31 March 2009

Bar Exams

A law blog cartoonist (yes there is such a thing), makes a wry observation about the bar exam.

Texas Judge Understates Assets

Texas Court of Criminal Appeals Judge Sharon Keller claimed poverty while asking for state assistance in her legal defense in connection with ethics charges related to a death penalty case, but appears to have omitted many assets when making that case.

Bubbles


From here.

A Rare Sighting Of A Common Statutory Species

Drafting errors happen all the time in legislation, and unintended drafting slips in highly technical fields, like tax, are even more common. Usually, courts pretend that these mistakes were made on purpose to carry out legislative intent and do the best that they can under the circumstances.

Only in a rare case is a drafting error identified, the person responsible for the drafting error located, and the error admitted. But, Prof. James Edward Maule recently found one in Sections 121 and 163(h) of the Internal Revenue Code, where dollar limits on tax breaks intended to apply once to married couples mistakenly assume that married individuals are a single taxpayer for tax purposes, and directed his full wrath at the institutional changes that have made drafting errors more likely. (Another fairly famous drafting error involved two amendments to the federal death penalty statute made in different parts of the same omnibus law that were ambiguous when both made at the same time, even though each one was clear individually.)

Maule also cites interesting unpublished student research showing that the frequency with which technical corrections must be enacted to fix tax laws is correlated strongly with the experience of the assigned Joint Tax Committee staffer assigned to the original drafting of the law. This result is unsurprising, but not easy to spot statistically, and technical corrections bill approach was a clever way of finding this trend.

Having interned for a member of Congress on the Ways and Means Committee, and seen drafting in the Colorado General Assembly (which is more professional than many state legislatures) up close, and having had a government professor who started his class entitled "Congress" with a book on tax lobbying, I am rather more sympathetic than Professor Maule to the staff involved in the process.

The principals in legislative drafting (i.e. the elected legislators) rarely have, and generally are not expected to have, the kind of academic preparation that an excellent tax student should. Neither are their chief agents. The prime qualifications for staffers of individual legislators are political, not academic. Legislative staffers are expected to be quick studies, but not to have encyclopedic knowledge of all areas (or even any areas) of the law.

So, the people calling the shots are rarely fully aware of the problems they are getting into as they craft the deal. This is particularly true, even in private practice contract drafting, in tax sensitive deals. Partnership tax law is particularly prone to defy client expectations. Partnership tax law makes a strong, legally important distinction between allocations of profits and losses, and distributions of property from the partnership to partners. Business people who are tax professionals, even sophisticated venture capital investors with M.B.A.'s, often have a very hard time separating the ideas conceptually. As a result, deals that seem very straight forward on the back of a napkin, can be ambiguous when it comes time to draft a partnership agreement in a tax sensitive way.

Moreover, the cognitive style that favors precision in drafting is not always mated to the kind of mind that sees the forest of implications that a tax code amendment may have outside its immediate surroundings. Drafting is harder than it seems in twenty-twenty hindsight when a particular set of facts casts a lack of specificity or clarity into bold relief. Tax code amendments are frequently drafted with only one set of facts in mind, without much attention to how the text could be read in other circumstances. Indeed, many tax code provisions are utterly incomprehensible until you understand the unexplained underlying transactions that they are designed to address.

It doesn't help that American statutory drafting generally is not particularly systematic by international standards. American statutes are mostly written with an eye towards practioners who will cherry pick a sentence or two, rather than having overarching definitions and unacknowledged cross-references. American laws are more collections of little statutes, than they are comprehensive codes, a tendency that carries over even into the tax code.

Professor Maule states with authority that "it has been proposed that the drafters assumed that married individuals filing jointly become one taxpayer for federal income tax purposes. That, of course, is not the case." In other words, married individuals filing jointly are not actually one taxpayer for federal income tax purposes, something that is certainly true most of the time. But, I am rather more skeptical that there is one overarching and universal defintion of much of anything "for federal income tax purposes." It is not at all uncommon for a single concept, like "corporate control" or "dependent," to have multiple express statutory definitions in different parts of the Internal Revenue Code for extended periods of time. Tax reform advocates are forever identifying these false friends as important sources of complexity in the tax code. It is hardly a stretch to suggest that a concept as widely used as what constitutes a "taxpayer" might have multiple implicit definitions when used in different places for different federal income tax purposes. Indeed, as the "error" identified in this case suggests, in order to carry out legislative intent, it may be necessary to interpret the same language in this novel drafted by committee differently in different places. What is implied by pure logic often makes bad law.

One of the first lessons you learn drafting legislation, contracts and settlement agreements is that it is easy to go awry by going beyond what has been expressly agreed. If you take steps to embellish a deal during drafting, it often comes back to bite you, even if it seemed to be merely a technical correction. Tax and spending legislation, furthermore, particularly in the kind of legislation that draws dollar limit lines, is typically the subject of negotiation until the very last minute and its passage, ready for prime time or not, is often critical to the ongoing functioning of the Republic.

Upsetting compromises carefully crafted to reach sufficient agreement of interested lobbyists, members and senior staff of those members for reasons of potential drafting ambiguity (often after many other technical flaws have already been purged) takes more clout than is available to a junior committee staffer, even if a problem is identified. An inability to correct problems even when identified, discourages staffers from rigorously identifying every problem. There are plenty of lobbyists charged with doing that. And, of course, many laws that are drafted end up dying without being enacted anyway.

Another reason that tax statutes are prone to these kinds of technical issues is that they are prone to Congressional micro-management. While independent agencies in technical fields like securities law and environmental law are given vast authority to engage in quasi-legislative regulatory drafting, regulatory tax drafters at the Internal Revenue Code are given less free rein than the roughly five tax code sized volume of their work product would suggest. Most tax regulations stick to fine interpretive questions and tax regulations tend to be heavy on near verbatim restatements of the statutes and legislative committee comments themselves. There are rare exceptions, like the "check a box" regulations that ground the current tax classification rules of limited liability companies and similar entities. But, these are the rare exceptions that prove the rule.

Treasury officials who are charged with administering tax laws have far less participation in the tax statute drafting process than their counterparts in countries with a parliamentary system of democratic government. The Treasury, collectively, may get more respect on Capital Hill than a mere rank and file member of Congress, but the Treasury does not necessarily get much more input than a knowledgable subcommittee chair on the House Ways and Means Committee, or U.S. Senate Finance Committee, or senior staffers on the Joint Tax Committee. Ordinary tax practioners have even less of a say in the process -- and are less well equipped to participate in Congressional statute drafting than they are to participate in the regulatory drafting process.

As a result, administration is less important in statutory drafting than the question of distributive politics and appearances. For example, the phase out of personal exemptions for high income taxpayers (called the Pease Amendment for the Congressman for whom I interned), makes all sorts of political sense, even though there are far less administratively complex ways to arrive at almost the same distributive outcome, such as tweaking the tax bracket cutoffs. The psychological effort of taking away a tax benefit from someone is more important politically than the amount of revenue the provision actually generates.

The best solution, perhaps, might be an institutional one. Perhaps, courts ought to have the power to certify questions of statutory interpretation to legislative bodies with the authority to change the statutes in response for future cases, just as federal courts refer unsettled questions of state law to the supreme court of that state. This is particularly true in the case of the Tax Court, which is, after all, an "Article I" court, situated in the legislative branch, rather than an "Article III" court situated in the judicial branch.

30 March 2009

The Mixed Bag At the Denver Post

The Denver Post has done a couple of fine pieces of original journalism recently, but is sometimes mediocre.

It has done some solid reporting on the Denver Sheriff's office pattern of leniency towards deputies who have been dishonest or committed other abuses. Today's coverage features a deputy who Maced a rabbit for no reason, and was convicted of animal cruelty, but was permitted to continue guarding prisoners in the jail. The City has stepped up efforts for reform, and has noted publicly suspected perjury by police officers in a criminal trial against an officer who was charged with using excessive force,

It also did some good computer assisted journalism describing increasing racial integration in the Denver metropolitan area, supplemented by multiple personal stories of individual to flesh out the story. The transformation, tracked with birth records, since I moved to Denver in the 1990s, has been phenomenal.

On the other hand, the Post covered the run up to the vacancy committee race in Colorado State House District 3 in a couple of medium length stories, but then dropped the ball. The individual selected this past Thursday with the results known by 10 p.m. (about four hours before the deadline for the Friday print edition) appeared only in an exceedingly brief sidebar note which first appeared in the print edition on Sunday. Even worse, the brief story that did get printed is almost deceptive by implying that far more people were involved than were in fact there. The fact that the winner was sworn in this morning has not yet shown up in their coverage, nor has a profile of the winner. Broadcast journalists and internet journalists, on the other hand, promptly covered the news and provided far more detail about how the decision was made and what happened in this rather extraordinary vacancy committee meeting.

One of the reasons I originally switched to the Rocky Mountain News from the Denver Post, before the Rocky shut down, was that the Denver Post is consistently late on the draw when it comes to breaking news, and was less complete in its Denver metropolitan area coverage. Alas, consolidation has not improved the Post's product outside its now double sized comics page.

27 March 2009

The Case For The Electoral College

The Denver Post's blog "Politics West" makes one of the strongest points in favor of the electoral college, which is that it dramatically reduces the likelihood of a Presidential election that can only be resolved with a national recount. There can still be very close elections that aren't resolved quickly, as was the case in the 2000 election. But, even then, only one or two states will hang in the balance, narrowing the scope of the dispute. Also, vote counting disputes in close elections only really matter if they occur in states which will tip the electoral college balance.

