30 May 2008

Aviation Technology Group Bankrupt

Aviation Technology Group, a start up general aviation manufacturer, has filed for bankruptcy under Chapter 7. Fellow Colorado (and Centennial Airport) general aviation manufacturer Adam Aircraft filed earlier this year, but was bought out of bankruptcy by a Russian private equity firm which is reviving the business.

ATG has been looking for additional financing while operating on a skeleton crew for months, with no such success.

[It's] claiming $10 to $50 million in assets and $50 to $100 million in debts. ATG, which laid off the majority of its workers in December, said it has 100 to 199 creditors.

Honestly, I'm a little surprised at the way things turned out. ATG has more of a high end niche product, but would seem like a valuable addition to a defense contractor. I'd also expected that the high end of the general aviation market would be more recession proof than the low end. But, apparently, the ordinary general aviation market represented by Adam Aircraft has more life in it than I had believed, while the hig end is dead.

Witches Still Burning

Most recently in India.

Update On Ken Salazar And Tax Law

In a previous post picked up in several tax blogs, I noted that Ken Salazar, who represents Colorado in the U.S. Senate, was quoted making a gross misstatement about the meaning of adjusted gross income in the context of the farm bill he has been pivotal in negotiating (saying that AGI was determined before, rather than after, business expenses). Many people took him to task for doing so, despite being an experienced lawyer from the University of Michigan law school and holding himself out as a farmer.

More troubling, which I didn't realize until today, is that Ken Salazar also serves on the Senate Finance Committee, and in particular on the Subcommittee on Taxation, IRS Oversight and Long-Term Growth. Thus, he is one of thirteen Senators charged with given special attention to how the Internal Revenue Code is written. This makes such a fundamental misunderstanding of such a basic tax concept much more distressing.

While it may be too much to expect that every elected official has a basic understanding of basic tax concepts, we would hope that the people on the subcommittees that actually write our tax laws would understand such things.

Deal Reached On I-70 Rail

The Denver Post reports regarding road expansion and rail plans for I-70 from Golden to Vail that a group convened by Governor Ritter has come to an agreement on a plan for what to do, although not how to pay for it:

[The group] approved a plan for the often congested corridor with core elements that call for expansion of the highway in certain locations as well as construction of an "advanced guideway" train by 2025. . . .

[The plan includes] widening I-70 to a total of six lanes from Floyd Hill through the Twin Tunnels just east of Idaho Springs, making major improvements to the I-70/U.S. 40 interchange near Empire and adding climbing and acceleration/deceleration lanes on I-70 between the Bakerville exit and the Eisenhower/Johnson Tunnel. . . .

"[T]riggers" that would allow additional expansion of I-70 and other transit improvements beyond the advanced-guideway concept.

One trigger would occur when initially identified highway improvements are complete and an advanced guideway train is operating "from the Front Range beyond the Continental Divide," . . . Another authorizes the second phase of expansion, and other transit options, if studies on the feasibility, cost, ridership and other issues related to the advanced-guideway train show it is deemed technically "unfeasible" or "cannot be funded" by 2025.

One such study, a year-long, $1.5 million analysis of high-speed rail possibilities for the I-70 and Interstate 25 corridors, is just getting underway.

The I-70 corridor, which is perennially clogged by ski resort traffic, in season, is currently served by Amtrak, but it is slow and secured only a small percentage of all traffic despite reasonably good public transit and reasonably walkable communities upon arrival at the resorts.

The trip from Union Station in downtown Denver to Vail Resorts, is about 97 miles by road. On a good day, this is an hour and a half journey. But few Friday nights and Saturday mornings on westbound I-70, and few Sunday nights on eastbound I-70, in ski season, are good days. In heavy traffic, the trip takes several hours.

The report doesn't discuss the option, but earlier proposals also included HOV lanes. Some type of contraflow system would make a great deal of sense for the corridor, as it typically jams up in only one direction at a time, even without highway expansion.

One would expect construction costs for both the highway expansion and rail portions of the project to be much higher than average, given the mountainous terrain and possibly expensive condemnation of mountain homes which might be required. Indeed, the hope that rail could be reduce the amount of expensive highway expansion needed otherwise, and might be possible to build with less of a footprint, is one of the important reasons to seriously consider it.

A high speed passenger rail line in the I-25 corridor ought to be far cheaper to build, has no current Amtrak rail service, and would also probably have higher traffic as it would link multiple cities. If through freight rail traffic could be diverted to a route further out on a front range, a proposal seriously being considered at this time, the passenger rail system could even be build in existing right of ways, possibly with only modest modifications of existing track.

29 May 2008

Beyond FasTracks

Two former Coloradans (Steve Boland and Dan Malouff, CU-Boulder graduates (classes of '95 and '03, respectively)) have put together a website entitled Beyond FasTracks (with nice graphics), hosted by the Denver Infill blog, that lay four different proposals for additional transit construction in Denver when the FasTracks project is done (the first line is planned to open in 2013; the last work is supposed to be finished in 2016) -- one at a projected $500 million cost, one for $1 billion, one for $2 billion and one for $4 billion.

The design is aimed at turning Denver's system into one that provides a genuinely transit served city, as opposed merely to one where it is easy to use transit to commute from the suburbs to downtown for work and big events. As they explain:

The FasTracks rapid transit network is designed primarily to shuttle suburban commuters to and from downtown. As a result, its coverage of urban neighborhoods where demand for transit is highest is incomplete. To compensate for this, we've concentrated on the urban core.

The Plans

The cheapest proposal at the Beyond FasTracks webiste calls for:

(1) new light rail from downtown to I-25 and Broadway along Broadway or Lincoln Boulevard; and

(2) street car service: (i) from downtown to the Cherry Creek mall area, (ii) along East Colfax connected to Union Station via a loop around the Southern and Western boundaries of the Auraria Campus, and (iii) through Five Points to the Highland Neighborhood in Northwest Denver; and

(3) six bus rapid transit lines, generally speaking (i) along Wadsworth, (ii) along Sheridan (i.e. Denver's Western border for the most part), (iii) along Colorado Boulevard, (iv) from downtown through Five Points and North Denver, (v) more or less along Alameda approximately where the number 3 bus route goes, and (vi) along Evans from Sheridan to Colorado Boulevard.

Notably, as defined by the authors, Denver already has a mix of street car and light rail service. North of Colfax Boulevard, where Denver's light rail trains move along streets that it shares with cars, it qualifies as a street car under their classification scheme. South of Colfax Boulevard, where Denver's light rail system has dedicated right of ways, it qualifies as surface light rail.

The $4 billion proposal would put light rail, elevated rail and/or subway lines along the corridors where street car service is proposed in the less expensive plan, and extend the improvements in those corridors a little further, more notably connecting the Cherry Creek Mall area to the I-25 and Colorado Boulevard light rail station. It would also make modest expansion and add addition spurs to the proposed bus rapid transit network.

All of the proposed improvements, with the exception of a small portion of the bus rapid transit expansions, would be within the City and County of Denver proper.

How Solid Is It?

The backers of the plan explain some of their assumptions:

East Colfax Avenue is, by far, the Front Range's busiest transit corridor, and one with tremendous redevelopment potential. Cherry Creek is Denver's second downtown, and a popular destination for shoppers from all over Colorado. South Colorado Boulevard is lined by towers but choked with traffic. The Golden Triangle, Uptown and Highlands are Denver's most rapidly urbanizing neighborhoods. Yet each of them will continue to be served only by ordinary buses.

This project began as an open-ended exercise . . . using existing ridership and population density data, to envision a rapid transit system that would go where it's needed. . . .

Please think of these maps not as specific plans, but as ideas — as brainstorming. Study of a Colfax streetcar extending as far east as Yosemite Street on the Aurora border is already underway . . . the Downtown Multimodal Access Plan is now detailing plans for a Downtown Denver circulator shuttle. . . RTD plans eventual extension of the Gold Line to Golden; and one little-known aspect of FasTracks will preserve right-of-way for a future rail line in the Northeast Metro.

The emphasis on East Colfax Avenue and Broadway is appropriate.

Bus Route 15, which serves East Colfax, has the lowest subsidy per ride of any route in the entire RTD system, about $1.01 per ride in 2001 (the 15L at $1.35 per ride was fourth, and the 16, which serves West Colfax was third, at $1.21 per ride, and Bus Route 58, from Arvada to downtown Denver, was second at $1.16 per ride), excluding the free 16th Street mall shuttle and light rail.

The 15 and the 15L account for 6,430,016 trips per year, something rivaled only by light rail, the 16th Street mall shuttle, and the 3,003,149 annual trips on the combined 0 and 0L bus routes along Broadway and Lincoln Avenues, South of downtown Denver (even before considering other buses that also traverse that area).

This isn't an actual nuts and bolts Blueprint, but it is reality based.

