs get any money, property, or assets everything is valued by the Internal Revenue Service and taxed. Many people have a problem with the inheritance tax and feel that it is not only an unfair double tax but feel that their life’s wealth should be passed on free of taxes. The inheritance tax can put small businesses into bankruptcy and hurt families who invest all their wealth into land, such as farmers. Not only is the government hurting the economy, but in some cases the government is collecting less then they could be.
Imagine that you owned a small auto shop and you died. All your money and assets were tied up in the shop and your two boys who worked the shop with you inherit your business. Before your boys could do anything the Internal Revenue Service comes and values your business at 5 million. Now your boys have to pay taxes on that 5 million. Yet, they have no cash to pay the taxes so they have to sell the business to Pep Boys. In a best case scenario say that Pep Boys pay 5 million for the company. Now your children can pay off the inheritance tax and your income tax with some money left over. The money that is left over is substantially less then what you wanted to leave them and they are out of a job. Not only that but, all the employees that use to work at the shop are now unemployed and Pep Boys is the only store within miles to offer auto supplies and services. Pep Boys can now mark up their prices.
In response to society’s actions because of inherence taxes an act was passed. In 2001 George Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001. This law states that the federal estate tax exemption increased to $1 million in 2002 and will continue to gradually increase to $3.5 million in 2009. Then in 2010, the federal estate tax ends and in 2011 the federal estate tax is resurrected to the rates that occurred in 2001. Not only that but the top federal estate tax rate decreased in 2002 to 50% and will continue to decrease to 45% in 2009. In 2010 there will be no federal estate tax rate. Then the top federal estate tax rate will be revived to 55% in the year 2011. Lastly, in 2010, a "carryover basis" rule will apply, which will tax heirs on the capital gains they inherit. As it stands now, heirs who decide to sell an asset don’t have to pay any taxes period. However, in 2010, heirs who sell an asset will have to pay an income tax on the asset if the asset is sold for more than it was bought for.
The Economic Growth and Tax Relief Reconciliation Act of 2001 is the first step in eliminating the tax. Yet, one thing should be changed in the act: the old tax rates should not be revived in 2011.
It hurts the economy when small farmers and businesses are forced into sale or bankruptcy. The bigger corporations have less competition and more free rein to do what they want to do. What the government should do is phase out the inherence tax all together forever. By doing this people can inherent small businesses without having to sell their business just to pay the taxes on it. If the business is allowed to continue, it will still be producing payroll taxes and income taxes. The people who are employed at the company will be paying their taxes and will not be unemployed. In the end these taxes the business generates will be more taxes collected then the inherence tax would have collected. This fact has been proved over and over by our own system of government. When we lower taxes either on a state or national level we increase the economic expansion of our nation, spurring a larger tax base to collect on, and increasing the revenues the government has available to operate. When we increase taxes, we slow economic activity, lower the base of revenues we can collect, and fall into a downward spiral which usually causes economic depressions.

 

Miers Nomination

Everyone could see this comming. The withdraw of the Miers nomination was not surprising. The nomination was hotly contested by both parties partially because of the lack of a paper trail. Miers, never having been a judge, was asked to take a constitutional law 'test'. This is a test in whcih it took her three times to get the answers right. It has been said that the Senete Judiciary Committee was sent back because members found her responses "inadequate and even insulting." Miers does not appear to come close to the level of constitutional expertise required of a Supreme Court justice. It is rediculous to be a nominee for the highest court to not have adequate knowledge of constitutional law. I also don't understand why the president would nominate someone who would make him look like he doesn't understand what it is the court does. It says right there in the constitution that the Supreme Court is meant to interpret the constitution. If a nominee doesn't understand the elements of the constitution such as the equal protection clause, the due process clause, commerce clause or even what the fourth and ninth amendments protect- how can we expect them to make rulings on the constitutionality of the law? We have enough problems with the way the Supreme Court decides opinions already, it will not help to have someone on the court who doesn't even understand the arguement. The only intelligent thing that came out of this mismanaged and uninformed nomination was the eventuall withdraw by Miers.

 

Hamdi Habeas Corpus

The writ of Habeas Corpus has been protecting individual freedom since its English creation in the late 1600’s, and in the establishment in America, under Article I, Section 9 of our Constitution. The phrase Habeas Corpus, or “produce the body”, may be associated with the inability to detain criminals or terrorists, but it is instead an evocative way to safeguard our rights from the government. It works to protect the liberties of innocent people by establishing protection against arbitrary imprisonment from the government. In April, President Bush tried to sidestep this great writ and detained Yaser Hamdi in a military brig in Charleston, South Carolina, for almost two years without having contact from visitors or his lawyer.

The Bush administration has said that Hamdi didn’t need legal advice because he has not been charged with a crime. If he hasn’t been charged with a crime then why has he spent the last two years in a brig? Without a crime being charged, the Bush administration has effectively not "produced the body", and had no legal ground for keeping Hamdi locked up. This was a violation of the Writ of Habeas Corpus and the Bush administration has defended this holding because he was an “enemy combatant.” Nowhere in the Constitution does it say Habeas Corpus can be suspended upon the proof that the detainee is an enemy combatant. The only time Habeas Corpus can be suspended is in times of rebellion or invasion, and Hamdi case certainly does not fit into either of those two categories. The only time when Habeas Corpus was suspended was when Massachusetts suspended the privilege of the writ from November 1786 to July 1787, on the occasion of Shays' Rebellion, when there was actually a threat to public safety.

