The financial crisis began with a housing bubble collapse in California, Florida, Nevada and Arizona. This unraveled a house of cards involving the mortgage backed securities that funded the mortgages that made the housing bubble possible, and derivatives based upon them which all of the major investment banks, money center banks and other large Wall Street financial institutions had made big bets upon, relying upon grossly overstated estimates of the default risk in mortgage backed securities made by a small number of credit reporting agencies laboring under conflicts of interest. By the fourth quarter of 2007, it all fell apart.
An analysis of census data released Tuesday in a report by FRESC, a Denver based non-profit (via the Denver Post), shows that this financial crisis had a hard to foresee victim. Blacks in the Denver-Aurora metropolitan area saw their median household income fall "23 percent to $31,870 in 2008 from $41,429 in 2007, and held steady in 2009."
The 23% drop in median income far exceeds that for the state of Colorado as a whole, where median income has fallen 2.8% from 2007 to 2009, and for many Denver-Aurora metropolitan area counties for the population as a whole. In Denver median incomes were actually up 1.6% in that time period. In Adams county, they fell 0.6%. In Douglas County, median incomes were up 3.8%. In Jefferson County, they fell 0.9%. In harder hit Arapahoe County, which includes much of Aurora, however, median incomes fell 8.4%.
Some of this could attributable to rising unemployment, "the unemployment rate among blacks in Colorado was 14.7 percent last year compared with 6.9 percent of whites, according to the U.S. Bureau of Labor Statistics." Overall unemployment in the Denver-Aurora metro area roughly doubled from 2008 to 2009.
While I have no numbers to back it up, another possible culprit may be the demise of the subprime lending industry. Through 2007, subprime lending was making up an increasing share of the total mortgage industry market. This created a lot of good jobs selling mortgages and processing them. Subprime lending took place disproportionately in minority communities, where many people who could have been eligible for conventional prime rate mortgages took out subprime mortgages instead because those were the lenders with whom the borrowers were familiar. I've never seen a report that says so, but I suspect that I a lot of the people with good jobs in that subprime lending industry in Denver, a lot of real estate agents making home sales facilitated by those subprime loans, a lot of the neighborhood insurance agents providing home owner's insurance when these loans closed, and a lot of people doing renovations financed with subprime loans, were black.
Conventional mortgage lending from banks and non-subprime oriented mortgage finance companies, in contrast, tend to have overwhelmingly white employees and to have referral networks that connect people to white insurance agents and contractors.
The financial crisis virtually eliminated the entire subprime and Alt-A lending industry in a matter of months. The financial markets stopped issuing new mortgage backed securities almost completely, and the vast majority of subprime and Alt-A loans were financed with mortgage backed securities. Subprime mortgage finance companies were typically national companies that had obligations to repay investors if the mortgages they sold had unexpectedly high default rates, and when default rates rose and those obligations were called, almost all of those mortgage finance companies went out of business, with their few worthwhile assets sometimes gobbled up by commercial banks.
The loss of most of the good paying jobs in the real estate, finance and insurance jobs in black neighborhoods in a matter of months would be just the kind of event that could lead to the catastrophic decline in median income for African-Americans in the Denver-Aurora metropolitan area that happened between 2007 and 2008.
Another reason to suspect subprime lending as a culprit in that decline in median income is that this decline took place mostly between 2007 and 2008, while the rise in unemployment created by the recession that the financial crisis spawned took place mostly between 2008 and 2009. The people whose incomes fell to produce the decline in median income from 2007 to 2008 are probably some of the best educated, middle class members of the Denver-Aurora black community, while the people in the Denver-Aurora black community who became unemployed between 2008 and 2009 are probably disproportionately the least educated, working class members of the Denver-Aurora black community.
If rising unemployment were driving declining median income, one would have expected to see a big drop in median income from 2008 to 2009, and instead it held steady then. This suggests that unemployment disproportionately affected those who were in jobs that made less than the median income before the recession hit.
I haven't seen the numbers, but I also suspect that the drop in median incomes was even more severe for black women in the Denver-Aurora black community, who make up a disproportionate share of the employees in the finance, insurance and real estate industry in the subprime mortgage related industry that I suspect produced much of the decline, while the increase in unemployment from 2008 to 2009 in the Denver-Aurora black community was disproportionately among black men.
The bad news, if my suspicions are correct, is that the massive median income loss in the black community in the Denver-Aurora metropolitan area is structural rather than cyclic. The good paying jobs destroyed, and the incomes of self-employed people reduced by the demise of the subprime and Alt-A lending industries aren't coming back any time soon. The market has collectively decided to permanently reduce the scale of that industry, and changes in the policies of businesses key to the scale of that industry (like private mortgage insurers, secondary market mortgage buyers, and credit reporting agencies rating mortgage backed security obligations) and government regulators with jurisdiction over that industry, have changed in ways that insure that subprime lending and Alt-A lending cannot resume on a business as usual basis.
The good news, if my suspicions are correct, is that a generation of people in the Denver-Aurora black community were lifted into the middle class in the 2000s, and have built the business skills and earned the experience necessary to excel in the industries. The skills, the experience, and the expectations of the middle class life style that came with them, aren't going away. The cohort of finance, insurance and real estate professionals in the black community who rode the subprime boom in the 2000s, once they recover from the immediate setbacks that they have suffered, are going to use their skills and experience, and be driven by their heightened economic expectations to find places for themselves in the more conventional part of the finance, insurance and real estate industry. The numbers suggest that many of them have already found jobs after the setbacks they suffered when the industry collapsed. They are going to rebuild their careers. They will provide the human capital infrastructure that is needed to build neighborhood level economic health to black neighborhoods where they have built business networks and personal ties. Many will connect consumers in black neighborhoods to conventional lending opportunities.
You saw something similar in Grand Junction, Colorado after the oil shale bust. The oil shale boom caused Grand Junction to develop infrastructure and a base of professional people. When the bust hit, the buildings saw their values collapse, the infrastructure was dramatically underutilized, and the professionals were underemployed and some left the area entirely. But, many of the professionals stayed and over the next couple of decades, Grand Junction used its excess infrastructure and overabundance of professionals to grow its economy on a more diversified basis as city boosters beat the bushes to bring companies doing things like building 3-D copying machines and German software companies setting up branch businesses to the city. The result has been a healthier economy that suffered less this time around when the oil industry jobs slipped away after a mini-boom fueled by high oil prices.
There is no reason that black neighborhoods in Denver and Aurora, which make up about half of the black population of Colorado, can't used capacity developed in the subprime boom to fuel a similar round of more sustainable economic growth.
29 September 2010
28 September 2010
Who Knows Most About Religion?
Which groups have the highest knowledge levels? It turns out that it’s atheists and agnostics (an average of 20.9 correct answers out of 32) . . . Interestingly, atheists and agnostics (6.7 correct answers) score significantly higher than Christians (6.0) on the 12 questions that cover knowledge of Christianity and the Bible.
From here.
"The Recent Pew Research Center survey of American’s knowledge about religion shows widespread ignorance. The study asked 32 mostly relatively basic multiple choice questions about various religions (including a few on religion and public life)."
Denver's Housing Market Still Strong
Of the twenty cities in the Case-Schiller housing index for July, Denver was again down less from its peak housing prices than any other city in the index but Dallas.
Las Vegas, Phoenix, Miami, Detroit, Tampa, Los Angeles, San Francisco and San Diego all remain more than 30% below the peak. The California cities are all starting to recover from their low points, but the other cities hit new lows in July. Las Vegas real estate prices are down 57%. Needless to say, in these markets, even buyers with conventional mortgages who have been paying down their mortgages for years are now sometimes upside down.
This isn't to say that all is well in Denver, whose housing prices are still down 9.2% from the peak. They are still where they were in December 2008 and have nudged back down after some some statistically insignificant real estate appreciation from December 2008 to December 2009. But, compared to the rest of the nation, we come out smelling like roses.
Las Vegas, Phoenix, Miami, Detroit, Tampa, Los Angeles, San Francisco and San Diego all remain more than 30% below the peak. The California cities are all starting to recover from their low points, but the other cities hit new lows in July. Las Vegas real estate prices are down 57%. Needless to say, in these markets, even buyers with conventional mortgages who have been paying down their mortgages for years are now sometimes upside down.
This isn't to say that all is well in Denver, whose housing prices are still down 9.2% from the peak. They are still where they were in December 2008 and have nudged back down after some some statistically insignificant real estate appreciation from December 2008 to December 2009. But, compared to the rest of the nation, we come out smelling like roses.
Colorado Candidates Not Clean
Colorado Pols lays out the veritable mother load of misdeeds by candidates for State House and State Senate seats this year, following up on a Denver Post story on the same subject.
Some of the records of court cases are petty, not very blameworthy, or decades old, others are rather more serious.
Five of the most serious cases involve Republican candidates, often in suburban districts that can be won by either party, so this could change the outcome of the races.
* Republican Clint Webster, 59 is running against incumbent Democrat Sue Schafer, in House District 24, a first ring suburb of Denver that includes Jefferson County municipalities Wheat Ridge and Lakewood. This is a swing district that Republicans need to make progress to make progress in the state house. His record:
Colorado Pols elaborates on the 1991 incident:
If I were a swing voter in House District 24, I'd care about that sort of thing. Swing voters happen to be notorious for caring more about character than positions on issues, and firing two shots at your ex-wife does not show good character.
* In House District 31, Republican Tom Janich, 48, of Brighton (another first ring Denver suburb) was "[a]rrested five times from 1983 to 1989 for various crimes, including assault on a police officer, resisting a police officer and driving under the influence." He is challenging incumbent Democrat Judy Solano.
Resisting arrest repeatedly from the age of twenty-one to age twenty-seven does not exactly conjure up an image of responsible leadership.
* Incumbent Democrat Cherilyn Peniston of Denver suburb Westminster in the race of House District 35 faces Republican Edgar Antillon, 26, who "[p]leaded guilty in 2004 to misdemeanor perjury in connection with giving an alias to police, and was sentenced to six months probation and 24 hours community service. Has failed to appear for court hearings 18 times on various charges, including traffic infractions."
How can you expect someone who has missed a court appearance on average more than twice a year for his entire adult life, and lies about his name when he gets arrested, to show up to his job at the legislature every day? These incidents are not ancient history.
* One also worries about "J. Paul Brown (R), HD-59" who per Colorado Pol's, veered "in a recent legislative debate into a discussion of the United Nations, guns, and civil war. Brown's brothers were arrested in 2005 by federal agents for the theft of a very large amount of high explosives in New Mexico." You aren't your brother's keeper, but with his paranoid rhetoric, you may wonder if the fruit has fallen very far from the tree. He's the "moderate" in a district that includes Gunnison, running against Democrat Brian O'Donnell.
* In House District 46 in Pueblo, incumbent Democrat Sal Pace faces Republican Steven Rodriguez who, per Colorado Pols, "was arrested in 1996 for 3rd degree assault and domestic violence. He pled guilty and served one year of probation. Rodriguez was also divorced in 1996, and a temporary protective restraining order was issued." Rodriguez is running as a Tea Party supporter.
Some of the records of court cases are petty, not very blameworthy, or decades old, others are rather more serious.
Five of the most serious cases involve Republican candidates, often in suburban districts that can be won by either party, so this could change the outcome of the races.
* Republican Clint Webster, 59 is running against incumbent Democrat Sue Schafer, in House District 24, a first ring suburb of Denver that includes Jefferson County municipalities Wheat Ridge and Lakewood. This is a swing district that Republicans need to make progress to make progress in the state house. His record:
Record: Arrested in 1987 for disturbing the peace. The charge was later dismissed.
Response: "It was something involving my son. My big mouth got me in trouble," he said.
Record: Arrested in 1991 after an incident involving his ex-wife and the Jefferson County sheriff's office. He pleaded guilty in 1992 to second-degree assault, a felony, two counts of felony menacing and a misdemeanor assault charge. He received a two-year deferred judgment on the felonies, which were later dismissed because he successfully completed a diversion program.
Response: Webster said he was having a "nightmarish problem" with his former wife and had filed a restraining order against her. He said he called the sheriff's office during the dispute, which declined to come out, which angered him.
"I said I was going to shoot people and do whatever I had to do. That got them out there. I was 100 percent guilty. I freely admit I blew my cool, but I was so frustrated. It was probably the best thing that ever happened to me because as a part of diversion I had to go through counseling."
Colorado Pols elaborates on the 1991 incident:
The arrest report obtained from the Jefferson County Sheriff shows that Webster was apprehended after firing two shots from a semi-automatic pistol at his ex-wife. When asked by arresting officers what his intention was when he fired, Webster stated something along the lines that he had warned his wife to stop bothering him and had even threatened to kill her, yet she 'showed up at his home anyway.'
If I were a swing voter in House District 24, I'd care about that sort of thing. Swing voters happen to be notorious for caring more about character than positions on issues, and firing two shots at your ex-wife does not show good character.
* In House District 31, Republican Tom Janich, 48, of Brighton (another first ring Denver suburb) was "[a]rrested five times from 1983 to 1989 for various crimes, including assault on a police officer, resisting a police officer and driving under the influence." He is challenging incumbent Democrat Judy Solano.
Resisting arrest repeatedly from the age of twenty-one to age twenty-seven does not exactly conjure up an image of responsible leadership.
* Incumbent Democrat Cherilyn Peniston of Denver suburb Westminster in the race of House District 35 faces Republican Edgar Antillon, 26, who "[p]leaded guilty in 2004 to misdemeanor perjury in connection with giving an alias to police, and was sentenced to six months probation and 24 hours community service. Has failed to appear for court hearings 18 times on various charges, including traffic infractions."
How can you expect someone who has missed a court appearance on average more than twice a year for his entire adult life, and lies about his name when he gets arrested, to show up to his job at the legislature every day? These incidents are not ancient history.
* One also worries about "J. Paul Brown (R), HD-59" who per Colorado Pol's, veered "in a recent legislative debate into a discussion of the United Nations, guns, and civil war. Brown's brothers were arrested in 2005 by federal agents for the theft of a very large amount of high explosives in New Mexico." You aren't your brother's keeper, but with his paranoid rhetoric, you may wonder if the fruit has fallen very far from the tree. He's the "moderate" in a district that includes Gunnison, running against Democrat Brian O'Donnell.
* In House District 46 in Pueblo, incumbent Democrat Sal Pace faces Republican Steven Rodriguez who, per Colorado Pols, "was arrested in 1996 for 3rd degree assault and domestic violence. He pled guilty and served one year of probation. Rodriguez was also divorced in 1996, and a temporary protective restraining order was issued." Rodriguez is running as a Tea Party supporter.