Background Details On Transit Operating Costs In Denver

The subsidies per rider on various parts of RTD's service in 2001 were as follows (followed by data on the total annual number of rides in 2001 in each category):

16th Street Mall Shuttle $0.40 (16,495,486) (free shuttle in downtown Denver)
CU/CSU Game* $1.79 (27,169) (a single college football game in Denver)
Bronco Ride* $2.16 (387,986) (professional football home games)
Light Rail $2.01 (9,080,578)
Central Business District Local $2.42 (26,770,026)
Vanpools $2.56 (23,750)
Buffalo Ride* $3.25 (5,897)
Urban Local $3.32 (15,861,167)
Rockies Ride* $3.40 (221,952) (professional baseball home games)
skyRide $4.61 (1,899,475) (Denver International Airport service)
Express Routes $5.74 (3,020,984) (mostly serves commuters with fewer stops)
Senior Ride* $6.90 (92,804)
Regional Routes $7.09 (2,804,572) (intercity service within RTD boundaries)
Suburban Local $7.31 (3,530,642)
call-n-Ride $16.26 (71,746) (in suburban cities with little scheduled bus service)
Cultural Connection Trolley** $36.34 (4,703) (went from downtown to Cherry Creek)
access-a-Ride $44.80 (382,754) (for disabled riders)

* special irregular service routes
** discontinued

Heavy central business district and light rail traffic kept the per-ride operating cost subsidy for the RTD system as a whole down to a mere $2.71 per ride for a total of 80,336,868 rides in 2001.

Another notable point is that running small rather than large buses doesn't save much money.

Why don’t you use small buses during low ridership periods of the day?

The major cost of operating a bus is the driver (about 52%). The difference for fuel consumption (about 5% of the cost) is 5.6 miles per gallon for a 30’ bus, 4.5 mpg for a 40’ bus and 3.6 mpg for a 60’ articulated bus. Whenever possible RTD uses the right-sized bus; however, the time consumed pulling buses in and out of the garage often more than offsets other cost factors.

The data are obviously different in detail seven years later, but the general trends are likely to be similar.

Implications For the Overall Plan

They don't mention the fact, but one circumstance that also favors development of the urban part of the system is that the operating cost subsidy per ride is lower in central Denver than in the suburbs, because riders central Denver riders take shorter trips and both buses and trains tend to be more full, as shown above.

On the other hand, one has to have a certain amount of skepticism about the prospects of a major streetcar expansion in Denver given the dismal performance of the Cultural Connection Trolley that sought to fill a similar need.

One big flaw of the existing system, which is not addressed, is a shortage of parking at suburban light rail stations which materially suppresses ridership right now. Almost all stops on the surban side of the light rail system are pernnially full during commuting times, which limits the number of people who can take light rail. Expanding parking lots could easily increase fares and ridership while having only a negligible effect on operating costs.

The Costs

The basis of the cost calculations are disclosed, and appear reasaonble.

Our financial figures are not exact, obviously; in fact, they're little more than back-of-the-napkin guesstimates. Our plans might cost a bit more, or a little less, than advertised. We have attempted, however, to remain conservative in our accounting. Streetcar lines, for example, have recently been built in American cities for far less than we've assumed, and a light rail subway was recently constructed in Minneapolis for roughly half of what RTD estimated one would cost in its Central Connector study.

Specifically, they assume costs as follows:

• For bus rapid transit — limited buses made to behave like rail lines, with low-floor, multi-door vehicles for faster boarding, stops with shelters and wait-time displays, sensors that prevent stoplights and other enhancements, like Los Angeles' Metro Rapid system — $1 million per mile. . . .

• For streetcars — a sort of light light rail that can share the road with autos — $25 million per mile. Streetcars can be modern trams, like those found in Portland, Oregon, or vintage vehicles like those in New Orleans.

• For surface light rail, at-grade but in its own right-of-way, $50 million per mile.

• For elevated light rail, with no street crossings, $75 million per mile.

• For underground light rail, in a subway, $200 million per mile.

In one plan, we've also proposed an exclusive transitway for streetcars and rapid buses. Dedicated lanes with physical barriers to separate traffic might cost an extra $10 million per mile or so to build.

The cost numbers are comparable to the actual costs for FasTracks light rail and other comparable projects around the country.


They don't discuss financing this plan, but I will.

This suggests a financing arrangment in which RTD finances the operating costs and a small portion of the total bus infrastructure cost with a combination of existing taxes, users fees, federal transit dollars, and possibly some state and local governmental contributions. Any net increase in operating costs from the proposal would be modest, because the new services would replace existing low cost per passenger mile bus routes and would like increase ridership.

The major part of the infrastructure cost, including almost everything other than rapid bus transit, which would be within Denver, would presumably be financed with a combination of Denver proper taxes and federal (and possibly state) transit funds, with cooperations from, but the funding from, the rest of the RTD district. The suburbs would be unlikely to raise their taxes to pay for this kind of plan.

The City and County of Denver currently receives about $463 million a year in sales taxes and about $213 million a year in property taxes. Its total receipts, with most of the balance coming from users fees and governmental grants, are about $1,915 million a year.

Typically, a federally approved transit project receives an 80-20 capital expenditure match, so the local taxpayers share of the infrastructure for the least expensive plan would be something less than $100 million. If this were financed over ten years with Denver sales tax revenues, it would require a sale tax rate on the order of 0.1% after considering unbudgeted factors like interest costs (the core number before interest is about 0.08%, but increasing the scope of that project slightly to fit the symbolically important 0.1% number might make sense). By comparison, the Football Stadium tax and the Scientific and Cultural Facilities District taxes are each 0.1% sales tax levies, and the RTD sales tax is 1.0% -- of which 0.4% was for FasTracks.

A 0.1 percentage point tax sales tax increase in Denver would increase sales taxes from 7.72% to 7.82%. But, the current football stadium tax expires no later than 2012, around the time that a new City and County of Denver transit sales tax, as a post-FasTracks project, would begin.

A ballot issue in the time frame of 2009-2011 would be appropriate for an initiative like this one, which would then take effect immediately upon the expiration of the stadium tax. Timing wise, a group to organize to take this step would have to begin work now or in the very near future.

The full fledge $4 billion plan would probably require a sales tax increase on the order of 0.4 percentage points (the same as FasTracks) over a twenty year period.

Neither the low, nor the high end figures are beyond the realm of political possibility in strongly pro-transit Denver.

The FasTracks proposal, with four times as large as tax as the amount necessary for the smallest proposal above, passed in the entire multi-county RTD district area with 57% of the vote, and in Denver, it received 65% of the vote. Since it was approved by voters, FasTracks has grown far more popular, with 79% of people surveyed six months ago thinking that it was a good idea.

The website's proposal, which would replace an expiring tax, would be a quarter the size of FasTracks in tax impact on Denver voters, would benefit Denver exclusively and be voted on exclusively by Denver voters, and would come at a time when the country is even more sensitive to the need for transit in the face of higher gasoline prices.

Of course, there is nothing sacred about using sales tax revenues to pay for transit. The Denver Occupational Tax, which is imposed on employers with workers in Denver on a per head basis (and hence captures commuters as well as residents), an increase in street parking charges, and a tax on private parking charges, for example, might all make sense as revenue sources for some or all of the proposal.

Agriculture Pollutes

Coyote Gulch points out a detailed examination of water pollution from agricultural sources. His post, quoting the Steamboat Pilot & Today notes:

[I]n 2000 the National Water Quality Inventory reported that agricultural nonpoint source pollution is the leading source of water quality impacts on surveyed rivers and lakes, the second largest source of impairments to wetlands and a major contributor to contamination of surveyed estuaries and ground water[.] Agriculture activities that cause NPS pollution include poorly located or managed animal feeding operations, overgrazing, and improper, excessive or poorly timed application of pesticides, irrigation water and fertilizer. . . .

Pollutants that result from farming and ranching include sediment, nutrients, pathogens, pesticides, metals and salts. Using management practices that are adapted to local conditions can minimize impacts from agricultural activities on surface water and ground water. Many practices designed to reduce pollution also increase productivity and save farmers and ranchers money in the long run. . . . Farmers apply nutrients such as phosphorus, nitrogen and potassium in the form of chemical fertilizers, manure and sludge. When these sources exceed plant needs, or are applied at the wrong time, nutrients can wash into aquatic ecosystems. There they can cause algae blooms, which can ruin swimming and boating opportunities, create foul taste and odor in drinking water, and kill fish by removing oxygen from the water. High concentrations of nitrate in drinking water can cause methemoglobinemia, a potentially fatal disease in infants, also known as blue baby syndrome. To combat nutrient losses, farmers can implement nutrient management plans that help maintain high yields and save money on fertilizers.

The farmers, by and large, aren't breaking the law. The Clean Water Act and the regulations promulgated under it, contain broad exemptions for agricultural operations. The main federal environmental regulations governing pesticides and fertilizers are those under food quality regulations designed to protected harvested fruits and vegetables from posing harm to people who eat them.

Current regulations aren't designed to meaningfully protect farm workers or the environment. For example, from a food safety perspective, excessive pesticide or fertilizer application that is later washed away in runoff doesn't matter at all, while failure to protect food from pests could be a concern, so there is a regulatory bias in that encouraged sending agricultural chemicals into runoff.

The main reason that farmers were exempted from most provisions of the Clean Water Act was out of a concern that it would mostly impact small businesses that would lack the economic resources to comply. A related reason was that in the late 1970s, the options for reducing pollution from agriculture were less understood than the options for reducing pollution from industry and power plants.

The world has changed in thirty years. The vast majority of farm production comes from very large operations which are capable of implementing suitably crafted environmental regulations without going bankrupt. And, as the article above notes, there are now well understood ways to reduce agricultural pollution that actually reduce a farmer's expenses.

