U.S.: Richest Rich People In The World (But Not The Richest Middle Class)

Raise your hand if you have the richest middle class in the world. Not so fast, United States!

David Leonhardt and Kevin Quealy, writing for the New York Times, report that the U.S. no longer has the wealthiest middle class in the world. But, rest easy dear reader, the wealthiest Americans are still the richest rich people in the world. So we have that going for us.

So, what happened? Did our middle class stop being as productive, in relative terms, than our wealthiest citizens? Or did the upper class gain more leverage over the years with which to appropriate the wealth produced for themselves?

The report begins:

The American middle class, long the most affluent in the world, has lost that distinction.

While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades.

After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans.

The economic growth in the U.S. continues to be as strong as in many other countries; our middle class just isn’t benefiting terribly much. The poor have it worse. The usual response from those who don’t regard increasing income and wealth gaps as a problem is some variant of our middle class – and especially our poor – of being lazy and stupid. The economy is a morality play and the only way you fail or succeed is if you deserve to. Market don’t lie.

The report attributes the loss of ground by our middle class to three factors: 1) Our educational attainment – literacy, numeracy, and technical skill – is less than other countries; 2) Our top execs and management take a bigger piece of the productivity pie for themselves, minimum wage is lower, and unions are weaker; and 3) our government isn’t nearly as aggressive in redistributing income to raise the take home pay of lower and middle income households.

But socialism kills productivity, right? Not necessarily:

Even with a large welfare state in Sweden, per capita G.D.P. there has grown more quickly than in the United States over almost any extended recent period — a decade, 20 years, 30 years. Sharp increases in the number of college graduates in Sweden, allowing for the growth of high-skill jobs, has played an important role.

And of course, the poor in the U.S. have been doing worse for longer. But, we don’t care about them because they deserve what they get — on account of their laziness, lack of mental acuity, and poor life choices. But, those in the 95th percentile are doing much better than their counterparts in Canada, Britain, and the Netherlands. Which is as it should be on account of their pluck and ingenuity.

Being Aggressive

I coach my kids’ soccer teams – head coach for one, assistant for another. This weekend, one of the teams played a team coached by a hyper-aggressive type who seems to be working out some unresolved childhood stuff through the next generation. There is a rule in this rec soccer league that, when the goalie has the ball — even a finger on it — the other team is to back off. These are 8 and 9 year old girls. The goalie is often in an exposed position, we don’t need kids getting hurt. At one point during the game, one of our girls was bobbling the ball a little bit but still had her hands on it. The girl on the other team kept coming, kicking at the ball, either kicking our player or nearly missing. The opposing coach yelled encouragement to his player: “Way to be aggressive!”

My wife later said it looked like there was going to be trouble between the opposing coach, myself, and our head coach. When we challenged him for encouraging that kind of play, he feigned shock that we would be critical of him encouraging aggressive play. And, hell, who knows, maybe he really didn’t understand that one 9 year old girl kicking at another 9 year old girl, on the ground and focusing on the ball, might lead to unnecessary injury. Or, maybe he didn’t care – because it improved his team’s chances of kicking the ball into the goal. If the ref didn’t call it, then it’s not a foul, right?

There is a cultural divide of sorts among people who prefer a lot of civilized rule following and others who think that all of these protective rules are weakening us, that kids these days are too soft. As a parent, it’s been tough to teach my kids to be kind, sharing, conscientious rule followers on the one hand, then when sporting events come up, try to teach them to be rougher and more selfish – with the added ambiguity of being as physical as the rules allow — which always seems to be slightly beyond the amount of contact that the rulebook contemplates.

That opposing coach is, there is no doubt in my mind, of the school of thought that says kids these days are being made too soft. And, yet, I am sure that if I had walked up behind him and clubbed him over the head with a brick, he would have taken offense. And, if I’d explained afterward that I was just being aggressive that he should thank me for making him tougher, I doubt he would have been mollified. Personally, I’ve always been willing to play games as aggressively or unaggressively as the rules permit. I just want the rules to be clear in advance and everyone to play by the same rules. If we’re playing a friendly game, that’s great. If we’re playing a game where I can replace you with a smoking crater, that’s cool too. It’s when people break the spirit of the rules in a plausibly deniable way that I start feeling stabby and indignant.

