Month: March 2013

Quick Comment on the 2012 Employment Data

Last Friday was ABA employment data day, a national holiday all Americans celebrate with food and rum, salutes to the flag, and tales of John Adams, the nation’s first lawyer to become president.

I honored it by looking through the ABA’s master spreadsheet on the topic to glean a few points that you brazen researchers who need to be restrained from cutting corners might be unaware of.

(1)  Cooley’s branch campuses appear! But they’re all zeroed-out. Oh ABA, you tease us!

(2)  Aside from the JAG school, anyone working with the data might want to eliminate the most mediocre of law schools: The Generic University School of Law, which managed to graduate one student last year. He or she was placed in a law school-funded job with a 2-10-person firm. Congrats!

Heckuva Job GULS

(3)  Oddly, the ABA press release says there were 46,364 grads even though the master spreadsheet lists 46,408.

(4)  At last there are data on what happened to Puerto Rico’s law school’s graduates.

PR Law Schools

Someone explain to me again why there are no Puerto Rican scambloggers?

(5)  There’s a typo in Michigan’s entry in the master spreadsheet. It lists 358 employed-by-status graduates when there are only 355. It’s due to a mis-entry in the number of “other clerkship” employment status. It’s a “4” when it should be a “1”. I’m sure that saved your meticulous research from total ridicule.

(6)  The employment data for the freestanding private law schools, which I wrote about for The Am Law Daily last week, were largely unchanged from last year except there are a lot more graduates and a lot more of them bothered to tell their schools that they were totally unemployed. 1,329 FSP law school grads were unemployed, more than 1,000 were seeking work. They amount to about a fifth of all unemployed law school grads, and three in ten of all unemployed private law school grads.

FSP 2012

That is all.

Am Law Daily Original: Government Data Reveal Freestanding Private Law Schools’ Growing Reliance on Grad PLUS Loans

Government Data Reveal Freestanding Private Law Schools’ Growing Reliance on Grad PLUS Loans

While writing this post, I realized that my prior work on aggregate law school “debt-revenue” treated Grad PLUS loan spending on living expenses as revenue to law schools. Aside from campus housing, this isn’t true. What surprises me is that it took me more than a year to realize such a mistake.

Anyway, teenage love made me insane.

NYT Prefers Discussing Postindustrial Apocalypse to Rule by the Future-Present Aristocracy

Worry not millenials, your underemployment is a fantasy! The “Real World” is so much worse:

Annie Lowrey, “Do Millenials Stand a Chance in the Real World?,” New York Times.

This line stands out:

Thirty or 40 years from now, young millennials might face shakier retirements than their parents. For the first time in modern memory, a whole generation might not prove wealthier than the one that preceded it.

This is a novel definition of “wealth.” If we are talking about land, there’s global warming (why people use “climate change” escapes me), so there may be less of that, but it’s not like the U.S. is so densely populated that we live cheek by jowl coast to coast, document-review style. If we’re talking about capital, however, then it would be pretty crazy to believe that there will be fewer buildings in 40 years than there are today. Maybe when the last boomer dies, we’ll build a pyramid and throw all their stuff in it with them so they can enjoy it in the afterlife.

Oh wait, that’d create jobs. Can’t have that.

Absent an apocalypse (unless global warming really is that bad), the whole generation will prove wealthier than the one that preceded it. It will just be embarrassingly unequally distributed. Many millenials will basically spend their adulthoods waiting for their boomer ancestors to die so they can liquidate their assets. Whether they can live off them is a whole other discussion. The remaining children of the wealthy will be shoed-in to semi-hereditary positions. Not that this doesn’t go on already, it’s just a lot easier to hide, and the public is still very willing to accept it when the system is designed to give the impression that anyone can get into these positions.

For example, education:

Millennials are the best-educated generation ever. Their challenge may just be to preserve that advantage for their own children.

