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E minus 120:
Deviating from our typical approach, here’s a quiz about the current economic/political state of play. The challenge is to answer the questions correctly, and the potential reward is the satisfaction of being right (or being enlightened).

SAFE ran an exercise along these lines at a Newark Community Day get-together over 15 years ago. Our list of questions was about Social Security and Medicare funding, and we offered prizes for the most correct answers. SAFE newsletter,
Fall 2004.

Seventy-seven people accepted our challenge. The clear cut winner [who answered all of the questions correctly] was George Jurgensen of Newark, Delaware. He was awarded a check for $100 and a copy of “The Coming Generational Storm” (Kotlikoff and Burns, MIT Press, 2004). Several runner-up winners were also awarded copies of “The Coming Generational Storm,” and all participants were offered the SAFE pens with which they filled out the questionnaire. *** In our opinion, the [survey participants’] answers suggest that people may have a more realistic view of the outlook for Social Security and Medicare than our political leaders have.

Reflecting the multiplicity of challenges that this country faces nowadays, the questions on the current quiz cover quite a bit of ground. Here are some suggestions for navigating this material:

•Review the list of questions, decide what you think are the right answers, and jot down your thoughts on a pad or sheet of paper;

•Scroll down for discussion and answers.

•Share your results (
wwhpple3@verizon.net), including comments re any of the answers, if you feel so inclined..

==========Questions==========

FISCAL/MONETARY

1. According to actuarial projections, how much time is left until funds in the SS trust funds will run dry forcing projected benefits to be cut substantially? How does this compare to the estimate in 2004?

2. What is gross government debt as a percentage of Gross Domestic Product now versus in 2004?

3. How does the current amount of assets on the Federal Reserve System balance sheet compare to this amount at the end of 2004?

4. What are the likely consequences of massive deficit spending plus excessive monetary ease?

CONGRESSIONAL/EXECUTIVE BRANCH

5. Have Senate Republicans pigeonholed the $3T HEROES Act and a $1.5T infrastructure bill on grounds that further deficit spending would not be prudent at this juncture?

6. Who is the target of a House impeachment inquiry that was proposed on 6/30/20?

7. How much longer will the Senate filibuster rule remain in effect?

SCOTUS

8. How did Chief Justice John Roberts characterize the role of Supreme Court justices during his confirmation hearing in 2005, and has he observed this tenet in practice?

9. Did the Supreme Court term end on June 30, as it normally does, and if not what key case remains to be decided?

10. Of the nine justices on the US Supreme Court, how many are over 70 years old?

LOWER LEVEL COURTS

11. Has the Flynn case been dismissed in accordance with the request of the Department of Justice?

12. Has the legality of transferring funds from the military budget for border wall construction been settled?


==========DISCUSSION==========

FISCAL/MONETARY POLICY

1. In 2004, the Social Security trust funds had an overall balance of about $1.5 trillion. Actuarial projections indicated that this program would be solvent until 2042, at which point the trust fund would be reduced to zero and substantial benefit cuts would be required by law. Trustee’s report, 2004.

Currently, the trust funds balance is about $2.9 trillion, but projected plan requirements have increased (notably due to lax management of the disability income program) and a zero balance is projected in 2035. Trustee’s report,
2020.

If you answered that “there is no money in the trust funds, only IOUs,” that is also correct. The trust fund accounting may be important from a political standpoint, but it has no economic significance. Misleading the public: How the Social Security trust fund really works, David Johns, heritage.org,
9/2/04.

2. In 2004, gross government debt stood at 61% of Gross Domestic Product. It was estimated at about 107% of GDP as of 9/30/20 in the president’s FY 2020 & 2021 budgets. OMB historical tables, table 7.1, accessed 7/3/20.

Given recent supplementary appropriations re the coronavirus pandemic plus the economic recession, gross government debt as a percentage of GDP is now running considerably higher than previous estimates. The ratio reportedly stands at 132%, although this jump is yet to be officially confirmed. US debtclock.org, accessed
7/3/20.

3. In recent years, the Federal Reserve has added substantial assets to its balance sheet as a result of injecting liquidity into the economy. Substantial asset growth occurred in reaction to the 2007-2009 financial crisis and again this year in reaction to the recession triggered by the coronavirus pandemic.

On a cumulative basis, the Fed’s assets have risen 714% (over $6 trillion) since 2007. Recent balance sheet trends, total assets of the Federal Reserve, accessed
7/5/20.

4. The prevailing view among economists is that carefully managed fiscal stimulus and monetary ease can avert or buffer economic downturns, thereby optimizing economic results over the cycle. Experience has shown, however, that excessive stimulation can backfire by encouraging speculation and/or perpetuating failed programs or enterprises. Low taxes and stable money may seem somewhat boring, leaving government policy makers without a great deal to do, but this approach has delivered better results over time than Keynesian economics, etc. The Magic Formula, Nathan Lewis, 2019.