Prior to Bush v. Gore, it wasn't obvious that the federal courts had a role to play in vote counting disputes at all, and there is still basically no way for voting counting disputes in multiple states to become legally intertwined with each other.

The bonus it gives to smaller states (which have more senate seats and electoral votes per capita) is rarely outcome determinative, and doesn't influence campaigning much because in the electoral college, the pertinent factor for a campaign is not which states have the highest electoral votes to voter ratios. Instead, what matters to a campaign are the states where voters are most evenly divided. States that strongly favor one candidate or another are usually treated like lost causes.

Historically, the electoral college was also important because the percentage of the population that was allowed to vote varied a great deal from state to state. This made popular vote totals less than apples to apples comparisons between states. If one state limited the vote to property owners (a common requirement at the time of the founding and something that is still not clearly unconstitutional, even though no state uses this requirement), and another didn't, it had a big impact on the popular vote. Now, much of the difference in voter turnout comes from the relatively importance of a state's electoral votes in the national election, and there is an emerging consenus that almost every citizen who is at least eighteen years old should be allowed to vote.

We know from experience that now and then the electoral college does not give us the same winner of an election as the popular vote does in a close election. There is a good case to be made that its justice is too rough. But, the electoral college almost always reaches the same result as the popular vote (but by an exaggerated margin) in races that don't have a close popular vote, even though it theoretically doesn't have to work that way in practice.

An electoral college that awarded one electoral vote in each Congressional District would provide even better insulation against an uncertain electoral result in a close election, while at the same time more closely matching the popular vote.

The electoral college is, by design, closer to the popular vote than having Congress resolve a close election under the proceedures that apply when no one candidate receives a majority of the electoral college vote (where states Congressional delegates vote on a state by state basis). And, the electoral college also provides a decent way to resolve Presidential succession in the currently unprecedented case in which a President-Elect dies or is otherwise unable to serve after being nominated by that person's political party's National Convention and before the electoral college votes in December.

Indeed, one good alternative to the current constitutional rule for Presidential succcession if there were vacancies in both the Presidency and Vice Presidency would be to have the electors who voted for the winner (it is not a secret ballot) serve as the vacancy committee in that situation, thereby reducing the likelihood of a transfer of power to a member of Congress or cabinet member who had very different political views than the President or Vice President who was elected by voters.

As a footnote, another really interesting recent mathematical result pertinent to politics is that one procedural way to eliminante the partisan biases of gerrymandering in a two party system is to let one party draw districts for half of the population, while the other draws districts for the other half of the population, regardless of the political makeup of the respective jurisdictions. This suggests that the founders hit upon a fundamentally good approach when they entrusted Congressional district drawing to the states rather than to Congress, which tends to split partisan control of the process. At the state level, it suggests that one solution to gerrymandering would be to give one party the right to draw district lines for a state house, while the other draws district lines for a state senate, and to alternate each census.

The electoral college's virtue in assigning electoral votes at the at large state level for the most part, over assigning electoral votes to Congressional Districts, is that it largely eliminates from the election system any opportunity to gerrymander in the Presidential election by those currently in power at any level. It also prevents the single member district system of electing members to Congress from acquiring constitutional status, leaving open the door to approaches to electing members of Congress such as proportional representation that would make politically possible a more than two party system.

On the other hand, the electoral college gives undue important to third party candidates with no real chance of winning.

Daniel Kagan Wins HD 3 Vacancy Race

Daniel Kagan is the newest representative from Colorado State House District 3, effective later today.

The Colorado Independent provided excellent coverage of the Democratic Party House District 3 vacancy committee process, in the midst of a blizzard, to find a successor to my colleague, Democrat Anne McGihon. The Denver Post didn't manage to get a story about the decision announced about 10 p.m. last night in its print edition.

The principal item remaining on the Colorado General Assembly's agenda this year is adoption of a state budget in the face of financial crisis driven declining tax revenues and multiple state constitutional and federal budget constraints. New appointees are often permitted to introduce a "late bill" by the state house leadership, although it is not clear if it is too late in the session to do this this time. Kagan will then serve for the entire 2010 session of the Colorado General Assembly.

The 2010 election will be the last in the House District's current configuration, after which legislative districts will be redistricted based upon the 2010 census. It is possible that there will no longer be a district like House District 3 that bridges Denver and Arapahoe counties. Kagan is from the Arapahoe County portion of the district.

I was on the vacancy committee, but was returning from Florida on a business trip. While the plane made it back on time to Denver International Airport, traffic was moving slowly on account of the snow, so the final vote had been cast before I made it back to the neighborhood.

23 March 2009

Taxing Those With An Ability To Pay

The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.


- Jean-Baptiste Colbert

There was a tempest in a teapot last week at the Volokh Conspiracy over taxation based upon "ability to pay" and, in particular, a quotation from Illinois Governor Pat Quinn that:

There will be some that will have a higher tax burden — but it’ll be based on the principle that all of us in a democracy can believe in: ability to pay.


This is presumably in comparison to the principle that the tax burden should be carried by those who lack an ability to pay. But, governments based upon that principle of taxation swiftly collapse for lack of funds, unless they are independently wealthy (see Saudi Arabia and Alaska). In the bad old days reflected, not necessarily with perfect accuracy but with some reflection of the times, by Biblical writings, the efforts of rulers in ancient times to tax people who couldn't pay was reflected in the pariah status of the tax collector, and the cruelty of methods used to try to collect taxes (yes, tax collection can get much, much worse than tax liens and tax debts that aren't dischargeable in bankruptcy).

A focus on actual ability to pay may seem like a trivial distinction that merely distracts from the more specific and partially implied matter of progressive taxation. But, it isn't. A lot of important tax policy flows from the fundamental ability to pay criterion, and much of the disparity in the amount of taxes actually paid comes from the former and not the latter.

One of the fundamental reasons that the income tax is imposed on what amounts to discretionary income, rather than total income, is that people who can't pay rent or buy food make poor tax collection targets. Ability to pay is an important reason that we have withholding taxes, since it insures that people who lack the foresight to save will have the ability to pay their taxes. And, ability to pay is also one of the reasons that the property tax has survived so long. The property tax due at any given time is almost always lower than the value of the property, assuring an ability to pay.

Similarly, major increases in the nation's tax revenues through increased taxes on those in the bottom 50% of the income distribution aren't just unwise, they are impossible. The bottom 50% has a fairly modest portion of the nation's income and an even more modest portion of the nation's wealth. Even major increases in the tax rates for these taxpayers would not generate much revenue. Democracies are particularly sensitive to this reality.

One can choose between a "flat tax" and a "progressive" income tax, as a matter of policy, but either way, one has to make some allowance at the bottom for those who can't meet basic needs and also pay taxes (either through an government income assistance program or a tax break), and high income earners end up paying a disporportionate share of taxes. Indeed, taken as a whole, combined federal, state and local taxation burdens leave us with a system that is surprisingly close to flat. Many state and local taxes are regressive. The federal income tax is quite progressive, and FICA taxation is quite regressive when separated from the social security benefits that it finances. Many poor people receive government subsidies, but a significant number of high income people directly or through their businesses, receive really big government subsidies.

Funding through ability to pay also explains many non-profits seemingly not inherently charitable in operation. Why do operas, which are overwhelmingly enjoyed and consumed by the educated non-poor organize themselves as non-profits? Because some can pay more than others, and opera companies could not raise enough money to operate is they raised money only from tickets whose prices are set by what a typical opera goer is willing and able to pay. Economically, the revenue maximizing mix of non-means tested ticket prices for an opera is considerably less than the cost of putting one on. But, there are wealthy people who like opera and they are willing to pay a premium to have quality opera as an option at all. So, they pay far more than any non-means tested ticket pricing system would ever charge them, in order sustain the institution. Non-profit operas are a way of engaging in price discrimination similar in effect to a progressive income tax, with the additional factor of discriminating based upon intensity of love for opera. While some people go to the opera only because their girlfriends drag them there, others buy premium best in the house seats and would still do so if the price was $1,000 a seat per performance greater, and if it didn't tap into that extra wilingness and ability to pay, the opera would go under.

Similarly, it is routine in civil litigation to refrain from suing people who are culpable but judgment-proof. The cynical aphorism about tort law goes something along the lines of, you sue the person closest to the accident who is able to pay. Criminal laws punish wrongdoing typically committed by judgment-proof people, while tort laws demand compensation in situations where people are typically capable of paying for their wrong doing.

Virus Causes Birth Defects

We have long known that pregnancy is a time when environmental impacts can have a profound impact on a child's development. Warnings on every can of beer and bottle of wine you buy at a liquor store reminds you of that fact, and it is also why pre-natal vitamins are so important. Even birth order has a meaningful impact on the pre-natal environment that impacts a child's development.

One important cause of birth defects during pregnancy is cytomegalovirus infection of pregnant women who haven't previously been exposed to the illness. This causes birth defects in about 15 per 100,000 births, despite the fact that children or adults who aren't pregnant when effective suffer only minor symptoms. About a third of women have no previous exposure when they get pregnant.

