Desperate Efforts To Rescue The Poverty Scam

I spent the morning today attending a conference with the title "Can We End Poverty?", put on by the Cato Institute at Columbia University.  I came away disappointed.  This was a serious effort by some earnest and well-meaning people.  But in my opinion even the committed libertarians among the presenters gave way too much credence to the government's fake poverty measurements, and way too much credence to the idea that government "anti-poverty" programs are bona fide efforts to alleviate poverty as opposed to being intentionally structured to keep measured poverty from ever going down and thereby justifying and promoting never-ending ineffective expansion of the government.  All participants who addressed the subject agreed that governments (all levels) have spent over $20 trillion on the "war on poverty" since it began in the 1960s, and about $1 trillion per year today, and the rate of "poverty" by the official government measure started at about 15% and is still at about 15%.

The conference was structured in panels, with participants on the libertarian side balanced with others from the Left.  The participants from the Left seemed to view their role as figuring out a way to claim that the "anti-poverty" programs have actually accomplished something other than trapping the intended beneficiaries in a lifetime of poverty.

Most remarkable to me was a guy named Christopher Wimer, identified as a Co-Director of Columbia's Center on Poverty and Social Policy at its School of Social Work.  Wimer, along with several colleagues, claimed to have come up with a new and improved measure of "poverty" called the "Anchored Supplemental Poverty Measure."  He described it in qualitative terms, but without enough specifics to enable a detailed critique.  But the basic idea seemed to be to answer critics of the official measure by giving credit for the huge in-kind transfers passed out these days, and also to adjust the standard of deprivation poverty upwards to account for today's overall higher standards of living.  And the result: poverty today under this measure is just about exactly the same as by the Census Bureau official measure, about 15%.  But under this measure the poverty rate in the 60s would have been close to 30%, and much of the decline is credited to the handouts that have arisen since.  A couple of comments:

  • Since he could have picked whatever standard of "poverty" he thought appropriate for today, it is clear that his standard was reverse-engineered to come to approximately the same figure as the Census Bureau.  We must maintain the official party line that almost 50 million Americans are "poor"!
  • If the poverty rate in the mid-60s was close to 30%, then very likely he has defined my own family of the time into "poverty."  We lived in quite modest circumstances, but no way did we consider ourselves to be in or near poverty, and we would have found it insulting to suggest such a thing.

The guy gave an impression of being sincere, but all I could think was, how is this anything other than a completely cynical effort to keep alive the poverty scam?  For those who haven't read my prior articles, by the "poverty scam" I mean the intentional effort to keep the number of people supposedly in poverty high despite the trillions in government expenditures, in order to justify further growth of the government to cure the problem.

And along very similar lines, consider the op-ed from the Times's Thomas Edsall from Tuesday titled "How Poor Are The Poor?"  (Note that I have previously criticized Edsall for his "appalling ignorance" of the poverty scam.)  Edsall writes on the article appearing in the April 2 edition of the New York Review of books by Harvard's Christopher Jencks titled "The War On Poverty: Was It Lost?"  Edsall first notes that Jencks has analyzed the government's poverty rate calculations and made some simple adjustments to take account of the value of government handouts and inflation, and as soon as you do that the poverty rate gets cut to about a third, from about 15% to under 5%:

Jencks makes three subtractions from the official level to account for expanded food and housing benefits (3 percentage points); the refundable earned-income tax credit and child tax credit (3 points); and the use of the Personal Consumption Expenditures index instead of the Consumer Price Index to measure inflation (3.7 percentage points).  Jencks’s conclusion: “The absolute poverty rate has declined dramatically since President Johnson launched his war on poverty in 1964" [to 4.8%]

Edsall calls Jencks' 4.8% "the lowest poverty estimate by a credible expert in the field."  Well, I guess I have just been called "not a credible expert in the field" (OK, I wasn't very flattering toward Edsall either), but I would say that Jencks has only just begun with the needed adjustments to the so-called poverty rate.  He hasn't even started to account for the large numbers of affluent people counted in "poverty" because they don't have measurable "cash income" this year -- students living on scholarships and family support, early retirees with substantial savings and million dollar houses who haven't taken social security yet, people who take a year off from work to change careers or maybe travel.  Don't believe that these categories distort the statistics?  Take a guess what the official "poverty" rate is in affluent Ithaca, New York.  Ready?  It's 55.6%.  They just shamelessly count thousands of students (nationwide, it's millions), many from rich families, and hope no one will notice.