W. Cleon Skousen, Glenn Beck and the Tea Party
Why does the Tea Party sound like a reincarnation of the John Birch Society?
Because, intellectually, it is.
Law professor Jared Goldstein substantiates these connections and explains the view of the constitution that Skousen espoused, one that borrows heavily from Mormon ideology, not very heavily from the constitution itself or mainstream history, and not at all from the two century gloss placed on the document by courts and political actors interpreting it.
W. Cleon Skousen who rose to prominence in the 1950s and wrote the his books that are most read today in the 1980s, was a friend of the reactionary group, an ardent defender of their founder, and frequently lecturer to them. "Barry Goldwater and like-minded conservatives such as William F. Buckley broke with the Birchers, concluding that they were not fit members of the conservative movement," but Skousen saw them (and figures like President Eisenhower) as corrupted liberals.
According to a book he wrote in 1970:
His views of slavery were well outside the mainstream of history research:
He also claims in his writings that:
Skousen's writings, particularly THE FIVE THOUSAND YEAR LEAP and THE MAKING OF AMERICA, garnered renewed interest after they were promoted by conservative talk radio host Glenn Beck. With Glenn Beck's help, these books have become best sellers and a leading intellectual source for the Tea Party movement's view of the constitution.
Skousen's revisionist history of the United States and view of the constitution as primarily a device by which the Founders established God's law as the constitution of the United States through the concept of "natural law" turns the Enlightenment document into something quite the opposite.
Skousen basically disavows the expansion of the scope of the federal government that took place around the time of the Civil War, again during the New Deal, and yet again during the Civil Rights era, and seeks to create an institution more religious than it or the Founders ever were, and to give lassiez-faire conservative economic policies that the Founders didn't share, the force of constitutional law.
Skousen lays out all of the supposedly unconstitutional things Congress has done:
Ironically, the Tea Party is a strong supporter of eliminating the estate tax, the policy more important than any other to strengthening the position of the dynastic rich whom Skousen believed had conspired to pervert our constitution and system of government.
Skousen's paranoia is something the Tea Party shares:
The article is worth a read. While the view's espoused describe a "fantasy constitution" rather than the real thing, it doesn't hurt to trace the roots of a constitutional ideology that has gained a strong hold in the far right part of the conservative movement and is starting to be accepted, at least publicly, by powerful people with a shot at high political office.
Quite impressive really, for a paranoid racist conspiracy theorist with sense of history profoundly contrary to reality. One fears that Skousen's works might end up become the Mein Kampf of our generation of reactionaries, so they are probably worth being aware of, even if they are nuts.
It is hard to know what to think of the Tea Party's decidedly disreputable and dishonest intellectual foundation. Does it unduly dignify their off the wall ideas to take them seriously? Will they give rise to a terrifying anti-intellectual regime of delusion and hate, or will they fizzle out as normal people recognize just how out of touch their worldview is with reality?
Crazy without power is mildly amusing but a little bit sad. Crazy with power is terrifying. How do you reason with people who think the Enlightenment was basically a bad idea? How do you find common ground with people who want to turn back the clock of progress by two hundred years to a past that never existed?
Goldstein doesn't explore in this brief working paper, the roots of Skousen's ideology, which I suspect has far older roots, probably tracing back to at least the Second Great Awakening that gave rise to the religious fundamentalist ideas that parallel this political vision. But, that isn't inappropriate. Goldstein makes a convincing case that Skousen is the vehicle by which this ideological has been transmitted to the current generation of Tea Party activists and American conservatives, so going back further doesn't do much to inform understanding of the ideologies present in the nation today.
In the same way, one doesn't need to know much about the Mesopotamian roots of the myths in Genesis to understand their impact on Jews and Christians. These myths came into the Judeo-Christian world view the account in the Torah and its predecessors were mostly unknown to them.
Goldstein makes the case that Skousen is the Prophet, who as revealed by his disciple Glenn Beck, gave rise to the legal ideology of the contemporary Tea Party. I've pondered before how we got here, with Tea Party supporters like U.S. Senate candidate Ken Buck and Colorado Gubernatorial candidate Dan Maes representing the Republican Party in this election.
Are so many of my fellow citizens really on board with this kind of thinking? Why? It is surreal. I've speculated at length on what is driving this movement before at this blog, and it has profoundly shaken my faith that the participants in the political system are capable of making good decisions. It is still hard to figure out where they are coming from, and how much of this those in power in the movement really believe.
Perhaps most importantly, how does on defuse all of their anger, fear and hate?
Because, intellectually, it is.
Law professor Jared Goldstein substantiates these connections and explains the view of the constitution that Skousen espoused, one that borrows heavily from Mormon ideology, not very heavily from the constitution itself or mainstream history, and not at all from the two century gloss placed on the document by courts and political actors interpreting it.
W. Cleon Skousen who rose to prominence in the 1950s and wrote the his books that are most read today in the 1980s, was a friend of the reactionary group, an ardent defender of their founder, and frequently lecturer to them. "Barry Goldwater and like-minded conservatives such as William F. Buckley broke with the Birchers, concluding that they were not fit members of the conservative movement," but Skousen saw them (and figures like President Eisenhower) as corrupted liberals.
According to a book he wrote in 1970:
[T]he international communist movement . . . was actually the product of an even larger conspiracy directed by the “dynastic families of the super-rich.” These families created and manipulated both Communism and fascism to carry out their plan to create a globalized New World Order. The conspirators included a cabal of international bankers, the Council on Foreign Relations, the Rothchilds, Rockefellers, Kennedys, J.P Morgan, Henry Kissinger, John Dewey, and Albert Einstein, among countless others. . . [He] continues to be cited as a leading authority by New World Order, Illuminati, and anti-semitic conspiracy theorists.
His views of slavery were well outside the mainstream of history research:
THE MAKING OF AMERICA [1985] asserts that slaves were “usually a cheerful lot, though the presence of a number of the more vicious type sometimes made it necessary for them all to go in chains.” In Skousen’s history of slavery, brutality toward slaves was almost unheard of, and white schoolchildren envied “the freedom” of the slaves: “If pickaninnies ran naked it was generally from choice, and when the white boys had to put on shoes and go away to school they were likely to envy the freedom of their colored playmates.” Although the slaves were well treated, ate well, and lived happily, southerners lived in constant fear of slave rebellions instigated by abolitionists, making life for whites in the south “a nightmare.” In fact, “the slave owners were the worst victims of the system.”
He also claims in his writings that:
[T]he Anglo-Saxons are the descendants of the biblical Israelites and are therefore God’s chosen people. . . . [a view that] in turn, provided the foundation for the white separatist Christian Identity movement espoused by Randy Weaver, who died in 1992 in a shootout with federal agents, who he believed were agents of a Zionist Occupational Government.
Skousen's writings, particularly THE FIVE THOUSAND YEAR LEAP and THE MAKING OF AMERICA, garnered renewed interest after they were promoted by conservative talk radio host Glenn Beck. With Glenn Beck's help, these books have become best sellers and a leading intellectual source for the Tea Party movement's view of the constitution.
Skousen's revisionist history of the United States and view of the constitution as primarily a device by which the Founders established God's law as the constitution of the United States through the concept of "natural law" turns the Enlightenment document into something quite the opposite.
These notions focus on the need to restore the Founders’ true vision of the Constitution, including the centrality of natural law, understood to mean God’s laws; the necessity for limited government that may not undertake welfare programs, redistribution of wealth, or interference in any way with private property; and the embrace of manifest destiny at home and isolationism in foreign policy.
Skousen basically disavows the expansion of the scope of the federal government that took place around the time of the Civil War, again during the New Deal, and yet again during the Civil Rights era, and seeks to create an institution more religious than it or the Founders ever were, and to give lassiez-faire conservative economic policies that the Founders didn't share, the force of constitutional law.
Skousen lays out all of the supposedly unconstitutional things Congress has done:
Skousen asserts, the socialists were acting as agents of certain wealthy bankers and other members of the “dynastic rich,” who sought to gain control of the government and grant themselves monopolies. The capitalist-communist conspirators largely succeeded in duping the American people to abandon many of the ancient principles upon which the nation was founded. As a result, America lost its national identity, producing a “[g]eneration of lost Americans,” and a nation of “un- Americans.”
The United States soon began to adopt one policy after another that conflicted with its foundational principles, and today, almost everything the federal government does is unconstitutional. The primary transgression was the establishment of federal welfare programs like Social Security and Medicare, which violate the fundamental prohibition against redistribution of wealth. The entirety of the monetary system likewise operates contrary to the Founders’ formula because it is based on paper money not backed by gold. The entire administrative state is also unconstitutional because Congress cannot create agencies with regulatory powers, and the President cannot issue executive orders or promulgate regulations. In addition, it was unconstitutional for Congress to establish national parks, national monuments, national forests, and wilderness areas, to enact federal environmental and labor laws, and to provide foreign aid.
Ironically, the Tea Party is a strong supporter of eliminating the estate tax, the policy more important than any other to strengthening the position of the dynastic rich whom Skousen believed had conspired to pervert our constitution and system of government.
Skousen's paranoia is something the Tea Party shares:
To Tea Party supporters, advocates of foreign, anti-American ideas have taken over the federal government, threatening to displace true American values, and the fate of the nation hangs in the balance. Again and again, Tea Party supporters argue that the Obama Administration is “attacking” America, that he is “anti American,” and that he is seeking to undermine basic American values. The vehemence which Tea Party members characterize the Obama Administration’s agenda as “un-American,” “socialist,” or “communist”—or, perhaps even worse, “European”—easily matches Skousen’s own fears of a communist takeover during the Cold War. . . .
Skousen and the Tea Party movement, like religious fundamentalists, see the world in Manichean terms, a world in which believers in the constitutional faith stand on one side and all others are demonized as enemies who seek to undermine American values. Skousen wrote in the 1950s and 1960s that international Communism sought to undermine American values by promoting civil rights for African Americans, by promoting acceptance of homosexuals, and by persuading Congress to adopt welfare programs. Proponents of such measures were not merely wrong on government policies; to Skousen, they were America’s enemies. Tea Party supporters likewise believe that people who disagree with them on health care reform, tax policies, and immigration are not merely political adversaries with whom they disagree on the issues. Tea Party supporters view proponents of health care reform and other such measures to be deeply un-American. Tea Party members believe that, at best, their opponents are ignorant of the fundamental principles upon which the country was founded or, at worst, they seek to undermine these principles.
Indeed, the vehemence with which Tea Party activists demonize their enemies is one of the movement’s most remarkable traits. They characterize their opponents as socialists and communists; compare President Obama to Hitler, Stalin, and Saddam Hussein; and have a large percentage of members who believe that President Obama is a foreigner or a Muslim or at least someone who adheres to foreign views. The Tea Party movement believes that Obama is radically anti-American. The demonization of enemies follows from the fundamentalist nature of the Tea Party movement. Those who act contrary to what Tea Party supporters believe to be the fundamental American are perceived to be undermining or attacking those values; they are not merely Americans who hold differing positions; they are anti-American, and they must be defeated in order to save America.
The article is worth a read. While the view's espoused describe a "fantasy constitution" rather than the real thing, it doesn't hurt to trace the roots of a constitutional ideology that has gained a strong hold in the far right part of the conservative movement and is starting to be accepted, at least publicly, by powerful people with a shot at high political office.
Skousen’s influence has spread beyond Tea Party activists, and several prominent Republican leaders—Texas Governor Rick Perry, former Massachusetts Governor Mitt Romney, and Senator Orrin Hatch, among others—have openly endorsed Skousen’s views.
Quite impressive really, for a paranoid racist conspiracy theorist with sense of history profoundly contrary to reality. One fears that Skousen's works might end up become the Mein Kampf of our generation of reactionaries, so they are probably worth being aware of, even if they are nuts.
It is hard to know what to think of the Tea Party's decidedly disreputable and dishonest intellectual foundation. Does it unduly dignify their off the wall ideas to take them seriously? Will they give rise to a terrifying anti-intellectual regime of delusion and hate, or will they fizzle out as normal people recognize just how out of touch their worldview is with reality?
Crazy without power is mildly amusing but a little bit sad. Crazy with power is terrifying. How do you reason with people who think the Enlightenment was basically a bad idea? How do you find common ground with people who want to turn back the clock of progress by two hundred years to a past that never existed?
Goldstein doesn't explore in this brief working paper, the roots of Skousen's ideology, which I suspect has far older roots, probably tracing back to at least the Second Great Awakening that gave rise to the religious fundamentalist ideas that parallel this political vision. But, that isn't inappropriate. Goldstein makes a convincing case that Skousen is the vehicle by which this ideological has been transmitted to the current generation of Tea Party activists and American conservatives, so going back further doesn't do much to inform understanding of the ideologies present in the nation today.
In the same way, one doesn't need to know much about the Mesopotamian roots of the myths in Genesis to understand their impact on Jews and Christians. These myths came into the Judeo-Christian world view the account in the Torah and its predecessors were mostly unknown to them.
Goldstein makes the case that Skousen is the Prophet, who as revealed by his disciple Glenn Beck, gave rise to the legal ideology of the contemporary Tea Party. I've pondered before how we got here, with Tea Party supporters like U.S. Senate candidate Ken Buck and Colorado Gubernatorial candidate Dan Maes representing the Republican Party in this election.
Are so many of my fellow citizens really on board with this kind of thinking? Why? It is surreal. I've speculated at length on what is driving this movement before at this blog, and it has profoundly shaken my faith that the participants in the political system are capable of making good decisions. It is still hard to figure out where they are coming from, and how much of this those in power in the movement really believe.
Perhaps most importantly, how does on defuse all of their anger, fear and hate?
27 September 2010
The Small Business Jobs Act of 2010
The Small Business Jobs Act of 2010 (Title II of H.R. 5297) cleared Congress on September 23, 2010 and is expected to be signed any day now by the President. Many provisions are small but notable, although many will effectively only provide reduced taxes after the fact rather than incentives to take positive economic action as a result of the bill.
Most of the changes change the timing of revenue collections rather than the ultimate amount due. The bill reduces revenues from the 2010 tax year by about $55 billion and reclaims all but about $53 billion of that over the decade that follows. To the extent that interst rates stay low, that deferral of income taxation isn't worth much economically, but the idea is to provide stimulus now and pay for it when the economy recovers.
* Before the law was passed, self-employed people could generally deduct health insurance above the line for income tax purposes, but not for self-employment tax purposes (i.e. a tax in lieu of FICA) without relatively involved tax planning. For 2010, self-employed people can deduct it for both purposes, providing parity with the tax treatment of health insurance for employees. This is a major tax cut for small business owners. This one year tax break reducing revenues by $1.9 billion, provides one of the biggest pieces of permannent tax relief, as opposed to tax deferral, in the bill.
