Are We Overstating COVID Positives?

Evidence is growing that we may be overstating COVID positives, lumping in those whose immune system has already defeated the virus.

Here’s what’s been on my mind for the past several weeks: Are our COVID tests too sensitive? Have they been too sensitive all along? Are we overcounting positives, lumping in defeated COVID fragments which are not dangerous with those full viruses of infectious patients? Are we throwing away or deliberately obscuring some of the most useful signal data we have when we simply report “positive” or “negative?”

I don’t think we are doing enough to distinguish between “worrisome” positives and “less concerning” positives. I think in several years’ time, we will look back on this period and say we made a major mistake in the way we lumped them all together, when it was possible not to do so.

There is considerable evidence that in the “Positive” case counts, we are also counting those who pose no infectious spread risk and in fact are successfully processing or have already processed the virus, which helps toward herd immunity. From a public policy standpoint, given that so many of our “reopen” plans hinge upon “case counts must be below X%”, it is vital that we do as much as we possibly can to separate “worrisome” positives from “non-worrisome” positives.

And, though less urgent: Are our tests and thresholds even consistent between nations? Between public health departments within the US? Between college campuses? We should seek better standardization, so that counts can be better compared.

Let’s Dive Into “Positives”

When we look at “positive test cases”, we first need to understand what that number means.

First, does every positive case represent someone who is contagious or poses substantial risk of spread?

No. And evidence is growing that in many cases, perhaps even the majority of cases, a positive test does not mean they are necessarily infectious. That’s because “positive” counts will also include those whose immune system is well-functioning, who have low viral load, and even those who have inactive viral fragments and have “beaten” the virus, with or without their knowledge. Positives will also detect infectious people, as well as those who have low viral loads but are at the beginning stages of their infection.

It’s remarkable we are able to see into the molecular level and do this. PCR technology is incredible.

But each of these positive cases are very different circumstances which I would argue deserve different public health responses. And the ambiguity in a “positive” arises from the technology we use, which detects fragments or markers of the virus, not necessarily an entire active virus itself. It will pick up fragments of a defeated virus, extremely rare and tiny ones if something called the “Cycle Threshold” is high enough.

Some scientists are now suggesting ways to better distinguish between these very different types of positives (explained below.)

But importantly, for what must be various public policy reasons and inertia, we appear not to presently want to embrace or even much explore it with the urgency I think it deserves.

At a minimum, I feel it’s vital that we know and report hospitalization counts along with positives, but we also need to know something called the Cycle Threshold of viral detection, as well as both the aggregate and individual trends in that number.

Impact

Given the importance we place in the positive test counts now that we’ve moved from “flattening the curve so hospitals aren’t overloaded” to today’s I-don’t-really-know-what-but-sort-of “no positive test growth must be observed”, I’m surprised this issue of what constitutes a “positive” isn’t getting much more attention. Positive test rates now impact everything from school and campus closures to quarantine and isolation to individual mandatory quarantining to business and retail closures and cancellations and more.

We label a large number of positive test cases an “outbreak.” But in reality, a high cluster of positives might not represent an “outbreak” at all, it might in fact represent a cluster of, say, young people who have each successfully defeated the virus. A cluster of positives is a cluster of positives — reason for caution, dynamic, preventative action until more is known (and it generally can be known within days or weeks), and also, deeper investigation.

Shouldn’t we get this number right, and work hard to disambiguate between worrisome and not-yet-worrisome cases? Can adjustments to our testing protocols be made to better distinguish between those who might be on the early end of infection from latter tail? I think yes, below, see “Recommendations.”

What percentage of us actually knows what “positive” specifically means?

Shouldn’t we be reporting some kind of broken-out number that clearly distinguishes between those with strong enough viral load to be concerning versus those with a miniscule level of viral load which may only be partial? Shouldn’t we be establishing new protocols for those who come in with “high viral load signals” versus low viral load signals (e.g., testing the latter soon thereafter, to detect directionality — whether it’s worsening, stable or improving?)

By boiling down our reporting into a simple binary, we are losing a lot of valuable information, and causing a lot of unnecessary harm and restriction in our public response.

Background To Know

The main test technology we use in the US, polymerase chain reaction (PCR), is an exceedingly powerful technology. It works by duplicating the genetic material in a sample to the point where a specific genetic sequence is detected. Samples are put in a machine. Reagents are added, and multiple passes, or “cycles” are run, doubling the molecules each time. Ct is the “cycle threshold”, the number of amplification cycles needed to detect a particular genetic strand.

Note that PCR machines aren’t generally trying to detect the entire, active virus, but rather fragments. In the case of COVID-19, it’s key RNA markers. They may or may not be parts of a complete viral protein.

If the virus is detected in fewer cycle thresholds, a high viral load is likely to be in the sample. The more cycles (Ct) the test runs, the more likely it is to detect a small or even miniscule viral load, such as fragments of the virus that are not viable or contagious.

The cycle threshold (referred to as the Ct value) is the number of amplification cycles required for a fluorescent signal to cross a certain threshold. This allows very small samples of RNA to be amplified and detected. Each pass represents an approximate doubling of molecules in the sample – so there is a huge difference even between Ct 30 and 31.

A very important thing to know is that a person who has RECOVERED, with or without their knowledge, will have a small amount of viral debris and fragments in their body, and generally, from what I’ve read, evidence is emerging that 30 cycle passes (Ct==30) might not tend to detect those tinier and lower-viral-load fragments of the “already recovered or recovering”, but (Ct>= ~40) probably would, because the amplification is enormous at high ends.

A Harvard University epidemiologist recently suggested that positives produced with more than 30 cycles are unlikely to find infectious patients and some studies are confirming that conclusion (some of which are below.), But this is controversial, and is at the intersection of both longstanding public policy practices and agency/manufacturer recommendations and more. A leader of Minnesota’s public health lab said there is “no convincing proof” and that her lab is confident in the federally required cycle threshold (CT) of 38 for its COVID-19 test. Of course, the difference between 38 and 30 cycles is eight doublings — an enormous degree of sensitivity difference.

The WHO’s guidelines appear to be 45 cycles (Ct==45!)

The FDA appears to recommend Ct values of 40, as of late July 2020 (page 34-35.)

Worse, different manufacturers have varying recommendations on the “right” number Ct’s by which to run their machine. A growing number of researchers are recommending the Ct value be more like 30, and that any fragments picked up beyond 30 passes tend to NOT yield a patient who is contagious (studies linked below), but rather a person who has too little of the fragments to be a public health concern. Is it time to change the guidelines for these tests?

The FDA apparently has regulations or guidelines which prevent the Ct value from being reported by labs, only “positive” or “negative.” Why are we deliberately throwing away this potentially useful information? I am still trying to find a rational reason why we are deliberately mapping a fairly big continuum to a simple 1 or 0. That’s like taking a beautiful photograph and downsampling and grey-scaling it to a 16x16px black and white icon. You can never get that information back, once filed away and fragmented.

Related Evidence and Readings

Predicting Infectious SARS-CoV-2 from Diagnostic Samples: In this study, scientists were unable to demonstrate any viral growth in “positive” samples with Ct > 24, but could do so with 24 and below. “SARS-CoV-2 Vero cell infectivity was only observed for RT-PCR Ct < 24 and STT < 8 days. Infectivity of patients with Ct >24 and duration of symptoms >8 days may be low.” As a layman, I read that and say, “well, scientists tried hundreds of times and seem to be unable fostering any reproduction of the virus in Ct levels below 25. Probabilistically, it would seem to suggest that we really ought to pay attention to low-Ct positives and maybe less so those positives which are over some buffer beyond that level.”

To Interpret the SARS-CoV-2 Test, Consider the Cycle Threshold Value: “…[H]igh sensitivity for viral RNA can be helpful for initial diagnosis. However, reporting as a binary positive or negative result removes useful information that could inform clinical decision making. Following complete resolution of symptoms, people can have prolonged positive SARS-CoV-2 RT-PCR test results, potentially for weeks, as Xiao et al report. At these late time points, the Ct value is often very high, representing the presence of very low copies of viral RNA [5–8]. In these cases, where viral RNA copies in the sample may be fewer than 100, results are reported to the clinician simply as positive. This leaves the clinician with little choice but to interpret the results no differently than for a sample from someone who is floridly positive and where RNA copies routinely reach 100 million or more.”

Strong Inverse Correlation Between SARS-CoV-2 Infectivity And Cycle Threshold Value: “Correlation between successful isolation of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) in cell culture and cycle threshold (Ct) value of quantitative reverse transcription polymerase chain reaction (RT-PCR) targeting E gene suggests that patients with coronavirus disease 2019 (COVID-19) with Ct above 33 to 34 are not contagious and can be discharged from hospital care or strict confinement, according to a brief report published in the European Journal of Clinical Microbiology & Infectious Diseases.”

Are you infectious if you have a positive PCR test result for COVID-19? Oxford University. Noted in this meta-review is the following chart, which shows how the probability of infectiousness is greater (red bars) when the cycle threshold is lower (blue line.) It also shows that when symptoms to test time is shorter, it’s also more infectious:

Shedding of infectious virus in hospitalized patients with coronavirus disease-2019 (COVID-19): duration and key determinants medRxiv 2020.06.08.20125310.

Comparison of viral levels in individuals with or without symptoms at time of COVID-19 testing among 32,480 residents and staff of nursing homes and assisted living facilities in Massachusetts

In the above study of 32,480 subjects in Massachusetts nursing homes (residents and staff), it was observed that those with Cts less than or equal to 23 harbored 99.9% of the cumulative viral load, and those with Cts less than or equal to 26 harbored 99.99% of the population cumulative viral load.

Rethinking Covid-19 Test Sensitivity — A Strategy for Containment, New England Journal of Medicine (just published yesterday), focuses on the logistical and time delay involved in using PCR testing because of its high sensitivity, arguing that it would be more effective to go with cheaper (but less accurate) technology which can be done on-site. This article is peripherally related to the main issue of this blog post, but provides added caution about overemphasis on PCR and general goals of the upper ends of high-sensitivity.

Backgrounder on PCR and Cycle Thresholds from Public Health England

Very good backgrounder. But note their summary at the end — is it excessively cautious given the cost of lockdown?

Ct is a semi-quantitative indicator of the concentration of viral genetic material in a
patient sample.

From a laboratory perspective, Ct values should only be reported and applied for clinical
interpretation and action where the linearity, limit of detection and standard quantification
curves are assured.

Ct values are not directly comparable between assays and may not be reported by
some RT-PCR platforms in use. Interpreting single positive Ct values for staging
infectious course, prognosis, infectivity or as an indicator of recovery must be
done with context about the clinical history.

Low Ct values (high viral load) more likely indicate acute disease and high infectivity.

High Ct values (low viral load) can be attributed to several clinical scenarios whereby the
risk of infectivity may be reduced but interpretation requires clinical context.
Serial Ct values have greater utility for interpretation but are generally only undertaken in
hospital settings for the purpose of clinical management rather than infection control
purposes.

Understanding_Cycle_Threshold__Ct__in_SARS-CoV-2_RT-PCR_

CDC Guidelines

As of August 4, 2020, the CDC is displaying this Q&A with respect to cycle threshold values, which seems to be contradicted by several of the studies above:

Source: CDC website

Other Parts of the World

  • Spain also seems to have changed their guidelines this week about Ct’s, recommending that they stay in the 30-35 range when reporting positives
  • India also has now declared that COVID-19 test reports must now state cycle threshold

There are many more such studies and meta-reviews emerging, and I’ll update this list as I discover them.

Twitter Threads On the Subject

In the United States, one of the key scientists raising some of these questions is Michael Mina, an epidemiologist, immunologist and physician and Harvard Public Health/Medical School. His thread below is well worth reading. Click through on the link, and read each of the 17 posts in the thread:

Media Coverage

Given what’s at stake — millions of people in lockdown and quarantine, introduction of enormous anxiety for those who test “positive”, many of whom might not have major cause for alarm — this issue has gotten fairly light coverage. It has been drowned out by a host of other stories, from the national election to wildfires to other urgent crises. But a few reports have broken through:

Here’s a good interview with Dr. Michael Mina, Assistant Professor of Epidemiology at Harvard and director of molecular virology about the Ct issue, and why institutional practices on reporting have been slow to adapt:

Cases vs. Hospitalizations

A trend I’ve been noticing in many US dashboards is that hospitalizations used to follow cases after about 14 days or so, but often no longer do.

For instance, my son is a Northwestern University student, and so I follow the dashboard of Suburban Cook County IL closely. Let’s take a look at case counts vs. hospitalizations since this crisis began:

What’s going on here? Why did hospitalizations follow cases in April & May, and yet are virtually unaffected by positive cases starting in July? There are several possible explainers, which I’ll delve into in a future post, and it’s unlikely that there is just one and only one contributor. But one contributing factor is very possibly that a “positive” is also counting in those who have successfully processed the virus and/or who pose considerably less risk to public health. And yet, our public policy is essentially to treat all positives the same.

Key Questions

Are high positive test counts always a sign of the problem worsening within a community?

It doesn’t seem that this conclusion would naturally follow. It could also indicate clusters of “herd immunity / passed virus” forming, since a “positive” at high Ct can also indicate someone who is well past processing of the virus. We should ask this question particularly among student populations on campuses, since that age cohort has extremely low mortality from COVID.

Could overly-sensitive “positives” be a major contributing factor in why we’ve not seen the expected rise in hospitalizations and mortality following positive-counts? Back in March, spikes in positives would lead to strong spikes in hospitalizations and deaths. In late September, hospitalizations and mortality largely do not follow as closely, at anywhere close to the same order of magnitude as back in wintertime.

Could the way we report positives be improved to better differentiate “worrisome” positives from “less worrisome” positives?

Given the fact that people whose immune system has functioned well and fought off the virus will still test “positive”, should we still be using the term “outbreak” when we observe high positive test counts, or should we look more toward either low-Ct values or hospitalizations for such a descriptive term?

Most important, perhaps, what steps can or should we take to better distinguish between positives-likely-to-be-infectious and positives-likely-not-infectious in our public health reporting and public health response?

Recommendations

I am not alleging any kind of conspiracy or malicious intent to hide the truth. I am also continuing to mask-up, particularly in confined spaces like retail, etc. I am also not intending to suggest that COVID and associated risks are not serious — it is, and they are.

But I am also reminding us that we as humans are learning about this virus every day, and shouldn’t have our initial implementation of policies ossify just because they’re were established as such in emergency conditions. Public health officials are doing their best and have crafted responses. But some of those responses I think need to be adjusted, some perhaps dramatically. Certainly I think we could use more dynamism in the policies that are implemented — I’m not sensing a lot of movement or dynamic revision. That’s understandable — institutions and agencies don’t turn on a dime — but I don’t think it’s adequate, given the high costs being imposed.