[R]oughly 27,000 first-time cytomegalovirus infections occur in pregnant women in the United States every year. These women don’t harbor home-grown antibodies — generated from a previous infection — that would lower the risk of re-infection. . . . As a result, such women have a one-in-three chance of passing the virus along to their fetuses via the placenta. At birth, infected babies have an 11 percent chance of having symptoms that include hearing damage, visual impairment, mental retardation and diminished motor skills.


A vaccine now exists for cytomegalovirus, which can cut infections during pregnancy by 50%. But, given the long history of medical treatments aimed at pregnant women that had unintended consequences (DES and thalidomide are among the more notable examples), extreme caution is in order before this is used widely, even though this birth defect pathway in this case appears to be well understood, and vaccination is a well established technique of modern medical science.

Historical American and Asian Financial Panics

Prior to the Great Depression, the customary name for a financially crisis or sudden severe economic downturn was a panic. These have been the norm, rather than the exception in U.S. history. A brief guide to them, cribbed from Wikipedia (citations within the text omitted), follows:

The Panic of 1819 was the first major financial crisis in the United States. The new nation faced a depression in the late 1780s (which led directly to the establishment of the dollar and, perhaps indirectly, to the calls for a Constitutional Convention), and another severe economic downturn in the late 1790s following the Panic of 1797. In those earlier crises, however, the primary cause of economic turmoil originated in the broader Atlantic economy. In contrast, the causes of the Panic of 1819 largely originated within the U.S. economy. The resulting crisis caused widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It marked the end of the economic expansion that had followed the War of 1812. However, things would change for the US economy after the Second Bank of the United States was founded in 1816, in response to the spread of bank notes across United States from private banks, due to inflation brought on by the debt following the war.


Explanations from economists range from "boom-bust cycles happen," to "a failure of the banking system following the War of 1812 because it was not rechartered. Combined with the issue of the depression and overspeculation," the notion that

Government borrowed heavily to finance the War of 1812, which caused tremendous strain on the banks’ reserves of specie and led inevitably to a suspension of specie payments in 1814 during war & again in 1819-1821 during recession, violating contractual rights of depositors. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues. This inflation of money encouraged unsustainable investments to take place. It soon became clear the monetary situation was bad, and the Second Bank of the United States was forced to call a halt to its expansion and launch a painful process of contraction. There was a wave of bankruptcies, bank failures, and bank runs; prices dropped and wide-scale urban unemployment began. By 1819, land measures in the U.S. had also reached 3,500,000 acres, and many Americans did not have enough money to pay off to their loans.

The Panic was also partially due to international events. European demand for American foodstuffs was decreased because agriculture in Europe was recovering from the Napoleonic Wars, which had decimated European agriculture. War and revolution in the New World destroyed the supply line of precious metals from Mexico and Peru to Europe. Without the base of the international money supply, poor Europeans and governments hoarded all the available specie. This caused American bankers and businessmen to start issuing false banknotes and expand credit. American bankers, who had little experience with corporate charters, promissory notes, bills of exchange, or stocks and bonds, encouraged the speculated boom during the first years of the market revolution. By the end of 1819, the bank would call these loans [to disasterous effect].


Other notable historical panics in the U.S. are the Panic of 1873 and Panic of 1893, together sometimes known as the Long Depression.

Wikipedia describes the events leading up to the Panic of 1873 as follows:

It was precipitated by the bankruptcy of the Philadelphia banking firm Jay Cooke & Company on September 18, 1873, following the crash on May 9, 1873 of the Vienna Stock Exchange in Austria (the so-called Gr√ľnderkrach or “founders' crash”). . . . In September 1873, the American economy entered a crisis. This followed a period of post Civil War economic overexpansion that arose from the Northern railroad boom. It came at the end of a series of economic setbacks: the Black Friday panic of 1869, the Chicago fire of 1871, the outbreak of equine influenza in 1872, and the demonetization of silver in 1873.

The Black Friday panic was caused by the attempt of Jay Gould and Jim Fisk to corner the gold market in 1869. They were prevented from doing so by the decision of the administration of President Ulysses S. Grant to release government gold for sale. The collapse of gold premiums culminated in a day of panic when thousands of overleveraged speculators were ruined - Friday, September 24, 1869, popularly called Black Friday. There was great indignation against the perpetrators.

Coming at the height of an extremely dry period, the Chicago fire of October 8-9, 1871, caused a loss of nearly $200 million in property in a blaze that overran four square miles. . . .

The outbreak of equine influenza in 1872 had a pervasive effect on the economy. Called the "Great Epizoötic", it had an effect on every aspect of American transportation. The whole street railway industry ground to a halt. Locomotives came to a halt as coal or wood could not be delivered to power them. Even the United States Army Cavalry was reduced to fighting the Western tribes on foot; their adversaries likewise found their mounts too sick to do battle. The outbreak forced men to pull wagons by hand, while trains and ships full of cargo sat unloaded, tram cars stood idle and deliveries of basic community essentials were no longer being made.

The Coinage Act of 1873 changed the United States policy with respect to silver. Before the Act, the United States had backed its currency with both gold and silver, and it minted both types of coins. The Act moved the United States to the gold standard, which meant it would no longer buy silver at a statutory price or convert silver from the public into silver coins (and stopped minting silver dollars altogether.)

The Act had the immediate effect of depressing silver prices. This hurt Western mining interests, who labeled the Act "The Crime of '73." Its effect was offset somewhat by the introduction of a silver trade dollar for use in the Orient, and by the discovery of new silver deposits at Virginia City, Nevada, resulting in new investment in mining activity. But the coinage law also reduced the domestic money supply, which hurt farmers and anyone else who carried heavy debt loads. The resulting outcry raised serious questions about how long the new policy would last. This perception of instability in United States monetary policy caused investors to shy away from long-term obligations, particularly long-term bonds. The problem was compounded by the railroad boom, which was in its later stages at the time.


The conventional wisdom concerning the Panic of 1893, according to Wikipedia is that it "was caused by railroad overbuilding and shaky railroad financing; which set off a series of bank failures. Compounding market overbuilding and a railroad bubble was a run on the gold supply and a policy of using both gold and silver metals as a peg for the US Dollar value."

Since then, as measured by the stock market, the most notable economic downturns were the Great Depression, the 1973 oil crisis from January 1973 to October 1974, and the tech bust from March 2000 to October 2002, and of course, the current financial crisis which reached its pre-collapse stock market peak in October 2007.

Abroad, there are two frequently examined recent economic crisis precedents frequently compared to the U.S. financial crisis that we are in now.

One is the Japanese real estate bust. This started when a housing bubble in Japanese real estate collapsed in 1989 and produced a profound economic slump and deflation, followed by a brief recovery in the stock markets, at least, from April 2003 to June 2007, but, Japanese stock markets fell approximately 50% (between June 2007 and December 2008), and Japanese economy remains less than thriving now, in part due to the global impact of the American led financial crisis which is similar in many respects to the one we are in now.

The other is the Asian Financial Crisis of 1997 takes a bit of explaining to make sense of:

The crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.

Though there has been general agreement on the existence of a crisis and its consequences, what is less clear is the causes of the crisis, as well as its scope and resolution. Indonesia, South Korea and Thailand were the countries most affected by the crisis. Hong Kong, Malaysia, Laos and the Philippines were also hurt by the slump. The People's Republic of China, India, Taiwan, Singapore, Brunei and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.

Foreign debt-to-GDP ratios rose from 100% to 167% in the four large ASEAN economies in 1993-96, then shot up beyond 180% during the worst of the crisis. In Korea, the ratios rose from 13-21% and then as high as 40%, while the other Northern NICs (Newly Industrialized Countries) fared much better. Only in Thailand and Korea did debt service-to-exports ratios rise.

Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia, however. After 30 years in power, President Suharto was forced to step down in May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The effects of the crisis lingered through 1998. In the Philippines growth dropped to virtually zero in 1998. Only Singapore and Taiwan proved relatively insulated from the shock, but both suffered serious hits in passing, the former more so due to its size and geographical location between Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover.


Deeper analysis of what was behind these panics presented in thumbnail, economic history 101 sketches from Wikipedia above (to save me the trouble of rewriting well written prose there) will have to be saved for my uncoming paper on the financial crisis at the Law and Society Conference in Denve this May, but these tidbits of research are topic and useful, so they deserve and early release.

20 March 2009

Of Seasons and Calendars On The Vernal Equinox

Spring begins this evening, when the vernal equinox occurs. Astronomy doesn't define it exactly this way, but basically, this is the day when the period from sunrise to sunset is as close as possible to twelve hours. Days will continue to get longer until the first day of summer.

March used to be the first month of the year, in line with the beginning of Spring, a fact still reflected in month names like October and December for the 10th and 12th, as opposed to the 8th and 10th months of the year. I don't know precisely when this transition took place, although I've known in the past and could look it up.

Starting the year in the Spring makes a good deal of sense if you are basing your calendar on the Northern calendar seasons. In Spring growth starts and animals have babies. Winter proceeding it is a dead period. Spring is at the beginning of a tree ring, while winter is at its end.

Honestly, I've also never figured out why our solar calendar doesn't reliably start and end on or very near some solstice or equinox. If we were going to start the year roughly when we do now, for example, why not start the year on what is now December 21st?