Thing is, people behave this way because they get away with it. Cheaters absolutely prosper. Turning this to a legislative focus, the curious case of Rep. Turner comes to mind. Even if we find that his lobbying activities fall within the letter of the General Assembly’s ethics rules, I doubt they were within the spirit. But, hey, he was just being aggressive right? Think he made his millions by working hard and playing by the rules? Or did he make them by aggressively riding the edge of the rules in a plausibly deniable way?

In any event, it’s not rocket science – at the end of the day, we as a society will get more of the behavior we reward.

Turner Investigation: Good Work If You Can Get It

Tom LoBianco, writing for the Associated Press, reports that:

House Speaker Pro Tem Eric Turner earned nearly $8 million selling nursing homes in the last two years and stands to earn between $1 million and $2 million on projects now being developed, thanks in part to legislation he helped block this year.

Turner, of course, is now under an ethics investigation for his lobbying efforts against a construction ban on new nursing homes. During the legislative fight over the ban, the company in which Turner (and his son) have significant interests, said that the ban would affect five properties it had under construction. Two of those, for which information was available to the AP, would have – if the ban was passed – cost Turner $3.9 million.

This brings a couple of things to mind. First, I’m a chump for working a job that pays me based on the labor I put into the work. Second, the line between being a citizen-legislator who contributes his expertise and using your inside position for self-serving enrichment is not necessarily a clear one. But, given the amounts involved, Turner seems to be well on the wrong side of it. I wonder if he told his colleagues — “I don’t think this ban is good policy, but keep in mind that I stand to lose $3.9 million if you pass this thing.”

If I were in the legislature, I would expect to speak up a great deal if there was legislation concerning, say, the courts, local government, or debt collection. (Oh, who am I kidding — I’d probably spout off on everything: look what I do for a hobby.) But, if I was being sued in a private lawsuit, I’d expect to have to disclose an awful lot and probably recuse myself if the proposed legislation had to do with civil immunity for lawyer-legislators being sued in private lawsuits.

The question of when expertise becomes conflict has to do with how directly your interests are being affected by the issue at hand. In Turner’s case, the answer appears to be very directly. And that’s something the General Assembly needs to take very seriously if they wanted to avoid being tainted by association.

DOC plans to decline to accept low level offenders

Jack Rinehart, writing for “The Indy Channel” has a piece on the Department of Correction not accepting D felons for incarceration.

Beginning July 1, 2014, the Indiana Department of Corrections will no longer accept certain offenders convicted of D-felonies.

D-felonies are a lower-class of crimes, but include assaults, drug offenses and property crimes.

Starting July 1, offenders convicted of D-felonies and sentenced to 90 days or less will not be accepted to the DOC. Starting July 1, 2015, offenders convicted of D-felonies and sentenced to one year or less will not be accepted into the DOC.

As a practical matter, I’m not sure how much difference this makes. I don’t know how many convicted felons make their way from the county jails to the DOC in 90 days or less. On a more theoretical level, it raises interesting questions about the interplay between state judicial authority, state executive authority, and county authority.

Maybe practitioners of criminal law know the answers to these things, but let’s say a state court judge sentences a convict to a period of incarceration. That’s well within the judge’s authority, of course. But, where does a judge’s authority to compel another government entity to accept that offender begin and end? This story suggests that the DOC regards itself as having some discretion to decline to accept some of these offenders. Maybe the judge would like, as an alternative, to sentence the offender to a county community corrections program such as house arrest or home detention. Counties aren’t even required to have those programs in the first place, so a judge’s authority to compel acceptance by the county to the program has to be limited. The county could simply discontinue the program if the number of offenders sentenced to it became too expensive.

So, how about the county jail? Things get murkier. Sheriffs are charged with executing the writs issued by courts. But there are at least constitutional limitations to the number of individuals you can pack into a jail. Now, most judges would be wary of overcrowding jails in their counties. But, it may be that, given nowhere else to send offenders, a court would sentence enough people to overcrowd the jail and simply take the position that the county was obligated to build more space.

