30 September 2009

SCOTUS To Rule On 2nd Amendment Incorporation

The U.S. Supreme Court has decided to take a case which will resolve a key 2nd Amendment issue: Does the Second Amendment apply to the states, or only to federal laws?

The Selective Incorporation Doctrine

An existing constitutional law doctrine, called selective incorporation, applies some rights created under the federal bill of rights to the states, on the theory that they are necessary to protect the 14th Amendment right to due process. But, not all rights protected by the bill of rights apply to the states. For example, the 1st Amendment freedom of speech applies to the states. The rights (other than the Second Amendment) which do not apply to the states are the 5th Amendment right to be indicted by a grand jury, the 6th Amendment requirement that juries have twelve member and be unanimous, the 7th Amendment right to a civil jury trial, and the 8th Amendment protections against excessive bail and excessive fines (although there is some dispute as to this point and over the applicability to states of the 3rd Amendment (quartering soldiers)).

In practice, the 3rd Amendment almost never comes up and would be no great burden (it has been held incorporated one of the U.S. Courts of Appeals), the 6th Amendment unanimity requirement is violated in only two states (Oregon and Louisiana, a stance that the court refused to revisit in an October 2008 death penalty appeal), the 7th Amendment's protections are honored in fact in every state but Louisiana (with some possible narrow exceptions), and state constitutions in every states already protect the 8th Amendment prohibitions against excessive bails and excessive fines (a 2008 U.S. Supreme Court ruling even suggested that they were incorporated).

Existing precedents hold that the Second Amendment (right to bear arms) is not incorporated and applies only to the federal government. But, until the U.S. Supreme Court ruled in the case District of Columbia v. Heller (2008) that the Second Amendment protected an individual right to bear arms for self-defense subject to reasonable regulation, the scope of the federal right that might apply the states was unclear. Prior court rulings had suggested that the Second Amendment protected only a collective right to armed revolution and the federal courts had never applied it to strike down any limitation on the right to bear arms.

Many, but not all, state constitutions have constitutional rights to bear arms, and those protections vary considerably from state to state.

The Certiorari Grant

The U.S. Supreme Court decided to hear McDonald v. Chicago (08-1521), a case brought to it by Alan Gura, the Alexandria, VA., lawyer who won District of Columbia v. Heller.

A second appeal on the Chicago dispute had been filed by the National Rifle Association (NRA v. Chicago, 08-1497). Presumably, the Court will hold onto that case until it decides McDonald; the same is likely for the New York case, Maloney v. Rice (08-1592) — a case in which Justice Sonia Sotomayor had participated when she was a judge on the Second Circuit Court.

What Is At Stake?

Dicta in Heller followed faithfully by the lower courts, suggest that almost every federal gun control restriction other than the handgun ban in the District of Columbia, are reasonable restrictions on the right to bear arms protected by the Second Amendment.

If the U.S. Supreme Court affirms the appellate court ruling that the Second Amendment is not incorporated, Second Amendment litigation essentially begins and ends with Heller, leaving states free to make gun control policy without federal constraint. Heller keeps the federal government from usurping the state prerogative to permit gun ownership where relevant to a reasonably regulated individual right to bear arms for self-defense, but allows states to enact gun control laws if they wish.

In contrast, if the U.S. Supreme Court rules that the Second Amendment right to bear arms is incorporated and applies to the states, then litigation over the validity of almost every gun control law on the books is likely. Most, but not all state and local restrictions would probably be upheld. It is likely that different jurisdictions will resolve questions of first impression about what restrictions on gun ownership rights are reasonable differently, and so the constitutionality of gun control laws will became an important part of the appellate constitutional law docket for years to come until standards regarding what is and is not constitutional emerge.

Counting Noses

The Court's ruling in Heller in 2008 was a 5-4 decision along the usual liberal and conservative fault lines. Since then, Justice Souter has been replaced by Justice Sotomayor, who ruled against applying the Second Amendment to the states in a U.S. Court of Appeals for the Second Circuit ruling that has a certiorari petition pending before the U.S. Surpeme Court on the same issue.

The Heller opinion itself protected only a fairly feeble individual right, and the Justices in the majority have not not objected to a narrow reading of the Second Amendment right in later litigation (e.g. Justices Kennedy and Alito joined an opinion upholding the constitutionality on a gun ban for those who have been convicted of domestic violence misdemeanors).

Justice Thomas is not a strong supporter of the concept of incorporation in any context. For example, in his view, "the Establishment Clause is a federalism provision, which, for this reason, resists incorporation.” Perhaps Justice Thomas might be persauded by the preamble to the Second Amendment, which reads "A well regulated Militia, being necessary to the security of a free State," that the Second Amendment is a federalism provision in the same way that the Establishment Clause is, in his view, a federalism provision. The preamble almost presumes state regulation and its context suggests that its proponents were concerned about the threat that federal gun control regulation could pose to state autonomy.

Justice Thomas (and the other conservative Justices) are no great fans of habeas corpus litigation in the federal courts, and applying the Second Amendment to the states would push this issue into a great many habeas corpus petitions, delaying finality, where all other federal constitutional issues lack merit. Indeed, some originalist scholars have suggested that the framers intended all of the criminal justice provisions of the Bill of Rights as federalism provisions that would curtail federal criminal justice power, rather than protecting criminal defendants generally. See, e.g., George C. Thomas III, When Constitutional Worlds Collide: Resurrecting the Framers' Bill of Rights and Criminal Procedure, 100 Michigan Law Review 145 (2001).

Justice Thomas, just last spring, made a spirited defense of the harm caused by federal second guessing of the policies that local officials adopt to deal with suspected criminal behavior (he would have upheld as constitutional a strip search of an elementary school child to locate asprin based on flimsy evidence). His substantive jurisprudence is colored heavily by federalism concerns. Indeed, the concern that adoption of a total incorporation doctrine might undermine local death penalties and jury rules designed to make criminal convictions easier to secure might lead him to sacrifice the applicability of the Second Amendment to the states.

Thomas is often seen as a lone voice on incorporation and the establishment clause, but Justice Kennedy has likewise expressed discontent with the position that selective incorporation of it puts on the U.S. Supreme Court as "a national theology board." County of Allegheny v. A.C.L.U., 106 L. Ed. 2nd 472, 550 (1989)(concurring and dissenting).

Justice Kennedy is often a swing vote on the U.S. Supreme Court's conservative-liberal divide and might be influenced to follow existing precedent in favor of not applying the Second Amendment to the states by the prudential consideration that considerable litigation would result from a contrary ruling, but wouldn't overturn many state laws. Justice Kennedy might not relish the prospect of becoming the national arbiter of gun control law.

Justice Scalia himself, writing for the majority in Heller, while inviting further litigation of the Second Amendment incorporation issue, was ambivalent about the resolution of that issue, rightfully given that it was not before the Court.

Justice Roberts has not shown any real antipathy to an unprincipled approach to selective incorporation and did vote with the majority in Heller but might be convinced to support a majority rejecting the application of the Second Amendment to the states if the battle were lost anyway with another justice, to build court unity.

Thus, it is entirely possible that one or more of the five Justices in the Heller majority could break ranks on the question of selective incorporation of the Second Amendment.

Will Selective Incorporation Be Revisited?

There is also an outside chance that the court could take this opportunity to cast some opening shots in the huge question of how selective incorporation should work. Adoption of a new framework for the incorporation doctrine could win over reluctant Justices to the concept of applying the Bill of Rights to the states.

There are many liberals and conservatives who argue that the U.S. Supreme Court made a strategic mistake in applying the federal Bill of Rights to the states via the 14th Amendment due process clause, rather than the privileges and immunities clause of the 14th Amendment (a route in foreclosed in the heavily criticized Reconstruction era Slaughter-House Cases (1873)). Justice Hugo Black supported this idea in the 1940s and 1950s, but ending up as the dissent when the U.S. Supreme Court considered this option. As the Cato Institute (a libertarian think tank) notes in an article written by one of the Heller co-counsel who will be handling the current case as well:

Justice Clarence Thomas, for one, has declared that he would be open to reevaluating the meaning of the Privileges or Immunities Clause “in an appropriate case.” McDonald v. Chicago may be that case. Harvard law professor Laurence Tribe, a liberal icon, writes that “the Slaughter-House Cases incorrectly gutted the Privileges or Immunities Clause.” Yale law professor Akhil Amar agrees: “Virtually no serious modern scholar—left, right, and center— thinks that [Slaughter-House] is a plausible reading of the [Fourteenth] Amendment.”

Since the Second Amendment is not a particularly good candidate for selective incorporation (the articulated legal standard is whether a civilized society could afford due process and "ordered liberty" without it, something that England, Japan and Canada have all demonstrably done), one tempting approach for Second Amendment supporters is to argue for total incorporation of the Bill of Rights to the states, perhaps through the privileges and immunities clause.

The main effect of such a ruling might end up being the strengthening of jury trial rights in Oregon and Louisiana in felony cases and in Louisiana in civil cases. Many state laws would survive the kind of lenient scrutiny of gun control laws that the U.S. Supreme Court proposed in Heller.