I suppose that it is nothing more than path dependence (i.e. we stumbled into centuries ago, it not fully knowing what the consequences would be when the system was set up) and the notion that it is more important for calendars to be consistent than in touch with the astronomy and the weather. An adjustment was made around the time that George Washington lived to match up astronomy and the calendar, but apparently that was such a bad experience that the world is in no rush to repeat it.

Then again, one notable effect of this is that business quarters are out of sync with the seasons, which may be intentional. Starting the first business quarter in January makes great sense in the retail industry, where the year typically concludes with a big Christmas shopping season that accounts for much of the year's sales. If Christmas were honored a few days into the first quarter, rather than a few days before the first quarter, quarterly accounting reports would be much less useful.

The fact that our year now begins in January rather than March is, in part, symbolic of the ascendancy of commerce over agriculture in our economy.

On School Calendars

Conveniently, spring break in the Denver Public Schools starts this afternoon, right in sync with the season.

Presumably, the reason that the academic year starts in the autumn, rather than the spring, is that the longest break from school of the year rooted historically, and largely anachronistically, in the need to have children at home helping on the farm, is summer vacation. The period from fall through the spring is the longest period of time uninterrupted by a school break of more than a couple of weeks, so it makes administrative sense to start the school year there.

There are now a few schools in Colorado that operate on year round calendars, in an effort to respond to the fact that fewer than 2% of the population now lives on farms where the traditional justification for summer vacation makes any sense, and that the percentage is far, far smaller in the urban school districts that the vast majority of students attend. Instead, these schools have breaks spaced more evenly throughout the year. The long interruption of regular instruction during summer vacation means that teachers and students must spend considerable time in the autumn getting back up to speed on curricular content learned in the spring and forgotten over summer vacation. This is the evil most schools are trying to address with their no extended summer vacation schedule.

In an era where a large percentage of kids have two working parents, summer vacation can be a burden, rather than a help to families. It has created a cottage industry of summer camps with many kids going from one to the other for most of the summer. For kids whose working parents can't afford day care or summer camp and don't have relatives out of the work force, summer vacation means weeks with little or no adult supervision at all. Indeed, quirks like summer vacation, "late start days," teacher development days, relatively short school day schedules and the like are an important reason that a large percentage of homemakers make their choice, rather than choosing to enter to paid workforce.

This has major economic implications. Decisions about how long someone will spend as a homemaker are a major component of gender discrepencies in earnings. Years not spent in the work force while caring for children have a major impact on the lifetime earnings of women, because pay is strongly corrolated with seniority, especially for more knowledge based work, and each year spent out of the work force reduces reduces the number of available years at the end of one's career when one has reached late career peak earnings. The free child care provided by the public school system during the school day by freeing up parents to work at least part-time without hiring child care on an expensive private basis for a small number of children leaves families without pre-school children, on average, better off economically than one might expect, compared to families with pre-school children. Families get quite a bit more than simply freedom from having to pay school tuition in the public education deal economically. Indeed, some of the positive impacts of programs like Head Start, one of the consistently most praised government programs, may simply arise from the fact that they make it easier for families to support themselves economically and escape poverty with employment. Seemingly mundane administrative decisions, like school year schedules, have strong and measurable macroeconomic and distributive economic effects, and effects on issues like how many children a family will choose to have, simply because they have such a great impact on the economic structure of households.

Public school schedules may have greater economic impacts than objects of much greater study by economists and economically minded scholars, like contract law rules, tax benefits associated with having children, and interest rates. While quite a bit of study has been devoted to the individual economic impact of education on the people who receive it, relatively little study has been devoted to the economic impact of education institutions as a whole on how households are structured, which in turn impacts how economic activity is structured. But, major unheavals in the structure of the economy and the role of women in our society since the 1960s and 1970s have made a simple reliance upon tradition to reach the right result on these issues disfunctional.

The modern benefits of summer vacation are mostly not particular to summer. Many children of divorced parents who live great distances apart from each other spend the school year with one parent, and most of summer vacation with the other, with other breaks divided, and this works out better logistically when there is one big long break. Summer vacation is also convenience for school teachers who want to pursue graduate degrees, given them a big block of time to take additional courses. There is a common sense and sentimental attachment to the freedom from school year structure and opportunity to explore something different that a long break provides. And, the mere fact that most kids of school age (and most college students) get long summer vacations, impacts how the economy organizes availability of entertainment and camp options for kids, and the entire family tourism industry. Early adopters of an alternative schedule often are disadvantaged simply because they are out of step. In the same vein, I suspect that one reason that the Denver Public Schools is one of the first to get out in the spring (generally just before Memorial Day) is that there students through their parents value an opportunity for their teens to get a first shot at summer jobs for which many suburban teens will not be available for an additional week or two.

Conscious awareness of the current impacts of summer vacation on families, good and bad, could help us foster an educational system that is better integrated with a modern economy, and the kinds of families that we have today. While curriculum reform hasn't made a lot of progress since classical languages were dropped in the 1950s in favor of subjects with more modern relevance, the administrative traditions of schools are also basically stuck in a rut rooted in assumptions that haven't made sense since the Baby Boom.

Seasons and Weather

I've also wondered more than once about, but never seriously investigated, the discrepancies between seasons delineated by astronomical events, like the equinoxes and solstices, and seasons delineated by weather phenomena that vary within narrow boundaries from year to year, both randomly and in accordance with location and man made phenomena like global warming.

For example, one could have a perfectly serviceable definition of the "cold season" as the period that runs from the first frost of the autumn to the last frost of the spring, and there are purposes in gardening and farming for which concepts like this, such as the "growing season" are used. Indeed, the group of amateur naturalists who have kept consistent records of these kinds of events for their own fancies are now highly sought after by scientists and being coordinated by an internet site, in order to better understand climate change, a novelty in an age where amateur scientists have largely been replaced by professionals in universities, in government and corporate labs, and in consultancies. These are the sorts of seasons that groundhogs tell us about and that are referred to when one casually describes New Zealand as a place where it is summer all the time, or Northern Siberia as a land of endless winter.

My intuition is that the weather we associate with spring generally appears earlier than the vernal equinox, which may explain the calendar discrepancy, and that the same is true in other seasons. But, I've never sat down with average daily temperature and precipitation charts and figured out where the lines between the seasons would would be drawn if they were based upon weather, rather than sunlight.

Still, for all the flaws of our calendar makers, I have to give them credit for being more optimistic than the Mayans, whose calendar just quits at 2012.

19 March 2009

U.S. Warship Construction Cuts Planned

The U.S. Navy's surface warships far outnumber those of any possible competitor militarily. In part this is because surface warships are vulnerable militarily so that even nations that can afford them haven't built them. Aircraft and submarines are better alternatives for many military missions.

I have repeatedly posted about indications that surface warships are vulnerable to missile attacks and submarine warfare. There are active anti-submarine and anti-missile systems on every U.S. warship, but when push comes to shove, the information available to the civilian public indicates that surface warships usually lose. Tragedy has been avoided so far, mostly because we have had very few hostile military incidents since World War II with nations that have modern submarine or missile resources. The surface navy is mostly now as group of U.S. military bases that the U.S. doesn't have to receive permission to put in place, for use against opponents too militarily unsophisticated to have modern submarines or anti-ship missiles. And, recent conflicts in and around Israel have established that even well organizized non-sovereign terrorist groups now have access to modern anti-ship missiles.

Another problem with the U.S. Navy is that to get within striking range of a target, your entire self-contained force must be reasonably close to your military opponents. It takes about twenty active duty military personnel to operate an aircraft. But, when you deploy an aircraft to engage an opponent militarily, only a few of those military personnel are exposed to enemy fire from opponents with weapons that have the same range as the aircraft's. In the case of cruise missiles deployed by long range bombing aircraft, the support crew can be a very long distance from the active conflict, even the flight crew doesn't have to get particularly close, and many U.S. bombing aircraft are invisible to (or in the case of cruise missile carrying bombers can stay out of the range of) radar. In contrast, there is no such thing as surface ship stealth, and several hundred crew members must be within striking range, as opposed to one percent of that number of people for an aircraft. Submarines have slightly smaller crews (although still far larger than an aircraft) and are more stealthy than surface ships, of course.

The final problem, shared by both surface ships and submarines, but not aircraft, is speed of deployment and redeployment. Aircraft can be deployed en masse for a major engagement at Okinawa on Monday, and be in place to be deployed in a major engagement in Iraq on Wednesday. Surface ships and and submarines are hard pressed to move 600 miles a day. Their might is available only if military commanders had the foresight to preplace them, and they must be split between all the military theaters where their military capabilities might be needed. This means that, all other things being equal, it takes about a third to a half as many otherwise military equivalent aircraft to meet a global military force requirement as it does naval resources.

Increasingly, the main justification that backers give Congress for U.S. Navy construction is not that the ships are militarily useful, but that they create jobs.

Fortunately, the current administration looks likely to make major cuts in new purchases of surface ships, thereby freeing up fiscal resources for other needs.

Detroit Abandoned

The story of Detroit's decline is told in pictures.

Detroit has immense excess supplies of buildings and furnishings. But, the owners of these assets have abandoned them, because they no longer have economic value even as great as their maintenance costs. The land isn't even worth enough to scrape clean of abandoned buildings on it either (and while toxic waste cleanup risks are present in a small minority of buildings, it is minimal economic value and not environmental laws that explain why the other now useless buildings aren't at least scraped).