It was possible to obtain a similar result with a self-employed Section 125 plan under the health care reform bill already passed, but that involves more paperwork and fewer people were aware that it was available.
* Special record keeping requirements designed to prevent personal use of cell phones from being deducted as a business expense have been eliminated. This is a bit of uncontroversial tax simplification with only slight revenue costs.
* Business start up expenses up to $10,000 can be deducted rather than amortized over 60 months in 2010. The previous limit was $5,000.
* Up to $500,000 of purchases of capital assets that would otherwise have to be depreciated can be "expensed" in the current tax year to the extent that the assets cost under $2,000,000. The previous limit was $250,000. Expensing has also been extended to include qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property (appropriately, as leasehold improvements rarely have an economically useful life as long as the appropriate depreciation period, even if they don't become useless due to wear and tear in that time period).
Enhanced first year depreciation ("50% first year bonus depreciation") is available for investments that can't be expensed. In fact, this tax break for big businesses accounts for more than $40 billion of the $55 billion of tax breaks in the first year of the bill.
While both of these provisions should help spur capital investment, they may actually destroy jobs as well as creating them, since one common reason to make capital investments is to automate jobs, and this kind of tax break makes it sensible from a tax perspective to automate a job even when it costs more to automate the job than it would to keep the person employees on a discounted cash flows basis.
* The law excludes from income taxation and the alternative minimum tax 100% of the gain on the sale of qualifying small business stock stock purchased from C corporation with less than $50 million of assets and an active business (i.e. not more than 10% of which involves investments or real estate) that is acquired in 2010 after date of enactment (basically October, Novembver and December 2010) and held for more than five years. Various discounts of 50% or more have been available under prior law in a variety of circumstances, but not a 100% exclusion that is AMT free.
For the most part, the benefits are not attractive enough to make a C corporation more desirable than an S corporation for a start up business with owner-employees, particularly if the favorable tax rates for qualified dividends are not extended, and Democrats and the President don't want to extent those favorable dividend tax rates.
It also isn't very attractive for businesses that would own assets expected to appreciate in value, since assets held by C corporations don't receive favorable capital gains tax rates.
But, it could be attractive for angel investors and venture capitalists seeking to invest in growth companies that reinvest earnings rather than paying dividends, for companies making small NASDAQ public offerings, and for businesses where all owner-employees will be earning more than the maximum salary subject to Social Security taxation for whom selling the business is a viable exit strategy (it is pretty useless in "buy yourself a job" businesses).
This provision, combined with the start up cost and expensing provision, could make a C corporation attractive for businesses making significant, but not huge, investments in plant, equipment or leasehold improvements. For example, it makes investing a few hundred thousand dollars in a new franchised retail store look pretty attractive.
Of course, none of this matters if you can't find investors willing to put money into your business, and interest rates on loans to finance a business investment have never been lower for those who can get them.
From an economic stimulus perspective, the notion that this kind of provision increases economic growth is dubious. A three month tax holiday window offered with little advanced notice has probably delayed the closing of some C corporation stock sales, and will probably speed up other C corporation stock investments that otherwise would have closed in early 2011. But, offering more favorable tax rates on a profitable investment for which favorable tax rates were already available probably doesn't do much to change the amount of equity funding in this kind of venture over the entire year centered around the three months when the tax break is provided. It virtually guarantees a depressed venture capital environment in early 2011.
It takes too long to set up a long term, small C corporation equity investment opportunity for this to shift the amount of available investment funds from other kinds of investment opportunity (e.g. municipal bonds) to this kind of investment by very much. As stimulus, it is really pretty useless and is quite expensive from a revenue perspective.
This is the economic equivalent of the housing tax credit, or cars for clunkers, for investors. It is really little more than a transfer payment to people who were going to do what they did anyway. Unless a tax preferences turns a gain into a loss, or a loss into a gain, a change in the tax rate that applies that a gain won't change the number of situations where it makes sense to invest very much.
If there is any long term stimulus effect, it will probably start coming in around five years from now when the investors sell their investments and have more money available to invest in new venture capital projects than they would have in the absence of the tax break.
* Appreciated property in S corporations can be taxed at the owner's preferrential capital gains tax rate, rather than the C corporation ordinary income tax rate after a five year holding period from the S corporation conversion, rather than a ten year holding period.
Most taxpayers who use this provision have probably already started counting down the years until the ten year period runs and will now be able to liquidate their S corporations immediately, rather than a few years later. The theory would be that this frees up a de facto restriction on the alienation of appreciated property, mostly real estate, and strengthens the real estate market.
This does work as permanent stimulus, but the effect is probably pretty small. The change in the tax law that made it problematic for C corporations to hold appreciated property took place in 1986 when the General Utilities doctrine was repealed, so not many investments in appreciating property like real estate or investments were made after then through C corporations. There are 24 year old (or older) C corporations with appreciated assets in them kept in tact until death to erase unrealized capital gain in the stock, which are mostly medium sized businesses and professional practices that owned their own office buildings that heirs want to sell upon inheriting them because they aren't continuing the businesses, but there aren't a lot of them, and there are fewer than have recently made S elections to start the holding period running in time to benefit from the new rule.
* 401(k), 403(b), and governmental 457(b) plans can be rolled over into Roth IRAs in 2010 with the taxes due on the rollover paid over 2011 and 2012. This shifts revenues into the present from the future to make up for other short term revenue deceases, while looking like a tax break since it relaxes IRS rules to allow taxpayers to do something that they want to do.
Other than the revenue shifting effect this has no economic benefit, since the funds will probably be invested in the same things, and it probably discourages investment now by causing people to use available cash to pay rollover triggered taxes instead of making investments in productive activities or consuming it.
* Rental real estate owners must 1099 to claim expenses paid over $600 starting in 2011 and penalties for not filing information returns generally are increased starting in 2011. This should help to reduce the tax gap in the gray economy of informally operating home repair and cleaning professionals. This particularly puts the squeeze on self-employed undocumented immigrants who make up a fairly large share of employees in this part of the economy and may have a hard time producing Social Security numbers so that they can be hired by someone who knows that they will have to send 1099s to them later.
Most of the changes change the timing of revenue collections rather than the ultimate amount due. The bill reduces revenues from the 2010 tax year by about $55 billion and reclaims all but about $53 billion of that over the decade that follows. To the extent that interst rates stay low, that deferral of income taxation isn't worth much economically, but the idea is to provide stimulus now and pay for it when the economy recovers.
* Before the law was passed, self-employed people could generally deduct health insurance above the line for income tax purposes, but not for self-employment tax purposes (i.e. a tax in lieu of FICA) without relatively involved tax planning. For 2010, self-employed people can deduct it for both purposes, providing parity with the tax treatment of health insurance for employees. This is a major tax cut for small business owners. This one year tax break reducing revenues by $1.9 billion, provides one of the biggest pieces of permannent tax relief, as opposed to tax deferral, in the bill.
It was possible to obtain a similar result with a self-employed Section 125 plan under the health care reform bill already passed, but that involves more paperwork and fewer people were aware that it was available.
* Special record keeping requirements designed to prevent personal use of cell phones from being deducted as a business expense have been eliminated. This is a bit of uncontroversial tax simplification with only slight revenue costs.
* Business start up expenses up to $10,000 can be deducted rather than amortized over 60 months in 2010. The previous limit was $5,000.
* Up to $500,000 of purchases of capital assets that would otherwise have to be depreciated can be "expensed" in the current tax year to the extent that the assets cost under $2,000,000. The previous limit was $250,000. Expensing has also been extended to include qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property (appropriately, as leasehold improvements rarely have an economically useful life as long as the appropriate depreciation period, even if they don't become useless due to wear and tear in that time period).
Enhanced first year depreciation ("50% first year bonus depreciation") is available for investments that can't be expensed. In fact, this tax break for big businesses accounts for more than $40 billion of the $55 billion of tax breaks in the first year of the bill.
While both of these provisions should help spur capital investment, they may actually destroy jobs as well as creating them, since one common reason to make capital investments is to automate jobs, and this kind of tax break makes it sensible from a tax perspective to automate a job even when it costs more to automate the job than it would to keep the person employees on a discounted cash flows basis.
* The law excludes from income taxation and the alternative minimum tax 100% of the gain on the sale of qualifying small business stock stock purchased from C corporation with less than $50 million of assets and an active business (i.e. not more than 10% of which involves investments or real estate) that is acquired in 2010 after date of enactment (basically October, Novembver and December 2010) and held for more than five years. Various discounts of 50% or more have been available under prior law in a variety of circumstances, but not a 100% exclusion that is AMT free.
For the most part, the benefits are not attractive enough to make a C corporation more desirable than an S corporation for a start up business with owner-employees, particularly if the favorable tax rates for qualified dividends are not extended, and Democrats and the President don't want to extent those favorable dividend tax rates.
It also isn't very attractive for businesses that would own assets expected to appreciate in value, since assets held by C corporations don't receive favorable capital gains tax rates.
But, it could be attractive for angel investors and venture capitalists seeking to invest in growth companies that reinvest earnings rather than paying dividends, for companies making small NASDAQ public offerings, and for businesses where all owner-employees will be earning more than the maximum salary subject to Social Security taxation for whom selling the business is a viable exit strategy (it is pretty useless in "buy yourself a job" businesses).
This provision, combined with the start up cost and expensing provision, could make a C corporation attractive for businesses making significant, but not huge, investments in plant, equipment or leasehold improvements. For example, it makes investing a few hundred thousand dollars in a new franchised retail store look pretty attractive.
Of course, none of this matters if you can't find investors willing to put money into your business, and interest rates on loans to finance a business investment have never been lower for those who can get them.
From an economic stimulus perspective, the notion that this kind of provision increases economic growth is dubious. A three month tax holiday window offered with little advanced notice has probably delayed the closing of some C corporation stock sales, and will probably speed up other C corporation stock investments that otherwise would have closed in early 2011. But, offering more favorable tax rates on a profitable investment for which favorable tax rates were already available probably doesn't do much to change the amount of equity funding in this kind of venture over the entire year centered around the three months when the tax break is provided. It virtually guarantees a depressed venture capital environment in early 2011.
It takes too long to set up a long term, small C corporation equity investment opportunity for this to shift the amount of available investment funds from other kinds of investment opportunity (e.g. municipal bonds) to this kind of investment by very much. As stimulus, it is really pretty useless and is quite expensive from a revenue perspective.
This is the economic equivalent of the housing tax credit, or cars for clunkers, for investors. It is really little more than a transfer payment to people who were going to do what they did anyway. Unless a tax preferences turns a gain into a loss, or a loss into a gain, a change in the tax rate that applies that a gain won't change the number of situations where it makes sense to invest very much.
If there is any long term stimulus effect, it will probably start coming in around five years from now when the investors sell their investments and have more money available to invest in new venture capital projects than they would have in the absence of the tax break.
* Appreciated property in S corporations can be taxed at the owner's preferrential capital gains tax rate, rather than the C corporation ordinary income tax rate after a five year holding period from the S corporation conversion, rather than a ten year holding period.
Most taxpayers who use this provision have probably already started counting down the years until the ten year period runs and will now be able to liquidate their S corporations immediately, rather than a few years later. The theory would be that this frees up a de facto restriction on the alienation of appreciated property, mostly real estate, and strengthens the real estate market.
This does work as permanent stimulus, but the effect is probably pretty small. The change in the tax law that made it problematic for C corporations to hold appreciated property took place in 1986 when the General Utilities doctrine was repealed, so not many investments in appreciating property like real estate or investments were made after then through C corporations. There are 24 year old (or older) C corporations with appreciated assets in them kept in tact until death to erase unrealized capital gain in the stock, which are mostly medium sized businesses and professional practices that owned their own office buildings that heirs want to sell upon inheriting them because they aren't continuing the businesses, but there aren't a lot of them, and there are fewer than have recently made S elections to start the holding period running in time to benefit from the new rule.
* 401(k), 403(b), and governmental 457(b) plans can be rolled over into Roth IRAs in 2010 with the taxes due on the rollover paid over 2011 and 2012. This shifts revenues into the present from the future to make up for other short term revenue deceases, while looking like a tax break since it relaxes IRS rules to allow taxpayers to do something that they want to do.
Other than the revenue shifting effect this has no economic benefit, since the funds will probably be invested in the same things, and it probably discourages investment now by causing people to use available cash to pay rollover triggered taxes instead of making investments in productive activities or consuming it.
* Rental real estate owners must 1099 to claim expenses paid over $600 starting in 2011 and penalties for not filing information returns generally are increased starting in 2011. This should help to reduce the tax gap in the gray economy of informally operating home repair and cleaning professionals. This particularly puts the squeeze on self-employed undocumented immigrants who make up a fairly large share of employees in this part of the economy and may have a hard time producing Social Security numbers so that they can be hired by someone who knows that they will have to send 1099s to them later.
Jurisdiction and Israeli Settlements
The way that the issue is usually framed, the issue of Israeli settlements in the West Bank seems like a land use decision, which is an odd thing to make into an international issue. (Israel forcibly evicted 8,000 Jewish settlers from Gaza in the summer of 2005 in a decision that strained Israel's political will.) What is so bad about letting Jews build buildings in a particular place?
Of course, there is more to it than that. As I understand the issue, Israeli settlements are sometimes built without permission of the property owner, and equally important, they are not subject to the effective jurisdiction of the Palestinian Authority, since they are defended from the intervention with the force of the Israeli military.
It would be possible to develop an approach focused not on the issue of land use, but on the issue of legal jurisdiction.
If Israeli settlements were declared by Israeli law to be subject to the jurisdiction of the Palestinian authority and its courts, subject to appeal to the Israeli Supreme Court, and Israeli military forces only intervened when Palestinians were acting without duly authorized court process, or when Israeli settlers resisted legitmate court process and the Palestinian authority requested assistance, the result could be a federal solution, as opposed to a true "two state" solution to the Israeli-Palestinian conflict. Settlers in the territory the Palestinian Authority would control would be subject to Palestinian taxes, imposed on an uniform basis and subject to appeal to the Israeli Supreme Court on the theory that they are not uniform, as well.
Given Israel's need to defend itself militarily and the strong level of anti-Israeli sentiment in the Palestinian territories which would be signficant for the foreseable future even if it was not a majority view, ceding true sovereignty to the Palestinian territories may not be a viable option in the foreseeable future for Israel from a national defense perspective.
