Fanniegate

More Americans should own their own homes, for reasons that are economic and tangible, and reasons that are emotional and intangible, but go to the heart of what it means to harbor, to nourish, to expand the American Dream.

—William Jefferson Clinton, November 1994

So begins the recently released book, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, by Gretchen Morgenson and Joshua Rosner. Morgenson is a business reporter and columnist for the New York Times, and Rosner is a housing and mortgage finance consultant.

I have just finished reading it, and as bad as I thought the 2008 financial markets meltdown was, it was worse. The book depicts a tale of corruption, vote buying, governmental intimidation, and complicity between key government leaders, Wall Street firms, the executives of Fannie Mae and Freddie Mac, and regulators who tag-teamed to hornswoggle the American taxpayer – apparently legally because none of them has been charged with a wrong-doing.

How did it happen? I will devote this and my next blog to answering that question.

Two years into his first term, Clinton spoke to a fawning audience at the National Association of Realtors' annual meeting in Washington, D.C. and announced a new program, National Partners in Homeownership, a private-public collaboration whose goal would be to raise home ownership from its mid-1990s level of 64% to a hoped-for 70% in 2000.

Never before had regulators teamed up with those they were regulating, as would be necessary in the Clinton program. Unanticipated was the impact of loosening the home-buying rules to accomplish program’s goal – reduced down payments, historically the way to assure home buyers had substantial skin in the game; risky loan-to-value ratios; less due diligence on the borrower’s creditworthiness; and relaxation of the applicant’s debt-to-income ratios, which disqualified some aspiring homeowners and prevented others from taking on more home than they could afford.

Unchallenged and unexamined was the economic value of increasing the national home ownership six points, destabilizing the natural growth in housing demand and production, using government subsidies (which in the end are taxpayer financed) to create an inevitable bubble while inducing people to take on a strange new obligation for them – a home mortgage – for which they lacked the means and economic discipline to repay or sophistication to understand. Just as a college education is not for everyone, neither is home ownership. Improving access isn’t the problem.

Yet, the foregone conclusion of the Clinton program was that access problems had indeed locked out otherwise deserving people from home ownership, and that was to be the focus of Fannie Mae and Freddie Mac – two quasi-governmental institutions that facilitated the country’s home ownership.

Fannie Mae is a relic of the Roosevelt New Deal. The Federal National Mortgage Association (FNMA cum Fannie Mae) was created in 1938 during the height of the Great Depression. Originally its purpose was to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the production affordable housing. Fannie Mae provided loan originators a secondary market to sell FHA-approved mortgages. In 1968, with the cost of the Viet Nam war increasing the national debt, Lyndon Johnson wanted to get Fannie Mae off of the government’s books, so it was re-chartered to become a privately-held corporation, albeit one with special privileges. It then became a buyer of mortgages which were not FHA-backed (a function assumed by Ginnie Mae) and its explicit guarantee became an unwritten implicit guarantee. Changing the guarantee was a necessary condition to get Fannie off the government’s books and lower the government debt. Freddie Mac was created by the government in 1970 with the same mission as Fannie and to give Fannie competition. Freddie was privately-held from its inception.

The special privileges I just mentioned include the implied guarantees, which reduce Fannie and Freddie’s borrowing costs significantly – an advantage not possessed by its competitors in the private sector. The CBO estimated that this was worth about $2 billion annually. Moreover, Fannie and Freddie aren’t required to carry the capital reserves that others in the private sector must carry, increasing their financial leverage, which buoys earnings in good times and curses them in bad times. There are no SEC filing requirements for them, and neither institution is held to the same money market fund diversification standards as its private competitors are. Therefore, a fund manager may exceed the 5% limit and hold all of its assets in Fannie and Freddie debts if it wanted – because of its implicit guarantee from the federal government.

A person who really knew how to exploit these advantages to their limit was James A. Johnson, Fannie’s calculating and politically well-connected CEO. He was a foot soldier in the Viet Nam anti-war demonstrations, had worked in the failed presidential campaigns of Eugene McCarthy and George McGovern, and had been an advisor to Carter’s Vice President, Walter Mondale, later working on Mondale’s failed presidential bid. Johnson had been Bill Clinton’s roommate at Georgetown University. He was a political junkie whose career aspirations were totally political, hoping one day for a high position or office, perhaps White House chief of staff. (After Fannie, he aspired to be Secretary of the Treasury.)

In the mid-1980s of the Reagan years, Fannie was the target of shifting political winds in a “small government” administration set on squelching the privately-held institution’s government perks. Its CEO then was David Maxwell, a brilliant manager and leader, but no politician. He had met Johnson at one of Washington’s never-ending dinner parties. Johnson’s political connections could be helpful, he thought, so Maxwell asked Johnson to help fend off one of the many attempts to fully privatize Fannie. As 1990 approached and with it Maxwell’s retirement, he invited Johnson to become Fannie’s Vice Chairman, queuing him up as his replacement.

Lacking any business experience, particularly in the area of finance, Johnson took the helm of Fannie in 1990. He quickly grasped the potential of the money making machine he now ran, particularly if he could enlist the collaboration of Washington’s political class to fend off privatization efforts and any banking regulations that could interfere with his free-wheeling plans. Johnson would turn Fannie into a lobbying machine that at the same time engaged in self-promotion and fought off its enemies.

One of his first initiatives was to devote $10 billion to the “Open Doors to Affordable Housing.” The idea was to finance so much low income housing that Fannie’s federal perks could never be taken away. Thus, organizations like the Association of Community Organizations for Reform Now (ACORN) and similar low income advocacy groups, which had agitated for tighter regulations on Fannie, were bought off with “research” grants and invitations to sit on the Fannie Advisory Council, turning them into de facto lobbyists. Though most of the poor would surely be hurt most by turning them into homeowners, money is the great mollifier in quieting those agitating for the downtrodden.

When lawmakers, notably Democrat Rep. Henry Gonzalez, Chairman of the House Banking Committee and its subcommittee on housing and community development, wrote the laws to dictate the percentage of loans Fannie and Freddie must underwrite from low income and inner city families, ACORN was invited to sit at the table. ACORN had finally gained respectability.

The timing of Clinton’s 1994 Partners program was a godsend. ACORN used its research money to collect data showing that minority loan applicants were rejected many more times than whites. A researcher with the Boston Fed picked up the trail and published similar findings (although they were later found flawed, the critics were ignored.) Fannie fanned the racial flames to justify spending $7 billion on “underwriting experiments” – a euphemism for loosening underwriting standards for the low income loans it would buy on the secondary market. First to go were credit histories, then loan-to-income ratios. Down payments were lowered because the poor had a low propensity to save and it was thus discriminatory. Subprime entered the mortgage banking lexicon.

Having greatly reduced the underwriting standards of the mortgages Fannie and Freddie were willing to purchase after 1994, a predictable feeding frenzy among mortgage originators followed. Notable among them was Countrywide Financial. When Fannie announced its “Trillion Dollar Commitment,” a program to underwrite mortgages for ten million homes for low income families, it needed substantial suppliers of mortgages it could buy, and Countrywide was more than willing to fill the pipeline. Others – NovaStar, Fremont, and a gaggle of originators – would join later. But Countrywide Financial became Fannie’s single largest supplier of home mortgages and the nation’s largest lender, making a fortune for its co-founder, Angelo R. Mozilo. Mozilo wanted the elimination of down payments for low-income borrowers, along with paring back of documentation and paperwork so that loans could be approved “in minutes.” (It wouldn’t be long before he was abandoning underwriting standards altogether and doctoring mortgages so their applicants looked more creditworthy than they were.)

Mozilo’s business practices were risky and ill-advised. But unlike Fannie and Freddie, he was running a private sector for-profit business, and thus was free to offer his customers any and all enticements to use his money, provided he was willing to suffer the consequences when loans went sour. But Fannie was purchasing and implicitly guaranteeing over 25% of Countrywide’s mortgages. That’s hardly the same as operating in a free market.

Mozilo, the son of a Bronx butcher, was a co-founder of Countrywide Credit Industries in 1969, the predecessor to Countrywide Financial Corporation. A symbiotic relationship developed between Johnson and him, with Johnson allowing himself to be interviewed for the television program “The Countrywide Story” that aired in California in 1997 about the state’s leading entrepreneurs. In return, Mozilo let Johnson use his corporate jet to fly around the country, and Countrywide provided Johnson cut-rate mortgages to buy multi-million homes in Ketchum, ID; a penthouse atop the Washington, DC Ritz Carlton, and a home in Palm Desert, CA – homes he still owns and enjoys today.