If that came to pass, I predict that State officials would congratulate themselves on their fiscal discipline while criticizing the profligacy of local government. Because, it all flows downhill.

Reflection on Bundy Ranch and Armed Resistance to Court Orders

The Cliven Bundy federal trespass case brings to my mind two other court cases – a traffic citation contested by a sovereign citizen type and the 1832 case of Worcester v. Georgia in which Andrew Jackson reportedly made the probably apocryphal statement, “Justice Marshall has made his decision, now let him enforce it!”

The Bundy trespass case, for those who haven’t followed it, involves a Nevada rancher who is grazing his cattle on public lands and has been for quite some time. His family had paid rent for quite some time, but in the 90s, Bundy decided he’d prefer not to pay for the use of the land. The federal government told him he was trespassing and so he decided that he wouldn’t recognize the authority of the federal government. The government took him to court and won. The federal court presumably (I haven’t seen the text of the order) found that Bundy’s claim that he had inherent authority to graze on someone else’s land for free was so much nonsense. Here is a timeline of events. Most recently, Bundy has gained notoriety by resisting eviction efforts through threats of armed violence. He is dressing it up in some kind of crusade against an overbearing federal government. But, at its heart, the federal government has title to property that he wants for himself, so he’s pretending those property rights don’t exist in order to enrich himself. He does not deal with the inconvenient fact that, if the feds never had the right to the land, then title probably rests with Mexico who transferred title after being beat in a war with the U.S. government that Bundy claims never gained the right to that land.

The Worcester case cited above also had to do with the nature of the federal government and its relation to the states:

Chief Justice John Marshall laid out in this opinion the relationship between the Indian Nations and the United States is that of nations. He argued that the United States, in the character of the federal government, inherited the rights of Great Britain as they were held by that nation. Those rights, he stated, are the sole right of dealing with the Indian nations in North America, to the exclusion of any other European power, and not the rights of possession to their land or political dominion over their laws. He acknowledged that the exercise of conquest and purchase can give political dominion, but those are in the hands of the federal government and not in the hands of the individual states.

The court ruled that the individual states, had no authority in American Indian affairs.

The purported quote from Jackson, however, adds an additional layer of interest for me — proclaiming that Chief Justice Marshall would have to enforce the order himself. This gets at a fundamental question of court authority. When you dig down, court authority rests on a foundation of men with guns willing to, if necessary, go out and force compliance with the court’s order. Absent this force, a court order is little more than a guy in a robe writing words on a piece of paper. It becomes something else when the Sheriff or the U.S. Marshal or the 101st Airborne is willing to back up that order with force.

The local traffic ticket was just a case I had some incidental involvement in when one of my clients was subpoenaed as a witness. Basically, the defendant who had been cited for driving without a license or some such wanted to have a jury trial focused on the ability of the government to regulate his behavior at all and of the personal jurisdiction of state courts to preside over efforts to regulate his behavior. Rather than focusing narrowly on whether he did, in fact, engage in the prohibited behavior or, somewhat more broadly, on whether the particular law was Constitutional, this individual wanted to bog the process down in a debate over the foundations of law and government. As a practical matter, no sustainable government can entertain existential challenges every time it attempts to regulate the behavior of its citizens. And the judge wasn’t having it either. He correctly recognized that, if the individual insisted on a jury trial for the traffic ticket, he could have it. But the jury’s role was going to be to determine what, in fact, happened — whether this individual engaged in the prohibited conduct. The jury was not going to be asked to determine whether our system of government is, as a general proposition, a good idea. At the end of the day, this defendant was not some deep political thinker leading a well thought out movement for change. He was mainly just pissed off that someone was telling him what to do. In short: throwing a tantrum.