Specifically, from what I’ve read on this subject, I don’t quite understand why we aren’t now altering our public health response in the following ways:

  1. Move beyond a simple binary “positive/negative.” Sure, continue to report positives and negatives, but also: report Ct values on every test, and aggregate them into a histogram-style chart, as well as trends in that Ct value: medians, modes, and standard deviations over time. Set a benchmark for what constitutes a “high” viral load. (Several scientists now seem to coalesce around the number 30 or so.) How many subjects were detected with “high” viral loads? “Low” viral loads? What is the trend in that signal? Get a better picture of the “severity and infectiousness” of the virus.
  2. Always report hospitalizations, whenever “positives” are reported. Hospitalization counts are very important disambiguating metrics. Every dashboard needs to also report hospitalizations and mortality. Yet I’m not seeing hospitalization counts on many community and college campus dashboards. Just showing “positive test cases” creates alarm where it might not need to, because it is also including those in the population whose immune system is functioning well and have defeated the virus and are not at risk of infectious shedding.
  3. Shift from a “one and done” testing model to situational immediate followup testing for directionality, particularly among those with “low” viral load. That is, if you test positive but with Ct over some potentially “less concerning” threshold value (e.g., 34, or whatever health officials determine), yes, go ahead and isolate/quarantine but also test again in 18-24 hours to disambiguate between those who might be early in their infection versus those who might be beyond it. If the Ct of detection in the second or third test continues to be high (or higher), perhaps consider loosening quarantine protocols. Consider less rigorous quarantine or lockdown for those with high Ct values per the research above. If that number drops, quarantine and isolate, as it appears the course of the virus might be growing.

I think in a few years, we may look back on this time and say we made a major mistake overcounting positives, and considering that a high number of positives is an “outbreak.” It is vital that we at least take a moment to examine whether we should be making changes to the way we are reporting COVID positives.

DISCLAIMER

I am not a physician. I’m not a scientist. Nor do I have any medical training. I’m simply Very Online, and I read a lot. Like a lot of us, I enjoy building, I plan, and I invest. I generally find I need to have a mental model of what the next 0-24 month time horizon looks like in order to build and plan and invest successfully, and I work pretty hard at trying to have a good guess about that near to mid-term horizon.

Seattle Plows Ahead with 50% Cut To Police Department. Where are the Metrics Which Define Success?

Seattle City Council signals a veto-proof majority for a 50% cut in police funding. But where are the metrics?

Note (July 2020): This post is a compendium of links, resources and commentary related to the proposed cutting-by-half of the Seattle Police Department budget. Like the rapidly-building “plan” itself, this article is pretty scattered and incomplete, and meant to be a holding tank of relevant articles, resources and perspectives to consider when developing your own view on the topic. It will be updated over time.

It is not intended to be one-sided. So feel free to suggest new Seattle-specific resources and links to me via Twitter, especially those which disagree with mine. If they better inform outsiders, ideally with concrete data, I’ll do my best to work them in.

In general, my own views are: supportive of police reform, supportive of more transparency and oversight, yet opposed to a 50% cut being the way to drive it. Rather, I’m in favor of defining success metrics that matter to all Seattleites, letting those drive the reform plan, rather than a top-down “let’s cut 50%, allocate a bunch of money to this or that organization, and figure it out” kind of approach. Seattle has a terrible record of doling out funds to third party service providers; so little accountability, so little check-ins, audits, definitions of success metrics, and ongoing measurement. The result has largely been paydays for third-party service providers, who, once entrenched, are rather difficult to see into.

I also feel improved public safety outcomes cannot also arrive without serious inquiry into the judicial (i.e., post-arrest) system that all too often lets frequent offenders cycle through the system without treatment, has a myriad abuses of freedom and liberties, doesn’t address mental health or addiction properly, and imposes too few consequences for repeat offender actions which truly harm others. The process of success metric definition need not be a long one, but it should be inclusive, and take into account the public safety needs of all Seattle dwellers, renters, owners, service and businesspeople, all identity groups, etc.


“Laws without enforcement
are just good advice.”

Abraham Lincoln

Law enforcement has been essential in every society. Seattle’s own history with policing is a varied and checkered one, recently involving a federal consent decree, strong crackdowns on protests, some recent success in diversifying its workforce, leadership appointment political battles, worsening morale and staffing problems, a highly contentious and long-drawn-out battle over renewing the police union “SPOG” contract, increased militarization, claims of targeting and racial profiling, and fierce allegations by activists that the Seattle Police Department (SPD) both represents and perpetuates institutional, systemic racism.

Fast-forward to 2020

2020 has involved these distinct, contentious events:

One of the most central milestones was City Council’s vote indicating support for…

50% Cut in SPD Budget

Seattle’s City Council is a 9-member body that sets the laws of the city of Seattle. It now has a veto-proof majority of 7 of 9 councilmembers to cut the Seattle Police Department Budget by 50%, a goal long sought by some of the most leftward voices in the City. It gained increased calls in 2020, particularly in the wake of the murder of George Floyd in Minnesota.

City Council’s decision to slash 50% of the budget is, at present (July-October), without any bottoms-up plan or even clear set of metrics which will constitute success.

Chief Best’s Thoughts

Police Chief Carmen Best published a video on July 10 2020, addressing the roughly 1,400 sworn Seattle Police Department officers under her command. There’s a companion memo, below, summarizing what SPD feels those cuts will likely mean:

Chief Best outlined some of the adjustments she feels the department would have to make with a 50% cut:

468745236-Mayor-Letter-Chief-Best-Council-Budget-Proposal

Seniority May Well Result in a Less Diverse Force

SPD notes that due to legally-binding union contracts signed by the City and the Seattle Police Officer Guild, the layoffs forced by these cuts would result in SPD becoming less diverse, at least in the short-run.

Image
Of course, contract rules can be broken to adjust this layoff priority. But since this is a legal contract, this will no doubt trigger a series of expensive lawsuits and/or increase the chances of city liability.

This claim was met with swift reaction from “defund” proponents on Twitter, including former Mayoral Candidate and attorney Nikkita Oliver:

[An aside. It just struck me that the two most forceful, clear and consistent advocates of the camps which will move this city in one major direction or another are two Black women. Progress worth noting?]

Council Member Lisa Herbold notes that it should be legally possible to lay-off out of order of seniority:

Here’s a link to the document that CM Herbold was referring to: Rules of Practice and Procedure. You’ll find the relevant piece on page 33, which indicates some other conditions:

Is there a risk that lawsuits will still be levied and lost? I think so. Worth taking? Perhaps.

Constitutional Law scholar Jonathan Turley outlines many ways in which this proposal may violate laws:

While [Herbold’s suggestion to fire based on racial makeup, out of order] would be the definition of racial discrimination, Herbold clearly believes that it is discrimination for a good cause. The federal courts are likely to disagree.  Most notably, Herbold’s call for racial discrimination against white officers would seek to undue the work of Justice Thurgood Marshall who insisted that racial discrimination unlawful and evil regardless of the race you want to disenfranchise or discriminate against.

– Jonathan Turley, Seattle City Council Member Suggests Firing White Officers in Massive Reduction of Police Department

Public Disapproval

Crosscut/Elway is out with a new poll that shows 73% of respondents are opposed to reducing SPD funding by 50%:

Image
Poll Margin of Error: +/- 5%

Where does SPD’s money go today?

The Daily Hive has a pretty good rundown here:

https://dailyhive.com/seattle/seattle-police-department-funding-2020

Mayor Durkan’s Position

As is often the case, Mayor Durkan has been trying to strike a pragmatic middle, “kind of a lukewarm water between ‘fire’ and ‘ice'” as so memorably stated by Derek Smalls in Spinal Tap. She is still reeling from a very hard turn to the left by City Council from the November election, and hard-left activists flooding her inbox, and even, shamefully, her driveway.

But her reality — and the reality for us moderates and taxpayers is that there is considerable momentum to defund at least 50% of the SPD budget without any clear plan or measures for success.

And as Carmen Best notes, all this momentum now arrives at the doorstep of SPD, without much proactive input from the police department itself. At present, the Mayor’s Office seems to be trying to elide the COVID-related cuts with these funding cuts. I’d expect her to continue along this angle, attempting to preserve as much of the current makeup of SPD as possible:

But it will be a huge challenge.

On July 13th, the Mayor came out swinging, blasting the City Council’s plan:

https://crosscut.com/2020/07/durkan-hits-back-pledge-defund-seattle-pd-50

Legal Impediments

Kevin Schofield at SCCInsight has a must-read article on all the legal impediments to cutting the budget by 50%:

“Defunding SPD” is going to be a lot harder than anyone thinks

Where are the Guiding Metrics?

My biggest question — what will determine success or failure with such a drastic change? How will we know when we’re moving toward something better, or moving toward worse outcomes for the Seattle community as a whole?

The statement by 7 of 9 Council Members to support a 50% cut in police funding comes without a bottom-up plan, and without any metrics which will help us know if the changes made actually improve things or move them in the wrong direction.

“I have been struck, again and again, by how important measurement is to improving the human condition.”

Bill Gates

You cannot improve what you do not measure. You cannot even know whether you are improving at all without measuring.

And thus far, any measurements or metrics are wholly absent from the discussion.

It seems to me that good people can disagree about how to best achieve improved public safety and equity. But can’t we first try to establish agreement on, say, the Top 10 Signals for what constitutes better outcomes? If not, how will we know if we’re making progress or moving further away from our goals?

I think clearly, all citizens and leaders should want to reduce the rate of bias and unjust outcome. Do the public safety needs of all identity groups also matter? I assume they do. Most citizens do care about reducing assaults, robberies, addiction, homelessness and more.

I’ve asked Council members a few times, respectfully, what are the outcome metrics that they’ll be using to judge whether these changes are successful or not.

That is a very basic question.

Where is the Seattle press?

We need the press to ask City leaders what the plan is, and how they’ll measure success. Do City leaders have a mandate to do this 50% cut? Do citizens know what’s being proposed? Do leaders know how they’ll do it, and what will constitute success?

I’ve asked journalists like Dan Beekman of the Seattle Times, repeatedly, whether journalists will actually press Council members to answer these questions. No answer. For instance, this thread.

Silence, thus far.

And thus far, only one council member — Dan Strauss — has mentioned anything that could be considered a measure for success. It’s confined to 911, but it’s a start. His view is that the metrics for success are “Response times, and whether the people who arrive, 24×7, have the right resources to do the job effectively.” That’s a good start it seems to me, but those are the only measurable goal I’ve seen thus far in the entire discussion of these major changes. And I don’t quite know how we best measure “arrive having the right resources to do the job effectively.” (Do we do a followup survey? Who measures? Etc.)

Instead, the entire discussion to date has been driven by inputs to the program, as laid out in the four-point “plan” that 7 of 9 members have agreed to, in principle. It has the feel of a fight over both policy and money, with the latter sometimes taking precedence. Public safety seems to be taking a back seat in the dialog right now, at least the traditional measures of public safety (some typical measures listed below.)

“Decriminalize Seattle”

Take, for instance, the “4 Point Plan” being advocated by “Decriminalize Seattle” which is included in the PDF below.

Points 1-4 are entirely about inputs and allocations. None of these points include metrics for success, or a plan for who should own those metrics, how regularly they’ll be reported, and what we might do if we’re on the wrong (or right) tracks. As we’ve seen in the past, it matters whether there’s an interested agency reporting the numbers.

Presentation-Decriminalize-Seattle

Decriminalize Seattle held a Zoom call “teach in”, which is available on Facebook but not embeddable here.

Good governance includes establishing what “success” looks like. Numbers are a key barometer of whether the new plan is getting closer to the goals, or further away from it.

Typical measures of public safety often include the metrics below. Anyone willing to go on record with predictions as measured in, say, three years? Reasonable metrics it seems to me include things like:

  • Response times
  • Violent crime rates (reported violent crime per capita)
  • Property crime rates (reported property crime per capita)
  • Whether those responding have the right resources to handle the situation effectively
  • Officer-involved shootings
  • Complaints against officers or SPD
  • Assaults
  • Shootings
  • Recidivism
  • Burglaries
  • Gun ownership and purchase trends
  • Gang activity
  • Non-violent crime rates/conviction rates
  • Homelessness counts
  • Overdose deaths

Are there other key public safety, equity and public health outcome metrics that make sense to measure with numbers? What happens to “response times” when the agency is under entirely different leadership, and how should they be measured? Should they be independently verified? What do we anticipate about the directionality of these metrics down in let’s say, three years from now?

Are you personally directionally optimistic in these metrics, neutral or pessimistic?

The Challenge of Repeat Offenders

Last year, two blockbuster reports came out profiling Seattle’s most prolific offenders. System Failure Parts I and II.

Just 100 individuals accounted for 3,562 bookings in the State of Washington. About 9 months later, a follow-up report showed that these same individuals accounted for another 117 bookings. It also found that the City Attorney’s office only filed charges in 54 percent of the non-traffic criminal cases brought to it by the police, meaning, 46% of the time, they didn’t file charges in such cases.

system-failure-prolific-offender-report-feb-2019

System-Failure-Part-2-Declines-Delays-and-Dismissals-Sept-2019

It also found that on average, it takes about a half a year for the City Attorney’s office to file charges once the suspect is arrested, and nearly 2/3rds of a year in the case of assault.

Will Council Live By Their Own Decree?

Minneapolis’ City Council members who voted to “defund” the police about a month ago. And they quickly then voted themselves their own private security, at a cost to taxpayers of $63,000.

In Seattle, one council member signaling her support for a 50% cut in SPD forces is Council Member Lisa Herbold, who last year was quick to use her position to call not just the police’s 911 line, but the Chief of Police herself when she suspected, wrongly, that a mobile home was parked in front of her home to troll her.

Does she plan to go through Community Service workers in the new world or civilian 911, or make use of other channels? And will Mayor Durkan hold equal concern when personal property of others is violated as though it were her own?

“Decriminalize Seattle” Zoom Conference

A key set of players driving this conversation comprise a group called “Decriminalize Seattle.”

No question, their voices, just as others, are very important to hear in the process. Their lens is an emphasis on racial equity, many of the goals of the Black Lives Matter movement, funding affordable housing and more.

Given the rather large influence the group is currently having over major public safety decisions in the City of Seattle, it would be helpful to have an understanding of what kinds of public safety credentials and experience are represented by the group, and which cities of any size have adopted such plans, as well as their results. It includes groups like the Seattle People’s Party, Asians for Black Lives, the CID Coalition, La Resistencia, Trans Women of Color Solidarity Network, No Youth Jail, and more than 200 other organizations. What kinds of credentials in public safety and health policy, and what results of the collective group?

To be clear, my own public safety credentials are nil. They are nonexistent. But then again, I’m also not the one pushing a plan to reshape Seattle’s entire approach to public safety and cut the budget for the law enforcement organization of the city in half. I’m calling upon us to have metrics that guide our success, and I’m calling upon journalists to start asking that question of our leaders.

