Wednesday, December 31, 2008

Shark on the Air

I will be on Channel 12 News at (I think 6)prognosticating and pontificating on the comming year in politics.

Tuesday, December 30, 2008

I am not growing a mullett

To be honest, I doubt that I could. I think I'd wind up looking like Riff Raff (well, without the hump) in The Rocky Horror Picture Show.

A Russian "scholar" - actually a former KGB and current Kremlin mouthpiece - think that the US is going to have a civil war and break up into six pieces. Having been an official in the former USSR, I'd guess he knows about this type of thing.

We in Wisconsin would be part of the Central North American Republic which our Russian expert says would be under the influence or become part of Canada. Actually, given that this region of the US (which consists of the Great Lakes and Plains states) has a population of almost twice Canada's and a GDP between 2 and 3 times higher than our northern neighbor. I think they'd more likely be part of us.

Take off, you hoser.

Sunday, December 28, 2008

Music for New Year's Day

New Year's is about starting over, even if we rarely do and even if we don't feel the need to. It is a reminder that redemption is still on offer. That if we are still here, there are possibilities. In a year that, personally, has had both great highs and horrible lows, this is very much in my mind.

Over The Rhine's Trumpet Child expresses the idea with religious and musical imagery that recalls the now and the not yet. It's a great song for Christmas and New Year's Day.

The most fantastic singer that no one ever heard of is Beth Hart. She hits the hope and change theme in a way that reminds us of its potential and difficulty in "Hiding Under Water."

Beth is huge in Denmark and Holland. Why she isn't a huge star here is beyond me. But, then, I've already said that.

The obvious U2 selection would be New Year's Day, but my point is better reflected in "Walk On.' This is a performance shortly after 9-ll and can't be understood outside of that context. Near the end, the stage fills with New York cops and firefighters.

Friday, December 26, 2008

A Heartbreaker Named Detroit

As a native Milwaukeean, Detroit breaks my heart. There are just a few cities that you can go that you remind you of home. Chicago and Cleveland are the big two. Cincinnati is reminiscent but a bit too southern. Detroit - or what used to be left of Detroit - was another. (Minneapolis is an entirely different kind of place.)

So pieces like Matt LaBash's recent cover piece for the Weekly Standard disturb me. Websites like this one are fascinating and frightening chronicles of how bad urban decay can get. I have always thought that a conservatism that has no concern for places like the inner city of Detroit is not a conservatism that I want to be part of.

But one cannot, I think, make a great city by litigation or subsidy. Here in Milwaukee, the ACLU has filed a complaint with the Federal Department of Transportation alleging that actions of the Wisconsin Department of Transportation in approving the certain aspects of the reconstruction of I-94, including the partial closure of a city interchange and the construction of a new suburban interchange violates the anti-discrimination provisions of Title VI and its implementing regulations. It also complains of a decision to widen the freeway (which runs through the city) from 6 to 8 lanes instead of using the money for commuter rail.

What interests me about the complaint is that it is based upon highly contested propositions of what will best serve minority communities in the city of Milwaukee. The proposed changes, it says, discourage development in the city closer to the areas in which minorities live (although the interchange to be partially closed is in a predominantly white part of the city) and, since minorities are less likely to have cars, they are less likely to benefit from freeway construction.

Title VI does have broad anti-discrimination provisions but applying them here would seem to require resort to standards that the statute does not supply. Are minorities hurt or helped by greater access to and from outlying areas. There is a body of thought that holds that, if you make it harder to get in and out of the city, the city will prosper.

While that may have been an effective argument in 1956, I am not so sure that it works any longer and Detroit, it seems, provides some evidence for my skepticism.

While today we think of the demise of Detroit with the fall of the auto industry, the death of the former preceded the decline of the latter. Detroit long ago became the hole in a metropolitan donut. As Labash reports, a thriving Chrysler left the city's Highland Park for Auburn Hills because, among other things, the occasional bullet would whiz across its property. The tragedy, of course, is that while Chrysler left, the bullets still fly. Transportation policy could not have prevented and cannot reverse what happened.