Rising oil prices tend to increase the prices of fertilizer and pesticides, many of which either have petroleum as a component in their production, or are energy intensive to produce, transport and apply. Environmental concerns are just one more part of a chorus of concerns about the prevailing practices in conventional American agriculture (mostly not shared by organic agriculture).

While I am not convinced that organic agriculture provides health benefits to food consumers that are very significant, it is becoming increasingly clear that the time has come for a widespread shift towards organic agricultural practices (even if not with the same rigor), for both economic and environmental reasons.

This should probably come, in part, through federal environmental regulation of agriculture, a change which would probably pose the least compliance burden not necessary to achieve environmental goals, if it was offered as a single, industry specific environmental law, rather than as piecement amendments and regulatory changes in a variety of existing environmental laws and regulations that contain exemptions for agriculture now.

Last Day Of School

Most Denver Public Schools, including the one my children attend, have their last day of school today, usually a half day only. For tens of thousands of parents across the city, this means a whole new daily routine. Customary summer has arrived.

28 May 2008

Judicial Discipline in Colorado

The June edition of "The Colorado Lawyer" magazine has the annual (2007) report of the Colorado Commission on Judical Discipline, a typical one.

There were 211 cases involving 198 judges out of 350 judges. These broke down as 155 criminal case complaints, 38 civil case complaints, 16 domestic relations case complaints, and 2 off-the-bench conduct/disability complaints. Of the 211 complaints, 148 were brought by inmates against the judges who handled their cases.

One complaint was a judge's self-report, one was initiated by the commission, four were by people not involved, and the other 205 were by litigants in the case. All but two complaints were classified as appellate in nature (of which only two were investigated, in addition to the other two cases)

One case produced a private disciplinary sanction. Last year there were two private sanctions, the year before there were three. Reading between the lines, the private disciplinary sanction probably came in the self-reported case, and the commission initiated case was probably a medical disability case that produced a medical retirement.

In the past forty-one years, 26 judges have been ordered to retire for a disability, 169 private letters of admonition, reprimand or censure have been issued (can one imagine a more timid punishment?), and there has been one public reprimand. In addition 49 judges have retired or resigned during investigations, some culpably and some not.

The Commission claims in its annual report that it "performs a vital role in maintaining a fair and impartial judiciary." The reality is rather more modest. Basically, the Commission appeals to the consciences of judges who behave badly to do the right thing of their own accord and is the designated messenger to tell judges that the time has come for them to retire due to disability. The Commission also gives uphappy litigants a futile place to vent. The Commission also runs judicial ethics classes.

The Commission is worth the infinitessimal sum that is spent operating it. We'd be worse without it, and the threat that it could exercise its power more dramatically (it can recommend public discipline or removal of a judge from office to the Colorado Supreme Court) has a certain force. But, it is still largely ineffectual at addressing the problem of problem judges. The vast majority of judges in the past 41 years have been good ones, but the disciplinary numbers from the Commission vastly understate the problem.

SCORE Doesn't

Not surprisingly (I count myself amongst the "I told you so" crowd), Colorado's new state voter registration database called SCORE has all sorts of critical errors as we approach a critical Presidential election.

In and Out

I've been ramping up my writing output at work, for clients, and have been writing mostly fiction at home, so I've been neglecting the blog a bit lately. Sooner, or later, I'm sure that I'll drift back to a more typical pattern. I think it may be the webcomics I've been reading lately. They get your mind spinng in an entirely different way than the newspaper or my usual gruel of academic scholarship.

27 May 2008

It's Tuesday and No One's Voting For President

A week from today are the last Presidential primary contests of 2008. The remaining calendar:

May 31: Committee meeting to consider proposals to seat a delegation from FL and MI

June 1: Puerto Rico Democratic Party Primary (55 pledged delegates)

June 3: Democratic primaries in Montana (16) and South Dakota (15)

Obama currently needs 49 delegates to secure a 2025 delegate majority; Clinton needs 246 delegates (subject to the committee determination on May 31 and possibly a last minute change of policy at the credentials committee at the Democratic National Convention in August in Denver). There are 86 pledged and 201 superdelegates who have not yet declared their allegiances in the race.

Clinton is favored in Puerto Rico, but by a much thinner majority than in Clinton strongholds like West Virginia, Kentucky and Arkansas. Obama is favored to win substantially more than a majority in Montana and South Dakota. Realistically, Obama can expect to win about 42 more pledged delegates in the next week. Obama has also received a steady trickle of superdelegate endorsements and is likely to secure at least seven more in the next week. Thus, he will probably have enough pledged delegates and committed superdelegates to win the nomination by June 3, barring a change in the rules regarding Florida and Michigan.

The national party has refused so far to agree to any deal on Florida or Michigan that does not have the support of both the Clinton and the Obama campaigns, and also the suppport of the state party in question. Thus, delegations from these states are unlikely to be seated unless they are irrelevant to the outcome of the Presidential nomination race. Even if those delegations were seated at this point, Clinton would still lag in pledged delegates and would need to secure a disproportionate share of the remaining superdelegates.

Superdelegates can change their minds at any time prior to the national convention, but the more likely scenario is that superdelegates will flock to a presumptive winner, rather than jumping ship en masse from the Obama campaign to the Clinton campaign.

26 May 2008

A Brief History Of U.S. Agricultural Policy

A Daily Kos diarist sums up the history of U.S. agricultural policy, with all its absurdities, in a very large nutshell.

The extent to which our political process produces irrational results on this issue, which isn't terribly atypical, is horribly frustrating to anyone who wants to believe that democracy produces good policy.

5.56 v 7.62

A debate has been simmering for years in military circles (see, e.g., here and here and here (O.K., that one is about another feature, bayonets)) and in particular in the military blogosphere (of which I am a fringe, token liberal member). It reached a full boil when the Army was on the verge of adopting a new carbine and rifle (the XM-8), and then ebbed when the contract was cancelled for reasons of procedural missteps in the procurement process for the project.

Now, the Denver Post has finally caught on. The issue is bullet caliber. U.S. and NATO forces generally use 5.56mm rounds (i.e. .22 caliber) for their carbines and rifles (such as the M4 and M16). The Russian AK-47s and certain specialty troops (snipers with M14s and special operations commandos with the SCAR Heavy, for example) use the larger 7.62mm (i.e. .30 caliber) round.

The M4 is the standard weapon of vehicle drivers in Iraq, the M16 is the standard weapon of infantry troops. Both are automatic weapons (which means that they can fire multiple shots with a single pull of the trigger). The M4 and M16 differ mostly in length, with the M16s longer barrel making it more accurate at long ranges and more potent. The M14 used by snipers is designed for very long range, highly accurate shooting, usually with one shot at a time.

In a nutshell, the smaller round has the virtues of institutional inertia, standardization with allied forces, and lower recoil. The larger round has greater stopping power. Some participants in the discussion have urged an intermediate sized 6.8mm (0.27 caliber) round.

There are other reasons to replace the current Vietnam era M4 and M16. Newer designs are less prone to jamming in extreme conditions, for example, and can be built to be somewhat lighter than existing weapons. But, advocates for a larger round say those considerations are secondary to caliber, while advocates for the existing caliber also argue that jamming isn't a big enough concern to justify replacing the M4 and M16, since it is rare in any case.

The debate has an almost religious character. Advocates of each position are deeply entrenched. No one seriously doubts that the M4 or M16 are inadequate for most purposes, but advocates for change argue that we can do better. Supporters of the status quo argue that user training is the problem and that stopping power is not inadequate. Supporters of change argue that the current round doesn't kill with a single round as often as it should.

The absence of support for the larger round within the Department of Defense establishment, despite such a widespread call for it among former military outside critics is hard for an outsider to read. Likewise, the technical arguments are hard for someone who isn't personally a gun expert to evaluate. Too many real experts come out on opposite sides of the debate. Also, the Army's recalcitrance on providing soldiers with body armor, armoring Humvees, and deploying mine resistant vehicles in the current conflict, and unwillingness to confront evidence of the jamming problem in the current carbine and rifles relative to newer models has undermined its credibility on this issue.

While replacing the small arms used by U.S. troops would cost money, the amount of money involved is very modest. A new rifle or carbine for every soldier in the U.S. Army would cost less than $1 billion, a tiny piece of the overall defense budget, and less than the cost of a single typical naval ship or a handful of jet fighters, for something that almost all troops on the ground carry with them as their primary weapon every day. Spread over two or three years, it would be a pittance which Congress would easily agree upon if the Defense establishment recommended it.

I personally am agnostic on the caliber issue, but it is clear to me that a redesign of the M4 and M16 is in order, and it is likewise clear to me that the caliber issue ought to receive a fair hearing from experts independent of the current procurement brass.

Meanwhile, in a related story that wasn't covered in this particular pair of articles, there has been considerable dissatisfaction expressed with the standard issue Army pistol (more so than almost any other equipment used by U.S. troops in combat), but an effort to replace this has also derailed. Once again, I'm not an expert on why soldiers in the field dislike this gun. But the pistol issue would be an even cheaper problem to address because it would be easier to use commercial off the shelf replacements (since it does not require an automatic weapon and because many quality pistols are used by law enforcement), and because each gun is less expensive.


I am lucky, this Memorial Day.

