Update On Unions In The Private Sector

Did you notice that President Obama held a little mini-summit with labor union leaders in Washington on Wednesday this past week?  It didn't get much play in the press, but here is some coverage from Reuters.  Probably Obama's main idea was to assuage the Democratic Party's union allies after having just dissed them with the Trans Pacific Partnership.  But he did take the occasion to restate his oft-expressed view that unions are a positive force for workers in rising up to the middle class:

"I believe when people attack unions, they're attacking the middle class," Obama told attendees of the first-ever White House Summit on Worker Voice.  "We've got to make sure ... working Americans don't get lost in the shuffle," he said. "They can come together and they can win."   

So it's an appropriate time to take stock of the status of the union movement in the private sector.  Have the union-friendly Obama administration and NLRB made any progress in reversing the long-term decline?

The answer is no.  Perhaps the continuing decline would have been even faster if a Republican had been President, but what we have is continuing decline nonetheless.  Here is the latest (January 2015) summary release from the Bureau of Labor Statistics on union membership.  In the private sector, union membership in 2014 slipped another tenth of a percent to 6.6% from 6.7%.  It's not much in any given year, but it's a steady drip, drip, drip.

But how could the steady decline continue when the NLRB is currently so friendly to union organizing drives?  Part of the answer is that workers increasingly work in situations that are very difficult to organize.  Think Uber or, more generally, the so-called "gig" economy.  But an even bigger part of the decline is the distressing tendency of unions to drive their employers out of business or, if not quite that, to make them uncompetitive and cause them to shrink drastically.

A notable example of a union killing off a major employer is currently playing out here in the New York area in the supermarket industry.  The supermarket chain called A&P is now in round 2 of bankruptcy after a previous round just a few years ago.  This time the chain is liquidating.  A&P stores are organized by a union known as the UFCW (United Food & Commercial Workers Union).  At its peak A&P had some 16,000 stores.  The latest pre-bankruptcy count was about 300.  Oh, and that 300 is not just stores under the A&P name.  The current company is basically a roll-up of a collection of the unionized chains in the northeast -- besides A&P, it's also Food Emporium, Waldbaum's and Pathmark.  The 300 is what is left for all of them following round after round of downsizing.

On October 7 the New York Post reported that in recent auctions in the bankruptcy court, only about a third of the A&P stores had attracted bids from other supermarket operators who planned to continue them as grocery stores.  Close to half of the stores either received no bids, or only bids from operators who decline to hire the workers.  Basically, very few people are willing to take on the task of dealing with the UFCW and its onerous work rules.  The latest projection is that nearly half of A&P's current 28,500 workers will lose their jobs by Thanksgiving.

Now it's not like the supermarket business overall is shrinking in the New York area.  The amount of food that people eat is not changing.  Here in Manhattan, two very large and successful chains have recently grown substantially -- Whole Foods and Trader Joe's.  They are non-union.  Two other non-union operations have expanded in the downtown area -- Garden of Eden and Mrs. Green's.  In the outer boroughs and near suburbs, non-union Target has moved in.  One other unionized operator, Fairway, has been growing until recently, but in May announced plans to rein in its expansion -- because it is losing money.   Around the corner from where I live, a unionized operator called D'Agostino hangs on despite the new non-union competition.  All the employees there seem to have chips on their shoulders.  My bet is that they will be gone within a couple of years.

All this is not much different from what has happened in the automotive industry over the past few decades.  In 1979 the UAW had over 1.5 million members, and in 2001 it was still around 700,000.  Meanwhile lots of foreign carmakers opened non-union plants in the south -- Toyota, Nissan, BMW, Mercedes, VW.  When GM and Chrysler went through their bankruptcies in 2009 and thereafter, the UAW lost another 200,000 or so members.  Today, the membership is under 400,000, although it has increased by small amounts in the last few years.  You would think that the UAW would realize that it has a fundamental problem with its business model, and would be seeking to help the employers become more efficient and compete more effectively.  But that's just not their way.  The new head of the UAW, Dennis Williams, is reputed to be "aggressive," and made a point of showing the aggressiveness in the recent negotiations with Chrysler.  How is that going to help Chrysler grow and compete against the Japanese, German and Korean competition?  Now Michigan has a new Right to Work law, and UAW members in that state will start to have the right to opt out of paying dues starting in 2016.  Good luck!