Of course that doesn't mean that transportation policy can't have an impact on metropolitan areas,

But I'm interested in the larger question that the complaint raises about the use of anti-discrimination laws in this way. It is one thing to interpret anti-discrimination laws to prevent the exclusion of minorities and quite another to interpret them to compel policies that are thought to serve the interests of minority groups as envisioned by a certain set of ideological presuppositions. I understand that you can call the failure to do so "discrimination" and "advancing minority interests" is a standard of sorts.

But it does not seem to be one that is capable of judicial application without essentially calling upon judges to act in accordance with their individual policy preferences. Returning to my earlier remark about a conservative urbanism, a conservative judge might find another set of policies - i.e., those thought to discourage marriage or to inhibit effective law enforcement - from disserving the interests of minorities.

Cross posted at PrawfsBlawg and the Marquette University Faculty Blog.

Thursday, December 25, 2008

Merry Christmas

Have yourself a Merry Little Christmas

Remember why.

Even without the seasonal trappings.

Sunday, December 21, 2008

Scathingly Brilliant

I'll admit. As a tweener, I loved the movie "Trouble With Angels" because I loved Hayley Mills who was always coming up with an idea that she thought was "scathingly brilliant."

President-elect Obama may have come up with such an idea in asking Rick Warren to give the invocation at his inauguration. Warren is not the least inoffensive evangelical a liberal could want, but he's close. Still, although he apparently favors domestic partnerships, he is not down with same sex marriage and, notwithstanding the fact that this is, more or less, the position of the President-Elect, it is quickly becoming unacceptable in the Democratic Party. Obama (who I rather doubt is committed to it) will almost certainly be the last Democrat leader who espouses, even if only for a while, such a view.

Critics have tried to twist Warren's comments into a hostility toward homosexual couples. In a recent interview, after essentially endorsing domestic partner benefits for same sex couples, he said that he opposed redefining marriage and noted some other relationships that he would argue shoulf not be included within the definition of marriage, including relationships between brothers and sisters and older men and younger women.

Here is where the villification comes in. Gays and lesbians say that he is likening our relationships to incest and pedophillia.

Well, no.

We can't expect more from Rick Warren that he can deliver. He's a guy whose talent lies in taking concepts that are simple and true and translating them for his age and for the masses. That's no mean feat and he has done it well. Warren has probably done more for most families than almost any of our self proclaimed "compassionate" political leaders.

But that doesn't mean that he can manage to be converant with the complexities of the larger issues that engulf his age (even as he gets them right) or that his responses to an interviewer exhausts his views on the subject.

I've used the brother/sister analogy on same sex marriage and it has nothing to do with incest. No one really argues that the basis for extending marriage to gays and lesbians has anything to do with sex. No one says that a gay couple should have the legal protections and obligations of marriage because, like heterosexual couples, they engage in genital intimacy. To the contrary, they emphasize, as they should, the loving and mutual dependency of relationships which they may also form.

But that begs the question. Why extend marriage to same sex relationships involving genital intimacy, but not to a variety of equally loving and dependent relationships (like that between a brother and sister or bachelor son and mother living together) which do not? This is what Warren was trying to get at and, given a chance to explain, may have made more clear.

The example of an older man and younger woman was poorly chosen, although I can see how he got there. Relationships of that type used to commonly result in marriage. We learned - or changes in society came to show us - that this was not a good idea.

My larger point is that Warren is not ignorant or some type of bigot. He is trying to address these issues publicly because his ability to reach out to the faithful on less controverial issues has made him a prominent figure. Given his success at the latter task and resulting prominence, he is an obvious choice to lead prayer at a major national event.

Obama is right in recognizing that, but then there's the scathingly brilliant part.

He knows that his left flank will be upset with him, but not enough to cause him damage. He knows that the larger population will see their attack on Warren as nasty and unfair. His resistance will be seen as reasonable. Not a huge thing but, still, scathingly brilliant.

Songs for Christmas Week

I haven't done this for a while, but maybe it's time for some Christmas songs.

Let's start with the fantastic band Over The Rhine and "All I Ever Get For Christmas Is Blue." Karin Berquist may have one of the sexiest voices in the business.