The Palestinian territories, in any case, probably aren't viable as a stand alone state. They are small, have few natural resources, have an anemic economy, has a thin tax base, couldn't build (and Israeli wouldn't want it to have) a fully functional modern military force, and has a civil society that is struggling to function in a workable way to use the power that it does have to run its territory as a local government. It is hard to see that giving the civilian government greater responsibility as a stand alone sovereign nation would work better.
But, acknowledging genuine Palestinian sovereignty over Israelis in its territory would give legitimacy to the Palestinian Authority that would give it a greater ability to work. It would also give Palestinians some positive incentives to recognize the legitimacy of the Israeli regime. It would create a lot of individually low stakes and decoupled opportunities to build trust while working together, between Israel and Palestine. It would allow Israel to disavow systemic land theft and unilateral expansion of its sovereign territory, without actually personally conducting court proceedings and operating bulldozers to evict Israelis from their homes in the West Bank. It would show respect.
There are religious and personal reasons, as well as economic ones, why someone in Israel might want to settle in the West Bank, and that would not be precluded. But, that decision would have to be made in a context where defiance of legitimate local political authority would not be permitted.
The sovereignty transfer deal could reserve a lot of practical legal authority to local governments in an intra-Palestinian territories federal regime, allow settlements with sufficiently large populations to set up their own local governments, and acknowledge of principle of adverse possession after a long period of time, allowing the oldest and best established Israeli settlements to establish legal title to territory that they control. It could also be part of the fig leaf that shows Palestinians gaining something in exchange for giving up land on the Israeli side of its security fence, where three quarters of Israeli settlers are located.
I don't claim that this idea is original. Hillel Halkin proposed something along the same lines in the Wall Street Journal in February of this year.
As Halkin explains:
I suggest something somewhat more modestly than Halkin that there be two jurisdictions in a federal state, only one of which with a say in the national government, rather than two true states, because I don't think that the promises necessary to make this kind of arrangement workable could be honored by either side without the commitment of the Israeli government to honor it, and because I don't think that Israel would tolerate a complete cession of its right to enter onto Palestinian territory and its genuine agreement would be necessary to make this work.
Yes, this would be basically a colonial arrangement, with the Israeli Supreme Court functioning in much the role of the British Privy Council. But, this would still be better for Palestinians than the status quo. It is now a dependent political body without even ordinary civil law and tax jurisdiction over everyone within its boundaries.
I think that this could work. It is easier to regulate the functioning of courts and tax systems than the overall decisions of people to live in a particular area. It is easier to change someone's legal rights than to forcibly evict every single one of tens of thousands of your own citizens. It is easier to have a situation where the norm is simply to refuse to intervene militarily, and where one can count on never having sovereign opposition to one's own forces.
Of course, there is more to it than that. As I understand the issue, Israeli settlements are sometimes built without permission of the property owner, and equally important, they are not subject to the effective jurisdiction of the Palestinian Authority, since they are defended from the intervention with the force of the Israeli military.
It would be possible to develop an approach focused not on the issue of land use, but on the issue of legal jurisdiction.
If Israeli settlements were declared by Israeli law to be subject to the jurisdiction of the Palestinian authority and its courts, subject to appeal to the Israeli Supreme Court, and Israeli military forces only intervened when Palestinians were acting without duly authorized court process, or when Israeli settlers resisted legitmate court process and the Palestinian authority requested assistance, the result could be a federal solution, as opposed to a true "two state" solution to the Israeli-Palestinian conflict. Settlers in the territory the Palestinian Authority would control would be subject to Palestinian taxes, imposed on an uniform basis and subject to appeal to the Israeli Supreme Court on the theory that they are not uniform, as well.
Given Israel's need to defend itself militarily and the strong level of anti-Israeli sentiment in the Palestinian territories which would be signficant for the foreseable future even if it was not a majority view, ceding true sovereignty to the Palestinian territories may not be a viable option in the foreseeable future for Israel from a national defense perspective.
The Palestinian territories, in any case, probably aren't viable as a stand alone state. They are small, have few natural resources, have an anemic economy, has a thin tax base, couldn't build (and Israeli wouldn't want it to have) a fully functional modern military force, and has a civil society that is struggling to function in a workable way to use the power that it does have to run its territory as a local government. It is hard to see that giving the civilian government greater responsibility as a stand alone sovereign nation would work better.
But, acknowledging genuine Palestinian sovereignty over Israelis in its territory would give legitimacy to the Palestinian Authority that would give it a greater ability to work. It would also give Palestinians some positive incentives to recognize the legitimacy of the Israeli regime. It would create a lot of individually low stakes and decoupled opportunities to build trust while working together, between Israel and Palestine. It would allow Israel to disavow systemic land theft and unilateral expansion of its sovereign territory, without actually personally conducting court proceedings and operating bulldozers to evict Israelis from their homes in the West Bank. It would show respect.
There are religious and personal reasons, as well as economic ones, why someone in Israel might want to settle in the West Bank, and that would not be precluded. But, that decision would have to be made in a context where defiance of legitimate local political authority would not be permitted.
The sovereignty transfer deal could reserve a lot of practical legal authority to local governments in an intra-Palestinian territories federal regime, allow settlements with sufficiently large populations to set up their own local governments, and acknowledge of principle of adverse possession after a long period of time, allowing the oldest and best established Israeli settlements to establish legal title to territory that they control. It could also be part of the fig leaf that shows Palestinians gaining something in exchange for giving up land on the Israeli side of its security fence, where three quarters of Israeli settlers are located.
I don't claim that this idea is original. Hillel Halkin proposed something along the same lines in the Wall Street Journal in February of this year.
As Halkin explains:
"They," though, are hardly a monolithic group. They are a highly heterogeneous population, having in common only one thing: the fact that all live across the Israeli-Jordanian cease-fire line with which Israel's 1948-49 war of independence ended, on land wrested by Israel when it conquered Jordan's holdings west of the Jordan River in 1967. All are in "Area C," the part of the West Bank that has remained, according to the terms of the 1993 Oslo agreement, under temporary Israeli jurisdiction.
Some settlements were built on former Jordanian government-owned land that passed to Israeli jurisdiction, some on land purchased from Palestinians, some on land that was expropriated. Some are 40 years old and some were established recently. Some are isolated outposts, some small villages, some medium-sized towns with six- and eight-story apartment buildings. Some settlers are living where they are, often in the more isolated areas of the West Bank, for religious or ideological reasons; others, generally closer to the old 1967 border, because they have found well-located and pleasant surroundings at affordable prices. There are those who would willingly accept compensation in return for being evacuated as part of a peace agreement and those who would resist evacuation with all their might.
And there are settlers, roughly 225,000, who live on the "Israeli" side of the anti-terror West Bank security fence and settlers, about 75,000, who live on its "Palestinian" side. (Another 200,000 Israelis living in parts of former Jordanian Jerusalem that were annexed by Israel in 1967 are not listed by Israeli statistics as settlers at all.) Approximately 1/20th of Israel's Jewish population, the settlers' numbers have grown by over 5% a year, some three times the national average—a figure due to in-migration, mostly of young couples, and a high birth rate. . . .
Even if all the settlers living on the "Israeli" side of the security fence end up in Israel in the land swap that has come to be an assumed part of any peace deal, the 75,000 who would find themselves in a Palestinian state happen to be the very element of the settler population—the ideological and religious militants living deep in Palestinian territory—who are most committed to being where they are. What does one do with them? . . .
Clearly, these settlers do not want to be under Palestinian rule and would threaten violent resistance to it, too. But they would quickly find out that a Palestinian police force would not coddle them as Israeli governments have done, and paradoxically, because they attach a greater value to the Land of Israel than to the State of Israel, many of them might ultimately be willing, if they could have their civil and property rights safeguarded and continue to be Israeli citizens, to live in the land but outside the state. So might many of the more politically moderate ultra-Orthodox and secular Jews in the settlements, whose approach would be more pragmatic.
I suggest something somewhat more modestly than Halkin that there be two jurisdictions in a federal state, only one of which with a say in the national government, rather than two true states, because I don't think that the promises necessary to make this kind of arrangement workable could be honored by either side without the commitment of the Israeli government to honor it, and because I don't think that Israel would tolerate a complete cession of its right to enter onto Palestinian territory and its genuine agreement would be necessary to make this work.
Yes, this would be basically a colonial arrangement, with the Israeli Supreme Court functioning in much the role of the British Privy Council. But, this would still be better for Palestinians than the status quo. It is now a dependent political body without even ordinary civil law and tax jurisdiction over everyone within its boundaries.
I think that this could work. It is easier to regulate the functioning of courts and tax systems than the overall decisions of people to live in a particular area. It is easier to change someone's legal rights than to forcibly evict every single one of tens of thousands of your own citizens. It is easier to have a situation where the norm is simply to refuse to intervene militarily, and where one can count on never having sovereign opposition to one's own forces.
Venezuela Racked By Violence
The print copy of the Denver Post today (page 2A), in a story I couldn't find on their website, noted that Venezuela, which has parliamentary elections today, has had four times as many violent deaths as Iraq in the last year, despite having about the same population (about 16,000 in Venezuela and about 4,000 in Iraq).
This echos the wave of drug cartel related murders in Mexico, although it appears at first glance that the causes are different.
The story also makes me wonder if statistics on global terrorism deaths, because a terrorism designation is political and subjective, are really as useful as statistics on global homicides whatever the motive. In theory, the two are distinguishable. But, when a death body of a person who has been killed is discovered, it isn't always obvious what motivated the killer. When one introduces concepts like "nacro-terrorist" into the equation, the distinction between murder and terrorism can become particularly vexing.
This echos the wave of drug cartel related murders in Mexico, although it appears at first glance that the causes are different.
The story also makes me wonder if statistics on global terrorism deaths, because a terrorism designation is political and subjective, are really as useful as statistics on global homicides whatever the motive. In theory, the two are distinguishable. But, when a death body of a person who has been killed is discovered, it isn't always obvious what motivated the killer. When one introduces concepts like "nacro-terrorist" into the equation, the distinction between murder and terrorism can become particularly vexing.
A Modest Proposal For Judicial Retention Elections
This year, as every year, about half of the "Blue Book" that arrived in my mail last week for the upcoming Colorado general election was devoted to lengthy profiles of the myriad judges who face judicial retention elections. No where is the list longer than in Denver. About 98% of the time, this booklet is the only source of information available to a voter to evaluate a judge, voters with more knowledge often agree with the recommendations made by the Blue Book, and when the blue ribbon panel that reviews judicial performance recommends that judge be retained, the public has, to the best of my knowledge, always agreed.
I don't oppose periodic performance evaluations of judges that can result in their removal from office. A safety valve in the system makes good sense. But, in the case of lower court judges why not vest that power in bodies that already have supervisory authority over them, have access to better sources of information, and have an interest in removing bad judges because they have to deal with their mistakes.
In other words, why not undertake the same information gathering process that we use now to evaluate judges, but have retention decisions made not by voters with little information and little incentive to gather it. Instead, votes on retaining state trial judges could be made by judges of the Colorado Court of Appeals, collectively, a body that is uniquely qualified to know if a trial court judge is performing well and has an incentive to act if one isn't.
Similarly, votes on retaining Colorado Court of Appeals judges could be made by judges of the Colorado Supreme Court, who have to deal with every single decision that those appellate judges make that litigants are unhappy with, are intimately familiar with their work, and have to undo their work if they consistently perform poorly.
Trial judges and intermediate court of appeals judges should be responsive to the law as interpreted by the people who review their decisions, in published and unpublished decisions, not to the whims of the general public when they are contrary to the law.
Retention elections could continue for seven justices of the Colorado Supreme Court on the same schedule of ten year terms that exists now, since they are not responsible primarily to other higher courts with supervisory authority over them. Since virtually all of their work comes in published opinions, and there is just a single set of opinions to review for the entire state, the media and groups interested in the legal philosophy espoused in those opinions would also be better positioned to inform the general public about a judge's philosophy as applied in practice than in the case of trial judges and court of appeals judges to whom members of the public can much less easily become informed through their own efforts with public information.
Alternately, this basic proposal could be adopted, with the caveat that judges who did not receive a recommendation from a blue ribbon panel that they be retained would face the voters if retained by the judicial body charged with deciding on their retention in the ordinary course, something that could add one trial judge to the ballot of affected voters in a very small number of judicial districts every couple of years.
This would significantly shorten the Colorado general election ballot, shorten the "Blue Book" dramatically, reduce the amount of effort required of a voter who wanst to cast a full ballot in an informed manner, lead to better informed decisions on judicial retention, and give trial court judges an incentive not to flaunt appellate court authority, while still giving the People of the State of Colorado an ultimate say over the people who ultimately direct how Colorado's common law develops and how our state's laws are developed.
The current system also makes it harder to remove judges about whom there actually is any question by making a vote to retain a judge a matter of rote habit for many voters, rather than a carefully considered issue. The proposed reform would focus attention from voters on judicial retention where it provides the greatest benefit.
When we can make the job of a voter committed to making informed decisions easier, and get the same or better substantive decision making than the voters could provide because the decision maker has better information, that is a win-win for the people of Colorado.
I don't oppose periodic performance evaluations of judges that can result in their removal from office. A safety valve in the system makes good sense. But, in the case of lower court judges why not vest that power in bodies that already have supervisory authority over them, have access to better sources of information, and have an interest in removing bad judges because they have to deal with their mistakes.
In other words, why not undertake the same information gathering process that we use now to evaluate judges, but have retention decisions made not by voters with little information and little incentive to gather it. Instead, votes on retaining state trial judges could be made by judges of the Colorado Court of Appeals, collectively, a body that is uniquely qualified to know if a trial court judge is performing well and has an incentive to act if one isn't.
Similarly, votes on retaining Colorado Court of Appeals judges could be made by judges of the Colorado Supreme Court, who have to deal with every single decision that those appellate judges make that litigants are unhappy with, are intimately familiar with their work, and have to undo their work if they consistently perform poorly.
Trial judges and intermediate court of appeals judges should be responsive to the law as interpreted by the people who review their decisions, in published and unpublished decisions, not to the whims of the general public when they are contrary to the law.
Retention elections could continue for seven justices of the Colorado Supreme Court on the same schedule of ten year terms that exists now, since they are not responsible primarily to other higher courts with supervisory authority over them. Since virtually all of their work comes in published opinions, and there is just a single set of opinions to review for the entire state, the media and groups interested in the legal philosophy espoused in those opinions would also be better positioned to inform the general public about a judge's philosophy as applied in practice than in the case of trial judges and court of appeals judges to whom members of the public can much less easily become informed through their own efforts with public information.