In time, Mozilo would develop a VIP Friends of Angelo (FOA) program that would make sweetheart loans, not available to the average slug like you or me, nor to low income borrowers, but to such luminaries as Chris Dodd, Democrat Senate Banking Committee Chairman; Kent Conrad, Democrat Senate Budget Committee Chairman; Democrat Sen. Barbara Boxer; Democrat Diplomat Richard Holbrooke; Democrat HHS Secretary Donna Shalala; Republican Clinton Jones III, adviser to Republican members of Congress responsible for legislation of interest to Countrywide; Republican Alphonso Jackson, Bush’s acting secretary of HUD which regulated Fannie; Democrat Franklin Raines, Fannie Mae’s chairman after Johnson retired; the son of Democrat Nancy Pelosi; Republican Rep. Adam Putnam; Democrat Rep. James Clyburn; and 40 key employees and Directors of Fannie. Countrywide also gave Paul Pelosi, son of Nancy, a job.

Countrywide and other mortgage originators grew rapidly not only because they were the front end of the Fannie and Freddie growth engine, but also because the rising tide of the housing bubble, which Fannie and Freddie had a role in creating along with the Fed’s low interest rates, was raising all ships. This created extraordinary demand for new home construction and financing as well as demand for existing home refinancing. The latter all too often cashed out and spent the increased equity that price inflation caused.

On the back end of this growth machine was a nightmare in the making. Let me set the stage.

Fannie and Freddie and its competitors which bought mortgages on the secondary market couldn’t sit on those mortgages because they would have run out of capital to lend. Therefore, they bundled them into mortgage backed securities (MBS) and wholesaled them to Goldman Sachs, Lehman, J.P. Morgan, Citigroup, American International Group, and others which in turn retailed them to investors.

An MBS was structured in a tranche stack, and tranches were rated by Standard & Poor, Moody, and Fitch so they could be selected on the basis of the investor’s risk appetite. A “AAA” was at the top of the stack putting it first in line for the income stream. Since it took the least risk, it was paid the lowest return. A “BB” was the bottom tranche in the stack and would be last in line, but it received the highest return. It works well as long as borrowers repay their mortgages; therefore in the days before subprime mortgages, it really worked well. If homeowners failed to pay their mortgages, the last investor got hit first, but that’s why he got the highest yield.

As riskier mortgages appeared on the market – interest-only, adjustable rate mortgages, subprimes – their losses made it harder and harder to sell the lower tranches in a stack. If the entire stack couldn’t be sold, none of the stack could be sold. So the bright boys on Wall Street did what they do best – put lipstick on a pig. The unsalable lower tranches were repackaged with lower tranches from other MBSs. With a new wrapper on them called a collateralized debt obligation (CDO), this new product structure became the dumping ground for low rated tranches. The rating agencies didn’t really have a clue how to rate this risk or, in many cases, know what was in the CDO. It might contain mortgages but it could also contain credit card debt, used car loan, and other types of asset-backed obligations.

A CDO manager would take a pile of “BB” tranches from many MBSs and convert the pile into a CDO. All of the investors in that CDO would be taking a “BB” risk, but they would also be getting, collectively, a “BB” return. The CDO investors would line up by rating so that the “AAA” would be first in line but would get the smallest share of the income stream, whereas the “BB” investors would be last in line but get the largest share of the income stream.

You don’t have to be a financial wizard to wonder what in the world is “AAA” about a “BB” tranche, but you’d soon realize that it has little to do with an investment quality rating and more to do with payment priority and return. Too bad the investors didn’t understand this. Investors don’t mind risk as long as they can price it. But those who relied on the ratings agencies to vet the CDOs never had a chance. In the first place, the ratings agencies didn’t know how toxic the CDO was because they didn’t do a loan-level analysis of what was inside. And in the second place, it likely would have done little good. The CDO structure was too complex to be understood by outsiders because they contained dozens, if not hundreds, of pieces of multiple loan bundles made up of thousands of mortgages.

The gospel of the CDO is that it diversified risk. But if the starting point is a low quality obligation – a subprime mortgage – cutting it into little pieces to diversify it doesn’t improve its quality. In truth, CDOs made it possible to create demand for bad mortgages, prolong this shell game, magnify the losses investors would ultimately take, and increase the size of the bailout of firms like Citi and AIG in taxpayer dollars. In the end, CDOs were a house of cards if an extraordinary number of people stopped paying their mortgages. CDO values could (and did) evaporate overnight.

But greed often overwhelms good sense and investors lined up to buy these exotic instruments because they offered above-market yields.

More next week.

“Eat your peas …”

In a press conference last week, Obama once again resorted to his gelatinous whine that the current economic crisis engulfing the US is really a carry-over of the mess he inherited from the Bush Administration. You’d think that after two and a half years in office, not even Obama could fob off that line with a straight face.

As I recall, the budget deficit in Bush’s second term was headed in the right direction, and in 2007 it had gotten to a figure that looks paltry next to Obama’s deficits – a measly $160 billion, down from $400 billion at the end of Bush’s first term. The budget was moving toward balance when the 2008 financial market meltdown occurred, causing what the CBO called a “record” budget shortfall of $438 billion. This year’s deficit will be almost four times that amount – about $1.5 trillion. Obama inherited $9 trillion in national debt at the end of Bush’s term and quickly raised it to over $14 trillion in two years.

USA Today’s October 7, 2008 edition reported:

The deficit is virtually certain to balloon even higher next year as the government sorts out the financial crisis and taps a $700 billion Treasury fund to buy toxic mortgage-related securities.

The next president is likely to have to scale back campaign pledges as he inherits a likely deficit for 2009 exceeding $500 billion. But neither GOP standard-bearer John McCain nor Democratic nominee Barack has given much detail regarding what promises they won't be able to keep …

The deficit numbers for 2008 represent about 3% of the size of the economy, which is the measure economists consider the most relevant. By that measure, the deficit is smaller than the deficits of the 1980s and early 1990s that led Congress and earlier administrations to cobble together politically painful deficit-reduction packages.

The TARP and Fannie and Freddie bailouts weren’t cheap, but a steady hand on the tiller could have managed their aftermath and restored the economy to its pre-meltdown deficits. Instead, Obama and his band of merry novices decided to exploit the crisis, following the advice of his Chief of Staff, Rahm Immanuel, to never let a crisis go to waste. Government spending exploded and the figure “trillion” became the new normal of its measure. The Obama Administration enacted a feckless stimulus, passed an eye-popping budget, and shoved ObamaCare through Congress without a single Republican vote, since both houses had bullet-proof Democrat majorities and could do what they wanted.

Trillion dollar deficits abounded. The debt that Obama inherited from Bush, which was 20% of the GDP – already high by historic standards – sky-rocketed to 25%.

As federal spending sped like a runaway freight train toward the nation’s debt limit, Obama did nothing. Oh sure, he appointed a bipartisan debt commission to look into the fiscal Frankenstein he had created, but then he ignored their findings and recommendations when they were delivered to him last December.

The 2010 elections should have been a wake-up call that voters didn’t like Obama’s new normal. The Republicans regained the House but failed to get a majority in the Senate, so Obama’s transformation of America into a Eurostate labored on. His 2011 budget was such a joke, however, that even his Democrat-controlled Senate voted it down 97-0.

With deficits piling on at a rate of $1.5 trillion per year and the national debt at a stratospheric $14 trillion plus and rising, somebody must have elbowed Obama in the ribs during one of his many golf outings and told him he was going to run out of money this summer, because suddenly he got fiscal religion. Besides, the 2012 election was coming up and, as he reminded his audience in a recent fund-raising speech, he had 5 ½ more years to go in the White House.

Initially, Obama sent Biden the Blowhard as his representative to negotiate spending cuts and tax increases with the leaders of both parties in the House and Senate. He sent no plan, however, forcing witless Republicans to negotiate against themselves. The talks were held in secret sessions, a mistake that allowed Democrats to feign support for deep spending cuts without giving specific public evidence – like a budget. It also allowed Obama to demagogue the Republicans for wanting to preserve “tax cuts for the wealthy,” his standard class warfare horse hockey. Republican Rep. Cantor and Sen. Kyl walked out of the meetings when they were hopelessly deadlocked while images of Obama playing golf and flying about on fundraisers filled the evening television news.