Wait a minute!  If you keep this up you're going to get the "poverty" rate down to about 1 or 2% -- how can that possibly justify additional trillions of government spending that I want for myself and my friends?  Well, Edsall says he went out and talked to a bunch of "experts," and they have the answer -- a measure of poverty that defines the concept in relative rather than absolute terms.

[An alternative measure of poverty] is to count all those living with less than half the median income as poor. There are strong theoretical justifications for the use of a relative poverty measure. The Organization for Economic Cooperation and Development puts it this way:

In order to participate fully in the social life of a community, individuals may need a level of resources that is not too inferior to the norms of a community. For example, the clothing budget that allows a child not to feel ashamed of his school attire is much more related to national living standards than to strict requirements for physical survival.

Using one-half of the median income estimates the number of poor people at over 70.6 million, far above the 45.3 million official number, according to Shawn Fremstad, a senior fellow at the Center for American Progress, a liberal think tank.

Sounds to me like they're getting desperate.  The American people have so far shown themselves remarkably easy to scam with the poverty statistics, but the purveyors of the statistics at least go to major effort to hide the scam in complicated survey techniques and program definitions that take a lot of work to penetrate.  When you go to the so-called "relative" measure of poverty, isn't it immediately obvious to everybody that the whole idea is to have something that by its very definition cannot go down no matter how much the government spends to fix it?

And I love that part from the OECD about a "child feeling ashamed of his school attire."  I lived the bulk of my childhood in hand-me-downs from friends and relatives -- and so did lots of other kids I knew.  Do they think I felt "ashamed"?  Really, that's obnoxious.  Now, if my family had taken government handouts to buy new clothes so that I wouldn't have had to wear hand-me-downs, then, yes, I would definitely have felt ashamed.



Can The Administrative State Ever Be Reined In?

A couple of weeks ago on March 9, two Supreme Court cases came down on relatively obscure issues of administrative law.  They are Perez v. Mortgage Bankers Assn. and Dep't of Transportation v. Ass'n of American Railroads.  Both were unanimous reversals of the lower courts, and neither one attracted much attention in the press at all.  But there's something unusual and very remarkable about these cases that I did not notice at the time: both contain lengthy concurrences by several of the Justices (Alito, Scalia and Thomas) that call into question in fundamental ways the whole basis of the administrative state.  Thomas, most notably, wrote a separate concurrence of 23 pages in one case and 27 in the other.  This is by no means an every day event.

What do I mean by the administrative state?  It is the vast extra-constitutional apparatus of agencies and rules that sprang up mostly starting from the New Deal and has only accelerated since.  Read the Constitution and you will find only three grants of power, one to each of the three branches of government: "All legislative Powers herein granted shall be vested in a Congress of the United States . . ." (Art. I); "The executive Power shall be vested in a President of the United States . . . ." (Art. II); and "The judicial Power of the United States, shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. . . ." (Art. III).  What could be simpler and more elegant?  Three sorts of power allocated to three separate branches, who do not work for each other and can check each other's power in various ways.

Even though the Constitution has not been amended in any respect on this subject, here's how it works today: Dozens of administrative agencies, some within the executive departments and some not, promulgate thousands upon thousands of pages of rules purporting to bind the American people.  Then agency staff prosecute the people for violations of those rules before "administrative law judges" who are also employees of the same agency; and if you lose before the ALJ (which almost everyone does -- they are not impartial in any meaningful sense) your "appeal" is to the head of the agency, who is also the boss of the prosecutors and of the ALJ.  Then, assuming that you have infinite resources to continue a fight against the ultimate deep pocket, you have a theoretical right to take further appeals into a court system, but that court system under Supreme Court precedent gives so-called "deference" about 99% of the time to agency determinations.  And by the way, every federal official involved in this gigantic charade has taken an oath to uphold the Constitution.  Has anybody here even read it?