Fortunately in Hamdi v. Rumsfeld, the Supreme Court ruled that detainees must have the ability to challenge their detention before an impartial judge. I completely agree with this decision because the Executive Branch does not have the power to indefinitely hold a U.S. citizen without basic due process protections through judicial review. Although Hamdi was just about as close as comes to qualifying to U.S. citizen, and a suspected terrorists, there was no reason to detain him for almost two years without charging him with a crime and not giving him the chance to defend himself. What is surprising is that the most conservative Justice, Scalia, went the farthest in restricting the Executive power of detention. Scalia asserted that based on historical precedent, the government had only two options to detain Hamdi: either Congress must suspend the right to habeas corpus in times of "insurrection" or "rebellion", which hadn't happened; or Hamdi must be tried under normal criminal law.


 

TABOR Revisited

With an intense debate concerning Referandems C and D, the Colorado Taxpayers’ Bill of Rights (TABOR) has re-emerged as a prominent talking point. A review of TABOR should be re-examined. TABOR possesses two features, which have generated a great deal of tax relief for Colorado residents during the past decade. First, TABOR places a tight cap on all state expenditures, limiting increases in per capita state expenditures to the inflation rate. Second, it mandates immediate refunds of all surplus revenues. As a result, when the state collects revenues above the limit set by TABOR, Colorado taxpayers are entitled to a rebate. Overall, between 1997 and 2002, Colorado has reduced taxes more than any other state, issuing annual tax rebates that have totalled more than $3.2 billion.

Even before it was enacted, Colorado Democrats sensed and feared TABOR's potency. In fact, during the 1992 campaign Governor Roy Romer repeatedly denounced TABOR, saying that defeating TABOR was the "moral equivalent of defeating the Nazis at the Battle of the Bulge." He personally attacked TABOR's author Douglas Bruce, calling him "a terrorist who would lob a hand grenade into a schoolyard full of children." Finally, Romer predicted that TABOR would result in an economic Armageddon and warned that the Colorado border would have to be posted with signs reading, "Colorado is closed for business."

However, since 1992, nothing of the sort has happened. In fact, Colorado's economy has been exceptionally strong. Between 1995 and 2000, Colorado ranks first among all states in gross state product growth and second in personal income growth. Furthermore, according to the National Association of State Budget Officers, Colorado was one of only five states that did not run a deficit during fiscal 2002. In addition to providing tax relief and fostering economic growth, TABOR has also forced Colorado residents to see the costs inherent in government programs. In other states, residents often support higher government spending because they can see the benefits of a particular program, but remain blissfully unaware of the costs that they and other taxpayers will be forced to bear.

However, in Colorado the annual tax rebates brings these tradeoffs clearly into focus. In every year from 1993 to 1999 there was a proposal on the ballot to either raise taxes or increase spending in excess of the TABOR limit. Knowing these initiatives would markedly reduce the size of their annual tax rebate, voters soundly defeated each of these measures. In 2001, for the record, an initiative to increase spending for Colorado schools did pass. However, Colorado taxpayers still received tax rebates totalling more than $900 million from fiscal 2001 revenues.

Because of this long-term success, Colorado's TABOR may well surpass California's Proposition 13 in terms of effectiveness. In 1978, Proposition 13 did an excellent job of providing taxpayers and homeowners with some much needed short-term tax relief. However, since it failed to restrain expenditures, the California state legislature eventually increased other taxes to compensate for the loss in property-tax revenue. For instance, in the years following the passage of Proposition 13, California raised the income tax, the sales tax, and taxes on beer, wine, and cigarettes. During the early 1990s, former Governor Pete Wilson even proposed increasing taxes on snack foods. This vicious cycle of spending and taxing is the root cause of California's current fiscal mess.

Overall, Colorado's Taxpayer Bill of Rights has quietly become America's most effective limitation on government. It has kept spending in check, provided tax relief to Colorado residents, and deserves a great deal of credit for Colorado's strong fiscal position.

 

Supreme Court

Watching the news this morning I was interested to see who the new nominee for the court would be. I was fairly surprised with President Bush's pick. I was expecting someone similar to O'Conner to fill her space. Judge Samuel Alito is a conservative and has been mostly seen by the public with abortion cases. While I do think that Alito would be a great edition to the court, some are a little worried about his judicial philosophy. While I think judicial philosophy is relevent in selecting a new court justice, the more important factor, as discussed in class, is how he interprets the constitution. According to cnn.com, Alito could end up similar to Justice Scalia in that he will "choose to make law rather than interpret law and move the court in a direction quite different than it has gone." I feel that this form of ruling is incorrect. The purpose of the Supreme Court should not be to make different laws but to interpret laws that already exist, and the best way to do this is by understanding the constitution. I feel that it is important for any future Supreme Court justice to make it known how they feel about the different parts of the constitution.