There are limits to the value of land and physical capital. Economic prosperity ultimately comes down to what people do in a place. Abundant natural resources and supplies of physical capital are far down the list of things important to economic development and prosperity. Many places awash with natural resources are poor. Many places with almost no natural resources are rich.

Denver Outpacing Burbs

A U.S. Census Bureau report released today shows Denver grew faster last year than all but one of its surrounding suburban counties. . . .

The report showed Denver's population grew 2.7 percent in the 12 months ending July 2008, adding about 16,000 people since July 2007 and falling just short of 600,000.

Only Douglas County, at 3.5 percent, grew faster in the seven-county metro area.


From the Denver Post.

Douglas County, has been one of the fastest growing in the United States many years running, and is a "second ring" suburb/ex-urb at the urban fringe. It is home to urbanized areas including Highlands Ranch and Castle Rock. Several factors limit its capacity to grow further. Douglas County is rapidly depleting its groundwater aquifer and does not have many options to expand it. Rising gas prices and the increased commuting traffic that its growth has created have made getting to work more troublesome. The failure of residents to back a recent school levy has made deep cuts in the local school system, often a main draw for those relocating to the suburbs, necessary. And, finally, the larger the population of Douglas County grows, the more growth in absolute terms it requires to maintain high percentage rates of growth -- absolute growth numbers that the size of the metro area as a whole places practical limitations upon.

Most of the land suitable for development in Jefferson County and Arapahoe County (except for some of Arapahoe County's far eastern portion) has already been developed at a suburban density scale and is prevented from zoning laws currently in place from increasing density. Adams County has more land available and zoned for development, but the surburb tract home developments common there declined in popularity as these starter home heavy developments were hit hard by the mortgage and subsequent financial crisis.

Denver is a nearly landlocked combined city and county jurisdiction. Denver's growth has come through a mix of infill development. This has happened most notably the former airport Stapleton and Lowry neighborhoods, but also projects that would be notable in other cities like Elitch Gardens, the South Platte Valley, residential development in LoDo, and the gentrication and increased urban density of Uptown between City Park and Downtown. There have also many infill developments turning single family homes into duplexes or townhouses in upscale neighborhoods. Denver has also seen more traditional suburban growth in the Gateway and Green Valley Ranch neighborhoods in territory aquired in connection with the construction of the Denver International Airport.

Meanwhile, "Sixteen of the state's 64 counties lost population. Most are on the Eastern Plains. For example, Cheyenne County has seen its population fall every year since 2000 and has lost more than 20 percent of its residents since the 2000 census."

Population declines on the Eastern Plains have been matched by population growth in bedroom communities in the I-25 corridor from Colorado Springs to the Wyoming border like the "Greeley metro area, consisting of Weld County, was the fourth-fastest growing metro area in the nation since 2000." This demographic change is a key engine driving the ouster of CO-4 Republican Marilyn Musgrave, a noted social conservative by Democrat Besty Markey, a pragmatic Democratic in the model of her former boss, then U.S. Senator and now Interior Secretary Ken Salazar.

Politically, however, the big day is still thirteen months away, in April 2010, when the census will set population figures for redistricting purposes. Colorado is almost certain to end up with the same seven Congressional Districts it has now in the wake of the census, but state legislative and Congressional district boundaries will be adjusted to shift power to places that have grown in population relative to the state as a whole, and to take power away from place that have not kept up with the rest of the state population-wise.

For most of the state, these trends are so well established already that it is fairly easy to guess what the impact will be on redistricting, in the general sense, if not in terms of specific district boundaries (there are just too many degrees of freedom in that determination to make any firm predictions).

The biggest question mark demographically in Colorado will be the Western Slope's oil and gas impacted areas, like Mesa and Garfield counties. These areas saw a dramatic surge in population when oil prices made the Western Slope's high cost oil and gas resources attractive, but has a history of going bust just as fast when oil prices fall. Oil prices are now on the downswing as the economy slows, so some recent population gains might be lost just in time for those departures to have a decade of political impact on that region of the state.

The changes will also probably have more of an impact on the composition of the Republican party than it will on the Democratic party in Colorado. Democratic party gains are coming where the party has tended to be strong, in central urban cities and areas reliant upon tourism economically. The boundaries of Democratic party strength have crept out to working class and middle class first ring suburbs, but geographically it has been a fairly modest change.

For Republicans, in contrast, their rural base has collapsed in most of the state, while their exurban and suburban areas of support have grown strongly. Crabgrass Republicans are squeezing out Sagebrush Republicans.

17 March 2009

Fertility down in Brazil.

According to The Economist (hard copy), in 1960, the average Brazilian woman has 6.3 children in a lifetime, while this number dropped to 2.3 children per lifetime by 2000. This happened despite (of because of) military rule for much of that time period.

There are lots of lessons that could be learned from this dramatic change in a basic element of family life and culture in Brazil, that has parallels in countries all across the world as they experience economic development in similarly short spans of time (including Mexico amd China). While China poses an example where this change was imposed forcefully, in Brazil contraception was gently discouraged for part of the 40 year period in question, and Mexico has, at the very least, imposed strict legal prohibitions on abortion.

The big picture lesson I choose to draw is that dramatic social change can be secured in a generation or two. The dramatic increase in the number of women in the professions in the 1970s and 1980s, and the demise of the legitimacy of de jure segregation or open racial discrimination per se, even among far right conservatives (including many prominent segregationist politicians) repeat this point. The present is not destiny, and dramatic social change is possible in considerably less than a single lifetime.

CIA Still Evil

The U.S. Central Intelligence Agency was used as a U.S. government authorized method of committing war crimes. The documents regarding the Bush Administration's use of the agency to engage in torture and secret indefinite detention without any semblance of due process or concern for human rights is detailed in a leaked memorandum that has now been leaked, although many of the details were leaked in less easily confirmed ways.

These policies have increased U.S. exposure to terrorist threats, and have produced casualties for U.S. troops in Iraq, by providing many who would not otherwise have supported or participated in anti-U.S. terrorism the justification for doing so. These policies have deprived the U.S. of foreign cooperation critical to fight terrorism, in one Italian case, even resulting in the ongoing prosecution of CIA personnel. These methods have also been proven time and again to be ineffective means of securing useful intelligence.

The biggest disappointment of the Obama Administration has been its steadfast refusal to disavow the Bush Administration legal doctrines that made this possible, or to pursue the criminals in the Bush Administration who carried out this regime (the Military Commission Act limits civil and criminal remedies available to punish these individuals, but we, the people in whose name these atrocities were committed, are, at least, owed the name of those involved and the details of what happened).

This isn't the first time that the agency once led by George H.W. Bush has abused its authority. The agency's culture remains rotten to the core. It repeatedly violates human rights, its covert actions frequently backfire disasterously, it is unaccountable, and it doesn't do a very good job of providing intelligence or carrying out covert action relative to private sector news agencies or other government agencies with parallel responsibilities such as the State Department, the FBI, and the U.S. military's special forces.

To be clear, I am not disputing that the spy satellite and signals intelligence of the NRO and NSA may have an important role to play. I am not arguing that the U.S. should limit itself to investigating terrorist from its own territory. I am not even arguing that there isn't an important role to play for human covert intelligence, or rare covert actions.

Instead, I am arguing that the CIA has outlived its usefulness in serving these functions. The agency is a failed tool.

A good part of that agency's staff consist of analysts who can be more effective in the State Department where the institutional culture calls for secrecy to be maintained when necessary to serve large foreign policy goals, not simply for secrecy's stake.

The covert operations responsibilities of the CIA, including all detentions and arrests of persons targeted for action, need to be transferred to the U.S. military special forces where the military justice system, and internal military rules of engagement, at the very least, can provide some relief from abuses and public oversight. These rules of engagement furthermore, need to be consistent with what humanity tells us is right and experience tells us work, goals that fortunately are not inconsistent.

Where possible, human intelligence should be conducted as investigations by the FBI (which is authorized to have agents go under cover when necessary).

If this division of CIA responsibilities leaves the nation with no one capable of providing some kinds of human intelligence important to U.S. national security, which can be achieved without torture or detention or assassination, those residual CIA responsibilities should be transferred to a new, much smaller agency, created from scatch with a new institutional culture, that has no other responsibilities or mandate, its own inspector general, a public budget top line, and closer supervision from a mix of political appointees and senior civil servants.

Anything less than the dismantling of the CIA can't fix its failed legacy.

16 March 2009

Hello Neighbor

Another Obie blogger has moved to Colorado and I didn't even notice.

Who knew? Mount Virtus did.

Honestly, we don't have much in common politically and I don't read her blog, but I haven't seen the less famous Mr. Malkin since I wrote an article or two as a token liberal for a publication he founded in college (pack rat that I am, I probably have a copy somewhere in my basement) and would love to see how life has been treating him over drinks one of these days in neutral territory, like Castle Rock.

FWIW, I also recently put in a good word for David Harsanyi recently with a die hard anarchist capitalist, explaining that while Mr. Harsanyi is sometimes provocative, that he is not stupid.

Not Running

I received an amusing inquiry from a reporter, apparently following up a multiple source rumor/speculation that I might run for Colorado State House District 3. Absolutely not! Not at this point in my life anyway. I do applaud said reporter's diligence in going right to the source, rather than guessing without asking, however.

Higgs Mass Bounded

The Higgs boson is one of two particles (the other is the graviton, which would be a particle that would transmit the gravitational force in the same way that a photon transmits electromagnetism), predicted by the "Standard Model" which has not been discovered. It would explain particle mass and inertia.

