Eliot Spitzer

William Barr’s full-throated defense of the Unitary theory of executive power is built on a fictional reading of constitutional design

Attorney General William Barr’s November 15 speech before the Federalist Society, delivered at its annualNational Lawyers Convention,received considerable attention.Barr attackedwhat he views as progressives’ unscrupulous and relentless attacks on President Trump and Senate Democrats’ “abuse of the advice-and-consent process.” Ironies notwithstanding, the core analysis of his speech is a full-throated defense of the Unitary theory of executive power, which purports to be an Originalist view of the Founders’ intent.

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President Obama Just Lost His Leverage on the Debt Ceiling

Second guessing is oh so easy, and I always looked askance at those outside the negotiating room who had wisdom after the fact. But having said that …

Why did the president agree to a deal without the debt ceiling being lifted? Didn’t we play this script out once before? And didn’t the president, since he needs to be reasonable, in the end cave to Republicans who used the debt ceiling to extract concessions that shouldn’t have been granted?

This was the president’s moment of greatest leverage. The White House could have said to the House: Take us over the fiscal cliff, go ahead and have all taxes go up. You will suffer the wrath of the public—and for what? All we are demanding is that you eliminate a negotiation that will do enormous harm to the nation, a negotiation about the debt ceiling that merely authorizes us to borrow to pay for the expenditures you have voted for.  

Having won the rhetorical debate about raising taxes on the wealthy, the president could have framed the debt-ceiling argument in an equally compelling way. All eyes would have been on the House of Representatives.

Now we will face a much tougher moment. The House will demand a series of deep entitlement cuts in return for lifting the debt ceiling, and the president will have little to offer or demand in return. It is hard to imagine that even he thinks he will get the House to raise taxes again.

So what did we get that was worth leaving the debt-ceiling issue unresolved? Very little. Thin soup at best: little revenue, no grand bargain sufficient to calm demands for deeper cuts in entitlements, and a payroll tax increase that will still lead to a net increase in taxes for the middle class.

We should savor the brief moment of perceived victory that the cliff deal has created, because there is going to be much pain in the coming weeks over the debt ceiling.

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The Four Most Important Political Lessons of 2012

What are the most important political lessons of 2012?

First, we saw the end of the electoral power—at the national level—of the Republican Party's theologically rigid agenda. Mitt Romney's primary season embrace of the social and economic agenda of the more rabid elements of his party doomed him, especially the shrill immigration rhetoric and the harshly insensitive theory that no additional sacrifice or contribution should be sought from those at the top. When he tried to move away from the sharpest edges of this during the general election, the public didn’t trust him.

Romney's defeat was not simply the arithmetic of voting blocs; it was the larger statement that "We all did build this." The sense of community in our politics and society re-asserted itself against the hard individualism of the right. Hence the near certainty that Congress will enact immigration reform and tax rates that require the wealthiest to pay more. The two theologians of the Republican Party—Grover Norquist on taxes and Wayne LaPierre on guns—are now struggling. This is good for our politics.

Second, the president did best and crafted his majority when he spoke to true progressive values. During much of his first term he was quite tepid in his embrace of those values. And his poll numbers were flat, the public disengaged from his efforts. But when he finally spoke up on the agenda that the public cares about—from same-sex marriage to immigration reform to a fair distribution of the tax burden—the public responded. The lesson is clear: The timorous politics of so many Democrats who feel compelled to rush to the middle, to be meek, to shy away from the agenda of change that is needed, is not only wrong substantively, it is wrong politically.

Third, revolutions are messy things. The initial euphoria of the Arab spring—the most important foreign policy event of the past several years—has now been replaced by the grind of upheaval that has no clear direction. Yet the move toward secular society does seem to have traction, the desire for freedom as we understand it seems to be real. There are countervailing forces—the Islamists' desire to impose an intolerant theology. Yet in Egypt and elsewhere the foundation of democracy is visible, if under threat. Whether the state of Egypt ends up replicating Pakistan (we hope not) or Turkey (we hope so), it surely will not be Iran. The Middle East is still a mess, from Syria to Iran. Yet it does appear to be moving in the right direction.

Fourth, just because I can't resist coming back to this issue at least briefly, our financial system is still fraught with structural problems. From insider trading to LIBOR bid-rigging to analysts still shilling for IPOs they have an interest in, the problems continue. It is part human nature, part our failure to sanction properly when we need to, part our government's failure to have the backbone to restructure a system that is clearly unstable and flawed.