Sunday, October 30, 2005

 

Gasoline: Taxes v. Profits


From TaxProf Blog:
"Since 1977, governments collected more than $1.34 trillion, after adjusting for inflation, in gasoline tax revenues—more than twice the amount of domestic profits earned by major U.S. oil companies during the same period:"
Now, that's interesting.

 

Privatizing K-12 Education

We are all very aware of the condition of funding for education in the state of Colorado. We have been bombarded lately with ads for and against referenda's C and D, in hopes of helping the financial situation in Colorado. However, if there is such a problem with T.A.B.O.R (which limits the amount of money the state can keep each year) and Amendment 23 (requiring increases in K-12 funding every year), why don't we look at other ways to solve the problem?

I propose privatizing K-12 education to not only free up Colorado's financial obligation to K-12, but doing so would also increase efficiency. The article that is attached to this posting is a study that was done in Hawaii, after that state faced similar budget problems. The study compared private and public K-12 institutions, as well as private and public higher education institutions (however, for the purposes of this posting, I will focus solely on the finding of K-12).

The study found that private schools do a better job at hiring more teachers, which results in smaller class sizes (lower per pupil to teacher ratio), than public institutions. This results in more focused attention on individual students. Private institutions have higher test scores and higher teacher morale. The study shows that income growth in Hawaii is about five times as much with private institutions as it is with public institutions. This just means that the study shows a correlation between increases in participation in private K-12 and increases in gross product per capita. The study does show indicate some benefit from public K-12 in the long run, mainly because more students attend public K-12 rather than private and because some students who would go to private schools in Hawaii, end up going out of state to other private K-12 schools, because their parents can afford it. The survey indicates that the state legislatures should keep this data in mind when deciding what course to take, because private K-12 education helps promote efficiency and competition.

If we transfer some of these ideas to the current status of Colorado's educational system we could alleviate, or at least minimize, many of the budget problems. In 2002-2003, Colorado spent $7,384 per K-12 pupil, while the national average for cost of attending a private K-12 school is around $5,000. Colorado is spending over $2,000 per pupil more than it costs to attend a private school that generally has smaller class sizes, do better on tests, and recruit more teachers that are happier to be there (as seen in the study from Hawaii). If Colorado privatized their K-12 schools, this would create a massive market of K-12 competition, which would drive the cost of education lower-or at the very least stabilize it. It would also force the schools to manage their finances more than they currently do under the state system, because they would no longer have guaranteed state funding.

Of course there are potential flaws privatizing K-12, most importantly is the idea that some families wouldn't be able to afford to educate their children if they are forced to pay for it. This is definitely a concern that should be considered, but discounting the option of privatized based on this unproven idea is irresponsible. Privatized should be considered as a viable option to help resolve the state budget problems, create efficiency within K-12, improve the education that the students receive, and possibly increase state revenue, as shown in the Hawaii study.

Thursday, October 27, 2005

 

Miers Withdrawl

I was very interested to see this morning that Miers had withdrawn as a nominee for the Supreme Court. I must admit that I was concerned about her nomination, since it seemed to me that her nomination was an extremely political move on the part of the president, and as such, it did not seem appropriate considering the role of the Supreme Court.
From reading her letter, it seems that Miers was concerned about the integrity of the executive branch. I find this admirable, and I appreciate her idea that it is the role of the Supreme Court not to make law, but rather to interpret the law.
Bush's reaction was interesting. He seemed to blame her withdrawal on what he seemed to consider unreasonable requests for documents that would help to inform people of her background. Though I understand that it is important to retain the integrity of the executive branch and the trust among the President and his advisors, I wonder at why it would be such a problem for Miers to speak with regard to her previous actions and as to what she would do with regard to interpretation of the law.
This situation serves as a good example to show why it would be helpful to require Supreme Court nominees to answer questions with regard to interpretation of the constitution. We never did learn what Miers' definition of commerce was as it applied to the commerce clause in the constitution. We also never heard what Miers' opinion was on whether or not the power to tax was limited. If she had been made a member of the Supreme Court, we would have had very little evidence to tell us how she would have interpreted a very important aspect of our government. I think, after reading her letter of withdrawal, we have a much clearer idea of what she would do if she was on the supreme court, but that is only in the face of her withdrawal.
It seems to me that if we nominate people to the Supreme Court without knowing how they would interpret it, we are being irresponsible in using a tool that we have for limiting government's coercive power and preserving our rights. Perhaps we would do well to encourage our President to be cautious in whom he nominates to the Supreme Court. I think that it is important to know how Supreme Court nominees would interpret the Constitution based on this particular event. Miers’ withdrawal should be applauded, in light of her not having any examples of her interpretation of the Constitution. She made an admirable decision, based on the power of the Supreme Court within our government, and based on the ability of the American people to trust her judgment.

 

Katrina & K-12 Vouchers

"Hey, this sounds like a voucher, we can't be doing things that way. It might work and things could then get out of hand. Vouchers in Colorado for higher education. Now vouchers proposed for helping children after Katrina. People may be starting to see there is wisdom in education vouchers, eh?"
Read the rest.