I can think of only one relative who died while serving in this country's military, out of many dozens of them. I've been to the Vietnam Memorial, been told of the relationship, looked at the name engraved in stone. He was a cousin of my father. But I never knew him, and he is a relatively distant relative. A large share of my ancestors came to the U.S. after the Civil War, and good share were the wrong age, the wrong gender, or had essential occupations (mostly in farming) that kept them out of World War I, World War II and Korea. They made sacrifices in wartime, but not of their lives. Many of my relatives were drafted in peace time, but that rarely kills you.

My family tradition does not include military service as an important virtue and obligation that one must volunteer for as a matter of duty in the absence of a draft. I can't name a living relative who ever told war stories, bragged about his military service or extolled the value of becoming a soldier or a military officer of any kind. If my relatives expressed any sentiment that I recall, it was relief at having escaped the draft or having mustered out as soon as possible after having been drafted. I grew up never seeing service as a military officer as a path that I was under any pressure to pursue or consider, although I was never expressly discouraged from doing so either. I grew up with a strong sense of honor, but that sense had little to do with bearing arms.

In law school, I investigated the Judge Advocate-General's Corp. The physical fitness requirements, the expectations of spit and polish, and a prevailing belief at the time that military justice was corrupt quickly dissauded me. (The pay and benefits, as well as the opportunity to see the world, actually seemed rather decent at the time.)

My peers were mostly college bound small town kids from the Midwest and didn't sign up (or even seriously consider doing so) either. I knew as many consciencious objectors as I did people who signed up. I wasn't either. I registered for the Selective Service and read the rules and felt a great relief the day that registration expired. I actively opposed the first Gulf War from a seat as an intern in Congress, but I was opposed to that war, not all wars. My peers and I exaggerated the danger and assumed that if you signed up to serve in the military that there would probably be a war and that you would probably get shot.

Honor as a war hero is something that it never occurred to us to crave. I still have mixed feelings about war heros. While they often did the right thing at a given moment and saved their buddies at great risk to their own lives, acts of heroism are usually made necessary by somebody else's incompetence. Heroism is usually a symptom of failure. Respect for what the hero did is often tempered in my mind by rage at our other guy's deadly mistake.

I am hardly atypical of my generation. No U.S. military action since Vietnam has involved a draft or killed U.S. service members on a similar scale. Vietnam was in its final days before I had even a glimmer of a notion that it had ever happened. For me, it is a piece of history I have heard retold vividly but never experienced myself. Hearing the American Top 40 played looms larger in my memories of those early years of my life, than the war, although I recall seeing a glimpse or two of it on the TV news.

The current Iraq War has come with the highest price in our soldier's lives since Vietnam, but it is an order of magnitude smaller in scale and because it has been fought by a volunteer force, very few of my peers have had connections to it. Some of my high school friends and some friends of friends in my adult life have been involved in the enterprise, but thankfully, have been spared so far, like 99% of their peers who have served in the military during the Afghanistan and Iraq Wars period. Certain units have paid much higher prices, but my friends haven't been in those units. I suspect that we are in the last half of these wars, although one can never really know for sure until it is over.

The most personal it has gotten for me was sharing a home with a distant cousin in Washington D.C. as her beloved was deployed to the Gulf War, feeling her anguish, fear and uncertainty. Fortunately, in the end, the Gulf War turned out to be the most lopsided military victory that the world has ever seen, and Bush the elder didn't push to turn it into a prolonged insurgency. No one we knew died.

I have received the benefits of the service of those who have died for their country, while paying a low price among my friends and family. I am lucky and I know it. Civilized people should feel gratitude for benefits conferred upon them, even when they didn't ask for the sacrifices that brought them about.

Thank you, those of you have have died for our country, and even more so, those of you who have been left with holes in your lives as a result of their absence. I fly the flag before my house today for you.

Millions of people in our country today weren't so lucky. The latest war has produced thousands of orphans, widows and parents who have lost children. Prior wars left even more behind, their lives shattered by the loss of a son, husband or father, or sometimes (rarely until the recent war) a daughter, wife or mother. Ten times as many still have their loved ones, but those loved ones are maimed in mind or body or soul. All those losses are not easy to bear. We have a government agency, a big one called the Veteran's Administration, to console you and give you what you need. But government benefits can never be enough. Tragic losses can never truly be repaid.

Their losses have nothing to do with the politics that brought about the wars that they died in. Soldiers do what they are told. They don't decide whether or not to engage in the wars that produce their sacrifices. Those decisions, we leave to another caste, politicians. The soldiers didn't make those choices. They didn't choose to uphold our values or to betray them. They made a simple act of submission to the needs of their country and the wisdom of its leaders. Their sacrifices were an investment in our future, placed in trust for management by others who never knew them. Our country needs their gifts of obedience to survive. We betray their memory when we mismanage what they have offered us.

War seems to make heros out of some men, demons of others, and hardens most of the rest. The line that divides these men can be paper thin.

Of course, not every hand has been dealt yet. I could still lose a friend, a son or a daughter, a son-in-law or a daugher-in-law, or a grandchild to war. I long for peace from 2017 to 2027 or so. But there are no guarantees in life. It is a possibility every parent faces and feels differently about. I refuse to think very hard about it until it becomes reality, or at least, until it becomes probable. There is no reason to borrow worry. Like prior generations, I am unlikely to encourage or discourage service, and I suspect that my children are unlikely to seek it out, although they might.

My parents took that chance when they let me participate in the proto-military culture of the Boy Scouts (that part always spooked me a little, as did the anti-gay culture of the military and later the Scouts). But nothing came of it. I don't know if the service minded generation of my children will influence them towards this end. The soldier's life gets better press now than it did when I was a child in the immediate aftermath of Vietnam. I will have to wait and find out the hard way.

Until then, I will remain lucky and thankful.

Mixed Feelings About The FLSA

It may be Memorial Day, but my thoughts are currently more in a Labor Day mode.

The Fair Labor Standards Act primarily sets the federal minimum wage and imposes overtime requirements on "non-exempt" employees.

FLSA cases tend to be small

The Department of Labor pursues some of the most serious cases it can locate, usually in an effort to change the customary practices of an industry or a large employer.

In several recent years (before new regulations under the FLSA) the number of actions (and the number of employees impacted) has been as follows:

2003 - 29,425 (342,358)
2002 - 40,264 (263,593)
2001 - 31,772 (195,257)

Average number of employees per action:

2003 - 12
2002 - 7
2001 - 6

Average back wages per employee (per action):

2003 - $621 ($7,222)
2002 - $666 ($4,361)
2001 - $569 ($3,497)

Average civil penalties as a percentage of back wages awarded:

2003 - 1.5%
2002 - 1.3%
2001 - 2.7%

Of course, most of these cases would not be cost effective for private attorneys to pursue. There is a private cause of action under the FLSA, and a win can provide attorneys fees awards, but in a private action there is also a risk of a less than the anticipated outcome, such as an attorneys' fees award for an amount less than actually earned on a billable hour and expenses basis.

The largest half a dozen settlements over the past few years (involving millions or tens of millions of dollars), largely involve misclassifications of low level employees who are called managers as exempt rather than non-exempt for overtime purposes at major franchises or national companies.

Most FLSA actions involve agricultural workers, day wcare workers, restaurant workers, garment manufacturing workers, private security guards, health care workers, hotel and motel workers, janitors, and temporary help.

A good share of the actions have roots in overtime regulations that are not always clear regarding how an employee is classified, coupled with employers taking aggressive stances knowning that the consequences of getting it wrong are modest.

The Economic Impact of the FLSA

Something on the order of 90-160 million U.S. workers are non-exempt, and the vast majority make well above the minimum wage (since the minimum wage is so low), so overtime is the only major benefit that they receive from the FLSA.

Since overtime is simply 1.5 times base pay, and the FLSA does not regulate base pay, any employer who wants employees to work more than 40 hours a week on a predictable basis can control total compensation to the employee simply by adjusting base pay. Employers who pay a base rate more than 1.5 times the minimum wage are capable of restructuring their affairs to avoid the economic impact of overtime entirely.

Overtime only has mandatory economic effect that can not be eliminated by juggling base pay based upon hours worked, for employers who pay less than 1.5 times the minimum wage and have employee who work more than 40 hours a week. This group of employees turns out to be quite small, perhaps because low wage jobs have been structured to avoid any risk of overtime pay. Suggestive of this fact is the knowledge that in 2005, about 1% of workers who worked full time or overtime were paid no more than the minimum wage (and some were tipped employees who actually made quite a bit more after tips). In contrast, about 6% of part-time employees (less than 35 hours a week) made the minimum wage or less. In raw numbers, there were 67,000 workers paid overtime who were paid minimum wage or less in 2005, of whom about three-quarters were tipped employees, out of 75.6 million hourly employees for the nation as a whole in the same data set.

The FLSA's tendency to encourage employers to fashion low hourly wage jobs as part-time also tends to give workers, like teenagers and people working "second jobs" for their families, who have the luxury of being able to work part-time and survive economically an edge in the labor market over those people who need to have a full time job to get by, possibly increasing unemployment for low skilled primary breadwinners. (Although, teen employment, in a long term trend, is at record lows, with only about one in three teens working, compared to almost half a few decades ago).

The FLSA is a bit like the laws which prohibit discrimination on various prohibited grounds in hiring (as opposed to wrongful termination and failure to promote for discriminatory reason). Enforcement is absolutely anemic, and is hardly enough to overcome major economic opposition to its policies. But compliance has a negligible negative economic effect (other than the costs of figuring out the law itself) on employers, and establishes social norms that probably have far greater effects than the legal rights established by the laws themselves.