Alternately, this basic proposal could be adopted, with the caveat that judges who did not receive a recommendation from a blue ribbon panel that they be retained would face the voters if retained by the judicial body charged with deciding on their retention in the ordinary course, something that could add one trial judge to the ballot of affected voters in a very small number of judicial districts every couple of years.
This would significantly shorten the Colorado general election ballot, shorten the "Blue Book" dramatically, reduce the amount of effort required of a voter who wanst to cast a full ballot in an informed manner, lead to better informed decisions on judicial retention, and give trial court judges an incentive not to flaunt appellate court authority, while still giving the People of the State of Colorado an ultimate say over the people who ultimately direct how Colorado's common law develops and how our state's laws are developed.
The current system also makes it harder to remove judges about whom there actually is any question by making a vote to retain a judge a matter of rote habit for many voters, rather than a carefully considered issue. The proposed reform would focus attention from voters on judicial retention where it provides the greatest benefit.
When we can make the job of a voter committed to making informed decisions easier, and get the same or better substantive decision making than the voters could provide because the decision maker has better information, that is a win-win for the people of Colorado.
Small Business Regulation Cost Study Off Base
The 2010 report of the Congressional Budget Office under the Regulatory Right To Know Act has been released and garnered an op-ed in the Wall Street Journal today by Nicole V. Crain and W. Mark Crain.
Crain and Crain Make Dubious Estimates Of Total Regulatory Costs
The WSJ op-ed inflates this number dramatically (to $1.75 trillion in costs per year), and argues that regulations unduly burden small businesses because their adjusted estimate of regulatory costs is higher per employee based on a report that they wrote for the U.S. Small Business Administration Office of Advocacy.
In contrast, the CBO report itself finds that "The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 1999, to September 30, 2009, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $128 billion and $616 billion, while the estimated annual costs are in the aggregate between $43 billion and $55 billion."
The WSJ authors also make no effort to quantify the benefits associated with the regulations in question.
They argue that "The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008, a 3% real increase over five years, to about 14% of U.S. national income," based on a regression models across countries that uses only a handful of inputs and a "regulatory quality index" that measures "perceptions of the ability of governments to formulate and implement sound policies and regulations that permit and promote private sector development" and an "unobserved components model." It comes up with a number wholely unconnected to actual directly measured costs of regulatory compliance, and doesn't even purport to be based on measures based on actual cost.
They also make it their policy in their report to use the highest possible estimate of every cost, despite acknowledging that this is controversial: "This report uses the high end of the cost range provided in the OMB reports and Hahn and Hird (1991)." Their estimate of regulatory cost for environmental regulations would be 19% lower if mid-point estimates were used instead, which is the only statistically defensible stance to take, because even if some costs are overestimated, the claims that costs are always underestimated doesn't hold water.
The cost-benefit analysis is inherently limited, because it depends upon how you choose to value lives saved and injuries avoided by regulatory efforts. But, the only way to conclude that the regulatory cost driving environmental regulations do not provide greater benefits than costs is to value lives lost about a sixth as much as the CBO does.
Measuring total costs and measuring benefits is inherently nebulous. There is a tendency to overlook or undervalue important benefits, and to count as the cost of actions that would have been required even in the absence of federal regulation by tort laws and other requirements as costs caused by the regulations. But, it can guide our considerations of public policy issues.
Dubious Allocations By Industry and Firm Size
The WSJ discussed study breaks regulatory costs into four categories "economic," "environmental," "tax" and "occupational health and safety" regulations.
Environmental, tax and occupational health and safety regulations are deemed more expensive per employee in small businesses in their report than large ones, although only the differences in cost per employee in environmental and tax regulations is particularly stark.
In reality, the only class of regulatory costs where the analysis is well supported by the evidence is their allocation of tax costs.
An examination of the expenses claimed as tax deductions by small businesses, for example, shows that one can allocate only a tiny percentage of those expenses to regulatory compliance costs. Many small businesses have fewer expensive overall than the amount of regulatory expenses that they are said by the WSJ authors' study to incur.
Cost of goods sold in a retail business, for example, simply doesn't constitute a regulatory cost under any reasonable view of the concept.
Small Businesses Reportedly Have Lower "Economic Regulation" Costs
Their study finds that compliance with "economic regulation" per employee, computed based on the "unobserved components model" grows as businesses have more employees and that these regulations make up more than half of all regulatory costs. So, they find the largest part of regulatory costs favors, rather than hurts, small businesses.
There is good reason to think that the entire concept of "economic regulation" as used in the WSJ authors' study is flawed. But, even if it is not, they do not make the argument that these regulations impose an unfair burden on small business relative to other businesses.
Small Businesses Have Higher Per Employee Tax Compliance Costs
The tax estimates, based on the actual forms filled about by firms by size and the actual time it takes to complete those forms and estimates of the cost of hiring tax preparers to complete them, are fairly solid. There is a simple economy of scale factor at work in this situation. Preparing a tax return for a business involves similar activities in big firms and small ones, and so economies of scale favor big firms on this count.
The economies of scale differences are also mostly gone once businesses have twenty or more employees. Most of the diseconomies of scale (about $750 per employee) involve only the smallest businesses.
Occupational Health and Safety Costs Differ Only Modestly By Firm Size and The Allocation By Industry In The Study Is Questionable
Occupational health and safety costs are allocated just $171 dollars per employee higher in the smallest businesses than in the average business.
Moreover, the allocation of occupational health and safety costs they make implausibly states that the cost of compliance is the same in every sector of the economy. In fact, it is almost certainly the case that compliance costs are much higher in industries like manufacturing, construction and utilities that make up a small share of all small businesses, than in trade, services and health care industries where small businesses are concentrated.
Occupational health and safety costs are roughly proportional to work related accidents that are uniquely work place related (as opposed for example, to work related crime and on the job traffic accidents in ordinary vehicles), and to OSHA inspections, not to pure employment, the basis used to allocate those costs by the WSJ authors.
One also gets a sense of how those costs differ from industry to industry by looking at worker's compensation insurance rates which are much higher in manfacturing, construction and utility industries than they are in commercial or health care environments. OSHA compliance in small businesses outside high risk industries in negligible.
Environmental Costs
The WSJ authors' study, concludes contrary to the CBO, that "economic regulation" of types unspecified, is a greater cost than "environmental regulation. The regulatory biggest benefits and costs according to the CBO report itself were: "the air pollution rules from the Environmental Protection Agency (EPA) produced 60 to 87 percent of the benefits and 58 to 64 percent of the costs."
Those rules predominantly impact utilities, car makers, and smoke stack manufacturing industries (a.k.a. heavy industry). Exceedingly few small businesses must comply with the Clean Air Act, and its benefits are well demonstrated in scientifically rigorous studies.
The main small business sector that produces air pollution and water pollution, farming, benefits from broad exemptions to the Clean Air Act and Clean Water Act.
Environmental regulation costs vary dramatically by business sector. The WSJ authors study breaks the economy into five business sectors: Manufacturing (5.5% of employment in firms with fewer than 20 employees), trade (with 19% of that employment), services (with 48% of that employment), health care (with 12% of that employment), and "other" with 16% of that employment.
They then use regression models for the business sector as a whole to allocate costs by firm sizes. The vast majority of environmental regulation costs are in the "manufacturing" business sector and the "other" business sector that includes construction and utilities.
There are no environmental regulation costs in any firm in the trade sector under their model, there are only $25 of environmental regulation costs in the service sector per employee under their model in firms with fewer than 20 employees and less than $203 of envirnomental costs per employee under the model in the health care industry in firms with fewer than 20 employees, sectors that combined make up 79% of all employment in firms with fewer than twenty people.
So, the vast majority of small businesses have negligible environmental regulatory costs.
Environmental costs per employee are greater in small employment manufacturing operations than in large ones, but the economic scale of manufacturing firms isn't particularly closely tied to the number of employees it has, due to automation, and because the environmental costs per employee vary dramatically by industry a manufacturing industry wide regression formula isn't particularly helpful in estimating environmental costs in small manufacturing firms which are outliers in many respects in a big business dominated industry.
A more relevant measure in the manufacturing industry, not examined in the WSJ authors' study, is environmental regulatory costs relative to gross revenues from sales. If environmental regulatory costs at a factory with fifteen employees (perhaps a microbrewery), are similar as a percentage of sales to those of a large factory in the same industry (perhaps Molsen-Coors), we shouldn't be concerned that there is any bias against small manufacturing businesses.
It also isn't a safe assumption that regression models showing environmenmtal costs per employee in medium and large firms hold true for smaller firms which may be in different industries, and for which the "fixed cost" factor of compliance in a regression model will tend to be inaccurate because different kinds of manufacturing equipment is used in small firms. The types of manufacturing industries most affected by environmental regulations tend to be large employers in heavy industries, and they tend to incur most of their costs generating air and water pollution, while small, light manufacturing operations tend to use electricity and natural gas purchased from utilities to carry out their operations.
The "other" business sector lumps together the utility and construction industries and then uses a similar regression model to that of the manufacturing industry to allocate costs, which is particularly inappropriate in that diverse business sector.
The methodology used allocates costs from high environmental regulatory cost utilities to low environmental regulatory cost small firms, mostly in the construction industry, distorting the figures dramatically.
The study's conclusion that firms of fewer than 20 employees in the "other sector" comprised largely of small construction firms, are incurring $13,760 per employee of environmental costs, which powerfully drives the purported environmental costs of small firms generally, is absurd.
The vast majority of environmental regulation costs derive from Clean Air Act and Clean Water Act regulations. Small construction firms generally do not directly comply with either. Costs incurred by tool making companies to make their tools and equipment greener are accounted for in the manufacturing firm side of the ledger, not at the construction firm level.
Also, small employment utility firms tend to be either rural electric cooperatives and renewable energy power producers.
Rural electric cooperatives generally incur little or no environmental regulatory costs themselves, because they usually purchase electricity from large centralized energy producers where the regulatory costs are appropriately counted because the employment activity and expenditures associated with the regulatory costs take place there. To the extent that environmental regulatory costs associated with electricty production are allocated to rural electric cooperatives, this should be measured relative to the cost of the electricty purchased, not relative to rural electric cooperative employment.
Small renewable energy based operations such as solar or wind power production firms also incur little or not regulatory costs under the Clean Air Act or Clean Water Act. Environmental costs incurred, for example, in manufacturing solar panels, are counted at the usually large firm manufacturing level in any case.
Of course, even if manufacturing companies and utilities with under twenty employees do have very high environmental regulation compliance costs per employee, that is a conclusion with a very different policy implication than a general statement that environmental regulation compliance costs are a drag on the small business sector generally. It has nothing to do with the regulatory environment of the vast majority of small businesses. It has a great deal to do with the sensible way to cope with the reality that technology has dealt us.
To the extent that environmental regulatory costs are higher in small utilities than in large utilities, it isn't obvious that the public should care. There is no great moral virtue to having small businesses in the utility industry, if power that produces similar environmental impacts can be produced more cheaply in larger firms. Utility regulation exists precisely because the technologically driven economies of scale associated with large operations, even to the point of having a near monopoly producer, have long been recognized.
Creating exemptions from environmental regulations for small firms in the same industry can create perverse incentives that make the regulation of large industries far less beneficial by shifting production to less efficient firms that generate more pollution.
Implications Of A More Accurate Analysis
More sensible allocations of regulatory costs by firm produce very different conclusions on what kind of agenda for regulatory reform small business would benefit the most from putting into place. Environmental regulations and workplace safety regulations start looking far less consequential to small businesses in general and even to small businesses in business sectors where those regulations are relevant to some extent.
"Economic regulations," whatever those are, don't appear to be particularly burdensome for small businesses.
Under a more realistic analysis, the main conclusion that applies across the board to small business regulation is that tax simplification confined largely to the smallest businesses is the place where there is the most opportunity to help small businesses by easing regulatory burdens, this is where the compliance costs are highest relative to the amount of tax collection involved.
There are ways to achieve this and a number of them have been recommended to the President by a panel of advisors. Simplifying tax law in areas like the home office deduction, deductions for the business use of cell phones, and reducing the distinctions between 1040 tax return income and self-emploment tax income can make a big difference on this front, as could simplified withholding tax rules for small employers. There is probably merit in simply removing a small amount of self-employment and tip income from the tax base entirely because it takes more work to collect than it is worth in tax revenues.
This is a very different conclusion than the one pushed by Crain and Crain who are effectively apply to make a "strave the beast" kind of anti-regulation argument to regulation in general, rather than examining in a fine tuned ways that regulations that may actually be a problem.
Marginal New Regulations
None of this means that it isn't possible that some regulations produce few benefits and high costs relative to those benefits.
Regulation is not inherently bad or good. A regulation that effectly puts an industry out of business can be a good one if that business produced a lot of harms and few benefits to society. There is no magic formula to determine how much regulation there should be in society any more than there is a formula to determine from first principles how many cars the automobile industry ought to sell each month. The more regulations that there are that provide more benefit than cost, the better. The fewer regulations that there are that involve more costs and benefits the better. The whole point of cost-benefit analysis is to provide an analytical framework to determine whether particular regulations should or should not be adopted, and to encourage regulators to fine tune regulations that create costs the the harms that they prevent.
Cost-benefit regulation is analysis isn't designed to quantify aggregate regulatory costs in an economy, something that is inextricably intertwined with the entire method of producing value in a healthy economy. For example, accounting system costs help managers make good business decisions, help banks make good financing decisions and help tax authorities collect the proper tax amounts and can't be entirely allocated to any one purpose. Some of the costs of tax compliance as a whole include costs that would be incurred by well run businesses even in a tax free world.
Even when benefits and costs aren't quantified in dollar terms, it makes sense to look at both in the case of individual regulations, recognizing that some costs and some benefits may be hard to monetize.
The CBO study identifies four individuual safety regulations that deserve examination:
The rules in the last year judged the most marginal by the CBO study involved (1) regulation of salmonella in eggs, (2) rules giving heightened strutiny to new trucking company compliance with safety rules, and (3) rules regarding stopping distance requirements for semis, each of which was deemed to have negative net benefit.
In addition, roof crush resistance for vehicles, which was determined to cost about $6.4-$11 million per life saved, which is higher than the value of lives saved usually used to estimate the benefit of new regulations.
It is a lot less headline grabbing to say that a handful of obscure rules promoting food safety and traffic safety, which everyone agrees are good things in the abstract, are really cost effective ways to meet their larger goals, than to rant about the specter of the growing regulatory state. But, if we want to be serious about having the right amount of regulation, rather than simply disliking regulation in all circumstances, even when it provides great benefits at low costs, this is precisely the kind of debate that we should be having.