The only unincorporated right not protected by state law in almost every state is the 6th Amendment right to indictment by a grand jury. Many U.S. states substitute a right to a preliminary hearing for a right to indictment by a grand jury. Grand juries are used only selectively in many states and have not received vigorous defense because their ex parte sessions, which are controlled by prosecutors have indictment rates that are comparable to or higher than those of judges presiding over preliminary hearings.

But, the limitation of the grand jury right to capital and "infamous" cases, and wide variation in how grand juries have been operated over history, is certainly susceptible to an interpretation that would limit its impact, if it were held to apply to the states.

If the grand jury right were applied to the states, a loosening of the substance of the grand jury requirement (for example, by holding that not all non-capital felonies were "infamous") would have no immediate effect at the federal level, because it has already been incorporated into federal statutory criminal procedure and federal criminal procedural rules, although it might invalidate a number of death sentences. In particular, it might provide a hook for U.S. Supreme Court review of dubious grand jury rules in Texas, the nation's leading user of the death penalty.

Even if federal statutes and rules were changed, the impact of a narrower interpretation of the "infamous crime" provision of the Sixth Amendment grand jury right on federal criminal defendants in felony cases would be modest because federal courts have among the highest indictment rates of any of the grand jury systems that currently exist. Also, generally speaking, a criminal defendant who have been convicted beyond a reasonable doubt by a unanimous jury faces an almost insurmountable task to show that it was improper for a majority of the grand jury that indicted the convicted criminal defendant to find that there was probable cause that the criminal defendant had committed a crime, or that any civil damages have resulted when grand jury review, if properly afforded, would have produced a conviction anyway. Even in a civil case by an acquitted criminal defendant, proof that any damages were caused by the denial of this constitutional right would require a showing that there was not even probable cause that a crime was committed.

One way that liberals could be won over to the cause of incorporating the Second Amendment would be to have the Court adopt a privileges and immunities based total incorporation doctrine and overrule the Slaughter-House Cases. For liberals, the harm caused by applying a weak Second Amendment to the states might be overshadowed by the gains in other areas of the law, like the unanimous jury trial right. For conservatives, a Second Amendment protecting an individual right to bear arms applicable to the states has been a holy grail, that might make the practical consequences of total incorporation seem a small price to pay.

Justice Kennedy would be a natural to build a coalition on the issue, because, as illustrated by his opinion invalidating application of the death penalty to juveniles, under a broad reading of the Eighth Amendment, he does not place a high value on the right of states to be outliers from the general constitutional order, or the right of Louisiana, in particular, to be governed by a different constitutional order than the rest of the nation, which has been one of the main effects of selective incorporation.

Law Profs In The Obama Administration

There are many law professors who have joined the Obama administration (not least of whom, President Obama himself).

A Proper Measure Of Excessive Bank Exec Pay

Everyone loves to hate huge paychecks for big business executives. But, outrage simply because executives of big businesses make very large sums of money isn't justified when those big businesses are profitable. Excessive senior executive pay is primarily a fight between shareholders and management over claims to the profits generated by everyone below them in the organization. If senior business executive pay packages are modest relative to the returns that the companies provide to shareholders, this isn't a cause for concern. The people whose compensation finances high senior executive compensation are being taken care over nicely.

But, these days, executive pay has gotten to a level where it is a concern to shareholders. Executives are getting paid well even when they aren't producing good returns. In the fight between shareholders and management over the money generated by big businesses, bank executives are winning. They are running their companies as if they were senior executive owned closely held businesses, taking home more than 80% of the distributed returns of the banks.

In 2008, salaries of the top 10 banks reached $75 billion (up from $31 billion in 1999), while cash dividends to shareholders were only $17.5 billion. Management took 4.3 times more than shareholders at a time when shareholders were injecting capital and government was guaranteeing deposits.

Capital has never been more important to banks, but the rewards are going to the executives who have screwed up the American financial system, not to the people providing capital. Indeed, bank executive bonuses are at a level on the same order of magnitude as the $69 billion of capital that the "stress tests" conducted in 2009 showed that these banks need to avoid collapsing in the event of bad economic news.

When management is getting more than 80% of the paid out returns from the enterprise, it is time to worry that the system is fundamentally flawed.

Private equity funds and hedge funds, in contrast, are designed to have the opposite ratio of capital return to management return in most cases:

[I]nvestors typically pay 2% of committed capital to the management company to manage the fund and 20% of returned funds above the initial capital as an incentive.

The management fee is fixed and agreed upon up front. The 20% of returned funds above initial capital, called the carried interest, is typically paid to investor and management alike five years out or so, and leaves the investor with 98% of what they invested, plus 80% of the profits.

For a private equity firm as a whole to get at least 81% of returns bank executives received under a 2/20 compensation formula, it need to be earning a roughly 3.3% or less investment return over the entire term of the investment, which is a little more than six-tenths of a percent per year in a typical five year deal.

In reality, since a good share of the 2% management fee goes towards overhead and salaried employee costs similar to the expenses of ordinary banks on their overhead and salaried employees. Overhead is a lot smaller in a private equity fund than it is in a commercial bank, but everybody has to pay some rent and make payroll for the staff. My very rough estimate is that overhead and salaries eat up at least half of the management fees in private equity funds. This implies that the senior management of a private equity fund gets an 81% of the returns only when the fund is producing an annual rate of return of about three tens of a percent per year, the same rate of return that my bank pays on plain old FDIC insured savings accounts, or less.

Needless to say, unlike senior bank executives, private equity fund managers who have trouble generating FDIC insured savings account returns to their investors rarely manage to keep their jobs.

The obvious conclusion: While the mere fact that bank executives get large pay packages doesn't itself prove that they are overpaid, other measures of their pay that are reasonable and proportional do show that bank executives are getting too large a piece of the pie.

29 September 2009

Rewards For Snitching?

Lots of the tax returns that a business has to file are "information returns" (such as forms W-2, 1099 and K-1). The returns report revenue or income that the filer is aware that someone else has received. No tax is due from the filer, although there is a penalty due if the return isn't filed on time (that can be abated in some circumstances).

Empirically, information return filing dramatically increases compliance by the person whose information is reported. But, this generates work for the party that files the return and is unlikely to be caught if there is non-compliance.

How could the IRS encourage filers to file returns? What if there was a reward assigned to every time that an information return identified taxable income that was not reported by the person identified in the return?

Alternately, should those who file information tax returns, at least, be entitled to some compensation for preparing them for the benefit of the IRS, much like vendors who collect sales taxes sometimes do?

Denver-Seattle Amtrak Route Would Be Expensive

A study looking at the possibility of reinstating a Denver to Seattle Amtrak route shows that it would cost $478 million to set up, carry 111,000 passengers a year, and produce $13.1 million revenue, at $46.2 million of direct operating costs a year (a net operating loss of $33.1 million).

The annual net operating loss per passenger per trip would be $298.19, despite the $118 per passenger per trip ticket charge. The operating cost is $416.19 per passenger trip. This is ignoring any allowance for the infrastructure costs -- even before depreciating any of the investment, a 3% interest rate on the money investment would be $14.3 million, $129.19 per passenger per trip, for a total cost of $545.38 per passenger per trip with service that would be much slower and less likely to be on time than commercial airplane service. It would be faster and not a lot more expensive, to simply subsidize commercial airplane tickets on these trips. An investment in bus service would likewise make much better sense. You can run a very nice bus service for $545.38 per passenger per trip from Denver to Seattle, and a high end bus service would be faster and more likely to be on time.

Passenger trains can be a great choice in some circumstances. But, long haul trips across a largely uninhabited part of the country, at conventional passenger rail speeds, is not one of those circumstances.

Law Student Heroes

A group of SUNY Buffalo law students helped save their law profs life, getting him to a local hospital.

Denver Housing Market Barely Busted

Denver's real estate prices have fallen less after the housing bubble collapse than almost any other major city in the United States. It is down 9.1% from its peak through June 2009 (only Dallas, down 4.9%, has done better).

By comparison, Las Vegas is down 55.2%, Phoenix is down 53.5%, Miami is down 47.4%, Detroit is down 45.3%, San Francisco is down 41.7%, San Diego is down 40.7%, Tampa is down 40.6%, and Los Angeles is down 40.5%.

Quote of the Day

Despite conducting perhaps one of the simplest of all federal investigations – order movies, receive movies, watch movies – the government has taken three years to conclude its investigation, set up a sting operation, and ultimately end up right back in New Jersey. The government may be perhaps more interested in a conviction than in justice, and [its conduct] offends due process to the point of dismissal.

- Lawyer for man facing adult obsenity charge declined in multiple venues by local prosecutors.

Income Gap Survives Financial Crisis

The financial crisis seemed to have greatly narrowed wealth concentration in the United States, disproportionately striking those with high net worths.

The 2008 figures come from the Current Population Survey and the American Community Survey (sample size 3 million households, data set starts 1967) show that the household income gap grew in 2008:

The . . . 10 percent of Americans — those making more than $138,000 each year — earned 11.4 times the roughly $12,000 made by those living near or below the poverty line in 2008, according to newly released census figures. That ratio was an increase from 11.2 in 2007 and the previous high of 11.22 in 2003. . . .