What a year it has been. And while 2013 will not see a major national election, we can be sure that most Republicans will obstruct and some Democrats will appease.  We can be sure that the Middle East will continue to be a source of vexing questions that need solutions.  And we can be very sure that Wall Street will not fix itself.  Which is why we will have loads to discuss.

Have a wonderful holiday and New Year.

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Cerberus’ Exit From the Gun Industry Shows How Public Pressure Can Shame Companies To Do Right

Perhaps it is not a surprise that Cerberus quickly decided to sell the Freedom Group, its collection of gun companies, including Bushmaster, the firm that made one of the weapons used in the Newtown, Conn., massacre. Cerberus has been notoriously secretive about its finances, and the adverse press it has attracted in the aftermath of Newtown forced a hasty retreat. This should be very encouraging to those of us who wish to shift the debate about guns: A few critical articles, some whispers from major investors questioning their investment in Cerberus, and decisions were instantly made that could cost the company hundreds of millions of dollars.

So there is a significant message here: Ownership matters. Ownership can be more powerful than regulation. The capacity of pension funds and endowments to act collectively and use their rightful interest in having their funds invested in a way that reflects their core values is something we have largely forgotten. It is too easy when things go fundamentally awry to call for more legislation or blame failed regulators. And surely we shouldn’t diminish the pressure we apply to Congress now to enact real gun control. But at the end of the day, it is those who own the shares and invest the dollars who can and must be held to account. And if those investors awoke to this responsibility and possibility, they could make enormous improvements in American life.

Imagine if investors in Wal-Mart really cared about bribery at that company’s overseas operations or safety standards at its overseas manufacturing plants. If investors pulled their capital, corporate leaders would have to respond.

Imagine if the pension funds and endowments that own much of the equity in our financial services companies demanded that those companies revisit the way mortgages were marketed to those without adequate skills to understand the products they were being sold. Management would have to change the way things were done.

And to return to guns, imagine if the shareholders pressured large retailers to cease the sale of certain semi-automatic weapons or risk having their shares sold? You can bet that those retailers would reconsider their gun sales.

Shareholders have the right and obligation to set the parameters of corporate behavior within which management pursues profit. The speed with which Cerberus said it was getting out of the gun business shows how easy it could be to change corporate behavior, if only shareholders set their minds to it.

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Eliot Spitzer: Tax the Traders! It Would Solve Economic Crisis and Stop Reckless Activity

Both the White House and House Republicans, publicly at least, are digging in their heels deeper and deeper in the so-called negotiations over what we call, alternately, the fiscal cliff, the fiscal slope, the austerity bomb, or the cable-talk-show topic of last resort.

Whatever logic either side pretends to have is irrelevant to the other side, because each is speaking a different political language and indeed a different economic language.

I agree with the White House on the substance of the debate, and I think the administration’s hand gets stronger over time. But as anyone who has been through negotiations will tell you, sometimes you just need a new idea to change the dynamic.

This one is not so new; it has been around for a long time, supported by a wide range of economists, including Nobel laureate James Tobin, as well as advocates, including Ralph Nader in the Washington Post this weekend, and elected officials: a tax on financial transactions. It will give us gobs of revenue. It will fall on a sector that has generated enormous and unwarranted profits for a very few, who at the same time have benefited from huge bailouts and regulatory help and largely escaped any responsibility for their central role in creating the financial cataclysm that we are still struggling with.

Here is the idea: A tax of less than half a percent on every $100 of stock sales or sales of other financial instruments including bonds, derivatives, and options. The tax could raise anywhere from $170 billion to $350 billion per year depending how it was applied. Extend that over 10 years, and we are raising almost what the White House and Republicans agree needs to be raised in order to accomplish the objectives of a grand bargain.

But there is an added benefit here: Trading in the equity and debt markets has gone wild over the past few years. High-speed trading and speculation have overtaken the economically legitimate reasons for our desire to have highly liquid markets: the capacity to raise capital and then allocate it efficiently among sectors and companies. The trading that has emerged over the past few years is not serving that purpose—it is a casino enterprise driven by hidden pools and computer algorithms that do not seek to hold capital for longer than an instant.

