Category: Law and Inequality

Respect for the Troops = Benefits Now

Bilmes & Stiglitz’s book The Three Trillion Dollar War explains in depth how aggressively the Administration has denied benefits to many returning veterans. It’s a natural consequence of going to war while cutting taxes–and given Jonathan Chait’s work, I’m not terribly surprised to see the Social Darwinist wing of the Administration trump the military on this issue. I’m happy to see that some are now starting to challenge these policies in court:

Berkeley-based Disability Rights Advocates filed a lawsuit that could affect thousands of veterans returning from Iraq and Afghanistan. They allege that the Department of Veterans Affairs is unable to provide timely mental health treatment for returning veterans.

Bipartisan resistance to courts’ evisceration of the ADA may also benefit a large number of veterans:

Advocates for people with disabilities say that recent court rulings have made the employment protections of the disability civil rights law almost meaningless, especially to people with diabetes, epilepsy, cancer, and mental illness. . . . Last year, a version of [the ADA Restoration Act] quickly got support from more than half of the House of Representatives. That forced the business community to negotiate. [Now the] bill’s backers hope to give President Bush something he can sign by the end of July.

As any viewer of Iraq: Alive Day Memories knows, many returning veterans will appreciate these developments.


Maternity Leave Means Fathers Too

A Commissioner at the Massachusetts Commission Against Discrimination (the Commission) has announced that effective immediately the Massachusetts Maternity Leave Act (MMLA) will apply to new parents of either sex. This means that both mothers and fathers (or both parents in gay marriages) in Massachusetts will be entitled under state law to eight weeks of unpaid leave upon the birth or adoption of their child. (The MMLA applies to employers with six or more employees.)

This announcement by the MCAD is startling for many reasons. First, it appears that the Commission, has rewritten a statute that is clearly gender-based (“maternity” rather than “parental”) to be gender-neutral. The Commissioner admitted as much when he said the reason for the Commission’s interpretation is to avoid the following problem:

“If two women are married [as is legal in Massachusetts] and adopt a child, then they are both entitled to leave under the [MMLA], and yet if two men are married and adopt a child, they would be entitled to no leave under a strict reading of the statute. That result was troubling to us, and we didn’t think it was in keeping with our mandate by statute, which is to eliminate, eradicate and prevent discrimination in Massachusetts.”

The Commission says it “enjoys broad discretion” and so it is applying the statute to avoid what it considers to be a state constitutional problem. Of course, the Commission must apply the law in a constitutional manner, but it does seem to have taken a radical step in this instance without a notice and comment period that most major legislation (or legislative changes) undergo before passage. As some lawyers have said, it creates significant obligations for employers overnight, which obligations may not be what the legislature has intended.

Second, the Commission’s interpretation of the statute appears to understand the “discrimination” the MMLA seeks to eradicate as discrimination against parents rather than against women. I don’t know the history behind the MMLA, but its title (and language) suggests that the gist of the law was not to eradicate discrimination against parents but against mothers. (The word “female employee” is all over the statute.)

The big question for me, however, as I read this news is whether I care how startling it is and whether instead I should jump for joy that finally FINALLY some official legal body has recognized in a brave (however radical and oblique) way that gender equality requires that fathers/spouses be equal parents of newborns with mothers. I don’t think it a radical idea (although people I mention it to think it novel and curious) that the disparity in child care in our society — where most women are in charge of child care in their household despite more than sixty percent of mothers working outside of the home — is rooted in maternity leave, a gendered leave policy that creates inequality in the competence and expectations for child care. (To be sure, the FMLA is gender neutral and passed under congress’s section five powers as a remedial and prophylatic measure to combat sexism. But the MMLA targets infant child care specifically where as the FMLA covers diverse family relationships. For a quick comparison of the MMLA and FMLA see here.) By interpreting the MMLA in this way, the Commission has given most fathers/spouses in the Commonwealth the right to stay home with their newborn.