Median income fell last year from $52,163 to $50,303 . . . the lowest level since 1997.

Poverty jumped sharply to 13.2 percent, an 11-year high. . . . Analysts attributed the widening gap to the wave of layoffs in the economic downturn that have devastated household budgets. They said while the richest Americans may be seeing reductions in executive pay, those at the bottom of the income ladder are often unemployed and struggling to get by. . . . .

Among other findings:

_Income at the top 5 percent of households — those making $180,000 or more — was 3.58 times the median income, the highest since 2006. . . .

_Between 2007 and 2008, income at the 50th percentile (median) and the 10th percentile fell by 3.6 percent and 3.7 percent, respectively, compared with a 2.1 percent decline at the 90th percentile. Between 1999 and 2008, income at the 50th and 10th percentiles decreased 4.3 percent and 9 percent, respectively, while income at the 90th percentile was statistically unchanged. . . .

_Use of food stamps jumped 13 percent last year to nearly 9.8 million U.S. households. . . . The increase was most evident in households with two or more workers.

In the most recent French national election, the American economic model was derided because while it did well for those at the top, the majority of people were seeing their standards of living decline. American politicians are afraid to engage in that kind of "class war" analysis or even to really admit that it is a problem that has to be solved. Yet, men who have not gone to college have seen their lot stagnate and decline for several decades, with no clear signs of hope for improvement on the way.

Too few people are even asking whether this inequality primarily reflects productivity, comparative advantage as the world economy globalizes, or an ossifying social structure that those at the top are exploiting notwithstanding issues that arguably should matter, like productivity. These numbers cast light on those questions. If the highest income earners are receiving merely a "residual" after everyone else is paid, their income should be plummeting in this hard economic times. Why aren't we seeing their incomes fall fast, rather than slower, than the rest of the population?

UPDATE (9-30-09): Why is this such a big deal? Because it is "contrary to the almost universal expectations of economists," (and me) that income inequality would decline in the Great Recession.

The Geography of Income Inequality in America

Large cities such as Atlanta, Washington, New York, San Francisco, Miami and Chicago had the most inequality, due largely to years of middle-class flight to the suburbs. Declining industrial cities with pockets of well-off neighborhoods, such as Pittsburgh, Cleveland and Buffalo, N.Y., also had sharp disparities.

Up-and-coming cities with growing middle-class populations, such as Mesa, Ariz., Riverside, Calif., Arlington, Texas, and Henderson, Nev., were among the areas showing the least income differences between rich and poor.

"During the years of the housing bubble, there was middle-class movement from unaffordable metros with high-income inequality," Frey said. "Now that the bubble burst, more of the population may be headed back to the high-inequality areas, stemming their middle-class losses."

_Twenty-one states and the District of Columbia had higher poverty rates than the national average, many of them in the South, such as Mississippi (21.2 percent), Kentucky, Arkansas and Louisiana (each with 17.3 percent). . . .

_Use of food stamps jumped . . . led by Louisiana, Maine and Kentucky.

_Pharr, Texas, and Flint, Mich., each had more than a third of its residents on food stamps, at 38.5 percent and 35.4 percent, respectively. . . .

_Plano, Texas, a Dallas suburb, had the highest median income among larger cities, earning $85,003. Cleveland ranked at the bottom, at $26,731.

Will a return to urban centers reduce the economic inequality that people experience there? Is the South just perrennially behind, or is something getting worse there, and if so what? There is some indication that the South is more manufacturing base than people accustomed to thinking about the "Rust Belt" understand, and that industrial malaise is finally catching up to the South.

28 September 2009

Fed Ends Hard Money Subprime Lending

The Federal Reserve is issuing new regulations that end the practice of "hard money" lending that ignores ability to repay from income or other assets because the loan to value is high enough, given current housing price trends, to make up any losses in a foreclosure.

The final rule [effective October 1, 2009] adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling. For loans in this category, these protections will:

• Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
• Require creditors to verify the income and assets they rely upon to determine repayment ability.
• Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
• Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.

What are subprime loans under the new definition?

The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the "average prime offer rate," based on a survey currently published by Freddie Mac. A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage.

Hard money and liar loans make short term economic sense when real estate prices are soaring rapidly turning low loan to value loans into high loan to value loans, but are disasterous when real estate prices collapse.

All mortgages are subject to additional limitations on pyramiding late fees, and requirements regarding when payment must be credited and balances due must be provided. Specific kinds of deceptive advertising, and coercing appraisers to give inaccurate appraisals, both of which were arguably already illegal in many cases, have been banned for all residential mortgages.

The new rules on underwriting subprime loans and requiring escrow accounts for first mortgages that are subprime, basically give the force of law to what has always been represented a best practice in the industry. And, given that subprime lenders who didn't follow best practices are now overwhelmingly defunct, there aren't many private interests around to complain about this decision. There are good arguments that regulations of this type, that merely reinforce existing market incentives, create unnecessary paperwork. But, in the short term, they are unlikely to do much harm. And, recent experience has shown that systemic bad underwriting by private parties can spill over to hurt the larger economy, not just those who made the bad decisions.

Two year pre-payment penalties are still permitted in subprime mortgages with a fixed payment for the four four years or more, which will now have a property tax an insuance escrow, and verified income and non-real estate assets that show an ability to pay for the first seven years of the loan. It isn't entirely clear, at first glance, how these regulations with interact with parallel state law restrictions on pre-payment penalties.

All of this matters, of course, only if the market decides to rebuild the subprime mortgage industry that the financial crisis virtually eliminated.

Unless housing prices are rising rapidly and likely to stay high until the property is sold, subprime loans are a bad choice for anyone who can qualify for a prime rate loan (a surprisingly large share of subprime loans entered into by minority borrowers) who should seek another lender, and subprime loans are also a bad choice relative to renting for almost everyone else. Subprime loans are a product that almost nobody needs, so growth in this market segment is a symptom of an economy that is out of whack.

Those hardest hit by the new regulations are self-employed people and other people with incomes that are difficult to document (e.g. people who receive reliable streams of discretionary trust fund and gift payments). At some level of loan to value, that is sufficiently cushioned against housing bubble collapses, it isn't obvious that a ban on no document loans really makes sense.

Employed people generally benefit in loan underwriting from a presumption of continued employment at current income or better, that is often unrealistic, while self-employment people face a high burden to show that their future incomes will be regular and high enough. The distinction is legitimate, but the process can overstate the differences in risk between the employed and the self-employed.

Denver Public Schools Enrollments High

Enrollment at the Denver Public Schools "had its largest increase in enrollment since 1962. Enrollment at DPS jumped by 2,419 students, according to school- system estimates. This is the third year enrollment has increased, and it raises the school population to its highest level since 1975."


[T]he projected total number of preschoolers enrolled in full-day classes is about 2,600, up as many as 500 from last year. . . . "Eighty percent of those preschool kids come from families in poverty . . . [.]" A 10 percent increase is estimated in children enrolled in full-day kindergarten. "Two years ago, we had 70 percent of kindergarten kids in full-day; now, it's over 90 percent. That is an additional 1,200, 1,500 kids.

Stapleton is supplying many of the new pre-schoolers and kindergartners. The school is considering reopening two new elementary schools next year, "Whiteman and Fallis —[which] were among eight Denver elementary schools closed two years ago in an effort to reduce facility costs and improve student achievement."


The Denver Public Schools have ample, indeed excess facilities to meet the needs of its current number of students, with much of its real estate empty or underutilized. But, of course, not all of those facilities are where they are needed. New subdivisions in Northeast Denver are under served. Older neighborhoods have excess school space.

One of the biggest issues for DPS is market share. Something like 25%-35% of the school aged children in the district don't attend DPS schools. In raw numbers that is more than 25,000 students who attend a non-DPS school (either private schools or as a result of school choice) or home school or have dropped out. The percentage of students who could attend DPS, but don't, is particularly high at the middle school and high school level. The local papers have covered where these children have gone and it isn't a simple story. Catholic parochial school enrollments in Denver, for example, have seen declines that have paralleled those in the public schools.

The new enrollment numbers cited today suggest that this barrier hasn't been broken yet. There are just 700-800 new students in grades 1-12, with the balance coming in at the preschool and kindergarten levels. The 1% increase at those grade levels is in line with general population growth in Denver proper, which has had the healthiest real estate market in the metro area during the real estate downturn that metropolitan Denver is at the tail end of experiencing. There isn't a strong indication that the Denver Public Schools are increasing their market share in the higher grades.

My intuition is that a disproportionate share the 700-800 student enrollment growth we are seeing at the post-K level in Denver, is in the grade 1-5 range. In a post-school busing era of neighborhood schools, further buffered by significant school choice options, parents are able to reach a comfort level with their neighborhood elementary schools that they lacked in the past. At my children's elementary school, Steele, every single available space for students in filled. No one is being accepted off waiting lists, every available space for instruction has been utilized, and pre-schoolers have been diverted to a new early childhood education center where the Knight Fundamental Academy charter school was located until it relocated this academic year to a location that was less of a drive or bus ride for most of its students.

