Presidents Propose--The Court Disposes

A few weeks ago I reminded you that in picking a replacement for a Supreme Court Justice (Souter, in this case) a president makes one of the most important political choices in his career. Obama has made his choice—Sotomayer—Congress will began the bitterly politicized process of confirming or denying on July 13.
The importance of what is happening was underscored this past weekend. A good part of President Obama’s “bailout and get America’s boat moving again” is predicated on his ability to salvage our auto industry with its masses of high paying jobs and its vast periphera of dealerships and part suppliers.
He and his minions had a deal all worked out for Chrysler. Everybody would take a hit; what was left would be sold to Fiat as a supposedly viable automobile manufacturer. All was ready to roll by June 15—when the Court said, “Not so fast”. And everything stood still.
This is a classic situation in which nine men, unelected, appointed for life, can step in and act with more power than the president and congress combined. They spoke on behalf of three pension funds in one state—Indiana.
The pension funds stood to lose about six million dollars—out of the billions and billions of losses and endangered funds involved in the Chrysler restructuring. A drop. But, they argued, the present Chrysler bailout created and forced by the administration’s carrot and stick use of the Congressionally approved bailout funds, was unfair to small investors and holders of Chrysler debt.
In short, the pension funds felt that they could get more of their money back by forcing Chrysler into total bankruptcy (Chapter seven) in which the company is dissolved and everything is sold at auction. So much for jobs. Instead of a few hundred car dealerships, possibly all current Chrysler dealerships down the tubes. What about Chrysler suppliers?
But the Indiana retirees would receive possibly fifty cents on the dollar instead of half that. (An understandable concern in this age of collapsing retirement funds and endangered pension plans.) So the funds cried foul and the Supreme Court chose to hear their plea.
In an assertion of raw Supreme Court Power, nine men tipped Obama’s carefully wrought restructuring plan on its head and sent everybody back to “Go” without collecting $200.
Now, the Court may choose to allow Obama’s plan to stand as is. It may declare it unfair and force a complete reworking—which could drive Fiat right out of the picture if the terms are less favorable. The point is: no one knows what it will do. It has the power to do anything.
There will be no appeal. Just as there was no appeal back in the 1930s when the infamous (or famous, depending on your political persuasion) Nine overturned facet after facet of Roosevelt’s New Deal. FDR finally became so outraged that he resorted to a desperate tactic.
He asked Congress to create six more seats on the Court which he could then fill with justices favorable to his legislation. Realizing that this was a serious threat, the Court quickly reversed itself and began ruling in favor of New Deal legislation. (The switch in time that saved nine.)
Historically Roosevelt is portrayed as having egg all over his face from this incident (Congress turned him down), but we still have Social Security and the Fair Labor Act today.
The point is that it took that kind of a drastic threat to force the Supreme Court to bend to the will of the elected officials of America—and the American people. Obama is not likely to try another “court packing scheme” no matter what the court does to his proposals.
The Court knows this. It is pretty much free to do as it pleases. Which leaves Obama, Congress and Chrysler (and Fiat) waiting in total uncertainty, an uncertainty no one thought of only a week ago.
And, as everyone is asking, what impact will a court action have on the even bigger General Motors restructuring. Also back to “Go”? When the Court is done, will we have nothing left as an auto industry but Ford? The answer lies in the hands and minds of the Court.
This is the sort of “hard case that can make bad law”. Thousands of concerned and potentially impoverished pensioners in Indiana may be benefitted, but what of millions who depend on the auto industry for income and tax base?
In the ancien’ regime (Europe before 1789), kings had this sort of arbitrary power. The continent was drenched in blood before they were forced to listen to the peoples’ representatives in Dumas, Reichstags, and Assemblies.
Perhaps it isn’t such a good idea to allow one branch (unelected) of government to wield such unrestricted power over the other two branches. It would take courage. In many people’s minds the Court holds a place of respect comparable to that held by Tsars, Kaisers and Kings. To challenge it will risk the disapproval of a large number of loyalists.
But perhaps it is time to think about it.