Has this combined group’s novel approaches been implemented, at scale, in cities of any size? If so, great! Let’s hear more about that experience and what we can learn. What can we learn from what works and what doesn’t? And if not, if we are truly donning the labcoats here, shouldn’t we know it? Isn’t that something that might make headline-level at The Seattle Times? What harm is there in bringing that fact to the attention of the public? And if true, isn’t it then ever more important to establish the metrics for success?

You can see a ZOOM call of a recent virtual meeting with council members and the Decriminalize Seattle group here:

https://twitter.com/madsnicolee/status/1281304357351260160?s=20

CM González on “Defunding”

In recent days, Council President González has apologized for supporting police budget increases in past years, saying she no longer believes the department can be wholly reformed.

Oath of Office

Some, like Chief Best, are questioning whether a 50% cut in SPD is consistent with Council Members’ sworn oath of office. Curious, I tried to make the connection as to what they’re alleging.

All City Council members, when sworn in, take an oath to uphold the City Charter. See the 11 minute mark, for instance, for CM Herbold’s swearing-in ceremony, for instance, below.

Now, the preamble of the Charter of the City of Seattle, says very clearly:

“Under authority conferred by the Constitution of the State of Washington, the People of the City of Seattle enact this Charter as the Law of the City for the purpose of protecting and enhancing the health, safety, environment, and general welfare of the people…”

Charter of the City of Seattle

I think reasonable people can disagree about the right way to ensure health and safety of a citizenry. And “Decriminalize Seattle” has certainly stated their desires to enhance health and safety.

But notably absent so far from the “Let’s cut the SPD budget by 50%” movement have been any kind of metrics around public safety and health, merely (a) adjustments to INPUTS and policies, (b) hopes that by making these changes, we will achieve better equity and outcomes and (c) claims that SPD is unfixable/irretrievably broken and needs to be entirely reimagined.

How will we know if we are making improvements? How will Council Members know if they’re truly upholding their oaths to ensure better safety and health?

Morale Crisis at SPD

Meanwhile, even prior to this, there was a growing crisis of morale at the Seattle Police Department.

“Culture is toxic; morale is low”: Survey of Seattle Police officers paints bleak picture, Crosscut

Speak Out Seattle, a public-safety advocacy group which I volunteered for last year, chiefly by livestreaming their City Council forums, put out a video a year ago on the Seattle Police Officer morale crisis, and how Seattle’s staffing levels compare to other cities. I share it below because the comparative figures at the end are I think worth noting in the context of this discussion:

The crisis appears to be accelerating:

https://www.q13fox.com/news/seattle-police-officers-send-out-dozens-of-job-applications-to-other-departments-amid-unrest

Finally, is all this premised upon real, or imagined human behavior?

As I wrote back in November, I really hope the human behavior that the current majority of City Council members imagines actually exists in real life. Because from that, all else follows.

  • Is compassion the same as lenience?
  • Are unarmed community service workers better at diffusing, say, assaults and domestic violence?
  • What do unarmed community service officers do when situations suddenly escalate?
  • All public safety situations come with risk. Do you design law enforcement response for the average/typical scenario, or the atypical scenario, just in case?
  • Are all observed discrepancies of outcomes mostly or fully explained by oppression or discrimination? Are we ignoring other factors that might also be at work?
  • Are some of Seattle’s problem with repeat offenders not a police problem at all, but a problem of revolving justice?
  • Is homelessness generally just a problem of affordability, not treatment (mental health or addiction) or other services? Do studies validate that?
  • Do fewer police officers mean less crime and a safer community overall?
  • Will a myriad of fragmented, private security forces (e.g., at larger retailers, perhaps for neighborhoods, gun-owning households, etc.) be a safer and easier-to-manage environment?

These and other questions will be put to the test in the coming years.

Real-world examples?

What cities serve as the best examples of what we’re trying to do? The example of Camden, NJ is often mentioned. But that story is also understood as one in which Governor Christie joined forces with police reform activists to essentially “union-bust” the police union. While it very temporarily did “abolish” the police, Camden now has more police officers on duty than it did before they were “abolished.” And Camden remains a high-crime city — in fact, it’s in the Top 4% of highest crime per capita in the nation; 96% of American cities are safer. Is that change we can believe in?

In the past two weeks, Seattle City Council has passed one of the largest progressive tax increases in the city’s history, and also signaled its desire to defund the police by half. None of this is directionally surprising to anyone following last year’s City Council election. Elections have consequences; I get it. They certainly appear to have full legal authority to enact these changes, and I’m not challenging their ability to press the accelerator on this bold new progressive direction.

But if we look at the recent experiment of CHAZ/CHOP, we see both that the SPD is in need of real reform in its unwarranted arrest and abuse of reporters and unnecessary use of force in teargassing protestors, but, with five shootings in a three week period, I’m also unconvinced we’ve seen proof that SPD standing down improves public safety. I’m not confining my views to this or that identity group. I’m talking about outcomes for all of us who call Seattle home.

Sworn Officer Levels

SPD Sworn Officer Levels (grey line) by year

Comparison to Other Cities

One metric that’s used to compare police coverage is officers per 10,000 citizens.

Seattle’s population is about 730,000. So we have about 1190 officers covering 730,000 people, or 16 officers per 10k citizens. By comparison, that number for DC is 65, Baltimore: 46, Boston: 33, SF: 28, Atlanta: 30, and LA: 26 (source: governing.com.)

More To Come

I’ll be updating this running post over time with major developments related to public safety in Seattle.

Seattle ended 2020 with the highest recorded number of homicides in the past twenty years. And police officers are meeting Priority 1 Calls (emergency calls, the highest level) in the goal time in fewer than half of all calls.

I love this city, and I hope this turns around. We need to find a way to get beyond the division, the grandstanding, the posturing — and literally improve public safety. Since resource allocation is about tradeoffs, I think that begins with defining what the most important metrics are which indicate public safety, be clear about them, and then optimize those. Personally, I put things like response times, shootings, reports of assault and sexual violence and validated reports of law enforcement bias-crimes/brutality fairly high on the list.

Without getting clear about the metrics which matter most, we pretend that we can make major cuts in one area and “reimagine public safety” without having any clear idea of what may lie ahead, nor even being able to measure whether our decisions were the right ones.

Updates

March 9, 2021 — Brandi Kruse shares several slides from SPD showing how understaffing is leading to poor response times:

Warren’s Withdrawal: It’s Age of the Meme, not Age of the Wonk

In the age of simplicity, nuance is a liability, not a strength

Senator Elizabeth Warren has suspended her campaign. With comparatively more realistic and detailed plans and the talent to explain them, she should have easily beaten Senator Bernie Sanders for the hearts and minds of the progressive left wing of the party. But she didn’t. Why not? Was it sexism alone, or was more at work?

Warren Wasn’t My Preferred Candidate

First, I should state right off that I didn’t favor for Senator Warren for president, because in her ideal world, the size and scope of the federal government would be much, much bigger than my view of optimal. I’m by and large a limited government federalist, not a gigantic-federal-government liberal, so her candidacy did not naturally appeal to me. I also think major pronouncements from her campaign contained warning signs. The wealth tax is unconstitutional, as is her penchant for abolishing the Electoral College, and court-packing is an equally surprising turn toward the authoritarian. Her candidacy, overall, was significantly to the left of my views.

The battle over the proper role of the federal government in our lives is a fundamental question that we’ve been wrestling with since even before our republic was founded. Warren outlined her positions clearly and forthrightly, and they are decidedly on the left of America’s center.

Everyone has their own views on this question about the role of the federal government. And I think good people can disagree, because there’s usually a tradeoff between benefits to various constituencies and liberty, and often unexpected consequence of federal action. It’s the rare federal program that’s universally beneficial to all. While I very much support services and support for those truly in need, I have noticed that I also tend to include one test in the “optimal solution design” process that others do not: I imagine the brand new powers we’d like to hand over to the federal government in the hands of my worst ideological foe.

That may sound overly harsh, but it’s because, as we certainly know by now, federal powers last. These powers last through Democrat administrations and Republican administrations, through our lives and those of our grandchildren. They increase over time. The have a trajectory and they have momentum. Agencies and federal powers last through competent and incompetent, benevolent and vindictive administrations. Most important, the Executive Branch can and will be occupied by a variety of presidents in possession of varying degrees intelligence, ideology, religions and leadership styles.

Once granted, such federal powers almost never get rescinded. So if there’s a reasonable option short of federalization of a particular problem/solution that preserves some choice and liberty for those who value it, I tend to want to try that approach first, pivot and make adjustments to them, and only then if they’ve failed default to federalizing them. (This is short of obvious national concerns, like the military, or Center for Disease Control work. But it’s not obvious to me that we must nationalize healthcare to make major improvements, nor have we honestly grappled much with what we lose in the process of doing so.)

On healthcare, we’ve in no way exhausted sensible improvements we could make to the Affordable Care Act or successor private health insurance driven approach before we throw that all away in favor of a nationalized single payer option. We could for instance subsidize services for those truly in need, means-test benefits so they’re focused where they’re needed, but not rush to federalize solutions unless it really is the best place for that power, regardless of administration competence or ideology.

Americans have experienced ever-increasing federal spending per capita. As shown in this chart below, per-capita federal spending (in inflation-adjusted 2016 dollars) seems to march inexorably higher, except during the Obama administration, when discretionary spending actually declined. Please note that I’m not a big fan of slashing it per-capita, but I’m not entirely sure it needs to be instantly doubled or tripled, as Senator Warren would like to do.

See the source image

Warren literally wanted to more than double the size of spending of the federal government, with plans totaling more than $50 trillion in new federal spending over the next decade. I don’t think such a massive change is what I think is best for our prosperity, opportunities, choices or liberty.

Warren wanted to more than double our federal spending per year

Washington DC decision-makers and resource allocators have suddenly became enormously popular of late, at least rhetorically.

All of this love for expanded federal powers by the progressive left is quite surprising to me in the age of Trump. Many of the same voters who see dangerous, capricious authoritarianism and the rise of a fascist state in every presidential action also want to dramatically expand those same federal powers for whomever may follow. I can’t quite square these two thoughts, except if progressives truly believe that all future presidents will be competent, and fully equipped with incisive mental faculties. This is rather hard to believe, given that we now hurtle toward a Biden-Trump 2020 election.

But we still haven’t quite gotten to why her campaign ended today.

But I admire her for her ability to explain her positions and make the case for them.

Warren is a Terrific Explainer and Advocate

Without question, Senator Warren was and is by far the most intelligent, on-point campaigner and debater, with the possible exception of Mayor Pete Buttigieg. She was the top performer (or tied for top) in every debate. She campaigned tirelessly. She was and is well qualified for the job, having created the Consumer Financial Services Protection Board, and serving as Senator who has been a key leader in several pieces of legislation. In a more rational world, where the campaign really is a way to winnow the most qualified from the field, the Democratic finalists would to me have come down to Senators Warren and Klobuchar and former mayor Mike Bloomberg.

But It’s the Age of the Meme, not the Wonk

But today’s America has a distaste for nuance and detail. It’s the Age of the Meme, not the Age of the Wonk.

Simple, incorrect answers to complex problems are much more appealing than more correct but complicated ones.

See the source image
Warren campaign office – The candidate of plans

Twenty years ago, I didn’t think we’d be dumber and less capable of discussing nuance and tradeoffs intelligently. In fact of all the predictions I’ve made privately to myself over the years, this is one that I think is most incorrect.

I’ve watched and been part of the technology revolution, and from 1980 onward, I took it as a given that we’d get progressively smarter, as we had information at our fingertips, and were given more and more great tools to research and dive into issues… essentially for free.

We’re not smarter, by and large. Instead, we seem to be going in the opposite direction, with meme wars and dumb one liners and sTupID cAsE rEspOnseS on Twitter, and video clips, and susceptibility to misinformation and fakery. The only signal that rises above the noise is the soundbite. It takes simplicity, however dumb, to thrive in the Attention Economy. Simplicity is more viral than complexity. Simplicity gets passed along; complexity dies a lonely death.

Noah Rothman of Commentary Magazine and others have made the case that Warren is the ultimate Twitter candidate, embodying all the best and worst things about Twitter: its performative signaling (“I’m gonna get me… a beer”), its relentless focus on identity, and its occasional long threads filled with insight.

But she didn’t master simplicity. And she certainly doesn’t embody its cruelty; I find her a fundamentally decent person. But in the end, in 2020, we prefer simplicity over complexity.

Maybe the Progressive Wing is Smaller than it Appears

There was also this, from Nate Silver, which I think captures it well. The Democratic electorate might not in fact be as leftward as it would appear:

Indeed, Gallup reports that we continue to be, by and large, a centrist to center-right nation. Progressives might be dominant on Twitter in particular, but that may not reflect their size in the electorate at large, as The New York Times noted.

We Reach for Simple Answers to Explain Her Withdrawal, Too

And yet in her resignation from the race today, there is a strong desire for one simple explanation, and that is that it’s because she’s the victim of overwhelming sexism, among Democratic primary voters no less. That simple explanation certainly fits neatly for the identitarians. If it’s sexism, that makes it pretty easy. But I have my doubts that it’s the main driver.

Such a simple and I believe incorrect explanation ignores many things about Warren and her candidacy which round out the picture.

It ignores a lingering discomfort with a decades-plus long false story about her own identity with the very voters who have spent the past decade making “identity” an extremely important factor. Her self-declaration of being Cherokee for decades was one which she apologized for but never really had a good answer for to a wide group of voters she wished to attract.

More directly, her “I have a plan for that” strategy requires the key ingredient of trust to work, especially in the age of those who don’t read more than 280 characters at a time. And she kind of blew the trust part from the get-go.

Nor are many people really willing to honestly and earnestly consider that her demise was primarily of her own strategic missteps — e.g., the foolish DNA test, the foolish idea of swerving quickly to embrace massive programs like Medicare for All early on without a simultaneous plan to pay for it, an inability to acknowledge that her wealth tax idea was unconstitutional, and most importantly her decision not to directly challenge Sanders on the massive scope and lack of realism about his plans to better capture his ground. She had the ability to challenge Sanders on the realism of her plans versus his (an argument she’d win), and she lost that opportunity, choosing that angle far too late to be effective.

Rather than making her first attack on him about policy, she made it about a he-said she-said moment, and never really followed it through.

That this same party previously nominated a woman four years ago and that literally millions more of us Americans voted for her than her male opponent seems memory-holed today as so many come to the simple but incorrect explanation for Warren’s failure to thrive: “sexism.”

I look forward to all the “if you don’t vote for a woman you don’t support women” voters’ unconditional support for Nikki Haley in 2024.

No Country For Old Men? Fact Check: Mostly False.

It looks like President Trump, at 73 years old, is the youngest person in this race. Biden or Sanders, if elected, would turn 80 shortly after election. Yet gain, Generation X will have to wait for its first Generation X president. This will not be the youthful energy, nor diverse choice I expected. It’s going to be an interesting election.

“Modern Monetary Theory” is Magical Thinking: There’s No Free Lunch

There’s a new genie that’s popped from the lamp to help pay for the wishlist of multi-trillion dollar programs, and it’s got a smart-sounding name: “Modern Monetary Theory.”

