What the F*** is Federalism Comment 1

Recently heard a piece on NPR Radio somewhat on point with my thinking for my What the F*** is Federalism!? Theme/Thread.

http://www.npr.org/2013/12/03/248320213/upset-over-divisive-political-culture-blame-burke-and-paine

Very interesting indeed although I think it is a bit over simplified, especially in today's atmosphere where politics have become so fragmented. I agree that the tea party does seem to be advocating for  revolution and the democrats are trying to hold fast to a 1930s new deal big federal government tradition. However, there is Neo-Conservatives that want international capitalistic empire that fall somewhere in between without even having to point to the fact that the tea party has become a hot bed for the religious right and/or tax protesters and other extremist states rights advocates. And for that matter, states used to be able to sponsor religion, just the Federal Government could not, the Constitution did not apply the same to the states as soviergns themselves in 1795. The tea party would not necessarily oppose the state of Alaska requiring all people to practice traditional Christianity in order to be elected to the state legislature. A political libertarian would probably let it slide so long as the government was not inteferring with free market capitalism, and that should go for both state and federal regulations. That is an important distinction to consider when trying to understand what the tea party actually is. It is much more than just the political philosophies of Ron Paul.

A philosophical libertarian would be opposed to both, yet an epistomological libertarian would consider the alternative to determine which outcome is more easily falsifiable and leave open the possibility that a requirement of Christianity (primarily white male Protestant views of Christianity through the mind of an enlightened aristocrat) may allow for more freedom of religion an thought, as it seemed to do generally in 1776, or it might not, as in today with some conflicts between science and religion. But one must always be careful to not be too sure. 

Is the federal government necessary. Yes. How much power do they deserve is and has been open to debate. Jefferson did not expect the Constitution to last this long. It only did because of the flexibility of Supreme Court Interpretations. And those interpretations allowed the New Deal to go through. Bad or good political is better than violent, yet violent in reality has proved to be an oft necessary spark (see American Revolution, Civil War, Labor Movement, Civil Rights Movement). Big changes often come only after some violence. It usually (not always) benefits to be the less violent one. 

Can we unwind some of the power without undermining, say, Civil Rights? yes probably and in that sense these so called radical revolutionist tea party folk pointed to be the author being interviewed on NPR are advocating for conservative revolution that is trying to recover some form of lost atonynimity of the individual and his or her liberty under the modern administratie state (and both state an federal governments are so much larger than they were when the Constitution was drafted, along with the populations they govern over. And the author points out Burke was advocating for a King. The tea party folks against the federal government would surely prefer the radical ideas of Paine, unless of course, the king could enforce a prohibition like, I don't know, no abortions. Not that I should comment, I adhere to the espistogical libertarian perspective and no government or individual has the right to tell another what to think or that matter what to do to their body, they do have the right to shun them after, and that creates a real problem with respect to states enacting restrictions that make abortions very difficult. But on the orherhand, we don't have the right to tell and individual they cannot shun someone else. We can however tell and individual that they cannot shun someone using the long arm of the state if they are in a position to exert that power, so long as the majority agrees and/or the cultural traditions and values otherwise demand.

There are surely some flaws and inconsistencies in my position, but the world is not black and white, it is shades of grey, and an espisotmological libertarian should always strive to avoid universal maxims and at the same time help other to better narrow in on their own values. 

There is no conflict between the principles: (1) all I know is I know nothing, and (2) know thyself. There is and has been an inconsistency between individual liberty and government power. The issue is skewed when we focus too much on federal government invading liberties, when state governments have and do at the same time, and yet no one wants complete anarchy there needs to be some control besides just the civil society, church and family, and this author, Mr. Levin, jumps to the conclusions to use Paine as one that supports federal government control. But when we contextualize it in the era, there was to be no more king, then once free states had too much power and the United States was disfunctional and indefensible and in debt. We then had a great internal debate and illegal overthrew the Articles of Confederation, and the new Federal Constitution added power while the Bill of Rights added limits. None applied to states at first. This author, along with the moden american political discussions, often ignore this problem and the battle becomes that of lovers of Federal Govenment vs. lovers of some lost notion of liberty and capitalism.  And in viewing in through that over simplified state government ignoring lense, the author is right on point.