Wednesday, October 26, 2005

 

The Problem With ATM's

Banks provide convenient ATMs to their customers who open an account and regularly pay for the bank’s services. To offer these convenient ATMs, a bank must purchase the machines and the infrastructure necessary to integrate all of them. From the bank’s standpoint, both the ATMs and the overall infrastructure represent large indivisible fixed costs. On the other hand, each time a customer uses one of the bank’s ATMs, the bank incurs only a nominal variable cost for each transaction. Likewise, the cost of serving bank customers through a network of ATMs is less expensive then building more branches of the bank. As the bank serves more paying customers with its existing ATMs, the bank’s average cost declines because the fixed cost of the ATMs and infrastructure are spread across more customer transactions.
However, the prime locations where a bank can install an ATM are limited. By establishing a greater presence of ATMs in these prime locations, the bank can secure a slight competitive advantage over its competitors by improving the benefits (lowering transaction costs) to its customers. The strength of a bank’s competitive advantage is reflected by the premium the bank can extract from non-bank customers who use the bank’s ATM machines. Therefore, when two banks consolidate, they are likely to achieve greater economies of scale and a competitive advantage by attracting more customers through a larger network of ATMs. If two banks agreed to allow reciprocal use of their machines (that is, bank A and bank B allow each other’s customers to use their machines at no charge) the outcome would not be the same as is achieved through a merger. If the two banks were separate, each bank’s investment in a new ATM location would provide a benefit not just to the bank making the investment, but also to the bank which has reciprocal rights to the machine. As a result, two separate banks would invest in fewer ATM locations than would the consolidated bank—therefore, the consolidated bank would attract more customers.

Tuesday, October 25, 2005

 

Minimum Wage: Women & Eugenics

In my Constitution and the Economy class we recently studied the first Supreme Court opinion regarding the imposition of a minimum wage for women. The Court's opinion was that the law was unconstitutional (later to be overturned). Students were quite interested to read in the opinion that the legislature's concern was to protect the "health and morals" of women, as well to learn that the legislature sought to use the minimum wage to protect the future of the "race." But the context for the legislation was not very clear from the opinion.

Alex Taborrok notes a paper by Tim Leonard that probably provides the context:
"It's no surprise that progressives at the turn of the twentieth century supported minimum wages and restrictions on working hours and conditions. Isn't this what it means to be a progressive? Indeed, but what is more surprising is why the progressives advocated these laws. A first clue is that many advocated labor legislation 'for women and for women only.'

Progressives, including Richard Ely, Louis Brandeis, Felix Frankfurter, the Webbs in England etc., were interested not in protecting women but in protecting men and the race. Their goal was to get women back into the home, where they belonged, instead of abandoning their eugenic duties and competing with men for work.

Unlike today's progressives, the originals understood that minimum wages for women would put women out of work - that was the point and the more unemployment of women the better! "
Isn't it interesting that the constitutional jurisprudence that was created to support the constitutionality of the minimum wage we have today was erected on the foundation of an effort intended to keep women in the home and out of the labor force?

Would anyone like to return to the constitutional foundations and decide that the first Court opinion was indeed correct and it is unconstitutional to impose minimum wages?

 

C & D Referendum Debate

The October UCCS debate over Referenda C & D on this November's ballot was an interesting, but uninformative event. The debate between John Hazelhurst and Doug Bruce turned more into an infantile slam than the information sharing meeting I'd personally hoped it would be. I learned very little about just how Refs. C & D will actually help Colorado, but this was probably due to the fact that the lack of a C & D author in the debate made it less 'official' in nature. I did learn however that C & D is not a 'Tax Increase', as Mr. Bruce has tried to sell it as, but is rather a five-year hold on his precious TABOR in order to bring a little (and as Mr. Bruce puts it - very little) extra revenue into improving the general infrastructure of the state of Colorado. The lack of my puny twenty dollar refund each year over the next five years won't bother me in the least - IF it means we might have a few better roads, a few better schools and a little money for medicaid should we need it. I understand that those who have refunds in the hundreds may just want to put it back into their own pockets, and that is fine with me, but I just don't want to hear those people talk about how bad the roads are, the schools are, etc.

I think that Colorado has experienced growth at an unprecedented rate the last fifteen years and the increased tax revenues weren't enough to keep the infrastructure expanding equal to the growth rate. In our Public Finance class, we're learning just how important it is to provide society with the basics, and although we haven't gotten into the taxation side of government sector economics, we are at least privvy to the needs of the individual, and it seems that many of those who are in need in Colorado, probably aren't receiving the benefits necessary to tide them over in rough times, and the current system obviously isn't bringing in enough revenue to allow the legislature of Colorado to do what they need to do to keep Coloradans satisfied. Mr Bruce states that these Refs. are just a ruse to get more money so they can expand the general budget since C & D don't specify EXACTLY where the extra revenue will go, and Mr. Hazelhurst, in his lack of any real political experience, says that it doesn't matter where it goes, it will help Coloradans in the long run either way. Mr. Bruce says keeping our refunds is unconstitutional since TABOR forbids the legislature from spending the revenue from excess taxation, and C & D will cost the average family of four over four thousand dollars over the next year. He brought some shaky math to the debate, mainly because the majority of Coloradans aren't part of a 'family of four' (I've been here six years, have a twelve year-old son and personally don't know any four person families!), and the math looked at statistics that bent and molded to whatever he wanted to show. I didn't like the fact that his chart showing how the general budget of Colorado had grown in dollar amounts, but weren't adjusted for growth (per capita spending) or true inflation rates. But I think it is the idea that his TABOR is the main point of attack by C & D that causes Mr. Bruce the greatest source of frustration, but, as a Political Science major here at UCCS, I think Mr. Bruce needs to remember one very important American Constitutional fact - any part of ANY constitution is open for both amendment AND repeal - this includes his amendment.

