To Rename or Not to Rename

You might find this piece by Jim Sleeper at The Politic on the controversies about naming at Yale University interesting:

Holloway’s America and mine was still the country where Joan Baez, a progressive’s progressive, had moved audiences of all persuasions by singing Robbie Robertson and The Band’s “The Night They Drove Old Dixie Down,” a song that enfolds the Confederacy’s “lost cause” romantics empathetically into a larger American civic culture. If there wasn’t much controversy in 2009 about Calhoun College and the title of “master,” it wasn’t because no one was “woke” to history’s cruelties and ironies; it was because there was more hope for a shared civic and political culture. No one was more “woke” to that culture’s defaults than Holloway, an intellectual historian of black America, but he had wiser ideas and inclinations, honed since his childhood, about how to confront America’s racial cruelties and ironies.

Now that Yale is stirring again, as it was in 2015, with controversies over re-namings – a somewhat nasty rehashing of what was accomplished and lost in renaming Calhoun College for the late, pioneering Yale computer scientist Grace Hopper, and a rising resistance to the university’s renaming of its historic Commons dining hall as the “Stephen A. Schwarzman Center” – we need to reassess Holloway’s admonition that “The real work for a place at Yale is not about the name on the building. It’s about a deep and substantive commitment to being honest about power, structural systems of privilege and their perpetuation.”

My own view is that a lot could be accomplished by treating students as the product rather than the customer (most don’t actually pay the bills) and gently suggesting to students who are not happy about how things have been conducted at Yale might be happier attending a school that wasn’t named for an officer of the East India Company and notoriously corrupt colonial governor. Just a thought.

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The WSJ on Income Inequality

The editors of the Wall Street Journal remark on changes in income inequality:

The left’s apocalyptic economic predictions for the Trump Presidency haven’t panned out. With jobs plentiful and wages rising at the fastest rate in a decade, liberals are doubling down on alarms about inequality. The inconvenient evidence is that low- and middle-income folks are reaping more economic benefits than during the Obama years.

Democrats flogged last week’s Census report that showed health coverage and Medicaid enrollment declined in 2018. But they ignored the other side of that story: Worker earnings increased by 3.4% while the poverty rate declined 0.5 percentage points to 11.8%, the lowest level since 2001. Benefit rolls are shrinking as low-income workers earn more.

According to the Census Bureau, the number of full-time, year-round workers increased by 2.3 million in 2018, and employment gains were biggest among minority female-led households. The share of workers in female-led households who worked full-time year-round increased by 4.2 percentage points among blacks and 3.6 percentage points among Hispanics.

As a result, real median earnings for female households with no spouse present jumped 7.6% last year. The poverty rate among female households declined 2.7 percentage points for blacks, four percentage points for Hispanics and 7.1 percentage points for their children. Remember this the next time Senator Kamala Harris complains that Mr. Trump’s policies are harming women and minorities.

These findings reinforce Labor Department monthly reports that have shown stronger employment and earnings gains in industries dominated by women such as health care and hospitality. The jobless rate for black women last month fell to a historic low of 4.4% and neared a nadir for Hispanic women at 4.2%.

Democrats also keep saying the middle class is shrinking, but income gains are being distributed more evenly. The share of households making less than $35,000 in inflation-adjusted dollars has fallen 1.2 percentage points since 2016 while those earning between $50,000 and $150,000 and more than $200,000 have both increased by 0.8 percentage points.

More Americans are making more across the income spectrum, which has kicked some in the middle class into the ranks of the affluent. The Census Bureau reported no significant increase in real median household incomes last year, but this is probably because a decline in transfer payments and investment income offset wage and salary increases.

Seniors are also retiring in greater numbers, which usually results in an income drop. But, notably, real median incomes increased in households between the ages of 15 to 24 and 25 to 34 by 9.1% and 5%, respectively. Avocado toast-eating Bernie Sanders voters are among the biggest beneficiaries of the Trump years.

Here’s where we part company:

What really matters for a healthy democratic society, however, are economic opportunity and income mobility.

I don’t think that’s the limit of what matters in this context. As I’ve said before I don’t care about the wealth of top-earning athletes, performers, or business owners. I care about their power and I think that’s a consequence of corruption in government.

Does anyone think that Jeffrey Epstein could have maintained his empire of teenage girls without government at many levels looking the other way? I don’t. I think he had lots of help and they’re all still out there. Can anyone seriously contend that wealthy people secure sweetheart deals and tax breaks in the absence of political and governmental corruption?

The home mortgage interest deduction is widely billed as a benefit to the middle class but most of its benefits go to the rich. The ultra-rich don’t pay cash for their mansions, you know. They have mortgages just as middle class folks do. When you dig into the details rich people get most of the benefit from the home mortgage interest deduction. That same pattern is true of a lot of tax breaks. We should not be subsidizing the rich.