Ignoring the authors over simplification , we should look deeper into the historical flip flopping of liberal and conservative, left and right. There is a saying: If you go far enough left, you end up on the right. America's political history is riddled with said phenomena and is evinced but the minimum of 5 different political epochs (that are only comprehensible in hindsight). This author offers an interesting layer to the examination of that American political phenomena. It makes me wonder whether it is true that there are no unique ideas as everything is just recycled. At least with respect to modern american intellectual-commercial society, it all seems to go back to the Ancient Greeks.

What the F*@# is Federalism!? Part II

But before we trace the evolution of politics in the United States, I want to illustrate my purpose and draw on some professional experience. I am a bankruptcy attorney. Bankruptcy in the United States has a unique purpose, especially today. It is a government promulgated system that prevents people from going bankrupt. I always stress to clients that by filing their bankruptcy petition, they are not going bankrupt but instead filing for bankruptcy protections. It may sound like a difference in semantics, but I mean to emphasize that difference in all seriousness.

Under state contract laws, property laws, and consumer protection law, there is still little protection for the debtor that is overwhelmed by creditors with unmanageable debt. That is were the power of the federal government comes in. First, the Supremacy Clause in the US Constitution is an important point of consideration. This is, in my opinion, the ultimate foundation for federal power, and this ties directly to the US Supreme Court case of McCulloch v. Maryland and the state government vs. federal government battle over banking and insurance regulation. This battle rages today. Look at any banking or insurance  regulation, ERISA, and even the bankruptcy laws with states opting out of federal exemptions. It is a political hot potato game of jurisdiction.

I can best speak on the bankruptcy laws. An they do a lot of good for a lot of debtors, but not all debtors. Business debtors have unique circumstances where they get almost a sort of preferential treatment. Here are some examples:

MEANS TEST

If you have primarily consumer debts you have I pass a means test to qualify for the usually quicker and easier Chapter 7. If you have primarily business debts, then you automatically qualify.

Sometimes their may be disadvantages for a Chapter 7, and a Chapter 13 (or Chapter 11 in the business context) does not require all assets (minus exemptions) be liquidated. But if you are not in a Chapter 7, you can hedge a good bet that your bankruptcy will be a long and drawn out process.

LIEN STRIPPING 

You can usually strip down and strip off liens for investment property. Not so if it is your homestead. If it is your homestead, then you can only strip off. Business debtors are more likely to have investment property than consumer debtors. And it would be very advantageous, especially in today's real estate crisis, or even just to accelerate recovery, to allow homeowners to strip down and strip off.

I will explain this is more detail for those completely lost. Liens are used to secure creditors with particular types of collateral. Think of mortgage, lien, or anything else the creates a right to repossess collateral as a security interest, and it is an actual property interest, it is what secures the creditor on the repayment of a particular debt. 

When you have a lien on your new car from the creditor that jut financed the transaction, that creditor should generally take a purchase money security interest away from the transaction. An off the cuff estimate is that when you drive your new car off the lot, it loses half its value. That creditor is now undersecured.

Say instead you finance a house with a bank. And the bank, as part of financing the transaction, receives a mortgage in your real property. If that house is your primary residence, it becomes your homestead. Your house goes up in value, now your creditor is oversecured. Now you want to renovate the house. You pull equity out of the house with a 2nd mortgage and the new bank gives you money to remodel. 

Now the housing market crashes, or hell your spouse pulls all the equity out and stops paying the bills and you do know, either way, and innocent but unfortunate debtor deserves bankruptcy protections. And then of course states like Florida have an unlimited homestead exemption. But even other states, if you owe more on your home than it is worth (underwater) there is no equity to claim exempt anyways. 