Here is a link to NBCs 5/30 report on the debate. http://www.koaa.com/news/view.asp?ID=4132

Saturday, October 22, 2005

 

Fire Department Wants to Charge for House Calls

An issue that has recently come up for Black Forest is the chance for the local Fire Department to charge for house calls. Currently non-emergency calls make up 5% of the responses that the Fire Department has to make. The Fire Department has been treating these calls for free, most of them consist of diabetes and asthma attacks. It is said that the average cost to respond to these calls is $150 for supplies. The department is suggesting putting a $100 fee to those that need their services. I don’t think that this is a bad idea although I wonder aren’t tax dollars used to purchase those supplies or is it only partial payment? If the Fire Department is experiencing this loss in supplies due to these calls I think that it is the best solution for the problem. Although 5% is not a large percent of the population these calls take away from the resources that could be used on people who are victims in household fires.

The charge of $100 for medical help in your home when otherwise you would have to seek medical help along with the $91 glucagons cost for those with diabetes seems to be well worth it not to mention the added cost to see a doctor! The opportunity cost of having medical service brought to you at a slightly higher cost than the medication seems like not too many people would want to give up that opportunity cost. It seems that the number of people treated by the Fire Department is fairly low and I would take into account the people that have health insurance and other resources to go to first. Black Forest has a wide variation of incomes and it seems with those variances would come different choices for health insurance. If one can avoid paying higher health insurance fees to get free medical treatment from the Fire Department this adds to the costs of the whole when they can be decreased with this new idea.


 

Talks about Eminent Domain

Efforts are being made to protect private property rights and to prevent government from taking land for economical reasons. The local Tribune had an article called “Eminent domain will be on defensive” displaying the concerns that people have for the ownership of their land. After the Supreme Court left the taking of land up to individual state government, there is a big movement to get protection of property on the 2006 ballot. This group that is coming together to help protect the individual rights of property owners in Colorado first came together after talks of taking land to make toll roads and strip malls. While these things would be nice for a community they are certainly more for public purpose and not public use. Colorado Rep. Al White was quoted as saying
“Eminent domain is completely out of control.”. As Olson’s theory says one key to having a successful economy is to have well defined property rights. If the government is able to take our land for the public purpose we have no solid ownership of our land and this will decrease the demand for ownership. Who wants to buy land just to have it taken away to build a strip mall? Not me. The Supreme Court needs to reread the Constitution and say that public use is NOT public purpose; otherwise we are going against Olson’s theory and headed for a world of hurt.
We can is in Iraq the new economic opportunities they have and the hindrance that they had when the land was taken from them by the government in the past. This has been seen and proven that defining our property rights is key to growth in the economy.

Friday, October 21, 2005

 

Steroids in Baseball

With the baseball season winding down, not all of the focus has been on the winning teams, but rather that steroid use has been tainting the game, some of its star players, and of course the controversial records it might have helped break. Many congressmen, like Senator John McCain of Arizona, have been very outspoken against the perilous use of steroids. Many fear that past and continued steroid use in the major leagues could have very serious repercussions in many facets of life such as the dangerous impact it has made with Americas youth and the records it might have helped athletes break. In a hearing brought about by the House Government Reform Committee, Committee members concluded that the sports drug testing policy wasn’t strict enough in deterring the use of steroids. Congressional action was threatened to reform the sports testing policy more in line with the Olympic policy, where first time offenders are handed a two year suspension compared to 10 days.

In speaking of the justification for Congress’s actions to change Baseballs steroid policy, we have to look at how steroids affect the market. In so far as that many congressmen are angry that steroids may have helped break records, that doesn’t give them an allowable reason to legislate. The only way their intervention would be necessary is if there is a market failure because of the use of steroids. Congressman Henry Waxman argued that “There is an absolute correlation between the culture of steroids in the major league clubhouse and the culture of steroids in high school gyms.” Congressman Waxman is making the argument that there is a negative externality involved with the use of steroids in the major league level. The extent that teenage steroid use is dependent on major league use is very debatable.

Even if the major leagues adopted a more stringent policy, it would be unforeseen if it would help prevent steroid use among teenagers. The potential salary an athlete could earn playing in the major leagues is just as good or better of a reason to use steroids as seeing a professional ballplayer using them. The opportunity cost of not taking steroids could be too high for players at the cusp of being a major league caliber athlete. Anyway they could improve their chances of making it into the majors they might take, regardless of if major league players discontinue their use of steroids. Steroids may hurt the legitimacy of the records it breaks but I don’t see it as a negative externality. It’s too implausible of an argument that if teenagers are using steroids, it’s because they are emulating their major league heroes. I don’t think steroid use in the major leagues is as much of a market failure as many of our members of congress do. Although their concerns are justified, the use of legislation to enact harsher policies isn’t from an economical stance.