Pop quiz, hotshot: After applying the appropriate discount rates, which document has a higher net present value: an Ivy League university degree dated May 2013, or a birth certificate with Sallie Mae exec Albert Lord’s name in the “Father” field?

If Law Schools Managed Our Wars

Ten years after the Iraq invasion, the paper of record is finally catching on.

David Beagle, “Is Foreign Occupation a Losing Game?” The New York Times.

For some reason the link doesn’t work, so I’m just going to quote the article in full. I’m sure the Times won’t mind.

If anyone could teach a course in how to remain calm with sovereign debt, it’s Jack Lew. Managing the finances of a declining superpower with a net public debt-to-GDP ratio of 73 percent, a rent-seeking health care system, low taxes on the rich, high youth unemployment, and endless wars takes equanimity. Lew tells me over a latte, “The trick is to ignore all the naysayers claiming that we’re in a depression and willingly believe in America’s dynamism.” His creditors would foreclose on him, except he didn’t spend the money on a house but on foreign occupations. By all metrics, it’s been a catastrophic investment, except for one: the United States military.

Looking at the statistics that the U.S. military gathers and provides to U.S. News & World Report to publish in its influential rankings, invading foreign countries for any reason or no reason seems like a great investment, with an average of one corner about to be turned every three months since the magazine began tracking “success after invasion” data in 2001.

How can the military paint such a rosy picture to U.S. News?

“It’s an open secret that the American public has no idea what the military is doing in Afghanistan or Iraq,” says U.S. Army Colonel William Hendricks, one of many exasperated officers cajoling the Department of Defense to change how occupation forces are assessed. “We need to come up with a way for armed conflict consumers to know when they’re getting the Army of the Tennessee under Grant and Sherman or the U.S. Army under Westmoreland and Abrams in Vietnam.”

For example, a corner is claimed to about to be turned whenever a Predator drone kills thirty revelers at an Afghan wedding party, which the military then claims were Taliban fighters all along. Corners are also neared for every hundred Afghanis who enlist for training by the U.S. military, but it won’t tell you that they then promptly desert, taking their bonuses with them. Simply sending more soldiers to the country (called “surges”) also helps it approach corner-turning—and gives the military more money.

The lack of any real corners being turned is enraging taxpayers, who are taking their protests to the Internet with blogs titled, But I Done Killed Everything Right!, Rose Colored WMD, Restoring Dignity to the Death Squad, and Killing Them Die Hard. “Stay clear of this disgusting, putrid, shit-pile of filth called the U.S. military if you want economic growth,” writes the author of the blog, THIRD TIER OCCUPATION—in typical scatological tone. “Unless, of course, you think adding $1 trillion dollars to your NON-REPUTIATABLE sovereign debt is worth no greater security and a reduced standard of living for your populace.”

Sadly, there’s no shortage of citizenries willing to fork over trillions of dollars a year even though their economies haven’t produced enough jobs to keep up with population growth.

In February 2013 Congress subpoenaed the top brass to testify before a Senate Armed Services Committee hearing to hear their views.

“Militaries find it’s more cost-effective to simply pay out a million dollars per soldier per year than recommend Congress reinstitute the draft. The problem with non-volunteers is that they require more training and then frag their commanding officers when ordered to patrol Helmand Province. Occupying countries for no good reason is difficult, and that costs money,” testified recently promoted Brigadier General Irwin Chemicalinsky.

Responding to the beating the U.S. military has received as an investment from antiwar scambloggers, one general, Richard Balthazar said, “There’s this persistent myth out there that armed forces and weapons manufacturers are tricking Americans into invading and occupying other countries. That would make us immoral, unethical, and terrible people, and we’re not. Citizens must do their own due diligence before deciding whether to invest in foreign invasion as well as which military to use. There are plenty of popular security-debunking websites for them to read, so they’re informed by them rather than by our about-to-turn-another-corner numbers from last year. When the Treasury Department auctions those securities, they’ve made their choice.”