Parents hunting middle schools for the DPS elementary school children are carefully reviewing all their options, in a way that I didn't encounter growing up until I went to college, and the job DPS faces is to earn a larger share in this competitive market. Each student the Denver Public Schools fails to win over costs the District about $7,000 per year in operating funds and contributes to its overhang of excess school room capacity.

This is all a bit new to me. So, while I see what is going on, I am ambivalent about what to do about it.

When I was growing up, there was absolutely no school choice, and there was only one K-8 private school option, for kids in Oxford, Ohio. The Talawanda School District has one high school with no private school competition anywhere close, its junior high encompassed everyone even remotely close to it (if not the whole district, I don't recall), and elementary school assignment was strictly a matter of your address. While one could elect to participate in particular extracurricular activities, prior to high school there were no "school within a school" program choices of the type found in a large share of DPS schools. Once in high school there were a couple of vocationally oriented alternatives, but while the rest of the students were tracked, there was no cohesive plan for them other than to prepare them for college, whether that was a plausible option or not. Homeschooling was also less established as a concept or choice.

This background didn't leave me with much intuition about what works for education in a much more highly competitive environment. The issues are obviously important, however, as Denver prepares for another round of school board elections in November (by mail).

25 September 2009

Denver Tidbits

* RTD had a bad, but not fatal bus accident. A driver fell asleep. Bus accidents are much less common than car accidents by every measure, but they happen.

* U.S. Representative Mike Coffman has filed a dubious ethics complaint with attorney regulations officials related to criticism of his conduct as Colorado's Secretary of State.

In a letter to the state Supreme Court, Coffman accused Chantell Taylor of wrongly claiming a state commission found that he "technically violated state law" when he was secretary of state.

The statement made by the lawyer against whom the complaint was lodged was based upon a statement in a government report in which the:

Independent Ethics Commission cleared Coffman on a conflict-of-interest complaint in April. It ruled that Coffman did not overlook the actions of an employee in the state elections office who wrongly operated a political side business. The commission also ruled Coffman did not violate ethics rules when his office granted a voting-machine contract to a company that used a political consulting firm in common with Coffman. In its report, the commission found that "although there may have been a technical violation of state law, this was mitigated by the vigorous and immediate remedial action taken by both Coffman and (his assistant)." In his complaint letter to the commission, Coffman said the finding of a technical violation referred only to possible illegal activity by his employee and not to Coffman.

The attorney discipline process does not exist to allow people to insist on fine nuance in statements made in course of political debates concerning the conduct of a public figure while in public office that are reasonably related to a finding made in a published report of a governmental agency, about matters of public concern -- in this case a non-frivilous complaint about ethical misconduct that the Independent Ethics Committee examined in a hearing.

Colorado's Property Taxes Are Below Average

While the Census Bureau is not the most accurate source of property tax information, because people often inaccurately report information to it, it has a lot of information on the topic, which the Tax Foundation has collected in a convenient set of documents. The documents also collect interesting information such as the median income of homeowners, something that is higher than the median income of the general population, and median home value data.

Colorado ranks 30th in dollars of property taxes paid per household, 38th in property taxes on homes as a percentage of home value, and 37th in property taxes on homes as a percentage of income.

These statistics understate the importance of property taxes in the Colorado tax base, however, because Colorado's state constitution mandates that Colorado value homes at a lower share of fair market value than the value it assigns to other property. (Some accuracy is lost in this summary as I am intentionally avoiding using the precise property tax terms under state law in this post.)

Criminal Fines and Restitution in Colorado

Yesterday's front page Denver Post story looked at the issue of criminal fines and restitution in Colorado. Some key facts:

Fines and court costs

Fines and court costs were assessed in about 2.7 million cases in the past ten years with amounts assessed equal to an average of about $262.

About 79% of those cases were paid in full - about 85% in traffic cases and about 41% in felony cases.

About $215 million in fines and court costs are owed in about 570,000 cases, an average of about $38 outstanding per case. The median number is probably smaller.

The biggest fine and court cost debts outstanding in the state are:

1. Evan Sanders (drug charges) $202,056
2. Verna R. Brown (forgery) $178,235
3. Ernest A. Salazar, Jr. (forgery) $112,254


Restitution was ordered in 148,381 cases in the past ten years, about 5.5% of cases where fines or costs were assessed (there is almost never a criminal case where restitution is ordered but fines and costs are not assessed).

About 56% of restitution orders have been paid in full. About $563 million is owed in about 78,500 cases, an average of about $7,170 per outstanding case.

The top ten restitution awards combined are for more than $100 million. Eight of the ten people owing those amounts are currently incarcerated. Excluding the top ten outliers the average owed per case is about $5,898. The median number is probably considerably smaller.

The biggest restitution award is owed by Terry Lynn Burton who started the 2002 Hayman fire, the largest in Colorado history. She owes $44 million.

Michelle Cawthra, a Colorado Department of Revenue employee owes $10.8 million that she stole from the state.

Robert Olan Bryant owes $8.8 million to securities fraud victims.

Collection Efforts

The state has about 100 in house collection investigation employees. This is increased collections by 25%-50% depending on the jurisdiction.


Fines and restitution are attractive alternatives to incarceration. A fine is clearly understood by the public to be a punishment, and in an economically motivated crime, it is even similar in character to the harm involved in the crime itself. Restitution makes victims whole.

Neither requires costly state expenditures for incarceration. Collections investigators easily pay for themselves in terms on net revenue generated relative to not hiring them.

Non-incarceration penalties also tend to keep criminal defendants employed and connected to community support that can discourage future crime, while incarceration makes criminal defendants unemployable, making them unable to support themselves and their families without assistance, leaving them unable to compensate crime victims, giving them an economic incentive to commit new crimes, and forcing them to socialize with and build social bonds with other criminals. All of this contributes to the high rates of recidivism we see in people released from incarceration.

Large "day fines" are a common criminal sanction for moderate severity offenses that might be punished with incarceration in the United States throughout Europe. How does this compare to probation which is used in a far larger share of moderate severity offenses (non-traffic misdemeanors and lesser felonies) than most people realize.

In traffic cases and in other misdemeanor cases, where the fines, costs and restitution awards are small, the amounts owed are usually paid in full, and even when the amounts owed are not paid, there is usually an ability to pay.

In felony cases, the amounts owed are usually not paid, even in the common situation when the amount owed is fairly modest, often in the 1000s or low 10,000s of dollars, although, of course, some felony cases, almost by definition, cause very great amounts of harm and in turn create very large restitution awards.

Incarceration can't earn significant incomes. Civil forfeitures deprive many felons of much of their property. Even when they end their incarcerations, many felony defendants have little capacity to earn income. Most felons have one or more of the following problems: They have little education, few marketable skills, felony records, mental health and substance abuse problems, and generally don't know how to behave socially as a valued stable employee.

Even when convicted felons do have an ability to earn an income, they have little incentive to do so. A large share of their income will go towards current taxes, current criminal justice related obligations, and to past obligations for taxes, fines, court costs, restitution awards, breach of fiduciary duty judgments, intentional tort judgments, student loan payments, child support, and maintenance awards, that often cannot be discharged in bankruptcy. Given their limited attractiveness in the job market, most criminal defendants who can find a job at all have little left over affter paying for minimal food, marginal shelter and bare necessities, current taxes and criminal justice related obligations, and past obligation.

Should we develop some inferior form of bankruptcy, or conservatorship for ex-cons that perserves some incentive to engage in productive work while not significantly compromising existing recoveries of fines, costs and restitution, and not unfairly rewarding ex-cons with unpaid fines, costs and restitution who receive winfalls?

The vast majority of non-traffic crimes have an economic motivation, and were committed to a significant extent because the defendants couldn't find any legitimate way to earn a better living. A large share of non-economically motivated crimes involve people with serious anger control, impulse control or substance abuse problems who make poor employees until they can solve their problems.

Further Research

Some numbers that aren't provided by the story, but would be interesting to have would be the total amount of fines and court costs outstanding, in dollars and number of cases, for traffic, non-traffic misdemeanor and felony cases, with the felony numbers broken down by felony class.

From a policy perspective, the fact that there are hundreds of thousands of people out there with one or two small unpaid traffic tickets is pretty uninteresting, as is the fact that people who commit very serious felonies that do massive amounts of harm can't pay what they owe while incarcerated. Those are the dog bites man stories.

The interesting numbers are the payment rates and amounts outstanding as fine and costs, and for felonies for DUIs, non-traffic misdemeanors, and for felonies broken down to show felony class and whether the defendant is incarcerated.

If defendants in cases involving DUIs, non-traffic misdemeanors and less serious felonies who are not incarcerated, or are given only short jail terms, are able to pay their fines, costs and restitution awards at a high rate, then it is worth considering making economic sanctions perhaps with short jail terms, the presumptive sanction in these cases of intermediate severity. In particular, it might be the case that there are a significant number of crimes where increased fines make more sense to involving defendants in the probation system at meaningful economic, administrative, incarceration and negative incentive costs, in part for the defendants in part for the victims (for whom restitution payments may be slowed), and in part for the state.

But, if those rates are low, there may not be much room to make greater use of economic sanctions as an alternative to costly incarceration.

