To hell with social distancing: Let's loot the liquor store!

Derek Chauvin killed George Floyd on Memoria Day. Riots began in Minneapolis on the following day and quickly spread across the country. Within a week of Floyd's death, more than half the states had called out their National Guard.

Dozens of police officers have been injured over a week of rioting. In New York City, almost four dozen police cars were damaged or destroyed. In Chicago, a policewoman was assaulted by rioters who tried to keep her from making an arrest.  In Minneapolis-St. Paul, more than 250 buildings were damaged or destroyed by rioters, including a police station and a post office. 

All this mayhem was triggered by the unjust killing of a black man, but I think there are other causes for all this violence. After all, there are 40 million Americans who are out of work.  Surely some protestors are on the streets simply because they are unemployed and bored.

For example, while watching the television coverage of the riots last week, I saw a slightly obese white guy in his fifties who was out on the streets of Minneapolis.  A television camera captured the man verbally abusing a police officer from a distance of about six inches from the officer's face. Does that guy have a job, I wondered? 

I don't wish to disparage the motives of the people who are demonstrating in our cities, but I think there would have been a lot less vandalism, arson, and looting if there were not so many jobless people.

A dude with a job would probably turn down an invitation to set fire to the post office. "It's a lovely invitation," he might say, "but unfortunately, I have to be at work tomorrow by 8 AM." 

He might also beg off from joining an expedition to loot the local liquor store. "I wish I could join you," he might explain," but I have to get the kids off to school tomorrow morning.

Requiring people to wear masks when they appear in public is also playing a role in all this chaos.  Many states passed anti-mask laws back in the 1920s to help bring down the Ku Klux Klan. But this past week, thousands of protesters were wearing masks that cloaked them in anonymity should they decide to throw a firebomb at a police cruiser.

George Floyd's death has fueled legitimate anger all over the United States. Everyone realizes that. But in my opinion, these riots will not be quelled so long as millions of Americans are jobless and required to wear masks when they are on the streets.

Burning police cars: requiring people to wear masks is part of the problem.

Second (and kinder) thoughts about distance learning at the universities during the coronavirus pandemic

Not long ago, I commented on the mass shift to distance learning at American universities, which were forced to close their campuses last March due to the coronavirus pandemic.

Disappointed students sued more than 50 colleges about the transition, arguing that the quality of their education had deteriorated when face-to-face instruction was suspended. I commented that the students were surely right and that distance learning is indeed inferior to traditional modes of teaching.

Since I wrote that commentary, however, I taught a course as an adjunct at my former university, and I was pleasantly surprised by the experience.  I delivered this course using two distance-learning tools: Moodle and Zoom.

With Moodle, I was able to post all my reading materials and communicate with my students about their assignments. Using Zoom, I met with a small group of students in "real-time," and we were able to discuss court cases very much as if we were all in the same room. 

This positive experience with distance learning caused me to revise my views. I now believe that most colleges can maintain the overall quality of their instruction, even if they are forced to rely heavily on distance learning in the upcoming fall semester. But I still believe something will be lost if universities rely too heavily on technology.

 Zoom, I learned, is an excellent way to meet with small groups of students who are in different places. I think seminars and small-class settings taught through Zoom or a similar product can continue with little loss in quality.

And it seems to me that large lecture classes will not be adversely affected if professors give their lectures by video.  After all, one of my first classes as an undergraduate more than 40 years ago had 700 students enrolled. I was given an assigned seat at the back of the auditorium and could hardly identify the gender of my professor.  Delivering video lectures may actually be an improvement over having instructors drone on to hundreds of students in a cavernous auditorium.

I am still skeptical of so-called asynchronous teaching, where the professor presents students with canned instructional units without ever having any personal interaction with them. In my view, this kind of education amounts to little more than a correspondence course.

I am also skeptical about distance-taught instruction that assesses student performance through pass-fail grading.  It has been my observation that all rigor goes out the window when a professor is grading students on a pass-fail basis. It is almost impossible to fail anyone when the assessment standards are so relaxed, and it is absolutely impossible to reward students who excel in their classes.

And I continue to be opposed to academic programs that are delivered entirely online. After all, who believes that an undergraduate degree, a master's degree. or a doctoral degree that is offered entirely online is in any way comparable to an academic degree taught traditionally on an actual college campus?

I wish all the colleges well as they adjust their academic programs in response to the COVID-19 pandemic.  I think most of them can deliver instruction this fall through various distance-learning formats without too much loss in quality.

Nevertheless, most students choose their colleges based on their perception of what their campus experience will be like. They don't just sit in classes, after all. They live in residence halls, interact with other students, and immerse themselves in all kinds of extracurricular activities. Some percentage of students will not go to college this fall if they can't have a traditional college experience.