Obama had to get involved.

He did. He gave a $38,500 per plate fundraiser speech in New York after talks collapsed saying,

The tax cuts I’m proposing we get rid of are tax breaks for millionaires and billionaires, tax breaks for oil companies and hedge fund managers and corporate jet owners. ... Before we ask our seniors to pay more for healthcare, before we cut our children’s education, before we sacrifice our commitment to the research and innovation that will help create more jobs in the economy, I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up that tax break that no other business enjoys.

Conveniently left out of this agitprop was any reference to the fact that Obama’s own stimulus package two years previously had contained a provision shortening the depreciation of corporate jets from seven to five years in order to stimulate US sales of jets.

And he kept it up. In a press conference several days later, Obama mentioned corporate jets not less than six times, excoriating Republicans for opposing this “tax loophole.” Also conveniently omitted was that Obama wanted to count loophole closings as spending cuts because the federal government was subsidizing them. In other words, if I was going to steal your wallet and decided not to, that nets outs the same as giving you the money I would have taken. A couple of rounds with that kind of logic and you ain’t right anymore!

Incidentally, plugging the corporate jet “loophole” would raise $3 billion over ten years, or as Charles Krauthammer put it, 5,000 years would pass before the loophole generated last year’s budget deficit. Or if you collected all the corporate jet taxes and oil depreciation allowances for 100 years, you wouldn't cover the amount that Obama added to the national debt last February.

With the venue for talks shifted to the White House, and with Obama leading them, the sides grew farther apart than they were with Biden on Capitol Hill. Since the rate at which Obama is spending money requires 40 cents of every dollar spent to be borrowed, there is no way in the short term to cut spending enough to avoid borrowing, which means the debt ceiling has to go up. But Republicans want debt ceiling increases to be matched dollar for dollar by spending cuts, whereas, Obama wants a “balanced approach” in which a dollar increase in the debt limit is matched by 75 cents in spending cuts and 25 cents in tax increases. Obama had to know that the tax increases would poison the well. And yet he put them in anyway, probably to make political hay because there is no economic rationale for raising taxes on job creators in the middle of a recession. There also was no way that the Republican majority in the House would approve tax increases, so predictably, the talks stalled.

After sitting through two days of talks, McConnell was ready to bolt. The schedule of spending curbs offered by Obama was a pittance. Only $2 billion would occur in 2012, with “empty promises of more to follow,” McConnell said. He strode to the well of the Senate and delivered a sharply worded speech, saying, “I have little question that as long as this president is in the Oval Office, a real solution is unattainable. In my view the president has presented us with three choices: smoke and mirrors, tax hikes, or default. Republicans choose none of the above.”

Obama countered with press conferences, knowing that they usually preempt regular TV programming. If there are a thousand ways of lambasting Republicans for protecting their millionaire and billionaire friends from “paying their fair share of taxes” Obama used them all in his press conferences. His claim that the rich aren’t paying their fair share, however, is his usual redistribution barnyard refuse. In the first place, Obama considers anyone making $200,000/year or a couple earning $250,000/year to be “rich.” In the second place the CBO has shown that the top 40% of income earners pay 99% percent the taxes and the top 1% pays more than the bottom 95% combined. While the top 40% of income earners make three times as much money as the bottom 60%, they pay 75 times as much in income taxes. The bottom half of all income earners pay no income taxes whatsoever. The US is the most progressively taxed nation among the Western democracies. But it will never be enough for Obama because his fiscal policies are driven by ideology, not economics.

The US has never failed to pay its obligations on time, and the 14th Amendment forbids default. If a debt ceiling limit standoff isn’t resolved by early August, tax receipts will pay about 60% of current obligations and the Federal Reserve will print the rest. It isn’t the best solution, but neither is continuing Obama’s reckless spending or raising taxes.

Believing that he can persuade or scare the public into taking his side, on July 11 Obama again called a press conference and said he couldn’t guarantee that Social Security checks would be paid. That was designed to get Grandma on the phone to her congressional representatives.

Republicans wet their britches and signaled they were willing to pass a small $500 billion (that’s small?) increase in the debt ceiling for a $500 billion reduction in spending or to do a dollar for dollar deal for 30 to 60 days. Obama said he would veto it. He wanted a “grand bargain” that would pull the issue out of the TV news hole until after his reelection. Trying to appear presidential, if not parental, he glowered at the press corps and snorted that he had bent over backward to accommodate Republicans and that it was time to “eat our peas.”

Republican legislators were furious. “What the hell kind of talk is that – ‘eat our peas’?” one ranted. It was Saul Alinsky Chicago-style politics, of course. Belittle, intimidate, and attack your opponent’s impure motives. As ancient wisdom teaches, politics ain't beanbag.

McConnell caved. He began crafting what he called a “backup plan” that he believed would cause Obama to suffer voter wrath for raising the debt ceiling while keeping Republican skirts clean. The onus would be on Obama to request three tranches of debt ceiling increases from Congress and concurrently propose spending cuts. Congress would vote each time on a resolution to disapprove Obama’s request but it would have to muster a two-thirds majority to override a veto and prevent the increase.

McConnell apparently hasn’t read Article I, Section 8 of the US Constitution, which expressly grants to Congress, not the Executive, “the power to borrow money on the credit of the United States”. Republican Sen. Tom Coburn called the McConnell plan a political rather than a fiscal solution whose sole purpose was to give Republicans political cover and hang the debt limit solution around Obama’s neck. House Republicans warned McConnell that his “Cut, Run, and Hide” plan wouldn’t pass the House in contrast to their “Cut, Cap, and Balance” Act which passed the House Tuesday night. It would cut spending, cap future spending at its historic level of 20%, and call for a balanced budget amendment to the Constitution – which requires a two-thirds majority approval in both houses before states vote on it in their legislatures. Obama has already announced he would veto Cut, Cap, and Balance. It’s an empty threat. He knew the House bill will never get through the Democrat-controlled Senate, which voted Friday 51-46 to kill it before rushing to get out of town.

Late Tuesday afternoon, the so-called Gang of Six, a bipartisan group of Senators not consumed with Obama’s class warfare resentment, has been meeting since the beginning of the year. They pitched their $3.7 trillion plan to reduce the deficit to an audience of 50 other Senators from both parties. It’s not written in legislative language – really little more than a list of talking points and lethally short on details. Here’s the good, bad, and ugly of their proposal.

The Good: the alternative minimum “theft” tax is repealed, corporate taxes are reduced to 29% (they’re 23% in Europe), and ObamaCare’s budget-busting CLASS Act is repealed. The Bad: net tax increases of $1 trillion, no spending caps or entitlement reform, income-based limitations on mortgage interest and charitable deductions, no deduction of second home mortgage interest, and Sen. Baucus, the author of ObamaCare, will write the bill. The Ugly: Washington math is used therefore a reduction in the rate of increased spending, like the Afghan war, is called a “spending cut,” the CPI is rejiggered to reduce cost-of-living adjustments and inflate tax brackets, and capital gains and dividends get double-taxed.

On balance, the Gang produced more bad ideas than good which Baucus will only make worse if he writes the legislative language. Keep in mind that in 1982, Congress promised Reagan it would cut spending by $3 for every dollar raised in taxes in order to reduce the deficit. Taxes went up but not one dime of spending was cut. Reagan’s 1986 Tax Reform Act reduced the top tax rate from 50% to 28%, where Reagan promised it would stay in return for the elimination of certain tax havens. That promise lasted until he was out of the White House, but the prohibition of tax havens stuck. Last year the freshman who swept out many in the 111th Congress promised to eliminate $100 billion in spending. That was then “prorated” for the fiscal year to $66 billion, and then whittled down to $38.5 billion. The CBO scoring on the final cuts: $352 million.

Congress can’t be trusted.

During the White House “negotiations” between Obama and congressional leaders, House Majority Leader Eric Cantor argued relentlessly for spending cuts and against raising taxes. When he brought up the possibility of an abbreviated extension of the debt limit last week, Obama lectured Cantor and threatened: “Don’t call my bluff. I am not afraid to veto and I will take it to the American people. ... This may bring my presidency down, but I will not yield on this.”

Tough talk from a guy who has no plan of his own and who’s hiding behind the skirts of a Democrat-controlled Senate which protects him from having to use a veto that could come back to haunt his reelection campaign next year.

