IN THIS ISSUE:
- Judicial Appointments - A Most Important Issue
- The Bush Record On Judicial Appointments
- Get Ready For Liberal Judicial Nominees
- Will Minority Republicans Roll Over Or Fight Back?
- What About The Obama Supreme Court?
- Conclusions - What Obama Has In Store
It didn't come entirely as a surprise that I got a lot of negative feedback on my November 4 E-Letter about the Democrats holding hearings on ways to highjack our 401(k) plans - and eventually other types of retirement accounts as well - into a quasi-socialistic "let us take care of you" Guaranteed Retirement Accounts (GRA).
Since that E-Letter was sent in the late afternoon on Election Day, I'm sure many readers didn't see it until Wednesday, and perhaps more than a few readers thought it came across as a sour-grapes piece because Barack Obama won the election by a comfortable margin.
In actuality, my article on the 401(k) proposal had nothing to do with Obama. Democrats were already holding these hearings before the election, and it will be these same Democrats who may send a bill to the president for his signature with the provisions I discussed, or worse.
The most important point, however, is that I have said since the inception of this E-Letter that I write about politics because I firmly believe that politics affect investments and the markets, and vice versa. Anyone with common sense should recognize that my article about the Democrats' 401(k) trial balloon actually proves the point I have been making all along.
The 401(k) proposal was purposely sweetened to fix the problem of recent large market losses by having 401(k) participants turn their accounts over to the government, which would in turn restore such account values to their August 15 balances. But the trade-off would be that these accounts would be invested in 3% government bonds, and Congress could then spend the money as it always does. Tell me how this does not affect our investments!
If you have been reading this E-Letter very long, you know that I often remind my readers of the unintended consequences that sometimes arise from laws intended to "help" people or right a perceived wrong. A good example is the Alternative Minimum Tax (AMT) law. When originally passed, it was targeted at less than 200 super-rich who were not deemed to be paying their fair share of taxes. Now, it hits millions in the middle class right where it hurts, and Congress has been wrestling with how to undo what was done in error.
If Congress can capitalize on the fear gripping retirement plan participants and pass a 401(k)/GRA law or something like it, we could be in for another round of unintended consequences. However, one consequence I can already predict is going to be higher taxes, and not just on those making over $250,000 per year.
Why write about politics and investments? So you, my readers, will know what's going on and contact your congressional representatives to tell them what you think. As for those who feel that I shouldn't write about politics in general, and about conservative politics in particular, I suggest you consider it a learning experience - just as I do when I regularly read liberal points of view.
I have long maintained that the most enduring legacy of many presidents is often the judicial appointments they make, and especially those for Justices of the Supreme Court. You may recall that I wrote about the importance of this issue in regard to the 2008 election in my July 1, 2008 E-Letter.
Most people focus only on the Supreme Court nominations that presidents make during their terms in office. However, there are also very important judicial appointments presidents make to the various District Courts and the Circuit Courts of Appeal. Since judicial appointments are for life, they not only have the potential to extend a president's legacy beyond one or two terms in office, but can also affect the manner in which laws and even the Constitution are interpreted for many years to come.
It's no wonder then that the Democrats are now very excited about the prospects of judicial appointments. As President-elect Obama prepares to take office, he enjoys a majority in both Houses of Congress. As such, his judicial nominations should be slam dunks, no matter how liberal they are, unlike when President Bush found it almost impossible to get appointees confirmed as the Democrats found them to be "too conservative."
I'm sure you will recall this issue playing out before us as George W. Bush fought with Senate Democrats to have his nominees for federal judiciary vacancies confirmed. This confrontation eventually introduced such terms as "nuclear option" and "Gang of 14" into the national lexicon, which I will discuss further as we go along.
In a President Obama Administration, the shoe will be on the other foot, and it will be the Republicans in the minority who will be fighting Obama's presumably liberal and possibly activist judicial nominations. It's going to be very interesting to see how much or how little difficulty Obama will have filling judicial vacancies with left-leaning judges while his party controls the Senate.