It’s also got a very heavy lift, because of the staggering federal spending ambitions of both Senators Bernie Sanders and Elizabeth Warren. Each candidate would more than double the size of the entire federal government.

To get a feel for the scale of the federal spending that front-runner Sanders is proposing, you could zero out everything the US spends today on the military, and you’d only pay for about 10% of his agenda. His agenda includes massive spending initiatives such as “free” college tuition for all, forgiving all outstanding student loans, enacting Medicare for All, paying for early childhood education, initiating massive infrastructure spending with a Green New Deal.

This agenda costs trillions. Nearly $10 trillion more in federal spending every year.

By comparison, in 2019, the entire US federal government revenue was $3.5 trillion. That’s everything — individual and corporate taxes, tariffs, etc. So adding another $10 trillion in spending on top of what we already spend (about $5 trillion) creates a huge gaping hole.

So, how do they propose to pay for these new programs?

In theory, theory and practice are the same. In practice, they are not.

Albert Einstein

Before we get to that, it must also be noted that Sanders, for his part, isn’t concerned much with the details of cost. His refrain generally is, if other countries have done it, then so can we. To wit, he recently told Anderson Cooper on 60 Minutes that he doesn’t know how much the “nickels and dimes” add up to for his program (it’s $97+ trillion over 10 years):

Senator Elizabeth Warren, by contrast, is to be commended for at least attempting to show how she pays for a more “modest” set of policy ideas which yes, still more than double the size of the entire federal spending, though about half the Sanders agenda.

But they also both rely upon clearly unconstitutional wealth tax plans as a key method to close the gap.

Even if this wealth tax plan were to pass Congress (and I don’t think it would), the idea of confiscating the already-owned property citizens would surely run into Constitutional challenge, and it’s highly unlikely that the Supreme Court of the 2020’s would rule in favor of such a plan. (Read more about why a wealth tax is clearly unconstitutional.)

For both Sanders and Warren, there are also significant hikes on personal income taxes, new charges on every investment transaction and significant hikes in corporate income taxes. Warren throws in some additional unique elements, like attempting to recapture the full corporate contribution to insurance plans (i.e., imposing a very high corporate tax levied on most corporations) to help pay for Medicare for All.

Yet the funding plans of Sanders in particular fall tremendously short.

When he or his supporters are confronted with the challenging reality of making the math work without massive borrowing or taxation, supporters often fall back to what has recently been coined “Modern Monetary Theory (MMT).”

MMT is a type of fringe neo-chartalist economic theory which ultimately says, metaphorically, “let the money printing presses fly.” The genie commands, “don’t worry much about the debt; it’s not a big deal.” MMT works hand-in-hand with a federal jobs guarantee. While other countries have tried printing their way out of fiscal crises (e.g., Zimbabwe, Argentina) with disastrous results on inflation and currency valuation, the new key lever in MMT is the government’s use of taxation and/or bond sales to attempt to keep inflation in check.

MMT is increasingly gaining a foothold among the most ardent left, because it frees big-government proponents from the nasty business of actually trying to pay for things with taxes or borrowing during the budgeting cycle; that’s all done after the big spending is initiated.

What’s MMT?

MMT essentially says that governments can print their own money to pay for programs, and keep inflation in check by “clawing back” money from the economy either through taxation or bond sales.

MMT proponents begin with a re-framing of what money itself is. They generally assert that money shouldn’t be viewed as the thing we use to exchange value and make trade easier between one another, but rather it should be viewed as a way for governments to structure deferred payment. To MMT supporters, currency should be viewed first and foremost as a public monopoly for the government. Any government without full employment can simply print money, and inflation will be kept in check up until there’s full employment.

This assumes that employment itself is pretty much always “full” private or government employment — i.e., the employee pool always consists of some mix of a government jobs and private jobs. (This dependency is why a federal wage or job guarantee is a key part of MMT proponents’ agendas.)

MMT suggests that, combined with a federal jobs guarantee, money could be pulled out of the economy via taxes or bond sales to limit runaway inflation, which has always plagued “just let the presses run” every time it’s been tried before. In fact, MMT advocates say that a government surplus isn’t actually noble or good — it should be avoided at all costs, because it represents value that could have been put to use in either the public or private sector.

They argue that a government can run the printing presses all it wants to pay for things, and as long as it uses taxation and government bond issuance to “claw back” the right amount of money from the society, it can keep inflation low.

Key tenets of MMT include:

  1. Government spending can expand the economy to its full capacity, eliminate unemployment, and fund major programs such as universal healthcare, free college tuition, and green energy.
  2. If the spending generates a government deficit, this isn’t a problem. That’s because a government’s deficit is the private sector’s surplus.
  3. Governments can control inflation by spending less or withdrawing money from the economy through taxes.
  4. Increased government spending will not generate inflation as long as there is unused economic capacity or unemployed labor.

Perfect Fit to “Fund” Massive Spending

MMT lets you skirt the difficult task of explaining how you pay for things.

It allows big-government proponents to tout the benefits of massive programs, swinging for the fences, with funding questions answered by “just print more money, and pull money out of the economy with taxes and bond sales to keep inflation in check.”

Notable MMT Advocates and Detractors

MMT is a complex topic, and one rubric people turn to when dealing with complexity is to ask — “who is supporting it, who is opposing it, and what are their credentials?”

Now, to be sure, that’s not an infallible rubric. Many highly-credentialed people have created huge disasters (e.g., Jeff Skilling, CEO of Enron, was a Harvard MBA and McKinsey Consultant), and many people without credentials did amazing things (e.g., the Wright Brothers never owned a pilot’s license.)

But I was unable to find any supporter of MMT with a really strong CV. Perhaps you’ll be able to help me by offering a few up in the comments section.

SupportersDetractors
Stephanie Kelton, Stony Brook University Economics Professor, and advisor to Bernie Sanders
Rep. Alexandria Occasio-Cortez (BS in Economics, Boston University)
Andres Bernal, doctoral student
Greg Carlock, a climate researcher
Randall Wray, Professor of Economics, Bard College
Christine Lagarde, IMF chief
Warren Buffett, Investor
Jerome Powell, Federal Reserve
Larry Fink, BlackRock CEO
US Treasury Secretary Larry Summers
Jamie Dimon, CEO JPMorgan Chase
Janet Yellen, former chair of Federal Reserve
Dozens of economists surveyed in Chicago Booth School poll (below)
Bill Gates, Investor and Philanthropist
Kenneth Rogoff, former IMF chief economist

Risks and Criticisms

From a high level, I think there are numerous problems with MMT:

  1. It’s novel and untested. MMT, in its complete form (including a federal job and wage guarantee) is still only in the minds of a few academics and policy wonks. It’s never been deployed in any country with any success. So there’s that. Seems like a pretty risky bet. If it doesn’t work out, it’s going to run up the public bill enormously in short order.
  2. It violates the intuition that there’s no free lunch. One of the certainties of life is that there are, in the end, no free lunches. A couple cannot run up unsustainable debt, because eventually, they cannot pay back what they owe, and it tanks their credit rating. While a government has the distinct advantage of being able to issue its own currency, metaphorically running one’s currency printing presses is the way that banana republics have often paid for their programs. The result has always been runaway inflation and terrible devaluation of the local currency compared to external currencies. With our economy more interconnected than ever, tanking the dollar versus other non-MMT economies would be a very dangerous bet indeed.
  3. Our Constitution Has Separate Budget and Central Banking Institutions: If MMT did indeed work, it would require very tight coordination between the entities which budget (the House of Representatives, the Senate and the Presidency) and the Federal Reserve. This would require not just institutional changes but perhaps Constitutional changes to tighten the connection, coordination and feedback loop.
  4. America benefits enormously by being the world’s reserve currency. We enjoy comparatively low borrowing rates, and it’s comparatively easy to attract foreign and domestic capital for government initiatives. If we adopted MMT, it’s quite easy to see that foreigners might change their view on US Treasuries or the dollar. A major source of America’s strength is that we are the de-facto reserve currency of the world. This means that wealthy nations, corporations and people have the trust and confidence that we have the means to pay back our loans, and that the dollar will be compare relatively favorably to their local currency over time. Adopting a “just run the printing presses” attitude has a real chance of permanently resetting that mindset.
  5. A simplified form of it has been tried, and failed spectacularly. The closest analogies were probably the deficit spending by the Socialist government of France in the 80’s and Germany in the late 90’s. There were brief experiments with running the presses in each of these countries to pay for massive social programs; they had to reverse those policies later. See Larry Summers’ comments in the videos below.
  6. It imagines a very tight timeline between spending and “claw back” to remove that spent money from the economy. The chief mechanism by which MMT theorists believe that inflation will be kept in check after profligate spending occurs is to claw back money from the economy via taxation. But in reality, tax revenues are highly seasonal — the main collection time for individual taxes is every April, and for corporations, every quarter. It’s also not like a discrete dial can be turned in our economy on taxes, since new tax rates are subject to the legislative process, which is hardly an instantaneous or in any way assured process.

Key Figures in Finance Speak Out

A government may be able to do this once, but doing this systematically will make it impossible to sell bonds in the future.

Kenneth Judd, professor of Economics, Stanford University

MMT is confused and kind of a mish-mash of things that don’t make sense. I wish they’d spend less time talking about theory and a lot more talking about what’s reasonable.

Austin Goolsbee, former Chairman of the White House Council of Economic Advisors

If you could create growth by printing money, then Zimbabwe and Argentina and Venezuela would be some of the richest countries in the world.

Stephen Moore, Economist and former WSJ Editorial Board member

In principle, a government interested in preserving its future ability to borrow at reasonable rates should be concerned with the credibility of its repayment promises.

Benjamin Zycher, public policy analyst

Heaven forbid that our Keynesian-inspired, decades long, deficit-spending profligacy continues unabated and is exacerbated, turbocharged, by proponents of MMT.

Larry L. Henry, opinion piece in Wall Street Journal

Among mainstream economists, there has been little support and some prominent commentators have been far from complimentary, including Paul Krugman, Kenneth Rogoff and Lawrence Summers. Proponents such as Stephanie Kelton and other MMT-ers have responded fiercely. And even writers potentially sympathetic to MMT politics and/or critical of the mainstream have found themselves under attack.

IGM Chicago, University of Chicago Booth School of Economics

[MMT proponents write] ‘for most governments, there is no default risk on government debt’. When reading these words, my reaction alternates between languid concession and vehement opposition.

Gregory Mankiw, professor of Economics at Harvard University

I’m not a fan of MMT — not at all, We don’t need to get into danger zones, and we don’t know precisely where they are.

Warren Buffett, investor

There will come a point where the currency is so debased that further spending becomes difficult if not impossible.’

Eric Maskin, professor of Economics, Harvard University

Countries all over South America have tried it with disastrous results. It was tried by the Socialist Mitterrand regime in 1981 and they had to reverse it, it was tried for six months in the late 90’s in Germany and they had to reverse themselves.

Larry Summers, former Treasury Secretary

20+ Economists Challenge Key Assumptions

The vast majority of surveyed economists have major problems with MMT.

The Chicago Booth School conducted a survey in March 2019, asking dozens of well-credentialed economists from Stanford, MIT, Yale, Harvard, Cal Berkeley, and University of Chicago to weigh in on two questions that are central to MMT theory. If either of these assumptions are incorrect, MMT cannot stand on its own:

Question A: Surveyed economists generally agree that countries SHOULD worry about deficits
Question B: Economists strongly disagree with a central tenet of MMT

What Might America’s Debt-holders Think?

As of December 2019, the national debt was $23 trillion. When the US government borrows, it sells Treasury bonds. So, before re-jiggering the entire way we fund our government, we might want to consider the reaction of bond buyers.

Who holds America’s existing $23 trillion in debt and expects it to be paid back with a currency of predictably strong value?

Here’s how it breaks down:

Chart by Visualizer

OK, but who owns the Treasury bonds? As of September 2019, the ownership looked like this:

Source: Who Owns the US National Debt? TheBalance.com

The public holds $17.1 trillion of the national debt. Foreign governments nd investors hold 39% of it. The top holders are Japan ($1.15 T), China ($1.07T), The UK ($332B) and several holders smaller than that.

One of the central claims of MMT proponents is that a sovereign currency issuer need not self-fund with taxes or borrowing (bond sales.)

But this ignores the reality that the government and private sector are highly interconnected. When the government fiddles around with the “value of money” (let’s say, by making a decision to fund a trillion-dollar infrastructure project and funding it by effectively printing currency), it has immediate impact on the value of those dollars held by private individuals and corporations. And there’s substantial lag in the feedback loop of budgeting, monitoring true employment levels (to test for full employment), taxation opportunities and collecting the money.

Anyone can spend first and obtain income later on credit. And everyone, including government, relies upon output and income to assure its credit. It cannot just immediately raise taxes to claw back the money, because tax rates will not only be delayed but will be different for all citizens. This fundamentally undermines the belief in, and thus the credit inherent in, the system. The word credit in our system stems from the Latin “credit”, meaning, “belief.”

So, put me down as an MMT skeptic.

Video Discussion

Below are a few pro/con videos that might be helpful for more information.

Randall Wray, Professor of Economics at Bard College, is a key MMT Proponent
Former Treasury Secretary Larry Summers is a key MMT Detractor
Key MMT proponent, Stony Brook University Economics Professor Stephanie Kelton
Austin Goolsbee, former Chairman of the Council of Economic Advisors under President Obama
Stephen Moore calls MMT “One of the Stupidest Ideas for Monetary Policy”

Further Reading

[1] “Warren Buffett Hates It. AOC Is for It. A Beginner’s Guide to Modern Monetary Theory”, https://www.bloomberg.com/news/features/2019-03-21/modern-monetary-theory-beginner-s-guide

[2] Chicago Booth School Survey of Economists on two central MMT questions, http://www.igmchicago.org/surveys/modern-monetary-theory

[3] “Alexandria Ocasio-Cortez is a fan of a geeky economic theory called MMT: Here’s a plain-English guide to what it is and why it’s interesting”, https://www.businessinsider.com/modern-monetary-theory-mmt-explained-aoc-2019-3

[4] Warren Buffett Joins Scorn of Modern Monetary Theory and ‘Danger Zones’: https://www.bloomberg.com/news/articles/2019-03-15/buffett-no-fan-of-modern-monetary-theory-with-its-danger-zones

[5] Elizabeth Warren’s Savior: Modern Monetary Theory, https://www.aei.org/articles/elizabeth-warrens-savior-modern-monetary-theory/

[6] Modern Monetary Theory, explained: https://www.vox.com/future-perfect/2019/4/16/18251646/modern-monetary-theory-new-moment-explained

[7] Alexandria Ocasio-Cortez’s favorite economic theory derided by IMF chief Christine Lagarde as no ‘panacea’, https://www.businessinsider.com/mmt-aocs-favorite-economic-theory-is-derided-by-imfs-lagarde-2019-4

[8] What is Modern Monetary Theory?, Forbes: https://www.forbes.com/sites/miltonezrati/2019/05/28/what-is-modern-monetary-theory/#69a33c131869

[9] AOC’s Beloved MMT Earns Surprising Rebuke from Warren Buffett, https://www.ccn.com/aocs-beloved-mmt-earns-surprising-rebuke-from-warren-buffett/

[10] Debunking Modern Monetary Theory & Understanding It First, https://www.the-lighthouse.net/debunking-modern-monetary-theory-mmt-understanding-it-first/

[11] The Left’s Embrace of modern monetary theory is a recipe for disaster, Larry Summers, Washington Post

Relearning the 20th Century’s Most Important Lesson

I went to the bank yesterday to get a document notarized, and struck up a great conversation with the lovely associate manager, Roxana. Noticing an Eastern-European accent, I asked her about her background, and she said her family came to the United States from Romania in the 80’s, fleeing the Ceausescu regime. I mentioned that I don’t think many Americans know much about Romania, nor how truly evil Nikolae Ceausescu was. I asked her what her opinion was of the rising popularity of Socialism and even Communism in America as we head toward the 2020 election.