When asked by Committee Chairman Carl Levin (D-MI) if the military was committing waste, fraud and abuse of government funds, General Balthazar told Congress that the military is overcharging taxpayers for its services, primarily because it’s “grossly inefficient.” “Does the U.S. really need seventeen intelligence agencies, all of which are politicized? Probably not for America’s purposes. Would it be cheaper to send in commandos than fight a robot war in Pakistan? Sure. Do we need a Department of Homeland Security when we already have a Department of Defense? Yeah, that’s probably redundant too. Should soldiers do their own laundry instead of contracting it to KBR for no-bid contracts? I guess that’d be cheaper. But it’s not like the brass has some moral obligation to tell the American public that spending $100 billion per year occupying a Central Asian un-state is a waste of the United States’ non-repudiatable debt dollars. A little caveat emptor here, people.”

Another officer suggested that U.S. military unbundle its services, a “Motel 6” force for humanitarian missions or patrolling the Alaska-Canada border, and a “Ritz-Carlton” military of nuclear submarines and ICBMs for deterring Soviet invasions of West Germany.

Leaders of occupied countries quickly claim that American soldiers simply aren’t ready to forcibly control their territories upon arrival. Said Hamid Karzi, President of Afghanistan, “I don’t care what the rankings say, Americans simply suck at foreign occupation. The guys they’re sending aren’t nearly as good as the Brits were. I mean, they sent motherfuckers like Francis Edward Younghusband to Tibet. Why don’t the Americans have guys like him? He knew how to massacre monks. Hell, even the Soviets were better. Shit, they may not’ve turned any corners either, but have you seen the number of landmines they left in our country? Tons, man. Tons.”

When confronted with its “gross inefficiencies” the Department of Defense claimed that its hands were tied. “If we limit how military forces operate, we open ourselves to antitrust lawsuits,” incoming Defense Secretary Chuck Hagel commented, “Militaries worldwide need to find ways to cut costs, like sharing their aircraft carriers and nuclear arsenals.” He added, “We’re overhauling our military accreditation standards so that every armed force must declare what kind of wars it intends to be useful for, and we’re also going to ask militaries to voluntarily provide us with better about-to-turn-corner data.” In the meantime, Defense officials said they intend to negotiate with U.S. News as to how it ranks militaries. However, the magazine quickly pointed out that it won’t ask for any more corner-turning from the world’s armed forces unless the Defense Department comes up with better metrics first.

Asked about his concerns about his country’s sinking fortunes, Lew moped, “Hey, this is the age of bailouts. I’m sure someone will give us a grant. Or we could just double-down and go to law school.”

LSTB’s editorial: Troops Out Now!

Assets Are Not Income

Jordan Weissmann, “Why Twenty-Somethings Aren’t Doomed to Be Poor (but Thirty-Somethings Might Be),” The Atlantic.

Referring to the recent Times article about the Urban Institute’s study on young (under 40) people, Weissmann opines:

But the Times misses something key, I think, which is that not everybody under 40 is in the same boat. As this graph from Urban Institute’s study shows, it’s mostly Americans in their thirties (in red) who have seen their net worth collapse compared to 30 years ago. The quarter-life set are actually doing a bit better.

Weissmann further argues that the wealth lost by 29-37-year-olds is due to the housing bust, which didn’t affect their juniors. Twenty-somethings may have some student loan debt, but they’re better-educated than their parents were, so they can expect higher incomes, he says.

Would that Weissmann were right, but young people (however broadly you feel like defining them) are doomed because they don’t have much income. This is how the financial life cycle works. Young people are asset poor but cash rich, the cash being their unrealized net future incomes as good drones in the capitalist order. As they work, they gain skills and wage raises, pay down their debts, save for retirement, and dissave as they age. As I wrote last week, if you lock their wages and load them down with nondischargeable debts they don’t get to be good drones and end up paying an income surtax to the government.