Currently, there are 37 federal judiciary vacancies with 26 Bush appointments pending. Virtually all of the names pending the certification process were nominated in 2007 or later, while the Democrats have had control of Congress. Thus, there's little wonder why these nominees have not been confirmed, and I trust they never will. With a Democratic president and Congress, the liberals have to be salivating at the prospect of being able to substitute their own nominees for all of these vacancies.
This week, I'm going to discuss the importance of federal judiciary appointments, and what kind of judges Obama is likely to nominate. Will the Republicans roll over and allow liberal judicial nominations to be confirmed? Or, will they exhibit the same cohesiveness that Democrats showed during the Bush Administration and attempt to block unacceptable nominees, even though they are in the minority? These are good questions, and ones that might be among the earliest tests of the Republican Party.
Judicial Appointments - A Lasting Presidential Legacy
As a practical matter, many of the policies of a particular presidential administration may disappear shortly after they leave office. However, judicial appointments continue on for the life of the appointee and thus, can have a much longer effect. Unfortunately, most Americans are usually more attuned to what new administration policies are being proposed and what laws are being passed by Congress than the judges that are being appointed to the courts.
The federal judiciary includes Supreme Court justices, US Courts of Appeals (Circuit Court) judges, and District Court judges. Individuals for these positions are nominated by the President and confirmed by the Senate. Nominees are typically suggested by members of the president's political party, and generally share a similar political ideology.
Before being confirmed, however, the nominees are subjected to confirmation hearings by the Senate Judiciary Committee, and these events are usually more of a partisan political forum than actual hearings. Once these hearings are completed, the full Senate votes on the nominees. A simple majority vote is necessary for confirmation, and judges are appointed for a life term. Obviously, the Democrats will have more than a simple majority in the Senate next year and beyond.
In years past, these judicial hearings were generally quite respectable with tempered dialogue between the Committee members asking the questions and the nominees. But those days of reasoned debate vanished when Ronald Reagan nominated Robert Bork for the Supreme Court in 1987. Judge Bork, who was a devout anti-abortion conservative, was vehemently opposed by the Democrats who attacked him viciously.
Judge Bork unfortunately became the ‘poster child' of such partisan attacks, lending his name to a now-generic verb - "Borked" - meaning to prevent someone from attaining a public office by attacking their character and/or political philosophy. While Robert Bork's name was eventually withdrawn from nomination, similar attacks occurred during the confirmation hearings of Justice Clarence Thomas. One speaker at a 1991 National Organization for Women conference stated, in reference to Clarence Thomas, "We're going to Bork him. We're going to kill him politically..." Despite these attacks, Thomas was eventually confirmed by the Senate, but not until after one of the ugliest hearings processes in recent memory.
Thus, it was no surprise that President Bush had difficulty getting many of his judicial appointments confirmed, especially when the Democrats regained majority control of Congress beginning in January 2007. Since then, judicial hearings have regularly been highly politicized, decency and decorum were thrown out the window, and nominees were frequently subjected to an uncomfortable and often bitter confirmation process filled with both partisan and personal attacks.
Now, it will be very interesting to see how things change next year when Barack Obama becomes president. I fully expect the Democrat-controlled Senate to once again return to the days of decency and decorum and rush to confirm Obama's judicial appointees, many of whom are almost certain to be "activist" judges... But I'm getting ahead of myself.
The Bush Record On Judicial Appointments
During his two terms, President Bush has had mixed success in regard to federal judiciary vacancies. According to the White House website, Bush has had 61 Circuit Court judges and 261 District Court judges confirmed as of October 6, 2008. Plus, President Bush has had two nominees for Supreme Court justices also confirmed by the Senate.
However, as discussed above, the road to these confirmations was not without serious bumps along the way, and numerous nominees withdrew their names after being blocked by Democrats. The Dems didn't approve of judicial nominees with political values attuned to those of Republicans, and who would be more likely to resist "legislating from the bench" and other forms of judicial activism.