CONGRESSIONAL/EXECUTIVE BRANCH

5. Two big spending bills have been passed by the House on basically party-line votes, only to be pigeon-holed by Republican leadership in the Senate:

•The HEROES Act (H.R. 6800) providing for some $3 trillion in additional coronavirus relief payments, which was passed on May 15. House Democrats offer a mess of pottage,
5/18/20.

•The INVEST in America Act (H.R. 2), passed on 7/1/20, would provide some $1.5 trillion in infrastructure outlays including extension of FY 2020 spending limits to FY 2021 and numerous subsidies for “green” energy. Josh Siegel, Washington Examiner,
7/1/20.

Does this mean Republicans are acting more fiscally conservative than Democrats? Perhaps, but the evidence doesn’t clearly support such a conclusion. The GOP is reportedly in favor of another big spending bill for coronavirus relief and will probably offer its own multi-trillion proposal in mid-July. Trump supports another and bigger round of relief checks, Nihal Krishan, Washington Examiner,
7/1/20.

Also, the president has said on several occasions that he would like to do an infrastructure bill if the Democrats would meet him halfway on the details.

6. Ready for another impeachment inquiry? A House resolution calling for such an inquiry was introduced on June 30 with 35 co-sponsors? The target this time, however, is not the president – it is Attorney General William Barr.

The complaints cited in the resolution don’t strike us as having much merit, but readers may wish to review the text of the resolution (see link in the following report) and reach their own conclusions. Desperate Democrats introduce resolution to impeach AG Bill Barr, rawconservativepolitics.com,
7/1/20.

7. SAFE has recommended repeatedly that the Senate filibuster rule be abolished for votes on legislative matters (as was previously done for votes on the confirmation of appointments). In our opinion, this rule has contributed to the mediocre legislative record of Congress in recent years – facilitating deadlock on Capitol Hill while encouraging presidents to exceed their proper authority in order to occasionally get something done. Time to bin the filibuster, 4/3/17.

The current situation is a bit different in that we now have divided control of the two houses of Congress, i.e., filibuster or not, Democrats can block legislation in the House. Senate Democrats have continued to use the filibuster rule, however, whenever it suits their purposes – as for example when they recently blocked any discussion of the Republican drafted police reform bill.

Some Republicans may sincerely believe that preservation of the filibuster rule is conducive to robust debate in the Senate, but we concluded some time ago that Democrats would abolish the rule if and when they regained control of the Senate so Republicans had no valid reason to accept this constraint in the meantime. Our reasoning was recently confirmed by Senator Chris Coons (D-DE) in an interview with the Hill, according to a Wall Street Journal editorial on
6/25/20.

I will not stand idly by for four years and watch the Biden administration’s initiatives blocked at every turn. I am gonna try really hard to find a path forward that doesn’t require removing what’s left of the structural guardrails, but if there’s a Biden administration, it will be inheriting a mess, at home and abroad. It requires urgent and effective action.

SCOTUS

8. At his Supreme Court confirmation hearing in 2005, Chief Justice John Roberts compared his contemplated role to that of an umpire. With pivotal votes, Chief Justice John Roberts confounds conservatives and liberals, msn.com, 7/1/20.

It's my job to call balls and strikes, and not to pitch or bat.

Some have questioned whether the chief justice is living up to this credo, or has actually become a political justice who generally favors liberal views while pretending to be impartial.

In the first decision upholding GovCare, for example, the conservative justices plus Anthony Kennedy (a swing justice) were prepared to rule that the government lacked power to mandate that Americans participate in this government healthcare program. The chief justice penned a concurring opinion that construed the individual mandate as a tax rather than a fine, thereby derailing the proposed ruling without appearing to side with the liberals. Assessing the GovCare decision,
7/9/12.

Most of the major decisions in this year’s Supreme Court term went against the Trump administration, and Roberts contributed to or seemed supportive of the outcomes. Conservative critics were quick to point this out. Carrie Severino [a former law clerk of Justice Clarence Thomas]: Justice John Roberts tends to “fold under pressure” from the left and media, Julia Musto, foxnews.com,
6/30/20.

9. The Supreme Court term normally ends by June 30, with the bulk of its full case decisions being published during the last few days of the session. This year the term was extended into July, and at least one major decision is still pending.

It’s not the third challenge to the constitutionality of GovCare (seems like Republicans never got the message on that matter), nor the attempt by House Democrats to get their hands on all of the Mueller investigation files including grand jury testimony as fuel for further investigative efforts. These politically charged matters remain on the docket, but they probably won’t be resolved before the November elections.

What does seem imminent is a ruling on the House demand for the president’s tax returns. SCOTUS about to rule against Trump on tax returns, says Obama’s SCOTUS lawyer, NBCU, yahoo.com,
6/30/20. However this case is decided, good luck to Chief Justice Roberts et al. in claiming that the outcome was anything other than political.

10. Supreme Court justices receive lifetime appointments and often serve for several decades, so it’s hardly surprising that there is periodic speculation about their health status and/or retirement plans.