 

Vaccine Shortages

Looks like government's heavy hand is at work again.

Wednesday, October 19, 2005

 

Miers Nomination

I've posted on my conclusion that I cannot support the nomination of Harriet Miers over at Economics & Liberty.

Do you agree with Robert Bork?
"Any philosophy that does not confine judges to the original understanding inevitably makes the Constitution the plaything of willful judges."

Wednesday, October 12, 2005

 

Net GDP or Tax Inefficiency

Is there a better way for the national government to raise revenue? Do we really want to loose 2% to 5% of the economy's output every year merely because of the way government chooses to raise revenue? The President has created a Commission to make proposals to reform the tax system, and I wonder, what are the odds the Commission's proposals will find a way to reduce this large tax burden of lost output?

Read the rest here.

Monday, October 10, 2005

 

Quote

A good quote that was in the paper by R.J. O'Rourke was "You can't get rid of poverty by giving people money." This really goes with what we are talking about in 321.

 

Finally a Real Explanation!

Finally an article that explains the reason for high gas prices! The Gazette printed an article by an economist from the University of North Texas who gives a clear explanation of supply and demand. Constantly hearing from the media and even Donald Trump that the gas prices are determined by the government or even a single person is absurd. Poor Mr. Trump, he may be rich but his schooling is not complete in the Econ department. Hearing people give their explanation of prices is crazy when one simple graph explains it all!

In the article "Let's not be too hasty with charges of price gouging", Bernard explains the increase of prices due to the decrease in supply (from the hurricanes) has given us the results of higher prices. The weeks after the hurricanes and thus increase in prices, the economic theory had been proven, demand fell by 5 percent. Even though this decrease in demand is not enough to bring prices completely down it is showing an effect in the market for gas. One illustration that I thought was relevant was just showing the increase in prices for lobster in the New England coast when there was a storm that destroyed the fishing tools and decrease the supply of lobster and thus created an increase in price.

Our resources are being used up daily and we do not have an infinite amount of gasoline to use, so I can't wait to see how people react to the natural increase in prices over time as the supply decreases. It seems that gasoline is something that virtually everyone uses and so when supply decreases by natural events people tend to jump to calling it a political issue. Now if people would just take one Economics course they may better understand the fluctuation of prices. Then they could stop pointing the finger at everyone else and start pointing at themselves; after all actions speak louder than words.

 

Oppression question

I think the term oppression can be used in different ways, however I think the most common way the term is used is in a political context. Oppression, as a political term, has to do with the unfair restrictions placed on members of society. Oppression is found throughout the histroy of the United States, from the African Americans to American women.I feel that it is important to look at oppression in another form, an economic form. As pointed out in another comment the definition of oppression is an "unjust or cruel exercise of authority or power." If you look back on previous court cases, oppression is something that has been going on for some time. From the limit on how much women could work in a week, to a limit on the amount of trade and the type of trade allowed to leave a state. These are forms of oppression in an economic standpoint. Oppression is not only found on the local and national levels but also on the international level. Countries often oppress another country by enforcing trade mandates, and some countries oppress themselves with their cultures. The countries that oppress members of their society based on culture or religion are also affecting their economy. For example the Middle East is known for their oppression of women. However I feel that if this oppression changed the economy in these areas would greatly increase because they would have more man power to create more output, which then creates more money. Oppression can be defined and found in many different ways. However I feel it would be best for the economy if oppression did not exist as much as it does. Other countries could learn from the United States, we have changed many laws that freed many who were oppressed and we have grown to be the most stable and powerful country in the international economy.

Saturday, October 08, 2005

 

why urge higher fuel standards?

I think it's a bad idea for the government to regulate the feul economy of cars for two reasons. Firstly, this is a market activity. People in the economy are going to react to a rise in gas prices by considering their opportunity costs and either limiting their gasoline consumption, or pursuing other substitute goods. The market will handle the changed price of oil on it's own. Secondly, the constitution gaurantees economic liberties in the fourteenth amendment. The language is as follows;"Nor shall any state deprive any person of life, liberty, or property without due process of law."Liberty, as referred to in the fourteenth amendment relates to economic liberty as well. People have the right to buy and sell the things that they wish to, at the prices the owners set on their own. If there were no regulation from the government in the first place, there would be no constitutionally granted ability to regulate prices set by a free market. People are not gauranteed certain prices by the constitution. They are gauranteed the liberty to react to prices as they see fit.Another problem with instituting CAFE standarts is that The government would be hindering the natural correction our market diagrams would predict, and instead, the gov't would regulate the production of vehicles, not the price of gasoline. The market will equilibrate on it's own. This proposition simply begs the question, "Is it legal for government to react to high, market set prices by regulating industry?" Constitutionally, and economically, the answer is no. Market failure would result from government interaction. Price gouging does not have an economic meaning because people are going to react to ridiculously high prices by not paying them. They will consider other options, and the market will find the correct market price eventually.