I'm not entirely sure that the norms created by FLSA overtime rules help those whom it is designed to help at a macroeconomic level. Despite the fact that it is easy to pay overtime without increasing overall payroll, employers do tend to avoid employing rank and file workers more than forty hours a week in practice, while the norm for managerial and professional employees who are exempt is far greater, probably on the order 50-70 hours a week. More hours means, on average, greater productivity per employee, and greater productivity per employee means, on average in a competitive market for the services an employee offers, greater compensation.

Thus, the exemption for managerial and professional employees leverages even modest per hour differences in productivity between exempt and non-exempt employees into big differences in productivity per employee. This, in turn, may be an important reason why there are meaningful social class divideds in the U.S., rather than merely gradual gradations. A 25%-50% difference in hours worked can greatly amplify the effect of even a dollar or two difference in productivity per hour.

An employee making $14 an hour will earn $28,000 a year working full time at 40 hours a week. If that employee is equally productive and works 60 hours a week and is classified as exempt, a $42,000 a year salary will have the same economic impact on the employer and will create less fuss, since there is no need to keep track of hours and there are two-thirds as many employees to manage, so there may be room to pay the salaried employee even a little more than that amount, perhaps by matching 401(k) contributions of the salaried employee to some extent. This is the difference between a working class life and a middle class life.

If, in fact, the hourly employee's productivity gives rise to a $13 per hour rate of pay, while the exempt employee's productivity gives rise to a $15 per hour rate of pay, the non-exempt employee may make $26,000 per year, and the exempt employee may make more than $45,000 per year and probably a few extra benefits as well.

It isn't that non-exempt workers a lazy. They simply have employers reluctant to put them to work for the kind of hours that they do exempt employees, and as a result, non-exempt workers produce less per year (indeed, non-exempt workers frequently have productivity that is more obviously a function of hours worked than exempt workers).

The tendency of employers to honor the forty hour a week expectations for hourly workers also leads to the greater frequency with which working class families have bread winners who work two or three jobs. Yet, working multiple jobs generally doesn't produce overtime pay. Instead, someone who works two jobs usually earns less per hour at their "second" job than they do at their first one, essentially earning negative overtime pay, and must endure a more complicated life as a result of juggling more than one work schedule.

The forty hour week for non-exempt employees may also help explain why self-employed constructive and maintenance contractors like plumbers and carpenters are often economically comfortable compared to employees in big companies and government agencies doing comparably skilled work.

The fact that employers tend to structure jobs that require only a high school education as hourly, while structuring jobs that call for college educations as managerial or professional, a division more or less embedded in the FLSA regulations, which look to education as a key factor in a "professional" designation, also impacts how employees are managed. The route of least resistance for a work place that has hourly employees under the FLSA is to micromanage work hours and breaks in a way that can manifest itself as a paternalistic lack of trust that can be socially demeaning. A salaried workplace, in contrast, almost necessitates a more hands off management style that implicitly trusts the worker. This puts one more brick in the wall of class separation between the working class and the middle class.

Overtime, ironically, is one employee benefit that economically rational people stuggle to be denied.


This post isn't an economics journal article and includes only intuition, not econometric estimates, although I have no doubt that there is a whole literature out there that attempts to quantify these amounts and, in all likelihood, not much consensus within that literature.

But there is real reason to wonder if the FLSA doesn't contribute to, rather than mitigating, the serious problem of the social class divide in the United States.

23 May 2008

Moving Gitmo To Afghanistan?

The U.S. is building a new prison, in Afghanistan, for up to 1100 terrorists and terrorism suspects. The existing prison, in Bagram air base, holds 610 inmates. Apparently, the U.S. wants to transfer the 270 prisoners held at the at Guantánamo Bay, Cuba prison.

From here.

Given the source, I'd count this as a credible rumor, but not a sure thing.

Merchants Love Pictures

I have a credit card with my picture on it. I am continually amazed at what a strong and positive reaction this draws from merchants, from proprietors to cashiers, of all types. They are impressed by the technology of it, and heartily endorse its value in preventing credit card fraud, a problem which even cashiers and grocery store baggers are remarkable sensitive to, even though they personally face little harm from it.

In commercial practice, almost all credit card fraud is born directly by the credit card company, that generally reverses fraudulent charges incurred with customer cards and often waives "deductibles" that its contracts allow it to impose, and indirectly by merchants, who generally receive charge backs for fraudulent charges at their premises from the credit card company.

Reducing credit card fraud with photo ID cards would both reduce time and money spent processing disputes arising out of these incidents for customers, credit card processors and merchants alike, and would also save merchants money.

About 23% of credit card fraud takes place in lost or stolen card transactions that could be prevented with photo ID credit cards. Fraud is actually surprisingly low, however, at least in Canada where:

In the end of 2005, MasterCard and Visa generated a sales volume of more than $190.6 billion, from the circulation of approximately 56.4 million credit cards across Canada. Credit card fraud statistics show that about $2.8 million was lost due to credit card fraud, from fraudulent use of MasterCard and Visa alone.

Thus, credit card fraud produces about $1.47 of losses per $100,000 of sales.

Another source suggests that fraud losses are higher overall, with net fraud losses of $70 per $100,000 of sales, for a total of just under $1 billion per year, although it doesn't identify how much of that loss is in face to face transactions.

Another tool, password protection for credit cardsand ATM cards using the same kinds of personal identification numbers used by ATM cards verified by "smart chips" on the card that are not revealed to the vendor, has reduced fraud in face to face transactions in the U.K. by two-thirds from 2004 to 2007. Credit card PINs will be near universal by 2010 ion Europe. Similar declines have been seen elsewhere in Europe (also here).

Any way you cut it, losses in credit card transactions to fraud pale compared to losses by credit card companies due to defaults by credit card holders.

In the U.K. for instance:

[B]etween 2007Q2 and the same quarter a year earlier the write-off rate for credit card debt rose from 5.6% to 7.5%. Each write-off rate is calculated by dividing the amount written-off over the latest four quarters by the average stock of debt over the same period. Write-off rates are increasing. At the start of 2000 the write-off rate for credit card debt was below 2%.

On a comparable basis with the numbers mentioned above for fraud, that means that write offs produced losses of $5,600-$7,500 per $100,000 of sales, and approached $2,000 per $100,000 of sales the less debt stressed year 2000.

Merchants pay on the order of 1% to 3% of their sales as a service fee to credit card companies, which works out to $1,000 to $3,000 per $100,000 of sales, which is similarly far more significant than merchant losses from fraudulent charges which they are required to bear through charge backs.

Bad debts are 100 times more important to credit card system bottom lines than fraud.

Drinking Like A Prosecutor.

In an amusing feat of hard hitting investigative journalism, the staff at the Colorado Springs Independent spent a day copying the drinking habits of El Paso County District Attorney John Newsome to see how drunk they would become.

Not surprisingly, the evidence overwhelmingly established that drinking as much as alcoholic attorney Newsome is enough to make anyone legally unable to drive, which Newsome did after his binge (which isn't out of the ordinary for him).

Newsome faces a Republican primary challenger. No Democrat stepped forward to run in Colorado's most conservative city.

22 May 2008

Peak Oil Gets Personal

As recently as 2004, trucks and SUVs accounted for 70 percent of Ford's sales volume . . . . Retail sales of trucks and SUVs accounted for just over 30 percent of sales in April. . . Ford's smallest offering, the Focus sedan, saw sales jump 29 percent in the first four months of this year.

From here.

All of the big three automakers have cut truck and SUV production as a result of recent sales trends, and reduced their overall sales forcasts. Small cars are doing well in the used car market. Another parent at my children's school often drives to school in a neighborhood electric vehicle (picture above), which looks like a Smart car but smaller.

If gasoline prices continue to rise, truck and SUV sales will presumably fall even further. The lemonaide side of the equation is that this shift will produce a reducing in U.S. oil consumption as a result of increased fuel efficiency for another decade.

Obama On Taxes

According to F. Patrick Brown, writing for the Kansas City Star (hat tip to the Tax Profs Blog), Obama's key tax proposals are as follows:

Obama will reinstate the individual income tax rates established in 1994.

While the difference between the highest tax rate in 1994 (39.6 percent) and the highest tax rate in 2008 (35 percent) is less than 5 points, that figure is misleading, because tax brackets increased faster in 1994. For example, in 1994, the maximum rate on taxable income started at $250,000, while in 2008 it doesn’t start until $357,700. . . .

Congressional leaders want to lower corporate income tax rates to be more competitive with our trading partners. Obama wants to redirect corporate tax incentives (credits, deductions and exclusions) to achieve economic and social policy objectives. . . .

Obama will tax dividends at marginal income tax rates and will raise the tax rate on long-term capital gains to 1994 levels (28 percent). . . .

The prior Republican Congress lowered the tax rate and raised the amount of the exemption, but did not repeal the taxes on the transfer of property between generations. With the expiration of the Bush tax cuts in 2011, the higher rates and lower exemptions will be reinstated. The Democratic Congress has also adopted the policy of “mend it, don’t end it.” . . .

