Migrants 1.

Social scientists posit that people experiencing disturbing social change can seize on particularist identities like ethnicity or nationality.  Demographic change and economic change and shifting social values all can trigger such a response.  On the other hand, cultural and economic elites in Western countries celebrate the free flow of goods and labor.  They also have developed more cosmopolitan views than have many fellow citizens.[1]

Illegal immigration provides a good example of the particularist-cosmopolitan tension.  In recent times, illegal migration has become easier than ever before in history.  In both Europe and America bitter quarrels over immigration rack politics.[2]  These controversies arise not from heavy current immigration, but from heavy prior immigration.  More importantly, the general backlash against elites–who led us to war in Iraq and then into the financial crisis—has ensnared migrants.

Illegal migration to the United States dropped sharply during the Great Recession.  It hasn’t picked up immensely in the past year.  However, that still leaves 10-12 million illegal immigrants in the United States.  Human symbols of elite failure.  Liberals insisting on calling them “undocumented immigrants”—as if there is just some bureaucratic foul-up in Washington—adds fuel to the fire.  President Obama’s skirting of the law angered many people.  Illegal immigration in the European Union is more recent.  There the flood of migrants from various failed states mixes with refugees from war-torn Muslim states.

People leave their “shithole” countries for good reasons and not just on a whim.  Until conditions in those countries improve, there is not likely to be a significant drop in attempts at illegal immigration.  To complicate matters further, while many of the migrants are economic migrants, the law allows them to request asylum as victims of persecution.  This clogs the immigration system and delays repatriation.

In light of this reality, attention has turned to deterring them from reaching American or European soil in the first place.  Europeans have negotiated with pathway countries—Libya, Sudan, and Turkey—to stem the departures for Europe.  The implementation of those agreements involves a good deal of brutality that is much worse than anything suffered by Central American migrants to the United States.  Mexico is unwilling to play that sort of role for the United States.  The “zero tolerance” policy attempted by a Trump administration grown tired of waiting for Congressional approval of a border wall offers another form of deterrence.

Cosmopolitans sometimes phrase the choice in a misleading way: “What sort of society do they wish to be?  Do they wish to be immigrant nations with continual demographic and cultural change?”  First, both the European Union and the United States have long had substantial legal immigration.  Second, it is legitimate to debate what kinds of immigrants best serve the interests of the community.

[1] Benjamin Barber, Jihad and McWorld: How Globalism and Tribalism Are Shaping World Society (1996).  Barber’s analysis remains engaging, but it wasn’t new.  Late-Nineteenth Century sociologists had identified the problem of anomie.  For that matter, historians long ago diagnosed the rise of “mystery” religions as a response to the cosmopolitanism of the Hellenistic kingdoms.

[2] Amanda Taub and Max Fisher, “In U.S. and Europe, Conflict Over Migration Points to Political Problems,” NYT, 30 June 2018.

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GPA+.

Ten years ago, 32 percent of graduating seniors received some form of “Latin honors” from the University of Southern California.[1]  This year, 44 percent received “Latin honors.”  Way to go Southern Cal!  Recruiting all those extra smart kids!  I bet the Ivy League schools will be taking their meals standing up after that spanking.  Oh, wait.  Turns out Harvard granted “Latin Honors” to more than half its graduating seniors.[2]

Granting “Latin honors” isn’t based on the subjective direct judgement of individual merit by the faculty members.  It’s based on the more objective quantifiable judgement of Grade Point Average.  So, Southern Cal and all the many other schools granting “Latin honors” to a growing share of graduates is just an artifact of long-term grade inflation.  According on one expert, a 3.7 GPA (on a scale of 4.0) “is just a run-of-the-mill student.”[3]

It starts in the schools.  In 1998, 39 percent of high-school seniors graduated with an “A” average.  In 2016, 47 percent graduated with an “A” average.  Over the same span, the SAT Critical Reading scores fell from an average of 505 to an average of 494; the Math scores fell from an average of 512 to 508.[4]  Students expect to continue their high-school experience in college.  Elite schools claim that they haven’t studied the trend, and don’t know how to explain it.[5]  The situation probably differs at tuition-driven, not-selective schools.  Too many schools pursuing too few students has led the recruiting effort look like feeding time at the shark tank: “Throw in another goat.”  After the admissions office has done what it can, the faculty face a heavy emphasis by their employers on retaining the students who have been admitted.

Grade inflation is like monetary inflation.

It is fueled by a weak authority in charge of controlling the volume of the unit of exchange.   In the case of the schools this could be parental pressure applied through the influence of a school’s reputation on housing prices.  In the case of colleges and universities, it is the desire to attract student dollars.  A strong authority might tell students that they aren’t particularly distinguished, or well-prepared, or hard-working.