Over at the (unionized) Postal Service, this chart shows that they lost only about 3000 employees last year, after years of losses in the range of 25,000 to 30,000 per year.  But they just lost $1.5 billion in their second quarter, and $600 million in their third quarter.  With losses that big, their ability to sustain the current level of employment of almost 500,000 is very doubtful.  FedEx?  Non-union.

It's a slow decline, but it shows no signs of turning around any time soon or, for that matter, ever.







Is Paul Krugman Really An Economist?

Paul Krugman was designated as the Manhattan Contrarian Official Worst Economics Writer way back in March 2013.  At the time, I said that Krugman "takes everything about economics and turns it around a full 180 degrees."  I made particular note of a Krugman column on March 28, 2013 that took the position that "we're cheating our children" by the economic policy of having too little government spending and not taking on enough debt.  And I'm 100% sure that he really meant it, and did not realize that it was a self-parody.  I have also frequently taken note, for example here, of Krugman's regular advocacy, often contained in endless tirades against what he calls "austerity,"  that the best government economic policy is to borrow as much money as possible and waste it as fast as possible.  Is it really possible that he does not realize that this is a fallacy?

But with Krugman, there's always a new low to be reached.  The most recent new low came with his column on Monday October 5, titled "Enemies Of the Sun."    The theme here is that the Republican presidential contenders, particularly Jeb Bush and Marco Rubio, are ignoramuses because they do not support government direction of investment into "clean" forms of power, mainly solar, and also wind.  Why?  Take it away, Paul:

[S]olar panels are becoming cheaper and more efficient at a startling rate, reminiscent of the progress in microchips that underlies the information technology revolution. As a result, renewables account for essentially all recent growth in electricity generation capacity in advanced countries. 

And how does this apply to Bush and Rubio?

So you might expect people like Mr. Rubio, who says he wants to “unleash our energy potential,” and Mr. Bush, who says he wants to “unleash the Energy Revolution,” to embrace wind and solar as engines of jobs and growth. But they don’t. 

But here's the thing, Paul:  If solar and wind power are so great, why does any politician need to "embrace" them?  You say that they are becoming "cheaper" and "more efficient" at a "startling rate."  OK then, but if and when they are actually competitive with other forms of power, the market will then produce them without any need for government to do anything at all, just like the government doesn't have to tell anyone to drill for oil or to "frack" for gas or to mine for coal.  It just happens, unless the government somehow puts a stop to it.

But solar and wind power don't just happen.  They require big government subsidies, because even after big recent price declines, they are not competitive.  Government subsidizing inefficient producers to keep them in business against more efficient producers -- when I studied economics we called that "wealth destruction."  Comment please, Paul?

Furthermore, renewables have become major industries in their own right, employing several hundred thousand people in the United States. Employment in the solar industry alone now exceeds the number of coal miners, and solar is adding jobs even as coal declines.

Let me try to get my head around this.  Employing lots of people in an uncompetitive industry that could not exist without massive government subsidies is supposed to be a good thing?  According to information from the government's Energy Information Agency here, in 2014 the U.S. generated 39% of its electricity from coal and 0.4% from solar.  So then if I believe Krugman's employment statistic, the solar industry used more people than the coal industry to generate about 1% the amount of electricity?  OK, I admit that there are other people involved in generating electricity from coal than just the miners.  Suppose in the whole coal power industry it's four times as many people as in the total solar industry.  Then solar would still take 25 times the number of people to generate the same amount of electricity.  And Krugman thinks that this is somehow a positive?

Really, if this guy were in my intro economics course, he would get an F.  And yet I hear that he has won a Nobel Prize in economics.  And this is where the likes of Obama, Sanders, Clinton and Biden get their economics.  For myself, I'm sorry, but I don't believe that he is really an economist.