Thus, Senate Democrats banded together and filibustered Bush's "objectionable" nominees during Senate debate. I'm sure you recall from high school government class that a filibuster is an obstructionist tactic, usually in the form of indefinite debate, intended to stall or kill legislation by preventing it from coming to a vote. It is most often used by a minority party to block votes on objectionable legislation, or in the case of this discussion, votes on judicial nominees.
There is a way to end a filibuster, called "cloture," which ends debate and forces a vote. Invoking cloture takes the vote of three-fifths of the Senate, or 60 Senators. Thus, if the minority party knows that the majority party can muster 60 votes, it probably wouldn't pursue a filibuster. However, if the majority party does not have 60 votes to bring debate to an end, then even the threat of a filibuster can be a powerful weapon.
During President Bush's first term, and until the end of 2006, the Senate Democrats knew that the Republicans could not muster the 60 votes necessary to invoke cloture. As a result, Senate Democrats threatened to filibuster those judicial nominees that they felt were inappropriate for the job due to their conservative political views.
All of this came to a head in 2005 when Senator Trent Lott coined the term "nuclear option" in regard to a little-used procedural way to end a filibuster with a majority vote instead of the usual three-fifths rule. The term was later changed to "constitutional option" in light of negative connotations surrounding anything termed "nuclear," but the result is the same.
Interestingly, the Republicans lost their nerve and chose not to use the nuclear option for shutting down Democrats' filibusters over judicial nominees, which disappointed many conservatives. The Republicans buckled when the Democrats threatened to shut down the Senate and prevent consideration of routine legislative business if the Republicans tried the nuclear option.
Threatened with gridlock over judicial nominations, the stalemate was finally broken by the now-famous "Gang of 14," led by none other than John McCain, among others. The Gang of 14 was a bipartisan group made up of enough Senators from both political parties to prevent the use of the nuclear option as well as filibusters in regard to judicial nominees. The result was that certain of President Bush's nominees were blocked, but others were confirmed without filibusters, nuclear options or shutting down the Senate.
I'm providing all of this background because now the tables are turned and the Democrats are in control of both the Executive and Legislative branches of government. Depending on the outcome of Senate elections in Minnesota and Georgia, the Dems may or may not have the 60 votes necessary to invoke cloture, so we could see a repeat of the 2005 judicial battle played out in the months and years ahead - only this time with the Republicans in the minority. I will come back to this issue later on.
Get Ready For Liberal Judicial Nominees
Of course, Senate Republicans might not threaten filibusters if they feel the judges nominated by President Obama are mainstream jurists who are not judicial activists or do not engage in "legislating from the bench." Some consider the Cabinet appointments President-elect Obama has announced so far as being moderates for the most part, so they expect future judiciary nominations might be the same.
However, Obama's appointments so far have largely been announced to show Wall Street and foreign nations that he's willing to go with experience rather than a strict liberal philosophical alignment. Since judicial appointments can carry on long after these Cabinet members are retired and selling their memoirs, it's possible that Obama might pay homage to the far left by nominating liberal judges. This is actually what I expect to happen.
Since we do not yet know the identity of Obama's judicial nominees, we don't really know how liberal they might be, or how the Republicans will react. However, we do have some hints about who Obama may nominate based on his past statements.
Considering that Barack Obama was a professor of constitutional law for 10 years would seem to indicate that he knows a thing or two about the principles upon which the country was founded. However, constitutional lawyers, scholars and judges tend to fall into one of two categories: First, is the category called "originalists," meaning that they tend to believe that the Constitution should be interpreted based on its original wording and intent.
Basically, originalists believe that if judges are allowed to interpret the Constitution to mean anything they want within the context of current society, then the Constitution means little or nothing. Instead, originalists believe that the original document is sufficiently flexible to take into consideration the changes in our society without sacrificing the wording and original intent of the Founding Fathers.
