In a previous post I explained that nullification and a constitutional convention could help the current economic situation by getting around the roadblocks that the Fed is producing with tight money. My plan has about the same chance as a snowball in hell, but I thought that it might be fun to think about what their markets might look like if it did happen.

On the likelihood of the plan ever going anywhere, the first thing is that there has never been a constitutional convention called by the states since ratification of the original constitution. In the early 1930’s enough states were interested in repealing the 18th amendment (liquor prohibition) that congress stepped in, repealed it and sent it out to the states to be ratified. One of the reasons that congress did it for them, and I’m speculating, is that if states were to call a convention, they could make any changes they wish to the expanse of Federal power and send them out to be ratified. Congress seems to be very protective of its usurped power, and can’t have the states straightening it out. The other exception might be is that Virgina called a convention for considering amendments to the constitution in 1861, but it wasn’t intended to produce amendment proposals that would go directly to the sates for ratification. The intention was that they would go to congress, and congress would then pass them and send them out to the states. But that didn’t follow the process for calling a convention and there was considerable discussion about the propriety of the entire affair, especially since not all of the states were invited.

The second thing, about nullification, is that since the New Deal, there has been very little state activity in that area. There have been some things, like the Real ID Act, that states have dragged their feet on so much that it made it near impossible to implement. That is sort of an unofficial form of nullification. Several states have officially nullified ObamaCare, but have yet to be challenged by the Federal government and I suspect that if the Supreme Court upholds the law, these states will end up folding like cheap lawn chairs and let it be enforced. Texas tried nullifying the touchy-feely violations of the 4th amendment by the Transportation Safety Administration by passing a law making air passenger bodily inspections covered by the lewd behavior ban. Texans were ecstatic that they could get on a commercial airliner without being felt up. When the Obama administration pushed back, however, it threatened to prohibit all flights leaving Texas from landing anywhere. And I suppose you can guess that Texas did the lawn chair thing because it was pretty much standing all by itself.

It would be a huge undertaking to get enough states to take on the Fed, or challenge the whole market-making cartel the Federal government has going. I wish they would, though. That whole thing is a source of endless amounts of corruption. I’m not talking about bribes, of course there might be some of that there too, but there is so much temptation for the politicians and bureaucrats to bend rules or make special rules that help out their friends. It’s like an express lane to massive corporatism, like the kind of stuff that caused the mortgage crisis.

Still, if the state governments decided to run their own markets, there would be some of that stuff going on. But it will be different stuff with different major players from state to state all across the 50 states and when one scheme goes belly-up it isn’t likely to take down the entire country.  States also have the incentive to not let it get out of control because they compete with each other economically and if they kill their own economies, they could end up in a real big mess – much like Spain is right now – and not be able to catch up for quite a long time. The Federal government doesn’t really have to worry about competition (although it should) and it can follow whatever temptation to go all out on a wild scheme, even if it starts out with good intentions, and we all get screwed, all at once in the end.