And that’s what we seem to have with this Bundy fellow. He would prefer that the government land be his land, and he’s mad that the government won’t let him use the land as if it were his own. He has convinced himself that he has a right to the land. But the underpinnings of that imagined right falls apart rather quickly when you look too closely at them. If the United States government is not in the property rights business out in that stretch of Nevada, then Bundy doesn’t even have a claim to his land — let alone the adjacent parcels of real estate. He’s squatting on Mexican land — land that Mexico has not regulated because of a (if we adopt Bundy’s way of thinking) misguided notion that the United States had jurisdiction over the land and a willingness to use force to assert its rights. Property rights under U.S. law flow from the premise that the land in question is within its jurisdiction. And it does no good to claim that those rights flow from the authority of Nevada because, if the U.S. doesn’t take the land from Mexico, Nevada never has authority over the land in the first place.

I’ll be interested to see what the government and the court do from here. They backed off for the time being in the face of armed resistance to a court order. Unless I misunderstand the nature of the proceedings, this would seem to be the time for some sort of criminal obstruction of justice charge. Law, in the end, boils down to potential violence. The government has asserted a monopoly on violence, and it has been crystallized into a body of law which dictates when and how that force can be used. That we are a “government of laws, not men” means that we have attempted to create a bulwark against arbitrary and self-serving use of force by individuals. After a legal decision has been made and the subject of that decision has been afforded due process in the course of that decision being made, the government has a strong interest in using that level of force necessary to coerce compliance with the law. If the importance of the legal decision is marginal and the implementation of the decision is more or less just ignored, that’s probably acceptable from time to time. But highly publicized armed resistance is detrimental to the long term viability of the rule of law. That’s why President Washington took armed troops to put down the tax protestors in the Whiskey Rebellion. If Bundy continues armed resistance to court orders, I presume he’ll meet with the same fate.

Update I just wanted to link to some relevant court documents (pdf) in the Bundy case. From the United States District Court for the District of Nevada’s order of July 9, 2013.

Bundy principally opposes the United States’ motion for summary judgment on the ground that this court lacks jurisdiction because the United States does not own the public lands in question. As this court previously ruled in United States v. Bundy, Case No. CV-S-98-531-JBR (RJJ) (D. Nev. Nov. 4, 1998), “the public lands in Nevada are the property of the United States because the United States has held title to those public lands since 1848, when Mexico ceded the land to the United States.” CV-S-98-531 at 8 (citing United States v. Gardner, 107 F.3d 1314, 1318 (9th Cir. 1997)). Moreover, Bundy is incorrect in claiming that the Disclaimer Clause of the Nevada Constitution carries no legal force, see Gardner, 107 F.3d at 1320; that the Property Clause of the United States Constitution applies only to federal lands outside the borders of states, see id. at 1320; that the United States‘ exercise of ownership over federal lands violates the Equal Footing Doctrine, see id. at 1319; that the United States is basing its authority to sanction Bundy for his unauthorized use of federal lands on the Endangered Species Act as opposed to trespass, see Compl. at ¶¶ 1,3, 26-39; and that Nevada’s “Open Range” statute excuses Bundy’s trespass. See e.g., Gardner, 107 F.3d at 1320 (under Supremacy Clause state statute in conflict with federal law requiring permit to graze would be trumped).

Nor is there a legitimate dispute that Bundy has grazed his cattle on the New Trespass Lands without federal authorization. The United States has submitted Bundy’s deposition excerpts indicating that Bundy has grazed livestock on the New Trespass Lands and further evidence of the trespass of Bundy’s cattle in those areas. Notwithstanding Bundy’s contentions that the observed cattle bearing his brand may not in fact be his own, such a denial does not controvert Nevada law regarding prima facie evidence of ownership of branded cattle. In sum, in this most recent effort to oppose the United States’ legal process, Bundy has produced no valid law or specific facts raising a genuine issue of fact regarding federal ownership or management of public lands in Nevada, or that his cattle have not trespassed on the New Trespass Lands.
. . .
IT IS FURTHER ORDERED that Bundy is permanently enjoined from trespassing on the New Trespass Lands.

IT IS FURTHER ORDERED that the United States is entitled to protect the New Trespass Lands against this trespass, and all future trespasses by Bundy.

IT IS FURTHER ORDERED that Bundy shall remove his livestock from the New Trespass Lands within 45 days of the date hereof, and that the United States is entitled to seize and remove to impound any of Bundy’s cattle that remain in trespass after 45 days of the date hereof.