Some Reaction To The End Of Non-Insider Insider Trading

I can't claim to have read every article today about the Supreme Court's denial of cert yesterday in the Newman case, but I have read a bunch of them.  As examples, there is the New York Times article, the New York Post article, and one in the New York Law Journal.  All of these (as well as others I have read) pitch the story as whether the prosecution of insider trading is now going to be "harder" or "more difficult."  None of these ever mentions the most important issue, which to my mind is whether Congress has ever passed a law making non-insider insider trading a crime.  Damn right it should be "more difficult" for prosecutors to put people in jail for something that no law passed by Congress says is a crime.  How about making it "impossible"?

For an opinion coming at least close to the mark, there is the Wall Street Journal editorial page.  They almost (but not quite) say that there never was a statute making this conduct illegal, although not quite in those words:

U.S. Attorney Preet Bharara['s . . .] prosecutions of Wall Street have pushed aggressive interpretations of insider-trading law

For the other news organizations, although it's no excuse, perhaps they were led astray by the fact that Mr. Bharara, undoubtedly panicked by the looming damage to his reputation, held a conference call for reporters yesterday afternoon to pitch his spin of the story.  Here's a quote of Bharara's spin from the New York Post:

"The [Todd] Newman decision goes some way to creating an obvious roadmap for unscrupulous investors," Bharara said Monday.  "You can think of this as a potential bonanza for friends and family of rich people with access to material non-public information."     

For Bharara, it's all about stirring up anger and jealousy over income inequality, and he will never address the issue of whether it is acceptable conduct for a prosecutor to seek to put somebody in jail for something that no statute says is a crime.  Hey, these traders are "rich" and in my personal opinion they are "unscrupulous."  Therefore I will turn the full resources of the federal government on them to put them in jail whether or not they violated any actual law.

Still, even Bharara's outrageous statement does not support the Post's headline, which is "Roadmap to Steal."  How exactly is non-insider insider trading "stealing"?  Even Bharara did not claim that.  At the Times, the lede is:

The Supreme Court on Monday refused to review an appeals court decision that made it harder to prosecute insider trading and threatens to undermine a number of convictions.    

In the New York Law Journal article, the lede is:

Southern District U.S. Attorney Preet Bharara has lost his last chance to reverse a decision that makes it more difficult for prosecutors to win convictions in insider trading cases. 

There is no recognition in either the Times or Law Journal articles that the so-called "insider trading" that will now be "harder" or "more difficult" to prosecute is actually trading by people who are not insiders at all; nor is there any recognition that the statute under which these people were convicted doesn't mention "insider trading," let alone insider trading by non-insiders, and only prohibits "any manipulative or deceptive device or contrivance."  How again was this conduct supposed to by "manipulative"?  And who was supposedly "deceived," and by what false statement?  They just don't find these questions at all interesting.

As reported by the Post, Bharara claimed in his conference call that after the fallout from this decision he would still have a conviction rate of 90 percent.  I don't know how he's coming up with that, but I'll believe that when I see it.  Most likely he will just never mention the subject again and hope that nobody is able to put together a count.  But there is one area where we can put together a count, and that is of Bharara's convictions for insider trading after trial.  In 2014, Bharara claimed six insider trading convictions after trial without a loss.  Then in July 2014 Rengan Rajaratnam was acquitted by a jury.  Now Newman and Chiasson have been cleared.  The conviction of Michael Steinberg is totally undermined by the Newman/Chiasson reversal (Steinberg was in the same information chain as Newman and Chiasson, but one more level removed from the original sources).  That looks to me like the conviction rate will shortly be 3 out of 7, or 42.8% -- and that's assuming that all of the remaining three survive.  Not very impressive if you ask me.  And I'm definitely not impressed by convictions through strings of guilty pleas, when the prosecutors present people with cases that take many millions of dollars to even attempt to defend, and they forum shop for favorable judges who are known in advance to buy into legal theories not supported by the underlying statute, meaning that to defend successfully you must first live through a trial and suffer a wrongful conviction and then appeal for years, and they threaten you with a sentence three times as long if you go to trial and lose than if you take the guilty plea.  Sorry, Mr. Bharara, but your real conviction rate is 42.8%.