It distorts incentives.  Thus, if you can get the same or more money for less work, then you’ll do less work.  If you can’t trust the money to have real value, then you’ll pursue other stores of value.  One form of this could be a flight to non-public schools with a reputation for greater rigor, or to home-schooling.

It favors people, better positioned to exploit the nominal value of a unit of exchange/measure and disfavors people poorly positioned to do so.  Employers, for example, lack any reliable means to evaluate the educational attainment of potential employees.  High GPAs fog over individual differences in both ability and work ethic.

The historical record shows that breaking an inflation is very painful and politically difficult.  People are willing to try this only after conditions have become intolerable.  We aren’t there yet.

[1] That is “cum laude,” magna cum laude,” and “summa cum laude.”

[2] Down from 91 percent in 2001.

[3] Melissa Korn, “You Graduated Cum Laude?  So Did Everyone Else,” WSJ, 3 July 2018.

[4] See: https://blog.prepscholar.com/average-sat-scores-over-time

[5] See “Captain Henri” in “Casablanca.”

The Old Way and the New Way.

Once upon a time, the United States briefly (1945-1965) stood unchallenged atop the world economy.  “What America makes, the world takes.”  A handful of giant companies dominated the American economy.  They were capital-intensive mass production and mass employment manufacturers.  They paid good wages and many offered generous defined-benefit pension plans.[1]  The companies had been created by ruthless, visionary entrepreneurs.  By the Forties, Fifties, and Sixties, they were owned by mere heirs and by a great many upper middle-class stockholders.  Salaried managers with B-School degrees actually ran the increasingly bureaucratized companies.  No one much objected to punitive taxation of the well-off.  This is today’s Democratic Party idea of a “normal” economy.  It has been in decline for 50 years.[2]

Then change happened.  Part of the change came from abroad.  Foreign countries became serious competitors with American industry.  Then the “oil shocks” of the Seventies set off an inflation that disordered many areas of the American economy.  Part of the change was domestic.  New generations of ruthless entrepreneurs pushing new products rose up.  These people weren’t heirs to someone else’s work.  They had built their own businesses and fortunes.  Many of these people got rich without getting stupendously rich.  Therefore, many of them rejected the existing social consensus on soaking the rich.[3]  Reaganism followed and continues to this day.[4]  These changes sent shock waves through America’s economy, society, and politics.

For example, dying old industries and growing new industries faced the same problem of employee compensation.  (For that matter, so did many states and cities that had fobbed off public employee unions by promising them generous benefits in what the Brits call the “Never-Never”).  Neither corporate profits nor the stock market could guarantee adequate returns to support the defined benefit promises.  First, beginning in 1978, the private sector began to shift from “defined benefit” to “defined contribution” retirement plans.  Second, employers shifted a large share of medical insurance costs to employees as a way of holding down labor costs.  Since 1999, inflation has raised prices by 47 percent, but average contributions by workers to individual health insurance premiums have risen 281 percent.

The future well-being of employees came to depend upon their wisdom in choosing suitable retirement plans and on their willingness to divert income into savings.  Other factors also shaped their behavior.  First, we’ve been living with low interest rates for quite a while now.  This both encouraged people to pick up “cheap debt” and—through the magic of compound interest—slowed the rise in value of what people did save.  Second, many people had never thought much about saving and investing because the company’s pension and Social Security allowed them to not learn about it.  People often opted out of savings plans or made poor investment decisions when they opted in.

The median personal income of people aged 55 to 69 leveled off from 2000 (before the Great Recession) to the present.  This did not stop people from spending more.  On average, people approaching retirement these days have heavy debts (some for college for their kids, but also for other stuff).[5]  They also have been mining their savings, rather than building them.  The Great Recession both reduced contributions to 401k plans and caused many people to withdraw from them to make ends meet.

The long-term results of this huge change in the social contract are just now beginning to be felt.[6]  More than 40 percent of households headed by people aged 55 to 70 will not have the resources to maintain the standard of living they enjoyed while working once they hit retirement.  Households with at least one worker aged 55 to 64 had a median savings of $135,000 in their 401k plans.   The median annual income from their 401K plans is $8,000.  This should yield a paltry $675 a month in income.

Worse still, the Social Security Trust Fund will have to reduce payments at some point in the future as it is depleted or exhausted.