She said “So many Americans have a warped sense of Socialism and Communism. I hear romantic talk from several of my American friends about Socialism, but I urge them to go visit a Socialist country.”

With that, she swept her arms emphatically outward. “I tell them ‘You would not want that. You do not know what you speak of. Socialism is sold to the people in a different way, and it never works’.” She told me of her mother, who used to keep a radio under her pillow at night, to listen to Radio Free Europe, deathly afraid of being arrested by the Securitate for doing so. She dreamed of finally making her own break to the free West.

Romania was one of the most paranoid and closely-controlled Eastern-Bloc states, with an estimated half a million informants monitoring the everyday lives of 22 million people. Children informed on their parents, neighbors on neighbors, teachers on parents and more.

In 1975, when Romania’s coal miners were organizing behind the scenes to strike, the Securitate brought leaders in for medical checkups and x-rayed them each for five minutes straight, intending to give them lung cancer; all died prematurely. In the 1980’s, when central authorities became concerned about birthrates, the Securitate sat in on all gynecological appointments, and prevented all abortions. In 1989, Romanians rose up and finally overthrew the regime, and have moved toward a more Western style economy. Their GDP is up fourfold since then.

The most important lesson we should have learned from 20th Century History is that Socialism and Communism, at national scale, are harmful to prosperity, human rights, liberty, national output like Gross Domestic Product and therefore opportunities for advancement, innovation, private property, personal safety, the environment, religious freedom, women’s rights, gay rights (and all human rights), freedom of speech, freedom of movement, better use of resources, and much, much more.

I am not arguing that America’s current balance of laws and distribution is perfect, nor am I arguing against new regulations which should be passed. I am in fact in favor of most of Bloomberg’s aggressive tax plan, which would raise rates on the wealthy considerably.

But a largely free market with private property (i.e., well-regulated “capitalism”) beats Socialism and Communism any day. We should have learned this over the past 100 years of trying it.

Expand Federal Powers Cautiously

Here in the United States, nearly all federal powers, once granted, live well beyond a single administration. They last through D and R administrations, through competent and less competent, through “good” and “evil.” It is therefore a good exercise to ask yourself, before granting central planners more authority and power over our lives, whether you’re comfortable with that authority and resource allocation being in the hands of your worst ideological enemy.

Too many people seem to assume that these new federal powers will be overseen by a benevolent, transparent, uncorrupt agency and executive, forever. It’s worth pausing for a moment to consider the likelihood that there will some day be an administration which is none of these. Do you wish them to be in control of all those powers?

History’s Lessons

Why does Socialism continue to fail time after time? Why does it never seem to work out as well as envisioned, from the days of New Harmony, Indiana to the USSR, to the Cold War Eastern Bloc, to North Korea to Venezuela? I’d say it’s human nature, and human capacities.

One cannot legislate out the human desire to better oneself nor the life for one’s family. If you put agencies in charge of billions/trillions of dollars, it’s not always going to be the case that you get wise, benevolent resource allocators. Further, most people will expect things in return for their efforts and risk, and will work hard to acquire better resources.

Compounding matters — it’s impossible to unlock, or even to know, the full innovative and productive potential of humans in a command economy, nor the hidden demands as revealed by markets.

A centrally-planned, aggressively re-distributive economy saps the motive from productive and risk-taking humans, and moves all ambition to corrupt power positions of the state. Because it runs counter to human nature, vast security states need to be established, travel must be restricted and oppression must be implemented to force people into a system they do not, by nature, desire.

State-sponsored Socialism has played out this way every single time in the 20th century when it’s been tried.

What are Some of the Most Mind-Blowing Things About Communism?

It’s mind-blowing that Communism still has a hold, and an increasing one at that, on the minds of so many in the “progressive” left, despite its dismal record in the 20th and 21st centuries.

According to a recent Gallup poll, 43% of Americans feel that some form of socialism would be a good thing for the country, gaining 18 percentage points since 1942.

People not impressed with Communism: a West Berliner pulls an East Berliner Up on the Berlin Wall, 1991.

It’s mind-blowing that so many in America, particularly our youth, continue to think Communism and Socialism are somehow preferable, more Utopian, romantic, more efficient, more green, more compatible with human needs and the human condition than our existing system of regulated Capitalism.

This despite overwhelming evidence to the contrary. And no, Denmark is not a Socialist country.

It’s mind-blowing that while Socialism and Communism seem to be universally hated by the vast majority of people who’ve actually lived under it, it’s desired by a growing many who never have. It’s astonishing that the numerous gripping testimonies of those who have suffered under Communism and Socialism — the brutality, famine, loss of freedoms, corruption, shortages and poverty — aren’t more convincing than their own imagination of just how great it could be. It’s the Tide Pod some would like to eat. It’s the outlet some would like to dangerously short circuit. It’s the “Why are you hitting yourself?! Why don’t you stop hitting yourself?!” of twenty first century America.

It’s mind blowing that the same person who makes a compelling case that accidentally calling a transgendered female by their original male name constitutes “oppression,” also think people in socialist Romania, Russia, Cuba or Venezuela didn’t really live under oppressive regimes.

It’s mind blowing that the numerous people risking their lives and those of their own family to flee from these societies, and conversely essentially zero fleeing to them, isn’t signal enough.

It’s mind blowing that Venezuela was once the wealthiest nation in South America, blessed with more copious oil reserves that even Saudi Arabia, and within just twenty five years of Socialism, has a starving people literally eating zoo animals.

It’s mind blowing how quickly socialist supporters parrot some version of the No True Scotsman fallacy when any of this is ever pointed out.

It’s mind-blowing that literally millions of Americans seem to favor Socialism and its close sibling Communism without understanding that it’s never worked out well for those that have had to live under it.

It’s mind-blowing that the same people who regularly label the federal and even local governments as too-authoritarian, out-of-touch with the population’s needs, systemically racist, or much more would also like to hand the federal government much MORE centralization of decision-making, and seem oblivious to the fact that such federal powers, once granted live well beyond one administration.

It’s mind-blowing that 92% of Americans wrongly think that global poverty rates have increased or stayed the same over the past 20 years.

They haven’t. 92% of Americans are dead wrong in that belief. Global poverty rates have dramatically fallen. And why? It’s thanks primarily to movements AWAY FROM, not toward, Communism and Socialism, notably the opening up of private property ownership and some forms of markets in China.

It’s mind-blowing to me that so few of us know the most important lesson from 20th Century History.

The most important lesson we should have learned from 20th Century History is that Socialism and Communism, at national scale, are harmful to prosperity, human rights, liberty, national output like Gross Domestic Product and therefore opportunities for advancement, innovation, private property, personal safety, the environment, religious freedom, gay rights, freedom of speech, freedom of movement, better use of resources, and much, much more.

Mankind has tried it. Numerous times. And it always ends badly. Yet we still have people selling it as some kind of better vision of society than well-regulated market economies.

Neither Communism nor Socialism eliminates greed, nor the “selfish” human desire to better oneself or one’s family. And as long as at least one human being seeks more power for themselves, communism will not be a utopian society. And it ultimately leads to police states and far more corruption than we see in the free enterprise system.

I am in favor of a well-regulated market (capitalist) economy. I think we can and should continue to adjust the regulations we do have. But that doesn’t mean that “abolish capitalism” is a direction we should head. There’s this classic moment with Phil Donahue and Milton Friedman:

“In the only cases in which the masses have escaped from the kind of grinding poverty… it’s precisely the places where you’ve had capitalism and largely free trade.” – Milton Friedman

Let’s take a quick trip around the globe in the twentieth and twenty first century at our experiments with socialism and communism:

North Korea vs. South Korea

Same basic ecosystem, same cultural history, one ruled under Socialism, one went with the free market. After only 70 years’ time (just two generations!), here’s a satellite photo at night of how well these two societies are doing. One is an innovation marvel with nearly the highest per capita GDP in the world, the other is a police state that goes through regular famine.

Cuba before Castro and afterward

Venezuela prior to Hugo Chavez’s socialism and afterward

East Germany vs. West Germany

Poland under Soviet/Socialist rule and afterward

China before its openness to market reforms and after

source: China Lifts 85 Million People from Extreme Poverty in 6 Years

What happened which changed this? China moved from full Socialism to the embrace of markets and some forms of private ownership, which China called “Socialism with Chinese Characteristics”. Listen: The Secret Document That Transformed China (NPR).

Romania

Roxana’s family fled one of the most hated regimes of the 20th century. If you’re interested in learning more about the Ceausescu’s regime of terror in Romania, here’s a 45 minute documentary from the History Channel:

Nikolae Ceausescu was one of the most hated people in history.

Learning from History

We will never have pure “controlled experiments” in the way we organize ourselves as a society, but these are about as close as we will ever get.

In every single one of the “semi-controlled experiments” we have, freedom and free enterprise has resulted in much greater prosperity, much lower poverty and more overall happiness. The record is 100% for the benefits of freedom, free enterprise and well-regulated capitalism, and 0% for nation-state Socialism.

And yet, young Americans continue to find “Socialism” favorable. THAT is the most mind-blowing thing to me about Communism — its allure to some, despite overwhelming evidence to the contrary.


Redistribution For Thee, Not For Me

The most mind-blowing thing about Communism and “from each according to his abilities, to each according to their needs” is its continued romantic appeal, which generally lasts until people are are confronted with the idea of fully redistributing that which they feel they’ve worked hard to earn:


Recommended Books

Top 3 Takeaways from the 2020 New Hampshire Primary

What does last night’s New Hampshire primary tell us about the developing 2020 presidential race? Here are my top three takeaways:

  • The chances of a brokered (i.e., contested) convention have never been higher
  • Trump demonstrated record turnout for an incumbent, suggesting a core of enthusiasm which has expanded since 2016
  • Warren’s campaign is toast: does she position for a Sanders running-mate nod?

I also think we’re underestimating the relatively high likelihood of some kind of “black swan” event between now and November 2020. What kind of event? I touch on a few possibilities below. While I don’t know which one might happen, the number of possible disruptive events seems quite large between now and Election Day. And while each event has a low probability, they’re independent and thus the possibility of at least ONE of them happening is the sum of those small percentages.

Projecting forward, though we’re a long way away from the general election, I’d say Trump’s re-election seems put in greatest jeopardy by his health, not by the current state of the Democratic competition.

1. The Chances of a Brokered Convention Have Never Been Higher

On Monday, July 13th, Democratic Party delegates from across the country will convene in Milwaukee, Wisconsin. It is quite possible that by that time, no candidate will possess the required 1,991 delegates to earn the nomination.

As I write this (February 12, 2020), these four candidates all have substantial “gas in the tank,” i.e., a combination of momentum and funding sources:

  • Sanders
  • Buttigieg
  • Bloomberg, and, to a lesser degree:
  • Klobuchar

Making matters worse for these candidates, Tom Steyer, though clearly not viable, is still spending gobs of money, making it more expensive for any one candidate to rise above via advertising. Each of the four above will almost certainly last through “Super Tuesday” on March 3rd, which is bigger than ever. At that point, odds are that Klobuchar might perhaps realize she’s not viable and drop out. (Does she throw her support to Buttigieg at that point? Unclear.)

At this writing, Biden is polling #1 in Nevada and South Carolina. So it’s hard to count him fully out. What will it do to have not just four but five potential double-digit candidates?

Putting Biden aside, I don’t really see how Sanders, Buttigieg and Bloomberg really call it quits until at the earliest, early May, under any scenario. And when the first of those candidates does, the other two will surely continue on through a couple more elections.

All Democratic primary/caucus delegates are proportionally allocated. This increases the chances that each of the strongest four will continue to accumulate delegates. Further, some state primaries are Open, meaning voters may vote in either party primary. If Republican voters organized in larger numbers, they could increase the chances of a contested convention, by boosting the vote of the lowest-polling “strong 4.” (I don’t think this will happen in large numbers, but it’s interesting to think about from a game theory perspective.)

As for Super Tuesday, the big prize of course is California. Due to the rules of California, if no candidate gets over 50% of the vote, they don’t get the extra “super boosting” delegates that the 50%+ majority threshold awards them. It seems very unlikely that with 3-4 “top” candidates, none of whom are from California, that any one candidate will earn 50%+ of the California vote. In fact, none of the “top” candidates represent states west of the Mississippi River, nor south of South Bend. Assuming Super Tuesday’s votes emerge with moderately strong votes for these top three candidates, what does that mean about the next milestone?

There are 775 unpledged delegates (i.e., “superdelegates”) in 2020, few of whom will be backing a Sanders candidacy.

Here’s the NYT’s visualization of when on the calendar these delegates are decided. Notice the pacing — there are really three (or perhaps four) big phases:

Image result for delegate count 2020 presidential primary schedule
2020 delegate count by month; source: New York Times
source: 270towin.com

While Super Tuesday (the blue states above) have relatively wide geographic distribution, particularly in the west and south, the northeastern states (NY, PA, CT, DE, RI) have a big determination to play in the April traunch of delegates. That is, Bloomberg’s geographically strongest areas may appear late. While the western and southern states might present Bloomberg with a challenge, he is organizing and spending like crazy in California (more than all other of his opponents combined.) And the northeastern states seem like potentially significant Bloomberg states, as they are very familiar with his relative success as mayor in NYC, where he remains generally quite popular.

A brokered convention is when the nominee of the party isn’t determined by the time of the party convention. Then, the delegates themselves do the wheeling and dealing to figure it out. The last brokered convention we had was in 1952, when the Democrats nominated Adlai Stevenson, who did not win the presidential election.

While still less than 50/50 odds, the chances of a brokered Democratic convention moved closer to a coin-flip from where we sit here in February 2020. Prediction market PredictIt put the odds around 40-50%; at a high-level, especially glancing at the pacing above and without running a full model, this feels about right to me.