Chloe Agnew (of Celtic Women fame) may have one of the most beatiful voices around. She sings Panis Angelicus.

Nat King Cole has garnered himself a permanent place in the Christmas repertoire.

But today is also the first day of Hannukah, so here is Maoz Tzur.

Since we can't be too serious, here is a montage set to Eric Cartman's Christmas classic, Swiss Colony Beef Log.

But we can't end there, so here is Michelle Shocked with some Gospel Christmas.

Friday, December 19, 2008

Indulgent pictures of dogs

The Esenberg family compound welcomed a new member last month. Lambeau (aka "Leapage" and "Bullwinkle")is a 12 week old Golden Retriever. Here he is alone.

And with his older brother, Derry (aka "Darwin")

Musings on residential segregation

I was interested to see a discussion on residential racial segregation in Milwaukee on the Political Environment Blog run by former journalist and Norquist aide Jim Rowen.

I was once absorbed in this debate. As a young associate at Foley & Lardner, I was part of the defense team representing 24 suburban school districts who were sued by the Milwaukee Public Schools. MPS sought a metropolitan-wide integration plan. We tried the case for a few months and then it settled on terms largely favorable to the suburbs.

I was in charge of the "housing" case, i.e., our response to the plaintiffs' claim that residential racial segregation (causing school segregation) was caused by discriminatory government practices over a period of 50 years or so. Very heady stuff for a young lawyer still north of 30.

I have kept up with the issue casually since then but I think that there were three important things that we learned then that our still relevant today.

1. Milwaukee is not as unique as we think it is. The claim was made then - and still made today - that Milwaukee has fewer African Americans in the suburbs than other large cities. That was true then and I suspect it still is. But when you mapped racial distribution in the metropolitan area (without regard to municipal boundaries), Milwaukee looked just like other rust belt cities. Over time, the African American community took hold near the city center and moved in a single direction in a pie-shaped movement in a single direction. In Milwaukee, that direction was to the northwest. This movement did not cross into suburban communities largely because of historic annexation of formerly independent areas to the north and west of Milwaukee during the mayorality of Frank Zeidler.

2. Milwaukee exacerbated the problem with an extraordinarily broad residency requirement for municipal and MPS employees. My sister lives in a beautiful neighborhood of nice newer houses on the northwest side. The neighborhood is predominantly African American and overwhelmingly made up of city and MPS employees. We did a computer simulation that randomly distributed people around the area as income would permit. We then adjusted for the residency requirement effect and, while not huge, it was a material factor.

3. Residential segregation is not easily altered by government policy. Surveys traditionally find that both blacks and whites express, in significant numbers, a willingness to move into integrated neighborhoods. But they define them differently. For whites, in general, an integrated neighborhood could be no more that 20 % African Americans. For African Americans, an integrated neighborhood could be no less than 50% African American. More recently, there are studies that minimize the role of choice and others that find it to be the single most important cause of residential racial segregation.

4. This implies that interventions like "affordable housing" outposts in areas that are far removed from minority communities may meet with limited success.

If they can be built. I am sure that a substantial degree of opposition to these development over the years have been racially motivated. although there are substantial nonracial reasons to oppose them. Development with modest property values and potentially large numbers of children will generally consume more tax dollars than they produce.

This is not to suggest that we ought to be indifferent to persistent racial divides. But we should be clear eyed about them.

Cross posted at Marquette University Law School Faculty Blog.

Thursday, December 18, 2008

Labor costs and the Big Three, part 3

Detroits disadvanatage when it comes to labor costs (legacy or otherwise) is not really the cause of their predicament, but a symptom. The bargaining pattern was set during a period in which the Big Three faced little competition. They could overpay production workers, add unnecessary salaried workers, and design cars without regard for or, perhaps more accurately, no incentive to push for improvements. To the contrary, when I was a kid, the Big Three were accused of planned obsolescence, i.e., they made cars that wouldn't last too long.

