Arnold Kling  

The Tonkin Principle

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FinReg21 reports,


While emergency bailout funds helped avert a collapse of the financial system, the Treasury Department now thinks the money should be diverted to helping small businesses and homeowners, a Treasury official said.


Speaking before the Congressional Oversight Panel for the Troubled Asset Relief Program, assistant Treasury secretary Herbert Allison said TARP helped put large banks and the auto companies on a sounder footing.

"It is time to set a new direction for the TARP," Allison told the panel chaired by Elizabeth Warren, "to account for the recent improvements in capital markets and to address lingering weaknesses in housing markets and small business lending."

The idea of diverting the money back to taxpayers probably never occurred to him.

The Gulf of Tonkin resolution was used by President Johnson as the legal basis for waging the war in Vietnam, even though it was not a declaration of war. To me, the Tonkin principle is that the executive will stretch its legal authority far beyond the contents of particular legislation. We have already seen many examples of this from the current Administration--the FTC regulating bloggers, ex post regulation of pay, the energy Secretary's use of billions of dollars of taxpayer money to fund his personal obsession with electric cars, and so forth. I have started calling these arrogant uses of executive power The Obaminations.

I strongly suspect that once health care reform passes, it will evolve according to the Tonkin Principle. The Administration will exercise power and authority far beyond anything that anyone is envisioning as the issue is being debated in Congress this year.


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COMMENTS (12 to date)
MikeDC writes:

I think health care is a much more obvious example (not that the others aren't) because Congress wants to get Tonkin'd

I think Congress sees putting the hard choices in the lap of faceless and unaccountable bureaucrats as much preferable to making them itself.

Floccina writes:

the Treasury Department now thinks the money should be diverted to helping small businesses and homeowners

All these proposals that give to this group or that group strike me as unfair. Rob Peter to pay Paul now I am OK some unfairness, that is progressive taxes so the better plan would be to eliminate FICA for the first 25k/year. People could use that extra income to pay for housing or pay down loans.

Chris writes:

Exactly how did TARP put auto makers on sounder footing? They declared bankruptcy anyway.

Matt C writes:

> I strongly suspect that once health care reform passes

Why are you assuming that something will actually get passed?

I am a little hopeful when I look at the Intrade contract:

http://data.intrade.com/graphing/jsp/closingPricesForm.jsp?tradeURL=https://www.intrade.com&contractId=683800

I'm not paying close attention though. Is there a round II in the works? Is it unreasonable to hope that this will all just fizzle (at least for Obama's admin)?

E. Barandiaran writes:

Stretching legal authority? Then you may be interested in reading this new paper
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1491767

Shakes writes:

What I can't stand is the unfairness of it all.

I had a neighbor who used political connections to get 30k taken off his mortgage. He wrote a letter complaining to a prominent politican, and next thing you know his bank was writting down his mortgage. I want 30k taken off of my mortgage. Imagine making 30k in one day. Unless you are a high commission salesman, most people never have that opportunity.

Some people will gain and others will have to pay for it all, and a lot of this will be doled out according to political connections. I think it stinks.

I have never given to a political party, but I am tempted to give to the DNC and register as a Democrat before I try to get in line for my own 30k. Might be money well spent. Some people in the neighborhood are going to get tens of thousands, others will get nothing. I want to be in the right line.

Last fall someone came to my home with a hand held computer. She knew my name, it was on her database. She had SEIU buttons on and I think an SEIU jacket. She asked me who I was going to vote for. I told her I was undecided, I didn't know what to say. She logged in my response. I didn't like the experience and I have thought about it a few times since. Somewhere there is a list of how people were going to vote. I wonder who has that list and who uses it. Part of me wishes I would have told her Obama and that I support the SEIU. I don't want to make the wrong list.

I really fear some of this stuff. If you want to get a small business loan in a tight credit market, being on the wrong list can't help when the Government owns the banks. Let alone if you want to be a major executive at a banking operation or an automobile company. Maybe I am paranoid, but I fear the Chicago strong arm.

Dan writes:

The Obaminations is a nice one-liner, but I'm afraid you come across as partisan. The government (and the executive branch first and foremost) abuses its discretion under both parties. Obama may have hastened this trend, but what else do you expect? He has Congress to back him up. Madison wrote about this in Fed 51 before the country even existed. I think your argument would be more forcible if you directed it at the violation of principle, rather than the specific transgressor.

David R. Henderson writes:

Arnold,
All good points. And don't forget the Bushinations, as when he illegally engaged in surveillance on Americans.
Best,
David

Douglass Holmes writes:

I would rather be surveilled than robbed. Fortunately I didn't hold any Chrysler bonds.
Of course both parties abuse executive power. It was President Bush who extended TARP to automobile companies, contrary to what was passed by Congress. It just seems that Obama wants to do it with more zeroes at the end.

matt writes:

As a community banker i can promise that we don't want or need the government's money in "helping small business and homeowners". long gone are the days where you can dictate rates and charge undeserved fees, a little thing called competetion has insured that any reasonable and worthy customer can get credit and do so at highly cometetive terms. Instead the government needs to butt out. Every time they look to help the consumer, they hurt community banks and more importantly they hurt the consumer.

ThomasL writes:

Yes, TARP Tonkinization started literally the day it was passed. It is, as nearly as I can tell, a limitless pool of money (I personally doubt it is constrained by the $700b figure) which can be used to do whatever the current executive likes, and has the magic and infections property of turning any recipient into a mindless zombie steered, controlled, and abused by the Uberbrain in DC as it wills.

Bush started it, and gave license to its Tonkinization. I doubt Obama would have had as much leeway had Bush not clearly established the precedent of not being constrained by the letter or [stated] intent of the law.

He has shown creativity in adapting it to his own purposes, though. More invasive, petty, and capricious than the Bush versions, though I'm not sure any more harmful.

TARP is, in my opinion, one of the greatest abuses of the rule of law in all of civilization. It is the flashing signal of the end of the rule of law in the country that had done the most to maintain it.

Randy writes:

"I strongly suspect that once health care reform passes, it will evolve..."

Of course. They don't call themselves "progressives" for nothing.

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