And the beat goes on. Friday evening the “grand bargain” unraveled when, after agreeing to about $2.7 trillion in spending cuts over ten years in return for $800 billion in new taxes, Obama reneged and said he needed $400 billion more in taxes in order to win the Democrat votes needed to pass this scheme. Obama’s “balanced approach” – 75% in spending cuts and 25% in tax increases to match a debt ceiling increase dollar for dollar – had now gone to more like 67% and 33%. "Dealing with this White House is like dealing with a bowl of Jell-O," Boehner said. “The White House moved the goalpost,” he added.

Two telephone calls from Obama to Boehner were not returned. Then the Speaker called Obama and said the talks were off. Glory be! I didn’t think the guy had it in him. Republicans never miss an opportunity to miss an opportunity. Or maybe Boehner knew that he was going to have a lot of defections among House Republicans, and that the Democrats whose vote would be needed to pass a bill had also bailed because spending cuts were too much and taxes were too little.

So the guy who threatened Eric Cantor with a veto if an abbreviated extension was offered may get no more than that. Maybe it will keep him in town and off the campaign trail and golf course for a while.

Advice to Boehner: Get the spending cuts enacted by the Senate before passing a debt ceiling increase – even for an extension of a few months. As Reagan’s experience and history has shown, the Democrat’s batting average on upholding their end of a spending cut bargain should make you as nervous as a long-tailed cat in a room full of rocking chairs.

ObamaCare in Court

A Rasmussen poll taken July 11 showed a majority (53%) of likely voters want ObamaCare repealed. Since the law was passed in March 2010, weekly polls show the percentage of likely voters wanting it repealed has averaged 56%, ranging from a low of 50% to a high of 63%. In contrast, the percentage of voters opposed to repeal has averaged 39%, ranging from 32% to 44%.

In the almost 18 months since ObamaCare became law the much-ballyhooed claim that its popularity would rise after people understood it has failed to materialize. The 2010 elections swept out many of the Democrats in the House and Senate who voted for the law. But Republicans failed to win the Senate, and Obama remained in the White House making repeal of ObamaCare impossible until after the 2012 elections. ObamaCare is another unsustainable big government program like Social Security, Medicare, and Medicaid. Republicans are therefore planning their election campaigns as a referendum on Obama’s imperious makeover of American life with its intrusions and regulations, and ObamaCare will be Exhibit A in their argument.

However, even if Republicans win the Senate and White House and maintain their control of the House, the repeal of ObamaCare will not be easy. A simple majority in the Senate cannot pass legislation as can be done in the House. Republicans will need 60 votes to prevent filibusters, which they are unlikely to get. Moreover, it is harder to repeal a bad law than it is to prevent its passage. Unless voters scare Congress into action for repeal, the inclination in both houses will be to “fix” the most onerous parts of ObamaCare – which explains why so much of our laws and regulations are a crazy quilt of patches when starting over with a clean slate would have made more sense.

ObamaCare opponents have therefore hedged their bet on a legislative solution by turning to a judicial solution. This is an odd twist for the GOP, which is historically opposed to judicial activism and prefers to let Congress rather than the courts set the rules we live by. The well-known argument for a judicial solution, however, is that Congress overstepped its constitutional limits in passing ObamaCare with a mandate that requires every citizen to buy a product – insurance in this case – and if Congress has the power to compel Americans to buy insurance then there is no limit on what other things future rogue Congresses can force citizens to do or not do.

In pursuit of a judicial solution to ObamaCare, the Attorneys General for 27 states and organizations like the Thomas More Law Center have filed suits challenging the constitutionality of the mandate. Four district court judges have heard the arguments and two of them, liberals, decided the mandate was constitutional while the other two, conservatives, decided it wasn’t.

All of the district court cases have moved up to the appellate courts. Two of the three judges chosen to hear the appeal for the Sixth Circuit were nominated by Republican presidents, whereas Democrat presidents nominated two of the three chosen to hear for the Fourth Circuit and all three chosen for the Eleventh Circuit.

Notwithstanding its 2 to 1 Republican advantage, the Sixth Circuit appellate court ruled last month in favor of the mandate. The surprising switch-over was Judge Jeffrey Sutton, who clerked for Justice Antonin Scalia and was nominated to the bench by George W. Bush. Anyone longing for a migraine headache can Google his tortured opinion. In it Sutton muses and opines as thoughts spin like pirouettes from his brain to his pen, finally concluding with this verbal rim shot:

No debate in the forty years after the country’s birth stirred the people more than the conflict between the federalists and anti-federalists over the role of the National Government in relation to the States. And no issue was more bound up in that debate than the wisdom of creating a national bank. In upholding the constitutionality of a second national bank, not a foregone conclusion, the Supreme Court erred on the side of allowing the political branches to resolve the conflict. Right or wrong, that decision presented the challengers with a short-term loss (by upholding the bank) and set the platform for a potential long-term victory (by allowing them to argue that Congress should not make the same mistake again). There was no third national bank....

Today’s debate about the individual mandate is just as stirring, no less essential to the appropriate role of the National Government and no less capable of political resolution. Time assuredly will bring to light the policy strengths and weaknesses of using the individual mandate as part of this national legislation, allowing the peoples’ political representatives, rather than their judges, to have the primary say over its utility.

In other words, if you think a law is bad, the place to correct it is the ballot box, not the courthouse.

Judge Sutton’s opinion and indeed the Sixth Circuit outcome shows how unpredictable a judicial solution can be, even by conservative justices. There is no doubt that all of these cases are headed to the Supreme Court where – conventional wisdom holds – the four liberal justices (Ginsberg, Breyer, Sotomayor, and Kagan) will line up solidly for the mandate, the four conservative justices (Scalia, Thomas, Roberts, and Alito) will be just as solidly against the constitutionality of the mandate, and Justice Kennedy the Swing Vote Guy will decide the outcome as if the other eight were superfluous.

This “wisdom” is wrong for at least two reasons. First, it implies that Kennedy is the only thoughtful justice on the Court. Second, it assumes the conservatism of the Court’s conservative wing is homogenous, which it isn’t. Thomas tends to be an originalist or strict constructionist in his decisions, whereas Scalia, Roberts, and Alito tend toward judicial restraint even when congressional acts conflict with an originalist interpretation of the Constitution. While Thomas may be considered a likely vote against the mandate, the votes of the other conservatives can’t be predicted – just as Sutton’s.

The argument posed by the defenders of the ObamaCare mandate bifurcated early after it was attacked in court – vacillating between the right of Congress under Article I, Section 8 “To lay and impose taxes …” and “To regulate Commerce with foreign Nations, and among the several States …” Well, which is it? Is the mandate a tax or is it regulation of commerce?

Section 1501 of the ObamaCare bill did not create a tax. That section calls the $750 levy a "penalty." The defenders of the mandate, therefore, decided early on that the tax dog wouldn’t hunt and stopped building a legal defense around the congressional taxing power in Section 8.

I discussed at length Section 8’s third enumerated power in my January 8, 2011 blog, Our Amazingly Elastic Commerce Clause. Since health insurance is a modern contrivance, it’s not surprising to find its regulation absent in the list of powers granted to Congress 225 years ago. But as my previous blog noted, the Supreme and Appellate Courts have through the years allowed Congress to transgress its enumerated powers with such hair-splitting Pharisaical interpretations of the Commerce Clause that it’s a wonder the Justices could do it with a straight face. How they might argue favorably for the individual mandate will be no less creative, I’m certain.

One hopes the Court will confront these questions. How could the Commerce Clause possibly be interpreted to allow Congress to force free people against their will to buy a product or face punishment? And if the Court concurs that Congress has that right, was there any reason, then, for the Founders to list in writing the limited powers granted to Congress under Article 8, since an elastic interpretation of the Commerce Clause lets it do anything? Finally, why did the Founders deem it necessary to state in the Tenth Amendment, “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”?

An understanding of the rationale behind the Commerce Clause at the time of its writing to is needed to reason how its regulatory principle would apply to a modern society. (See Commerce Clause blog.) It’s clear in the historical context prior to the Constitution that the Founders gave Congress, rather than the states, the power in order that commerce could flow between the states. There was no intent to give Congress the power to regulate commerce within a state.

Thus Article 8 grants that Congress may regulate what is traded (commerce) and how it is traded (regulate) across state lines (between the several states).

Health insurance is not bought or sold across state lines. Moreover, “commerce” implies there is a willing buyer and willing seller. If the buyer isn’t willing and is forced to buy under protest, is that really commerce? And does it need regulation or police power enforcement?