It would also be interesting to see a chart comparing the total amount owed in a given case to the rate of payment and the amount that remains outstanding. Where do fines and restitution orders reach a point of disminishing returns? Are there significant exceptions to the general rule? In what kind of cases are the biggest fine, cost and restitution payments actually made? Are the windfalls that justify keeping uncollectable fines, costs and restitution awards on the books common enough and large enough to justify the trouble that the system goes to in order to collect them, or would forgiveness at some point make more economic sense? If it doesn't make economic sense to keep uncollectable awards alive in order to collect windfalls, do moral considerations make the net loss worthwhile sometimes in any case?

FDIC Defended

As a regulator, FDIC supervises state-chartered banks that aren't members of the Federal Reserve system—that is, smallish banks that played little or no role in igniting the financial conflagration of the past couple of years. It also takes over and shuts down or sells off troubled banks supervised by other regulators such as the Fed, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision—but it's those other regulators that are supposed to tell it when there's trouble.

The reason the FDIC might soon have to borrow some money is because banks are caught up in their worst crisis since the 1930s. It was in the 1930s, of course, that Congress created the FDIC with the intent of heading off bank runs by insuring that small depositors wouldn't lose their money. It's been hugely successful in that; the problem is that we allowed the creation of a shadow banking system of securitization, money market funds and investment banks that was outside the FDIC umbrella and turned out to be pretty susceptible to bank runs. There's lots of blame to go around for letting this happen, but not very much belongs with the FDIC.

From here.

Closing Failed Denver Schools Helped Kids

A study of schools closed by the Denver Public Schools in 2007 for poor performance shows that students forced to attend new schools performed better academically at their new schools.

24 September 2009

Playing Dumb

While I'm all for keeping an open mind, this isn't a license to be stupid.

BIG CREEK, Ky. – A census worker found hanged from a tree with the word "fed" scrawled on his chest met his end in a corner of Appalachia with an abundance of meth labs and marijuana fields. . . . At this point, police cannot say whether Bill Sparkman's death was a homicide, an accident or even a suicide.

Yeah, right. I'm sure Vegas is putting big money on the accidental death possibility.

Guy Justifies Saving Thirty Year Old College Notes

He blogged it, therefore it was worth it. I'm sure his wife will be hearing him tell her that he really did save all those yellowed notebooks for some worthwhile reason for decades to come. Saved long enough, junk becomes intellectual history.

Hat Crime

Once upon a time, during the reign of Queen Elizabeth I (r. 1558-1603), in England, it was a crime to fail to wear an English made wool cap on Sundays and holidays. Specifically, the law, enacted in 1571 when Queen Elizabeth I was 38 years old, stated:

Every person above the age of seven Years shall wear upon the Sabbath and Holiday . . . a Cap of Wool knit, thicked and dressed in England, made within this Realm, and only dressed and finished by some of the Trade of Cappers, upon pain to forfeit for every Day not wearing three Shillings four Pence: except Maids, Ladies, and Gentlemen, Noble Personages, and every Lord, Knight and Gentleman of twenty Marks land and their Heirs, and such as have borne Office of Worship in any City, Borough, Town, Hamlet, or Shire; and the Wardens of the Worshipful Companies of London.

Elizabeth I instituted many policies that would be condemned as authoritarian and ruthless today. Being queen (and before that a crown princess) has its privileges. Many young women, in fairy tales and reality, grow up in a home with an evil stepparent. Few realize the fantasy of beheading him when your mother dies and he starts to get out of control as a result.

But, she was not an isolationist, was not opposed to trade per se, and was not particularly crazy as British monarchs go. Her navy defeated the Spanish Armada, in 1588, in one of the most storied military victories of world history. She established trade with the Ottoman Empire, the Barbary states of North Africa, Morocco, India and Japan. Her speeches changed hearts and minds at the time, and are still recalled as examples of exemplary rhetoric.

She did not herald a major wave of feminism or undue love of private enterprise, however. Rome had free bread for the masses. English Devonshire during Elizabeth's reign, in contrast, settled for wife scolding services at public expense:

[T]he lord of the manor was required to provide and these instruments in repair at his own expense. Thus we are told by an early writer on Devonshire that the manor of Daccombe which enough belonged to the Dean and Chapter Canterbury had the custom of free bench and "the lord was obliged to keep a cucking stool the use of scolding women."

One wonders if the expansive reach of juvenile justice hasn't brought us close to a system of publicly administered child scolding today.

Oregon Court Finds Mandatory Minimum Invalid

The Oregon Supreme Court has held unconstitutional under the state constitution, which provides at that "Article I, section 16, of the Oregon Constitution" which provides that "all penalties shall be proportioned to the offense," a mandatory minimum (and maximum) sentence of 75 months for first degree sexual assault, imposed by a statutory state initiative (Measure 11 approved in 1994) as applied to two cases with the the following facts:

Veronica Rodriguez touched a 13-year-old boy when, standing behind him in a room with 30 to 50 other people, she brought the back of his head into contact with her clothed breasts for about one minute. Darryl Buck touched a 13-year-old girl when the girl, who was sitting next to him while she was fishing, leaned back to cast her fishing line, bringing her clothed buttocks into contact with the back of his hand and Buck failed to move his hand; that happened one or two more times. When they stood up, Buck brushed dirt off the back of the girl's shorts with two swipes of his hand. Each of those touchings was unlawful because a jury in Rodriguez's case and a judge in Buck's case found that they had been for a sexual purpose -- a fact that brought the physical contact within the definition of first-degree sexual abuse. . . . before the passage of Measure 11, a person convicted of first-degree sexual abuse would have received a guidelines sentence that took into account criminal history and other aggravating or mitigating circumstances. The presumptive guidelines sentence for a defendant with no prior convictions would have been 16 to 18 months in prison.

Neither child had any prior criminal history. The convictions themselves were affirmed on appeal to both the state court of appeals and the state supreme court. But:

First-degree sexual abuse carries a mandatory sentence of six years and three months (75 months) in prison, under Ballot Measure 11 (1994). In each of these cases, however, the trial judge determined that the mandatory sentence was not "proportioned to the offense" committed by the defendant and therefore was unconstitutional under Article I, section 16. The trial courts imposed shorter sentences -- 16 months in the case of Rodriguez and 17 months in the case of Buck. The state appealed the trial courts' sentencing rulings, and Rodriguez and Buck cross-appealed their convictions. The Court of Appeals affirmed the convictions, but agreed with the state that the trial courts should have imposed mandatory 75-month sentences. . . . Defendants filed petitions for review, which we allowed. For the reasons that follow, we affirm defendants' convictions. However, we reverse the decisions of the Court of Appeals as to sentencing and affirm the sentences imposed by the trial courts. We conclude that the imposition of the mandatory 75-month sentence for first-degree sexual abuse, as applied to the facts of Rodriguez's and Buck's offenses, would violate the constitutional requirement that the penalty be proportioned to the offense.

This keeps in place, instead, the 16 and 17 month sentences imposed. However, one suspect that both children, due to their felony sex offender records, will face all of the collateral consequences of these convictions.

It isn't obvious why these cases were handled through the criminal justice system, why prosecutors decided to prosecute these cases with these charges, or why prosecutors defended the sentences entered on appeal. One suspects that this is a case where the ball got rolling, and no one took personal responsibility for the common sense of what they were doing. The defendants probably fought the charges because their culpability for this serious a crime was in doubt, and because a conviction of any sex offense carries so many collateral consequences.

It isn't surprising, however, that a ballot measure relating to criminal justice would exclude relevant nuances. The truth of the matter is that this kind of conduct shouldn't be a serious felony at all, shouldn't be outside the juvenile justice system, and in context, is not conduct that most people would consider rising to the level of a criminal offense. It is a classic case where a statutory rape offense without a "Romeo and Juliet clause" targets cases that shouldn't be criminalized at all.

Oregon's governor should seriously consider issuing a pardon in this case.

Denver's 2009 General Election Ballot

The General Election ballot in 2009 for Denver will be conducted by entirely by mail, and will go out around Columbus Day in October. The School Board District lines can be found here.


Deborah Sims Fard
Christopher Scott
Mary Seawell

District 2 (SW Denver):
Ismael Garcia
Andrea Merida

District 3 (Central/East Denver)
Jeanne Kaplan

District 4 (NW Denver)
Alton Clark
Nathaniel Easley
Vernon Jones
Andrea Mosby
Jacqueline Shumway


Initiative 100: Shall the voters of the City and County of Denver adopt an ordinance amending the Denver Revised Municipal Code and in connection therewith, requiring immediate impoundment of a vehicle when the driver is driving without a valid operator's or chauffeur's license, or driving contrary to the restrictions imposed upon their license, or driving while their license has been denied, suspended, canceled or revoked, or when a driver of a vehicle is an illegal alien, while mandating the issuance of a summons without requiring the immediate impoundment of a vehicle when a validly licensed driver does not have such license in their immediate possession but has corroborating identification and proof of insurance, and allowing bond exemptions for rental cars, stolen vehicles, expired licenses renewed within 20 days, and lien holders when vehicles were sold to validly licensed drivers?

Via Denver Pols

I live in School Board District 1, which is not up for consideration this year. The other two East side School Board District 3 and 5 also do not involve contested elections this year. Those of us who live in East Denver will be deciding only the At Large School Board race and the Denver Municipal Ballot Initiative. Those who live in West Denver will also be voting in one of two contested school board races for their district.