IT IS FURTHER ORDERED that the United States is entitled to seize and remove to impound any of Bundy’s cattle for any future trespasses, provided the United States has provided notice to Bundy under the governing regulations of the United States Department of the Interior.

I’ll be in the way guys yell when they’re mad: Grapes of Wrath Turns 75

On the way into work today, I heard an NPR piece by Lynn Neary that The Grapes of Wrath by John Steinbeck was published 75 years ago today. I read Grapes of Wrath relatively close in time to when I read “The Jungle” by Upton Sinclair. If those books don’t make you skeptical about the way the free market values labor, probably nothing will.

Tom: I been thinking about us, too, about our people living like pigs and good rich land layin’ fallow. Or maybe one guy with a million acres and a hundred thousand farmers starvin’. And I been wonderin’ if all our folks got together and yelled…

Ma: Oh, Tommy, they’d drag you out and cut you down just like they done to Casey.

Tom: They’d drag me anyways. Sooner or later they’d get me for one thing if not for another. Until then…

Ma: Tommy, you’re not aimin’ to kill nobody.

Tom: No, Ma, not that. That ain’t it. It’s just, well as long as I’m an outlaw anyways… maybe I can do somethin’… maybe I can just find out somethin’, just scrounge around and maybe find out what it is that’s wrong and see if they ain’t somethin’ that can be done about it. I ain’t thought it out all clear, Ma. I can’t. I don’t know enough.

Ma: How am I gonna know about ya, Tommy? Why they could kill ya and I’d never know. They could hurt ya. How am I gonna know?

Tom: Well, maybe it’s like Casy says. A fellow ain’t got a soul of his own, just little piece of a big soul, the one big soul that belongs to everybody, then…

Ma: Then what, Tom?

Tom: Then it don’t matter. I’ll be all around in the dark – I’ll be everywhere. Wherever you can look – wherever there’s a fight, so hungry people can eat, I’ll be there. Wherever there’s a cop beatin’ up a guy, I’ll be there. I’ll be in the way guys yell when they’re mad. I’ll be in the way kids laugh when they’re hungry and they know supper’s ready, and when the people are eatin’ the stuff they raise and livin’ in the houses they build – I’ll be there, too.

Kathleen Parker on Colbert

I enjoyed this Kathleen Parker column on Stephen Colbert taking over for David Letterman. Probably I liked that she said that “heartlanders” have the best sense of humor. When I hear “heartland,” I think “Midwest.” Colbert is from South Carolina, so Parker calls “heartlanders” those who are “devoted to family and devout of spirit.” So, that’s kind of weird. Aside from geography, I guess my sense of “heartlanders” has to do (at least in the context of personality and humor) with a self-deprecating modesty that stems from a perspective of one’s place in the world. An awareness of one’s relationship to others and theirs to you is a fertile source of humor. Colbert clearly doesn’t take himself too seriously, nor is he overawed by those who have an overblown sense of their own importance. In that, I think he’ll be an excellent successor to David Letterman.

Teacher Evaluations Failed Because Not Enough Teachers Failed

Indy Democrat has a post about the recent teacher evaluation reports showing that 87% of Indiana teachers were in the top two categories. The post indicates that the low fail rate has caused skepticism by Rep. Behning and State Board of Education board member Gordon Hendry.

Per Hendry:

“I find it hard to believe that a system of evaluation where only a handful of people are said to need improvement is accurate or effective,” at-large board member Gordon Hendry said. “Clearly, the system failed.”

Per Behning:

“We didn’t think it was possible for a D or F school to say all teachers are effective or highly effective,” State House Education Committee Chairman Bob Behning said. “We thought [the school ratings] would keep schools somewhat a little more honest.”

There are a number of possibilities. Maybe the teachers aren’t, by and large, the problem in schools where kids are failing. Maybe chaotic home lives and a social setting that doesn’t value education, combined with a tattered social safety net contribute more to struggling schools than the merits or lack of merit of particular teachers. No offense to the fine teachers and administrators in the West Lafayette school system, but I’m of the opinion that you could likely put some fairly bad teachers in our system, and the students in our area would, by and large, emerge well educated. Teachers are just one variable in a very large system, and the metrics we use to evaluate teachers and schools have never been very well thought out in terms of controlling for all of the variables that are well outside the control of the school system.