And how are the drones’ incomes? The Census Bureau (P-28–P-31) tracks mean earnings by age bracket and education via the Household Survey.

Mean Earnings by Age

Observe that the income growth stops for most age brackets in 2000.

Annualized Earnings Growth by Age

The under-25 crowd is especially in a bind because its income increases even to 2000 were trivial in absolute terms. Thus they drop out of the workforce (and probably go to college):

Top: Civilian Noninstitutional Population (16-24); Middle: Civilian Labor Force Level (16-24); Bottom: Civilian Employment Level (16-24)

How many “young people” can afford to wait until their 50s for their first real job so they can become land speculators?

None of this is to say I’m in favor of wholesale generational warfare. Many older Americans lost everything in the last two bubbles, they pay high health care costs, and even their student debt levels are exploding upward. Rather, it’s a handful of older Americans who are hoarding the country’s wealth. People like Mark Zuckerberg and Lena Dunham are extreme exceptions.

I’m not going to address Weissmann’s value-of-the-college-degree point.

If You Wonder Why I Keep Saying Henry George Was Right…

…Then wonder no longer.

Annie Lowrey, “Younger Generations Lag Parents in Wealth-Building,” The New York Times.

A new study from the Urban Institute finds that [people] up to roughly age 40 have accrued less wealth than their parents did at the same age, even as the average wealth of Americans has doubled over the last quarter-century.

Because wealth compounds over long periods of time — a dollar saved 10 years ago is worth much more than a dollar saved today — young adults probably face less secure futures for decades down the road, and even shakier retirements.

“In this country, the expectation is that every generation does better than the previous generation,” said Signe-Mary McKernan, an author of the study. “This is no longer the case. This generation might have less.” The authors said the situation facing young Americans might be unprecedented. [Emphasis LSTB]

More accurately, most people in this generation will have less. Some people will inherit vast fortunes because some wealth is zero-sum, like land. The Urban Institute, much less the Times, won’t say that existing wealth has been redistributed to a handful of war generationers and boomers, even though they know that average wealth has doubled over the last 25 years. Rather, they believe that we’re failing to create the economic conditions that enable young people (now redefined as “under 40”) to thrive. To them, people work to accumulate wealth and hooray! We have more than people our age did thirty years ago. It’s magic.

And since magic is a fiction, so too is “upward mobility” a red herring concept. You can’t be upwardly mobile in a world of fixed opportunities and growing populations. This is why I think “young” Americans in particular should tune in to Henry George because they can expect to pay the following fees for the rest of their lives:

  • Federal income tax (the all-time number one)
  • FICA (probably worse than federal income tax, but no one cares)
  • Rent
  • State income tax (usually)
  • State and local sales taxes (almost assuredly)
  • Local income tax (all too often)
  • User fees (Go-Go Gadget transit hikes)
  • Student loan graft (the crowd pleaser)
  • All kinds of other windfalls, e.g. hospital chargemasters, patent rents, and interest on public debt for wars to spread democracy by shooting people

Do the monopolists pay these? Yes, but they get the rents and windfalls, which more than offsets the other costs.

Young Americans have the following options:

(1)  Wait for their aging war generation or boomer parents to die and liquidate their assets (if available)

(2)  Make way for the new aristocracy (if the previous option is unavailable or insufficient)

(3)  Sail away

(4)  Demand a tax shift

Me, I’m for the tax shift. The people interviewed by the Times should be too.

Good Recommendations From Illinois Bar Association Report

Special Committee on the Impact of Law School Debt on the Delivery of Legal Services: Final Report and Recommendations,” Illinois State Bar Association.