Should this happen, it heavily favors the Democratic “Establishment” (i.e., the Clinton/Biden/Emmanuel/Podesta/Neera-Tandens), given the dominance of the Podesta and anti-Sanders crowd in the governing committees.

Such an event — a brokered convention — would be one that most of us have not yet seen in our lifetime. It definitely wouldn’t seem to bode well for Democrat Party unification if it happened. It would also leave the ultimate Democrat nominee with very little funding, a coalition needing unification, harsh feelings among the vanquished and little planning time for the November general. How does one reconcile a sweeping social agenda (say, on Medicare for All) with a much more moderate one, while maintaining the enthusiasm of young voters that Sanders, especially, has been able to excite?

PredictIt’s Chances of a Brokered 2020 Democratic Convention, 90 Day View

While a brokered convention is still on balance unlikely, there are several factors that contribute to this possibility:

  1. Sanders has momentum, but he has both a high floor of support (24%) AND a low ceiling (30%). He wins pluralities, but not majorities. Yes, the field is large today, and he did carry 62% of the vote in the 2016 New Hampshire Primary against Hillary Clinton. As the field thins, it will be interesting to see how Sanders support changes, particularly as Clinton herself (and James Carville, Rahm Emmanuel and many from the Clinton/Obama years) seem to be dumping on him. Yet Sanders has a lot of money and a core base of unwavering supporters. There is relatively low odds that moderates will vote for Sanders in droves, yet also virtually no chance Sanders supporters will vote for, say, billionaire Mike Bloomberg.
  2. Bloomberg hasn’t yet “fully” entered the race, but now joins the stage and the airwaves with a ton of cash. He didn’t campaign in either New Hampshire or Iowa. Yet he’s got a war-chest that dwarfs every other candidate. At some point, he will have to take on socialism and Sanders’ message, and that will likely not go well for Sanders.
  3. Buttigieg is off to a strong, though not dominant start; a key test of his appeal beyond white voters is coming up in the next 3 weeks. He currently has dismal polling numbers in the black and Latino communities. If he cannot expand these numbers, it will be hard to convince the Democrat electorate that he has a good chance.

Unpledged delegates, better known as “superdelegates,” make up about 16% of Democrat Party delegates in 2020. These are generally party insiders. While the Democrats have moved to a few rule changes after the tremendous friction of the 2016 election, it is quite possible that the ultimate nominee is again in their hands.

We will have a lot more clarity on each of these after Super Tuesday: March 3rd, 2020.

Joe Biden’s Campaign Is On Life Support

Joe Biden, though polling nationally high throughout the summer, had a disastrous fifth place showing in New Hampshire.

If your main selling point as a candidate is your electability, what does it tell voters that you’ve never won a single state primary in a presidential election in your 40+ year career in politics, and haven’t even come in second or third place in the first two states of 2020? Biden continues his halting, odd style, which is unlikely to draw new voters. “Vote for Joe because all the polls say he’s our best chance to beat Trump” message suffered a gut-punch in New Hampshire.

He is currently polling as the leader in February’s remaining contests (both Nevada and South Carolina), and these will be crucial tests to see how well he holds up. If he doesn’t finish first in South Carolina. things are looking very grim indeed for his candidacy. The PredictIt market for the 2020 Democratic nominee tells a sad story for Joe Biden’s candidacy. Beginning about January 17th, most betters turned sharply negative on his chances.

PredictIt Betting Market
RealClearPolitics National Averages. Note again Biden’s tremendous plunge and Bloomberg and Buttigieg’s rise

2. Trump Demonstrates Record Turnout for an Incumbent

Trump demonstrated a record New Hampshire primary turnout for an incumbent, more than doubling the past high water mark (George W. Bush in 2004.)

This continues after Iowa showed similar findings: Republican primary turnout in an incumbent year was a record there, too.

This is not to say that overall party turnout was a record. On the contrary, the overall record was set by Democrats in NH last night, certainly suggesting some enthusiasm by many in voting him out, but also attributable to the relatively large field (and population growth of New Hampshire.)

If you limit to “incumbent” years (i.e., when the nominee of one party is certain), voter enthusiasm for Trump’s showed record numbers. Compare his incumbent primary with that of the Republican Primary of 2004, when George W. Bush was the incumbent, and the Democratic Primary of 2012, when Barack Obama was the incumbent.

I went back and charted the total votes cast in the NH primaries. Note also that the 2020 race is as of 92% reporting, so the the degree to which he outperformed past incumbents is under-reperesented in chart below. Compare the red bar in 2020 with the blue bar in 2012; it should be clear that Trump’s turnout is quite strong.

Compare incumbent turnout in the gold-arrow years
New Hampshire Primary Turnout by Year (2020: as of 92% reporting)
Boldface indicates “incumbent” years, non-bold indicates “Open” years.
Names are there to remind you who was running but are of course not the complete list of candidates.

3. Warren’s Toast – VP Ticket Hopes?

Elizabeth Warren, the Senator from neighboring Massachusetts, did very poorly, placing a distant fourth behind Sanders, Buttigieg, and Amy Klobuchar. With her “progressive leftist with huge spending plans but not quite as socialist as Sanders” message, it is hard to see how she can appeal to the hard left flank of the party.

And to the right, she’s flanked by Klobuchar and Buttigieg. Klobuchar finishing ahead of Warren was the big “story” of the night for many pundits, and this will not help Warren.

What, precisely, is her positioning from here? In business school, I learned that brand differentiation answers the key questions: (a) WHAT are you, (b) to WHOM, (c) COMPARED TO WHAT ELSE.

I have a very hard time answering those questions for Warren. This “stuck in the middle” role, plus some serious past flubs in claiming Native American status for years, have cost her. I don’t see anything which could reverse this trend for her candidacy, short of another major health scare by Sanders.

Compounding matters, her poor showing will not help her fundraise — already, large donors are starting to express concerns like “she’s done.” This cannot help, as Bloomberg, Sanders and Buttigieg will each have large coffers going into Super Tuesday. She’s polling 3rd or 4th in the next key states.

She has a key decision to make now as to just how aggressively to challenge Sanders. Because Sanders is currently the favorite for the nomination, and if he’s the nominee, he’ll need a running mate. Sanders has previously said he’d prefer a female as his running mate, and she’s probably the most ideologically aligned candidate with Sanders who could win an election, with perhaps Stacy Abrams being the other one (though she’s never held elected office.) Note that while Alexandria Occasio-Cortez might seem a logical choice in many ways, she’s too young to be on the ticket.

We are Underestimating the Odds of a Major “Black Swan” Event

“Black Swan” events are unpredictable events that are beyond what is normally expected which carry potentially severe ramifications. I suppose by definition, “black swan” events are always underestimated, but I have this feeling in my gut that by November, we’ll have high odds (20-40%?) of some kind of serious shock. That’s because the number of likely major disruptors is quite high, though each individually has relatively low odds. But I think we are in a period of overestimation that November will look like a straight line from February.

Chief among these: our mental models of how 2020 will play out have seem to assume relative health of the candidates and the economy — i.e., they make a roughly straight-line projection from where we sit in February 2020. But there are nine months until Election Day. And it seems quite possible that one (or more) of the following rare events will happen:

  1. The straight-line projection from today is Sanders v. Trump. Or potentially it’s Bloomberg v. Trump. Regardless, odds are high that two aging septuagenarians (two in not very good health) will face off against each other. We’ve not had a presidential contest like that before.

    Risks: Actuarial tables indicate that the average lifespan of a 78 year old American is another 6 years, but these odds go down quite a bit if the 78 year old has had a major heart attack. What happens if one of the nominees (D or R) has a serious health scare, and/or needs to withdraw?
  2. A brokered Democrat Party Convention is a distinct possibility. This hasn’t happened before in my lifetime.

    Risks: What might happen if a brokered convention leads to fractioning of the Democrat party? Where does mainstream liberal/progressivism go next, should Trump earn re-election? Who are the most likely “unifying” candidates among Bloomberg, Buttigieg and Klobuchar, and if it’s Sanders, do we really think he can unify the 65+% of Democrat voters who are currently voting for some other candidate?

    If there’s a brokered convention, would Hillary Clinton be a candidate? While unlikely, it’s not so far fetched.

Additional shakeup events between now and Election Day that I don’t think we’ve fully factored into how 2020 might play out include: another Supreme Court vacancy, a downturn in the markets and economy, a spreading coronavirus, the emergence of a global debt crisis, or Iranian/North Korean hostile action or instability.

Potential surge in Black/Latino Support for Trump?

And, while not an entirely unexpected event, I think it’s quite possible that Trump may well earn far more support from people of color — notably black and Latino voters — than he did in 2016. It was clear from Trump’s State of the Union that he’s making black and minority votes a significant part of his campaign.

Between 1968 and 2004, Republican candidates averaged just 12% of the black vote.

In 2016, Trump earned just 8% of the black vote, yet still won. With historically low unemployment numbers and rising wages among black voters, it’s quite possible that Trump’s support rises. If Trump earned just 16% of the black vote, that’s double what he earned in 2016, which could make a very large difference.

And some fairly recent polls (November 2019) indicate his “favorables” among black voters could be as high as 34%, which would more than quadruple his 2016 support:

While I don’t think his electoral support will be quite that high, it’s certainly possible that it could reach into the 20% range, which would be more than double his 2016 support. Of course, many details are still unknown at this stage, chief among them, who the ultimate tickets are.

Put all these factors together, add in a substantial fundraising coffer for the president and longer time to organize than his competition, and I think the odds of his re-election (assuming no major health events — which is a pretty big assumption) seem rather high.

Mitt Romney: I Agree.

I’m with Mitt Romney: I’d vote YES on Article I and NO on Article II.

The enormous powers of the Executive Branch should not be marshaled or weaponized to damage, investigate or monitor political opponents.

That’s a terrible precedent.

This goes for a president coaxing foreign allies either with favor or via threatened-withheld resources to get them to launch a damaging investigation, or getting them to announce one.

And it also applies to allowing a discredited opposition research paper — whether it’s called a “dossier” or simply an oppo-research paper — known at the time to have been paid for by one’s political opponents and “sourced” from abroad — and known to the FBI to have less than stellar credibility — to spark a full-blown FISA electronic monitoring and multi-year investigation effort. This electronic monitoring affected not just a private citizen but also a rival political campaign, and it was done by people with very clear partisan views. There was no valid reason for the prior administration to unmask political opponents. This whole FISA monitoring and resultant, unsubstantiated “collusion” smear campaign damaged the political opponent, damaged the institutions of the FBI and the Presidency, and consumed the nation with wild, unproven rumors for a couple of years.

The Obama Administration’s Crossfire Hurricane just prior to the 2016 election, and the attempts by the Trump Executive Branch to use federal powers to investigate a direct political opponent just prior to the 2020 election are two sides of the same corrupt coin. Tell me the consistent governing principle which decries one and yet celebrates the other.

Executive Branch abuse of office also, for that matter, should cover allowing the IRS to repeatedly harass and investigate those with a different political ideology, or those who form “small, accountable government” political action groups.

ALL those things are wrong. They are all Nixonian. I wrote about this two years ago and will share that post below.

Now, mechanically, given the political realities that a full removal vote in the Senate (i.e., requiring 2/3rds of Senators to agree) was never going to happen, I’d have favored censure.

But given these two articles as written, I think a YES on 1 and a NO on 2 is the correct vote, and it’s the one I hope I’d have cast were I in Romney’s shoes.

Why a NO on Article 2? Because it’s decidedly not impeachable “obstruction of justice” to refuse a subpoena. Otherwise, President Obama’s refusal to turn over “Fast & Furious” documents and many other occasions of presidential refusal including and predating him would have risen to an impeachable offense.

Our Constitution provides a specific and clear remedy when two branches disagree — go to the third branch, the judicial branch, to resolve it. The House did not do so. We don’t know how the courts would rule, but THAT is the right place to adjudicate this difference.

So, personally I’d have pushed for a Censure, not an Impeachment drive, but given these articles as written, I support Romney’s vote.

Two years ago, I wrote this:

I don’t see how one can rationalize the clear Executive Branch abuse that happened during “Crossfire Hurricane,” yet look the other way on a pretty clear abuse of Executive Branch powers to damage a political rival.


A friend asks:

So by that logic, no one running can be investigated? Even the Obama State department said it was conflict of interest. Trump is the top law enforcement officer of the land. How do you see an investigation happening then? Certainly there is probable cause.

I think the right thing to do, in clear cases of conflict of interest, is to hand one’s suspicions to a more “arm’s length” party for investigation, not to manage it oneself. But it’s true that they would ultimately report into the presidency.

Therefore I think it’s appropriate to have some kind of independent counsel or investigator for such a concern raised, but it should be with oversight, ideally by a bipartisan panel of three or small committee of some kind, and NOT done in wheeling-and-dealing, secret fashion behind the scenes. Otherwise we will forever be in a position of approving and even applauding “ginned up” concerns.

But your point above is I think precisely the knife’s edge here, and the question of where one draws the line, and what the “test” is or should be. For me, it’s pretty clear that it was done for political damage (as in the FISA case against Trump’s campaign), not really to root out corruption. But I also think part of it was done because he reasoned “welp, they did something just like this to me,” and he’s not wrong in that assessment. We should not let the moment go by, though we will. We will spiral forever worse and hand yet more power to the Executive Branch, when we shouldn’t.

But unfortunately, I think both the R’s and the D’s would like to play it that way, as clearly evidenced by whoever is in power at the time over the past 6 or so years.

Wealth Tax Reality Check: It’s Unconstitutional

The Constitution’s apportionment clause makes wealth taxes clearly unconstitutional.

That’s not to say a wealth tax is impossible. Just as when federal income taxes were enacted, there is a way to have a legal wealth tax: the Constitutional Amendment process.

But to pass an Amendment, the Constitution first requires two thirds of the House and two thirds of the Senate. Then it requires 75% (i.e., 38 of 50) of the states to ratify. Even if it were to pass in both Congressional houses by 2/3rds, there are 61 state legislatures in Republican hands, and only 37 in Democratic hands. The odds of getting a new Constitutional Amendment to allow it are slim to none for the foreseeable future.

Why a Wealth Tax?

There’s perhaps no proposal more populist than taxing the owned property of the very wealthy. It regularly gets center-stage in stump speeches for the 2020 election. Two motivations are cited by wealth tax proponents: (1) Funds are needed for programs, and (2) America has a vast and growing wealth disparity.

Here’s Senator Warren, who frames it as a way to unite Americans (note, she means $50 million, not billion):

The 10-year plans put forward by Sen. Bernie Sanders cost about $97 trillion over ten years. For her part, Sen. Elizabeth Warren’s plans cost about $50 trillion over the same period. That’s a lot of money. How much? Just to calibrate it, you could zero out all US military spending — weapons, ships, salaries of all soldiers, supplies — and that’d pay for only about 10% of Sanders plans, and less than 20% of Warren’s plans.

A major pillar of the funding for each of these plans are new wealth taxes. This would be an entirely new federal idea — that tax on owned property would be owed every year. While real estate property taxes exist, they’re not done at a federal level; these are state and local county responsibilities, allowed by their State constitutions.