I'm among a minority of those with an opinion who think that it probably doesn't exist (although honestly, I suspect that most people have never considered the issue or don't know that the issue exists, and hence have no opinion).

The possible range of masses for the Higgs boson, if it does exist, has been narrowed.

Physicists announced March 13 that . . . the particle’s mass window, indicating with 95 percent certainty that the Higgs cannot have a mass between 160 and 170 GeV. That means the Higgs could only range between 114 and 160 GeV, or between 170 and 185 GeV.


The Large Hadron Collider will likely settle the question definitively, but closed for repairs shortly after it opened (PhD comics had laugh compelling coverage of this hurry up and wait event).

My reasons for thinking that a Higgs is unlikely are essentially the same as those that favor loop quantum gravity (LQG) theories over more traditional quantum gravity theories. Both the Higgs and the graviton deal with phenemona that general relativity treats as functions of open space itself, as an approach that makes "background independence" easier to accomplish in a mathematically rigorous theory, which is why LQG approaches the issue in a way that describes the underlying nature of time-space. Achieving background independence and other properties of time-space under general relativity with particles is a more difficult, and possibly mathematically impossible task.

LQG also provides a natural way to explain the four dimensionality of time-space as an emergent phenomena at a macro-level (the dimensionality of time-space at a quantum level is less well defined), a plausible way to explain some of the weirdness of quantum mechanics with a time-space structure that is not perfectly local at the quantum level (i.e. some seemingly distant points are directly adjacent to each other quantum mechanically), an explanation for something very similar to the gravity of general relativity, and the suggestion that matter itself may be essentially lumpiness in time-space itself rather than different in kind.

In short, LQG doesn't sorely need new undiscovered particles in the way that the Standard Model and most string theory based models do. So, a definitive ruling out of the existence of the Higgs boson in the two remaining mass windows that fit the Standard Model concept of the particle could very well tip the balance of theoretical physics towards LQG and away from currently leading theories in the theoretical physics community.

Now, of course, someone would quickly come up with some alternative to the Higgs that is a less radical departure from the majority view, indeed, I'm sure that someone has already done so. But, any replacement theory would not have nearly the momentum of the Higgs boson idea. Then again, the LHC could offer up "new physics" that send scientists in entirely different directions as well. After all, in the "good old days" of science, people got unexplained evidence first, and theories second, and we could surely do so again. The current era of multiple theories that all explain the evidence equally succesfully can be tiresome.

HD 3 Vacancy Coming Soon

There will be a vacancy in Colorado State House District 3, which includes West Washington Park, effective March 27, 2009. My professional colleague, Anne McGihon, announced her resignation officially today.

A vacancy committee comprised primarily of Democratic party precinct committee people and Democratic party member elected officials who reside in Denver's House District 3 will fill the vacancy at a meeting convened for the purpose. This isn't the default rule of Colorado law in multi-county districts like House District 3 which straddles the Denver-Arapahoe County line, but is a long standing tradition readopted every two years at Democratic party reorganization meetings by the smaller statutorily designated group that adopts a vacancy committee membership resolution. The group of people who serve on the vacancy committee generally heavily overlaps with the people within the Democratic party who nominate candidates during the caucus process in Colorado for general elections.

A call to that meeting will go out shortly, and it will be held very close in time to the effective day of the resignation. The vacancy committee meeting must be held no sooner than ten days after the call for the meeting and may be held prior to the effective date of the vacancy in this case. Customarily, a vacancy committee meets only once in a single session.

The 2009 legislative session will have a little more than one month left when a replacement is appointed and sworn in, and the last month of the legislative session deals mostly with the state budget - other legislation is front loaded. The person selected at the vacancy committee meeting will serve through December 2010 (and the first few days of January before the legislative session starts in 2011), with the person elected in the November 2010 general election serving in the 2011 session of the legislature. Redistricting based on the 2010 census will take effect in the 2012 general election, for the 2013-2014 legislative sessions, a process that will be controlled by Democrats unless Republicans make major progress in the 2010 state general election.

House District 3 is a safe Democratic party seat, and has grown more safe due to improved Democratic party performance during Anne's tenure, but is not entirely safe. It includes of many Denver's Southeastern neighborhoods, Englewood (a working class to middle class first ring suburb of Denver) and Cherry Hills (a first ring suburb comprised almost entirely of high end gated communities).

Anne McGihon was first appointed to the Colorado General Assembly by a vacancy committee (which I attended before we were professional colleagues, I actually nominated another candidate at that meeting). She is term limited, so she would not have been permitted by the Colorado Constitution to run in 2010. Multiple people informally expressed interest in running in 2010, and it is not yet clear who will announce for the short vacancy committee race.

I have known that this would happen for a little while, of course, but it hasn't been my story to tell, so I haven't posted on it until the official announcement came today.

The partisan vacancy committee system is one of the genius elements of the Colorado Constitution because it disentangles the personal lives of legislators in the Colorado General Assembly from the critical question of the partisan legislative balance in the state which is left to voters. In Congress, in contrast, the politics of personal destruction are a major source of partisan turnover in legislative seats, and vacancies can leave seats open for months.

Colorado Supreme Court Validates Ritter Ed Funding Bill

Colorado Governor Ritter came up with a plan, that the General Assembly adopted, to increase the local share of education expenses in school districts that had waived TABOR limitations on tax increases. A lower court invalidated the plan, finding it to be a new tax, but the Colorado Supreme Court reversed that decision today and found SB 07-199 to be valid under the state constitution.

If SB 07-199 had been invalidated, a new and bigger hole would have appeared in the state budget, as the state constitution also mandates minimum levels of K-12 education funding, so the lost revenue would have had to have been made up from another source in the state's general fund.

Seattle P-I Ends Tomorrow, San Fran Chronicle Next

The days of the two newspaper town are numbered. The Rocky Mountain News just died in Colorado (although a collective of reporters from the Rocky are operating an online news venture at "I Want My Rocky" and are about to announce a more formal venture). Now this expected turn in Seattle:

The Seattle Post-Intelligencer, the city's oldest newspaper, will roll off the presses for the last time Tuesday, its owner said today.

The Hearst Corp. also said it will keep the the P-I alive online "as a new type of digital business with a robust, community news and information Web site at its core." . . .

Last month Hearst said it would sell or close its money-losing San Francisco Chronicle if costs can't be cut quickly.


When the Rocky died, they said that left six two newspaper towns in the United States. With the P-I dead, the San Francisco Chronicle dying, and trouble brewing in Los Angeles, the number of cities with two daily newspaper may fall further. New York City seems in no danger of falling to fewer than two daily papers, but I'm not certain that any other city is sure to be spared.

If the online experiments at the P-I and in Denver succeed, of course, as one in San Diego apparently has according to Colorado Matters (at Colorado Public Radio), however, the need to have two dead tree daily newspapers in one town may start to seem as quaint as the notion of an afternoon newspaper does in most American cities now.

B-3 Program Killed

[T]he Obama admin has decided to delay purchase of a new tanker by five years and cut out altogether the Next Gen Bomber program . . . [but] no final decision has been made . . . . the F-22 line will be kept open, with production funding for as many as 40 more planes, and that the F-35 will be trimmed back from plans in 2010, but ramp back up in 2011 . . . though . . . [there are] no numbers to attach to [F-35] Lightning II buys.


From here.

The Next Generation Bomber has been called the B-3 by pundits and was reputedly similar in concept to the B-2 stealth bomber (long range, stealth, flying wing with a reasonably large payload), but more modern in its technology. This project is purportedly in early R&D stages with the basic concept itself something that has just been decided upon.

The new tanker is to replace the KC-135 (it looks like a commercial airliner with the tube hanging out that fighter planes touch their nose to while in flight to refuel). A first attempt at a tanker contract was embroiled in corruption exposed by Senator John McCain. A second attempt at a tanker contact was awarded to a consortium led by European aircraft maker Airbus, but cancelled after an appeal by Boeing related to the procurement process, which was currently in the process of being reopened.

The proposed F-22 purchase increase is reduced from a previous report that 60 more F-22s than originally planned were proposed. A temporary or permanent cut in F-35 procurement to offset increased F-22 procurement was implied when an increase in F-22 production was anounced, but not expressly stated. The F-22 is a fighter plane designed for air to air combat and small payload stealth bombing missions early in a conflict that replaces the F-15 fighter in service now. The F-35 is intended as a a multipurpose replacement for the F-16 and F-18 (at least), and comes in a plain vanilla Air Force version (the F-35A), a vertical landing version for the Marines and foreign allies (the F-35B), and an American aircraft carrier version (the F-35C).

13 March 2009

Obama Moderates Detainee Policy

The Obama Administration is taking a less extreme position than the administration of George W. Bush regarding Presidential authority to engage in extra-judicial detention, but isn't abandoning a claim to the power either. SCOTUS Blog explains:

Here are the differences:

First, the new version requires proof of “substantial” support of Taliban or Al-Qaeda forces, while the former version required proof of “direct” support of such forces.

Second, the new version requires proof of “substantial” support of forces (other than Taliban or Al-Qaeda) engaged in hostilities against the U.S. and its coalition partners, while the former version only required “support.”

And, third, the new version applies to a person who “directly” supported hostilities to aid enemy armed forces, while the former version only required “support” of such hostilities, and did not include the word “armed” as to enemy forces who had been supported.