Pesky thing, this Constitution! But ah! … not to worry. The New Deal Supremes found a way to get around these bothersome limitations 75 years ago by using the “necessary and proper” clause in Section 8 as an excuse for regulating nettlesome local conditions that impede federal power expansion. Here’s how this bit of judicial black magic works.

The last of the 18 enumerated powers in Section 8 grants to Congress the power “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers …”

Liberal constitutional exegetes on the Court have interpreted this clause in a way that gives cover to Congress when it claims the power to regulate intrastate commerce in violation of the Tenth Amendment and the principles of federalism. When intrastate activities “substantially affect” interstate commerce, Congress can elbow its way into the affairs of a sovereign state. One need only show “substantial affect” and the federal government supplants state government – or so the Court says.

How substantial is “substantial”?

In the infamous Wickard v. Filburn Farmer Filburn, planted and harvested more wheat than President Roosevelt’s overreaching New Deal Agricultural Adjustment Act of 1938 allowed. Roosevelt wanted to override free markets and drive up the price of wheat during the depression. When his transgression was discovered, Farmer Filburn was fined. He claimed he raised the excess wheat to feed to his livestock, not to sell – a fact not disputed by the federal government. Thinking he had the rights of a free citizen to grow grain to feed his chickens and cows, Filburn appealed to Roosevelt’s Supreme Court. Bad mistake. The Court told Farmer Filburn that if he hadn’t grown his surplus feed grain, he would have had to buy grain on the market to feed his animals. And if every farmer did what Farmer Filburn had done, why, the demand and the price for wheat would go down! There was no proof that a nationwide black market in feed grain existed, nevertheless Farmer Filburn stood guilty as charged because his actions could have had “substantial affect” on the government’s regulation of interstate wheat sales – even though they didn’t.

Don’t laugh. It really did happen. Google it for yourself.

“Substantial affect” was the basis of an equally infamous case – United States v. Wrightwood Dairy. The owners of the dairy held the benighted view that the powers of the federal government were limited and therefore argued that Roosevelt’s Agricultural Marketing Agreement Act did not apply to their commerce since its buying and selling activity was wholly within the state of Illinois. Roosevelt’s Marketing Act was another thinly-veiled interference in a free market by the federal government in order to prevent milk from becoming too expensive when bought and sold across state lines. Roosevelt’s Court rejected Wrightwood’s defense and deferred to the government’s argument that Congress had the power to regulate "the marketing of intrastate milk which competes with that shipped interstate [and] would tend seriously to break down price regulation of the latter." The Court argued that "Congress plainly has power to regulate the price of milk distributed through the medium of interstate commerce," therefore the necessary and proper clause gave it "every power needed to make that regulation effective" when intrastate sales had a “substantial affect.”

Hard to believe, isn’t it?

These two decisions show how intrusive the creative interpretations of the Constitution by the courts can be.

There is little doubt how the liberal wing of the Court will decide the ObamaCare case. Their Dean, Justice Breyer, holds to a narrow interpretation of many constitutionally protected liberties. He claims belief in self-government, but his opinions are contemptuous of its most basic right: the right of individuals to manage their own lives without excessive government interference. Justice Ginsburg’s decisions reveal a mistrust of the relevance of a 225 year-old document in governing a modern society. Four of Justice Sotomayor’s six opinions, which she wrote for the majority when she was an appellate judge, were overturned on appeal, making one wonder if she is judging by the same constitutional document used at the Supreme Court. Justice Kagan has yet to show that she is undeserving of the appellation, “airhead.”

In contrast, it’s hard to predict how the conservative wing of the Court will decide. Justice Thomas, as mentioned, is an originalist. He will, therefore, skip over lots of precedent case law and interpret the constitutionality of the mandate by reasoning the Founder’s use of the terms “commerce,” “regulate,” and “between the states.” Justice Scalia is a toss-up. In some cases original intent appeals to him. But more often Scalia defers to judicial restraint, respecting legislated political solutions and respecting precedent case law – that hateful principle of stare decisis. Justice Alito and Chief Justice Roberts avoid activism and are swayed from originalism when hair-splitting distinctions involve political discretion. Both made this interpretative philosophy clear in their confirmation hearings.

Unless there is an egregious constitutional violation, Scalia, Roberts, and Alito are loath to substitute their judgment for the judgment of Congress on matters of policy; but who knows, they may see the mandate as more than a political policy.

Yet even if the four Court conservatives vote against the mandate, the deciding vote will be cast by Justice Kennedy. In his book Justice Kennedy’s Jurisprudence author Frank Colucci notes that Kennedy has voted with the majority more than any of his colleagues. He voted with the majority in Rowe v. Wade, but he wrote the majority opinion upholding the federal Partial Birth Abortion Ban Act. He votes like a Libertarian but denies that he is one. He is neither an originalist nor a believer in judicial restraint. His reading of the Constitution is moralistic, giving precedence to individual liberty and human dignity, rather than democratic principles.

Judge Sutton’s tortured opinion may therefore prove to be the best advice: if you don’t like a law, head to the ballot box not the courthouse. Conservative’s abhorrence of judicial activism, after all, can’t have it both ways. Conservatives can’t rail at liberal judicial activism and plead for conservative judicial activism. Hamilton’s Federalist 78 argued passionately for judicial review of “legislative encroachments” but also argued that of the three branches of government, the judiciary "will always be the least dangerous to the political rights of the Constitution." Conservatives must insist that it remain so.

Judge Sutton’s opinion recalled that the debate over a national bank was ultimately resolved by an elected official – President Jackson. The Supreme Court found the bank constitutionally necessary and proper in an 1819 decision. But Jackson said he would give the Court’s opinion "only such influence as the force of their reasoning may deserve." Then he applied his standard of “necessary” and “proper” and vetoed the reauthorization of the bank in 1832.

The Supreme Court has refused to fast track the mandate cases around the appellate courts. Whether it will wait for all four appellate decisions is unclear, but it’s unlikely that the case will be heard before the 2012 presidential election. A ruling against the constitutionality of ObamaCare would be a disaster for Obama’s reelection hopes and Chief Justice Roberts will avoid that possibility.

However, before the Court has its say, the electorate will have spoken in 2012. Let’s hope that this time voters have learned that elections have consequences.

Who Is Rick Perry?

He is a fifth generation Texan, the son of hardscrabble west Texas tenant farmers – Democrats but conservatives through and through. He grew up in a farm town too small to be on the state map. Life was so hard that he was six years old before his house had indoor plumbing. His mother sewed his clothes, including the underwear he wore to college.

He is an Eagle Scout. After Paint Creek High School, he attended Texas A&M, graduated, and was commissioned into the Air Force where he became a C-130 pilot.

Now 61 years old, he has won nine elections to four different offices in Texas state government. In the first three elections he ran as a Democrat then switched to the Republican Party. He is currently the 47th governor of Texas – a position he has held for 11 years, the longest tenure of any governor in the nation.

He has never lost an election.

Rick Perry was the Lieutenant Governor to whom Governor George Bush handed over the office after winning the 2000 Presidential election. Since then, Perry won gubernatorial elections in 2002, 2004, and 2010, the last time by 55% against a field consisting of a Democrat, a Libertarian, a Green Party, and an Independent.

Since he became its Governor, Texas – a right to work state that taxes neither personal income nor capital gains – has added more jobs than the other 49 states combined. In the last two years, low taxes and little regulation led his state to create 47% of all jobs created in the entire nation. Five of the top ten cities with the highest job growth in the nation are in Texas. People follow jobs, so in the last four years for which data are available, Texas led every state in net interstate migration growth.

Perry signed ground-breaking “loser pays” tort reform and medical litigation rules that caused malpractice insurance rates to fall. Some 20,000 doctors have since moved to Texas.

Texas boasts 58 of the Fortune 500 companies – more than any other state. Since May 2011 Texas resumed its pre-recession employment levels. Only two other states and the District of Columbia have done that.

Texas ships 16% of the nation’s export value. California trails at 11%. Of the 70 companies that have fled California so far in 2011, 14 relocated in Texas.

In this year’s Texas legislative season, Perry got most of what he wanted. With no new taxes, a fiscally lean state budget was passed leaving $6 billion in a rainy day fund even as other states around the country struggled to balance budgets and avoid more deficit borrowing. A voter ID bill passed that was designed to prevent ballot box fraud and illegal voting. A bill passed that makes plaintiffs pay court costs and attorney fees if their suits are deemed frivolous.