Really, wouldn't life be just so much more perfect and fair if the federal prosecutors could make up the criminal law as they go along, based on their own personal sense of what is "unscrupulous"?



The End Of Non-Insider Insider Trading Prosecutions?

This morning, on the first day of its new term, the Supreme Court denied cert in the case of U.S. v. Newman and Chiasson, otherwise known as the non-insider insider trading case.  Bloomberg News has the story here.   This is the case of two corporate non-insiders who acted on a "tip"  coming from an official company investor relations spokesperson, who would have given the same information to anyone who called, and where the tip passed through multiple layers before arriving at the defendants, where the defendants did not pay anything for the "tip" and the original guy who got the information from the spokesperson did not pay the spokesperson, and finally where the spokesperson himself was never prosecuted or charged with any wrongdoing.  On these facts, Newman and Chiasson were convicted and sentenced to 4 1/2 and 6 1/2 years respectively.  In December 2014 a unanimous Second Circuit reversed, held that what they were accused of was not a crime, and directed that there be no retrial.  I have previously covered the subject of these prosecutions multiple times, most recently on August 9 here, and going back to July 13, 2014 in an article titled "The Impending Demise Of The Insider Trading Jihad."

In the August 9 article I predicted that "the Supremes are not going to give this one the time of day."  Denying cert without opinion on the first day of the term for a petition that was only filed two months ago is the Supreme Court equivalent of "not giving it the time of day."

So where does that leave the insider trading jihad of Mr. Preet Bharara, and particularly the non-insider branch of the insider trading jihad?  The answer is, at least for the non-insider portion, it's dead.  If the Feds want to go on with this charade, their only avenue now would be to start a prosecution in some other jurisdiction (with a prosecutor other than Mr. Bharara), then try to get a court of appeals in that jurisdiction to take another approach from the Second Circuit, and then try to get the Supremes to take it on the ground that there is a "split" of the circuits.  This would be a multi-year process in the best of circumstances.  And most of the stock trading takes place in New York.

Up until today Mr. Bharara has tried to keep up the facade that he had 80+ good insider trading convictions, but now that game is over.  How many of those 80+ convictions are about to get thrown out?  Nobody has an exact count.  Bloomberg says "at least 10."  I think that's way low.  It could easily be twenty or even more.  That news will be dripping out over the next several months.

This was never more than a charade to begin with.  When the financial crisis hit in 2008 - 09, there was a cry for scalps from the likes of Elizabeth Warren and Barney Frank.  Their theory was that the stock market decline and the bank liquidity crisis could only be caused by greedy bankers and their dangerous trading practices.  None of those calling for scalps has ever articulated a coherent theory of how insider trading had anything at all to do with the 2007/08 market bubble or its bursting, nor even a theory of how insider trading (let alone its non-insider branch) causes any harm to other investors in the market.

But no matter.  Scalps were needed.  So the prosecutors cast around for something they could charge lots of rich traders with, and the best they ever came up with was insider trading -- which had literally nothing to do with the market bubble or its bursting no matter how you look at it.  But other than insider trading they never came up with anything that they could pin on individuals.  Of course, they came up with endless ideas to shake down the big banks, who will never take any case to trial.  See my tag on "Phony Prosecutions."  But at least a few people other than yours truly keep asking the embarrassing question, how can there be a crime here if no individual ever gets prosecuted?  (You mean it's just another shakedown of a bank?  Really?)

Recently the Justice Department says it is supposedly is taking a new tack and will start focusing on the individual wrongdoers in its prosecutions of financial wrongdoing.  I'll believe it when I see it.  Here's the problem, government:  When you prosecute a big bank, even if they did nothing wrong, you get a billion dollar settlement and a press conference and a front page article in the New York Times.  When you prosecute an individual, next thing you know, they take you to trial, and you may well lose, or have the conviction reversed and the whole prosecutorial theory declared to be not criminal to begin with.  Good luck!