Most commentators predict a significant enrollment decline if academic life doesn't get back to normal (or at least close to normal) by the fall semester. I think they are right. And the colleges that will suffer the most are the small liberal arts colleges and the regional public institutions.

This guy should be teaching online.

California ain't got the do re mi: Will Americans bail out the Golden State?

California is a garden of Eden, a paradise to live in or see;

But believe it or not, you won't find it so hot
If you ain't got the do re mi.

Woodie Guthrie

Just a few months ago, the California economy appeared to be in great shape. Governor Gavin Newsom predicted a $7 billion budget surplus for 2020, and the state had $16 billion in its rainy day fund.  

The governor was feeling so confident that he promised to distribute $75 million to the state's illegal residents.  Very thoughtful. But after all, what's $75 million to California, the world's fifth-largest economy?

But then COVID-19 came along like a drunken ex-spouse at your wedding reception, and the Golden State's economy began heading south.

Today, Governor Newsom projects a $54 billion budget deficit--more than three times the amount of the state's rainy day fund.  California has 4.2 million unemployed workers and huge healthcare expenses connected with the coronavirus. One in three Californians (13 million) are on Medicaid and can't pay their own medical bills.

And of course, California's financial problems are more severe than this year's budget deficit. According to the California Policy Center,California's state and local liabilities total $1.5 trillion.  

A lot of California's debt can be traced to high salaries paid to the state's civil servants and unfunded pension obligations to government workers.  California's public employees (professors, school administrators, hospital administrators, etc.) are paid well. In fact, about one-third of a million government employees draw salaries of $100,000 or more.  Over 1,400 of them are paid more than Governor Newsom.

California's state and local employees also enjoy great retirement plans. Some retired school administrators draw pensions of more than $300,000 a year.

California desperately needs a federal bailout to keep essential services going and to pay thousands of overpaid public workers. Indeed, Governor Newsom said he is optimistic about the state's economic future but, "My optimism is conditioned on this--more federal support." 

Hence, Nancy Pelosi's $3 trillion HEROES Act, which, if passed, will shower more than $1 trillion of federal money to distressed state and local governments.  If the Senate votes to approve Pelosi's bill, lots of federal money will arrive in California.

But there's just one problem with the HEROES Act. The national debt already tops $25 trillion. Pelosi's legislation will add another $3 trillion to that number.

So if the federal government bails out California, taxpayers in Kansas, Ohio, and Oklahoma will help pay the tab for those quarter-of-a-million dollar California pension benefits. The citizens of the Midwest will help fund the princely salaries of California's college professors and school superintendents.  

As Woodie Guthrie observed nearly 100 years ago, California is a garden of Eden and a beautiful place to call home. But the state's dwindling middle class is going to find that California is not so hot if you ain't got the do re mi to pay for a whole lot of high living by people who call themselves public servants.

But Governor Newsom, we ain't got the do re mi!

HEROES bill dishes out thin gruel for student-loan debtors: "Please, sir, I want some more."

In its original form, the HEROES bill was 1,800 pages long; and I am grateful to Steve Rhode of Get Out of Debt Guy for summarizing its essential elements.  The original legislation provided up to $10,000 in student-loan relief for borrowers holding federal or private loans.

By the time the House of Representatives approved the HEROES Act in mid-May, relief for student debtors was watered down considerably. As Mark Kantrowitz reported, the bill that was approved by the House limits relief to "economically distressed borrowers."

Who are the economically distressed borrowers? Mostly these benefits will go to people who are:

• in default on their loans or whose monthly payments are more than 90 days overdue,
• People with economic hardship deferments, cancer treatment deferments, or unemployment deferments,
• People whose loans are in forbearance and whose debt burden exceeds 20 percent of the borrower's income.

The HEROES Act was thin gruel when it was first introduced, but the gruel got even thinner by the time the House of Representatives passed it by a vote of 208 to 199.

Forty-five million Americans are burdened with federal student loans totaling $1.6 trillion, and private-loan borrowers owe about 125 billion. That's a lot of debt, and the HEROES Act offers only a few crumbs of relief.

Assuming the Senate approves the HEROES Act in its present form (which is not likely), most of this money will do nothing more than pay down the interest on borrowers' student-loan balances. People in income-driven repayment plans are seeing their debt grow larger with each passing month due to accruing interest. People whose student loans are in deferment or forbearance are not making their monthly loan payments, but interest is accruing on their loan balances as well.

In short, the HEROES Act is an insult to the millions of people who are being dragged down by unmanageable student loans. Like Oliver Twist, all 45 million student-loan borrowers should shout, "Please, sir, I want some more."