The proposed federal wealth taxes would start to kick in at $30 million of net worth for Sanders, and $50 million for Senator Warren.

Though the mechanics have yet to be spelled out, every year, presumably, wealthy households would have to assess their net worth, and pay an annual fee to the IRS.

On the surface, it’s a compelling notion, the idea that Jeff Bezos and Bill Gates, Wall Street Hedge Fund managers and the uber-wealthy should pay even more for the programs we want than they do today in income and other taxes. There’s no more attractive idea than that others pay for things. The majority of the dollars to be tapped is in wealth — i.e., property — not annual income.

“Why do I rob banks? Because that’s where the money is.”

Slick Willie Sutton, bank robber

The best estimates today are that such a wealth tax might raise between $2 and $4.3 trillion over ten years, meaning they’d fund between 2% and 8.6% of Sanders’ or Warren’s spending proposals. But these forecasts make a lot of highly debatable assumptions, such capital won’t flee, or that illiquid assets with subjective value like ownership in family businesses (or land or art) would be fairly valued, kept in the open and honestly reported.

Wealth tax proponents generally ignore the realities of what’s happened when large wealth taxes have been implemented in other nations. When wealth taxes are passed, the wealthiest flee or move assets elsewhere, resulting in far less revenue than originally forecast.

Capital has never been more global nor more mobile than it is today in the twenty first century. Billions of dollars can migrate at the click of a button.

Wealth Gap

The second rationale for such plans is to help narrow the vast and growing disparity between the nation’s wealthiest and poorest households.

As this chart illustrates, the Top 1% of households as measured by net worth now own more than the bottom 80%, and that this separation has been increasing since the late 1980’s, which began a period of both innovation — the Information Age, which helped create spectacular wealth for a relatively few pioneers, and financial deregulation.

See the source image

This wealth gap is mostly explained by appreciation of owned assets: stocks, bonds, land, and more. Roughly 55% of adult Americans own stock, 45% do not.

So the motivation for such a tax is twofold.

But there are big problems. Some have cited that it’ll raise far less than they plan. Others focus on capital flight. Still others say it’ll depress charitable contributions.

But first and foremost, such a wealth tax is clearly unconstitutional.

The Constitution is a Power Limiting Document

Let’s first begin with the uncomfortable reality for the leftward side of the Democratic Party. The United States Constitution is a document which fundamentally limits what the federal government can do. That means, adding new powers to centralize control and tax from Washington DC is a very hard thing to do, given the clear words in the Constitution.

Specifically, The Tenth Amendment to the United States Constitution, introduced by James Madison, limits the power of the federal government:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Tenth Amendment of the United States Constitution

Read that again. It’s text that too few people know. It means that unless The Constitution explicitly enumerates the power, it is assumed that the States or the people have that power, and the federal government does not. Neither a President nor Congress can claim powers that aren’t already allowed by the Constitution.

The Tenth Amendment originated from the framers’ fear, particularly that of James Madison, that the federal government would eventually have too much power over the lives of individuals and of the States. By adding and adopting this amendment, the framers made it clear that they expect federal powers to be limited.

And the power to levy a tax on property (wealth) is not explicitly granted to the federal government. The federal government does have power to enact a “Direct Tax”, but only if it is “Apportioned to the States by population.”

The Apportionment Clause

In Article I, Section 3, The United States Constitution makes it crystal clear that Direct Taxes must be Apportioned to the States by Population:

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers

Article I, Section 3 of the US Constitution

You may ask: why then, are federal income taxes legal? Good question: the answer is because we’ve been through such a moment in our history before, and an Amendment was enacted.

We didn’t originally have federal income taxes when the Constitution was written.

The history of federal income taxation in the United States began in the 19th century, with the imposition of income taxes to fund war efforts. Proponents quickly found that the practicalities of ensuring that an income tax was “apportioned among the States” would make the new income tax run afoul of the Constitution’s apportionment clause, and sure to be overturned by the Supreme Court of the United States. This valid concern came from the fluid nature of changing populations, and the prospects of new states joining the Union.

So, in order to make federal income taxes legal, Congress put forward the Sixteenth Amendment in 1909 to “get around” this provision.

But here’s the thing. The Sixteenth Amendment narrowly restricts the override to income, not wealth, nor property taxes:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Sixteenth Amendment, US Constitution

In other words, the Constitution still very much requires that all Direct Taxes be apportioned by State. And a wealth tax is very much a Direct Tax, meaning directly laid upon individual citizens (and households), not States. In fact, the Supreme Court has specifically ruled that a tax on one’s land is a Direct Tax.

Yes, real estate property taxes are legal — but those are imposed by counties (or Cities or States.) They’re not levied by the United States federal government. You don’t write a check to the IRS for your property tax.

So what does this Apportionment Clause mean in practice? Basically, it requires that Congress follow a specific process. First, it must determine what revenue it wants to raise, then apportion that revenue by State (based on population), then craft such a tax to get it.

Given the mobility of residence of the households subject to such a hypothetical tax, that is impractical and not a means by which wealth taxes could be created.

The practical reality is that the wealth tax as contemplated by Sanders and Warren would affect some 75,000 households. But those 75,000 households are very much not distributed evenly among the States, and certainly not by population. For instance, Nebraska, a relatively low-population state, has billionaire investor Warren Buffett. Here in Washington State, we’ve got several billionaires claiming residence, including Bill Gates, Jeff Bezos, and Steve Ballmer.

See the source image
Wealthiest Americans by State, Daily Mail

The federal government does not have Constitutional power to lay a net direct tax on individuals without it being so apportioned.

How to Amend The Constitution

Luckily for wealth tax supporters, the framers created a vehicle to modify the Constitution: the Amendment Process.

To amend the constitution, there are three basic methods. Each are difficult and time-consuming processes. That’s a feature, not a bug. Since the states ratified the original Constitution in 1788, only 27 out of 11,000 proposed amendments have ever been adopted.

  1. Article 5 of the Constitution governs how amendments are made. They can be proposed either by Congress or by a “constitutional convention.” The latter method, however, has never been used. All current amendments to the U.S. Constitution have been proposed by the U.S. Congress and not by constitutional convention.
  2. When Congress proposes an amendment, they do so in the form of a joint resolution agreed upon by a two-thirds majority in both the House of Representatives and the Senate.
  3. From there, the amendment goes to the National Archives and Records Administration, which packages and ship it to the states for approval. Three-fourths of state legislatures or conventions (that is, 38 out of 50) must approve the motion for the amendment to pass.
  4. For an amendment to be proposed via a constitutional convention, two-thirds of the state legislatures must call for it. That convention proposes the amendment which is then sent to the states to be approved, and approval must be granted by three-fourths of the legislatures or conventions among the states

Take note of Steps 2 and 3 above: it must first pass 2/3rds of both houses, and perhaps even more critically, be ratified by three-fourths of the States. That’s 38 of 50 States.

But at current writing, 61 state legislative chambers are held by Republicans and 37 are held by Democrats. So a Constitutional Amendment is quite unlikely for the foreseeable future.

Warren on Wealth Tax

Warren’s plan places a 2% levy on fortunes above $50 million in net worth. She “sells” this, rather disingenously in my view, as a “two cent tax.” That’s because it’s not actually two cents, it’s two cents on every single dollar you own (liquid or not), above $50 million in wealth. This owned wealth, by the way, has already been taxes.

Her plan also places a 6% levy on fortunes above $1 billion in net worth.

See her campaign website.

Sanders on Wealth Tax

Sanders starts taxing wealth of $32 million in net worth at 1% per year, which increases to an 8% tax on fortunes above $10 billion.

See his campaign website.

History: Carriage Tax in 1794

The idea of taxing wealth isn’t a new one. In fact it predates even a federal income tax.

The story begins in 1790’s, and George Washington wanted to raise money for the federal government. He and Alexander Hamilton thought that taxing the wealthy was a very good idea.

What’s a good way in 1794 to determine who’s wealthy? Carriages.

See the source image

So Hamilton and Washington and their staffs wrote An ACT laying duties upon Carriages for the Conveyance of Persons.

Just like Warren’s wealth tax proposal, it was progressive, hitting the more expensive carriages harder.

This Act set off a huge debate within the country about what kind of taxing power the founders wanted the federal government to have.

Carriage Act of 1794 – Statutes and Stories

The Jeffersonian Republicans strongly opposed the taxes at the time. In particular, James Madison, one of the main architects of the Constitution found it improper. He indicated that the Carriage Tax ran afoul of the apportionment clause, and brought it to the Supreme Court in 1796.

Alexander Hamilton himself argued at the Supreme Court on behalf of the Carriage Tax. He argued for three hours. The Supreme Court found in favor of the Carriage Tax, feeling that the apportionment clause was only reasonably interpreted to apply to land and slaves. The history of the clause, they argue, comes from the Constitutional framers wanting to assure Southern slave states that a tax on property and slaves would never be enacted.

The basis of the Supreme Court decision was that a carriage tax was not a “direct tax.” This all sounds like great news for wealth tax proponents, but there’s a huge catch: the Court very specifically noted in that decision that a tax on land would be a direct tax.

By the time the Jefferson administration came to office, the Carriage Act was repealed. (A victory for Big Carriage.)

And a later decision (Pollack v. Farmers’ Loan and Trust Co.), the Supreme Court noted “We are of the opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.”

By 1913 the Sixteenth Amendment was adopted. And in the 1916 case of Brushaber v. Union Pacific Railroad Co., Chief Justice White explained that the “[Sixteenth] Amendment contains nothing repudiating or challenging the ruling in the Pollock Case that the word ‘direct’ had a broader significance, since it embraced also taxes levied directly on personal property because of its ownership, and therefore the Amendment at least impliedly makes such wider significance a part of the Constitution….”

So today, it’s very hard to make the Constitutional argument that a tax on total wealth is not a direct tax by the federal government, as there are several times that the Supreme Court has gone on record to confirm it.

One interesting thought experiment — would this mean that if America ultimately embraces a wealth tax, might it first take the form of a tax on net wealth exempting land to avoid some of these very Supreme Court issues? Perhaps. In that case, you could see literally billions, perhaps trillions of dollars in holdings migrate to the purchase of land. (And is it land in the United States only, or land anywhere?)

Video Commentary

A couple of quick video overviews that I found helpful for context are below.

POLITICO — How does a wealth tax even work? — December 19 2019
Bloomberg Markets and Finance, October 15 2019

CNBC Discussion

Joel Griffith, Heritage Foundation v. Vanessa Williamson, Brookings Institution

Two Lawyers Argue: Yes it is, No it isn’t.

To be sure, lawyers can be found who argue that a wealth tax is Constitutional, as well as lawyers who argue that it is clearly not Constitutional without an Amendment.

For those who wish to go much deeper, the best polemic I was able to find that argues in favor of the constitutionality of wealth taxes is a piece by Law Professor Calvin H Johnson. He and Erik M. Jensen (emeritus) argue back and forth in the ABA journal, bringing in case law and analogous circumstances.

I’ve shared the links below.

In terms of practical reality, however, such a debate means that such a wealth tax would be fairly immediately challenged, right up to the Supreme Court. And I’d ask you to consider the odds that the existing federal court circuits and especially today’s Supreme Court of The United States would find wealth taxes either (a) not a “direct tax” or (b) otherwise Constitutional. Given that there’s now a 5-4* conservative bent on the court, I think the odds are very slim. [*EDIT: This post was written before Amy Coney Barrett was appointed, taking Ruth Bader Ginsberg’s seat — which way do you think she’ll vote?]

A Wealth Tax is Constitutional, Calvin H Johnson, John T. Kipp Chair in Corporate and Business Law, University of Texas

Rebuttal: “An Unapportioned Wealth Tax Has Constitutional Problems“, Erik M. Jensen, Coleman P. Burke Professor Emeritus of Law, Case Western Reserve University, Cleveland, OH

Sur-Rebuttal: “A Sur-Rebuttal to Professor Jensen on the Constitutionality of an Unapportioned Wealth Tax“, Calvin H Johnson, John T. Kipp Chair in Corporate and Business Law, University of Texas

Conclusion

It’s important that supporters of the wealth tax idea understand that it would be quickly challenged as unconstitutional, and today’s Supreme Court is likely to agree. Thus, supporters need to have a realistic sense of how to enact a Constitutional Amendment to allow it, and/or factor the likelihood of this into their assumptions about ways to raise revenues for the plans they’d like to see.

Reading

[1] Is a Wealth Tax Constitutional?, NPR’s Planet Money Podcast

[2] Here’s Why Elizabeth Warren’s Wealth Tax is Completely Unconstitutional, The Federalist, August 8 2019

[3] Elizabeth Warren’s Wealth Tax is Unconstitutional, National Review, January 24 2019

The Staggering Costs of Sanders, Warren Federal Plans

The costs of the Sanders and Warren Plans are staggering. Sanders and Warren Would Each More than Double the Size of the Federal Government.

Sanders and Warren Would Each More than Double the Size of the Federal Government

It’s January, and Election Season is in full swing. There are many remarkable aspects to the 2020 Presidential Race. Lost in the shuffle of impeachment news, the DNC nominating horserace and the latest juvenile presidential tweets, is the sheer size and scope of the expansive spending proposals of both Senators Sanders and Warren.

When you lay it all out in total, it’s breathtaking. The American voting public deserves to know more about its scale, and I don’t think very many do have a sense of the scale that’s being proposed.

How well do you know the scale?

Try this quick quiz (no Googling just yet!):

  1. What is the approximate amount of money the United States spends on the military per year? It’s a large sum, right? What percentage do you think it represents of overall federal spending? If we zeroed out all that spending and redirected it toward the Sanders or Warren proposals, how many times over do you think it might pay for the things they’re promising? How much would be left over if we just zeroed out everything we spend on the military?
  2. The population of the United States is about 325 million. Roughly how many people work for the federal government today? If the Warren or Sanders plans were enacted, roughly how many people would have their paychecks dependent upon the government? Have you thought much about the fact that these employees and agencies and regulations and policies, once shifted to federal control, will be subject to the whims of any future administration which follows? Are Washington DC resource allocators and decisionmakers widely popular? In your experience, have they generally done a better job allocating resources than more local control?
  3. When you add up all federal spending in a given year, approximately what percentage is it of our Gross Domestic Product? How might the percentage change with the Sanders or Warren plans?

OK, let’s dive in.

Each candidate has published plans which would more than double the size of the US Federal Government as measured by spending. Each would eliminate the private health insurance industry, an industry that employs about a million Americans. Each have pledged to ban fracking, a technology which has contributed enormously to United States GDP growth over the past decade and turned us into a net exporter of fossil fuels, greatly improving our strategic position vis-a-vis oil rich nations.

The US federal government employs about 4 million Americans today, if you include military and civilians.