And thus, to take just one example among zillions, we now have EPA in the process of promulgating "regulations" having the purpose and effect of forcing the shut-down of the entire coal-based portion of electricity generation in this country, which until recently was almost half of our electricity.  If those regulations are to be generally applicable to the American people and govern private conduct, don't they have to be passed by both houses of Congress and signed by the President?  Or how about the SEC purporting to ban what they call "insider trading" by non-insiders -- something that Congress has never made illegal -- and then seeking to prosecute "violators" before its own ALJs?

There's not nearly enough room in a post here to describe the sorry history that got us into this predicament.  But I do recommend reading all of these concurrences in their entirety.  If you take an hour with that project, you will get a good grounding in some of the most fundamental constitutional principles, and with any luck you will also unlearn a good deal of the looking-glass constitutional law that you have undoubtedly ingested from the likes of Linda Greenhouse and Adam Liptak (of Pravda).

Just a few key quotes to give you a taste.  This is from Justice Alito's concurrence in Association of American Railroads:

The principle that Congress cannot delegate away its vested powers exists to protect liberty. Our Constitution, by careful design, prescribes a process for making law, and within that process there are many accountability checkpoints. See INS v. Chadha, 462 U. S. 919, 959 (1983). It would dash the whole scheme if Congress could give its power away to an entity that is not constrained by those checkpoints.

From Justice Thomas's concurrence in Association of American Railroads:

We have held that the Constitution categorically forbids Congress to delegate its legislative power to any other body . . . but it has become increasingly clear to me that the test we have applied to distinguish legislative from executive power largely abdicates our duty to enforce that prohibition. . . .  I would return to the original understanding of the federal legislative power and require that the Federal Government create generally applicable rules of private conduct only through the constitutionally prescribed legislative process.

All of these concurrences cite and rely to varying degrees on the excellent current book by Columbia Law Professor Philip Hamburger, Is Administrative Law Unlawful?  Hamburger has done an unbelievable job of tracing the history of the rule of law and separation of powers back into Renaissance and even medieval times.

So the answer to the question in my title is, yes the administrative state could be reined in, and dramatically so, by the right Supreme Court.  However, currently a plurality (but maybe a small plurality) of our justices think that micromanagement of the people by unaccountable government "experts" is the way to go, and if the Constitution doesn't seem to say that, we'll just find some way to let it happen.

Thanks to Michael Greve of Library of Law and Liberty for pointing me to these decisions and the concurrences.

UPDATE March 26, 2015: I had some time on the subway this morning with nothing better to do than read the op-eds in today's New York Times (now that's desperate!) and I came across one by recent NYU Law dean Ricky Revesz complaining about Harvard Con Law Professor Larry Tribe (he taught Con Law to President Obama -- and also to me!) filing a comment on behalf of Peabody Coal raising constitutional objections to EPA's currently proposed "Clean Power Plan" regulations mentioned above.  The objections raised by Tribe include violation by EPA of "the Constitution's nondelegation doctrine, which bars agencies from exercising legislative power"  -- exactly the subject of the Alito, Scalia and Thomas concurring opinions described aboveTribe also raised additional constitutional issues under the Tenth Amendment and the Takings Clause of the Fifth Amendment.  Revesz continues:

In the estimation of his Harvard Law School colleagues Jody Freeman and Richard Lazarus, “Were Professor Tribe’s name not attached to” these arguments, “no one would take them seriously.” But even if his claims don’t help Peabody in federal court, they are undoubtedly useful in the court of public opinion, where sentiment can be swayed by legal arguments, however weak, from a scholar of Professor Tribe’s reputation. 

You are observing how they use shaming to enforce the official groupthink in the groves of legal academia.  Well, Mr. Revesz, maybe you can call me "nobody," and maybe even Michael Greve and Philip Hamburger, but Alito, Scalia and Thomas?  Really?