I have long lamented the accommodation of maternity leave – not because I think it unnecessary for mothers but because it creates an expectation that mothers (and not fathers/spouses) will stay home with the baby when born or adopted. In addition to providing time to physical recuperate from labor (which for most women takes between two and four weeks), maternity leave (especially for new moms) is a form of boot-camp, teaching women how to care for an infant by forcing the togetherness. Most women don’t know any better than most men how to calm a fussy baby, how to feed a baby, how to swaddle a baby or put her to sleep. These skills are gender-neutral. When do women become more competent than men at these tasks? When they care for their own newborn during maternity leave (or, admittedly, when they have taken a job caring for children or cared for a sibling or friend’s child prior to having their own child). Maternity leave is a three month (sometimes more) “head start” in the child-care department. And this head-start often sets the parameters for child-care duties in the future. At four months when a mother is back at work, that mother is typically better at soothing and dressing and feeding the baby because she has done it so often the past twelve weeks while her husband/spouse was at work. It makes sense, therefore, at the end of the work day, that when the baby is fussy or hungry that she calms and feeds the baby because she is better at it. This is an efficient division of labor. But it also relegates her to the “second shift,” one that mothers have historically complained about, whereby she works in the office all day and in the house all night. And this gendered child care dynamic is entirely avoidable if fathers/spouses became as competent as mothers in the earliest days of their baby’s life. Three months of total immersion in child care is a long time. Ask any parent: the learning curve is a steep one. And when the baby is crying, you want the most skilled person to calm that baby (i.e., the person who can succeed the fastest at the task). This is often the person who stayed home with the baby, and it is usually the woman.

So back to the Commission’s announcement. What it might accomplish if applied to both parents is to encourage them to become equally competent at caring for their newborn at an early enough stage in the parenting relationship to prevent gender inequality in child care in the future. And it sends the message that both parents are crucial to nurturing the child – which is of course true. How will it apply in practice? Does it allow for the possibility that one parent might stay home for the first eight weeks and the other parent for the second eight weeks? Would it allow for both parents to stay home at the same time? Either way, I hope this significantly changes the parental leave landscape in Massachusetts – for the better. It is long overdue that fathers/spouses be expected to care for their newborns as mothers are expected to. I would bet that many fathers/spouses would relish the idea of a three month leave to care for their new child. And I have no doubt that children will be better off for it. I applaud the Commission.

The Curiously Non-Ideological Debate over the “Falling Down Professions”

Over the past year, law and medicine have been characterized as the “falling down professions“–losing both status and economic clout to “masters of the universe” in CEO suites and Wall Street offices. We now better understand some of the sources of those Wall Street profits. But as doctors and lawyers in training lament their plights on message boards, I’m struck by the curiously non-ideological nature of their complaints. Most appear to believe themselves afflicted by economic forces as natural and unavoidable as a tsunami–when in fact it’s political decisions that have led us to where we are.

Whatever complaints the young lawyer or doctor has today, they must be contextualized in a larger economy. As Nan Mooney’s new book (Not) Keeping Up With Our Parents: The Decline of the Professional Middle Class argues, most young professionals today feel more financially pressed than their boomer parents. Basic costs of health, education, and housing have skyrocketed. In the health arena, politicians are adopting policies that allow more and more of the costs of health care to be shifted from the government and employers to individuals. Alan Greenspan disastrously inflated the housing market, and anyone in a big urban area on the coast is caught up in the uncertainty of wondering whether an inflation-fearing Fed will shock prices back to normal or if “Helicopter Ben” Bernanke will keep the easy money flowing.

I could go on and on, but just look at the recent spate of books on new middle class anxiety:

*Elizabeth Warren and Amelia Warren Tyagi, The Two-Income Trap.

*Jared Bernstein, Crunch.

*Steven Greenhouse, The Big Squeeze.

*Peter Gosselin, High Wire: The Precarious Financial Lives of American Families.

*Barbara Ehrenreich, Bait and Switch.

*Jacob Hacker, The Great Risk Shift.

Each of these authors examines particular political and legal decisions to shift risk from government and business and onto individuals. So those who feel economically insecure today shouldn’t think their worries are the bane of a particular profession or region, or the inevitable result of global economic change that could be remedied if they could just get a bit more education. And a final note for practicing attorneys: it would be quite surprising if an ideological movement to shut the courthouse door to the injured failed to threaten your livelihood. Just as primary care doctors should not be surprised if their incomes suffer in the face of extraordinary efforts by the federal government to avoid spending money to help those entitled by law to care.

Positional Concerns in the Big Apple

Are those who are concerned about inequality really members of the “radical malcontent left?” Turns out that some of our most prosperous citizens are also affected. As David Lat at Above the Law notes, some lawyers in NYC are tired of being vastly outclassed earnings-wise by bankers–and may be happy to see a Wall Street meltdown. Lat wonders if “lawyers [will] move up a notch or two in the Gotham caste system thanks to the recession?” The NYT reports on “fantasies of New York returning to a pre-Gilded Age, before the average Manhattan apartment cost $1.4 million, SAT tutors charged $500 an hour and dinner entrees crossed the $40 threshold.”