The practical effect of this position is to strengthen the case, legally and politically, of the more marginally culpable individuals detained at Guantanamo Bay, Cuba by U.S. forces as enemy combatants, in part in the hope that admitted terorrists and more culpable individuals who remain there can still be detained indefinitely, probably in some U.S. prison or military brig.

The Obama administration is also relying strictly upon the Authorization for Use of Military Force declaration from Congress, rather than the inherent powers of the President as Commander-in-Chief. This is notable because the 2001 AUMF applies only to people appropriately connected to "the terrorist attacks that occurred on September 11, 2001, and persons who harbored those responsible for those attacks," and to "persons who were part of, or substantially supported, Taliban or al-Qaida forces or associated forces that are engaged in hostilities against the United States or its coalition partners."

Outside the arena of the war in Afghanistan (and neighboring areas like Northern Pakistan), this is quite a small subset of all people who are terrorists or allies of potential military adversaries. It would exclude, for example, individuals affiliated with the "Real IRA" of Ireland, the Tamil Tigers of Sri Lanka, or, in all likelihood, perpetrators of the Mumbai terrorist attacks of Thanksgiving 2008.

Then again, the Obama administration has simply argued that the President's power to conduct foreign affairs and act as commander-in-chief, is inapplicable to the very specific situation of Guantanamo Bay, Cuba, not that the President is entirely without authority to act outside the criminal justice system against foreign terrorists in general. But, the existence, scope and source of James Bond-like license to kill authority for U.S. government agents acting at the direction of the President against people believed by the President to be national security threats is not entirely clear. Such cases have largely escaped the courts, in part due to legal doctrines like the "state secret doctrine" (which the Obama administration has defended), the requirement of legal standing to bring suit, absolute and qualified governmental immunities to civil rights liability, the War Powers Act that abdicates Congressional war making authority for small, short conflicts, and the statutory limitations to the causes of action that do exist, such as the Alien Tort Claims Act.

The Congressional authorization for the war in Iraq, unlike the 2001 AUMF, was less amorphously directed at a non-geographical, non-state actor like al-Qaida, and that Congressional authorization has decreasing relevance as U.S. forces withdraw from Iraq and are government by the additional restrictions of status of forces agreements with the Iraqi civilian government.

The Obama administration has also moved away from the Bush Administration "enemy combatant" to describe the detainees at Guantanamo Bay whose habeas corpus petitions are now being viewed by multiple judges in the U.S. District Court for the District of Columbia.

Then there is the issue of geography. Some judges, particularly in the U.S. Court of Appeals for the D.C. Circuit have placed great importance on the legal status of the place of the detention. But, the U.S. Supreme Court's recent rulings on the issue have been more equivocal and focused on particular facts and circumstances.

[T]he [Obama administration] memorandum asserted that the detention power “is not limited to persons captured on the battlefields of Afghanistan.” It mentioned those who “provide substantial support” to a terrorist network “in other parts of the world,” but did not say what that reference meant — and, thus, did not exclude applying the detention power inside the U.S., when “substantial support” for terrorism is found inside the country. . . .

The memorandum expressly noted that the new definition would only apply to individuals now held at Guantanamo Bay. That leaves out, among other detention sites, the U.S. military jail operated at Bagram airbase in Afghanistan. Earlier, the Obama Administration told Judge Bates that it was not changing the Bush Administration view that the Bagram detainees have no rights to challenge their captivity there.


The question of the right to detain people in the U.S. for suspected terrorism raises the issue of the continued validity of the post-U.S. Civil War case, Ex Parte Milligan which was believed to place great limitations on Presidential detention powers within the United States in places where the courts are functioning, but has been called into question by the Padilla and Al-Marri cases, and complicated by a case involving U.S. military saboteurs on U.S. soil during World War II, and a U.S. Supreme Court ruling on the detention of those of Japanese descent during World War II (and subsequent legislation in reaction to that case).

On the other hand, at this point in time, there is no one in the United States (apart from Guantanamo Bay, Cuba) whom the United States government or any credible source has claimed is detained as enemy combatant (although some U.S. nationals have been detained in Iraq in connection with the U.S. conduct of military operations and support of the Iraqi civilian government there).

All other persons detained in the U.S. are detained under long established doctrines such as those in connection with the criminal justice process, foreign extradition laws, the juvenile court system, the mental health custody process, immigration detention process, civil contempt power, the material witness laws, or the very short term preventative detention in connection with terrorism cases allowed by the U.S.A. Patriot Act. The only people held prisoner under military authority in the U.S., apart from Guantanamo Bay, Cuba, are U.S. soldiers detained in connection with the U.S. military justice system. Of these, only brief military detentions of U.S. military personnel, and some immigration detentions lack meaningful supervision from either civilian courts or courts-martial. Court intervention in immigration cases by writ of habeas corpus is sometimes possible, but is very attenuated and often the government claims that detainees have waived what rights they may have to court review of their detention. Practically speaking, even a U.S. citizen misidentified as a deportable non-citizen might secure relief more quickly by accepting deportation and then applying for assistance from a foreign U.S. embassy, than by trying to secure relief while detained by immigration officials through the U.S. court system. Of course, for non-U.S. citizens, securing any legal rights at all is often dependent upon remaining within the U.S. until legal rights can be adjudicated.

Outside the U.S., U.S. troops and certain people affiliated with them may be detained at U.S. military facilities and subjected to U.S. military justice, and in exceedingly rare cases, federal criminal cases are conducted through a U.S. embassy, but most detentions under U.S. authority abroad are made by U.S. military forces or their agents in places where U.S. forces are engaged in wartime deployments (primarily Afghanistan and Iraq).

The Bush Administration was also widely reported by major news outlets to have a network of CIA prisons across the world for extra-judicially detained terrorism suspects, possibly numbering in the thousands. It is unclear how much of that network remains, in the face of complaints from allied nations where those prisons are located, or how many people remain in that kind of detention.

And, it is also unclear to what extent that U.S. affiliated operatives continue to engage in "extraordinary rendition" which is the process of delivering terrorism suspects to be detained by cooperating countries known to mistreat detainees for interrogation and/or punishment purposes. People detained by foreign powers whose detention the U.S. government does not actually control are clearly beyond the scope of traditional habeas corpus jurisdiction, but the U.S. could conceivably be found liable for civil rights violations under these circumstances, something that has so far not occurred.

President Obama has also made no indication that he has backed away from the position of prior administrations that have claimed the authority to detain and return to the U.S. criminal suspects outside the extradition process, a power that the U.S. Supreme Court has upheld, at least in one Mexican case.

It does appear, however, that the Obama administration has disavowed torture to a much greater extent than the Bush Administration did.

The Obama Administration has also stated that it is continuing to review its policies over the next six months.

Service Interruption

Chez Prophet is suffering some technical difficulties of undetermined origins at the moment, so posting may be suspended over the weekend.

Italian Vampire History

A dig in Italy helps link medieval notions about vampires with the mouth area shroud decomposition, decomposing organ seepage, and gas bloating associated with decaying bodies. They responded by putting a brick in the mouth of the corpse to starve it. Lo and behold, it worked. Nobody in areas that followed the procedure died of vampire bites.

12 March 2009

Same Lawyer, New Shingle

It was nice to have my name on the door as a partner with the law firm of McGihon & Oh-Willeke, LLC. But, life takes funny turns, often for the better. I am now practicing law with hundreds of my closest friends at the law firm of Akerman Senterfitt, where I am "Of Counsel" as part of the firm's Denver offices.

For now, physically, I am practicing at the same address (a beautiful converted turn of the century mansion in Denver's Capital Hill neighborhood), one floor above my previous office, and my telephone number will be the same, although I will have a new professional e-mail address (for personal e-mail and communications regarding this blog, you can continue to contact me at an e-mail address that is my last name without punctuation at hotmail dot com). My practice will shift a little, but I will continue to work with many of the clients I've enjoyed serving for years, and look forward to being able to better serve some of them with the resources that a large firm can provide.

Some rituals will be new, like a conflict of interests update the size of a small newspaper to read each morning (something that took just a sentence of two on the telephone or in person every couple of days in my MOW days), while others, like doing quality legal work and accounting for every moment of the day in a time sheet, are eternal.

Also, while it is always there and always has been, to reiterate, read the disclaimer in the sidebar. It still applies, but more so, especially, the part about the gremlins. For some reason, even large law firms do not provide copy editing for personal blogs as a perk. Go figure.

11 March 2009

DIA Noise Down

For the first time ever, Denver International Airport had no major noise complaints in 2008, after having one each (which costs the airport $500,000 a piece under a legal settlement of the issues) in 2005, 2006 and 2007. Some prior years, there were as many as twenty-four instances per year.

Neighors did continue to lodge 942 noise complaints (still down from last year by 12%), although 54% of the complaints came from just five families.

The Denver Post story, linked above, offers no insights on what DIA did to reduce noise, or what the circumstances of the five unhappy families are in this situation (e.g. if they were also the five closest families, simply buying out their properties and converting them to uses that aren't noise sensitive might make sense). DIA traffic is not markedly down, and no particularly notable models of aircraft have discontinued service in that time period.

10 March 2009

Who Files For Bankruptcy?

Did the bankruptcy reforms of 2005 achieve their goals of changing the mix of people who file for bankruptcy?