My bet is that Revesz does not even know of the existence of Hamburger's book or of the Alito, Scalia and Thomas concurrences in the Perez and Ass'n of American Railroads cases.  Don't worry -- none of the New York Times readers know about those things either!






Two Ways To "Help" The Middle Class

A recurrent theme here is that there are two ways of looking at the world.   One arena where those two visions play out is the current competition by politicians to demonstrate that they will "help" the middle class.  Nearly all politicians claim to make "helping" the middle class a priority, but there are two completely different ways of going about it.  One proposed method of "help" is government handouts; the other is facilitating increased self-sufficiency.

There are inevitably some things about this discussion that are not completely intuitive.  Here in my business of commercial litigation -- that is, the fight over who gets the money -- it is taken totally as a given that getting more money is always better and getting less is always worse; that the quantity of money that you gain or lose is the measure of how much better or worse off you are; and that the source of the money doesn't really matter -- you could earn it from a job, or have a good trade in the stock market, or it could fall from the sky, and it's all equivalent.  But I would argue that the principle that it's always better to get more money from whatever source actually does not apply in all circumstances.  For example, suppose that I could somehow supply my children with so much money that they could have everything they possibly want in life without ever having to work -- would that be a good thing for them?  And would it really be better for them than having to work and earn their own way?  I think this would be the worst possible thing for them.  Maybe that's because I think that the thing that makes life worth living is figuring out how to achieve individual and family self-sufficiency in a complex world.  I've known multiple people in my life who got too much money from their parents and found themselves lost and adrift, and quite unhappy.

So where do government handouts fit into this picture?  The political Left completely follows the principle that we use in litigation -- more money is always better, and the fact that the money comes from the government as handouts and obviates the need for the recipients to figure out how to live independently is of no consequence.  Values like hard work, self-sufficiency and, for that matter, freedom, get weighed at zero.  I could give lots of examples, but let's take a few.

The food stamp program (aka SNAP) is a frequent subject of commentary, perhaps because it is a regular target of budget cutters.  It didn't become a target of budget cutters randomly, but rather because it has exploded in size and cost totally out of proportion to any ability to explain that from underlying economic conditions.  According to data compiled here by the Food Research and Action Center, the number of food stamp recipients was 17.2 million in January 2001 (last month of the Clinton administration), 32.2 million in January 2009 (last month of the GW Bush administration) and -- after six years of supposed economic "recovery" -- 46.3 million in December 2014 (last data provided).  Here is what the Center on Budget and Policy Priorities (left-wing think tank) had to say in January 2015 about a proposal to reduce that 46.3 million by about 1 million:

Roughly 1 million of the nation’s poorest people will be cut off SNAP (formerly known as the Food Stamp Program) over the course of 2016, due to the return in many areas of a three-month limit on SNAP benefits for unemployed adults aged 18-50 who aren’t disabled or raising minor children. . . .  The loss of this food assistance, which averages approximately $150 to $200 per person per month for this group, will likely cause serious hardship among many.

No mention of any value placed on loss of self-sufficiency by people who have no reason why they can't take care of themselves.  And that CBPP comment is actually tame compared to a September 2013 article in the New York Daily News reacting to a then-proposed 5% cut in the food stamp program (then at more than 48 million recipients), which within a span of a few sentences used all of the following descriptors: "heartless" "devastating," "sheer meanness," "repugnant," "hunger crisis," "repulsive," "cruel," and "disastrous."

Or consider the dozens of amicus briefs filed in support of the government in the King v. Burwell Obamacare litigation.  The question there is whether the federal government can provide healthcare premium subsidies to people on the federally-established exchanges -- or to put it another way, whether permanent government hand-outs to millions of not-poor citizens (if they were poor they would be getting Medicaid) on balance help those people (because more money is always better) or hurt them (by taking away self-sufficiency).  As far as I can see all of those who support the government, and for that matter the government itself, see the Obamacare subsidies as a dollar-for-dollar gain for the recipients, with no value at all placed on independence or freedom.