Perry scored points even in his legislative failures. He failed to get sanctuary cities banned – Texas towns in which police cannot question detainees about their immigration status. The blame fell on the legislature. Perry also failed to get a so-called “anti-groping” bill passed that would put Transportation Security Administration agents in prison if they touch the genitals, anus, or breasts of passengers in a pat down. Federal officials threatened to halt all flights out of Texas airports and the bill died in special session. That endeared Texans even more to TSA employees living in Texas.

Perry jogs daily in the morning. He has no bodyguard with him, but his daughter’s dog runs by his side and he carries a laser-guided automatic pistol in his belt. Last year while jogging in an undeveloped area, a coyote paralleled his jogging route, eyeing his dog. He drew his pistol and killed the animal with one shot, leaving it where it fell. “He became mulch," Perry said. Animal rights groups protested, but Perry shrugged it off. “Don’t come after my dog,” he warned them.

Recently, Obama asked Perry to delay the July 7 execution of Humberto Leal in order to comply with the International Court of Justice in The Hague and the Vienna Convention on Consular Relations. Perry refused. Therefore Obama asked the US Supreme Court to delay the execution because it would damage US foreign relations. The Court refused 5-4 and Perry ordered the execution to go forward as scheduled. Over the howls of diplomats, politicians, and the UN, Leal was administered a lethal injection at 6:20 p.m. Before he died, he admitted his guilt and asked for forgiveness.

The case has special implications for Perry, who is considering a run for the presidency in 2012. Even his critics resent federal interference in a Texas execution, which is related to a state, not a federal, crime – an alcohol and drug-fueled rape and murder 17 years ago by an illegal whose family brought him into the country 35 years ago as a child. The interference hinges not on the man’s guilt, which Leal’s advocates acknowledged, but on a technicality – failure to inform Leal that he could have gotten legal representation from the Mexican consulate in lieu of the court-appointed attorneys who represented him. Independent Texans saw Obama’s interference as another intrusion of federal power into the affairs of a state, which could cost Obama support in other states.

Needless to say, Perry is a hard-edged conservative and a ferocious defender of 10th Amendments rights (“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.”) – an explicit restriction of the federal government to only those powers granted in the Constitution. Perry accuses the federal government, especially the Obama administration, of illegal overreach.

Perry said “no thanks” to the feds whose stimulus offered taxpayer dollars for education and unemployment assistance. The strings on “free money” from Washington, he said, would restrict Texas in managing its own affairs. Perry even depleted all state funds to fight recent wildfires before asking Washington for disaster relief. His request has been ignored, which comes across as an unvarnished federal power play, further pitting Perry and Texans against the federal government.

It’s little surprise, then, that 31% of Texans prefer Perry, who hasn’t announced for the presidency, versus 15% who prefer Romney and 11% who like Bachmann. This is consistent with a Fox poll which put Romney at 18% with national Republicans, Perry at 13%, and Bachmann at 11%. A Marist poll had Romney leading with 19% but Perry and Giuliani, neither of whom has announced, are tied for second at 13%. Perry is the favorite among Tea Party voters, beating Palin, also unannounced, and Bachmann. For a guy who is not officially running, Perry has more than an insignificant following compared with the announced candidates.

But none of the candidates – announced and unannounced – has caught fire. It’s still early in the 2012 election cycle, and polling results this far out border on meaninglessness. Yet I would have expected Romney to have a greater lead, given his money and name recognition, unless he is being perceived by voters as a nomination retread, now haunted by the Massachusetts experiment that Obama claims inspired his unpopular remaking of the national healthcare system. His business and economic expertise towers over Obama’s, but I suspect it would be easier for him to be elected than nominated. Palin has a fan base rather than a constituency ready to hand another rookie the keys to the White House. Bachmann, recently insulted by Chris Matthews in an interview asking if she was a “flake” because of her bizarre statements, might keep in mind that James Garfield was the only House member to be elected President – and that was over 130 years ago. Ryan may have recalled that fact when he declined to run.

But Perry is not without his negatives. French cuffs and cowboy boots adorned with the words “Freedom” and “Liberty” bespeak a self-assuredness that wears well in Texas and even in the south and southwest, but will it work in Philadelphia, New Hampshire, and Ohio?

Perry is ruggedly handsome – a modern Marlboro kind of man – whom the late Texan and liberal columnist, Molly Ivins, called "Governor Goodhair.” His high octane rhetoric is unmistakably conservative. Speaking to the Republican Leadership Conference in New Orleans last month, he pumped the air with both fists as he strode to the podium. “Whew!’ he cried repeatedly. “Yeah!” He was like an excited race horse being shoved into a starting gate.

I stand before you today a disciplined conservative Texan -- a committed Republican and a proud American -- united with you in the desire to restore our nation and revive the American dream…

Our party cannot be all things to all people. It can't be. And our loudest opponents on the left are never gonna’ like us so let's quit trying to curry favor with 'em! … Let's speak with pride about our morals and our values and redouble our effort to elect more conservative Republicans. Let's stop this American downward spiral! …

This administration in Washington that's in power now clearly believes that government is not only the answer to every need, but it's the most qualified to make essential decisions for every American in every area. That mix of arrogance and audacity that guides the Obama administration is an affront to every freedom-loving American and a threat to every private sector job in this country.

He left the podium and stage as he had mounted it: pumping his fists, shouting “Yeah!” and “Whew!” as if he were returning to his corner after Round 1 of a prize fight.

It’s hard to imagine the cautiously moderate Romney, the bland somnambulistic Pawlenty, or even the outspoken and misspoken Bachmann delivering that performance. Yet, what a contrast Perry is to the pontifical, condescending Obama speaking style, his head robotically swiveling from side to side, nose unconsciously elevated. I suspect even the leading GOP candidates wish they had Perry’s “negatives.”

Perry’s speech was a tea partier’s delight. The almost cocky swagger. The Texas accent. But I wonder how it would sell to political independents – those more pragmatic than ideological?

Sweeping these concerns aside, Perry’s biggest challenge may be overcoming the fact that he is “another” Texas governor seeking the White House. After four years of Obama, Bush fatigue may have attenuated. But by how much? For those in the center – the ones who will decide the next election – the choice will be between four more years of someone they know (which they didn’t four years ago) versus someone who reminds them of someone they know (Bush) and wish they didn’t.

Beyond the Texas Governor’s mansion, the accent, and the swagger, however, the similarity ends. Their differences have been no small source of friction between the Bush and Perry camps.

A 2007 YouTube, for example, showed Perry at a fundraiser saying, “George Bush was never a fiscal conservative – never was,” going on to say, “I mean, ’95, ’97, ’99, George Bush (while he was Texas Governor) was spending money.” The video came to the attention of Bush aides and they were not happy with Perry’s criticisms of their man.

Then after initially embracing Bush’s “No Child Left Behind” law, Perry turned against it, calling it “a monstrous intrusion into our (i.e. the Texas education system) affairs” in an interview. His 10th Amendment fire-breathing can’t be contained.

When Perry ran for his third gubernatorial election, the Bush family and political team retaliated by backing Perry’s Republican opponent, Sen. Kay Bailey Hutchinson, providing her campaign with fundraising and organizational support. Perry won the primary and went on to win in the general election by a sizable margin, no doubt giving him cause to gloat and giving the Bush camp cause to mope.

The relationship between Perry and Bush continues to be frosty. But it would be foolish for Perry to provoke the Bush family into working against him if he chooses to run for President. And it would also be petty of the Bush family to deny that politics requires a candidate to show that he is his own man, not a clone of his former boss. Gore ran against Clinton in 2000, and if Perry runs, he will have to show his independence of Bush if he is to have any hope of shedding the “Oh no, not another Texas Governor” image.

Bush ran as a “compassionate conservative,” probably a euphemism for the liberalism of his rich family, which is what caused Reagan to balance his conservative ticket with running mate George H. W. Bush. Perry will have to show that he intends to reverse the reckless spending of the Bush-Obama years.

Bush ran as a “uniter, not a divider.” Perry will have to show that he intends to be an unmistakable contrast to everything Obama stands for and will undo the Obama program, even as Clinton undid the Reagan legacy and Obama undid the Bush programs, complaining all the while that Bush was responsible for everything that was wrong with America.