I will look at the candidates in the three contested school board races in a future post. These races are officially non-partisan, although some of the candidates have a history of involvement in partisan politics.

I oppose Initiative 100. Zero tolerance policies (e.g. the $2,500 fee and mandatory impoundment apply even when you actually are a valid driver but don't have a license on your person) are bad policy, and we don't need to get Denver's traffic court into the business of conducting immigration hearings. This is a policy on how police operate and the municipal impoundment lot runs that the City, it officials and its police do not support.

Wellington Webb Bound For UN

Former Denver Mayor Wellington Webb has been nominated to be a public delegate to the United Nations General Assembly. It isn't a traditional ambassordorship, but we hear that life is quite civilized in New York City, where the UN meets, despite the fact that rents are way down there. So, the hardships of foreign service in the Third World can be avoided.

Also, notably, since this Presidential nomination would traditionally have to be cleared by Secretary of State Hillary Clinton, Webb has shown that he was able to make it through the hard fought 2008 Presidential primary without long to harm to his relationship with either of the contenders for the Democratic nomination.

Why Does SCOTUS Hear Fewer Cases?

[F]or every Justice appointed from the October 1986 Term through the October 1993 Term, the newly-appointed Justice voted to grant certiorari less often than his or her predecessor. In fact, the average Justice appointed between 1986 and 1993 voted to grant certiorari 46.2 fewer times per Term than his or her predecessor.

The substitution of Justice Ginsburg for Justice White had the greatest significance. Justice White voted to grant plenary review a prodigious 215.6 times per Term, on average, between 1986 and 1993. Meanwhile, Justice Ginsburg voted to grant plenary review during the October 1993 Term only 63 times, or 29.2% as often as her predecessor.

From here.

Usually, we evaluate U.S. Supreme Court justices on a liberal to conservative scale based upon how they vote in cases where certiorari has been granted. But, the invisible votes of Justices on whether to grant certioari or not may have an equally important effect.

The data don't, of course, tell us why new justices granted certiorari less often.

It may, for example, be a product of strategic decision making by Justices when the outcome of a final decision of the court was hard to determine in many cases because the swing voters were unpredictable.

Or, perhaps conservatives have doubts about the desirability of U.S. Surpeme Court review of state courts generally, and trusted increasingly conservative lower federal courts to move jurisprudence in the direction desired with less visibility in most cases, while liberals on the court knew that voting to grant certiorari would often risk have undesired outcomes in an increasingly conservative court.

For the why part of the answer, we will have to wait for memoirs and the release of personal papers.

23 September 2009

Pundits Give Edge To Boring New Warship Design

3089 ton Lockheed Martin Freedom LCS 1

2784 ton General Dynamics Independence LCS 2

The U.S. Navy decided a number of years ago that it needs a new class of warship, called the littoral combat ship (LCS). Frigate sized, non-nuclear powered warship, with high peak speeds that can operate in shallow waters, would be outfitted with removable modules. These modules would be designed for missions like anti-submarine warfare, mine countermeasures, and anti-surface craft; additional modules for missions like supporting special forces operations, naval fire support, and medical-disaster relief have been considered. The LCS would have less than half the crew of existing U.S. Navy frigates which are similar in size.

The original plan was for two ships to made made of each competing design. The first ship, the Lockheed Martin Freedom (LCS 1), looks pretty much like any other traditional warship at first glance (although it is innovative compared to many other recent new Navy ships) and is now estimated to cost $640 million per ship. It is further along in the process. The competitor, the General Dynamics Independence (LCS 2), has a a trimaran aluminum hull and is estimated to cost $700 million per ship. Both were wildly over the $220 million per ship budget (all prices before "modules") and behind schedule; so each company will make only one ship before a decision is made by the Navy early in Fiscal Year 2010. Ships 3 and 4 were cancelled. Current plans call for a buy of 51 additional ships, with two ships being built each year from fiscal 2010 to fiscal 2014, although the greatly inflated purchase price of the ships may lead the U.S. Navy to buy far fewer than originally anticipated.

While these per ship prices remain the lowest of any U.S. Navy ships currently in production, they are expensive relative to their size and capabilities.

Pundits think that lower costs and lower technology risk give the traditional LCS 1 design the edge in the competition. In a similar competition to build the F-35, the most recent big contract prototype contest, Lockheed Martin won with a more traditional design over the more radical Boeing design. Both Saudi Arabia and Israel expressed interest in a modified version of the Freedom Class vessel, the LCS-1, but Israel have dropped out of this project in favor of a new frigate design to be built in Israel.

Fiscal Year 2010 for the federal government starts October 1, 2009 and goes until September 30, 2010, so the decision will be made soon.

The Big Warship Picture

The Littoral Combat Ship will probably be the only new surface warship design to be decided upon during the Obama Administration. Five other classes of U.S. Navy surface ships (three of which have not yet had a ship in that class commissioned) and one class of U.S. Navy submarine are currently in production.

The Littoral Combat Ship was been developed in lieu of new frigate designs, new coastal patrol ships for the Navy, or new anti-mine warfare ships for the Navy. The existing FFG-7 Oliver Hazard Perry class (first commissioned 1979) is being phased out. The Navy has MCM-1 Avenger class Mine Countermeasures ships (first commissioned in 1987) commissioned in 1987-1990, and MHC-51 Osprey class Coastal Mine Hunters (first commissioned in 1993), but the Navy is in the process is transfering Osprey class ships to foreign navies and has already transferred two to the Greek Navy, as it has expected the LCS to come online sooner. The 331 ton Cyclone class coastal patrol ships (PC-1) (first commissioned in 1995) also have no replacements other than the LCS in the works, although they have received renewed upgrade priority and use from the Navy since 9-11.

There were to be 32 ships in the 14,500 ton USS Zumwalt (DDG-1000) class destroyer (larger than any surface combatant other than an aircraft carrier in current service and closer in concept to a battleship), which has a current estimated cost of $3.5 billion per ship, with the first scheduled to enter military service in 2015. The buy is currently expected to be two or three ships. It was designed to be useful in supporting ground troops on coasts and in amphibious invasions.

The current generation Ticonderoga class cruiser (first commissioned in 1986), remains closed. The 22 ships in the class currently in service will gradually be replaced by new destroyers. This is because the 9496 ton Arleigh Burke-class destroyer (first commissioned in 1991), which was developed not long after the Ticonderoga class cruiser was very similar in size and concept. Basically, the Arleigh Burke represented an upgraded version of the Ticonderoga. Both classes of ships are currently used mostly to escort aircraft carriers, although they are multi-purpose ships, with advanced sensors, helicopter pads and cruise missiles as their core features. Both classes are just under 10,000 tons in size. The last Spruance-class destroyer, which preceded the Ticonderoga and Arleight Burke classes, left service in 2005. The production line for Arleigh Burke-class destroyers has been kept open as its replacements are failing to come on line, with new destroyers in this class costing something like $1.1 billion each.

Efforts to build a next generation cruiser,CG(X), have been basically abandoned for now. Two separate classes, one conventional and the other for missile defense and nuclear powered had been contemplated.

A next generation aircraft carrier, the 100,000 ton Gerald R. Ford-class (CVN-78), which is a modest modification from the current Nimitz class of aircraft carrier, is currently under construction and scheduled to enter service in 2015 at a cost of $23 billion including $14 billion of costs involved with developing a new class of ship. The last Nimitz class carrier, the George H.W. Bush, entered service in 2009. Current plans call for a slow rate of construction (one every five years) for future ships in this class, which would allow the nation's aircraft carrier fleet allowed to dwindle.

There are two generations a helicopter carriers (which can also be used for Harrier Jump Jets and soon to enter service F-35Bs) in US Navy service, two of the Tarawa class (first commissioned in 1976) which is now closed, and eight of the Wasp class (which entered service in 1989), with the last of this class of ships to enter service in about a month, in 2009. A third ship class of this type, the 45,000 ton America class LHA(6), is under construction and currently scheduled to enter service in 2013 at a cost of $2.4 billion.

There are also no new designs for attack submarines on the drawing board. The 7,800 ton Virginia class nuclear attack submarines (which first entered service in 2008) remain in production at a cost of about $2 billion each. The two prior classes, the SSN-668 Los Angeles class (first commissioned 1976), the SSN-21 Seawolf class (first commissioned 1997 with only three ships of the class built) have been closed. The Navy is also in the process of converting four Ohio class submarines (which entered service in 1984) built to carry ballistic nuclear missiles to conventional cruise missile carrying submarines, leaving 14 unmodified and carrying nuclear missiles. Current plans call for a next generation nuclear missile submarine based upon the Virigina class design to enter service in 2019, but is merely a concept that has not entered a detailed design phase.

