More Shades of TARP: Latest Deficit Ceiling Plan to Establish Extra-Constitutional Legislative Process

We commented last night on the parallels between the pressure tactics used to railroad the passage of the TARP and our current contrived debt ceiling crisis. The similarities have increased in a predictably bad way. Even worse than the economic toll radical budget cutting will impose on ordinary Americans is the continued undermining of basic democratic processes.

The foundation was set with the TARP’s radical power grab. As we wrote when the Treasury presented its initial draft:

But here is the truly offensive section of an overreaching piece of legislation:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

This puts the Treasury’s actions beyond the rule of law. This is a financial coup d’etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review?

The answer to that question, as we know now, was “no.”

The TARP, along with a new extralegal legislative process that is likely to be part of the bailout bill, are enabling acts. In a 2010 post, John Ryskamp discussed enabling acts, using the German Greek bailout legislation, Paulson’s 2008 draft legislation, and Hitler’s 1933 enabling act as case studies. His overview:

The enabling act changes the nature of the political system which puts it into effect, which is why such political systems are said to have “committed suicide” by passing enabling acts. It is important to keep this in mind, because, on their face, enabling acts seem often only amend the previous political system; the political system remains, and indeed enabling acts make much of the supposed preservation of the existing political system. They also make much of dealing only with specific problems over a specified period. But various traps, sprung along the way to enforcement, lead to unitary power and the discarding of government. People wonder how a simple remedy led to such profound dislocation.

As with the TARP, we have the drumroll of a purported threat to public safety, namely the possible Destruction of the Financial System as We Now Know It. John Boehner is stoking the panic by saying there needs to be a deal by the opening of trading in Asia or the Market Gods will take their vengeance. Turbo Timmie will no doubt warn of dire consequence of the failure to ink a deal by the supposed drop dead date of August 2 when he makes the rounds on Sunday TV.

However, the New York Times apparently did not get the memo. Its story on the status of the budget talks is below the fold on the front page. Above it are two stories on the Norway bombings, two on the Murdochs, one on the death of Amy Winehouse, and one on the first gay marriage in New York. And the Treasury markets did react to the news of the breakdown of talks on Friday. Yields rose initially, as one might expect, then fell back.

Nevertheless, both the Washington Post, which is taking up the deadline hysteria, and the more jaundiced Times are neglecting the most heinous aspect of the latest proposed remedy, which is to circumvent Constitutionally-prescribed legislative procedures. There’s no mention in the Times, and from what I can tell, only this oblique reference in the Post:

Then Congress would go to work to produce as much as $3 trillion in additional savings through an overhaul of the tax code and major changes to Social Security and Medicare, the biggest drivers of federal spending. To identify those savings, Congress would create a new bipartisan debt-reduction committee comprising 12 lawmakers from both the House and Senate, an idea offered by Senate Majority Leader Harry M. Reid (D-Nev.).

This innocuous description is incomplete and misleading. Ryan Grim explains what it really means in the Huffington Post (hat tip Guy S):

Debt ceiling negotiators think they’ve hit on a solution to address the debt ceiling impasse and the public’s unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress.

This “Super Congress,” composed of members of both chambers and both parties, isn’t mentioned anywhere in the Constitution, but would be granted extraordinary new powers. Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers — six from each chamber and six from each party.

Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

House Speaker John Boehner (R-Ohio) has made a Super Congress a central part of his last-minute proposal.

The Tea Partiers make a fetish of invoking the Constitution when it suits them but will happily run roughshod over it when it conflicts with their pet wishes. Not that they are singularly guilty in this conspiracy against the public-at-large, but their faux holier-than-thou/populist pretense while aligning themselves with an elite power grab is particularly nausea-inducing.

I hate using the word “fascism” because overuse has weakened its bite, but trumped-up threat by trumped up threat, our government is moving relentlessly in that direction.

This post originally appeared at naked capitalism and is reproduced here with permission.

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