Complete Self-Delusion In New Haven, Connecticut

I'm just back from New Haven, Connecticut, where my Yale class (1972) and the ones immediately before and after (1971 and 1973) held a "mini-reunion."  And I'm reminded once again that the political orthodoxy among these seeming best-and-brightest people makes the Manhattan orthodoxy seem mild by comparison.  To give you one indicator, looking around for political bumper stickers on cars, I spotted many of them, and every single one I saw was for the same candidate: Bernie Sanders.  Really.

To me the single most striking aspect of both the Manhattan and Yale versions of the orthodoxy is the smug self-satisfaction that "we" are helping "them" with massive socialist-model government programs and handouts, all while absolutely refusing to look around and observe the evidence of the destructive effects of these efforts.

The first session I attended after arriving was a presentation by a guy named Michael Morand, identified as Yale Deputy Chief Communications Officer.  The subject of the presentation was the renaissance in New Haven since we attended some 40+ years ago.  Or at least, it is a "renaissance" according to Morand. 

I will start by agreeing with Morand on one thing.  The area of New Haven immediately adjacent to the Yale campus, including the heart of downtown, is much improved since the early 70s.  There are new and renovated buildings in these areas, new and improved retail uses along Chapel Street and Broadway, and several new and better restaurants.  These things are visible to anyone who comes to visit the university, because they are right there in front of your eyes.  Morand could have pointed this out and left it at that, but that was not why he was here; he had bigger things in mind.

So instead of sticking to a plausible story of some gentrification immediately around the campus, Morand set out to prove that New Haven is having a "renaissance."  He had a slide show full of photographs.  Beautiful new buildings -- almost all of them Yale or Yale-backed buildings.  Heartwarming stories of all the efforts by Yale personnel to improve the lives of the people in the town.  Yale students and faculty running music and art programs for kids out in the "community."  Pictures of the bright new low-rise public housing projects that have replaced some of the prior grim high rises.  A new light-industrial area called "Science Park" backed by Yale to bring jobs back to an otherwise abandoned factory neighborhood.  And so forth.

Then he got to some statistics, which is where he started to lose me.  I guess he didn't realize that he might have an aficionado of population and income statistics like yours truly in his audience.  The first statistic he tossed out was that New Haven is (supposedly) "the fastest-growing city in New England."  Huh?  I knew that that couldn't possibly be right, so I looked it up immediately on my return.

According to decennial Census data compiled at Wikipedia here, New Haven reached its peak population of 164,443 in the 1950 census, and has declined to 130,282 as of the most recent (2014) estimate.  That's sure not my idea of "growth."  The same table does show that New Haven's population bottomed out at 123,626 in the 2000 census, and has increased by a little over 5% since then.  Is that what Morand was talking about?  Well, to take just one non-random example, the population of New England's largest city, Boston, while also well off from a 1950 peak of 801,444 to a current (2014) 655,884, has increased by over 11% and 66,000 people since 2000 (589,141 to 655,884).  New Haven is not even close to that.  Nearly every city in New England has lost population since peaks somewhere between 1930 and 1960 (this is true not just of New Haven and Boston, but also of Springfield, Cambridge and Lynn, MA, Providence, RI, Portland, ME, Bridgeport and Hartford, CT); but there are exceptions, notably Stamford, CT, and Manchester, NH, both of which hit all-time highs in 2014.  Stamford's 2014 population, at 128,278, is up over 9% since 2000.  How could that also not count as "faster growing" than New Haven? 

And of course, now that I knew that Morand was blowing smoke about New Haven's population, I thought to check more broadly into relevant statistics on income and poverty.  After all, New Haven has all those Yale geniuses right there, cooking up all kinds of ideas and programs to uplift the downtrodden and eliminate poverty.  Likely, after decades of this, they will have largely succeeded by now.  Right?