Additionally, I don’t believe republican government can survive a culture of adulation or envy of the rich. Tamping that down would require some cultural changes, particularly among the rich. The rich are different from you and me. They have more money as Ernest Hemingway retorted. And, in my experience, they care more about having more money. As Paul of Tarsus wrote in 1Timothy, a love of money is the root of much evil (ῥίζα γὰρ πάντων τῶν κακῶν ἐστιν ἡ φιλαργυρία).

What is the cure? I think that we need a diverse, dynamic economy, control over immigration, and more open and honest government. All tall orders.

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CEO to Worker Compensation By Industry

The table above is from a report on the fast food industry from Demos, a left-leaning think tank. I am passing it along for what it is worth. I was looking for something else when I stumbled across it. What I was seeking was an analysis of how unequal various industries are with actuaryish sorts of things like medians, means, modes, and standard deviations.

I don’t think that the table is as meaningful or outrageous as its authors seem to. What it tells me is that the hospitality sector uses a lot of low-wage workers which is not precisely a revelation. It doesn’t bother me that Ben Roethlisberger makes $45 million a year or that Bill Gates has a net worth of $105 billion since I don’t think that prodigies like those are the reason that income inequality is so high in the United States.

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We Can Only Hope

The editors of the Wall Street Journal point to two recent appellate court cases on the role of federal agencies:

Elizabeth Warren touts her creation of the Consumer Financial Protection Bureau as a major accomplishment, and expect regulatory agencies shielded from accountability to proliferate in a Warren Administration. But as a recent appellate ruling suggests, the courts may prove an obstacle to such bureaucratic entrenchment.

An en banc Fifth Circuit Court of Appeals ruled this month that the design of the Federal Housing Finance Agency is unconstitutional, with 12 of 16 judges agreeing (Collins v. Mnuchin). The agency, created amid the financial crisis to manage Fannie Mae and Freddie Mac, is controlled by a single director who cannot be removed by the President except “for cause.” The CFPB has a similar structure, suggesting it too may be vulnerable.

Judge Don Willett ’s majority opinion said the FHFA director’s independence violates the separation of powers, the Constitution’s “most essential attribute.” The Constitution provides for power divided between a legislative branch, the executive and the judiciary. Too often the bureaucracy has become a kind of fourth branch, shaping policy but lacking political oversight. “The Constitution bounds Congress’s power,” the majority writes, “to create agencies, draw their structure, and grant them authority.”

The Sixth Circuit also grappled with the limits of agency power in an en banc order Aug. 28, though 9 of 16 judges deferred to the agency. The plaintiff wanted to challenge certain IRS reporting rules; the IRS said its rules couldn’t be challenged pre-emptively (CIC Services v. IRS).

The IRS prevailed, but Judge Amul Thapar wrote for seven dissenters highlighting the importance of judicial review of agency decisions. He noted that the Founders deliberately gave the taxing power to Congress but now an executive agency exercises it “in ways that the Founders never would have envisioned.”

He added that courts “accepted this departure from constitutional principle on the promise that Congress would still constrain agency power.” But Congress has not followed through, surrendering legislative responsibilities to agencies.

Judge Jeffrey Sutton wrote in a concurrence that he was inclined to rule against the IRS but Supreme Court precedents “plausibly point in opposite directions.” He suggested the High Court is in a better position to decide the question. The Justices effectively punted on two major separation-of-powers decisions last term, Gundy v. U.S. and Kisor v. Wilkie.

We can only hope. Our political system was not designed to grant legislators lifetime sinecures with plenty of time for fundraising, create an all-powerful executive, or allow a federal bureaucracy that operates without supervision. We have evolved in that direction over a century. It will take a long time to reverse it but reverse it we must if we are to make our political system function as designed. Or at all for that matter.

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The Geopolitical Realities

In an old television program, The A-Team, the actor George Peppard’s character had a catchphrase: “I love it when a plan comes together”. Judging by his recent column in the Washington Post, I don’t think that Fareed Zakharia quite appreciates how the world has changed over the last decade:

“The enemy gets a vote.” U.S. military leaders are fond of using that line. Gen. Jim Mattis used it so often that it is sometimes attributed to him. In fact, it is a nugget of wisdom dating back to Sun Tzu, the Chinese military strategist, who counseled that one must “know the enemy.” It describes the central mistake of President Trump’s Iran policy.

In confidential 2018 cables that were leaked this summer, Britain’s then-ambassador to Washington, Kim Darroch, wrote something that was obvious to most observers: Trump pulled out of the Iran nuclear deal largely because “it was Obama’s deal” and had given little thought toward a “‘day-after’ strategy.” Darroch also noted that Secretary of State Mike Pompeo tried to put some distance between himself and Trump on this issue, privately referring to the move as “the president’s decision.” But while the decision might have been made for domestic political reasons, it has unleashed serious geopolitical consequences.