Crain and Crain Make Dubious Estimates Of Total Regulatory Costs
The WSJ op-ed inflates this number dramatically (to $1.75 trillion in costs per year), and argues that regulations unduly burden small businesses because their adjusted estimate of regulatory costs is higher per employee based on a report that they wrote for the U.S. Small Business Administration Office of Advocacy.
In contrast, the CBO report itself finds that "The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 1999, to September 30, 2009, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $128 billion and $616 billion, while the estimated annual costs are in the aggregate between $43 billion and $55 billion."
The WSJ authors also make no effort to quantify the benefits associated with the regulations in question.
They argue that "The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008, a 3% real increase over five years, to about 14% of U.S. national income," based on a regression models across countries that uses only a handful of inputs and a "regulatory quality index" that measures "perceptions of the ability of governments to formulate and implement sound policies and regulations that permit and promote private sector development" and an "unobserved components model." It comes up with a number wholely unconnected to actual directly measured costs of regulatory compliance, and doesn't even purport to be based on measures based on actual cost.
They also make it their policy in their report to use the highest possible estimate of every cost, despite acknowledging that this is controversial: "This report uses the high end of the cost range provided in the OMB reports and Hahn and Hird (1991)." Their estimate of regulatory cost for environmental regulations would be 19% lower if mid-point estimates were used instead, which is the only statistically defensible stance to take, because even if some costs are overestimated, the claims that costs are always underestimated doesn't hold water.
The cost-benefit analysis is inherently limited, because it depends upon how you choose to value lives saved and injuries avoided by regulatory efforts. But, the only way to conclude that the regulatory cost driving environmental regulations do not provide greater benefits than costs is to value lives lost about a sixth as much as the CBO does.
Measuring total costs and measuring benefits is inherently nebulous. There is a tendency to overlook or undervalue important benefits, and to count as the cost of actions that would have been required even in the absence of federal regulation by tort laws and other requirements as costs caused by the regulations. But, it can guide our considerations of public policy issues.
Dubious Allocations By Industry and Firm Size
The WSJ discussed study breaks regulatory costs into four categories "economic," "environmental," "tax" and "occupational health and safety" regulations.
Environmental, tax and occupational health and safety regulations are deemed more expensive per employee in small businesses in their report than large ones, although only the differences in cost per employee in environmental and tax regulations is particularly stark.
In reality, the only class of regulatory costs where the analysis is well supported by the evidence is their allocation of tax costs.
An examination of the expenses claimed as tax deductions by small businesses, for example, shows that one can allocate only a tiny percentage of those expenses to regulatory compliance costs. Many small businesses have fewer expensive overall than the amount of regulatory expenses that they are said by the WSJ authors' study to incur.
Cost of goods sold in a retail business, for example, simply doesn't constitute a regulatory cost under any reasonable view of the concept.
Small Businesses Reportedly Have Lower "Economic Regulation" Costs
Their study finds that compliance with "economic regulation" per employee, computed based on the "unobserved components model" grows as businesses have more employees and that these regulations make up more than half of all regulatory costs. So, they find the largest part of regulatory costs favors, rather than hurts, small businesses.
There is good reason to think that the entire concept of "economic regulation" as used in the WSJ authors' study is flawed. But, even if it is not, they do not make the argument that these regulations impose an unfair burden on small business relative to other businesses.
Small Businesses Have Higher Per Employee Tax Compliance Costs
The tax estimates, based on the actual forms filled about by firms by size and the actual time it takes to complete those forms and estimates of the cost of hiring tax preparers to complete them, are fairly solid. There is a simple economy of scale factor at work in this situation. Preparing a tax return for a business involves similar activities in big firms and small ones, and so economies of scale favor big firms on this count.
The economies of scale differences are also mostly gone once businesses have twenty or more employees. Most of the diseconomies of scale (about $750 per employee) involve only the smallest businesses.
Occupational Health and Safety Costs Differ Only Modestly By Firm Size and The Allocation By Industry In The Study Is Questionable
Occupational health and safety costs are allocated just $171 dollars per employee higher in the smallest businesses than in the average business.
Moreover, the allocation of occupational health and safety costs they make implausibly states that the cost of compliance is the same in every sector of the economy. In fact, it is almost certainly the case that compliance costs are much higher in industries like manufacturing, construction and utilities that make up a small share of all small businesses, than in trade, services and health care industries where small businesses are concentrated.
Occupational health and safety costs are roughly proportional to work related accidents that are uniquely work place related (as opposed for example, to work related crime and on the job traffic accidents in ordinary vehicles), and to OSHA inspections, not to pure employment, the basis used to allocate those costs by the WSJ authors.
One also gets a sense of how those costs differ from industry to industry by looking at worker's compensation insurance rates which are much higher in manfacturing, construction and utility industries than they are in commercial or health care environments. OSHA compliance in small businesses outside high risk industries in negligible.
Environmental Costs
The WSJ authors' study, concludes contrary to the CBO, that "economic regulation" of types unspecified, is a greater cost than "environmental regulation. The regulatory biggest benefits and costs according to the CBO report itself were: "the air pollution rules from the Environmental Protection Agency (EPA) produced 60 to 87 percent of the benefits and 58 to 64 percent of the costs."
Those rules predominantly impact utilities, car makers, and smoke stack manufacturing industries (a.k.a. heavy industry). Exceedingly few small businesses must comply with the Clean Air Act, and its benefits are well demonstrated in scientifically rigorous studies.
The main small business sector that produces air pollution and water pollution, farming, benefits from broad exemptions to the Clean Air Act and Clean Water Act.
Environmental regulation costs vary dramatically by business sector. The WSJ authors study breaks the economy into five business sectors: Manufacturing (5.5% of employment in firms with fewer than 20 employees), trade (with 19% of that employment), services (with 48% of that employment), health care (with 12% of that employment), and "other" with 16% of that employment.
They then use regression models for the business sector as a whole to allocate costs by firm sizes. The vast majority of environmental regulation costs are in the "manufacturing" business sector and the "other" business sector that includes construction and utilities.
There are no environmental regulation costs in any firm in the trade sector under their model, there are only $25 of environmental regulation costs in the service sector per employee under their model in firms with fewer than 20 employees and less than $203 of envirnomental costs per employee under the model in the health care industry in firms with fewer than 20 employees, sectors that combined make up 79% of all employment in firms with fewer than twenty people.
So, the vast majority of small businesses have negligible environmental regulatory costs.
Environmental costs per employee are greater in small employment manufacturing operations than in large ones, but the economic scale of manufacturing firms isn't particularly closely tied to the number of employees it has, due to automation, and because the environmental costs per employee vary dramatically by industry a manufacturing industry wide regression formula isn't particularly helpful in estimating environmental costs in small manufacturing firms which are outliers in many respects in a big business dominated industry.
A more relevant measure in the manufacturing industry, not examined in the WSJ authors' study, is environmental regulatory costs relative to gross revenues from sales. If environmental regulatory costs at a factory with fifteen employees (perhaps a microbrewery), are similar as a percentage of sales to those of a large factory in the same industry (perhaps Molsen-Coors), we shouldn't be concerned that there is any bias against small manufacturing businesses.
It also isn't a safe assumption that regression models showing environmenmtal costs per employee in medium and large firms hold true for smaller firms which may be in different industries, and for which the "fixed cost" factor of compliance in a regression model will tend to be inaccurate because different kinds of manufacturing equipment is used in small firms. The types of manufacturing industries most affected by environmental regulations tend to be large employers in heavy industries, and they tend to incur most of their costs generating air and water pollution, while small, light manufacturing operations tend to use electricity and natural gas purchased from utilities to carry out their operations.
The "other" business sector lumps together the utility and construction industries and then uses a similar regression model to that of the manufacturing industry to allocate costs, which is particularly inappropriate in that diverse business sector.
The methodology used allocates costs from high environmental regulatory cost utilities to low environmental regulatory cost small firms, mostly in the construction industry, distorting the figures dramatically.
The study's conclusion that firms of fewer than 20 employees in the "other sector" comprised largely of small construction firms, are incurring $13,760 per employee of environmental costs, which powerfully drives the purported environmental costs of small firms generally, is absurd.
The vast majority of environmental regulation costs derive from Clean Air Act and Clean Water Act regulations. Small construction firms generally do not directly comply with either. Costs incurred by tool making companies to make their tools and equipment greener are accounted for in the manufacturing firm side of the ledger, not at the construction firm level.
Also, small employment utility firms tend to be either rural electric cooperatives and renewable energy power producers.
Rural electric cooperatives generally incur little or no environmental regulatory costs themselves, because they usually purchase electricity from large centralized energy producers where the regulatory costs are appropriately counted because the employment activity and expenditures associated with the regulatory costs take place there. To the extent that environmental regulatory costs associated with electricty production are allocated to rural electric cooperatives, this should be measured relative to the cost of the electricty purchased, not relative to rural electric cooperative employment.
Small renewable energy based operations such as solar or wind power production firms also incur little or not regulatory costs under the Clean Air Act or Clean Water Act. Environmental costs incurred, for example, in manufacturing solar panels, are counted at the usually large firm manufacturing level in any case.
Of course, even if manufacturing companies and utilities with under twenty employees do have very high environmental regulation compliance costs per employee, that is a conclusion with a very different policy implication than a general statement that environmental regulation compliance costs are a drag on the small business sector generally. It has nothing to do with the regulatory environment of the vast majority of small businesses. It has a great deal to do with the sensible way to cope with the reality that technology has dealt us.
To the extent that environmental regulatory costs are higher in small utilities than in large utilities, it isn't obvious that the public should care. There is no great moral virtue to having small businesses in the utility industry, if power that produces similar environmental impacts can be produced more cheaply in larger firms. Utility regulation exists precisely because the technologically driven economies of scale associated with large operations, even to the point of having a near monopoly producer, have long been recognized.
Creating exemptions from environmental regulations for small firms in the same industry can create perverse incentives that make the regulation of large industries far less beneficial by shifting production to less efficient firms that generate more pollution.
Implications Of A More Accurate Analysis
More sensible allocations of regulatory costs by firm produce very different conclusions on what kind of agenda for regulatory reform small business would benefit the most from putting into place. Environmental regulations and workplace safety regulations start looking far less consequential to small businesses in general and even to small businesses in business sectors where those regulations are relevant to some extent.
"Economic regulations," whatever those are, don't appear to be particularly burdensome for small businesses.
Under a more realistic analysis, the main conclusion that applies across the board to small business regulation is that tax simplification confined largely to the smallest businesses is the place where there is the most opportunity to help small businesses by easing regulatory burdens, this is where the compliance costs are highest relative to the amount of tax collection involved.
There are ways to achieve this and a number of them have been recommended to the President by a panel of advisors. Simplifying tax law in areas like the home office deduction, deductions for the business use of cell phones, and reducing the distinctions between 1040 tax return income and self-emploment tax income can make a big difference on this front, as could simplified withholding tax rules for small employers. There is probably merit in simply removing a small amount of self-employment and tip income from the tax base entirely because it takes more work to collect than it is worth in tax revenues.
This is a very different conclusion than the one pushed by Crain and Crain who are effectively apply to make a "strave the beast" kind of anti-regulation argument to regulation in general, rather than examining in a fine tuned ways that regulations that may actually be a problem.
Marginal New Regulations
None of this means that it isn't possible that some regulations produce few benefits and high costs relative to those benefits.
Regulation is not inherently bad or good. A regulation that effectly puts an industry out of business can be a good one if that business produced a lot of harms and few benefits to society. There is no magic formula to determine how much regulation there should be in society any more than there is a formula to determine from first principles how many cars the automobile industry ought to sell each month. The more regulations that there are that provide more benefit than cost, the better. The fewer regulations that there are that involve more costs and benefits the better. The whole point of cost-benefit analysis is to provide an analytical framework to determine whether particular regulations should or should not be adopted, and to encourage regulators to fine tune regulations that create costs the the harms that they prevent.
Cost-benefit regulation is analysis isn't designed to quantify aggregate regulatory costs in an economy, something that is inextricably intertwined with the entire method of producing value in a healthy economy. For example, accounting system costs help managers make good business decisions, help banks make good financing decisions and help tax authorities collect the proper tax amounts and can't be entirely allocated to any one purpose. Some of the costs of tax compliance as a whole include costs that would be incurred by well run businesses even in a tax free world.
Even when benefits and costs aren't quantified in dollar terms, it makes sense to look at both in the case of individual regulations, recognizing that some costs and some benefits may be hard to monetize.
The CBO study identifies four individuual safety regulations that deserve examination:
The rules in the last year judged the most marginal by the CBO study involved (1) regulation of salmonella in eggs, (2) rules giving heightened strutiny to new trucking company compliance with safety rules, and (3) rules regarding stopping distance requirements for semis, each of which was deemed to have negative net benefit.
In addition, roof crush resistance for vehicles, which was determined to cost about $6.4-$11 million per life saved, which is higher than the value of lives saved usually used to estimate the benefit of new regulations.
It is a lot less headline grabbing to say that a handful of obscure rules promoting food safety and traffic safety, which everyone agrees are good things in the abstract, are really cost effective ways to meet their larger goals, than to rant about the specter of the growing regulatory state. But, if we want to be serious about having the right amount of regulation, rather than simply disliking regulation in all circumstances, even when it provides great benefits at low costs, this is precisely the kind of debate that we should be having.
26 September 2010
The Impact of Race On Jury Verdicts
This paper examines the impact of jury racial composition on trial outcomes using a unique dataset of all felony trials in Sarasota County, Florida between 2004 and 2009. . . .
We find strong evidence that all-white juries acquit whites more often and are less favorable to black versus white defendants when compared to juries with at least one black member. . . we find strong statistical evidence of discrimination on the basis of defendant race. These results are consistent with racial prejudice on the part of white jurors, black jurors, or both.
Using a simple model of jury selection and decision-making, we replicate the entire set of empirical regularities observed in the data, including the fact that blacks in the jury pool are just as likely as whites to be seated. Simulations of the model suggest that jurors of each race are heterogeneous in the standards of evidence that they require to convict and that both black and white defendants would prefer to face jurors of the same race.
From here (it is notable that two of the three authors are economists and that none are law school or criminal justice department faculty).
The paper itself lays out the facts with greater specificity:
On average, jury pools include twenty-seven potential jurors, of which seven are seated as part of the jury (including alternates). Because the eligible jury population of Sarasota County is less than four percent black, there are no blacks in the jury pool about half of the time and no blacks on the seated jury in over 80 percent of the trials. Our research design exploits the variation in the composition of the jury pool across trials, which is primarily driven by which eligible jurors in the county are randomly called for jury duty on a given day. We provide strong direct evidence that the composition of the jury pool is quasi-random, demonstrating that the attributes of the jury pool are uncorrelated with the characteristics of the defendant and the criminal charges. . . .