Actually, that couldn't be more wrong.  Here are some relevant numbers:

Before I left town, I thought to take a quick drive around to get my own impression of how things are going, not in the area immediately adjacent to the university, but rather in some of the remaining 80% of the town.  My verdict: sorry, but it looked worse -- a lot worse -- than when I was a student back in the 70s.  I went down Howard Avenue to the City Point area, then out Winchester Avenue to Newhallville, and back down Shelton Avenue and Dixwell Avenue.  If you don't recognize these names, don't feel bad, because almost nobody who has gone to Yale would recognize them either.  These are parts of New Haven where Yalies (except for crazies like me) just don't go.   The housing in these places is in an extremely deteriorated condition.  At least half the houses looked like they had not had a paint job in the forty plus years since I left Yale, and many had not only peeling paint but also broken, or loose, or even boarded-up, doors or windows.  Also remarkable was the complete lack of any renovation or upgrade projects in progress.  Contrast this to the former "bad" neighborhoods of New York, like Harlem, or even Bedford-Stuyvesant in Brooklyn, where renovations are going on everywhere; or to Greenwich Village, where seemingly every block has three renovations in progress.

But wait a minute.  New Haven is literally ground zero for government programs to cure poverty, with the Yale faculty in the forefront of designing and implementing the efforts.  Back in our college days, New Haven had the premier "urban renewal" program in the country, headed by one Ed Logue, who had declared the goal of making New Haven America's first "slum free" city.  From "Urban Renewal in New Haven" by Joseph Montagna, apparently written in about 1979 for the Yale-New Haven Teachers Institute:

The urban renewal program in New Haven was undertaken on a massive scale. No other city in the United States could equal the ambitious commitment to such a large scale redevelopment of its business and residential districts. On a per capita basis, New Haven outranked all American cities in securing funds which produced an impressive experiment in the physical and human rejuvenation of a city.

New Haven built public housing everywhere and was a national leader in public housing.  Today New Haven has 2,492 units of low-income public housing and 4,479 families receiving Section 8 vouchers, in a city of only 130,000.  At two per household (low estimate), that's close to 15% of the population of the city receiving low income housing assistance.  For comparison, the percent of people in the United States living in public housing is around 1% per HUD data here, and the percent receiving Section 8 vouchers is around 3%, per data here.  So New Haven has almost quadruple the percent of people receiving low income housing assistance as the national norm.  Food stamps?  Nationwide about 14% of the population receives them.  In New Haven it's more than double -- well over 28%, over 37,000 people out of 130,000, per the Yale Daily News just yesterday.  And these are just some notable examples.  New Haven is a champion of utilizing every government anti-poverty effort out there.

If these things worked even a little, one would think that New Haven would have a poverty rate somewhat below, if not significantly below, national norms.  If these things worked even a little, one would think that New Haven would have per capita income levels above, if not significantly above, national norms.  But instead New Haven has poverty double the national norm and per capita income at or below the level of dead-last Mississippi.  In other words, it's not that these programs are just not working.  They are actively destructive of work effort and of striving and of upward mobility, trapping wildly disproportionate numbers of New Haven's citizens into generations of unbreakable poverty.

So we all sat there looking at Morand's pretty pictures of the new housing projects that have replaced the old housing projects, and of the Yalies teaching music and art to the kids in the "community," and we all felt good about ourselves that finally "our" efforts to help "them" were turning things around.  That is, all of us felt good about ourselves except for me, because I already basically knew what the numbers would show when I went home and took a few minutes to look them up.

Before closing, I should mention that Morand did mention a few things that I thought were at least constructive rather than destructive.  These included efforts to lure start-up employers to New Haven and to remove some of the terrible scars left by prior "urban renewal" efforts (e.g., the "Oak Street Connector").  But left unmentioned were serious challenges faced by New Haven with no solutions short of very serious tough love.  These include uncompetitive personal and corporate income taxes and vast overhangs from near-worst-in-the-nation unfunded public pension obligations at both the state and local levels.  Not to mention vast "anti-poverty" efforts that seem designed only to increase government dependency, idleness, and anger among the subject population.  Feel-good presentations by Yale's New Haven boosters are not going to cure these issues.  If I had a business to locate somewhere, I sure know that I would not choose New Haven.