They have struggled against that, but have not done enough and are burdened about a generation of ill will. I am 52. I have purchased the following new cars in my adult life: Honda Civic, Volkwagen Jetta, Audi 4000, Volvo, Mitsubishi Eclipse, Mercedes C class, BMW 500, Mini and Mini S. (My wife does drive a Jeep Liberty). My sense is that American cars just aren't very good. I could be wrong but the Big Three earned that reputation and it can't be overcome by a bridge loan that leaves their substantial remaining sclerosis intact or an emphasis on "green" cars.

Shark on Prawfs

Before I get back to the Big Three, some of you may be interested in a debate over the Republic settlement that I have been having on PrawfsBlawg.

Tuesday, December 16, 2008

Labor and the Big Three, part 2A

I wanted to move on to the next point I want to make about the UAW and the Big Three, but need to stop and respond up top to some comments in response to the last two points. A commenter named Peter who identifies himself as a TA at UW made a number of comments, some worthwhile and some off the mark. I generally try to take people's arguments at their face value, but this guy, who demonstrates, at best, a limited understanding, if not fundamental ignorance, of economics, persisted not only in making his points (I never fault anyone for that) but in claiming his intellectual superiority.

As always, I wouldn't bother with him if I didn't think he shows the potential to be a valuable contributor to the local debate.

I think I have at least an average amount of patience, but when some TA whose schtick expresses his frustration at my inability to understand his corrections of my misunderstanding using every tired cliche of the net, including the single words followed by. a. punctuation. mark. and the arrogant command to "read that last sentence" again, I lose my religion.

I can read a financial statement.

I have substantial academic course work in economics, have litigated cases about manufacturing accounting and served for ten years as a member of the senior management team of a manufacturing firm that runs ten plants in five states and five foreign nations. It is a nonunion company but one that pays its employees well and has profit sharing for everyone from the receptionists to the shop employees to the CEO calculated by precisely the same formula.

And what I have said is as follows:

1. The Big Three's problems are not solely attributed to their labor contracts. While I have not yet finished my comments on the subject, I believe tht their labor contracts are part of a larger problem. But the problem went beyond labor.

2. Nevertheless, the labor contracts remain problematic, even after recent UAW concessions. The first issue is whether the current labor cost differential between the Big Three and the Japanese nameplate manufacturers in the US are solely due to legacy costs. It seems clear that they are not entirely explicable by those costs and unclear, at least to me, just how much of the difference is legacy related. Contrary to what some of the commenters say, I do look at the sources that the various sources rely on and, without doing more work than I am prepared to do, my view is that no readily accessible commentator has run the issue to ground and the easily accessed numbers require more explanation. If you dice them one way, it looks like the legacy costs could not be fully included. If you dice them another way, it looks like current costs could not amount to the $75/hr number.
What seems clear is that the costs are high - higher than the competition and higher than the compensation paid to comparable workers in the US.

3. But, to address the issue at hand, this seems to go to the magnitude of the problem and not its nature. Cash compensation for current production line workers averages $74,000 a year accompanied by unusually strong benefits, job security provisions and retirement benefits. Nothing wrong with that - until you want the taxpayers to subsidize it. The Big Three can't afford to pay this. Why should people who make much less be taxed to continue it another day? Even if it were not more than Toyota and Honda, those companies aren't asking you to pay for them.

4. This is so whether or not the UAW contracts "caused" the Big Three's miseries. . But even if we want to believe that the Big Three management should have been able to continue to pay 70% more for labor and still compete successfully, they didn't figure it out and the question remains: why should a teacher in Milwaukee be taxed to pay - even for a while - the much larger compensation of a guy in Flint who fastens bolts.

5. The idea that this is a temporary cash flow problem that requires only a bridge loan awaiting the Keynesian solution of creating something from nothing seems equally silly. The problem is lack of demand? 2005 was a near record year for auto sales. The Big Three got creamed. Their problems are not recent. How old is "Roger and Me?"

6. But even if it is "just" a cash flow problem (just as Mrs. Lincoln's problem was interruption of the play), immediate relief from uncompetitive labor contracts now instead of later will result in ... cash flow. In fact - and I do know something about this - it's the best type of cash flow because it is not accompanied by a corresponding increase in costs. Selling another car requires one to make another car and variable costs are never zero. If you're in a huge cash hole, you can climb out of it easier when you do things that go straight to the bottom line.