But, we have a rush to measure things; often in hopes of confirming preexisting biases and sometimes in the more venal hope of transferring gobs of public money from a constituency that donates and votes for the other guy to friends and well-wishers of one’s own political campaigns.

I tend to agree that a metric which lumps almost the entire population being measured into one or two categories probably isn’t calibrated in a way that provides much utility. But, first we need to clearly articulate what the hell we’re trying to measure. Then we need to test the tests to see if they actually measure that thing.

More Self-Dealing Trouble for Rep. Turner

In years past, I’ve mentioned the fine work done by others in bringing attention to conflicts of interest by state representative Eric Turner. I read about Rep. Turner’s profiting from his son’s leasing of space to ACS during the welfare privatization debacle via Advance Indiana and Angela Mapes Turner and his 2011 problems with nursing home legislation where he was invested in his son’s nursing home related business via Leo Morris and Heather Gillers.

Today, it’s the Indiana Law Blog where I first saw a link to Tom LoBianco’s article about how nursing home legislation would have cost Rep. Turner and his family. This incident from the 2014 session seems very reminiscent of the 2011 situation.

A top Indiana lawmaker, his family and investors in their company risked losing millions in future profits if a proposed ban on construction of new nursing homes in Indiana had become law this year, an Associated Press review has found.

Instead, the bill died after intense private lobbying by House Speaker Pro Tem Eric Turner, R-Cicero, who now faces scrutiny over his actions on legislation that would have directly affected his family.

Public and private financial documents show Turner and other direct investors in Mainstreet Property Group rely on building new nursing homes to make money, generating returns of up to 600 percent in some cases.

The ethics rules for the General Assembly are fairly weak. Even so, Rep. Turner has a reputation for playing closer to the line than most. (And, to be clear, plenty of lawmakers don’t seem to get anywhere near the line.) I don’t expect much to come out of the General Assembly’s own ethics investigation into Turner’s activity; but, I’d suggest that it’s in the General Assembly’s best interest to make it clear whether Rep. Turner’s actions are more of the exception or more of the rule.

The Free Market Isn’t Free: Minimum Wage Edition

Because I’m sure he’ll appreciate whatever minimal traffic I can send him, I’ll comment on a blog post by Abdul suggesting that we use the free market to raise the minimum wage. In particular, he suggests that, if as a matter of policy, our individual preference is to see workers paid better, we should direct our business to those organizations that pay their employees well.

This is a fine idea, but not sufficient to address what amounts to a structural imbalance. Commercial efforts generate a certain amount of additional value. That additional value, the profit, gets split up among the people who produced the value — investors, management, and labor usually. The way the profit gets divided up is not necessarily in proportion to the value of the contributions of each party. Rather, it has to do with the bargaining power of the respective contributors as well.

The problem labor has in getting its share of the profit pie tends to be lack of organization and lack of leverage. An individual laborer lacks bargaining power because an individual laborer is usually easily replaceable. In addition, the individual laborer often has to have whatever he or she can get as a matter of necessity — to acquire or maintain food, shelter, and clothing. That necessity has a coercive effect on their bargaining position. It’s not quite a gun to the head, but it makes it much more difficult for the laborer to walk away from the table than it is for management or the investor who is much more likely to have his or her necessities squared away.

So, I think the minimum wage debate ends up being a decision. The policy decision is that, by fiat, we require a certain minimum to ensure that labor gets at least a certain baseline portion of the profit. The alternative, I suppose, would be to go a more socialist direction where more of life’s necessities were guaranteed whether a person worked or not. At that point, the negotiation between labor, management, and investors would be more of an arm’s length transaction and the price point of the wages would more accurately reflect the value of the labor.

I’m not necessarily advocating the more socialist approach. Culturally, we have a deep opposition to policies that condone idleness — our Puritan work ethic perhaps. But, I think that’s the policy alternative to the minimum wage if we want the free market to receive accurate signals about proper labor prices.