Perry has not yet said he is in the race. Time is running out for him to do so. But should Obama be concerned if Perry runs? Absolutely. Obama cannot run on his record – an unpopular healthcare law, a failed stimulus, unprecedented spending and debt, a jobless “recovery” and the threat of a double-dip recession, not to mention a foreign policy he can’t explain and his undeclared war on Libya. Obama’s record is a disaster. Perry by contrast produced in Texas an oasis of prosperity in a sea of misery during the Obama years.

Not being able to defend his own economic record, or attack Perry's, Obama might try to paint Perry as a representative of the far right. That wouldn't be easy. Perry served three terms in the Texas House as a Democrat, and supported Al Gore's 1988 presidential bid. That was when there were still some conservative Democrats. Perry switched to the Republican Party in 1989 when the Democrat Party began moving left.

Obama might attack Perry’s ideological extremism. But Perry could remind voters that Reagan was initially painted as a conservative extremist, until Reagan’s folksy “Now there you go again” confidence showed Americans that the extremist was in the White House. Reagan’s proof was the economic chaos Carter had wrought (“Are you better off now than you were four years ago?”) and the foreign policy catastrophes his policies produced in Iran, whose hostage crisis was nearing 400 days.

Unlike Perry, Obama is all hat and no cattle. There is no Obama thrust that Perry can’t parry if he keeps his good humor and enthusiasm and reminds Americans that, yes, his flaws are large – until you compare them with Obama’s.

Pickett’s Charge, July 3, 1863

Robert E. Lee took command of the Army of Northern Virginia on June 1, 1862, replacing the overly cautious General Joseph E. Johnston who had been wounded in the Battle of Seven Pines. He would prove to be Johnston’s antipode – aggressive to the point of overplaying his hand at times.

Under Lee’s command, the Confederate army won the Shenandoah Campaign led by Stonewall Jackson, the Seven Days Campaign, and Second Battle of Bull Run – a terrible Union army loss. Lee then took the war into Maryland where, although winning at Harper’s Ferry, he lost a quarter of his army in the Battle of Antietam in September 1862. The northern and southern armies each lost nine generals and 23,000 soldiers combined. Essentially a draw, Lincoln considered it enough of a Union victory after the string of Union losses to issue the Emancipation Proclamation freeing the slaves, albeit only those in the secession states.

With his army refitted and losses filled as much as possible, Lee’s army won two significant battles – Fredericksburg followed by Chancellorsville, although the latter cost the life of Stonewall Jackson, his most resourceful general. He won at Brandy Station – the largest cavalry battle of the war – under the command of his flamboyant cavalry commander, General J.E.B. Stuart. Stuart held the field at the end of the battle and therefore claimed victory, but some – especially the southern press – considered it a draw and severely criticized Stuart for “bad management” of the fight.

Then, for the second time Lee took his army north in late June 1863 into Pennsylvania primarily to shift his summer campaign away from war-ravaged northern Virginia which could no longer support his need for food and horses. For the campaign, Lee reorganized his army into three corps under Lt. Generals Ewell, A.P. Hill, and Longstreet. The old corps of the now-dead Stonewall Jackson was split up and assigned to Ewell and Hill.

Lee’s army was in high spirits as it once again invaded the north where Lee hoped a substantial defeat of the Union army would provide the growing northern peace party the fodder needed to pressure Lincoln to stop the war and to recognize the legitimacy of the seceded Confederate states.

As the Army of Northern Virginia turned north, Lee ordered Stuart to protect the right flank of his army. An army on the move is particularly vulnerable, not only because it is strung out and can be easily attacked by a massed enemy, but also because it is moving into unfamiliar territory. Poor communications required the cavalry to be the “eyes and ears” of the army. Twice previously Stuart had taken his cavalry in a complete circle around the Union army – a feat which humiliated their commanders. Still smarting from the criticism received from the press after Brandy Station, Stuart thought a dash around the Union army, which was paralleling Lee’s movements northward, would restore his prestige as well as let him confiscate Union supplies he believed Lee’s army needed.

But the movement of the enemy kept pushing Stuart’s circumnavigation of it farther north. With a significant clash of the opposing armies inevitable, Lee was deprived of his eyes and ears. Stuart, meanwhile, had captured Union wagons and supplies which slowed his advance even more. He would arrive on the Gettysburg battlefield on the afternoon of the second day of battle, July 2, whereupon he received a rare reprimand from Lee for his absence. “Well, General, you are here at last.”

After his disappointment with Generals McClellan, Pope, Burnside, and Hooker, Lincoln was still looking for a general who would fight – at least as aggressively as Lee. He wouldn’t find him in his latest choice: General George G. Meade. The outcome of the impending battle would be determined by geography rather than the new Union leader. Meade had sent ahead General Hancock, one of his corps commanders, to determine whether Gettysburg was an appropriate place for a major battle. Hancock observed the terrain and said, "I think this the strongest position by nature upon which to fight a battle that I ever saw." Another Union general agreed, and Hancock said: "Very well, sir, I select this as the battlefield."

The most decisive battle of the Civil War was fought over a three day period that summer – July 1, 2, and 3 – in the outskirts of a small farming community, Gettysburg, PA. It would start out as a skirmish and end engaging 160,000 in the fighting.

The skirmish began when a unit of Lee’s army, out looking for food and a cache of shoes, collided with what they thought was local militia and began firing to push it back through Gettysburg. In fact, their opponents were units of Brig. General John Buford’s cavalry attached to Meade’s army who were scouting the outskirts of town.

Lee had given his generals strict orders not to start a fight until he could get all of his army on the battlefield. He wanted to select a defensive position that would force Meade to attack him. But the skirmish preempted that. Thinking that they were forcing Buford’s men to retreat, the Confederates were actually part of Buford’s “defense in depth” – a maneuver in which a defender selects the ideal position to defend and executes a retrograde, pulling back unit over unit to the ideal position while fighting a delaying action.

By late afternoon on July 1, the Union cavalry, fighting dismounted, had retrograded through Gettysburg to Buford’s position, which he had chosen to be the Union right flank as Meade filled in the line. Buford’s losses numbered slightly over 9,000, including some 3,000 captured, compared with Confederate losses of about 6,500.

In that sense, the day could be called a Confederate victory, but Union forces now held the high ground south of Gettysburg and Lee would have to fight on offense. Understanding this, Lee had earlier that day sent orders to Ewell to dislodge Buford’s position "if practicable." Ewell decided such an assault was not “practicable” and, thus, did not attempt it, even though, unknown to Ewell, his forces outnumbered Buford by 5,000 and reinforcements had not yet arrived. Ewell’s failure to test Buford’s strength before deciding not to attack was a significant missed opportunity and set the course of the later battle.

Throughout Wednesday evening, July 1, and Thursday morning most of the remaining infantry of both armies arrived on the field. When Confederate General Longstreet arrived, he declared the Union position nearly impregnable and told Lee it should be left alone. Instead, Longstreet recommended, Lee should move his army to the south and east of Meade’s west-facing battle line, putting the Confederates between Meade and Washington D.C. The threat to the Capitol would compel Meade to come out and attack them, putting Lee on defense.

Lee declined. His aggressiveness and belief that his army was invincible no doubt blurred his judgment. Throughout the centuries, however, military theorists believed the attacker should outnumber an entrenched defender by a three-to-one ratio. Lee brought 72,000 men to the field; Meade had 94,000. Moreover, Stuart had not yet shown up, so Lee was without the cavalry resources to reconnoiter the Union lines looking for weaknesses. However, it’s also known that during the three days of the battle Lee was suffering with diarrhea, a common malady among soldiers caused by the unsanitary habits and conditions of that time. Diarrhea causes dehydration, lethargy, and disorientation, especially among the elderly. Lee was 56 years old at the time – older then than it is today – and surely not at his best during the battle.

The success of his army in the fighting on July 1 encouraged Lee to continue trying to destroy the Union army. So, he ordered attacks on its flanks, attempting to roll them up. The Confederate assaults were not coordinated well, and the Union was effective in responding with counterattacks. Thus the outcome of July 2 was an inconclusive slugfest.

Still, Lee's confidence was unshaken. He decided to make his biggest gamble yet to win the battle and the war by attacking the center of the Union – a maneuver that would require Confederate infantry troops to march unprotected in close order formation for one mile across a field under the Union guns. Their pole star was a copse of trees located near the center of the Union line. When the survivors got within 100 yards of the copse, they were to fire their muskets in volleys and then run to the Union lines in a bayonet charge. It was a desperate, gutsy tactic.