Please, sir, I want some more.

A JP Morgan economist says U.S. is heading toward a "Weimar Republic Inflation Setup": What in the hell does that mean?

Earlier this month, Zerohedge.com published an essay by an unnamed JP Morgan economist who predicted that the national economy is headed toward runaway inflation.

According to this anonymous commentator, money in circulation is multiplying through various types of government handouts while "asset prices . . . [are] being propped up by central banks."  Thus, he reasons, it is just a matter of time "until inflation goes from 'subdued' to 'out of hand.'" Indeed, the economist predicts, "If central banks have no or a soft-washed inflation mandate we are headed toward a Weimar Republic style inflation setup."

That prediction sounds scary, but what in the hell does it mean?

I had only a hazy notion of the Weimar Republic in the 1920s when inflation in Germany got crazy out of control. I recall seeing photographs of people carrying German currency around in wheelbarrows. But what does the Weimar experience have to do with our national economy? I was clueless.

So I read some books on the German economy in the 1920s. The Weimar Republic, I learned, was created in 1919 after Germany lost the First World War. The German monarchy collapsed in November 1918, Kaiser Wilhelm fled to Holland, and a constitution was drafted in the Germany city of Weimar.

When World War I began, the German mark was valued at around 4.2 marks to the dollar.  When the war ended, the allies (France, Great Britain, and the United States) imposed harsh reparations on Germany, and the mark's value dropped to 7.4 to the dollar.

From November 1918 until the mark was finally abandoned in 1923, Germany was caught in a vicious inflationary spiral until the mark ultimately fell to 4.2 trillion marks to the dollar. In other words, it was worthless.

How did that happen? A multitude of factors were at work, but it seems that Germany's inflation during the early 1920s was mostly a result of carelessness, government subsidies to industry and state-owned railroads, and the government's effort to keep German workers employed and support a half-million war widows and 1.5 million disabled former soldiers.

In the end, German printing presses were running around the clock in a vain effort to supply paper currency that was deflating in value almost by the hour. Salaried workers and people living on pensions were driven into poverty, and hunger became widespread.

All this suffering and despair fueled radical political parties--Bolshevik-style communism, right-wing paramilitaries, and ultimately--the Nazis.  Hitler himself pointed out that Germans with billions of marks were starving.

Is the United States headed in that direction, as the unnamed JP Morgan economist predicts? Maybe.

Our accumulated national debt is now $25 trillion, and dozens of states and cities are running deficit budgets. A bill is currently working its way through Congress that would spew out $3 trillion, with part of this money going to prop up state and local governments. At the rate we are moving, the U.S. will see its national debt grow to $30 trillion within the next couple of years.

The federal government is also propping up the higher-education industry with student-loan money that has enabled colleges and universities to increase their tuition at twice the annual rate of inflation.  More than 45 million Americans are burdened by student loans that total $1.6 trillion.

Our spendthrift economy has enabled the U.S. to drop its unemployment rate to a historic low--last year it was only about 3 percent. If our government restores some fiscal discipline, that rate will inevitably rise. In the summer of 1923, when inflation was utterly out of control, the German unemployment rate was only 3.5 percent. Two months later, after the Reich restored fiscal discipline, unemployment rose to 23.4 percent.

Germany's inflation during the Weimar years destroyed the nation's middle class. The American middle class has been shrinking for the last 20 years, and many middle-income workers are losing ground.

I do not believe the United States can continue propping up more than 4,0000 colleges, universities, and trade schools with federal student-aid money. When all this comes crashing down, thousands of people with good jobs in the groves of academe will be out of work.

Small, liberal arts colleges are already closing at an accelerating rate, and regional public colleges are laying off staff and faculty.

When inflation breaks out in the U.S. economy, the wealthy and the financial speculators will do just fine. It is the middle class that will suffer, including a lot of people working in colleges and universities who now think they have bullet-proof job security.

The Weimar years: When German money was worthless

References

Ferguson, Adam. When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany. New York: Public Affairs Publishing (2010) (originally published in 1975).

Friedrich, Otto. Before the Deluge: A Portrait of Berlin in the 1920s. Harper Perennial (1995) (originally published in 1972).

Taylor, Frederick. The Downfall of Money: Germany's Hyperinflation and the Destruction of the Middle Class. New York: Bloomsbury Press (2013).

One-day bankruptcies for corporations and decade-long bankruptcy proceedings for student debtors: Is that fair?

Jonathan Henes, a corporate attorney, wrote an op-ed essay for the Wall Stree Journal a few days ago calling for Congress to codify one-day bankruptcies for financially troubled corporations. "The one-day bankruptcy would streamline the bankruptcy practice," Henes argued and would reduce business disruptions and legal expenses.