[T]he presence of even one or two blacks in the jury pool results in significantly higher conviction rates for white defendants and lower conviction rates for black defendants. In cases with no blacks in the jury pool, 84 percent of black defendants are convicted and 68 percent of white defendants are convicted. But, when the jury pool includes at least one black potential juror, conviction rates are nearly identical at 72-74 percent, and when the jury pool includes two or more blacks, conviction rates reverse: 86 percent for white and 77 percent for black defendants.
The dataset included 401 felony jury trials, in which "38 percent of the defendants are black and 55 percent are white."
One key implication of the study is that the percentage of blacks in the jury pool strongly influences conviction rates in the aggregate. This is consistent with previous studies that have shown that a more representative jury pool reduces conviction rates in states that change their jury pool selection process.
This is not a trival implication because blacks are almost always underrepresented to some extent, on average, in jury pools for particular trials. This may be, in part, because the populations from which jury pools are called are not representative due to factors like differing voter registration or driver's license rates and felony disqualification rules, and, in part, because of below average appearance in court to serve on juries.
For example, about one in six residents of Sarasota County, Florida is black, but only 4% of jurors in the county are black.
Does culture matter?
This study, and much of the prior empirical literature on jury verdicts in criminal cases involves Southern states.
It would also be interesting to see if this conclusion applies with equal force outside the South. Politically, race has a much stronger influence on the political identity of whites in the South, who are overwhelmingly Republicans and are overwhelmingly conservative, than in the North, where whites are not monolithic politically and where whites in urban areas, where black defendants most often face jury trials outside the South, tend to be politically liberal.
One way to interpret the stronger link between race and political identity and ideology in the South is that Southern whites have a stronger sense of racial identy and solidarity generally than whites elsewhere, which influences the impact of the racial composition of a jury on the conviction rate of those juries to a greater degree than it would elsewhere.
Are There Panel Effects?
At first glance, the data also appears to show strong "panel effects," something previously identified by political scientists looking at decisions made by multi-judge panels, which show that panels with people of multiple views tend to produce moderate results even when one view or another has a majority that could be imposed upon other panel members). A lot of the impact of jury pool composition on outcomes appears to come from changes in the deliberation process, rather than from raw exercises of political power.
Another fact that at first seems to suggest that the observed differences are psychological rather than political is that in "the subset of trials where blacks are present in the jury pool, trial outcomes are more favorable to black versus white defendants regardless of whether a black juror is actually seated."
But, the authors make a strong case that lawyers for the prosecution and defense simply strike the potential jurors least favorable to their case and that jury pools with some black members favorable to their case are statistically more likely to have a middle members, in terms of likelihood to convict by striking jurors who they believe would not be favorable to them. In other words, even if all black jurors on the pool are struck, pre-emptory challenges used to remove them from the jury pool force the jury selected to be more heavily biased towards pro-defendant white jurors than it would be otherwise. Black jurors in the jury pool, whether or not they are seated in this model, affect the result by influencing the likelihood of conviction of the median juror.
In fact, there are panel effects (as opposed to having results dominated by hold out jurors since unanimous verdicts are required), but the only panel effect seems to be a "majority effect" something quite different than what is seen in multi-member judicial panels where the median vote does not explain outcomes well:
[W]hatever the majority position is at the beginning of deliberations predicted the eventual verdict 90% of the time. Subsequent literature has continued to substantiate this. We incorporate this majority effect into our model by assuming that whatever position (acquittal or conviction) is in the majority becomes the eventual unanimous verdict. Thus, in the example above, where four of the seven jurors vote to convict, the eventual unanimous decision is a conviction. Note that implementing the majority effect implies the median juror is the deciding factor.
Beyond the majority effect, however, there do not appear to be panel effects:
Another potential explanation for the results we see is that whites behave differently when they are in a jury pool with another black. This would result in large changes in conviction rates when one black is added to the pool. This explanation seems unlikely, however, because we have already documented that whether blacks get on the seated jury has no effect.
What About Death Penalty Cases?
It isn't clear to what extent these outcomes apply to death penalty cases. On judicial panels, "panel effects" disappear in death penalty cases and judges instead vote their conscious regardless of who else is on the panel with them (one of the very few kinds of cases where this happens).
If the study's analysis is correct, "death qualification" of juries (the U.S. Supreme Court allowed practice of removing from juries in death penalty cases jurors who categorically oppose the death penalty), should, in theory, greatly increase the likelihood of conviction of black defendants and greatly decrease the likelihood of conviction of white defendants, in cases where the death penalty is sought, by changing the makeup of the pool from which jurors are drawn, and should also significantly reduce the likelihood of a hung jury in death penalty cases.
The seven capital case trials in the five year period were excluded from the study. But, one shouldn't automatically assume that this is the case because the death penalty is sought in many where a jury is unlikely to impose it for strategic reasons to increase the likelihood of a plea bargain to a serious charge and to increase the likelihood that a jury will convict as a result of its "death qualification," even if the facts of the case make it unlikely that the jury will actually impose the death penalty in that case.
Prior studies have shown similar effects when looking at the racial composition of the jury itself, in the likelihood of a jury to impose the death penalty in capital cases and in the likelihood of juries to convict in non-capital cases.
A Footnote On Hung Juries
The dataset they use treats a hung jury as an acquittal, but they suspect that hung juries are rare in Sarasota:
The National Center for State Courts conducted a survey of hung jury rates using felony case data from all federal courts and 30 state courts in 75 of the most populous counties. The NCSC project found that state courts in large urban areas had an average hung jury rate of 6.2%, with substantial variation across courts, ranging from a low of .1% in Pierce County, Washington to a high of 14.8% in Los Angeles County, California. Federal hung jury rates were found to be particularly low, averaging about 2% of all federal jury trials: federal civil trials had lower rates than federal criminal trials. One possible explanation for the low hung jury rate in civil trials is the fact that civil juries typically have just 6 members while many courts have 12 jury members for a felony trial. Given that Sarasota non-capital felony trials have 6-member juries, we would expect the hung jury rate in Sarasota to be on the low end of the spectrum.
Batson In Light Of The Empirical Evidence
This data suggests that U.S. Supreme Court rules that give special attention to the use of preemptory challenges to create all white juries in cases with black defendants are actually not as important as they might seem, while constitutional rules that require jury pools to take certain steps to make them representative of the community aren't as important as they should be.
Batson comes into play only after a jury pool is chosen and lawyers begin the jury selection process, and this appears empirically to have an approximately 35% impact on the likelihood that a black juror will be seated, but the fact that a black juror is seated turns out to have little impact on whether or not a jury will convict, the presence of that juror in the jury pool is what appears to produce the impact on the conviction rate empirically.
The study also suggests that while juries are influenced by race in making their decisions, that the process of selecting juries from the jury panel by lawyers and judges is not strongly racially biased, that it is modestly biased in favor of black jurors in the pool to the extent that there is racial bias, and that a lack of racial bias by attorneys is not inconsistent with their role as advocates for the state and the defendant respectively.
In other words, it appears that lawyers do generally comply with Batson, despite the fact that it is often be hard to prove a violation of it in practice, not because it has symbolic value, but because lawyers try to reach a maximally beneficial result for their clients. The appearance of all white juries in Sarasota appeared in five years of data to reflect little more than random chance, given the jury pool, despite the fact that the jury selection process itself is not actually random.
The study also provides some empirical guidance regarding the impact of larger juries in non-capital cases. The study suggests that the only real impact of a larger jury on the results is that it increases the size of the jury pool from which it is drawn, thus reducing the number of juries that differ significantly from the average for the population from which the jury pools for individual trials are drawn somewhat. This would not change the average number of convictions much, if at all, but a larger jury pool would reduce the extent to which the outcome was influenced by the race of the jurors in the jury pool chosen for the trial, by making those jury pools more homogeneous on average.
The model developed in the case also suggests strongly the death qualification is very unfair to criminal defendants in murder cases where the death penalty is sought, making them much more likely to be convicted on the same facts in cases where death is sought than similarly situated defendants in cases where it is not sought, and giving prosecutors a strong incentive to seek the death penalty for strategic reasons, even in cases where they don't sincerely believe that it is actually justified.
Few Criminal Cases Are Hard Ones
The study also seems to imply that the outcome is clear in about than four out of five of felony cases in Sarasota, Florida that go to trial rather than producing a plea bargain. A minimum of 68% of cases where convictions results and a minimum of 14% of cases that produce acquittals are sufficiently clear than the racial composition of the jury doesn't matter. Given that something like 90% of cases produce plea bargains generally, and that plea bargains are usually made before a jury pool is drawn, the random impact of the racial makeup of the jury pool that is selected for a case in Sarasota, Florida only directly matters in about 2% of all criminal prosecutions.
An average juror of either race would reach the same aquittal or conviction decision in about 55% of cases involving black defendants and about 68% of cases involving white defendants. So, more than half of felony criminal cases that go to jury trials are exceedingly clear.
The Model Used
The precise model developed to fit the data follows a normal distribution of the percentage likelihood that a juror will convict someone of a particular race and that the median juror in the jury pool will be the median juror in the selected jury. The numbers in that model were as follows:
[For White defendants,] White jurors are drawn from a truncated normal distribution with mean 0.68 and standard deviation 0.75, while black jurors are drawn from a truncated normal distribution with mean 1.1 and standard deviation 0.3. For white potential jurors, the relatively high standard deviation results in large mass points at both zero and one and the distribution between zero and one is relatively flat, thus spreading the required standards of evidence for white jurors pretty thinly. On the other hand, the distribution for black jurors is much tighter (with a large mass point only at one) and located largely in the upper half of the white distribution. . . .
[F]or black defendants[,] [w]e assume that white jurors are drawn from a truncated normal distribution with mean 0.9 and standard deviation 0.7, while black jurors are drawn from a truncated normal distribution with mean 0.45 and standard deviation 0.4. . . . Note that the bulk of the black juror distribution now lies in the lower tail of the white juror distribution. . . . A random black member of the pool is seated about 120 percent as often as a random white member. Again this matches the data quite well – as blacks in the jury pool are about 135 percent as likely as whites to be seated when the defendant is black.
Let's translate that into English. The variability of conviction rates among whites is much greater than the variability of conviction rates among blacks, and the amount of variability is quite similar for both propensity to convict white defendants and propensity to convict black defendants for both white jurors and black jurors.
But, the average likelihood of conviction varies greatly between white and black jurors and depends a great deal on the race of the defendant.
If the simple model is accurate, and it does reproduce the actually results from which it is derived quite well, the average white juror will initially vote to convict a white defendant 68% of the time and a black defendant 90% of the time. The average black juror will initially vote to convict a white defendant 100% of the time and a black defendant 45% of the time.
The average white jurors are twice as likely as the average black juror to initially vote to convict a black defendant. The average black juror is about 50% more likely to initially vote to convict a white defendant as a black defendant.
The study, of course, says little or nothing about why white jurors and black jurors have such different propensities to convict defendants of particular races, but it does suggest that the differences in how different jurors initially evaluate the evidence are stark.
25 September 2010
Beyond XX and XY
Since 1905, when Nettie Stevens and E.B. Wilson first identified the XY sex-determination system found in humans and many other species, it has been recognized that males and females differ in their sex chromosome arrangement. While males are heterogamic with two distinctive sex chromosomes (XY), females are homogamic with two of the same type of chromosome (XX). In approximately one out of 160 live births however, chromosomal anomalies occur with children being born with an abnormal number of chromosomes (aneuploidy). Among the more well-known sex-chromosomal disorders including Turner Syndrome (single X chromosome), Klinefelter's Syndrome (XXY syndrome), and Triple-X Syndrome (XXX chromosome karyotype).
When the 47,XYY karyotype was first identified in 1959, geneticists questioned whether it could be considered a disorder since there were no clear indications of pathology.
Most XYY males develop normally and have no idea that their genetic structure is abnormal. Although research into XYY males has shown no significant difference in testosterone levels, differences have been found on other physical characteristics including physical height, impulsivity, short-temperedness, and enuresis. XYY males are also more prone to certain types of learning difficulties as well as delayed speech and language skills. . . . research into the prevalence of XYY males in forensic populations has not yielded consistent evidence of a clear role for the karyotype in violent behaviour. Given that most XYY males in the general population never commit violent crimes (and, in fact, often remain unaware of their chromosomal abnormality), critics of research focusing on incarcerated males point out the obvious selection bias at work. These same critics also argued that XYY research led to potential stigmatizing of XYY males. While the controversy rages on, researchers continue to report significant findings for XYY males in terms of increased mortality, physical height, neurocognitive deficits and autism. Although behavioural differences are still being reported (including incidence of sexual violence), no clear consensus on the XYY-violence link seems likely to emerge at this point.
From here.
Notably, none of the most common sex chromosome anomolies have any clear link to sexual orientation.
Indeed, while being one sex chromosome short (as in Turner syndrome) produces some definitely noteworthy symptoms, an extra sex chromosome's effects are quite subtle, with many most clearly impairing fertility. Some of the symptoms associated with extra sex chromosomes in individuals with Y chromosomes seems very similar to conditions like ADHD, which are not uncommon in males generally.
Selected New Discoveries In Anthropology
Dienekes has conveniently posted some of the interesting abstracts from the 4th International Symposium on Biomolecular Archaeology. A few of the interesting results are summarized below.
Old World Research
* The first farming culture in Central Europe arrived there around 7,000 to 7,500 years ago and is known as the Linearbandkeramik aka LBK aka Linear Pottery culture. Researchers examined "mitochondrial and Y-chromosomal data from Neolithic individuals from a Central European early farming site, Derenburg (Germany)." This ancient DNA shows that the earliest farmers had a genetic affinity to modern Near Eastern populations (where farming was first invented), rather than to modern humans that first arrived there in the Upper Paleolithic (i.e. 40,000 years ago) and had a hunter-gatherer economy.
This suggests that the transition from hunting and gathering to farming in modern humans largely involved population replacement, rather than cultural transfer of farming technology.
A theory in which population replacement is predominant, also known as migrationism, would also help explain why Europeans all have roughly the same percentage of Neanderthal DNA, despite the fact that we would expect Upper Paleolithic in Northern Europe to have more Neanderthal DNA than Near Eastern modern humans. We would expect Upper Paleolithic modern humans in Northern Europe to have more Neanderthal DNA because successive generations of Upper Paleolithic modern humans would have had many more generations in which they would have been in close proximity to Neanderthals.