7. It's not quite right to regard the legacy costs as unalterable. They are fixed costs in the accounting sense in that they do not vary with production. But that's not the same as being unalterable. Some ERISA protected benefits are functionally unalterable. Others - such as retiree health care - are not. Of course, it would disrupt the retirees' bargain to deny them, but it was the Big Three and not the taxpayer that promised them.

Sunday, December 14, 2008

The Big Three and Labor Costs, part 2

So what difference do outsized UAW contracts matter to the Big Three? Locally, Jay Bullock says "machts nichts" citing calculations that bringing the Big Three into line with the Japanese manufacturers would save $800/car. Going back to the last post, I did a back of the envelope calculation for Chrysler/Daimler that seems to bear that out. Of course, if Sherk is right, the legacy burden adds another $500 or so to that figure.

Hardly enough to bother over, says Jay. American cars, he says, are already cheaper than their Japanese counterparts. Certainly it couldn't matter if they were even less expensive? It might. An $800 to $1300 cost difference is significant even if you are already at a lower price point. No rational businessperson would imagine that it is possible to exist with labor costs that are 70% higher than the competition unless your workers are adding some substantial value that the competition's are not.

But here's the larger point. The Big Three are losing money and say they need an immediate transfusion of cash. They want the taxpayers to come up with the money because no one else will. The UAW has made some concessions but the cost of their contracts is still, as we have seen, roughly 70% over the labor costs for the Japanese nameplate manufacturers.

But let's look at the excess labor costs. The UAW says it is making concessions. But, again, by a back of the envelope calculation using Chrysler Daimler numbers, let's see what that extra $800/vehicle means. Daimler/Chrysler sold 4.7 million units in 2006. $800/unit is almost 4 billion dollars annually. If the impact is the same for Ford and GM, then noncompetitive labor costs are costing the Big Three $12billion each year and the cost of deferring labor concessions for two years (as the UAW insists upon) could be as much as $24 billion even as, if Sherk is right, the legacy costs are untouched.

It could be more. It could be less. But, when we are talking about - at least initially - $ 25 billion in loans that no rational creditor would make (otherwise there would be no need to come to DC), the deferral of concessions to 2011 is material. The UAW is, in effect, asking the taxpayers (most of whom are earning substantially less) to give them a few more years of benefits their employers can no longer afford.

So Jay wants to be taxed to permit people whose compensation is twice his to continue to enjoy their unaffordable contract for a while longer.

What's the matter with Bay View?

I concede that the Big Three's problems are not limited to ill advised labor contracts. They have too many salaried employees (who also may be paid too much), designed lousy cars and have too many dealerships. They are a mess. But I do think that all of it is rooted in the same problem and that's where we'll start tomorrow.

Saturday, December 13, 2008

Labor costs and the Big Three, part 1

The debate over the UAW's role in the plight of the Big Three automakers and its responsibility for the cratering of the bailout deal has been rather tendentious. Let's start with the oft-cited statistic that the hourly labor costs of the big three are north of $70/hr while that of the name-brand Japanese manufacturers operating in the US are a bit over $40/hr.

The number seems indisputably correct but there is a disagreement over just what it means and how significant it is.

One argument belabors the obvious but does correct what may be a common mispprehension. To say that labor costs are $ 70/hr is not to say that the average Big Three worker receives this in cash compensation. UAW defenders point out that the average base wage of an assembler is actually around $28/hr. Nice money but much less than $ 70/hr.

Of course, if we stop there, we understate cash compensation. The UAW contracts contain a complicated patchwork of provisions for overtime, premium pay, compensation during layoffs, etc. It turns out that the cash compensation of current UAW workers is around $40/hr per hour worked. Since, to use Chrysler/Daimler as an example, the average hourly employee worked 35.5. hours per week in 2006, actual cash compensation would be a little under $ 74,000. For production line work, that's a ton.

But cash compensation is not all there is. The UAW has negotiated very nice health care and pension packages. Do they make up the remaining $ 30-some/hr?

No, say the critics of the number. They claim that it includes the cost of paying benefits to current retirees and at least one GM spokesperson is quoted as saying that it does.