An alternative way to help the middle class is to enable and facilitate private sector technological development that has the effect of increasing incomes and reducing costs throughout the economy and making the people richer.  Exhibit A is the "fracking" revolution for oil and gas, which has suddenly led to the price of oil dropping by more than half in the last several months.  Just that alone makes every American who consumes energy (all of us) a couple of percent richer -- and a couple of percent better able to lead independent lives.

Reaction on the Left?  Ban it!  And thus we have the Obama administration in the last few days coming out with restrictions on fracking on federal lands.  This is not a complete ban, and only applies to federal lands, but the regulations appear clearly intended to hobble fracking to the maximum extent that the administration can get away with right now.  And how did environmental groups react?  With outrage, of course -- according to the Washington Times here.  They want fracking outright banned immediately and everywhere.  I guess then we can all live off federal hand-outs while we freeze in the dark.




Washington Budgetspeak From The New York Times

On Tuesday Republicans in Congress released a budget resolution covering the next ten years through 2024, and on Wednesday, right on cue, the New York Times went apoplectic.  Wednesday's print edition contains both a "news" article by Jonathan Weisman on page A16 ("Republicans Propose Budget With Deep Cuts") and an unsigned editorial on the Editorial Page ("The House Budget Disaster").   I'll quote some of the main passages, and then, here is the one-question quiz that you will be asked to take after reading them:  Does the budget resolution propose that federal spending will increase or decrease over the period in question?  As fair warning, I will advise you that neither the article nor the editorial mentions any actual numbers as to the amounts of spending proposed, either in the aggregate or on any particular program.

In the editorial, the point is not only that there are deep cuts, but that they are directed specifically at the poor and innocent.

The plan’s deep cuts land squarely on the people who most need help: the poor and the working class. . . .  [T]he plan proposes deep cuts to “mandatory” nondefense spending, which includes Medicaid, federal pensions, food stamps, farm supports and tax credits for the working poor. . . .    Over all, at least two-thirds of the $5 trillion in cuts over 10 years would come from programs that focus on low- and modest-income Americans, even though such programs account for less than one-fourth of all federal program costs. . . .   House Republicans are sticking to their tired themes of spending cuts, no matter the need or consequences, and tax cuts above all.

I've got the word "cuts" in there four times, two of them "deep cuts," just in that short excerpt.  Then there's the "news" article:

The prescribed cuts would be deep. . . .  The plan would cut billions of dollars from the Supplemental Nutrition Assistance Program, better known as food stamps. . . .  Domestic programs would be cut $519 billion below the already restrictive caps set in 2011. . . . 

So get ready and take the quiz.  It must be that with these "deep cuts" and "$5 trillion in cuts" over the next ten years that federal spending will be going down at least a little, right?  Wrong!  In fact, the budget resolution proposes that federal spending will increase in every year, and over the ten years will go from $3.664 trillion in FY2015 to $4.995 trillion in FY2024.  Here is a link to a chart attached to the resolution materials with the proposed year-by-year spending.  The "$5 trillion in cuts" is not a real cut in the sense that any normal person would use the word, but rather a "cut" from a higher previously proposed rate of spending increase to a somewhat lower trajectory of spending increase.  If we kept spending at this year's level, we would spend $36.6 trillion over the next ten years.  We were previously projecting that we were actually going to spend $47 trillion, but now we're "cutting" our projection to $42 trillion, which is still almost $7 trillion more than keeping spending level.

Am I the only one offended by reading  what purports to be news coverage of spending "cuts" that somehow never mentions that the spending is not going down, but rather up, and not by a small amount?  New York Times, this is how you have earned yourself the name of "Pravda."  You can argue all you want that spending going forward should be higher than the Republicans propose, but can't you at least be honest with us and let us know that even under their proposal spending is going up and not down?  Back in the Soviet Union, everyone knew that what was in Pravda was ridiculous, but nobody had any way of getting at the real facts.  Even in the U.S. it used to be that you had to go to Washington to look at these government documents, and nobody really questioned the New York Times narrative, no matter how preposterous.  Today, we can get the government documents online, and people like the Manhattan Contrarian can read them and see what they say.