It may seem absurd to take this kind of “relative deprivation” seriously. Nevertheless, we may be hard-wired to object to economic arrangements that grant some people vastly more than they appear to deserve–even if everyone generally is doing all right. Here’s some evidence for that proposition, which a perceptive commenter made earlier to me:

[H]uman behavior is not solely driven by material outcome; fairness and equity matter as well. In a recent neuroimaging study, fair offers led to higher happiness ratings and increased activity in several reward regions of the brain compared with unfair offers of equal monetary value. Other neuroimaging studies have similarly shown activation in reward regions in response to cooperative partners or cooperative play.

I’m not a huge fan of brain studies, but I just offer this up for anyone who is. As Geraldine Fabrikant has reported, even the rich feel some resentment when the super-rich leave them in the dust.

Reverse Robin Hood: The $30 Billion Question

Remember the controversies over the State Children’s Health Insurance Program (SCHIP) last fall? The Bush Administration was very concerned that spending an additional $30 billion over the next five years to cover more children would put the country on the road to “socialized medicine.” Even if economic reports indicated that only one in five families in the coverage expansion would drop private insurance to purchase government sponsored insurance, that was seen as far too high a cost to pay to allow even a bit more publicly-financed insurance to “pollute” children’s health care.

Yet the administration has recently endorsed the Fed’s $30 billion guarantee for JP Morgan as it purchases Bear Sterns. I’ll let the accountants figure out exactly how much of that money will end up being provided by taxpayers, but I think it’s safe to assume that more guarantees like this are coming, and that the market itself priced it in in response to the toxic subprime securities Bear still counts as “assets.”

So what are the practical consequences when a country allows millions of kids to go uninsured, but structures financial regulation so that leaders of banking firms face nearly no downside, and high upside, on extraordinarily risky investment strategies? It appears that we only worry about moral hazard in the health care arena (where it has been largely discredited), and not in the financial world (where it has been amply confirmed). Internationally, the US is looking less like a leader in financial innovation and more like a haven for crony capitalism. The New York Times describes the situation as “socialized compensation” for the connected:

Bankers operate under a system that provides stellar rewards when the investment strategies do well yet puts a floor on their losses when they go bad. They might have to forgo a bonus if investments turn sour. They might even be fired. Their equity might become worthless — or not, if the Fed feels it must step in. But as a rule, they won’t have to return the money they made in the good days when they were making all the crazy bets that eventually took their banks down.

The costs of such a lopsided system of incentives are by now clear. Better regulation of mortgage markets would help avoid repeating current excesses. But more fundamental correctives are needed to curb financiers’ appetite for walking a tightrope. Some economists have suggested making their remuneration contingent on the performance of their investments over several years — releasing their compensation gradually.

In a recent hearing questioning the extraordinary gains at top financial firms (for pioneering strategies that now may lead to massive government bailouts), Henry Waxman suggested that current policies may lead to a crisis of faith in the market system:

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What happens when global inequality becomes extreme enough to be exotic? One result is “poorism,” which brings residents of the developed world to visit slums, favelas, and shantytowns as tourists. Eric Weiner explores the ethical dilemmas:

From the favelas of Rio de Janeiro to the townships of Johannesburg to the garbage dumps of Mexico, tourists are forsaking, at least for a while, beaches and museums for crowded, dirty — and in many ways surprising — slums.

David Fennell, a professor of tourism and environment at Brock University in Ontario [says it] is just another example of tourism’s finding a new niche to exploit. The real purpose, he believes, is to make Westerners feel better about their station in life. “It affirms in my mind how lucky I am — or how unlucky they are,” he said.

Not so fast, proponents of slum tourism say. Ignoring poverty won’t make it go away. “Tourism is one of the few ways that you or I are ever going to understand what poverty means,” said Harold Goodwin, director of the International Center for Responsible Tourism in Leeds, England. “To just kind of turn a blind eye and pretend the poverty doesn’t exist seems to me a very denial of our humanity.”