If the Upper Paleolithic modern humans made only small genetic contributions to the current population of Europe, then any Neanderthal admixture that left traces in that population would have been diluted to the point where it would be almost unrecognizable. Near Eastern farmers and herders who replaced Upper Paleolithic modern humans in Europe would have only traced of the admixture that took place in the Near East. By the time they arrived in Europe, Neanderthals had been extinct for tens of thousands of years.
Migrationism also helps explain why there is so very little genetic variation between European populations compared to other parts of the world. Even though modern humans have lived in Europe for 40,000 years, the bulk of their genetic ancestry may derive from a common Near Eastern farming and herding population in the last 10,000 years.
The only traits that would have survived migration and gone on to be present at high frequencie in contemporary European populations would have been those that entered the gene pool from the small amount of introgression of genes into the early farmer gene pool from earlier modern human populations that did take place, which either conferred very strong selective advantages or were part of some lineage that left an unusually large number of descendants for some other reason (e.g. an early marriage alliance into the aristocracy of the early farming population).
* Analysis of ancient pig DNA provides insights into the early migrations of farmers into Europe, and the genetic origins of ancient pigs. This too supports a migrationist analysis:
Another study also looked at pig origins, and gives it a subtly different interpretation:
Ancient pig DNA also matters because it provides a relatively independent and scientifically rigorous line of evidence coroborating the picture of human migrations into Europe in pre-history that has already been developed by other means.
Taken alone, some of the conclusions reached might be expansive, but when they reinforce conclusions already reached on the basis of modern and ancient human DNA, and on the basis of artifacts discovered in archeological digs and carbon dated, they make the evidence in support of the developing anthropological reconstruction of human pre-history in Europe considerably more robust. This research helps to insulate the overall conclusion that have been reached about the spread of farming in the early Neolithic era in Europe from any specific methological flaw that might make any one line of evidence less definitive than it had previously seemed.
* Analysis of the traces of materials that were stored in Beaker pottery, a post-Neolithic revolution culture, that is found in British graves show that, contrary to widespread supposition about the purposes for which they were used, that they were not used to hold alcohol.
New World Research
* A complete genome was obtained from a 4,000 year old piece of permafrost preserved hair of a man from the first known culture to settle in Greenland.
* Ancient DNA evidence is helping to determine: "To what extent are the early and late prehistoric Southwest occupants associated with the Mesa Verde, Chaco Canyon, Mimbres and Basketmaker cultures related to today’s Athapaskan, Puebloan and Uto-Aztecan speakers?" It can also help determine where these people's origins were in the Americas. Early examination of ancient DNA evidence in this region "has demonstrated both regional continuity and discontinuity." The abstract doesn't make clear, however, what conclusions this data has revealed, or the broad outline of the kinds of continuity and discontinuity that the earlier findings revealed.
* "DNA . . . extracted from over 115 samples exhibiting classic tuberculosis lesions obtained from both the New and Old Worlds and ranging in age from 5800 BCE to A.D. 1800" have made it possible to distinguish between tuberculosis strains that originated in the Old World and tuberculosis strains that originated in the New World.
Beyond the Conference
Denver's Julien Riel-Salvatore also reports some interesting new discoveries.
* Hunter-gatherers were turning wild plants into flour long before farming was invented.
A find in Utah shows flour being produced 10,000 years ago (long before plants were domesticated in the New World). The "milled seeds include sage, salt bush and various grasses, which were processed on grindstones."
Research at the "Gravettian site of Bilancino, in Tuscany, Italy, which dates to about 25,000 BP uncal [about 28,000 BP on a calibrated basis]. . . . includes notably charcoal, pollen and starch grain recovered from the surface of a grindstone. . . . [T]he occupants of Bilancino had been grinding cattail (Typha latifolia), likely its roots, as well as wild grasses to produce flour."
Why does this matter?
These finds also further supports the evidence from a variety of sources that modern humans may have had proto-agricultural societies existed for thousands of years before plants were domesticated in a way that made them more useful and permitted a more settled lifestyle with more dense populations.
* Todd A. Surovell of the University of Wyoming gave a talk at DU yesterday that examined megafauna extinctions in the Americas. His key points were as follows:
He argued "that a huge amount of circumstantial evidence points to humans as the primary causal agents of extinction," so that it is unreasonable to insist on that this human cause can be established only with direct evidence that humans caused the extinction of the other species of extinct fauna.
* Anthropology.net explores a new paper on the population genetics of Central Asia providing the author's own analysis while discussing two other reviews of the paper's implications in the blogosphere. Linguistic and genetic evidence is used to parse out the extent to which Indo-Iranian (from at least the Bronze Age ca. 2000 BCE), then Turkic (5th-10th century CE), and then Mongolian (13th century CE) layers in the last couple thousand years have left distinct surviving ethnic groups or have assimilated each other.
The general trend is unsurprising. Central Asia has a West to East gradient of genetic influence. To the West, there are stronger traces of Indo-European populations; to the East, there are stronger traces of Turkic and Mongolian populations. But, the waves are distinguishable.
Beware that the word "Turk" is false friend: "The Turks of Turkey are overwhelming derived from the same source populations as their Balkan (because of Rumelian Turks), Iranian, and Armenian, neighbors." The Northeast Asian people who gave rise to the language family to which Turkish belongs conquered Turkey at the far Western extent of their expansion and their rule led the people that they governed to switch from Indo-European languages to Turkic languages, but genetic descendants of these Northeast Asian peoples were largely limited to a ruling elite.
Old World Research
* The first farming culture in Central Europe arrived there around 7,000 to 7,500 years ago and is known as the Linearbandkeramik aka LBK aka Linear Pottery culture. Researchers examined "mitochondrial and Y-chromosomal data from Neolithic individuals from a Central European early farming site, Derenburg (Germany)." This ancient DNA shows that the earliest farmers had a genetic affinity to modern Near Eastern populations (where farming was first invented), rather than to modern humans that first arrived there in the Upper Paleolithic (i.e. 40,000 years ago) and had a hunter-gatherer economy.
This suggests that the transition from hunting and gathering to farming in modern humans largely involved population replacement, rather than cultural transfer of farming technology.
A theory in which population replacement is predominant, also known as migrationism, would also help explain why Europeans all have roughly the same percentage of Neanderthal DNA, despite the fact that we would expect Upper Paleolithic in Northern Europe to have more Neanderthal DNA than Near Eastern modern humans. We would expect Upper Paleolithic modern humans in Northern Europe to have more Neanderthal DNA because successive generations of Upper Paleolithic modern humans would have had many more generations in which they would have been in close proximity to Neanderthals.
If the Upper Paleolithic modern humans made only small genetic contributions to the current population of Europe, then any Neanderthal admixture that left traces in that population would have been diluted to the point where it would be almost unrecognizable. Near Eastern farmers and herders who replaced Upper Paleolithic modern humans in Europe would have only traced of the admixture that took place in the Near East. By the time they arrived in Europe, Neanderthals had been extinct for tens of thousands of years.
Migrationism also helps explain why there is so very little genetic variation between European populations compared to other parts of the world. Even though modern humans have lived in Europe for 40,000 years, the bulk of their genetic ancestry may derive from a common Near Eastern farming and herding population in the last 10,000 years.
The only traits that would have survived migration and gone on to be present at high frequencie in contemporary European populations would have been those that entered the gene pool from the small amount of introgression of genes into the early farmer gene pool from earlier modern human populations that did take place, which either conferred very strong selective advantages or were part of some lineage that left an unusually large number of descendants for some other reason (e.g. an early marriage alliance into the aristocracy of the early farming population).
* Analysis of ancient pig DNA provides insights into the early migrations of farmers into Europe, and the genetic origins of ancient pigs. This too supports a migrationist analysis:
The Neolithisation of Europe followed two main routes of expansion – the northern so called Danubian or Balkanic route and the southern Mediterranean route. . . . [T]he earliest domestic pigs in Europe were of Near Eastern descent. . . Our results support the current hypothesis that divergent mitochondrial lineages accompanied the different routes of expansion. . . . [But] by 4000 BC, introgression with wild boar was widespread in Europe.
Another study also looked at pig origins, and gives it a subtly different interpretation:
The results of over 300 individuals from 25 neolithic sites shows that around 4800- 4000 BC domestic pigs are introduced in the archaeological sites in northern Germany. . . the oldest domestic pig in the sample (4600 BC) has a “Near East” haplotype. All other domestic and wild boars show the same “European” haplotype. . . . the domestic pigs with a maternal “Near East” ancestor were introduced into central Europe with the linear pottery (LBK) culture. After a short period the domestic pigs with “European” haplotypes coexist with the “Near East” haplotypes in the LBK and the Chaseen culture. An explanation could be that the people of the Ertebølle culture adapt the idea of domestication and permuted it on the indigenous wild boar population.
Ancient pig DNA also matters because it provides a relatively independent and scientifically rigorous line of evidence coroborating the picture of human migrations into Europe in pre-history that has already been developed by other means.
Taken alone, some of the conclusions reached might be expansive, but when they reinforce conclusions already reached on the basis of modern and ancient human DNA, and on the basis of artifacts discovered in archeological digs and carbon dated, they make the evidence in support of the developing anthropological reconstruction of human pre-history in Europe considerably more robust. This research helps to insulate the overall conclusion that have been reached about the spread of farming in the early Neolithic era in Europe from any specific methological flaw that might make any one line of evidence less definitive than it had previously seemed.
* Analysis of the traces of materials that were stored in Beaker pottery, a post-Neolithic revolution culture, that is found in British graves show that, contrary to widespread supposition about the purposes for which they were used, that they were not used to hold alcohol.
New World Research
* A complete genome was obtained from a 4,000 year old piece of permafrost preserved hair of a man from the first known culture to settle in Greenland.
Analyses provide evidence of a migration from Siberia into the New World, independent of that giving rise to the modern Native Americans and Inuit. The migration was dated to approximately 5,500 years BP and the closest living relatives are found in North-East Siberia showing no signs of admixture with modern Native Americans or Inuit.
* Ancient DNA evidence is helping to determine: "To what extent are the early and late prehistoric Southwest occupants associated with the Mesa Verde, Chaco Canyon, Mimbres and Basketmaker cultures related to today’s Athapaskan, Puebloan and Uto-Aztecan speakers?" It can also help determine where these people's origins were in the Americas. Early examination of ancient DNA evidence in this region "has demonstrated both regional continuity and discontinuity." The abstract doesn't make clear, however, what conclusions this data has revealed, or the broad outline of the kinds of continuity and discontinuity that the earlier findings revealed.
* "DNA . . . extracted from over 115 samples exhibiting classic tuberculosis lesions obtained from both the New and Old Worlds and ranging in age from 5800 BCE to A.D. 1800" have made it possible to distinguish between tuberculosis strains that originated in the Old World and tuberculosis strains that originated in the New World.
Beyond the Conference
Denver's Julien Riel-Salvatore also reports some interesting new discoveries.
* Hunter-gatherers were turning wild plants into flour long before farming was invented.
A find in Utah shows flour being produced 10,000 years ago (long before plants were domesticated in the New World). The "milled seeds include sage, salt bush and various grasses, which were processed on grindstones."
Research at the "Gravettian site of Bilancino, in Tuscany, Italy, which dates to about 25,000 BP uncal [about 28,000 BP on a calibrated basis]. . . . includes notably charcoal, pollen and starch grain recovered from the surface of a grindstone. . . . [T]he occupants of Bilancino had been grinding cattail (Typha latifolia), likely its roots, as well as wild grasses to produce flour."
Why does this matter?
[I]t "implies the availability of an elaborate product, a flour, with high energy content, that is rich in carbohydrates, easily storable and transportable, to make a kind of bread (biscuits) or a porridge" . . . This means that plant material could be preserved and stored for much longer periods of time, which effectively can provide carbs during seasons such as winter during which they are normally difficult if not impossible to obtain. Also, it provides a subsistence items that serves as a buffer against the fluctuating availability of other types of subsitence resources, such as animal tissue. Lastly, because flour is easily ingested and digested, it also provides a foodstuff that both very young and very old members of a group can consume - and maybe even produce while adults are off procuring other things. This means that survival to adulthood and into old age can be facilitated, which has the potential of significantly reorganizing the way labor is divided within a society, and increasing the generational knowledge available to given forager groups.
These finds also further supports the evidence from a variety of sources that modern humans may have had proto-agricultural societies existed for thousands of years before plants were domesticated in a way that made them more useful and permitted a more settled lifestyle with more dense populations.
* Todd A. Surovell of the University of Wyoming gave a talk at DU yesterday that examined megafauna extinctions in the Americas. His key points were as follows:
Humans first arrived in North America approximately 14,000 years ago. Over the next two millennia, some 35 genera of Pleistocene megafauna suffered extinction. While it is tempting to see causality in this chronological correlation, after more than 80 years of fieldwork concerning the Pleistocene human occupation of the Americas, we can only demonstrate with confidence that humans hunted at most five species of extinct fauna.
He argued "that a huge amount of circumstantial evidence points to humans as the primary causal agents of extinction," so that it is unreasonable to insist on that this human cause can be established only with direct evidence that humans caused the extinction of the other species of extinct fauna.
* Anthropology.net explores a new paper on the population genetics of Central Asia providing the author's own analysis while discussing two other reviews of the paper's implications in the blogosphere. Linguistic and genetic evidence is used to parse out the extent to which Indo-Iranian (from at least the Bronze Age ca. 2000 BCE), then Turkic (5th-10th century CE), and then Mongolian (13th century CE) layers in the last couple thousand years have left distinct surviving ethnic groups or have assimilated each other.
The general trend is unsurprising. Central Asia has a West to East gradient of genetic influence. To the West, there are stronger traces of Indo-European populations; to the East, there are stronger traces of Turkic and Mongolian populations. But, the waves are distinguishable.
"The analysis of genetic variation reveals that Central Asian diversity is mainly shaped by linguistic affiliation, with Turkic-speaking populations forming a cluster more closely related to East-Asian populations and Indo-Iranian speakers forming a cluster closer to Western Eurasians." . . . [Turkic language speaking peoples] remained more genetic and linguistically unified and did not assimilate into Iranian genetics and languages. . . they did not absorb large populations of Iranians as their genetics and languages remained more separate than integrate.
Beware that the word "Turk" is false friend: "The Turks of Turkey are overwhelming derived from the same source populations as their Balkan (because of Rumelian Turks), Iranian, and Armenian, neighbors." The Northeast Asian people who gave rise to the language family to which Turkish belongs conquered Turkey at the far Western extent of their expansion and their rule led the people that they governed to switch from Indo-European languages to Turkic languages, but genetic descendants of these Northeast Asian peoples were largely limited to a ruling elite.
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