While not strictly speaking a surface combatant, the 25,000 ton San Antonio LPD-17 Class ship (first commissioned in 2006), which carries Marines and the vehicles and equipment by sea, but has only defensive weapons, is one of the few other classes of new ships in the U.S. Navy that remains in production at a cost of about $1.4 billion each. This replaces multiple classes of old Marine transports. Five Austin class ships (first commissioned in 1965) remain in use but will be phased out in the near future as new San Antonio class ships come into service. Ships of the LSD-41 Whidbey class (first commissioned 1985) and the similar LSD-49 Harper’s Ferry class (first commissioned 1994) have closed. No plans are in place to replace an existing class of "command ships" for the Marines.


A slow down in U.S. Navy ship building and ship class development is appropriate right now.

The U.S. has the largest blue sea navy in the world. Russia and China are the only potentially hostile real contenders that would seriously rival U.S. dominance in naval power, although North Korea and Iran have naval forces that could pose real challenges to U.S. forces. If naval combat with Russia or Iran were ever required, European allies would be expected to add their naval power to that of the U.S. Japan and South Korea could likely join the U.S. in a coalition effort against a North Korean adversary if that became necessary. Also, the U.S. Air Force and allied air forces would play a role in contending with any naval opposition faced by the U.S. military.

There has been very little naval combat anywhere in the world by any party since World War II. What little combat there has been, together with naval exercises and posturing encounters with foreign potentially hostile forces, suggest that surface ships are at a disadvantage against near peer threats like advanced diesel submarines, mines and advanced missile attacks. The defensive systems on U.S. Navy ships designed to cope with threats from missiles, enemy aircraft, enemy ships and submarines haven't been put to any real world tests. The cruise missiles that are the main offensive weapon of all U.S. surface combatants are largely untested in real world combat situations. Naval combat involves a highly complex set of offenses and defenses whose interactions are the subject of educated guesses, but models are frequently poor gauges of the factors that turn out to be most important in practice.

There is good reason to believe that the F-35 may be the last aircraft carrier delivered manned aircraft that the United States will ever build, as unmanned combat drones replace them. If this happens, it may be appropriate to rethink the conceptual underpinnings of the existing U.S. Navy fleet which has a large force of aircraft carriers and supporting ships at its core. Unmanned combat drones can be smaller and less crew intensive than comparable manned aircraft. The greater ability of unmanned combat drones to stay in the air for prolonged periods also reduces the advantage of having the persistent on location presence in a theater of battle that a ship provides, and need of carrier ships to be as close to where combat will take place. Drones may also prove to be a more cost effective way of providing fire support to ground troops than the Zumwalt class ships designed for that role.

The great cost of Virginia class nuclear attack submarines, at a time when destroying opposing surface combatants and attack submarines in non-coastal areas is not a very high priority, is hard to justify. New diesel submarines used by our allies are proving to be even more stealthy than nuclear submarines and are much cheaper to build and operate.

It also isn't clear how the U.S. will choose to use its amphiphious ships in the next several decades. It is hard to see how major amphibious operations make sense. They were used in World War II because air transportation had not really come into its prime at that point. The more likely use of these ships is to provide a stable base of operations beyond the range of technologically inferior military forces for small U.S. Marine units off the coast of unstable third world powers, as U.S. Marines take on limited missions like evacuating expatriots and foreign dignitaries, protecting U.S. installations, providing security to shipping, or disrupting primative, particularly genocidal waves of military activity in foreign civil wars. Severe development problems with the expeditionary fighting vehicle which was at the core of the Marine's ship building plan also call for caution in developing these resources.

The versatile Littoral Combat Ship is an appropriate approach at a time when we aren't precisely sure what our future needs in surface combatants will be, and when there seems to be increased need for ships that can operate efficiently against inferior forces in coastal areas in anti-piracy roles, in shipping control, against obsolete forces like the North Korean navy, against coastal missile boats, and against small craft.

Meanwhile, other parts of the U.S. military have needs that appear more urgent at the moment. Iraq, a war we remain engaged in despite the fact that U.S. involvement in it is winding down, is almost landlocked. The war in Afghanistan and related war in Northern Pakistan is ramping up in areas that are completely landlocked. Both wars are a major drain on U.S. military resources. The only hot conflict the U.S. Navy is engaged in right now is the conflict with Somolian pirates. Relations between China and Taiwan appear to be thawing. The greatest threat North Korea poses to South Korea involves North Korea's nuclear missiles, not its sea power. When there is a war on, parts of the military's wish list that aren't necessary for those wars may have to be put on hold.

Does Something Different Make Sense?

Given the press of other demands for U.S. military resources, and the risk that we may be building ships that are ill suited to our future needs, a slow down in the construction and design of new ships for the U.S. Navy is appropriate.

The U.S. Navy has been operating on something close to autopilot since World War II, replacing old classes of ships with improved versions when the old ones need to be retired, rather than approaching naval warfare from a clean slate. All but a couple of countries in the world have navies that look very different, with very different mixes of ships and objectives, than the naval forces of World War II.

The U.S. Navy may very well need more ships, but even if it does, they may not be the ones we are building now.

Experience may prove that the littoral combat ship concept is useful, but that smaller, possibly less capable or less versatile ships are more suited to the mission. Perhaps the U.S. Navy really needs more ships in the 300 ton size class of the Cyclone class patrol ship or ships similar to the small, but offensively powerful missile boats that are common a large share of all world navies. The Cyclone class ships operate with crews of about thirty, but modern technologies might make it possible to reduce crew sizes of small ships to ten or twenty. Armed drone helicopters could also become the optimal way to deal with hostile small craft.

High speed, intermediate capacity transport ships may prove to be a valuable middle ground between very fast, very expensive and very low capacity air transportation and very slow, very cheap and very high capacity conventional sea lift capabilities for U.S. ground troops. Alternately, it may make more sense from a cost perspective to pre-position caches of heavy equipment on a large number of slow, cheap sea lift ships which could roam the blue sea out of reach of most potentially hostile adversaries, and to bring troops to this equipment via air, possibly by seaplane. Or some hybrid of these approaches may make sense, for example, with high speed, intermediate capacity transport ships dispersed among regional hubs with transport plane bases where they can receive troops to deploy, making an intermediate stop at cache ships to load in gear en route to their final deployment locations.

The drone carriers we may decided we need in a decade or so may call for different designs than the Ford and America class ships currently under construction, or make make overhauls of existing carriers look like a sensible option. There may be room in the fleet for unmanned surface ships or submarines as well. If existing aircraft carriers could carry significant more drones with greater range than their existing (under utilized) capacity to carry manned aircraft, or if current helicopter carriers can carry useful numbers of drone aircraft, it may be possible to meet the nation's military needs with fewer aircraft and helicopter carrier ships. Drone tanker aircraft, similarly, could reduce the need for sea base aircraft carriers.

If anti-surface ship technologies sufficiently outpace defensive technologies, it may be useful to consider reviving the World War II era concept of submarine transports as a medium capacity embargo buster for coastal allies with shipping lanes closed by hostile forces.

Our own anti-surface ship forces may be more appropriately handled by long range, cruise missile carrying aircraft, manned or unmanned, rather than ship based missiles.

If advanced diesel submarines are much cheaper and more stealthy than nuclear attack submarines, it may sense to deploy them in distant locations with a large "mother ship" or "mother submarine" to support them, rather than requiring each submarine to have the persistence of a nuclear vessel.

If North Korea's nuclear missile threat becomes a trend, rather than a unique threat, it may be necessary to return to the notion of a missle defense oriented cruiser design, or if anti-surface ship threats become acute, a similar anti-missile submarine design, perhaps supported by sensors on unmanned surface ships. But, if Air Force deployed missile defense concepts catch up with the Navy's progress on this front, the missile defense cruiser could be obsolete before it is commissioned.

I don't claim to know for sure which path makes more sense for the U.S. Navy. But, given the press of other demands on military resources anyway, and the lack of current serious rivals to U.S. naval power, it may make good sense to pause and put naval ship development in low gear while we consider other options for the U.S. Navy for a few years in light of new technological and military developments. When the time comes to gear up military procurement, if it does come, this should be done from a blank slate by leaders with greater vision than some of our more recent stewards of the Department of Defense's resources.

Lush Ethics

They say a true friend holds her girlfriend's hair back when she is drunk and vomiting.

While excessive drinking and drug use are closely correlated with illegal behavior (a stunningly large percentage of people who are arrested are under the influence of alcohol or drugs at the time), in many communities there is entire subcultural set of norms are shared by people who are drunk or on drugs. Notably, people with good jobs and college educations very rarely end up in prison for their conduct while drunk or on drugs, even though neither a good job nor a college education is a a good predictor of abstinence. The people who get drunk or use drugs, and then do something illegal, and then get caught, and then are punished severely, are overwhelmingly ill educated and poor, in addition to having substance abuse problems.

There are norms about not snitching and about how impaired someone can be before it is inappropriate to make sexual advances towards them. There are norms regarding who pays, who shares and what obligations sharing carries. There are norms regarding etiquette lapses that should be ignored when the person making them is drunk, and regarding those which should not be ignored. There are norms about what one should do when some one's life appears to be in danger because they drank too much or overdosed on drugs. One of most powerful of the Mothers Against Drunk Driving advertising campaigns sought to change these subcultural norms in the area of drinking and driving ("friends don't let friends drive drunk"), rather than the law itself.