While the feel-good side of tourism is usefully satirized in Richard Flanagan’s Gould’s Book of Fish, I’m in favor of this type of travel in general. Spending 10 weeks in Lima, Peru the summer after my first year of law school fundamentally changed my view of the world. It’s very difficult to have a sense of what living on a dollar a day is like unless one has actually seen a shantytown in person. It certainly helps one understand why “contributing to widening divide between rich and poor” is one of the social sins recently highlighted by the Vatican.

Misery Loves Inequality

InequalityGraph.pngEconomist Robert H. Frank notes that Congress is finally considering alternatives to GDP as measurements of economic well-being:

This week, Senator Byron Dorgan . . . will hold a hearing exploring whether traditional economic measures like per-capita income accurately capture people’s sense of well-being.

[S]urvey findings [show] that when everyone’s income grows at about the same rate, average levels of happiness remain the same. Yet at any given moment, the pattern is that wealthy people are happier, on average, than poor people. Together, these findings suggest that relative income is a much better predictor of well-being than absolute income.

In the three decades after World War II, the relationship between well-being and income distribution was not a big issue, because incomes were growing at about the same rate for all income groups. Since the mid-1970s, however, income growth has been confined almost entirely to top earners. Changes in per-capita G.D.P., which track only changes in average income, are completely silent about the effects of this shift.

The chart above, from Lane Kenworthy’s blog Consider the Evidence, shows the trend graphically.

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The Home Finance Arms Race

A growing consensus seems to be emerging that we can borrow and spend our way out of the current subprime mess. The “stimulus package,” the Fed’s interest rate cuts, and new moves to increase the limit on “jumbo loans” all seem based on this assumption. Given that the U.S. is already racked with debt, I can’t quite see the logic here. Moreover, as Harold Meyerson noted recently in Congressional testimony, there’s a much simpler explanation for the current housing woes:

The subprime mortgage crisis is fundamentally a crisis of the rising cost of housing while the income of many Americans has flat-lined. As home-building executive Michael Hill pointed out in a Washington Post op-ed column just this Monday, “forty years ago, the median national price of a house was about twice the median household income. In some parts of the country, this ratio was closer to 1 to 1. Twenty years ago, the median home price was about three times income. In the past 10 years, it jumped to four times income.” And in most thriving metropolitan areas, Hill adds, the ratio is far higher than that.

Conclusion: If median income in America had continued to increase as it did in the years from 1947 to 1973, when it doubled, we would not be facing the mortgage-market meltdown we are experiencing today. So, too, with credit cards, where default rates are also increasing sharply, reflecting the growing desperation of Americans struggling to pay their bills, and further destabilizing many of our already shaky financial institutions.

If economic policies focus solely on allowing the middle class to borrow more, they may well be setting us up for yet another arms race of housing finance that we can ill afford. Consider, for instance, the effects of inequality in New York City, a bellwether for trends likely to affect more of America:

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Are Debtors’ Prisons Next?

Ah, the perils of unintended consequences. The federal government in the 1990s made direct deposit a default method of paying Social Security and some other benefits. Now “Social Security recipients could now more easily pledge their future checks as collateral for small short-term loans.” And the “payday loan” industry has found a lucrative new niche–“volume has climbed to about $48 billion a year from about $13.8 billion in 1999.”

Responding to the manifest failures of under-regulated consumer finance markets, many are now claiming that predatory borrowing was a bigger problem than predatory lending. I wonder if they’d find predatory “Ms. [Jennifer] Rumph, whose medical problems include severe asthma and two hip replacements,” and who appears to support herself and her children with disability benefits:

After Ms. Rumph fell behind on her payments, Miracle Finance sued her in small-claims court in Abbeville, Ala. Although federal law says creditors can’t seize Social Security, disability and veteran’s benefits to pay a debt, enforcement of the law is scant, and many Social Security recipients are unaware of their legal rights. Lenders and their debt collectors routinely sue Social Security recipients who fall behind in their payments, and threaten them with criminal prosecution, senior advocates say.

Debtors must go to court to prove their case. Ms. Rumph says she didn’t know any of this and was afraid to go to court. Miracle Finance won a $1,500 default judgment in July, and four days later sought a court order requiring Ms. Rumph to appear in person to detail her income and assets.

I suppose some analogue to the “fugitive disentitlement” doctrine might leave hard-liners unmoved by Ms. Rumph’s plight. Nevertheless, the payday borrowing boom in general should lead to reconsideration of exactly what the purportedly narrowing “consumption gap” between rich and poor is actually based on.