Henes's appeal in the Wall Stree Journal is not the only suggestion for streamlining the corporate bankruptcies that are sure to come due to the coronavirus pandemic.  A group of legal scholars wrote a joint letter recently asking Congress to appoint more bankruptcy judges to deal with corporate bankruptcies that are looming on the national horizon.

Henes's essay and the legal scholars' letter both make reasonable suggestions on behalf of America's big businesses. If corporate America backs these proposals, they have a good chance of being enacted into law.

But is anyone thinking about relief for America's distressed student-loan debtors? After all, according to the Department of Education's own report, 8.1 million college borrowers are in long-term repayment plans that are designed never to be paid off and which can last for as long as 25 years. How about some bankruptcy relief for these people?

It would be cruelly ironic if Congress codifies one-day bankruptcies for corporations while the Bankruptcy Code makes it nearly impossible for insolvent student-loan borrowers to discharge their college loans in bankruptcy.

And even student debtors who prevail in the bankruptcy courts often find themselves embroiled in appellate proceedings that can last for years.  Michael Hedlund, for example, filed for bankruptcy in 2003 and sought to discharge student loans he had taken out to go to Willamette Law School. 

Ultimately, a bankruptcy judge granted Hedlund a partial discharge, but the decision was reversed by a federal district court. Hedlund appealed to the Ninth Circuit Court of Appeals, which ultimately upheld his partial discharge. But the Ninth Circuit did not issue its opinion in Hedlund's case until 2013—ten years after he filed for bankruptcy!

One-day bankruptcies for big corporations and decade-long bankruptcy proceedings for beaten-down student debtors? That doesn't work for me.

References

Hedlund v.Educational Resources Institute, 718 F.3d 848 (9th Cir. 2013).

Henes, J. S. Congress Should Codify the One-Day Bankruptcy. Wall Street Journal, May11, 2020. 

Will Congress help corporations and ignore beaten-down student debtors?

Three out of four test-takers failed the California Bar Exam in February: Do you still want to be a lawyer?

This spring, pass rates for the California Bar Exam hit a historic low. Only 26.8 percent of the test-takers received a passing grade--about one out of four. The pass rate for retakers was even lower: a shocking 22 percent.

As one might expect, pass rates varied widely based on where the test-takers went to law school. People who studied at an ABA-accredited California law school had a pass rate of 42 percent, which is pretty poor odds.  But the poor blokes who got degrees from unaccredited distance-learning schools had a pass rate of only 16 percent.

No matter where students enroll, going to law school has gotten outrageously expensive. Most people who study law are forced to take out student loans.  According to one report, the average newly minted lawyer graduates with $145,550 in debt. How would you like to leave law school with $145,000 in college loans and then fail the bar exam? Or fail it twice?

People who graduate at the top of their class from elite schools (Harvard, Stanford, Michigan, etc.) generally find well-paying jobs with blue-chip law firms. But the leading U.S. law firms have been impacted by the coronavirus pandemic and are laying off lawyers and cutting salaries. Scroll down the list that Law360 compiled of the nation's most prestigious firms, and you will see that most of these big firms are hurting.

In other words, even law graduates with impeccable credentials are seeing their salaries cut due to COVID-19. People who graduate at the bottom of their class from second- and third-tier law schools will find it damned near impossible to pay off $150,000 in student loans because there are few decent-paying law jobs for these people.

So--if you are thinking about going to law school, do some research. Be sure to check out a couple of good web sites on the legal-education industry: Above the Law and Law School Transparency. Find out the bar pass rate and the average student-debt load for the law school where you intend to study. If you know some lawyers in the area where you hope to practice, ask them to share their thoughts about their local job market.

When I graduated from the University of Texas School of Law, the legal profession was a great way to make a living.  Tuition was very low, and I worked my way through school and graduated with no debt.  I did well in law school, graduating with honors, and I got several job offers.

In those days, even people who graduated with less than stellar grades could look forward to a stable job if they attended a well-respected law school. I had grown up in a small Oklahoma town, and law school opened up a bright, new world of seemingly limitless opportunities.

But those days are gone. Law school tuition is way too expensive. Today people who enroll at a mediocre law school are playing Russian roulette with their financial futures.

And law schools have lowered their admission standards to meet their enrollment goals, as evidenced by declining bar pass rates in states such as California.  This signals to me that the academic atmosphere of law school is not as stimulating now as when I was a law student.

So if you are dreaming about going to law school, think about it long and hard. Your world will definitely change if you get a J.D. degree, but it might not change for the better. Your dream of a better life could turn into a nightmare of bitterness, poverty, and regret.

Think hard about law school before you pull the trigger