Perhaps some drugs do swiftly and almost inevitably lead users to ruin. Crack cocaine used to have a reputation for creating instant addiction, even though subsequent research cast serious doubt on that conclusion. A current round of public service announcements are trying to make the case to the public with regard to methamphetamines.

There are sustained P.R. efforts to develop an image of other drugs, most notably, marijuana, as mostly harmless. These efforts have had great success in cities like Denver, which recently voted to decriminalize the use of small quantities of marijuana, an effort that cannot, however, repeal applicable state and federal laws.

The rise and fall of tobacco smoking in the United States, which was more than 50% higher than it is now in the 1970s and 1980s, was not so much a direct response to health research or legal sanctions as it was an indirect consequence of changes in social norms driven by health research. Notably, reducing smoking is one of the few public health matters where Americans lead most other developed nations. While the U.S. has ideal places to grow tobacco, and made tobacco one of the foundations of its early economy, Americans now smoke less than most of their European and Asian peers.

Few people feel many qualms about sharing alcohol with a peer in college who is not yet twenty-one. Many people, even if drinking while underaged themselves, would feel qualms about sharing significant amounts of alcohol with a young child.

Like all social norms, they vary between subcultures and over time. Young adults imposed different rules upon themselves in the 1990s than they did in the 1960s. What is acceptable in Mississippi may not be acceptable in Maine, or visa versa. One of the perennial parts of the dating game is to try to ferret out a potential partner's attitudes about substance use in a delicate way.

What is so fascinating about all this?

It undermines the simple notion that excess consumption of mind altering substances involves an inability to follow any social norms, or a decision to ignore societal restraint entirely.

Right and wrong are context specific and hierarchical. Indeed, some norms, like not snitching on those who drink when underage or use drugs in a private setting, apply even to people who are not willing to drink underage or use illegal drugs themselves, but can give way when it is a matter of life or death, or one faces long terms of incarceration for not snitching.

Part of the American link between substance abuse and crime may be that we don't do enough to socialize people into a culture of substance use. The problem is not just that people are drunk or on drugs, but that they don't know how to behave when they are drunk or on drugs.

The notion that heavy drinking and illegal drug use has its own norms also suggests that the common conservative "in for a pint, in for a pound" attitude towards punishments for crimes, that is indifferent to harsh punishments for minor violations, is deeply out of line with our values in this area. The attitude is politically viable mostly because it is dealing with a social context that is unfamiliar to most conservative voters, making it hard for them to gauge culpability.

This isn't to say that people who are drunk or on drugs aren't impaired or that they don't underestimate their own impairment. A big part of the norms of substance use concern when and where it is more or less acceptable to become impaired. Getting drunk after the big game may be expected; getting drunk before hand when you are on the team may be frowned upon.

And, some people are more prone to substance abuse problems than others, sometimes because they are trying to self-medicate other underlying problems, and sometimes because they are simply prone to becoming alcoholics or having other substance abuse issues. Indeed, there are norms about substance use in the presence of people know to be trying to stay sober.

Dan Slater In Colorado Attorney General Race

Dan Slater is best known in the political world as a blogger writing from the perspective of a state level Democratic Party vice chairman. As of October 1, 2009, when he officially commences his campaign, he will be running for the post of Colorado attorney general. Slater's Wikipedia biography notes, in the part relevant to his legal background, that:

[He] attended the University of Oklahoma, graduating with a bachelor's degree in 1994. He earned his law degree from Washington College of Law at American University. . . .

Slater resides in CaƱon City, Colorado, where he is an attorney in private practice, specializing in personal injury, employment, and small business law. He was named "Young Lawyer of the Year" in 2004 by the Colorado Trial Lawyer's Association and has served on the Board of Governors of the Colorado Bar Association and the Judicial Performance Commission for Colorado's 11th Judicial District.

Adams County District Attorney Don Quick, and Aurora State Senator Morgan Carroll (also a blogger and a vocal voice for the left in the Colorado General Assembly on a number of issues), were both widely rumors to have considered running for the post, but chose not to run.

He will be running against Republican incumbent John Suthers. Suthers was appointed to replace moderate Democrat Ken Salazar when he was elected to the U.S. Senate (Ken Salazar has subsequently become the Secretary of the Interior in the Obama Administration, and Governor Ritter replaced him with Michael Bennet, who now faces a primary challenge from former Speaker of the State House of Representatives Andrew Romanoff).

Slater is the underdog in this race. If I were putting odds on the Colorado Pol's Big Line, I'd probably start him at 14-1 odds, compared to 4-1 odds for Suthers (whose job security drops a little simply by having someone who will actually commit to being a serious challenger in the race), subject to amendment as the campaigns shape up and fundraising numbers develop.

Suthers has a strong resume, mostly in the area of criminal prosecutions, and all of the advantage that come with incumbency. He will have six years of experience as the Colorado Attorney General job when he completes his current term. He was appointed by George W. Bush to serve as United States District Attorney for the District of Colorado for four years, spent twelve years as a district attorney in the district that includes Colorado Springs (eight in the top elected position, and some of the rest leading the white collar crime division and a chief deputy), spent two years as executive director of the Colorado Department of Corrections under Governor Bill Owens, and spent nine years in between his positions as a prosecutor as a litigation partner in a Colorado Springs law firm, part of that time as head of its litigation section.

Suthers is the biggest dog on the Republican bench and the most powerful elected Republican elected official in the state (the two Republican members of Congress are currently politically impotent as junior members of the U.S. House of Representatives minority during a Democratic Presidential administration). Perhaps the biggest question on the Republican side of the political world in Colorado is why he didn't run for Governor or Senator, races he is believed to have considered seriously.

Slater is a younger, but experienced small law firm trial lawyer with political experience (although he has not previously held elected office). He is running at a time when the general trend of the state towards the Democratic party is stalled by the historical trend of voters to reduce their support for the party of the incumbent President, and a Governor and U.S. Senate incumbent who both lack strong support from their political base. The enthusiasm for the top of the ticket drives base voter turnout and grass roots campaign intensity, and in 2010, base voter turnout for the Democratic party may be anemic.

Slater has to run on the strength of his ideas (as someone who "truly fights for ALL of the people of Colorado, and who isn't afraid to go out and root out those who would prey on our most vulnerable citizens") and his personal story as someone from outside the metro Denver echo chamber who has built up his career serving as a defender of the little guy.

The Nature of the Job

The state attorney general's office is traditionally a job that involves serving both as the lead player in bringing consumer protection litigation (civil and criminal), engages in civil litigation on behalf of state government (often enforcing debts owed to the state and regulatory violations), and acts as the corporate counsel for the State of Colorado, with a large role in interpreting state laws and regulations in official opinions that bind state employees and a persuasive when applied to others.

The cases the office is charged with prosecuting criminally and civilly look more like a trial lawyer's portfolio than they do like a typical district attorney's docket and often overlaps in subject matter with cases brought by private lawyers as class actions or on behalf of consumers, employees and small investors. While district attorneys primarily prosecute run of the mill state crimes, and U.S. Attorneys in the federal system do essentially the same thing at the federal level, the job of Colorado Attorney General does not exclusively or even primarily concern criminal prosecutions, although the office does do have twelve lawyers who handle select criminal prosecutions in the criminal division (many in areas like environmental violations, election fraud, securities fraud and insurance fraud).

Like most senior government officials, the Colorado Attorney General is more of senior government executive than someone who actually does the legal work of the state personally. Almost all the trial work is actually done by others with supervision from the top. The job of the Colorado Attorney General is to referee policy disputes within state government and his own office, to hire good people to carry out the actual work, to set priorities, and to keep those he appoints acting in an accountable fashion. Slater's experience in senior positions in the Fremont County and Colorado Democratic parties is probably at least as relevant to this work as his direct legal experience.

How Strong Will Governor Ritter's Support Be?

At this point, Dan Slater is the only person known to be planning on mounting a serious campaign to be the Democratic Party nominee for Colorado Attorney General. Timing of the nomination process and fundraising cycle in Colorado leaves only about three or four months from now in which it is possible to launch a serious campaign for statewide office. Those who enter the race early aren't shoe ins, but the later you start to run for office, the more impressive a candidate you have to be to have a viable chance of winning the nomination and the general election that follows.

Traditionally, the Governor wholehearted endorses and supports fellow members of the state party ticket. But, even an endorsement for Dan Slater that should be automatic is anything but in Colorado this year.

Will this happen this time?

Governor Ritter has made a point of staking out his credentials as a moderate, and Republican John Suthers was endorsed by his blue dog Democratic predecessor, Ken Salazar. Governor Ritter is from Suthers' generation, rather than Slater's, and shares a background with Suthers in criminal prosecutions.

Governor Ritter has to decide between his loyalty to his party, with a strong and early endorsement of Dan Slater, and his seemingly natural inclination to stake out a stance as a moderate, perhaps by refusing to endorse anyone in the race on the grounds that he has to maintain a working relationship with John Suthers until the election is over and possibly for another four years after that.

If Ritter chooses the independent course, however, he puts himself at grave risk of drawing a primary challenge (perhaps Denver Mayor John Hickenlooper could be drafted to run for the Democratic Party gubernatorial nomination), and being defeated in a Democratic primary, turning the general election into an open race.