But this seems to be contradicted by company documents. James Sherk at the Heritage Foundation goes over the companies' SEC filings and concludes it does not. What it includes, he says, is amounts set aside to pay the promised retiree benefits of the current workers -something that currently applicable accounting standards require. Benefits paid out to current retirees are another matter,he says, costing the companies roughly another $30/hr per hour worked by current workers. In other words, according to Sherk, if you include legacy costs, the labor burden per current hour worked actually exceeds $100/hr.

I can't say who is right, but Sherk's claim sounds closer to the truth. If Chrysler/Daimler, to use one example, is paying and accruing, as he reports, $20/hr per current hour worked for the current and future health care costs of current workers, it seems unlikely that the pension obligations to current workers and the rather substantial benefits enjoyed by 84,000 retired workers and their families could be accounted for by a little over $10 per current hour worked.

Either way, the UAW contracts are still pretty rich. But what difference does it make? For ease of reading and in accord with blog etiquette, let's address that in a second post.

Friday, December 12, 2008

Good result for the wrong reason

I am not the right guy to play Scrooge this time of the year, but why is the resolution of the Republic sit down strike something to be applauded. I understand the plight of the employees. State law entitled them to notice and pay that they were not about to receive.

But this is hardly the fault of Bank of America. BOA has been politically pressured to make a loan that will never be repaid.

You may say "who cares?" BOA is a big bank and 1.75 million dollars is barely a crumb in its cookie jar. But, as the old saying goes, a million here and a million there, and pretty soon we are talking about real money. Neither BOA nor any other bank can survive by making, not merely a poor - but an insane "loan" in response to political pressure. In a free economy, businesses fail and various stakeholders - shareholders, employees and creditors - will be hurt by it. We can't expect banks - even those who have had an influx of federal capital - to insure against it.

The Republic employees acted boldly and certainly benefited from being from the President-elect's hometown. Maybe (although I would oppose it) the government should guarantee obligations under the plant closing laws. But shifting the costs to a firm's lender based upon who can and cannot exert the requisite political pressure seems irrational and even dangerous.

I suppose that those who are committed to a greater collectivization of losses and gains, this is a fumbling step in the right direction. My own view is that, if you want to assume community responsibility for private obligations, it ought to be done directly so the community can assess the costs and benefits.

Crossposted at Marquette University Law School Faculty Blog and Prawfsblawg.

I was answering a question

Yesterday, in its report to premium subscribers, quoted me as saying that I had been approached to run for the state supreme court and had decided against it. Bill Christofferson and Illusory Tenant wonder why I issued a "press release" announcing my decision not to run against the Chief Justice.

But, of course, I did not issue a press release. I was responding to an inquiry from a reporter who had heard a rumor. I answered honestly. Much to my surprise, some very good and influential people (and, no, it was not WMC or any officer, employee. memner or other affiliate of WMC) asked me to consider a run. I was flattered, but declined. That is all that I am ever going to say on the subject.

Xoff goes on to criticize me for not being a judge before I decided not to run in response to others' suggestion that I do so. As I blogged during the Clifford-Ziegler race, I don't think that being a judge is a necessary qualification for the state supreme court. The Chief Justice, I am sure, would agree with me because she herself was not a judge before joining the court and, while I certainly have my disagreements with her, she did go on to a long and impressive career.

I suppose I could have declined to comment but I don't see why I should allow rumors to circulate about me challenging Chief Justice Abrahamson when I am not doing so.

Wednesday, December 10, 2008

This is just plain fun

Now that Governor Rod Blagojevich has been caught. Of course, he was abusing his office and betraying the people of Illinois, but I see no larger issue other than the soon to be former Governor of the flatlanders is what is perhaps the worst amalgamation of the Friends of Dorothy.* He's got no brain and no heart, but he certainly has the nerve. Bad combination. He is, perhaps, the ur-FIB.

But there is no larger issue here. In the absence of some evidence that isn't there now and never may be, it tells us nothing about Obama. He comes from Chicago politics and Chicago politics is a cesspool of corruption. We knew that. But that doesn't translate into personal guilt.