The Trump administration’s strategy, such as it is, appears to have been to double down on pressure on Iran, force other nations to abide by the United States’ unilateral sanctions and bet that this would cause Iran to capitulate.

Tehran’s initial reaction was restrained. It simply sought to bypass the United States. It continued to adhere to the deal and made efforts to trade with other countries. This failed. Because of the dollar’s centrality to the international financial system, the sanctions worked. Iran’s economy suffered a big blow, and its oil exports have plummeted. European countries, furious about the abuse of the dollar’s role, tried to create an alternative payments mechanism, but so far, it has not succeeded.

Iran’s next effort has been to demonstrate that there is a cost to this kind of maximum pressure. It has harassed ships in the Persian Gulf, reminding everyone that 20 percent of the world’s oil supply goes through that narrow body of water. It shot down a U.S. drone, signaling to the Pentagon that it has the capacity to impede the United States’ intelligence and reconnaissance in the region. And now, Tehran — possibly using proxies and allies in the region — seems to be behind a precision attack on Saudi Arabia’s main oil processing facilities, a strike effective enough that it initially shut down half of the kingdom’s oil production. The message is clear: Hostilities with Iran would spill over throughout the Middle East and disrupt the global oil supply.

I doubt that President Trump planned it this way but the effect of his strategy of “maximum pressure” on Iran was to make Iran reckless.

Let’s look at today’s geopolitical realities rather than the nostrums of a decade ago. Who would be hurt the most if oil transport could not pass through the Straits of Hormuz?

  • The petrostates of the Middle East. These are the same people who are funding Islamist terrorists.
  • China. Maybe the Chinese can build electric cars fast enough to avoid the worst effects of cutting off their oil flow but they are much more dependent on Middle Eastern oil than they used to be. They could always trim oil consumption subsidies more but that, too, would have implications for their economy and would increase unrest in China at a very inopportune time.
  • Japan. Japan imports a lot less oil than it used to and we produce a lot more. I wouldn’t be surprised if Mexico, Canada, and the United States could fill the gap caused by a disruption in supplies from the Middle East.
  • Egypt. Egypt would lose fees from oil tankers passing through the Suez. That amounts to about a half mill a pop.

Who would benefit most? Oil producers in the United States, Canada, Mexico, Nigeria, Venezuela and Russia.

All of this presumes that we don’t go to war with Iran. As has been the case for most of our history, our best strategy remains to “put your trust in God, my boys, and keep your powder dry”.

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The Unselfish Germans?

Gibberish from the editors of the Washington Post:

Germans are immensely proud of their fiscal rectitude and their manufacturing prowess, as they should be. Their achievements nevertheless constitute too much of a good thing, because Europe’s economy, and the world’s, needs new sources of demand. By limiting its own government expenditure and taxing its people stiffly to pay for what it does spend, Germany leaves the role of consuming the world’s goods and services up to others, including Americans, who may not be able to play it indefinitely. This harms neighbors, such as Greece and Italy, who need more markets to help grow their way out of debt; and at this point, it is harming Germany, which now stands uncomfortably close to recession because of its undue dependence on global export markets — which are plagued by uncertainty amid President Trump’s trade war with China.

Among the many voices calling on Germany to put its balance sheet to work stimulating its economy — tax cuts and infrastructure investment would be especially helpful — are the International Monetary Fund and the European Commission. French President Emmanuel Macron has even said “the German growth model has perhaps run its course,” and he has a right to criticize, because his administration has instituted a number of structural reforms to the sluggish French economy that Berlin has long sought. Berlin certainly disdains the hectoring it gets from Mr. Trump and his threats of auto tariffs; a good way to shut him up, while stimulating growth, would be to spend more on much-needed defense modernization.

However tentatively, Germany is starting to get the message. Household and government consumption rose modestly last year, part of a trend toward slightly greater reliance on those engines of growth. The country’s current account surplus could fall below 7 percent of output by 2020, according to the Bundesbank.

Yet old habits, deep-seated ideological commitments — and the political clout of export industries — die hard. Berlin is on course for another budget surplus this year. Germany needs to move boldly toward growth based more on its own domestic needs. What the world needs now is for Germans be a little more selfish. Actually, it could be the most selfless thing they could possibly do.

Germany’s behavior is already motivated by supreme selfishness. Germany derives almost 50% of its GDP from exports. It’s one thing for tiny Denmark to derive half of its GDP from exports; it’s another for Germany to do so. j China derives 10% of its GDP from exports if you can believe the official statistics. Japan derives less than 20%. The U. S. about 12%.