Contrary to the advocates' claim that high-income filers would be driven from the system and, by implication, that those remaining would have more modest incomes, the data show no change in the income levels of bankruptcy filers after the amendments. These findings thus cast doubt on the suggestion that those purged from the bankruptcy courts - approximately 800,000 in 2007 alone based on trend extrapolation - were high-income deadbeats; they instead appear to have been ordinary American families in serious financial distress. The data also show that debtors filing for bankruptcy in 2007 have even greater debt loads than their counterparts from 2001, a development that seems to track a national trend of increasing consumer debt. The findings thus align with at least two predictions of some legal scholars. The first is that the bankruptcy reform bill was not aimed at high-income abusers but was instead a general assault on all debtors, regardless of their financial circumstances. The second is that debtors are waiting longer - and incurring more debt - before ultimately seeking bankruptcy relief, consistent with the so-called "sweat box" theory of credit card lending.


Median income (adjusted for inflation) was virtually unchanged:

Median income among Chapter 7 filers in 2001 was $23,761, while median income among Chapter 7 filers in 2007 was a virtually identical $23,136. Similarly, there is no statistically significant difference between the median incomes of Chapter 13 filers from 2001 and those from 2007, which were $33,742 and $35,688 respectively. . . . median household income for bankrupt debtors in 2007 was about $27,100— statistically indistinguishable from the $27,800 in 2001 and $27,100 back in 1991. Median household income across the United States in 2006 (the most recent year available) was $48,200. These figures put the income of the median bankrupt household in 2007 a full 45% below the income of the median household in the general U.S. population. In 2001, the story was the same. The median income for those filing for bankruptcy was 44% below the then-median income for all households.


The data also examined inflation adjusted income in $10,000 bands from $0 to $100,000 (and $100,000+) and found no major differences in the distributions of bankruptcy filers by income. About 72% of bankruptcy filers have under $40,000 (in 2007 dollars) of income. About 18% have $40,000 to $60,000 (in 2007 dollars) of income. Roughly half of the rest had $60,000-$70,000 of income. Notably, there were actually slight increases in the percentage of debtors in each of the categories from $70,000+ in 2007 compared to 2001, eliminating any possibility that the effect of the means test might have been felt by very high income debtors relative to mere moderately high income debtors.

Debt levels of bankrupt debtors, in contrast, have increased materially. "In the six years from 2001 to 2007, families that filed for bankruptcy were collectively carrying 20.8% more secured debt and 43.6% more unsecured debt – all on incomes that remained static." Debt to income ratios have also risen:

In 1981, the median bankrupt debtor owed about one year and five months of income (which is gross income, with no allowances for outlays such as income taxes or even food), for a total debt-to-income ratio of 1.4. By 2007, the median bankrupt debtor owed about three years and four months of income, for a debt-to income ratio of 3.3. . . . In 1981, the median household in bankruptcy owed just under six months of income in credit cards, medical debts, and other unsecured credit, for an unsecured debt-to-income ratio of 0.46. By 2007, the median household owed nearly 15 months of income to unsecured creditors, for an unsecured debt-to-income ratio of 1.22. This means that by 2007, the ratio of unsecured debt to income was two and a half times larger than the ratio in 1981.


What do the experts (whose ex ante theories were confirmed by the data) say?

The data are consistent, however, with at least one theory of consumer debt: Professor Mann’s sweat box theory of lending. Mann argues that the goal of the means test in BAPCPA was never to sort out can-pay debtors or to squeeze more payments from families in bankruptcy. Instead, he argues that what lenders really wanted from BAPCPA was more delay before filing bankruptcy.102 Mann observes that many credit card lenders have developed business models and fee structures that will allow a substantial boost of profit whenever families delay a bankruptcy filing. Mann thus reasons that the aspects of BAPCPA that should have the biggest impact on debtors are those that increase costs, insert more delays or otherwise raise the bar of desperation that a family must feel before making the decision to file for bankruptcy.

Provisions that increase the amount of paperwork and documentation debtors must produce, that require debtors to engage in prebankruptcy and during-bankruptcy counseling, and that drive up the costs for attorneys to provide their services would, according to this model, have a far greater impact on whether cash-strapped families in financial trouble turn to bankruptcy than a means test. The post-BAPCPA families’ higher debt loads, declining net worths, and higher debt-to-income ratios offerdata that are consistent with his analysis.

Professor James J. White takes a similar position, speculating that BAPCPA was a game of subterfuge. The true goal of the legislation may have been to make bankruptcy more undesirable to all, not just to the rich.

White argues that the amendments were designed to impose a death by a thousand cuts through low-visibility procedural burdens, and that high-visibility, substantive provisions, such as the means test, were simply distracting bonuses. With a mixture of apparent cynicism and admiration, White implies that the bankruptcy reform effort was an attempt to attack distressed consumers all along the income spectrum—an effort that was hidden behind the more politically acceptable rhetoric of the means test’s focus on high-income deadbeats:

By raising the cost in hundreds of little ways, you might make bankruptcy unpalatable to many who currently take bankruptcy. . . . Nor would you be obliged to admit that the true reason for advocating these bureaucratic changes was to degrade the machinery of bankruptcy; these rules could be justified as palliatives for acknowledged ills of the system.

107 One interesting new study conducted after BAPCPA finds not only that the change in law has been profitable for credit card lenders, but that none of that surplus has been shared with consumers. See Michael Simkovic, The Effect of 2005 Bankruptcy Reforms on Credit Card Industry Profits and Prices (Working Paper, July 8, 2008), available at http://ssrn.com/abstract=1157158 (finding consumers are paying higher interest rates, late fees and overlimit fees after the amendments’ implementation despite the lobbying promise that BAPCPA would eliminate alleged “bankruptcy tax” on non-bankrupt borrowers).

Mann’s theory of the creditors’ sweat box, White’s speculation on the real intent of BAPCPA, and our own findings about the increases in debt loads caused us to analyze two additional pieces of data. We report them here, in our discussion, because it was only after we reflected on our primary findings that we saw the importance of these results.

In both 2001 and 2007, the telephone surveys of the families in bankruptcy included questions about how long they had been seriously struggling with their debts before they filed for bankruptcy and about their experiences with debt collectors. The how-long-seriously-struggling options were blunt, pre-set categories. Indeed, the responses suggest that when we designed the question we had not fully anticipated how long people struggled with debts before filing. The modal answer was the longest interval category available: more than two years. More importantly for these purposes, the proportion of debtors choosing “more than two years” jumped significantly from 32.6% in 2001 to 43.8% in 2007. Thus it may not be that . . . non-filers have truly left the system; they may just be circling the drain longer. Again, more time will be needed to know what will ultimately happen to families squeezed from the bankruptcy system.

The increase in the length of time that people postpone filing for bankruptcy is consistent with creditor efforts to trap debtors longer in the sweat box, regardless of whether they eventually end up in bankruptcy. The increase in time struggling in the 2007 sample is particularly noteworthy because of the sharp increase in “transition bankruptcies” in 2005. Based on . . . predictions about strategic behavior, it would be reasonable to assume that people on the margin economically would have joined the rush to file for bankruptcy before the new law went into effect in 2005. To the contrary, our data suggest that many families that were already in trouble resisted “unstrategically,” only to end up in bankruptcy two years later. . . .

In the telephone survey of those who filed in 2007, 82% of households reported calls from debt collection agencies. Of these families, nearly a quarter— 23.6%—said the debt collectors had raised the subject of bankruptcy explicitly, threatening what would happen if they filed. More than half who received such warnings recount being told by the debt collector that it was “illegal” to file for bankruptcy, or that, if they filed, they might go to jail, the I.R.S. would audit them, or they could lose their jobs. The remainder received a mix of misinformation, including the oft-repeated “you won’t qualify.” These data suggest that after the 2005 amendments, the newly emboldened debt collectors may have had an important influence on people’s
willingness to file. In the wake of the publicity about the changes in the laws, debt collectors apparently worked hard to make debtors believe bankruptcy relief was now cut off.

112 Of the 845 debtors who had been contacted by a debt collector, these were the recorded responses:
1. It was illegal to file bankruptcy: 4.9% (n=41)
2. You might go to jail if you filed: 3.9% (n=33)
3. I.R.S. would audit you if you filed: 7.3% (n=62)
4. You might lose your job if you filed: 8.5% (n=72)
5. Something else might happen if you filed: 19.4% (n=164) (text fields recorded).

Overall, 12.9% (n=133) reported one or more responses in categories 1 through 4. The total with a response in any of 1 through 5 was 23.6% (n=244).

At least one expert shares this view. According to Bankruptcy Judge Michael Williamson:

I don’t think [the low filing rate] is a sign that people are not in financial difficulties. It’s just a sign that they have been scared off. From the anecdotal feedback we get, people apparently are being told by debt collectors that bankruptcy is no longer available.


It would be quite simple to eliminate provisions of the 2005 bankruptcy reform that simply create bureacratic obstacles for low income, low asset debtors without changing substantive bankruptcylaw remedies, eliminating, for example, the requirement to provide all schedules to the petition and to take a consumer credit counseling class prior to filing for bankruptcy, while preserving other more desirable reforms of the law.

(Citations and footnotes eliminated with a couple of exceptions with bold footnote numbers in the blockquotations. Full Disclosure: J.J. White was my bankruptcy law professor in law school.)