The other constitutional interpretation category is made up of legal practitioners and scholars who believe the Constitution is a "living document" that should evolve over time to take into consideration societal changes. In contrast to originalists, those who support the living document thesis believe the Constitution should be subject to re-interpretation and even amendment from time to time to fit the needs of current society.
Generally speaking, most conservatives are originalists, while most moderates and liberals support the ‘living document' interpretation of the Constitution. Unfortunately, the majority of lawyers, judges and legal professors are now in the living document camp, as noted in a recent speech by Supreme Court Justice Antonin Scalia.
So, in which camp does Obama reside? He's firmly in the camp of those who believe the Constitution should be interpreted as a "living document." This is not just speculation by conservative pundits, but is clearly evident from Obama's writings and speeches regarding judicial issues. The following are quotes made by or about Obama on various occasions that speak directly to the issue:
- From Obama's book, The Audacity of Hope: "I have to side with Justice Breyer's view of the Constitution--that it is not a static but rather a living document and must be read in the context of an ever-changing world."
- When asked about what kind of justice he would want to appoint to the Supreme Court during a primary debate, Obama said, "I taught constitutional law for 10 years, and . . . when you look at what makes a great Supreme Court justice, it's not just the particular issue and how they rule, but it's their conception of the Court. And part of the role of the Court is that it is going to protect people who may be vulnerable in the political process, the outsider, the minority, those who are vulnerable, those who don't have a lot of clout."
". . . ometimes we're only looking at academics or people who've been in the [lower] court. If we can find people who have life experience and they understand what it means to be on the outside, what it means to have the system not work for them, that's the kind of person I want on the Supreme Court."
- In explaining his vote against [Supreme Court Nominee John] Roberts, Obama opined that deciding the "truly difficult" cases requires resort to "one's deepest values, one's core concerns, one's broader perspectives on how the world works, and the depth and breadth of one's empathy." In short, "the critical ingredient is supplied by what is in the judge's heart [not the Constitution]."
- "We need somebody who's got the heart, the empathy, to recognize what it's like to be a young teenage mom, the empathy to understand what it's like to be poor or African-American or gay or disabled or old - and that's the criterion by which I'll be selecting my judges."
- Surprisingly, however, when faced with the nomination of conservative Janice Rogers Brown for the DC Circuit Court of Appeals, Obama said the following in opposing her confirmation: "The test of a qualified judicial nominee is also not whether that person has their own political views. Every jurist surely does. The test is whether he or she can effectively subordinate their views in order to decide each case on the facts and the merits alone. That is what keeps our judiciary independent in America. That is what our Founders intended."
Hmmmm....It seems that our new president is fine with straying from a strict interpretation of the Constitution in some cases, but not in others. Put differently, Obama seems to believe it is fine for liberal judges to "interpret" the Constitution as they see fit, but conservative judges must "subordinate their views."
In any event, it's pretty clear, at least to me, that Obama is in the camp that believes the Constitution is a living document and should be interpreted accordingly. In other words, judicial activism will be just fine as long as it's the little guy against the big guy, but is not acceptable if it is deemed to line up with a conservative political mindset.
In addition to his own well-documented feelings about judicial activism, there is little doubt Obama will also feel pressure from Democrats in Congress to appoint liberal, activist judges. Based on a number of articles and blog entries I have read, the liberals feel that it's high time they had their turn to appoint judges with political views akin to their own. In essence, they see the federal judiciary as being slanted to the right as a result of Republican presidential administrations in 20 of the last 28 years.
Will The Republicans Roll Over Or Fight Back?
There seems to be no question about the liberal ideology that is likely to influence Obama's judicial nominees. As noted above, Obama's own words indicate that he advocates judicial activism on matters where the heart should overrule the letter of the law. Thus, the big question becomes, what will Republicans do when faced with Obama's liberal judicial nominees with a proven record of judicial activism?