 

Oppression

Merriam-Webster defines oppression as an, "unjust or cruel exercise of authority or power." This is pretty interesting because we can look at it from and economic point of view as well as a humanistic point of view.
I think It's more relevant to look at oppression from the definition of it being unjust for an economic discussion of it.
The Constitution of the United States sets out to define what is just and unjust. It's our framework for interpreting laws, and influencing policy...ideally.There are many instances in past supreme court cases where a person could argue that an unjust excercise of authority happened, and where the supreme court upheld that excercise. Economic liberty is provided for in the 14th amendment. In Muller v. State of Oregon in 1908, the supreme court regulated the hours a woman could work in laundrys. In other cases, the court upheld statutes that hurt competition, as in the case of McCray v. U.S. in 1904. There are also instances where public policy has created an unjust use of power. Some examples are education subsidies, CAFE standards, and even some of the taxes we have now.
If economic liberty is provided for in the constitution, then any act which infringes upon that right could theoretically be called oppression. It's a strong word, but Webster's definition is precisely related to economics, and the policies that we can analyze with efficiency analysis. Any oppressive policy would not be efficient. As we've already discussed in class, markets are better left on thier own, than interfered with by imposing undue subsidies (when there is no positive externality), or regulating industry in ways the constitution does not explicitly provide for. Oppression all of a sudden becomes a large part of our discussion of efficiency analysis, and the issue of public policy.

Friday, October 07, 2005

 

The Constitution is Not a NFL Playbook

The U.S. Constitution, signed in 1787, starts with these words: “We the People of the United States, in order to form a more perfect union, establish justice, ensure domestic tranquillity, provide for the common defence, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.”

In its most general sense, a constitution is the fundamental, underlying framework of government for a nation or state. The United States has a constitution, which incorporates the ideas on which America was founded — commitment to the rule of law, limited government and the ideals of liberty, equality and justice. The United States’ Constitution requires everyone, regardless of position or office, to abide by higher law. The ultimate strength of the U.S. constitution, according to the U.S. Courts Web site, “is that it not only lets people know the limits of the government’s power, but the system of checks and balances that it has created ensures that these limits will be obeyed.”

Before ratifying the Constitution, several states, remembering how the British violated civil rights before and during the Revolutionary War, demanded the addition of sections which would protect individual citizens from government abuses. Since Article V of the Constitution allowed for changes, Congress in 1789 approved the first 10 amendments to our constitution. These are known as the Bill of Rights and list specific rights of the people.

In the wake of Katrina and Rita, many are calling for immediate direction and assistance from the federal government. However, this is not the responsibility of the President or Congress. The 10th Amendment “grants residual power to the states and to the people. The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” The first responders to a calamity should be the local government through law enforcement and emergency services, not the U.S. Military. Funds to initiate full recovery should be from state and city bonds, not 62 billion dollars of the U.S. Treasury. The local mayor and state governor should be directing from the front lines as a good commander should, not wait on the President to give orders or the FEMA director to advise on proper courses of action.

 

Writing to Learn

Robert Frank:
". . . .there is no better way to master an idea than to write about it. Although the human brain is remarkably flexible, learning theorists now recognize that it is far better able to absorb information in some forms than others."
Looks like I'm not the only economist who thinks students can learn economics by blogging. Maybe next semester I should assign students 2 blog posts per month, eh?

And:
"Daniel Boorstin, the former librarian of Congress, used to rise at 5 each morning and write for two hours before going into the office. "I write to discover what I think," he explained. "After all, the bars aren't open that early." Mr. Boorstin's morning sessions were even more valuable than he realized. Writing not only clarifies what you already know; it is also an astonishingly effective way to learn something new."

Thursday, October 06, 2005

 

Is The Pledge Really Unconstitutional

Undoubtedly you have all heard about the cases involving the Pledge of Allegiance. Spearheading the controversy is Michael Newdow, who first brought a case about the Pledge to court back in 2002. As you'll recall, that case was not surprisingly ruled in Newdow's favor by the San Francisco based 9th Circuit Court of Appeals, but later thrown out on standing issues by the Supreme Court. Newdow, unable to accept anything but the defeat of the Pledge, is suing again. This time, he is representing several atheist parents who are against their children saying the Pledge because they feel it violates the Establishment Clause of the First Amendment.

I find it absurd that anyone who has ever read the First Amendment to the Constitution can make any kind of rational claim the the words, "under God," in the Pledge are unconstitutional. The Establishment Clause reads, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof." My simple question is this, what establishment of religion is Congress recognizing by placing the words "under God" in the Constitution? When the Founders first created the Constitution and the Bill of Rights, they wrote those words to keep the government from creating a national church or religion, as they had experienced under the King. The Founders were not writing those words to exclude any and all reference to God or religion from government. Don't believe me? A close look at the Declaration of Independence (which was written/co-authored by the same people that contributed to the Constitution) shows that the Founders riddled the declaration with references to God, both implied and explicit. How could the same people write one document professing God's name and then create another document with the expectation that references to God's name should cease to exist in government? It's simply a ludicrous claim.

There's no question that the Founders wanted to keep the government from establishing or promoting a religion, but the words "under God" do neither. Some would argue that the words themselves constitute recognizing a religion. If this is so, what religion is being referenced? Who's God? The reference to God doesn't constitute an establishment of religion, because it is so broad we don't know what religion that God is being associated with. Is it a Catholic God? A Puritan God? A Muslim God? The point is we don't know. The Founders were concerned with a single religion being forced on the people by the government, not references to and about religion, such as a non specific God.

