Obama’s Monetary Policy: Stick It to the Middle Class

It’s a rare day when I, a self-confessed macroeconomics ninny, dare to write about anything so weighty as federal monetary policy. My husband of four decades loves to joke that I know nothing about money except how to spend it. (Ha. Ha.)

He fails to mention that I have been the chief financial officer of my household budget for 41 years now — that I have managed to put wholesome, safe meals on our family’s table through some of the most treacherous-to-the-middle-class periods of inflation in American history. Or that I take only cash to purchase nearly 100 items every single week and am never off my cost estimate by more than a few dollars at checkout. These are feats of which I am quite proud. In the process of weekly grocery shopping over four decades, I have become an expert at spotting inflation before my financial-guru husband has the slightest clue what’s around the bend.

I’ve been sounding the hyperinflation alarm for more than a year — to rolling eyes and shrugs, and the all-too-familiar “you just want a raise” discounting tactic. So when I read this little piece in the Wall Street Journal last week, I would have been downright giddy at the validation, if I weren’t so utterly depressed by the reality.

It seems that one heck of a prestigious dude — William Dudley, president of the New York Federal Reserve — decided to have a little tête-à-tête with local consumers, no doubt sensing a need to bolster their confidence in the Fed’s more-fishy-by-the-hour monetary policy.

Mr. Dudley gave a nice PR speech highlighting “improvements” in the economy and the Fed’s “successes.” Then came the questions. One guy had the audacity to hope he could make some sense out of the government’s insistence that inflation remains minimal despite the largest monthly increase in food costs in 36 years — and gas spiking so much that soon the cost of getting to work may exceed one’s wages. Dudley made use of a skill they must have taught him at Berkeley, proceeding to ram his Goldman Sachs resume, along with his Gucci loafer, right through his front teeth:

“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he replied. “You have to look at the prices of all things.”

To which one truly great American responded: “I can’t eat an iPad.” He might as well have added, “I can’t drive an iPad to work either.” And at the rate grocery and gas prices are rising, by the end of this year, I couldn’t afford that iPad’s monthly service fee even if I had enough discretionary income to purchase the little piece of dazzling technology in the first place.

If you ask me, Ms. typical American middle-class consumer, I would have to say that Mr. Dudley’s current yearly salary of $410,000 in taxpayer money is just a tad inflated as well. That $410,000 of our money is mere chicken-feed to a man of Mr. Dudley’s stature, I’m told. When he was at Goldman Sachs, he was pulling in millions every year. I’m sure he was worth every penny. If inflation really were down in the 2% range on the genuine necessities of life for us little people, then I wouldn’t begrudge the guy his half-million in wages and benefits.

But Dudley’s salary, along with Geithner’s and Bernanke’s and even Obama’s, are all based on lying statistics that mean nothing in the real world where inflation is actually rampant.

ObamaCare alone has caused a nearly 40% hike in insurance premiums for individual policies such as the one my self-employed husband and I have. The Democrats’ save-the-deadbeats credit card law caused an immediate rise in interest rates for us always-pay-on-time consumers to cover the cost of the mandated write-offs.

Right here, in the real world, Obama’s monetary policy is starting to look like it has a bottom line screw-the-middle-class philosophy.

For the president’s information, the most dreaded word in every middle-class household’s budget confab is — all together now — INFLATION. And just because a few golden-boy hotshots in the jet set can somehow ignore the cost of groceries and gas when they do their little on-paper tallies of deceptive figuring does not mean that a real family can get by without taking these vital things into account.

When inflation drives up the cost of food to fuel the little human bodies sitting around the dinner table every night, then the family must get the money from somewhere else in the budget. Otherwise children go hungry. We don’t have money-printing presses in our living rooms.

When inflation drives up the cost of gas — and gas is necessary to get to work and school and all the other places we must go — then that extra money has to come from somewhere else. The yearly vacation, which has been cut down to a couple of days close by, has to go entirely. Or that summer camp we were planning to send the kids to is out. Or the braces will have to go on the credit card whose interest is way above “prime rate.” There isn’t a middle-class family in this entire country who does not live in dread of the I-word.

Inflation stalks like a thief in the night, filling the nightmares of homemakers and breadwinners alike.

Inflation is the invisible beast that steals the long-awaited raise before it has a chance to hit the bank account.