To the extent that a financial-transfer tax drove some of those trading practices out of the marketplace, that would be another good outcome.

We are all used to paying a sales tax when we buy things—almost 9 percent here in New York City. The application of this concept to the financial sector could solve our need for revenue, bring some sanity back into the financial sector, and give us a way to raise the revenue we need to run the government in a fiscally responsible way. Maybe this is the old idea that we need folks in D.C. to pay attention to again.

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Why Won't Romney Rescind His Endorsement from the Vile Richard Mourdock?

I have grown increasingly mystified that a presidential candidate we know so little about is so close to winning our highest office. The much-derided Etch-a-Sketch strategy has actually worked. What began as a bad joke about a candidate without any substantial chance of victory has now turned into a path to the White House.

I'm not sure whom to blame: the voters? The media? President Obama? All share some of the fault for not calling Romney out for his inconsistency. Perhaps as a nation, we have all failed to hold Mitt Romney accountable. We don't know who he is or what he believes because we've never forced him to tell us. Every time he opportunistically re-creates his own platform or policy, he gets away with it.

We do know who Indiana Senate candidate Richard Mourdock is. The Romney-Ryan-endorsed Mourdock has added to the litany of outrageous and offensively backward positions that make up the Republican War on Women. But where is Gov. Romney? The former pro-choice moderate, who all but adopted a Todd Akin-like stance on "personhood" before asking Akin to drop out of his Missouri Senate race after his rape gaffe, is trying to have it both ways—disagreeing with Mourdock's beliefs while still supporting him.

It should be the obligation of every voter to find out what Romney really believes on this issue. He has a choice. If he doesn't agree with Richard Mourdock, he needs to rescind his endorsement. He needs to ask Mourdock to stop using his likeness in campaign ads to promote views that he disagrees with. He needs to denounce Mourdock.

If Romney does not take any of these steps, it should be clear to every voter that he cannot be relied upon—that his positions are truly meaningless—that he has no core convictions he deems worthy of fighting for.

American voters are supposed to appreciate straight talk. Mitt Romney makes a mockery of this core notion of American politics.

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We Must Defend Even the Ugliest Free Speech - Especially When There Are Riots

At the annual meeting of the U.N. General Assembly this week, plenty of voices will be heard, including that of the hateful president of Iran, Mahmoud Ahmadinejad, and not one of those voices will be censored.

Rarely has the value of free speech been so threatened. The arc of the unfortunate story is now well-told: Using a perceived attack on the Quran by a private voice as a pretext to ignite anger, forces of intolerance incite riots against visible American interests and representatives, usually causing damage of some sort, and in the recent incident in Benghazi, leading to a tragic loss of life.

How should we respond, both to the initial provocation, and then to the assault on U.S. interests?

We should be clear in understanding that these attacks are the price we pay for believing in free speech, especially in a world where such tolerance is not universally accepted. We are used to dismissing as cranks and crazies the fringe voices who preach everything from anarchy to conspiracy, or who feel compelled to elevate their own religious or political views by speaking in venomous terms about those of others. Yet in parts of the world where free speech is not an accepted part of the political or social fabric, such speech can be exploited by those with multiple motives. As Bill Keller points out in the New York Times, it is often the intent of those causing the riot that tough restrictions on speech be imposed. The very violence they cause becomes the argument they can then use to stifle opposition voices.

All of which brings me to a simple point. If we appear at all queasy in our dedication to the founding principle of free speech and tolerance for that right in others, we give sustenance to those who would squelch it. We also weaken the overwhelming long-term appeal our principles have in those nations now going through a tumultuous upheaval. Of course we cannot expect the end result to be universal adoption of our vision of freedom, but if we waver in defending it as a principle, then we will give up hope that we can move toward that goal.

We have learned well that it is in defending the ugliest speech that the principle of free speech is vindicated, and that point must be articulated even in those lands where the concept may now seem foreign. In nations where the voices of intolerance are most visible and momentarily powerful, it is in our long run interests to remain firm in our clear articulation that the use of violence in response to speech is to be condemned. The rise of democratic voices and free speech in huge parts of the world is a direct consequence of the fact that we have been willing to condemn such violence. So rather than apologize for legal speech, we should say simply that legal speech within our borders is neither endorsed nor condemned by the government, and the use of violence elsewhere in response to speech will not and cannot be tolerated.