Some good primary stuff:

Congress and the Department of Education should place reasonable limits on the amount that law students can borrow from the federal government. Student loans should also be made dischargeable in bankruptcy so private lenders have the incentive to properly screen loan applicants based on the chance that the school they attend will prepare them to be successful in the job market. That way, law schools will have an incentive to restrain costs to the level that students can borrow. If a school fails to do so, most students will not be able to afford to attend, and the school will close. (4)

And go diploma privilege:

Consider Ways to Reduce the Cost of Becoming Licensed: For example, supreme courts could allow qualified students to take the bar exam in February of their third year, thus avoiding the cost of studying for the bar exam after graduation, and reducing the delay before beginning work. Such a proposal should be careful not to restrict the time law students have in their third year to become practice ready. Alternatively, supreme courts should consider offering bar admission to qualified graduates of their state’s law schools without a bar exam. (6)

And some contradictory stuff:

Small Law Firms Face Challenges Hiring and Retaining Competent Attorneys… (1)

But:

The Committee heard testimony from many recent graduates who were unable to obtain any jobs in the private sector or elsewhere paying more than $40,000-$45,000. That fact makes the academic debate about the effect of debt on graduates’ choice between the public sector and the private sector, see supra note 25, somewhat misleading. There may be no significant difference in salary between the two sectors for the many graduates who are unable to obtain higher-paying jobs in the private sector. In addition, many graduates testified that jobs were so scarce that they would take any available job. (Footnote 38, emphasis added)

Because I really can’t ask for much more from a report like this that recommends restoring bankruptcy protections to student loans, curtailing the federal loan program, and easing licensing requirement, I’m not going to waste too much energy on it. However, if the executive summary is going to read, “Exessive Law School Debt Decreases the Quantity and Quality of Legal Services Available to the Public,” then it helps to make sure it’s arguing for the right policies for persuasive reasons.

Specifically, there are two theories of how debt relates to legal services. (1) The Special Committee says that poor people can afford legal services but lawyers’ debts are raising the lawyer labor costs to the point that it’s impossible for both parties to reach an agreement. (2) People like me say demand for legal services is scant because poor people can’t afford much of anything.

If (1) is right, then we’d see much higher employment rates for graduates with less debt than more, as small firms and clients would be able to pay them. Indeed, Southern Illinois’ and Northern Illinois’ 2011 graduates finished with a disbursed amount of debt below $70,000. Assuming none of this is Grad PLUS loans, we’re talking about a ballpark estimate of $6,250 per year in debt service on $75,000 over 25 years. It’s a lot, but it’s not irreparably impossible to service that on $40,000 in annual income (okay, there’s undergrad debt too, but did most NIU/SIU grads go to expensive private universities too?).

Do we see better employment outcomes for NIU and SIU than high-debt schools? Answer: Sometimes:

2011 Illinois Law School Graduate Outcomes

I think, though, that we’d expect much higher FT/LT lawyer job rates and much lower unemployment levels for the two public law schools. Instead, they’re no better than Illinois’ mid-range private law schools, and employers appear excited at the prospect of employing Chicago and Northwestern grads, even though they should cost quite a bit more. If theory #1 were true, the “market-failure” debt threshold at these schools would’ve been surpassed many years ago.

This is why I believe the second theory is accurate, for it explains how there can be graduates who would take any job no matter what their debt levels are.

As for IBR:

Many public interest attorneys are unwilling to enroll in IBR because, although it lowers an attorney’s monthly payment, any interest unpaid at that payment level continues to accrue. Moreover, the attorney’s debt will not be forgiven until ten years of service in public interest. Funding for public interest jobs is unstable, and an attorney who does not continue in public interest law may have her accrued interest capitalized, leaving the attorney in a worse position than before. In addition, IBR does not cover private loans, the program may penalize a lawyer for the earnings of the lawyer’s spouse, a lawyer’s credit score may still suffer while on IBR, and many attorneys do not expect funding for IBR to continue in a time of government austerity. In addition, some graduates were not aware of the intricacies of IBR and may not be taking advantage of all the features available to them. (2-3)

It’s implausible that people with high Grad PLUS loan levels are not on IBR. I think the Special Committee should have put more effort in determining how many graduates are in the program to bolster its points.