Longstreet, who had been reinforced by Maj. General George Pickett's division Thursday afternoon, would be in command of the attack on the Union center. Simultaneous attacks were to be made against the Union right and left flanks to prevent reinforcement of the center where Pickett’s men would be at the forefront of the attack. Two exhausted divisions of A.P. Hill would be on Pickett’s left flank. In all, about 15,000 men would be engaged in the attack.

Prior to launching the attack, Longstreet’s artillery was to unleash a 170-cannon bombardment of the Union center for as long as ammunition held out, excluding the reserve ammunition.

Stuart’s cavalry was to circle around the Union northern flank, get behind the Union position, and upon hearing a signal cannon, initiate a cavalry charge on the rear of the center timed to coincide with Pickett’s frontal attack. In a day of primitive communications during a battle, the assault plan was too complex with not much hope of total success, if any success at all.

When Lee explained the assault plan to Longstreet, Longstreet asked how many men would attack the center, Lee guessed 15,000. Longstreet was stunned. He had earlier suggested that twice this number was the minimum necessary. "General, I have been a soldier all my life," Longstreet remonstrated, speaking as frankly as he could to his commanding officer, "I have been with soldiers engaged in fights by couples, by squads, companies, regiments, divisions and armies, and should know as well as anyone what soldiers can do. It is my opinion that no 15,000 men ever arrayed for battle can take that position." Longstreet continued to protest "the sacrifice of my men" when Lee lost his patience. After the war Longstreet would recollect the meeting and say Lee was tired "of listening, and tired of talking, and nothing was left but to proceed;" but Longstreet would continue to brood after the meeting, convinced that the plan would fail and cost the lives of irreplaceable men. He would be correct.

Throughout Friday morning and into the afternoon amid 90° July heat and stifling humidity the Confederate assault force moved into position in the woods opposite the Union center. Interestingly, Meade had ordered some of the troops in the center to move to his left flank, which he thought was the target of Friday’s attack. That left only 5,750 infantrymen stretched out along the half-mile front that would receive Pickett’s 15,000 man assault.

At l p.m., Longstreet opened the greatest artillery bombardment of the war. The Union artillery responded and an artillery duel ensued which lasted for nearly two hours. Unfortunately most of the Confederate shells were falling behind Union lines and doing little damage, whereas the Union shells that overshot the Confederate artillery line fell among the assembled attack force, killing many before they ever got into the fight.

Pickett’s division consisted of three brigades commanded by Brig. Generals Armistead, Kemper, and Garnett. All would lead from the front. Only Kemper would survive, though he would be wounded and captured as a prisoner.

Around 2:30 p.m. the Union artillerists slowed their rate of fire, and then ceased fire, both to conserve ammunition and to fool the opposing artillerists into thinking their cannons were knocked out.

Pickett went to Longstreet and asked, "General, shall I advance?" Longstreet, now overwhelmed with emotion, did not respond, but simply bowed his head and raised his hand. Thus the order was given.

The assault line was one mile long from flank to flank. Riding along it Pickett exhorted, “Charge the enemy and remember old Virginia!" The ranks stepped out of the tree line in silence and pageantry and began their slow march toward the Union center. A mile away, Union soldiers crouched behind a stone wall and watched in amazement at the bravery of this spectacular sight.

Meanwhile, Stuart launched his attack from behind the center. It was confronted and then blunted by a counterattack from the Union Michigan cavalry led by a new Brig. General, just 23 years old – George Armstrong Custer. Without encouragement from their leader to go forward, Stuart’s men fell back and then retreated.

As Pickett’s men got within range, Union cannoneers fired grapeshot and cut them to pieces. Closing ranks, the march forward continued. Once within 100 yards, Union and Confederate infantry leveled volleys of musket fire into each other’s ranks. Then came the bayonet charge toward the Union line.

About 200 to 300 Virginians and Tennesseans made it over the wall and into the Union ranks. They engaged in hand-to-hand fighting for about half and hour. But no reinforcements followed them and many were captured or killed. Armistead managed to put his hand on a Union cannon before being mortally wounded.

The assault turned into the bloodbath that Longstreet had predicted. Survivors, some helping others walk, staggered back across the field that they had crossed about an hour earlier. But 7,500 were left on the field, dead, dying, and wounded.

Fearing a counterattack after so severe a beating, Lee rushed out to meet the remnants of the once proud Hill and Pickett divisions. “It’s all my fault,” Lee began repeating to the returning soldiers. “It is I that has lost this fight and you must help me out of it the best way you can."

Pickett and other senior officers stood with tears streaming down their faces aghast as the dazed men returned to the assembly area. When Lee told Pickett he must rally his division for the counterattack, Pickett replied, "General Lee, I have no division."

General Pickett was inconsolable for the rest of the day and some say he never forgave Lee for ordering the charge. His after-action report was so bitter that Lee ordered him to rewrite or destroy it. No copy has ever been found.

Pickett's military career was never the same afterward, although he was with Lee to the end and the surrender at Appomattox. But he was always displeased that his name was associated with the infamous Pickett’s Charge. Asked after the war why he thought his assault had failed he would say, "I've always thought the Yankees had something to do with it."

Back in his headquarters after the rebuff, Lee muttered repeatedly to his staff, "Too bad. Too bad! Oh, too bad!" His big gamble to win the battle and the war had failed. Pickett’s charge, more particularly the hand of General Armistead, had been the high-water mark of the Confederacy and from then on the tide would run against it.

It rained on Saturday – July 4 – as the opposing sides stared at each other across the corpse-strewn battlefield separating them. Casualties in dead, wounded and missing were about 46,000, evenly divided among both armies. But that number represented almost a third of Lee’s army while a quarter of Meade’s. The Union army losses would be replaced by new recruits. Those of Lee’s were irreplaceable losses.

When it became apparent to Lee that no counterattack would come – much to the chagrin of President Lincoln – Lee collected what wounded he could onto wagons and started the long retreat back into Virginia.

My great-great-grandfather fought in the Civil War with General Nathan Bedford Forrest’s cavalry. His theater of operations was Tennessee, Mississippi, and Alabama. Scarcely more than an infant, I was supposed to ride with him in the parade of the final reunion of Civil War veterans at Gettysburg in 1938. He got sick so neither of us attended. He died the next year so I have no recollection of him. But I knew his daughter – my great grandmother – very well. She lived for ten years after I graduated from college, and when I visited her as a child and adult, she regaled me with stories about the exploits of her father, my Grandpa Doggett, during the war.

My other great grandparents – I had five of them – also had roots in the war, and as a child I would sit at their knees listening and asking about a time I never knew personally, imagining myself caught up in that signal event which affected almost every southern family of the era in some way.

I am, therefore, an unapologetic son of the south. The war and southern heritage is in my veins as it is for all generations whose southern roots go back to the beginning of the 19th century. As a child and an adult, I’ve been to the Gettysburg battlefield many times. In 1988, when my wife and I last visited it, I stood where Pickett’s men had assembled. I looked as they did across that wide field toward the Union lines now dotted with monuments. My mind went back to what happened there 125 years earlier as I imagined myself a soldier among them, terrified, but admiring their bravery … ordinary farmers who never questioned what they were about to do or the reason they were doing it. I thought of the final words of General Armistead who pulled raw corn from his pocket and told the Union doctor treating his fatal wounds, "Men who can subsist on raw corn can never be whipped." And I recalled the words of William Faulkner:

For every Southern boy fourteen years old, not once but whenever he wants it, there is the instant when it's still not yet two o'clock on that July afternoon in 1863, the brigades are in position behind the rail fence, the guns are laid and ready in the woods and the furled flags are already loosened to break out and Pickett himself with his long oiled ringlets and his hat in one hand probably and his sword in the other looking up the hill waiting for Longstreet to give the word and it's all in the balance, it hasn't happened yet, it hasn't even begun yet, it not only hasn't begun yet but there is still time for it not to begin against that position and those circumstances which made more men than Garnett and Kemper and Armistead and Wilcox look grave yet it's going to begin, we all know that, we have come too far with too much at stake and that moment doesn't need even a fourteen-year-old boy to think: This time. Maybe this time with all this much to lose and all this much to gain: Pennsylvania, Maryland, the world, the golden dome of Washington itself to crown with desperate and unbelievable victory the desperate gamble, the cast made two years ago …