Thursday, March 22, 2007

Giving The District a Vote

The Washington Post reports today that efforts to grant the District of Columbia an actual, factual, vote in the House of Representatives was derailed by a poisin pill amendment, offered by Rep. Lamar Smith (R-Tex.), overriding the District's strict anti-gun laws. Very clever on the Republican's part in one of two ways. Either it puts Democrats from conservative districts in a tough spot (voting against gun freedom), or, it forces the Democratic Leadership to bring the bill up for consideration under a closed rule, thus reversing on a pledge to run the House in a more open manner.

House procedural maneuvering aside, none of this may matter as the President has said he will veto the bill should it reach his desk. He, or at least his advisors, believe the law is unconstitutional. The first clause of Article I, Section 2 of the Constution reads:
The House of Representatives shall be composed of members chosen every second year by the people of the several states, and the electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislature.
Which supports the President's claim... states get representatives, not districts. It's worth noting that the President also stated the the McCain-Feingold Bipartisan Campaign Finance Reform Act was unconstitutional, and yet is bears his signature.

Of course, the Democrats have their own legal argument. They point to Article I, Section 8, Clause 17 (the Enclave Clause), which says:
To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings
This clause has been read to mean the Congress can do pretty much whatever it wants within the confines of the District (makes me a little sad for the residents of DC... would you want Congress to effectively be your city council and state legislature all at the same time?).

Unfortunately, I have to side with the Republicans on this one, at least as far as the legal argument goes. There are two problems with using the enclave clause. First, it makes no meaningful distinction between the District of Columbia and military bases. Both are governed under the same clause and Congress may legislate with equal force. Which means if the District can be granted representation under the enclave clause then so can all of the military bases around the country.

Second, and for me more powerful, is the 23rd Amendment, which grants the District representation in the electoral college as if it were a state (with the minor provision that they can never get more votes than the smallest state, so they are pretty much stuck at three votes). If the Democrats were right about the enclave clause, this amendment would never have been necessary, Congress could have simply granted the District electoral representation by legislative action. Instead they went to all the trouble of assembling 2/3rds of the House and the Senate and a majority in 3/4ths of all the state legislatures.

Given this precedence, it is hard to argue that legislation, even if well intended, can alter the voting rights clearly outlined by the Constition. There have been efforts to grant the District either statehood or full voting rights under another constitutional amendment akin to the 23rd. The statehood route poses many complications (for example, could the new state pass a law ousting the national government?) and is not really consistent with the founders vision of a national capital free from state intervention. The full voting rights option, on the other hand, is pretty straightforward. The key obstacle is history--it's been tried before and failed--and partisan positioning--Republicans won't vote to grant representation to a Democratic stronghold unless they get the same in return.

But perhaps both can be overcome is sufficient political will. If the voting rights folks can frame the issue correctly, show how the Republicans are preventing a giant city from participating in self-governance, focus on representation in the House by dropping the demand for Senators, and then really push the issue when it goes out into the states, then maybe they have a chance. As for the current effort, I sincerely doubt it.

Wednesday, March 21, 2007

Must Share Funny Video

Sarah's father set her a link to a MadTV sketch that is truly inspired. It is a MUST see.

Because the copyright on this video is, err, dubious, I'm just going to provide a link back to YouTube, where you can watch the video and Google can deal with the liability.


Friday, March 09, 2007

Seeking Special Protection

We all know about Arthur Anderson, the big accounting firm that went down with Enron in 2002. Suddenly we went from having "The Big Five" accounting firms to "The Big Four." See, the Federal Securities & Exchange Commission (SEC) imposes pretty significant reporting requirements on any publically traded firms. Both before and after the adoption of Sarbanse-Oxly, many of these reporting requirements can only be fulfilled by an outside accounting firm. The large companies rely exclusively on the Big Four to fullfill their outside auditing needs.

But, did you know that before there was The Big Five there was The Big Eight? Presumably there was also the Big 12 and the Not Quite as Big 17. The accounting business, like so many businesses, have been seeking efficiency through mergers since the 70's. Taking smaller companies and merging them into successively larger companies. So imagine my surprise when I read in the Washington Post today that these same companies are seeking legislative protection from liability because, and I quote, "We just don't want to be put out of business."

There tactic here is classic. Since they provide such a valuable and necessary service, they will argue that it is better, for society as a whole, if they are essentially immune from suit so as to ensure the few of them that remain continue to function. It would be worse, they will say, for there to be only three or two firms than for one of them to engage in fraud and get off the hook. It's the same argument the airlines make when they get huge federal bailouts.

The critical difference between airlines and accounting firms is that there is only so much market capacity for airlines. Given the huge capital resources needed to run airlines, terminals, ticketing, etc, it is safe to conclude that there is an optimal number of airlines and that it is a relatively small number. But the accounting firms only real capital cost is in brain power. The more clients they have, the more brains they need to employ. My guess is the whole thing scales rather well... which is why they merged together in the first place. If there is no lost efficiency from merging two firms, both with 50 employees into a single firm with 100 employees (maybe less), then you're going to do it on the grounds of eliminating competition. It's a no brainer (excuse the pun).

I consider this classic short term profit driven thinking. One of the central principles of computing, especially network computing, is to reduce the number of single points of failure. You never want a system to rely on one part which, should it fail, the entire system will go down. The same principle applies to civilization. You don't want everyone employed in the same job, you don't want your food source to be in one location, you don't want all your energy to come from the same kind of fuel. The more you diversify the better prepared we are for unforeseen, yet inevitable, changes in circumstances. It's the same principle behind a diversified stock portfolio.

Yet everytime one of these accounting firms merged together, we got closer and closer to a single point of failure. Now the four firms are so huge and have such an iron grip on the market that it is near impossible for a new market entry. The public traded companies have no choice but to hire one of the Big Four, and thus no medium sized accounting firm can ever become Big #5. Now the possibility of a bankruptcy due to a civil lawsuit is a big deal... the investment system needs these firms to survive, regardless of the cost.

Which brings me the final thought of who, exactly, bears these costs? See, when there is fraud, and that fraud is aided by an accounting firm, the investors have civil recourse to recover lost funds. When a company goes bankrupt, like Enron did, there's not a lot of money available to make those investors whole. To be clear, "investor" should conjure up both thoughts of already rich billions as well as the middle class saving for their kid's college and industrial workers pensions (the stock market, it's not just for elite any more!). If the purpose of the civil justice system is to make those damaged whole again, then going after an accounting firm who helped perpetrate the fraud just makes sense. If the SEC, or Congress, goes along with the Big Four's wishes, don't think those unrecoverable damages just go away. Instead, all those damages felt by the collapse of a public company will be carried by investors, while the accountants who both aided and likely benefited by the fraud, will continue to operate without any punishment or financial loss. Talk about a single point of failure.