So now we have to determine whether these are secured creditors or not. In a Chapter 13, where most all jurisdictions allow consumer debtor to strip liens, and then in the 11th Circuit interestingly allows stripping in a Chapter 7, at least for the time being. If the lien is stripped, the creditor, or a portion of the creditors debt will be treated as unsecured instead of secured even though they have a security interest. This is determined by determining the value of the collateral at the time of filing. A creditor that owns a debt that is less than or equal to to value of the collateral is fully secured. They retain 100% of their security interest. All others are either partially secured or fully unsecured. 

Usually, consumers can only strip off liens if fully unsecured creditors. They cannot, at least with respect to their  homestead, strip down partially secured creditors. 

This lien stripping example should first serve as an example of federal law destroying state property rights in the interests of protecting debtors.

It should also demonstrate that bankruptcy laws are not perfect, and while jurisdiction difference allows us to compare and contrast the laws, it also means we must actually engage in contrasting and comparing and determine what we believe is best for self, group, and whole. 

Other places that need improvement:

STUDENT LOANS

The evolution of the law is interesting. Most used to be dischargable, but have changed since the federal government started guaranteeing. But the federal government subsidizes and guarantees particular housing markets, and these debts are dischargable and liens can be stripped. The difference between this housing crisis and the student loan crisis is minimal compared to the other dischargable debts, and the stark difference between the treatment of the various debts has lost touch with reality on multiple levels. There is a big difference between fraud, unpaid child support, unpaid taxes, and student debt. 

SOLUTION

No one should rant about issues with proposing a solution, and no solution is perfect but all can be amended. Ou have to start somewhere before Carl Popper's falsifiability can be put into motion. So here is mine with a millions flaws I have yet to think of.

I do not think this author has discounted the idea that most or at least some student loans should eventually be dischargeable, especially in a Chapter 13 type plan.

Same goes for treatment between consumers and businesses when it comes to qualifying for a Chapter 7 or stripping down liens in either a Chapter 7 or a Chapter 13. 

How do we balance this plans with the competing interest, longer disclosure and look back and claw back procedures, giving specific debts a reach forward power like that for probate/trusts/life insurance. The code could make a Chapter 13 look like a beefed up Chapter 7. This could solve all the problems including the numerous people that are scared if the Chapter 13 with a 5 year disposable  income commitment. This can all be remedied with federal law in one broad swoop. 

So what is federalism, but then it was strong federal government power. And in a lot of places back in the early days of the nation, that helped the merchants and bankers and creditors of the era. Today, systems like bankruptcy, do just the opposite, generally, but inconsistently.

Socrates and the Greater Fool Theory

The greater fool is an economic theory akin to riding the wave. 

Survivor investing.

Survivor vs. Value vs. Contrarian.

Survivor = Speculative Bubbles.

Value = Long Term Stability and Growth.  Finding outstanding company at sensible price.

Contrarian = Scavenger.

Value and Contrarian require discounting.

In my opinion the greater fool theory can be much deeper. The greater fool theory in an epistemological sense goes way beyond economics. Let me try and explain.

Behavioral psychology and epistemology.  What I think vs. what I know. What people think vs. what people know. People as a whole or as a group that is part of the whole cannot know anything without the forms (Plato's) and agreement and conversation. What individuals think can and must change for a group of individuals "know."

Knowledge is elusive and has its limits. 

The ship captain that thinks he/she knows when he/she really does not know is eventually going to wreck the ship carrying the whole.

To bring this into the current political sense, we cannot help but to think free market capitalism vs. socialistic government controls that restrict free trade. 

One can't help but think, when looking at the fat man standing next to the thin man, that the fat one has taken advantage of the thin.

So is it liberal/socialist policies that make one thin, or is it free-market capitalism that does so? And depending on your political perspective, you would come to opposite conclusions.

So ultimately we are asking what sort of government is best? And does that answer depend on what group we are categorizing together as a whole or as a part of a whole? Political philosophers have been debating this, in my opinion, since around 500 BCE, the time of Socrates. 

And before we can make decisions concerning the whole ship, we must first make decisions about who we are as individuals.