American taxpayers pay a Social Security payroll tax on earned income at the rate of 12.4 percent, plus a Medicare payroll tax on earned income at the rate of 2.9 percent. Self-employed individuals pay the entire 15.3 percent, while employees split the tax equally with their employers.

The amount of earned income subject to the Medicare tax is unlimited. The amount of earned income subject to the Social Security tax is limited. . . . in 2008 you will pay $12,648 (12.4 percent times $102,000). . . . Obama would remove any limit on the amount of earned income subject to the Social Security payroll tax. . . .

[Obama proposes an] oil windfall profits tax.

The article fails to note the Obama proposal to "create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family." The credit would be available to the extent of employee payroll taxes paid by the taxpayer on their first $8,100 of earned income.

Some other notable Obama tax proposals not mentioned are:

* "eliminate all income taxation of seniors making less than $50,000 per year."
* "a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief,"
* a reform of "the Child and Dependent Care Tax Credit by making it refundable and allowing low-income families to receive up to a 50 percent credit for their child care expenses,"
* a "universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students," and
* a proposal to "increase the number of working parents eligible for EITC benefits, increase the benefits available to parents who support their children through child support payments, increase benefits for families with three or more children, and reduce the EITC marriage penalty, which hurts low-income families."

Last year, Obama introduced legislation in the Senate to establish "a tax credit to companies that maintain or increase the number of full-time workers in America relative to those outside the US; maintain their corporate headquarters in America; pay decent wages; prepare workers for retirement; provide health insurance; and support employees who serve in the military."

Obama favors giving "the Treasury Department the tools it needs to stop the abuse of tax shelters and offshore tax havens" and "eliminating special-interest loopholes and deductions, such as those for the oil and gas industry."

Finally, Obama also proposes to allow the IRS to generate a starting point tax return for them based upon information returns already filed with the IRS.

The overall design of the tax plan resembles that of the Clinton administration, with moderately high taxes on the well to do, although not in any purist fashion that, for example, equates earned and unearned income as a matter of principle, accompanied by many targeted tax credits.

Would These Proposal Be Enacted?

If Obama wins the general election, it is likely that he would do so with Democratic majorities in the House and the Senate. The Democratic majority in the Senate would likely be largely than it is now, although a 60 vote filibuster proof majority would be a stretch and even with 60 Democrats in the Senate compromise may often be necessary with conservative Democrats in that chamber.

While a President Obama is likely to get some semblance of his tax agenda enacted, Congress is particularly strong vis-a-vis the President on the issue of tax policy, and indeed, democratic government in England, France and the United States was strongly motivated in each case by a desire to give democratically elected representatives a say over tax policy. Thus, Obama is unlikely to get precisely what he proposes, even though all of his proposals will receive a fair hearing.

For example, I suspect that it is unlikely that Obama will actually secure elimination of the earnings cap on Social Security payroll taxes, if elected, although he would probably secure a substantial expansion of that tax base.

Similarly, while Obama is likely to secure a return of the 1994 income tax brackets (including the 39.6% bracket), it is likely that the brackets would largely track the existing income cutoffs, rather than those in place in 1994.

In all likelihood, some, but not all, of the tax credits proposed will become law.

My best guess with regard to the gift and estate tax is that Congress will decide to lock in the tax rates and exemptions in place in 2009 (i.e. 45% of the taxable transfers in excess of $3,500,000 of taxable gifts and bequests in a lifetime).

Does Short Sale Regulation Cause Bubbles?

[I]n volatile markets, defined by a wide divergence of opinion on a new event, the bears sit on the sidelines and the bulls buy -- leading to a buying frenzy. Why do the bears sit on the sidelines? It is hard to short.

One of the reasons it is hard to short is government interference (which was recently reduced with the repeal of the up tick rule] . . . Government should get out of the way of shorts--let the market devise cheaper ways to short (not the modern ultra short ETFs) and we might have fewer bubbles.

From here.

While I don't necessarily agree, and the post is a stray throught attacking an issue of massive economic importance, it is empirically and theoretically well motivated and deserves greater attention.

21 May 2008

15 Women Burned As Witches In Kenya

The bad old days when women were burned for witchcraft aren't over.

The Gambia Run By Anti-Gay Quack

Sometimes truth is stranger than fiction. While there are lots of people in the world who want to kill all gays, and there are lots of people in the world who offer fake remedies for HIV/AIDS, rarely do both of these traits cohabit in the person of a national head of state. But, The Gambia has such a person in charge. His name is Yahya Jammeh.

The Gambia is a small West African country (it has about 1.7 million people and is geographically tiny as well, about twice the size of Delaware), which was formerly a British colony. It is predominantly Muslim (about 90%, with a minority of about 9% that is Christian), and is multi-ethnic and multi-lingual with English as the official language of government affairs. It is surrounded on all sides by land by the former French colony of Senegal, but has an Atlantic Ocean port at the mouth of the Gambia river, whose banks and delta comprise the territory of the country.

The CIA World Factbook offers the following recent history of the country:

The Gambia gained its independence from the UK in 1965. Geographically surrounded by Senegal, it formed a short-lived federation of Senegambia between 1982 and 1989. In 1991 the two nations signed a friendship and cooperation treaty, but tensions have flared up intermittently since then. Yahya A. J. J. JAMMEH led a military coup in 1994 that overthrew the president and banned political activity. A new constitution and presidential elections in 1996, followed by parliamentary balloting in 1997, completed a nominal return to civilian rule. JAMMEH has been elected president in all subsequent elections, including most recently in late 2006.

Half the population is under the age of eighteen, the average woman have five children in a lifetime, and three-quarters of the population get by as subsistance farmers in the tropical country. AIDS does not have a high incidence in The Gambia by African standards (about 1% of the population is HIV positive). Probably something on the order of 60,000 households, mostly in urban areas near the coast, live something resembling a modern Western lifestyle, although almost 30% of the population has access to cell phones. Of those age 15 years or older, only 48% of men, and 33% of women can read and write.

The Gambia is, alas, not terribly exceptional as African countries go. While some are far better off, the human prospect in many is equally dismal. Where does one even begin in a place like this?

20 May 2008

Online Newspaper Comments A Failure

The online editions of the Rocky Mountain News and the Denver Post both have comment features. Users can post comments to almost every story, just as they can to posts on this blog.

Of the two, the Rocky's is worse, not technically, but in terms of moderatation. It is an ocean of inarticulate xenophobic hate. The Post's comments are sometimes more reasoned and civil, but rarely inform.

Without the effective user moderation and common purpose found on sites like Daily Kos, or the reasonably vigilant owner moderation found on most individual or small group blogs, political discussions on the Internet (which most commentary on news stories amounts to) seem inevitably to degenerate into online shouting matches by users that few intelligent readers care to hear.

Newspapers are good producers of original content. While the dead tree version of their medium seems to be losing steam, this particular expansion of the medium has not been well executed and is better off abandoned for now. A return to the historical model of "Letters to the Editor" which are published only if they are deemed worthy contributions to the discussion, while high handed, would improve the product.

Immigration Agents Still Assholes

The New York Times notes that 3,300 people a year from countries where visas are not required to enter the U.S. are detained or deported on the whim of immigration officials (out of 8 million visits). Entry can be denied on a whim without proof or an opportunity to contest the decision.

Those whom the Department of Homeland Security claims are seeking asylum (even when the person detained denies it) are held indefinitely without meaningful due process. The case described suggests strong that immigration officials lie to punish people with unjustified detention for this ground, and often abuse their discretion. The responsible immigration officers in this case, for example, are little more than criminals in uniform.

Spirituality Bad For Law School Grades

This empirical study explores whether a student's spirituality affects academic performance during the first year of study at the University of St. Thomas School of Law (Minnesota).

A spirituality index measured 1) frequency of attendance at religious worship, 2) frequency of discussion of religion with others from different faith traditions, 3) the presence and strength of the connection between God and morality, and 4) the presence and strength of the view that entry into the legal profession is a divine calling.

The spirituality index was correlated with academic performance measured by comparing actual performance and predicted performance (using the LSAT and the student's undergraduate grade point average).

Strong spirituality had a negative correlation with academic performance. Medium and low spirituality had no correlation. And among the third of the students who performed substantially under expectations, the negative correlation was more significant than the broader positive correlation of either the LSAT or the undergraduate grade point average.

From here (paragraph breaks added for readability in a blog format).

The law school in question is affiliated with the Roman Catholic church.

What Should We Teach Our Children?

The curriculum of our K-12 schools it outdated.

We are teaching our children essentially the same things that we taught them shortly after the last round of school reforms when Latin was jettisoned from the canon not long after World War II. Keyboarding seems to have muscled its way into the curriculum, displacing cursive writing, but not much else has changed.

We have a curriculum aimed to preparing all of our students for a liberal arts college education, something that made sense when most kids never finished high school, that no longer makes sense when high school is intended to be universal, and most kids who do go to college will enroll in preprofessional programs. We are preparing them to be renaissance men and women, in an age that increasingly rewards specialization.

We particularly short change those students who don't go to college, or drop out of college after minimal training. We are not teaching them many things that they need to know before their formal educations end, and we often teach them things whose relevance is hard to understand.

We often teach high school students trigonometry but rarely teach them statistics. We often teach them 19th century literature but rarely teach them how to read a medicine bottle or a contract. We often teach them economics but rarely teach them how to complete a tax return. Students often ask why then need to learn what they are being taught and rarely receive satisfactory answers. Yet, there is every reason to believe that more students would be engaged if they could understand why they needed to know what they were being taught.