It doesn't tell us anything about the need for "clean government" reforms. The trap into which Blagojevich fell was inherent in the human government condition. Government dispenses things of great value (e.g., money) and the Governor has a fair amount of power in the the transactions by which these things are disbursed. There will always be a temptation to use that power for personal gain, if not campaign contributions, then a job, money or a friendly editorial board.

Thinking that we can remove these temptations is tantamount to a puppy who believes that great things will follow if he can only catch that tail.

* I am aware of one commonly accepted secondary meaning of this phrase. I don't use it in that way. I'm trying to say that removing a great flaw can lead to even worse results if it is unbalanced by other virtues. Or something like that.

Monday, December 08, 2008

Need money? Draw your own !

Last Friday, I gave a talk at a CLE seminar to the St. Thomas More Lawyers Society. In introducing the program's speakers, Dean Joe Kearney of the Marquette University Law School explained why each was qualified to speak on the particular topic to be addressed. With respect to me, he said that, as legal academic, I was (or, perhaps more accurately thought I was) qualified to speak on the law, the weather, the Brewers schedule or absolutely anything else. Substitute "blogger" for "legal academic" and the proposition still works.

Although I have a fair amount of course work in the subject, I am not an economist so I am ready to be corrected on this. But the notion that the East Side and Riverwest neighborhoods in Milwaukee ought to print their own money strikes me as completely pedestrian.

Imagine that the east side currency - let's call them "Bolshevik Bucks" - are purchased with US currency for redemption at participating east side businesses. For $40 US paid to a joint venture of those businesses, you get $ 50 in Bolshies. When you use them, the merchant receives eighty cents on the dollar from the joint venture. This makes it nothing more than a joint discount program akin to Disney Dollars with the marketing hook being neighborhood affinity. This appears to be the way that the Berkshares program works in Massachusetts.

There is nothing remarkable about that. It's called a "sale" and my wife tells me that they are happening all over the place about now. The only difference is that there is a patina of self righteousness that comes with promoting "sustainability."

The article suggests that this might be what's going on, but it's not clear. Another model seems to represented by the Ithaca Hours program in which businesses and employees agree to accept - to some limited extent - a local currency that is not redeemable in or pegged to US currency. In this iteration, the idea seems to be to create a mechanism for businesses and consumers to try to erect what the E. F. Schumacher Society calls a "protective membrane" but what is more commonly called a trade barrier.

As you might imagine, there is a limited demand for that type of currency because it is premised on the idea that economies of scale and comparative advantage are less significant sources of value than they are. The premise is that we ought to buy and produce locally and on smaller scales, presumably resulting in a kinder and gentler, if less wealthy, society.

Although some claim that these local currencies have a higher velocity (i.e., they circulate faster), there are apparently only $ 100,000 in Ithaca Hours (which are supposedly worth ten dollars per Hour) in circulation after 17 years. That doesn't seem very significant.

Apparently, the Camelot of the local currency movement is the Wörgl experiment. During the Great Depression, a town in Austria issued its own Arbeitsbescheinigungen. or labor certificates, that bore a negative interest rate, i.e., you could exchange them for Austrian schillings but at a depreciating rate, creating an incentive to use them or lose them. This supposedly resulted in a financial miracle in which depressed little Wörgl turned into the Lake Woebegone of the Tyrol. The idea is that, when people are overly liquid because they fear losing money, a depreciating currency (and inflation) are our friends. Maybe there is a circumstance in which this is true, but, if that's where we are now, I doubt that Linneman's, Outpost Natural Foods and Beans & Barley are going to lead us out. In any event proponents of local currency do not seem to propose it as a matter of economic management but as a way of life.

Are there legal problems? I don't think so - at least not in the examples that I imagine - but I'll leave that to others for now. That's too close to things that I am supposed to know about.

Cross posted at the Marquette University Law School Faculty Blog.

Sunday, December 07, 2008

The Big Three's Scrooge may be America's Santa

It's been incredibly slow here at Shark and Shepherd. This past week presented one enormous (but not bad) distraction and one smaller one as we cope with a new canine addition to the Esenberg family compound. My bipolar blogging identity (here and on the Marquette University Law School Faculty Blog) has now muted into full scale multiple personality disorder as I take my first guest stint on PrawfsBlawg. There will be a storm of crossposting for me this Christmas season.