Blank slate environmentalism (not green hippies, but in the sense that we are shaped by our environments and societies and upbringing) vs. some pre-determined universal, so imagined genetic advantage of some over others. And if the latter, we must consider advantage for what? Well I think the answer is advantage to get fatter than the thin man (what is fat, what is value, it seems that it must be subjective).

The government does and always has had a say in things. Not just what part of the free market to help, but what part of the free market to restrict or shut down. Moreover, the government, particularly through use of the law defines what property rights are in the first place, and perhaps more important, what rights are in the first place.

But we have a government of men (and women)... So that brings us to the question of whether the law shapes society or society shapes the law.

The answer is: a little bit of both, just the same easy cop out answer as the blank slate question. 

But we cannot help going back to epistemology and the Socratic image of the ship captain and the different types of individuals. Epistemology is of Greek origins and essentially refers to the study of knowledge with an emphasis on its limits. The ship captain image, already alluded to, is this:

One kind of person is a person who does not know. You may be a person who does not know how to be a ship captain. Then there is one that does know. What I said about you may be wrong. I do know some individuals that do know how how to sail and some that possibly know how to be a ship captain. But of those that know, for any specific category of knowledge, are usually less than those that do not. And then still we need Plato's forms to define the categories. So there are 2 categories I want to make clear so far: (1) those that do not know and (2) those that do.

Now we pull thinking in. (3) those that think they know when they do not. And perhaps even (4) those that think they do not know when they in fact do know. 3 seems by far more harmful than 4. And 2 seems more helpful than 1. That only leaves the question of where 1 falls compared to 4...

The greater fool theory posits that category 2 thinks that there will always be a category 3 in the future and thus wants to take advantage of category 3. 

Contrarian investing posits that category 2 thinks that there has always been a category 4 and they want to take advantage of category 4.

Value investing posits that everyone eventually learns the truth and becomes category 2 thus it is safest to not take advantage of other categories else you might discover you have been taken advantage of. Nevertheless, unless everyone is actually a category 2, this perspective still leaves one vulnerable to be taken advantage of.

In my opinion, the best perspective is to know that you do not know and you must try hard not to think you know things you do not. That is what Socrates would have demanded, and recognition of the limits of knowledge is a core component of epistemology. If great is also good, then the greater fool is also a good fool. And a good fool does not tell others what to think or believe, instead he lets each figure it out for themselves.

America was built by the greater fool in many ways. First, our constitutional freedoms let us believe what we want and say what we want. 

Next, our government has always been involved in propping up some activities while putting down others. From land grants to state sponsored monopolies to unfettered access to incorporate and tax breaks and outright prohibitions. 

This is no completely free market and there never has been one. And even if we could have one, I do not know if it would be good for the whole, even if some groups think it would. 

The greater fool is one the believes in possibilities. The notion of an American Dream would never have been created without the fact the individuals love to believe in possibilities. The American Dream will crash and burn if people cease to believe in possibilities. 

From this perspective, it becomes very difficult to differentiate value investing from the greater fool theory. Even the value investors believe somethings are possible. 

If you argue the difference boils down to discounting, well then I would say you are discounting social psychology and the role that public opinion, or what the greater fool theorist thinks is public opinion, controls or discounts the ultimate decision of what bubbles are rising and how fast. 

Know value. But how? That is the problem. The captain is valuable to the ship. 

What is valuable to you, money, gold, silver? If you want to make yourself fat, or rich in material possessions, you cannot help but speculate. But could there be something else beyond that. Something more spiritual perhaps. Something more true. Does it matter what the many think, or should it only matter what category 2 thinks?

I think we should work hard to make everyone learn to be category 2 and not know anything but realize and believe in the possibility that we can all one day agree  on what is truly worth valuing. Only at that time, and once we all agree on the forms, or the boundaries to that category, whatever we may decide to call it, will it be possible to stop some individuals from taking advantage of others. And we cannot forget we need different skill sets, different parts doing different things to make the whole more full, so that when the whole realizes there is an infinitely expanding universe or whole some other part of that bigger whole does not reduce us to nothingness and these conversations continue to be something to value.