While judicial appointments may not be the first potential area of conflict the Republicans will encounter with the new Administration, they are likely to become prominent within the first year of an Obama presidency, especially given the many unfilled judicial seats. How they react to Obama's judicial nominees, especially if they are known judicial activists, may set the tone for the next four years or longer.
As noted above, when the Democrats were in the minority and were faced with conservative nominees, they held together and filibustered nominees that they felt were too conservative for their tastes. President Bush was forced to withdraw numerous judicial nominees. This resistance eventually escalated to the point when the Gang of 14 intervened. The point is, all of this resulted in more moderate judicial nominees after 2005.
Knowing that the Senate Republicans didn't resort to the "nuclear option" when they were in the majority, will they wake up and become a cohesive resistance to activist judges nominated by Obama? Or will they roll over and allow them to be confirmed? I hope that they do provide some stiff resistance to judges who want to legislate from the bench, but I have to admit that I wonder if the defeated Republican establishment has the stomach for such a fight.
Of course, the next question to ask is whether the Democrats will be as fearful of using the "nuclear option" should the Republicans filibuster Obama nominees. Buoyed by the shift in power to the left in both the Executive and Legislative branches of government, my bet is the Dems will have no trouble at all resorting to the nuclear option to block efforts by the minority Republicans to stall judicial appointments.
Not only do I think the Senate Democrats won't hesitate to use the nuclear option, I also think their constituency would rebel if they hesitate to employ this drastic step. There is no doubt that the liberals are going to demand that Obama load the courts up with the most activist judges they can find. It remains to be seen if he will oblige them, but I would not be surprised.
What About The Obama Supreme Court?
Much of the above analysis is directed toward appointments to the District and Circuit Courts. While these positions are certainly important, we also need to be thinking about the potential for Supreme Court appointments during Obama's presidency. As I noted above, I wrote about the importance of the 2008 presidential election on the makeup of the Supreme Court back in July. However, since we now know who the president will be over the next four (or possibly eight) years, it bears repeating.
It is very likely that President Obama will have the opportunity to appoint at least two and possibly three Supreme Court justices in his four year term, and probably more if he wins a second term. Considering the above discussion about the liberal mindset Obama has in regard to judicial activism, his Supreme Court appointments are almost certain to be on the liberal side.
Thus, let's look at the current makeup of the court, and who may be retiring soon. In the current makeup of the Supreme Court, we have four generally conservative judges - Roberts, Scalia, Thomas and Alito; four consistently liberal judges - Stevens, Souter, Ginsburg and Breyer; and one sometimes swing voter - Anthony Kennedy (often more on the liberal side).
Casual readers might tend to think it is a good idea to have the High Court so well balanced. Admittedly, there are arguments to support such a position. But President Obama has the potential to change that if more than two Supreme Court justices retire on his watch.
Supreme Court justices tend to keep their retirement thoughts and plans to themselves, so there is no way to know with certainty if any of the current justices are likely to retire over the next four years. However, it is believed that some of the older Supreme Court justices have had health issues, so it would seem very likely that at least one or two or more will retire over the next four years.
Next, it has long been believed that certain Supreme Court justices prefer to retire when the sitting president is someone who shares their political ideology, and who is likely to appoint a like-minded replacement. So, even if their health isn't a problem, some justices choose to retire when it is politically expedient in terms of their likely replacements.
Now that Barack Obama is President-elect, it is widely believed that the two most likely Justices to retire will be John Paul Stevens and Ruth Bader Ginsburg. Justice Stevens is now 88 years old, so it would come as no surprise if he chooses to retire during the next four years, perhaps as early as next year.
Interestingly, Justice Stevens was thought to be a conservative judge when Richard Nixon appointed him to the 7th Circuit Court of Appeals in 1970, and when Gerald Ford appointed him to the Supreme Court in 1975. Yet Justice Stevens was at best a moderate on the High Court in his early years, and soon shifted to the liberal side on most issues.