And while we're discussing this subject, the food stamp program, aka SNAP, needs some special mention.  Before Obama, this program had at least some semblance of a real safety net item, and beneficiaries and spending generally went up and down with economic cycles.  Under Obama, there has been an aggressive effort to sign up absolutely as many people as possible onto SNAP and thereby hook them onto government dependency.  During a period of so-called economic recovery since 2009, beneficiaries have almost doubled to close to 50 million, and spending has more than doubled to about $80 billion per year.  Read about the aggressive campaign to sign up new recipients here.  Also, on the campaign to prevent any cuts, no matter how small, even though the program has somehow doubled when by any reasonable standard it should have been shrinking, see here




Which Is Better, Weak Currency Or Strong?

The field of economics is characterized by many brilliant insights about human behavior, combined with almost as many preposterous fallacies that somehow get widespread acceptance.  Like the idea that the way to improve a sluggish economy is to have the government borrow huge sums of money and waste it on unproductive projects -- how could anyone actually believe that?  (OK, it helps that the government puts out fake data that value wasteful projects as fully equal to productive projects.  But I digress.)

Right up there with that one is the idea that currency devaluation improves a country's economic position relative to others.  Suppose I put the issue this way:  Should the goal of a country's economic policy be to enrich the people of the country or to impoverish them?  Put in those terms, I would hope that most everyone would agree that the goal should be to enrich the people, and certainly not to impoverish them.  If a country that imports 20% of its consumption from other currency areas has its currency appreciate 10% relative to the other currencies, then its people just got 2% richer; and if its currency depreciates 10%, then its people just got 2% poorer.  Obviously currency appreciation is better.  What's so complicated about that to understand?

And yet we all know that in the 1930s world governments engaged in successive currency devaluations to try to improve the economic standing of their own country relative to others.  You may have thought that that era had passed.  No, it's back.  Today seemingly every major currency area is engaged in a game to drive its currency down -- Europe, Japan, China.  The ECB has just launched a big "QE" program, and suddenly the euro has had rather a dramatic decline against the dollar over the last several weeks.  And the big question is, should the U.S. be following suit?

Of course, the usual economic fallacists are popping up to advocate for competitive devaluation by the U.S.  As always, the leader is Official Manhattan Contrarian Worst Economics Writer Paul Krugman, with a column on March 13:

Who wins from this market move [of the declining euro]? Europe: a weaker euro makes European industry more competitive against rivals, boosting both exports and firms that compete with imports, and the effect is to mitigate the euroslump. Who loses? We do, as our industry loses competitiveness, not just in European markets, but in countries where our exports compete with theirs. America has been experiencing a modest manufacturing revival in recent years, but that revival will be cut short if the dollar stays this high for long.  In effect, then, Europe is managing to export some of its stagnation to the rest of us.

Well, of course certain export industries benefit from a declining currency, but obviously they are a minority of any economy and the people as a whole are hurt.

In the category of people who can usually be counted on not to fall for fallacies, we have Megan McArdle of Bloomberg News, who also comes out (on March 12) for the benefits of a weaker currency.  Megan sees the positive of a weak currency in "export[ing] more than we import" because of the "importance of work" to our lives.  Huh?  There's no inconsistency between a hard currency and full employment.  In fact, it doesn't take much looking at world economies to figure out that the most successful ones have consistently strong currencies and really low unemployment.  Switzerland -- now there's a strong currency!  Sure the exporters complain every time the currency goes up, but somehow they always figure out that they still have a comparative advantage in something.  The unemployment rate has ranged between 2.9% and 3.5% over the past year.  Or Singapore.  There the unemployment rate is barely 2% and you have to pay about $80,000 per year to hire a hotel maid.

And then there are the economies where the currency is not just declining, but collapsing.  Russia and Venezuela come to mind.  Do they really represent models to emulate?