The story of the last 30 years is not one of a beneficent Germany shipping the product of its labors and frugality to the profligate countries of southern and eastern Europe but of Germany exploiting the hardworking people of undercapitalized eastern and southern European countries to buy their goods, German banks lending them money so they can keep doing so, and then imposing punitive austerity agreements on them to save the reckless German banks. The Germans continue to maintain that they will never be transfer economy but they are already a transfer economy—transfering money from poorer eastern and southern European countries to much richer Germany. German politicians know what they should be doing they just don’t know how they can keep their jobs if they do it. They aren’t motivated by selflessness, either.

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Leave It Alone

11 And the whole earth was of one language, and of one speech.

2 And it came to pass, as they journeyed from the east, that they found a plain in the land of Shinar; and they dwelt there.

3 And they said one to another, Go to, let us make brick, and burn them thoroughly. And they had brick for stone, and slime had they for morter.

4 And they said, Go to, let us build us a city and a tower, whose top may reach unto heaven; and let us make us a name, lest we be scattered abroad upon the face of the whole earth.

5 And the Lord came down to see the city and the tower, which the children of men builded.

6 And the Lord said, Behold, the people is one, and they have all one language; and this they begin to do: and now nothing will be restrained from them, which they have imagined to do.

7 Go to, let us go down, and there confound their language, that they may not understand one another’s speech.

8 So the Lord scattered them abroad from thence upon the face of all the earth: and they left off to build the city.

Leave the language alone.

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What Do “Non-Compete” Contracts Do?

I tend to agree with the editors of the New York Times about this:

There is no single explanation for the stagnation of workers’ income in recent decades, but a key reason is that negotiating power shifted from workers to employers. The rise of noncompete agreements is both a symptom, demonstrating the power of employers to dictate terms, and a cause, undermining the ability of workers to obtain a larger piece of the pie.

Defenders of the practice say it encourages companies to make investments, for example in employee training, since the company is more likely to reap the benefits. They also insist that workers are compensated for the loss of bargaining power with higher wages or greater job security. Indeed, some experts have asserted that the elimination of noncompete agreements would cause wages to fall, because workers would no longer be paid for signing.

The Oregon study shows that this theoretical model of labor markets bears little relationship to the lived reality. After the law took effect, job hopping increased by as much as 18 percent — and wages for workers no longer bound by noncompetes rose by as much as 21 percent.

Put plainly, the old rule allowed employers to suppress their workers’ pay.

I would certainly like to see evidence that the availability of non-compete agreements to employers resulted in their spending more on training than would otherwise have been the case. I have not noticed it. Quite to the contrary I have seen an increasing reluctance of employers to invest in training. I have also heard employers express regret for having provided training to their employees only to have those employees leave them for higher paying jobs.

I’m skeptical, however, that non-competes are the main reason for slow growth in employee wages. I think employers are simply pursuing the incentives they have. More important reasons are globalization and its flipside, mass immigration.

Strategies other than bans on non-compete agreements, returning the H1-B visa to its original purpose, and controlling illegal immigration might be to provide incentives for employers to provide training for their employees and limiting the eligibility for bidding on federal contracts to companies who employ significant numbers of foreign workers, either as W-2 employees or temps.

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Training

Yesterday I participated in a (mandatory) Harassment and Sensitivity Training Seminar. These seminars aren’t what they sound like. I have been participating in sessions like this for about 50 years; I have conducted some.

This one was pretty typical. The one thing that was unusual was during the Q&A afterwards a question was asked (by the CEO) about pronouns. That’s a first, at least for me.

I asked a follow-up question: are there any relevant statutes or case law? The woman conducting the seminar sort of grimaced and said “No statutes but there was a case in the 9th Circuit…”. I interrupted—”So it’s not binding precedent here?”

I think that people are kind of getting ahead of themselves.

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Toss-up

Presidents who have been re-elected to a second term outnumber those who have not by about 2:1. In Larry Sabato’s Crystal Ball Kyle Kondik has this to stay about the present state of the 2020 presidential election:

That makes the overall Electoral College ratings exactly split, 248 apiece, with 42 electoral votes’ worth of Toss-ups: Arizona, Pennsylvania, and Wisconsin, plus Nebraska’s Second Congressional District.

This also puts all of Clinton’s 2016 electoral votes in at least the Leaning Democratic column. But that doesn’t mean the president shouldn’t target some of these states anyway — and he certainly will.

I expect Trump to campaign heavily in all of the toss-ups (Arizona, Pennsylvania, Wisconsin) and “leaning” states regardless of which way they’re leaning (Colorado, Florida, Georgia, Maine, Michigan, Minnesota, Iowa, Ohio, Nevada, New Mexico, Texas) and even some of the states that are supposedly locks for his opponent whomever that may be if only to force that opponent to defend his or her backside.

Will the general election be close? I have no idea. If forced to predict, I will go along with Ray Fair and say that if a new shooting war isn’t started and the economy is no worse than it is now a month before the election, President Trump is likely to be re-elected.

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