The next most likely Justice to retire is thought to be Ruth Bader Ginsburg, who is now 75 years old. Justice Ginsburg was diagnosed with colorectal cancer in 1999 and underwent surgery followed by chemotherapy and radiation treatments. While the surgery and treatments were deemed to be successful, it is unclear how long she wishes to remain on the High Court. Justice Ginsburg is widely considered to be the most liberal justice on the Court, and like Justice Stevens, she may have been waiting to retire until someone more liberal is in the White House.
Most analysts agree that the make-up of the High Court won't change much if Justices Stevens and Ginsburg retire (or pass away) during an Obama presidency, and I might agree. Obama will likely appoint two equally liberal judges. I think we can count on that.
Judging by age alone, the next most likely justices to retire over the next few years are Antonin Scalia (72) and Anthony Kennedy (72). Importantly, if either Justice Scalia or Justice Kennedy should retire, Obama will have the opportunity to dramatically shift the balance on the High Court to the liberal side. Justice Scalia is widely considered to be the most conservative judge on the Supreme Court. If Justice Kennedy, who is considered the "swing" vote, is replaced with another liberal ideologue, that too would represent a significant shift on the High Court.
Conclusions - Who Knows What Obama Has In Store
President Obama will likely have the opportunity to appoint at least two Supreme Court justices in the next four years. His appointments will very likely be liberal, "living document" judges. Most likely, Obama will be appointing liberal judges to replace retiring liberal judges with no net change on the overall balance of the High Court. That's the good news, we hope.
Yet if more than two Justices retire in the next four years, or should Obama go on to a second term, he may have the opportunity to shift the Supreme Court to a much more liberal bias. And keep in mind, these Supreme Court choices are lifetime appointments.
As a practical matter, I don't care quite so much what the political orientation of a judge is, IF they make their decisions based on what the Constitution says and not what they want it to say. No doubt there are some conservative judges that slant their interpretations to fit their political orientation, but I think they are the vast minority. Likewise there are plenty of other judges who are overly liberal in their decisions.
Judicial activism, however, is alive and well and it now appears that we have a president and majority in Congress who agrees with this method of interpreting the Constitution and the laws of the land. Fortunately, Presidents Reagan, Bush I and Bush II have had a conservative impact on the judiciary that should continue to reduce legislation from the bench in the future. But that can change decidedly in President Obama's Administration.
I have reluctantly refrained from discussing my many problems with Barack Obama in recent weeks as it looked increasingly that he would be our next president. And now he is. So just as well that I refrained. I have chosen my topics carefully.
As I discussed last month, our 401(k) plans may be at risk of government takeover under the new Democrat regime. This week, I focused on the Supreme Court and lower court implications. These are two topics we Americans need to be very aware of.
There will be other topics that we, as investors, will need to focus intently on in the months ahead, and I will get back to those in future issues. The combination of the global recession and financial crisis will likely dominate upcoming topics. But we cannot lose sight of critical issues like our retirement plans, the Supreme Court and what the liberal Congress is up to.
With a new, liberal president coming into office, we need to keep our antennae up!
Very best regards,
Gary D. Halbert
Obama's Judges and the Senate
Obama's Far-Reaching Reforms Can Wait
In Barack we trust? (written by a liberal)
Bill Clinton to release donor list & more (very interesting)
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Forecasts & Trends is published by ProFutures, Inc., and Gary D. Halbert is the editor of this publication. Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgment of Gary D. Halbert and may change at any time without written notice, and ProFutures assumes no duty to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Any references to products offered by Halbert Wealth Management are not a solicitation for any investment. Such offer or solicitation can only be made by way of Halbert Wealth Management’s Form ADV Part II, complete disclosures regarding the product and otherwise in accordance with applicable securities laws. Readers are urged to check with their investment counselors and review all disclosures before making a decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Gary D. Halbert, ProFutures, Inc. and all affiliated companies, InvestorsInsight, their officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results.
12-02-2008 5:02 PM
Gary D. Halbert