The Lawless State Comes to America

The Lawless State Comes to America

By Robert Tracinski - May 13, 2009

The breadth of President Obama's assault on capitalism is breathtaking: from seeking to regulate fine details like credit card fees, to exerting control over major banks, restructuring the auto industry from the Oval Office, seeking to nationalize the entire health care industry, and proposing a national cap on fossil fuel consumption and a thinly disguised system of energy rationing.

But that kind of sweeping control over the economy is not compatible with a system of government designed to protect individual liberty. America's traditional legal system is all about laws and rights and contracts-a fine web of protections for the rights of the individual-and that tends to get in the way of vast schemes for government disposal of our lives and wealth.

So President Obama has decided to throw out that existing legal system and knock down the protections for individual rights.

Our first major warning of this is the deal being forced on Chrysler's "secured creditors." These are institutions that loaned money to Chrysler when it was in trouble; they were willing to take the risk because they were relying on a legal principle which gives them first claim on the company's assets in case of bankruptcy. Thus, in the worst case scenario, they expected to reclaim as much as 80 cents on each dollar of their investment, limiting their losses.

But the Obama administration wants them to accept only 29 cents on the dollar, in the name of "sacrifice." The beneficiary of this sacrifice is the United Auto Workers, a Democratic pressure group which is being shoved to the front of the line and favored above the secured creditors.

How did Obama get these creditors to relinquish their rights? Major banks who have taken TARP money caved in first. When they were dragooned into taking government money last fall, Treasury Secretary Hank Paulson swore that the government would not interfere in their operations or dictate their decisions-except, apparently, for dictating how much they lend, how much they pay their executives, how much they accept as a buyout in major bankruptcy cases, and so on.

As for the non-TARP lenders, Obama has publicly singled them out as villains to be punished-and one prominent bankruptcy lawyer says that Obama's minions have been making direct threats to ruin firms who don't accept the sacrifice of their rights. Tom Lauria of White & Case, which represents several of the secured creditors, explains in a radio interview that "One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight."

Venture capitalist Bill Frezza succinctly sums up the meaning of the Chrysler deal: "There's no law to protect the politically unfavored in this country."

This is not an isolated case. In his statement about a new initiative to shake down corporations for $200 billion by increasing taxes on their overseas subsidiaries, President Obama describes his attempt to shut down offshore financial institutions that won't act as enforcers for the IRS. "If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly." In other words, financial institutions are guilty until proven innocent.

In other cases, the administration is re-writing or re-interpreting existing laws to empower them to impose new controls. I have already written about the EPA's decision to re-interpret the Clean Air Act-passed two decades ago to deal with the alleged problem of "acid rain"-to apply to carbon dioxide emissions, enabling the administration to impose "cap-and-trade" energy rationing without the approval of Congress. Now the administration is seeking to re-write the Montreal Protocols-intended to prevent the alleged erosion of the ozone layer-and use that treaty as another tool to impose global warming regulations. "Now it's going to be a climate treaty, with no ozone-depleting materials," an EPA official tells reporters.

And don't worry about this proposal coming up for a vote, either. HFCs were targeted by the same EPA decree that declared carbon dioxide to be a "pollutant."

This willy-nilly expansion of government power isn't just about economics. The move that should make us most concerned is Obama's attempt to make the government the sole source of funding for higher education. Obama's plan would "expand the Pell Grant program, making it an entitlement akin to Medicare and Social Security. Key to the effort is a consolidation of student lending that would give the US Department of Education a near monopoly over the practice."

This would make every university in the nation utterly dependent on the federal government. If you want to make the state into the central, controlling institution in the economy, it will become the central, controlling institution everywhere else, too-in the realms of education, ideas, art, entertainment.

This new lawless state, which has a hand in every important aspect of our lives and feels free to re-write or override the law at will, is not just something that Obama is implementing in practice. He advocates it in theory, too.

When he announced the pending retirement of Justice Souter from the Supreme Court, President Obama described what he was looking for in Souter's replacement.


"I will seek someone who understands that justice isn't about some abstract legal theory or footnote in a casebook; it is also about how our laws affect the daily realities of people's lives, whether they can make a living and care for their families, whether they feel safe in their homes and welcome in their own nation. I view that quality of empathy, of understanding and identifying with people's hopes and struggles, as an essential ingredient for arriving at just decisions and outcomes."


The idea that the law is not about "empathy" but about "abstract legal theory" is an ideal that men have fought for centuries to achieve. It is the idea that the meaning of the law is objective and predictable, that the law will be interpreted and administered only on the cold, factual merits of the case-that the scales of justice are tipped only by reasoning and evidence, and not by the judge's emotional sympathy for one party over another. We call this "the rule of law," and the whole point of it is that the last thing you should have to think about when you enter a courtroom is whether or not the judge likes you.

That is what Obama wants to reverse. He is replacing the rule of law with the rule of men. This is a system that divides men into politically favored groups-the ones who are considered worthy of "empathy"-and politically unfavored groups, who can expect their rights to be trampled and ignored.

All of this is being done in the name of helping out the "little guy"-but its real purpose is to make the little guy into the helpless pawn of government. It is a network of controls designed to prevent the little guy from rising and making a success of himself-and instead make him go hat in hand to a government official for every important need of his life, from buying a house to sending his kids to college, and pleading for "empathy."

In practice, of course, this means a state ruled by anarchic populism and a petty corruption in which government favors are doled out according to one's political connections. If you want to see an example, look to life under socialist demagogues like Venezuela's Hugo Chavez.

If we don't stop Obama, and soon, that is our future: life in Obama's banana republic.

Robert Tracinski is editor of The Tracinski Letter and a contributor to RealClearMarkets.

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