Undoubtedly, the disaster that is emerging renders a severe judgement on many of the “Baby Boomers.”  Not all of the human-interest stories included in journalists’ stories arouse the same degree of sympathy.  Faced with the need to save for the future and to be self-reliant, many of them delayed saving, stinted saving in favor of consumption[7] until too late, and then did too little.

Still, as a matter of public policy, there are going to be powerful and compelling arguments made in favor of a government response.  If the government expands benefits to the worst off retirees, then either taxes or deficits will rise or benefits for the better-off will be decreased.  Perhaps all three will form the basis of a compromise.

[1] By the 1980s, almost half (46 percent) of workers belonged to an employer pension plan.

[2] Without Democrats being willing to notice the changes.  JMO.

[3] Warren Buffett is in no sense a representative figure among this group.

[4] To the Democratic slogan of “tax, spend, elect,” the Republican learned to reply “tax-cut, spend, elect.”  See: William Shakespeare, Romeo and Juliet, Act 3, Scene 1.

[5] The per capita student loan debt of people aged 60 to 69 rose from about $300 to about $1,800 between 2004 and 2017.  Per capita debt for cars for the same group of people rose from about $3,000 to about $4,000 between 2004 and 2017.  It looks like people chose not to choose between guns and butter.

[6] Heather Gillers, Anne Tergesen, and Leslie Scism, “Time Bomb Looms for Aging America,” WSJ, 23-24 June 2018.

[7] Sales of HD televisions soared during the Great Recession.  The graph is for global sales, but may offer an approximation of American behavior.  See: https://www.statista.com/statistics/461114/full-hd-tv-shipments-worldwide/

Halloween on the Border 2.

Entering the United States illegally is a crime, a misdemeanor on the first offense and a felony on any subsequent offense.[1]  The courts have held that people who enter the United States illegally are entitled to due process before they can be deported.[2]  The courts have also held that Congress may determine what constitutes due process.  In 1996 Congress passed the “Illegal Immigration Reform and Immigrant Responsibility Act.”  Among other provisions, this law allows illegal immigrants to be deported without any hearing, lawyer, or right of appeal.  This is called “expedited removal.”[3]

For their part, illegal immigrants can try to dodge expedited removal by claiming asylum.  To gain asylum, the immigrants must demonstrate a credible fear of persecution if they remain in their home country.  What constitutes “persecution” is itself contested.  Most of the people now showing up at the border are trying to escape endemic poverty, violent crime, and ineffective and corrupt government in Central American so-called countries.[4]  Liberals regard these conditions as legitimate grounds for claiming asylum; conservatives want to restrict asylum to the traditional definition of people fleeing political or religious persecution by national governments.

Different administrations have applied the law in different ways.  Although the 1996 law sets no geographic boundaries to where the law may be applied, the current policy has been to apply it to illegal immigrants found within 100 miles of the border and within two weeks after they entered the United States.[5]  Furthermore, the government can either treat illegal immigration as a civil matter or as a criminal matter.

The Obama administration largely treated illegal immigrants as a civil matter.  This allowed illegal immigrants to work through the process of the immigration courts, to be represented by a lawyer, to appeal decisions of immigration judges multiple times.  This could extend the time to deportation to a year or more.  While the civil procedures dragged on, the illegal immigrants were paroled, rather than detained in custody.

Recently, the Trump administration broke with the policy of the previous administration.  It adopted a policy of “zero tolerance” for illegal immigration and it chose to treat illegal immigration as a criminal, rather than civil, matter.  Thus, illegal immigrants, even when claiming asylum, were arrested.  The government is legally-obligated to separate children from arrested parents within 20 days of arrest, then to place them in a suitable child care facility or foster family.  During the Obama administration, all but one family detention facility were closed.  This had the unpleasant knock-on effect that has garnered so much attention.[6]

[1] “In the United States, the federal government generally considers a crime punishable with incarceration for one year or less to be a misdemeanor. All other crimes are considered felonies.”—Wikipedia.

[2] Katie Benner and Charlie Savage, “Migrants to the U.S. Are Entitled to Due Process, With Some Exceptions,” NYT, 26 June 2018.

[3] Which is like calling illegal immigrants “undocumented.”  See George Orwell, “Politics and the English Language.”

[4] Ryan Duee, “Migrants Risk U.S. Crackdown to Flee Crime and Poverty,” WSJ, 26 June 2018.

[5] Obviously, there is some wiggle room here for the government.  It can be pretty difficult for migrants to prove when they entered the country.

[6] On the background to the “Flores Settlement” case, see: https://www.humanrightsfirst.org/resource/flores-settlement-brief-history-and-next-steps

Letting the Grime Settle.