Inflation is the bandit that steals from the poor while hardly ever even noticed by the likes of the politicians who guilefully prod its crime spree.

Inflation is the monster who gobbles up the goodies of responsible citizens no matter their station.

So, when Obama and Bernanke and all the Fed gurus like Mr. Dudley put their little heads together and formulate a monetary policy, it would really be nice if they remembered — just once — that while the iPads and the Guccis and the golf clubs they love so much are simply wonderful if they cost a little less, the rest of us do have to worry about the rising cost of our groceries and our gas.

In our world, the necessities of life don’t get paid for with other people’s money.

It would be nice if we weren’t told to eat our iPads when we notice that our government has set out to deflate the middle class.

The reason the constitution worked so well for so long was less because of the invention of new amendments, but because it was originally devised as a three-power system of balances of power between groups of people, each of whom would act as checks on the others.

The balances that most people recognize are first, the balance between the executive, legislative, and judicial branches of the federal government.

Then, as it was originally intended, there was supposed to be a balance between the people, who selected the House of Representatives (thus its nickname, “The Peoples House”), the States, who selected the Senators, and the Electoral College, that selected the President.

A spinoff of this was that the President selected the justices of the Supreme Court, but the senate, and thus the States, would have to confirm these justices.

There was a third balance, and it was critically important, but it has been discarded, creating many of the problems we have today.

This was the balance between the federal government, the State governments, and the people.

After the Civil War, it was realized that the States and the federal government were so equal in relationship to the people, that there was a need, created in the 14th amendment, for the federal government to be able to intercede to protect the people, from an abusive State government.

(Justice Thomas recently wrote a brilliant, 100-page defense of this “privileges or immunities” clause of the first article of the 14th amendment in the McDonald v. Chicago gun rights case. Likely out of concern that the “naturalization” clause of the first article may be thrown out, because of illegal alien “anchor babies”, and Justice Thomas did not want to see “the bathwater thrown out with the baby”, as it were.)

In any event, with the passage of the 17th amendment, the Direct Election of Senators, the States have lost the power to protect their citizens from an abusive federal government, *and* the States can no longer prevent federal growth to ridiculous levels.

And this is why our nation is so terribly out of balance.

The federal government will never, ever, reduce itself. It just cannot muster the ability to do less and spend less. But the only existing means for the States to get a handle on the out of control federal government is a constitutional convention, which has become an almost impossible thing to do.

But there is one thing the States might be able to do to restore balance to the entire system. A constitutional amendment to create a body that, at the direction of the States, can trim the federal government at will.

A constitutional amendment to create the Second Court of the United States.

Not a federal court, but much like a mirror image of the original US senate, composed of two judges appointed by each State legislature, judges serving concurrent terms with each State’s senators.

The 2nd Court of 100 State judges would be in between the Supreme Court and the federal District Courts in authority. Importantly, it would *not* decide the constitutionality of laws, because this is a federal court responsibility. Instead, the 2nd Court would determine the *jurisdiction* of cases appealed to the SCOTUS.

Each year, the 3600 US federal judges send some 8,000 cases on appeal from the federal District Courts to the SCOTUS. This is because even the lowest federal judge may assert that a local or State trial has a constitutional, and thus federal issue.

And nobody can tell them otherwise. Which results in enormous growth of federal judicial power, which needs to end.

But after reviewing what the lower federal judges decided about the constitutionality of a case, the 2nd Court could look at the federal case and say,

“There is no constitutional question, here. Thus the case is returned to its State of origin, and the judgment of the State court.”

This would likely “de-federalize” 7400 of those 8000 cases going to the SCOTUS every year.

And while the SCOTUS can only hear a few dozen cases each year, out of that 8000, instead of first reverting to the decision of the federal District Courts, cases the SCOTUS rejected would revert to the decision of the 2nd Court.

Which pretty well would restore the judicial branch to balance. But what about the executive and legislative branches, and federal the bureaucracy?

They would be actively trimmed by the one “original jurisdiction” of the 2nd Court. That all lawsuits between the federal government and the States, one suing the other, would be first heard in the 2nd Court.

This would mean, for example, if the Obama administration sued Arizona over its SB 1070 anti-illegal immigration law, the case would immediately go to the Second Court of the United States, where judges appointed by the States would determine the outcome.