There is nothing wrong with making cultural and civic enrichment a part of the curriculum. But our children need to be functionally literate as well. In the adult world, they are expected to know how to read a medicine bottle, how to explain their symptoms to a doctor or nurse, when to seek medical attention, what they are obligated to do under a lease, when and how to file their tax returns, how to buy a car, what to do if their car breaks down or they are in an accident, how to act if they are victims of a crime or are in an accident, and how to evaluate risk. Yet, we don't teach them these things in school and no one is born knowning them. Most students need to know what to do if they are arrested more than they need to know how an idea becomes a law.

We often try to teach them more difficult subjects, like reading classical literature, before they have mastered easier subjects, like reading contemporary literature.

History is often taught survey style. Year after year, a teacher tries to take on the entire scope of it in a single year. But this denies students the depth that makes history interesting and relevant to current circumstances.

The humanities also often come out of context. History and classical literature are too often divorced from each other, rather than enriching each other, and both often omit the history of art, and the music appreciation that should be part and parcel of the same enterprise, the task of really understanding in depth our cultural heritage. These subjects should usually be taught in the same class by the same person as an integrated endeavor, not taught in isolation, with students reading the Scarlet Letter for their 9 o'clock class, and hearing about the Chinese Cultural Revolution at 10 o'clock. This may work once students have context, as they often do at more selective colleges. But it misses opportunities for better teaching with younger children.

Most school systems start teaching languages in earnest in high school, when all of the evidence indicates that elementary school students have a much greater capacity to learn languages than older teenagers.

Most school systems begin classes for teenagers early in the morning, while beginning classes for younger children late in the day, despite the fact that we know that teens are far less ready to learn in the early morning than younger children.

Most school systems place too great an emphasis on teaching children with other children of the same age. While it is possible for ability tracking to be tyrannically rigid, as it was in the historical British system where tests taken at age eleven set your course for life, the current system which rigidly tracks children by age in furtherance of the ill established social benefits of doing so, is little better.

Colleges aren't necessarily better. By ill considered consensus, they impose traditional curricula upon high schools, whether they make sense or not. Their own practices are often little better.

For example, the business school at Miami University, in Oxford, Ohio, where I grew up, requires all of its students to take and pass calculus, despite the fact that very few business people need to know calculus. It is simply a device to weed students out. This isn't to say that calculus is inappropriate for everyone. Engineers, physicists and mathematicians, for example, all need to master it. But in the business world, it has little place except in the scholarly work of PhD economists and the practical work of sophisticated derivatives traders (and even in these cases, usually only in the service of statistics that doesn't require circular trig functions).

College foreign language courses similarly often prioritize classical literature over functional communication. Yet, many people need to be able to speak contemporary conversational Mexican Spanish in their daily lives -- from doctors and emergency technicians, to police and teachers. Few people has any great desire to read Don Quixote, written in the classical style of pre-industrial Spain in the original.

College teacher's education programs squeeze out classes designed to make future teachers themselves better educated, in favor of classes about teaching that often fail to meaningfully impart the abilities they aspire to teach. Thankfully, an increasing share of teachers have liberal arts degrees following by a year of integrated post-graduate clinical practice and theory, but these programs remain the minority approach.

No one person has all the answers, or all the detail required to take on the task of overhauling curriculum. Indeed, handing that task off to some blue ribbon commission is probably ill advised. But we do need leadership that makes clear that change is needed, that traditional approaches should not be retained simply for tradition's sake, and that focuses on teaching students what they need to know at the time when they are more ready to learn it.

19 May 2008

The Trouble With The Uniform Commercial Code

The Uniform Commercial Code (UCC) is not the world's best drafted law, although it has been adopted in all fifty states and has better drafting than many laws. One of the key problems in using it is that, as commercial law professor Gregory E. Maggs explains (immediately preceeding footnote 202 in this article):

Many parts of the UCC are intelligible only if you already know more
or less what they are attempting to say.

In the American legal system, where only a minority of judges have any background in commercial law or practice, and judges are generally assigned to cases at random, this is often a problem that creates considerable uncertainty in American business law.

The Economic Case For Immigration

Elementary economics make clear that immigration drives down the wages of native workers who have skills similar to those of immigrant workers. It is a simple matter of supply and demand. Increasing the supply of workers with a particular skill drives down the price of labor at any given level of demand.

Howard F. Chang, in a preliminary draft of an upcoming article in the Journal of Law, Economics and Policy, goes beyond this analysis to ask about the magnitude of this effect, and to compare restrictive immigration policies to other tools which could be used to protect the incomes of workers.

His conclusion:

[T]ax and transfer policies are more efficient than immigration restrictions as instruments for raising the after-tax incomes of the least skilled native workers. Policies to protect these native workers from immigrant competition in the labor market do no better at promoting distributive justice and are likely to impose a greater economic burden on natives in the country of immigration than the tax alternative. These immigration restrictions are especially costly given the disproportionate burden that they place on households with working women, which discourages female participation in the labor force. This burden runs contrary to the teachings of optimal tax theory and introduces excessive distortions in the labor market because the supply of female labor is more elastic than the supply of male labor. Thus, the best response to concerns about the effect of immigration on the distribution of income among natives is to increase the progressivity of the tax system.

Underlying this analysis is some empirical data on the magnitude of the immigration effect on the compensation received by native laborers:

[S]tudies of the effects of immigration in labor markets in the United States and in other countries have shown little evidence of any significant effects on native wages or employment, even for the least skilled native workers. Given the small effects of immigration on native wages and employment, protectionist policies seem particularly misguided. David Card's influential study of the effect of the Mariel Cubans on the Miami labor market, for example, produces fairly typical results for this literature: he found that the arrival of 125,000 Cubans in 1980, which increased the supply of labor in Miami by 7 percent almost overnight, had virtually no effect on the wages and employment opportunities for workers in Miami, including the least skilled whites and the least skilled blacks.

He cites for this point George J. Borjas, The Economics of Immigration, 32 J. ECON. LIT. 1667, 1697-98 (1994); Rachel M. Friedberg & Jennifer Hunt, The Impact of Immigrants on Host Country Wages, Employment and Growth, J. ECON. PERSP., Spring 1995, at 23, 42; NATIONAL RESEARCH COUNCIL, THE NEW AMERICANS: ECONOMIC, DEMOGRAPHIC, AND FISCAL EFFECTS OF IMMIGRATION 223 (James P. Smith & Barry Edmonston eds., 1997); and David Card, The Impact of the Mariel Boatlift on the Miami Labor Market, 43 INDUS. & LAB. REL. REV. 245, 256 (1990). The citation to Borjas, in particular, is relevant, as Chang describes Borjas as a leading proponent of restrictive immigration among published economists.

He also notes with regard to one of the leading papers of Borjas that:

Recent work by George Borjas, in particular, is widely cited by restrictionists for his large estimates of the effect of immigrants on native wages. In a recent study, for example, he attempts to estimate the effects of all immigration between 1980 and 2000 on native workers in the United States, concluding that the large influx of workers over these two decades reduced the wage of the average native worker by 3.2 percent and the wage of high-school dropouts by 8.9 percent during this period. These results, however, are based on a simulation that make two extreme assumptions. First, he assumes that immigrants are perfect substitutes for natives as long as the workers have the same number of years of education and of experience. Second, he assumes that the capital stock is fixed and does not respond to this immigration by increasing the supply of capital to the economic activities employing immigrant labor. Given these restrictive assumptions, his simulation is inherently biased in favor of finding large adverse effects on natives.

This criticism is supported by Borjas himself:

Borjas and Katz have since reduced their estimate of this adverse effect
on the wages of high-school dropouts down to 3.6 percent, “acknowledging that the original analysis used some statistically flimsy data.” Eduardo Porter, Cost of Illegal Immigration May Be Less Than Meets the Eye, N.Y. TIMES, Apr. 16, 2006, § 3, at 3.

Chang suggests that the low impact is due to the simultaneous impact on demand and supply created by the increased consumption accompanying the influx of immigrants, and the tendency of increased immigrant labor to encourage increased investment and economic expansion in areas where their labor is available. Then, he notes that:

Finally, the empirical evidence indicates that immigrants and natives are not perfect substitutes in the labor market, so they often do not compete for the same jobs. For example, immigrants are likely to have different language skills than natives do, so that employers may find natives to be better suited for some tasks than immigrants are. In fact, labor markets are highly segregated, with immigrant labor concentrated in some occupations while natives are concentrated in others. Immigrants compete with one another far more than they compete with natives. Indeed, some immigrant labor can be a complement rather than a substitute for native labor, so that an increase in the supply of immigrant labor will increase the demand for native labor and thus have positive effects on native wages rather than negative effects.

The last point is most disputed in the literature according to Chang's footnotes.

A study that makes the assumptions that Chang suggests, including the final assupmtion about imperfect substitution of labor between immigrants and native born Americans concludes:

Once they allow the capital stock to adjust fully, they estimate that all immigration into the United States from 1990 to 2004 increased the average wage of native workers by 1.8 percent and decreased the wage of native high-school dropouts by only 1.1 percent. Indeed, they find that all native workers with at least a high-school education enjoy increased wages as a result of this immigration rather than reduced wages. Thus, this influx of immigrants had only a small adverse effect on the shrinking minority of native workers with less than a high-school education.