Center Square in Easton, Pennsylvania is home to a particularly fine monument to the men who fought for the Union during the Civil War (1861-1865).[1]  The monument was erected in 1888, and formally dedicated in 1900.  Herein lies a puzzle (for me).  Does the monument commemorate the men who fought in the war (1861-1865) or does it commemorate the ideas of 1888-1900?

During the 1850s, the Whig Party disintegrated and the Republican Party rose up to rally under its umbrella all the opponents of slavery and of the expansion of slavery into previously “free” lands.  “And the war came.”  The Civil War ended with the North’s concept of nationalism victorious over the South’s concept of nationalism.[2]  During “Reconstruction”[3] the victors enforced a policy of racial equality and the political enfranchisement of African-Americans on unwilling Southern whites.  This led to the election of Republican state governments in many Southern states.  Southern resistance often took the form of the Ku Klux Klan, but it did not limit itself to either clandestine violence or fraud at the polling place.

Then the election of 1876 ended with dispute and contest.[4]  The Democrat, Samuel Tilden, and the Republican, Rutherford B. Hayes, both claimed victory.  In brief compass, the Democrats agreed to accept the Republican as president if the last federal troops were withdrawn from the remaining Southern States and (while never formally stated) the abandonment of the freed people to the rule of the former traitors.  This “Compromise of 1877” consolidated the rule of the Southern Democrats (backed by the Northern Democrats) in the South.

African-Americans were disfranchised and lost political representation.  Excluded from the voter rolls, they were excluded from juries recruited from those rolls.  Extra-legal violence terrorized African-Americans.  Separate institutions served blacks and whites, with the black institutions being gravely under-funded by white elected officials.  .Twenty years later, in 1896, the Supreme Court upheld the doctrine of “separate but equal” in its decision on “Plessy v. Ferguson.”

So, what do the Northern Civil War memorials of this era represent except the abandonment of the Freedmen to Southern “justice”?

Should they not come down too?

[1] NB: my great-great-grandfather, Sylvester G. Hill, was killed leading his troops at Nashville in December 1864.

[2] “You can’t leave” versus “We can leave.”  Essentially, Otto von Bismarck’s concept of nationalism triumphed.

[3] See: https://en.wikipedia.org/wiki/Reconstruction_Era

[4] See: https://en.wikipedia.org/wiki/United_States_presidential_election,_1876#Electoral_disputes

Public Opinion on Donald Trump.

It has been a good six months for President Donald Trump.  He has transitioned from an insurgent Republican to the un-contested face of the party.  Public opinion polls suggests that his base represents about a third of the electorate.  Thus, a little over a quarter (27 percent) of Americans are proud to have Trump as president and think (29 percent) that Trump is “a good role model for children.”[1]  Just under a third (31 percent) approve his handling of the Russia investigation.[2]  Almost a third (32 percent) found Trump more credible than James Comey on Comey’s allegations.[3]  More than a third (36 percent) of all voters would vote for Trump over a Democrat.[4]  More than a third (37 percent) of Americans think that Trump is a better president than was Barack Obama.[5]  More than a third (37 percent) believe that Trump is competent to deal with North Korea’s Kim Jong Un in a summit meeting.[6]  Half of Republicans don’t want another Republican candidate to stage a primary challenge to President Donald Trump in 2020.[7]  Two thirds (67 percent) of Republicans approve his handling of the Russia investigation.  Almost all (86 percent) Republicans approve his performance as president.[8]  It looks like Trump has a lock on re-nomination.

But could he be re-elected?  At least for the moment, Trump’s potential for re-election extends well beyond his narrow base.  Americans are pretty evenly divided—and on partisan lines–on some of Trump’s policies.  On policy toward Israel: 41 percent approve and 43 percent disapprove.  Some 80 percent of Republicans approve, while 72 percent of Democrats disapprove.[9]  On his suggestion to arm teachers: 44 percent approve and 50 percent disapprove.  Some 68 percent of Republicans approve and 74 percent of Democrats disapprove.[10]

Two thirds of Americans approved his decision to meet Kim Jong Un, despite misgivings about his abilities as a diplomat.[11]  Over half (52 percent) approve his management of the economy.[12]  Well over half (57 percent) of Americans believe that the country is on the right track.[13]  That is the highest figure since 2007.  In all these cases, his appeal extends beyond his core base and wins over some Democrats.  Whether that is true in a general election might well depend upon which Democrat gets the nomination.  No Hillary or Obama look-alike?

[1] “Poll Watch,” The Week, 9 February 2018, p. 17.  Almost three-quarters (72 percent) of Republicans think him a good role model.

[2] “Poll Watch,” The Week, 23 March 2018, p. 17.