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5 Questions for Eliot Spitzer on the Biggest Healthcare Fraud Settlement in History

It's the largest settlement involving a pharmaceutical company in history. British drugmaker GlaxoSmithKline has agreed to plead guilty to criminal charges and cough up $3 billion in fines for a long list of nasty and dangerous behavior, including misbranding drugs, failing to report safety data, and using undue influence to sway physicians to prescribe drugs by using everything from free spa treatments to outright bribes. The improper marketing of drugs -- especially to children -- is perhaps the most disturbing crime of all.

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Eliot Spitzer: How Wall Street is Gaming the Greek Bailout

A funny thing happened on the way to the Greek bailout: Credit-default swaps involving Greek debt—the same kind of financial instruments that triggered the 2008 fiscal cataclysm—were set aside, once again protecting big financial institutions from their own irresponsibility. 

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Spitzer: Romney is Collapsing Because His Economic Arguments Are Failing

From the wreckage of the 2008 financial crisis, two competing strategies emerged.  For the anti-Keynesian deregulatory ideologues—who created the crisis but still refused to acknowledge their role in doing so—the way forward was more tax cuts and austerity, and no government assistance to key sectors. For those who still believed in Keynes and sane regulatory intervention, the remedy was to restore financial regulations that prevented excess risk-taking and to help key sectors—the automotive industry in particular—recover through careful market-based intervention.

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Spitzer: All the Right Reasons for Raising Capital Gains Taxes

The U.S. tax code: Never has so much been done by so many for so few who need so little. The recent public debate about the inequities built into the tax code—triggered by the disclosure of Mitt Romney’s tax returns—is all for the good. So is the call for a “Romney rule” mandating that capital gains be treated as ordinary income, and so be subject to the same top marginal rate of 35 percent that applies to ordinary income, rather than the current top rate of 15 percent.

But we shouldn’t raise the capital gains tax just because it’s a popular idea. The rate should rise for philosophical, economic, and political reasons, as several colleagues and I argued in a recent debate at the Maxwell School of Public Policy at Syracuse University.

The philosophical argument for higher capital gains taxes is not tough. Modern American political philosophy is essentially a battle between John Rawls and Robert Nozick. Rawls, whose famous dictum is that we should maximize the well being of the least well-off member of our society, is generally understood consequently to support progressive tax structures that shift income from the wealthy to the less fortunate—with the proviso that marginal rates that were disincentives to work could over time diminish the well being of the least well off. So progressivity is bounded by that practical limit.

Anybody who is a Rawlsian—which means most Democrats—should favor a Romney rule that would raise his effective 14 percent tax rate to something approaching the 35 percent rate applicable to ordinary earned income.

But how to persuade those who view the world through the prism of Nozick? Nozick acknowledges the need for government to provide certain public goods, such as the national defense and police functions, but he is generally libertarian, and skeptical of an expansive view of government. When it comes to taxation, even those from the Nozick school can be convinced that a flat tax is the best of the bad alternatives. From their perspective, the tax code should not be used to redistribute—but it also should not be used to discriminate. So here is the pitch to them: Give us a flat tax! Do not discriminate between ordinary earned income and capital gains income: Tax them the same! Bring Mitt’s marginal rate to the same level as that or ordinary income. If both can be prudently lowered through loophole closing, that is fine.

This brings us to the economic arguments for raising capital gains rates. The only real caveat—for either Rawls or Nozick—is the claim that a marginal rate of 35 percent on capital gains would be such a disincentive to economic activity that the reduced economic activity would either harm the well being of the least well of member of society—the Rawls concern—or would simply reduce the total level of output, regardless of distributional concerns—the Nozick concern.

On this pure economic issue, all serious studies of the issue (see in particular the reports by Citizens for Tax Justice and work by my fellow debater Len Burman, a superbly well-respected economist—provide dispositive evidence. The issue has been tested in the real world: Capital gains rates have through most of history been the same as those for ordinary income, but occasionally been reduced—or raised. Consequently, we have been able to measure the actual impact of rising and lowering the capital gains tax rate. Raising the rate as we have proposed would not be a disincentive to investment.