The study Chang cites is GIANMARCO I.P. OTTAVIANO & GIOVANNI PERI, RETHINKING THE EFFECTS OF IMMIGRATION ON WAGES 3-4 (National Bureau of Econ. Research Working Paper No. 12497, 2006). About 9% of native born Americans are high school dropouts.

Chang finds the impact on native born working women comes mostly through consumption prices and not wage competition (as relatively modest shares of immigrant labor involve unskilled women). The jobs most impacts by immigration according to sources cited by Chang include gardeners, "cooks, kitchen workers, bakers, and others who work in food preparation, housekeepers, maids, and others who clean private households, child-care workers, and waiters, waitresses, and their assistants[.]" Lower wages in these positions, Chang notes, the benefits of cheap service sector immigrant labor accrue most strongly to two income couples, which enhances employment rates for women.

Among the most efficient tax benefits, in Chang's view, might be tax law provisions that set progressive tax rates for earned income person by person, rather than as a household, which imposes high marginal tax rates on someone who views themselves as a "second earner" in their household, or increased generosity in child care tax benefits.

Dead Men Don't Pay Death Taxes

[T]he burden of both estate taxes and inheritance taxes is borne predominantly by heirs.

From this pre-print of an academic article on the subject (which should be read with the understanding that changes may be made before the article is finalized to reflect comments and additional research).

The fact that death taxes are borne by heirs is important politically, because this fits the notion that these taxes function as a tax in lieu of an income tax on the inherited wealth of heirs, which is the primary political justification for these taxes.

Inheritance taxes are much more common than estate taxes, internationally.

While both inheritance and estate taxes primarily impact heirs (as opposed, for example, to decedents), the burden on particular heirs varies considerably between inheritance and estate taxes. This flows mostly from variations in the number of beneficiaries to whom bequests are left, which in turn is impacted by the number of children involved and the number of non-child beneficiaries in an estate (the study excluded bequests to charities and spouses for purposes of the comparison, assuming that both would be tax free in either system).

[A]bout 30% of inheritances come from estates that have no child beneficiaries, and the plurality of inheritance flows from such estates go to five or more non-child beneficiaries. In addition, about one third of estates have no child or non-child heirs, although they may have spousal or charitable beneficiaries . . . . the number of donor children is actually a very poor proxy for the donor’s total number of heirs. As the number of children rises, the number of non-child beneficiaries declines.

The degree to which the stereotype that people leave their estates overwhelmingly and entirely to their children, to the extent that they do not leave inheritances to charities and spouses, is far less accurate than one would expect. Indeed, despite having spent more than a decade preparing estate plans, I wouldn't have guessed just how large a share of inheritances don't go to children, spouses or charities.

Part of this may have to do with wealthy individuals recognizing that their children, who are often in the primes of their own economically privileged lives at the time an inheritance would be received, often don't have a compelling need to receive an inheritance. It also isn't entirely clear how bequests to trusts, which are common in large estates, are categorized.

Presumably, an inheritance tax would tend to favor collateral heirs who often receive fairly modest bequests, while burdening children, particularly in small families, who often receive fairly large bequests. This explains, in part, why countries with inheritance taxes frequently impose higher tax rates on inheritances from collateral relatives than inheritances from parents.

Six Sundays

There are just six Sundays left upon which it will be illegal to buy alcohol at a liquor store in Colorado.

Whose Afraid Of A Big Bad Blogger?

The response of attorney Clifford J. Shoemaker, to an Order to Show Cause why he should be sanctioned for misconduct in connection with his issuance of an abusive subpeona to an autism blogger Kathleen Seidel continues. He continues to discredit himself in the process.

Particularly notable are his claim that "her husband, has apparently seized control of a web encyclopedia" (i.e. Wikipedia); that she is "a person utilizing investigative ability well in excess of that available to the mother and housewife she claims to be"; and that it is proper to subpeona someone simply because "Ms. Seidel’s “beliefs” parallel the defensive positions of drug manufacturers."

The allegations that Siedel is defamed or committed constitutional torts against Mr. Shoemaker, if they exist, likewise, seems a basis for a separate collateral suit and not for a subpeona in a then pending (now dismissed) lawsuit.

The driving force behind his actions (and he is somewhat digging his own grave here by opening himself up to claims of vexatiousness that would otherwise be impossible to prove) is as follows:

The declarations filed herewith establish that at about the same time that this case was filed in a United States District Court, Ms. Seidel launched her campaign against the plaintiffs and the expert witnesses. She has defamed litigants and witnesses, destroyed business relationships and attempted to destroy their professional reputations and livelihoods. She has succeeded in causing them to spend time and money defending themselves against false accusations filed with state licensing boards, professional organizations and with Reverend Sykes’s bishop.

The trouble is, that Shoemaker doesn't understand the difference between a genuine conspiracy, and the reality, which is that the general public has grown far more assertive in taking action against people who abuse the litigation process, without the coordination that is the hallmark of conspiracy, than he understands.

Outraged people, told the facts (and the notion that there is defamation her is doubtful given Siedel's scrupulous attention to the sourcing of her posts) in the age of the Internet where information is easily processed and transmitted, often get personal about bringing liars and litigation abuse to light.

New Steampunk Lit

The book Clockwork Heart by Dru Pagliassotti (2008), is the latest literary contribution to the Steampunk movement.

It is equal parts detective thriller, romance, and techno-social commentary. It takes place in Ondinium, a technocratic, caste saddled early industrial state where psychological testing determines your career. The title's reference is to a computer dating program to be run on the city's mechanical computers, which are akin to the analytical engines (i.e. protocomputers) conceived by Charles Babbage in the early 19th century. Angelic icarri, chosen humans wearing wings made of the lighter than air metal ondinium (after which the city is named) carry messages across the city's caste divided sectors, rescue people from explosions and disasters in the city's wireferry system (elevated gondolas that allow the elite to travel above the masses) and have a reputation for being sexually loose.

The book nevertheless confronts modern concerns: terrorism aimed at holding back modernity, the price of failing to deal with domestic violence, politicians worried about immigration from less prosperous neighbors, a nation whose security is dependent upon keeping technological secrets from potential adversaries, the risks and benefits attendant in abdicating human judgment to computers and psychological models, the moral ambiguities that flow from having a society run by an isolated uber-wealthy class that is merely human, the extent to which genetics are destiny, the virtues and vices of the death penalty, the impact of a free press, the economic benefits we derive from having a technocratic reasonably non-corrupt society, and the depersonalization that flows reducing people to cogs in a massive coordinated economy.

The pacing of the novel is odd. It follows a traditional novelistic structure with a complete picture perfect ending that concludes the story in three hundred pages, then tacks on another ninety page encore novella like a short sequel that didn't merit another full length book, without acknowledging the break with anything more than a chapter ending.

But on the whole the book is a quick, but thought provoking summer read that stands out for avoiding cliche in a fresh new world.

Stage Set For General Election Contests

The dust is settling on the Democratic party's state convention and assembly (along with several Congressional District assemblies). But, Colorado Pols has hit the more crucial issue in Colorado politics this cycle, the state senate districts that will be targeted by Republicans this time around.

Republicans need three more state senate seats to prevent themselves from being shut out by Democratic majorities in both houses of the Colorado General Assembly and the Governor's office for the next two years. Republicans are too far behind in House seats (40-25) to have a viable shot at winning those seats -- there are many Democratic open seats this cycle as a result of term limits, but most are in safe Democratic districts. The Republicans have instead notched their arrows and taken aim at three suburban state senate seats held by Democratic women, two open and one held by incumbent Betty Boyd, an important player in the health care debate:

• Senate District 19, which covers part of Jefferson County and is held by outgoing Sen. Sue Windels, D-Arvada.

• Senate District 21, which covers part of Jefferson County and is held by first-term Sen. Betty Boyd, D-Lakewood.

• Senate District 25, which covers part of Adams County and is held by outgoing Sen. Stephanie Takis, D-Aurora.

These seats, along with the Presidential race, the U.S. Senate race in Colorado, the Democratic effort by Ken Salazar aide Betsy Markey to pick up House District 4 currently held by Marilyn Musgrave, a weak incumbent in what should be a safe Republican district, and initiative battles will take center stage this election cycle.

Dan Willis, secretary of the Democratic Party of Denver and blogger extraordinaire, has the line up for these races:

SD19 - Incumbent Sue Wendels (D) is term limited
[Democrat] Evie Hudak State Board of Ed. Placed on ballot
by Assembly
[Republican] Libby Szabo Placed on ballot by Assembly

SD21 - Incumbent [Democrat] Betty Boyd was placed on
ballot by Assembly
[Republican] Vicki Stack Placed on ballot by Assembly
[Republican] Chenoa Jensen Eligible to petition

SD25 - Incumbent Stephanie Takis (D) is term
[Democrat] Mary Hodge Rep. Placed on ballot by Assembly
[Republican] Robert Hadfield Placed on ballot by Vacancy
Committee to replace Heather Miller who withdraw
after being nominated by Assembly

Suffice it to say that the Republican line up is weaker. Democrats are running an incumbent and two Democratic office holders. Republicans are running three candidates who announced their races late and are unknown to the general public at a time when coat tails are likely to favor Democrats and Republican party identification is at a record low.