[3] “Poll Watch,” The Week, 27 April 2018, p. 17.

[4] “Poll Watch,” The Week, 8 June 2018, p. 17.

[5] In a different poll, 21 percent ranked Obama as the worst president to serve since 1945.  “Poll Watch,” The Week, 23 March 2018, p. 17.

[6] “Poll Watch,” The Week, 11 May 2018, p. 17.

[7] On the other hand, 38 percent of Republicans do want someone to challenge Trump, which means that 12 percent aren’t sure.  There remains a hard core of “Never Trump” Republicans who remain unpersuaded as well as a good number of doubters.  John McCain will not run against Trump in a primary, but Jeff Flake might well run.

[8] “Poll Watch,” The Week, 6 April 2018, p. 17.

[9] “Poll Watch,” The Week, 25 May 2018, p. 17.  So 28 percent of Democrats either approve or aren’t sure.

[10] “Poll Watch,” The Week, 9 March 2018, p. 17.  So, 26 percent of Democrats either approve or aren’t sure.

[11] “Poll Watch,” The Week, 11 May 2018, p. 17.

[12] “Poll Watch,” The Week, 18 May 2018, p. 17.  A halt to new regulations and a big tax cut for those who shoulder a disproportionate share of the burden, especially business.

[13] “Poll Watch,” The Week, 18 May 2018, p. 17.

Default Setting.

I’m not sure that History weighs on us, but Memory certainly does.[1]  For example, inflation and deflation are subjects of learning and memory for those who experience them.  Deflation (falling prices) plagued American borrowers and benefitted American lenders in the last quarter of the 19th Century.  People looked at inflation (rising prices) with longing or loathing.  If you were, say, 64 in 1934, then you were born in 1870.[2]  Growing up, you would probably have heard about reams of paper money printed without any fixed relationship to gold in order to finance your particular country’s search for victory in the Civil War.  As an adult, you would have read with exultation or dread, depending on your social class, William Jennings Bryan’s “Cross of Gold” speech and the Populist calls for the free coinage of silver at a ratio of 16:1.  That is, you would have been familiar with inflation as a good thing (for debtors) or a bad thing (for creditors), rather than as just a normal thing.  In the wake of the election of 1896, a conservative victory, Congress enacted American adhesion to the gold standard.  However, that was just Congress, a bunch of gutless poltroons (why else would you bribe them?) who might change their minds with the wind.  As a result, many lenders inserted “gold clauses” in contracts.  These obligated borrowers to repay in gold coins of “present weight and fineness” or in paper of equivalent value.  Basically, “gold clauses” were inflation-proofing insisted upon by lenders.  They applied to various contracts, but especially to bonds—government and corporate IOUs.

OK, skip ahead to the Great Depression of the 1930s.  Taking the leadership of a country sunk in the slough of despond, Franklin D. Roosevelt opted for inflation over deflation.  He severed the United States from the Gold Standard, which kept currencies fixed at specific rates of exchange, and then revalued the dollar.  This allowed Roosevelt to “raise” the price of gold held by the United States and print more dollars to accommodate its higher price.  The “price” of gold rose from about $21/ounce to $35/ounce.  So, by about two-thirds.  This inflated prices and devalued debts.  Great!  For anyone who had debts not inflation-proofed.

At this point, Roosevelt’s policy slammed into the “gold clauses” on many bonds.  Because of the two-thirds rise in the price of gold, debtors had to pay lenders about two-thirds more than they had borrowed.  One of those debtors was the United States government, which owed about $20 billion in gold-clause bonds.[3]  In 1935, the Supreme Court—in the “gold clause cases:–held that the government could abrogate public and private gold clauses.  That is, the U.S. government is not obligated to pay its debts and it did not pay them in this case.

Still, it is a commonplace that the United States has never defaulted on its debts.  That reassuring belief keeps people buying Treasury bonds when the deficit and national debt keep growing to extraordinary levels.  Except, maybe Bill Gross when he was at PIMCO.[4]

[1] That’s probably why “we” never learn from the past, but individuals often do learn from the past.  There is no way to transmit the acquired knowledge.  They why study History at all?  Because smart people will be among the few who learn lessons and for everyone else, it’s pretty entertaining.

[2] Sebastian Edwards, American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold (2018).

[3] Worth about $380 billion in 2018 dollars.

[4] https://www.theatlantic.com/business/archive/2011/03/pimcos-gross-asks-who-will-buy-treasuries-when-the-fed-doesnt/72276/ ; https://www.theatlantic.com/business/archive/2011/05/bill-gross-on-deficits-and-the-fed/238682/