To assume the Pledge of Allegiance is unconstitutional, is as ridiculous as asking for all U.S. currency to be taken out of circulation, and destroyed, because printed on it are the words "In God We Trust." The Founders were obviously concerned about religion being forced on the citizens, but unlike Michael Newdow, the Founders didn't expect to dismantle religion, and all references to it, from government.

Wednesday, October 05, 2005

 

PATRIOT Act Anyone?

I don't know if you pay attention to the Independent Newspaper at all, which I usually don't, but the front cover from last week (Sept. 29-Oct. 5) pulled me in rather quickly. The article titled "Doing what Sam says: In an era of terror, are we losing our land of liberty?" was particularly interesting to me (as it should be to everyone) especially in context of the Constitution class.

The Patriot Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001) was passed into law only 45 days after Sept. 11, 2001, without any real resistance. It basically gives the government the ability to collect information on American citizens without their knowledge or consent. You can be the target of a search (sneak-and-peek searches of your house when you are not there) or intelligence gathering (like taking samples of your DNA and monitoring your private phone calls, e-mails, and business transactions) if the FBI has a "significant purpose" to believe you are a terrorist. The article notes that the FBI has actually called peace activists "domestic terrorists." Does this mean that if you are a peace activist participating in our democratic system that fosters dissent that you are subject to having your privacy invaded by the US government?

If our democracy is based on free speech and the RIGHT to disagree with the government, then what the Patriot Act is essentially saying is that if you exercise this right you might be labeled a terrorist. And once there is a "significant purpose" established by the FBI, your constitutional rights can be suspended. What I want to know is a PRECISE DEFINITION of "significant purpose" because the two words can really mean anything. Could this be a harbinger of the collapse of our democratic way of life, moving toward a system of fascism?

I am very interested in learning more about the Patriot Act since it seems to give government the power to violate our right to privacy, free speech, and fair trial (shown in the article, as Mayfield was thrown in jail and denied the right "to see and contest the evidence against him, even though he could have faced the death penalty.").

What do you think about discussing the Patriot Act in class?


Tuesday, October 04, 2005

 

Sussette Kelo v. The City of New London, CN

Michael Mc Pherson
September 30, 2005
Economics 398-001: The Constitution and the Economy
September blog report: Susette Kelo v. the City of New London

Case number 04-108; Susette Kelo v. the City of New London .

Fort Trumbull, Connecticut is a small rural town in economic downfall and in order to prevent further economic regress the city of New London empowered The New London Development Corporation to plan a project in order to save the town, by developing the area in order to economically develop the area and generate jobs and tax revenue. The NLDC devised a plan to build a hotel/resort, 80-100 new suburban residences, and various strip-malls and commercial buildings in place of the town of Fort Trumbull. It purchased all but 15 properties in order to go ahead with the development. The remaining 15 properties were not willing to sell their properties to the NLDC, so the city of New London chose to exercise its right of eminent domain and ordered the development corporation to condemn the 15 holdout owners' lots on its behalf. Susette Kelo, and the owners of 15 properties in the city of New London, 11 of which were family residences and the other four properties were owned outright as investment properties then sued the city of New London in the Connecticut courts, arguing that the city had misused its eminent domain power which is limited by the Fifth and Fourteenth Amendment of the US Constitution. Mrs. Kelo and the other property owners argued that economic development did not qualify as public use. The decision, came in a 5 to 4 vote that the city of New London and the ND LC had not misused their power of eminent domain, and that their cities planned “economic development” did in fact qualify as a ‘public purpose’ of utilizing the property in a manner that would be more efficient for the city in tax revenue generation and therefore it could be considered a public use.

In the dissenting oppinion was most aptly but by justice O’Connor that the use of this power in a reverse take from the poor and give to the rich would become the norm, not the exception and that "any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms." She went on to argue that the decision eliminates "any distinction between private and public use of property — and thereby effectively deletes the words 'for public use' from the ‘Takings Clause’ of the Fifth Amendment".

This case has spurred many different reactions amongst citizens and the representatives of our government. Democrats and republicans alike disagree with the courts ruling in this case, and agree fully with the dissenting opinions of the Justice O’Connor. Congress has acted to correct this grave mistake in judgment by the Judicial branch of our government by adding to the ballad the “Protection of Homes, Small Businesses, and Private Property Act of 2005.” which restates the ‘taking clause of the fifth and fourteenth amendments and clarifies it to specify that the use of economic development did not promote the general welfare of the nation and therefore neither the federal, state or local governments cannot use their policing powers of eminent domain for that purpose.

This case is a definate veiw of the power of the supreme court overstepping their boundries and it demonstraites the need for an amndmant to the unite states constitution where termonology must be added to and written it giving the judicial branch its expressed powers and the definition of the terms voted in by the super majority of 2/3 from both houses and the ratified on the state level by people of 3/4 of the state. the expressed powers of the thre different branches are claerly and plainly stated in the constitution and its amendmants for congress and the president, but it has no documented expressed powers of the judicial branch and the role of the supreme court in our united states.

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