The opposition at the debate did not raise any counter evidence. Often what is not said is more important than what is. They said nothing factual about the actual impact of an increase in the marginal rate on capital gains. Instead, they simply asserted that raising the rate would be counterproductive, with no supporting evidence. Their arguments were reminiscent of the apocryphal story of the Russian economist who rejected an answer to a real-life problem by saying: It works in practice, but it doesn’t work in theory.

The argument that capital needs additional incentive to be invested is always asserted, rarely supported. It is time to put the other side to the hard test of proving its case. They can’t. Perhaps this is why so many on both sides of the political aisle—from President Reagan to the Bowles-Simpson report—have supported eliminating the disparity between capital gains tax rates and ordinary income tax rates.

The politics also favor raising capital gains rates. I do not mean the politics of Democrats vs. Republicans. Just the opposite. Americans on both sides—Tea Partiers, Occupiers, and everyone in between—is resentful of perceived inequities and preferences that inure to one favored group or another. Our sense of community, shared sacrifice, and shared obligations has been damaged. Having the benefit of equal burden sharing would be a welcome salve. Our larger politics would be better with a level playing field between earned income and capital gains.

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Eliot Spitzer: 2 Bold Ideas Obama Should Embrace to Stand Apart from Mitt Romney

With Mitt Romney’s almost certain win in New Hampshire this week, the race for the White House has now resolved to what was predicted almost a year ago: Mitt vs. Barack. The more extreme and entirely irrational voices of the Republican Party have nearly burned out, and the Republicans will be offering up a rather bland and opportunistic middle-of-the-roader who nonetheless has a credible record in the big leagues of private equity and as a one-term governor of Massachusetts. Romney has successfully navigated a minefield of debates and attacks from the right without marginalizing himself so that he lost his capacity to appeal to the undecided voters who will determine the election in November. So let’s be clear: Democrats cannot easily dismiss Mitt Romney. This will be a tight race, and the economic data of the late spring and summer will help determine the emotional state of the electorate.

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Eliot Spitzer: Our Rallying Cry Should Be, "We Own Wall Street and We Can Stop Corporate America's Worst Behavior."

 As the year ends, American politics remains mired in the agenda of the right. The House is, at least momentarily, refusing to extend the payroll tax cut and unemployment benefits—two policies genuinely beneficial to the middle class. And the presidential campaign heading into the Iowa primaries is dominated by the libertarianism of Ron Paul and the astonishing, appalling ideas—eliminate child labor laws, for instance—of Newt Gingrich.

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Eliot Spitzer: How to Turn the President's Nice Words into Action

On Tuesday, in Osawatomie, Kan., President Obama gave a glorious and powerful speech that was a testament to the enduring appeal of one of our greatest political figures: Theodore Roosevelt. The president harnessed the economic principles of the Progressive Era and applied them to the economic realities of today. He made an argument for a dynamic government that invests based upon principles of equity and opportunity for all; a government that fosters a genuine robust capitalism based on principles of true competition and market integrity. The difference between the president’s vision of government and that of his potential Republican presidential opponents is vast. The difference between the president’s speech and his own governance over the past three years is, unfortunately, only marginally smaller.

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Eliot Spitzer: 5 Ways to Make Banks Pay for Their Secret $7 Trillion Free Ride

Imagine you walked into a bank, applied for a personal line of credit, and filled out all the paperwork claiming to have no debts and an income of $200,000 per year. The bank, based on these representations, extended you the line of credit. Then, three years later, after fighting disclosure all the way, you were forced by a court to tell the truth: At the time you made the statements to the bank, you actually were unemployed, you had a $1 million mortgage on your house on which you had failed to make payments for six months, and you hadn’t paid even the minimum on your credit-card bills for three months. Do you think the bank would just say: Never mind, don’t worry about it? Of course not. Whether or not you had paid back the personal line of credit, three FBI agents would be at your door within hours.

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Eliot Spitzer: Why Occupy Wall Street Has Already Won

The following article first appeared on Slate. 

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Geithner and the AIG Emails: Scandal Is Only Tip of the Iceberg

In a December New York Times op-ed, we called for the full public release of AIG email messages, internal accounting documents and financial models generated in the last decade. This Thursday, a Bloomberg story revealed that under Timothy Geithner's leadership, the Federal Reserve Bank of New York told AIG to withhold details from the public about its payments to banks during the crisis. This information was discovered when emails between the company and the Fed were requested by representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

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