But, for now and here, I want to comment on John Nichols' column suggesting that the UAW is in need of bailout because it has devoted some of its considerable resources to causes that he - and, with respect to some of them, even people like me - like.

But this ignores the economic reality of the matter. The UAW negotiated sweet contracts for its members during an era that the Big Three enjoyed an oligopoly in the US auto market and it extended the cost of those contracts far into the future by securing outsized pension and retiree health care benefits.

But we need to understand the narrative correctly. It wasn't that the UAW took advantage of the auto companies. It was that the auto companies were taking advantage of us because they lacked competition. Sharing some of the swag with the UAW in order to buy industrial peace made perfect sense. Think of them as cohorts.

And cohorts they remain. When I was a kid, we talked about planned obsolescence in the auto industry. American cars weren't very good because they didn't have to be. Management, shareholders and labor put it to us.

But the foreign manufacturers came in and raised the bar. There was no more free ride but, for too long and even now, the UAW and Big Three management wanted to act as if there was. You can't compete by paying production line workers total compensation in excess of six figures while your competition is paying roughly half that. It's not that the only problem with the American companies is their labor costs but their labor costs are an inextricable part of the problem.

We can't just bail out the auto companies. Their union contracts must be repudiated because they can no longer afford them. If the shareholders have lost value, tough. Management should be fired, but at the direction of the owners (even if those come to be the creditors) and not the government. That is what would happen in bankruptcy. If bankruptcy, which has worked for a number of other companies, is somehow thought to be impossible for car companies, then the alternative should not leave any stakeholder - labor or owner or management - better off than bankruptcy would have.

If there is a bailout, it should be in the form of an imposed bankruptcy adjudication. Contractual obligations (including executive salaries and bonuses) are restructured. Shareholders take a hit and are free to exact their revenge on management.

But throwing money at failure is silly.

Monday, December 01, 2008

Gender and soul mates

I have been wanting to post on the e-Harmony settlement. I have the same reaction to its founder and his participation in its TV commercials as I do to George of the Men's Wearhouse. I am sure that he's a nice guy and all,but he might be a tad overexposed.

For those who missed it, eHarmony is a computer dating service that touts a system for matching men and women who are thought to be compatible based upon their answers to a series of questions. As I understand it, the system is based upon research on the experiences of heterosexual couples and premised upon the particular responses of men and women as to what they seek in an opposite sex partner and self identification of certain values and attributions. The selection of the questions is based on experience with married couples.

(I've thought it would be interesting to register and see if your are matched with your spouse, but the idea is hardly original. Green Acres did it in that age of punch cards.)

eHarmony doesn't provide this service for gays and lesbians and, for this reason, found itself subject to a discrimination complaint in New Jersey and California. Faced with significant litigation costs, it decided to settle the New Jersey matter and will develop a separate site for same sex matching.

The case hardly seems to be about discrimination in the traditional sense of the word. eHarmony developed a product designed for heterosexuals. It did not choose to develop one for same sex couples. That, in and of itself. cannot constitute discrimination. Harley's and Victoria's Secret do not discriminate by failing to sell, respectively, women's and men's clothing.

Those who support the idea of discrimination would respond by saying the analogy is inapt. There is a difference between clothing for men and women but not between heterosexual and homosexual couples.

That may be true but it's not self evident. Whether by socialization or otherwise, there are differences between men and women that affect relationships between them. This strongly suggests that a relationship between two men and two women will be different. Accepting a separate system for same-sex couples seems to be an acknowledgement of that.

Perhaps these differences are not relevant to the eHarmony system. I don't know and neither does the Attorney General for New Jersey. The case is not about that. It's about making the point that gender is irrelevant to sexuality other than for its obvious limitations on physical activities and the superficialities associated with socially constructed gender roles.

It also raises, again, the question of conscience protection as it relates to sexual orientation. Our society has decided that individuals cannot act in certain ways even if they belief that separation of the races is a moral imperative. Ought we treat beliefs about sexual orientation in the same way?