Four justice are currently 70 years old or more: They are Justices Ruth Bader Ginsberg (87), Stephen Breyer (81), Clarence Thomas (72), and Samuel Alito (70).
Biographies of current justices.

The most recent buzz has been about the possible retirement plans of Samuel Alito. Supreme Court Justice Samuel Alito reportedly considering retiring so Trump could replace him with conservative, Dongyoon Shin, upolitics.com,
7/3/20. But count us as skeptical; it’s too close to the elections for such a maneuver now.

LOWER COURTS

11. One of the first members of the Trump administration was retired Lt. General Michael Flynn, who became National Security Adviser on inauguration day (1/20/17). Flynn quickly became the subject of an FBI investigation about allegedly improper telephone discussions with the Russian ambassador during the transition period; after this subject surfaced in news reports, he resigned in mid-February.

Flynn was subsequently investigated by the Mueller task force, which did not come up with any substantive charges but prosecuted him for allegedly lying to the FBI. He eventually entered a guilty plea on the understanding that a threatened prosecution against his son would be dropped and that jail time would not be recommended.

After the Mueller probe ended in 2019, Flynn had been convicted but not sentenced. His new attorney (Sidney Powell) sought to have the conviction reopened on grounds that FBI investigators had entrapped Flynn and the Mueller prosecutors had failed to provide the defense team with exculpatory evidence (a Brady violation).

At the direction of Attorney General William Barr, the handling of the Flynn prosecution was reviewed and the defense claims were basically confirmed. Accordingly, the Department of Justice requested the judge (Emmett Sullivan of the district court in the DC Circuit) to dismiss the case.

Judge Sullivan was not inclined to comply, and he went so far as to suggest that the defendant might be declared in contempt for perjury in that he had pleaded guilty to lying to the FBI and was now seeking to change his plea. Some observers praised Sulliavan's stance as demonstrating independence, but in effect he was setting himself up as an alternate prosecutor. Flynn case to be test of independent judiciary, Barbara McQuade, News Journal,
5/19/20.

The defense filed an emergency appeal, and a 3-judge panel of the DC Circuit ordered Judge Sullivan to dismiss the case as the Department of Justice had requested. Appeals court orders judge to grant DOJ motion to dismiss Flynn case, Jerry Dunleavy, Washington Examiner,
6/24/20.

It had been a long time coming, but Flynn was apparently going to be vindicated – even though there would be no recovery for him of the six figure legal bills and public vilification that he had been forced to endure. Or was he?

Judge Sullivan did cancel one proceeding that had been scheduled, but to our knowledge he has made no move to comply with the appellate order by dismissing the case. Indications are that he may intend to contest the matter by seeking a review by the full DC Circuit appeals court (en banc) or even appealing to the US Supreme Court. Judge’s move opens door to appeal of decision ordering dismissal of Flynn Case, Jeff Mordock, Washington Times,
6/24/20.

As the saying goes, “justice delayed is justice denied.” Why should anyone want to accept a job in Washington after reflecting on General Flynn’s unhappy experience?

12. Here’s another example of how controversial issues can drag on, seemingly to no good purpose.

During the 2016 presidential campaign, candidate Donald Trump dramatically vowed to build a wall along the southern border and make Mexico pay for it. He was anxious to deliver after winning the election, but there was obviously no way to extract the funds from Mexico. If there was going to being any border wall construction, the funds would have to come from Congress.

The amounts involved weren’t all that significant in the overall scheme of things, so it should have been relatively easy to negotiate a deal – except the Democrats wanted to embarrass the president, not accommodate him. Even after a protracted government shutdown, see “Government reopens for 3 weeks,”
2/4/19, they weren’t prepared to give an inch.

Unable to obtain the funds required in the usual way, the president resorted to a workaround that involved transferring funds that had been appropriated for other purposes – e.g. military construction projects – to the border wall program. This tactic has been in use since 2019 with some $10 billion transferred so far.

Various parties filed suit, claiming that the transferred funds hadn’t been lawfully appropriated, and the Sierra Club et al. were granted an injunction against the use of $2.5 billion in transferred funds by a district court in the 9th Circuit. For once the Supreme Court stepped in promptly, issuing a rather cryptic order to stay the injunction on grounds that (a) the Sierra Club et al. probably lacked standing to contest the legality of the funding, and (b) further proceedings were pending in the 9th Circuit. Supreme Court opinion,
7/26/19.

The issue recently resurfaced when the 9th Circuit Court backed the district court and issued an updated injunction against use of the $2.5 billion in transferred funds. How odd, was the 9th Circuit overruling the Supreme Court? Hopefully not, but for now the administration will have no choice but to appeal to the Supreme Court again. Trump’s use of military funds for border wall construction is illegal, 9th Circuit Court rules, Nick Miroff, Washington Post,
6/26/20.

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#One report by a quiz taker, who provided the correct answers or came close on most of the questions. - SAFE director

T
hanks for your participation. Score: 9/12 = 75%. Good job!

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