This would give the States the ability to slash the size and scope of the federal government, as long as a simple majority of the States agreed that the federal government was acting in a non-constitutional manner.

Thus 26 States could decide to end the Department of Education, for example. And while this could still be appealed to the SCOTUS, if say, 2/3rds of the States decided one way, then the decision was final and could not be overturned.

This would give the States the *power* of nullification, but within reason. The power to trim the federal government down to size.

Well, technically, federal judges are supposed to examine the constitutionality of laws. The problem lies in that there are no constraints on them doing so. No organization to say that, “While there may be a constitutional issue that could be found here, or not, it should be within the jurisdiction of the local and State courts to determine, not the federal bench.”

Perhaps the most profound example is with the death penalty.

For many federal judges, they cannot overcome their whimsical desire to interfere, with what should be close to a sacrosanct decision by a jury of peers. Only on the most extreme cases, where horrific abuses have been levied on innocent people, should there be any issues with a State death penalty at the federal level.

Right now, for example, federal judges are bickering over the minutiae of the drugs used in State executions. There is no real justification in doing so other than to delay the execution, while nit-picking about the means of execution. This has been going on for decades about every well proven means of execution.

And it is intolerable.

A Second Court of the United States would be a great venue for this, as it would give the States an opportunity to lay down some blanket rules about appellate procedure. Importantly, while the SCOTUS might have once performed that function, they can no longer do so, inundated with cases. That is, 8,000 cases a year, of which they can hear just a few dozen. The rest are returned to the District Courts, for better or worse, often worse.

And even the SCOTUS wastes many of these precious few dozen, on trite and meaningless cases, such as the now infamous, Alaska “Bong Hits For Jesus” case, which they have agreed to hear TWICE.

Since they can only have such a limited caseload, these other about 7,964 cases should have a chance to be “de-federalized”, and only if the Second Court of the United States agrees that there is a federal, constitutional issue dominating the case, will it be returned to the decision of the District Courts. Otherwise, its “federal value” has not been established, so it is no longer federal business.

So it would be up to the Second Court to determine if a condemned man may be hung by the neck until dead with a hempen rope whose fibers twist right rather than left, and if the young man who held up the Bong Hits For Jesus sign should be returned to his high school assistant principal’s office for a paddling, instead of wasting the time of the federal courts.

Okay, dialing it back a little. There is triple set of prerogatives at work in this.

Yes, liberal States would be more inclined to appoint liberal judges, this would be the first prerogative, purely partisan. However, these judges would be appointed for their States prerogatives, different and possibly in conflict from a federal agenda of their party. And third, a judicial prerogative, that is, actually exercising their judgment.

Typically, like the federal District Courts, cases would be assigned to three judge panels *not* from the State of origin, to lessen conflicts of interest. The panel would examine the lower federal courts arguments about the constitutionality issues, but only to help them decide jurisdiction.

At this point, there are eight alternatives for the two parties involved in the case, only *one* of which wants the case *federally* appealed, and only *one* of which is “winning” the federal appeals:

1) Wants the federal appeal, winning the federal appeal, won the State case. This side is happy to end it all any time, and at any level.

2) Wants the federal appeal, winning the federal appeal, lost the State case. Wants to keep it federal, but doesn’t want to roll the dice again.

3) Wants the federal appeal, losing the federal appeal, won the State case. Wants jurisdiction returned to the State.

4) Wants the federal appeal, losing the federal appeal, lost the State case. Probably wants to go to SCOTUS.

5) Doesn’t want the federal appeal, winning the federal appeal, won the State case. Wants to end it as soon as possible at any level.

6) Doesn’t want the federal appeal, winning the federal appeal, lost the State case. Wants to end it in the federal courts.

7) Doesn’t want the federal appeal, losing the federal appeal, won the State case. Definitely wants jurisdiction back in the State.

8) Doesn’t want the federal appeal, losing the federal appeal, lost the State case. Has to go for SCOTUS.

As you can see, with these alternatives, it isn’t just simply that a liberal judge wants to forward liberal cases, but the parties to the cases also get a strong say in what they want to do.

So this seriously discriminates cases coming up from the District Courts. And once an appeal makes it past the three judge panel, all the State get their chance at it.

(I’d like to add, in context, that currently an amendment is being proposed in congress that would allow resolutions by 2/3rds of the States to overturn federal law. There are more holes in that idea than Swiss cheese.)

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