Other than a significant, understandable blip during WWII, the US federal spending has been remarkably consistent at around 16% to 20% of GDP:

source: Office of Management and Budget, Historical Tables

Yet in out years, each of the Warren and Sanders plans would consume a conservative 50-70% of the United States’ annual GDP. That’s not just WWII-level federal influence in the economy — that’s roughly twice the level of federal influence in the overall economy that we had during World War II.

For reference, US GDP came in around $19 trillion in 2017. And a very good argument can be mustered with little effort that the enormous tax burden each candidate would like to introduce on everything from financial transactions to owned property (wealth) would cause capital flight, reduce innovation and investment, putting a big drain on the collective economic output of this nation.

Sanders’ Plans

  1. Medicare for All Plan: $30-40 trillion over a 10 year period
  2. Green New Deal Climate Plan: $16.3 trillion
  3. Guarantee to all Americans a full-time job paying $15/hr and full benefits: $30.1 trillion
  4. Forgive all student loans and guarantee public-college tuition: $3 trillion
  5. Expand Social Security: $1.8 trillion
  6. Publicly financed housing: $1.6 trillion
  7. Family leave: $1 trillion
  8. Infrastructure: $1 trillion
  9. K-12 Education: $800 billion
  10. Public school teach salary boost: $400 billion

The 10-Year Total: $97 trillion, or about $9.7 trillion per year in additional federal spending in 2021 terms.

The entire US military budget in 2019 was about $989 billion (per year.) You could zero out all US military spending and it would only pay for about 10% of Bernie Sanders’ proposed spending.

Senator Sanders’ plans would roughly triple US federal government spending

Warren’s Plans

  1. Medicare for All: $3.4 trillion per year
  2. Expand Social Security: $150 billion per year
  3. Clean Energy: $100 billion per year
  4. Green Manufacturing: $200 billion per year
  5. Education Reform, Universal Childcare: $145 billion per year
  6. Affordable Housing: $50 billion per year
  7. Student Debt Cancellation: $125 billion per year

The ten year total: Approximately $50 trillion over 10 years, inflation adjusted, or about $4.2 trillion per year additional spending in 2021 terms.

Senator Warren’s plan would more than double US federal government spending

How Does It Compare To Current Spending?

If you head on over to the Office of Management and Budget, you can download Federal Outlays and Receipts.

Charting it, with the axis on the vertical in $billions, you can see that US federal outlays exceed our revenue, and spending is around $4.3 trillion per year. You can also see that we had a nice period during the Clinton Administration (and Gingrich Congress) where we had surpluses — we spent less than we brought in. Since about 2008, federal revenues have been increasing, but started to slow down their rate of growth around 2016, when the corporate tax rate was slashed.

In the hypothetical case where Warren and Sanders each had their plans approved, the charts would look approximately like this:

Bernie Sanders Spending Impact

I am deliberately not forecasting the blue line, revenue, because it’s very questionable what would happen to that line. In theory, with tax hikes on everything from financial transactions to middle class wage-earners (to help pay for his Medicare for All plan), tax revenues would grow substantially.

But it’s also hard to model what would happen to GDP; it’s very plausible that GDP would have a significant drag on it with the disruption to industries, elimination of fracking, elimination of the private health insurance industry, taxing many financial transactions and more. Not only are wealth taxes clearly unconstitutional, in European nations where they’ve been enacted, they’ve often been repealed or scaled back dramatically, because they have led to capital and headquarters flight.

Sanders’ startling 10-year $97+ trillion spending plans are comprised mostly of Medicare for All, Green New Deal spending and a proposal to guarantee all Americans a full time job (presumably paid for by government mandate, if necessary) paying minimum wage. It is remarkable that, while he’s also planning to forgive all student loans(!) and make every public university tuition free, that these sums are so “small”, relatively speaking, as to not even make it into his Top 3 Most Expensive Ideas.

Elizabeth Warren Spending Impact

The biggest chunk of Warren’s spending is her Medicare for All plan, the single-payer healthcare plan which she’s like to see enacted. Her plan to pay for it includes wealth taxes, and also “recapture” of the fees that corporations pay to subsidize health plans for employees. Do unions yet fully understand that what Warren is proposing is to eliminate their “Cadillac” healthcare plans, essentially telling their employers to send that money instead to Washington DC to allocate to healthcare providers?

Other issues for both Senators Warren and Sanders are the clear unconstitutionality of their Wealth Tax plan.

Deficit as Percentage of GDP

Here’s a chart of the Deficit as a Percentage of GDP. Source is from the Office of Management and Budget website, historical tables.

Chart by Visualizer

The average is 3.1%. Standard deviation (excluding unusual WWII period) is about 2.5%, which means that about 69% of the time, Deficit as a % of GDP falls within the range of 0.6% surplus and 5.6%, and this is (still) one of those times. But agree very much that this is the time to “save” for a rainy day.

What if we confiscate the wealth of the top 1% of households?

Sanders often cites the huge disparities in wealth between the richest 1% of Americans and all other households. And it’s true, the total wealth of the top 1% of American households is approximately $29 trillion.

That’s a huge sum.

But let’s go a step further here: where is most of that wealth? It’s not in stacks of cash, nor is it a bank account anywhere. The vast majority of that wealth is in shares of publicly traded (and some private) companies that founders and founding families own. But most founders don’t own 100% of their companies. In fact at this writing, even Jeff Bezos “only” owns about 4% of Amazon.com.

So who are the other 96% of the shareholders of Amazon? The other owners of these shares and other stocks are, either directly or indirectly, the 55% of American households that own stocks, which includes working families, teachers pensions, corporate 401(k)’s, union and municipal retirement funds, and global investors who think America’s a decent place to invest.

So let’s imagine we got past the clear unconstitutionality of a wealth tax, and, just to get a sense of the scale here, confiscated not just some, but 100% of the wealth of America’s richest households.

First, to get it, the stocks would need to be sold en masse.

And thus, you have to look at the devastating impact this action would have on the securities they hold. For instance, imagine Jeff Bezos being forced to sell all his Amazon shares. What’s that going to do to Amazon stock? Down by 20, 30, 40, 50%? The drop comes both from far more sellers than buyers, and the market’s conclusion that Bezos has “less of an interest” in Amazon.

Let’s continue with this thought experiment, and generously posit an unrealistic guess that this would only result in a 30% drop in the equity value as $29 trillion in starting market value is being liquidated.

You’re left with 70% of $29 trillion, or about $20 trillion (generous estimate) going to the federal government to serve central resource allocation. Confiscating 100% of the richest American’s owned wealth, in other words, even assuming it were constitutional, is not even enough to pay for three years of Sanders’ economic agenda. After those three years are up, funds to support it don’t appear by magic. All the wealth of the top 1% has been confiscated. What happens then? We turn to the 90-99%. But that’s only enough for another few months. Then the 70-90%. Then the 50-70%… and everyone.

Further, all this assumes, very incorrectly, that there wouldn’t be major negative impacts on GDP. To see this, simply ask yourself what happens to capital formation and investment to build new companies and jobs in such a world, where property is subject to seizure. Would there be capital flight?

Further, to get less than three years of the Sanders agenda, every American who holds stocks (55% of American households) receives a major haircut on their holdings, whether they be in 401(k)’s or retirement plans.

Historic Trends in Federal Spending Per Capita

What the federal government spends, per-capita, has been growing well beyond inflation since about 1952. The grey line below is an inflation-adjusted chart of federal spending per capita. (This particular chart ends with 2011 data; I’ll be pulling together more recent data shortly, but the trend and order of magnitude should be clear.)

A fully-enacted Sanders agenda would add another $29,000 to this chart (i.e., triple the per-capita levels of federal spending today.) A fully-enacted Warren agenda would roughly double the federal per-capita spending shown in this chart.

See the source image

Source: Office of Management and Budget Historical Tables, Consumer Price Index

How Well Does Sanders Know The Cost of His Plans?

“I can’t rattle off to you every nickel and every dime.”

Conclusion

Sanders and Warren’s federal spending agenda is strikingly large. These plans are not just incremental changes in how we envision the relationship of the federal government to our economy, it would be a truly staggering change.

While I personally don’t support this ratcheting up of federal spending and control, I am still a fan of the representative democracy we have. So if this is what we as a society truly want and vote for, so be it.

But here’s the thing. We should know what we’re voting for. Do you really? Did any of the information above surprise you?

Based on anecdotal polling of even the most intelligent, well-read friends and relatives I’ve asked, I think too little understanding actually exists in most voters’ minds about the scale of what is actually being proposed, and what it might mean for the change in federal control over our economy, impacts on GDP, hard-fought union “platinum” healthcare plans, entire industries which employ millions, the equity values for the 54% of American households that own stocks, a staggering level of debt we would pass along to future generations, and more.

Next time you meet a fellow voter, you might want to ask them to imagine zeroing out all the dollars we spend on the US military — every bomb, aircraft carrier and soldier salary, then ask them how much of a Sanders agenda it might pay for, and how much might be left over. You’ll probably be surprised at the answer; I’d be surprised if most Americans get the right answer within even a multiple of 10x.

References

[1] “The Unaffordable Candidate“, October 15, 2019, City Journal

[2] “The Staggering Cost of Elizabeth Warren’s Plans: $4.2 trillion per year“, October 24, 2019, Yahoo Finance

[3] “Plans“, Elizabeth Warren Campaign Website

[4] “Issues“, Bernie Sanders Campaign Website

[5] “The cost of Sanders’ agenda would set a peacetime US record“, CNN, January 14, 2020

[6] “Medicare for All Would Cost $32.6 Trillion Over 10 Years, Study Says“, Bloomberg July 29, 2018

[7] “New analysis finds Sanders’s plans would add $19 trillion to debt,” The Hill, May 2016

[8] “The High Cost of Warren and Sanders’ Single Payer Plans“, The Atlantic Magazine, October 2019

Congratulations to Seattle’s New City Council

There’s a new City Council in Seattle. If human beings actually behave as they appear to believe, we’re in for some major improvements.

Congratulations to the victors! There was a big City Council election earlier this month, and it’s likely to set the course of the city for the next decade.

This isn’t the slate of leaders I’d have preferred. I’ve been clear about my own moderate political views on this blog, and this is not a moderate council. However, I do very much wish for their success. They now set the laws in a city I love.

Above all, I hope their imagined model of human behavior actually exists. Because from that, all else flows.

I hope that the key to ending homelessness is delivering publicly owned, affordable or even free-to-the-residents shelter, and that near-exclusive focus on that vis-a-vis homelessness pays the dividends they feel it will. That is, I hope that directing very little of our attention to treatment continues to be appropriate, and that results will show addiction to be mostly a second-order effect that can be — relatively speaking — ignored.

I hope the true addiction rate among those experiencing homelessness is in fact roughly what is self-reported (i.e., “only” about 35%, about 4 times rate for the housed.) I hope even that is high, by some mistake or something. Maybe lots of people who are not addicted are reporting that they are. I don’t know why they would, but it sure would be great if that’s the case. I hope a much higher level of addiction than 35% among the unhoused isn’t reality, because it would justify the near-silence on this topic at Seattle City Council hearings, and it would almost even justify the name-calling of anyone who dares to raise addiction and drug use as concerns worthy of addressing.

I hope it is the much easier-to-address problem of affordability, not addiction or mental health, that has driven and perpetuated the rapid rise in homelessness that we’ve been seeing over the past decade. Because 75,000 new units are currently under construction in Seattle, the $290 million Affordable Housing Levy is still in effect, HALA and MHA have passed with aims of creating 6,200 new affordable units, and the new slate of leaders will be pressing the accelerator very hard on affordable housing.

We will very likely try the Employee Hours Tax (EHT) and other taxes again, likely more aggressively than attempted in 2018. But this time, the group overseeing it will be a slightly different collection of resource-allocators, so perhaps the plans will be more comprehensive and robust — perhaps there will actually be a plan. But if it’s focused pretty much exclusively on building out publicly-owned housing as the first EHT was, I hope those who are addicted, if given warm shelter, get well largely on their own, because I hear a lot more about addressing affordability from these new overseers than I do the critical importance of establishing wraparound services such as treatment, pilot treatment programs with measurements, or frankly any kind of asks or gentle requirements for beneficiaries of these programs to try over time to get well.

I hope the crime and assaults which have been on the rise are truly driven by poverty and expensive rent, not by drug use or mental health. Because, once they have affordable or even free shelter, these second-order problems will greatly diminish. I hope that the Seattle Police Department (SPD) has largely been lying to us about the drug trade being a major source of property crime. Maybe it too is mostly about poverty.

I hope that “compassion” and “lenience” are pretty much interchangeable concepts, and that by doubling down on lenience, we create a more compassionate City for all who have been negatively impacted by assaults and other forms of crime.

I hope that by investing heavily in solving affordability with publicly owned housing and far more tiny villages in 12+ new areas, metrics like addiction rates, discarded needles, property crime and assault drift downward. That is to say, I hope Washington DC’s failed experiment in focusing on housing only was a complete anomaly, and I hope we’ve learned how to implement it better from Licton Springs.

I hope laws of supply and demand don’t apply to services. I hope that by funding a regionally and nationally generous set of policies without limits or requirements (“barriers”, in the parlance) in a mobile society, it doesn’t simply bring in more demand, taking us back to where we started. I really hope that it is indeed true that the term “Freattle” is just a hateful, invented pejorative spewed by the uncompassionate, and bears no connection to reality. Put another way, I hope that the laws of supply and demand are somehow suspended when it comes to services, and that there’s no such thing as magnet policies.

Or alternatively, if the laws of supply and demand are still in play, I hope we have a near-infinite capacity to fund shelter and services after the first 15,000 are served, because not a single one of the new city council leaders has really put forward any kind of limitations on service, nor are we prepared to discuss them without name-calling. Speaking of name-calling, I hope the whole “Seattle Is Dying” piece was mostly just staged and heavily edited to push an utterly false and hateful narrative, and that Sinclair somehow profits wildly by fabricating stories wholecloth. It would be a relief to discover it was fiction.

I hope that the third party service providers we taxpayers fund all sincerely want to do the right things by their clients and feel an obligation to make the most of taxpayer dollars, and don’t need much of any oversight, accountability or checks and balances. I hope it’s simply more funding that’s needed to have better results. Because with the exception of one new Council Member, I didn’t hear much about service provider accountability, measurements, audits, or any kind of payment-tied-to-results orientation.

I hope that it’s true that the best use of city-owned land is to put a few dozen tiny homes on it and allow more RVs inbound on city streets without really monitoring or caring about what anyone chooses to do with those spaces, or any kind of third party checks on who resides there. I hope for the sake of those subject to human trafficking, that an affordable place to live makes RV ranching and crime rings centered in some of those spaces disappear.

I hope it really does work that diverting repeat offenders away from punishment (like jail and drug court) and into lenient counseling really means they’re no longer likely to offend again, because it sure sounds like the compassionate thing to do, and who doesn’t want to be compassionate? I hope those diversion programs really do have tremendously beneficial harm reduction impacts on the communities where they’re deployed, even though that data’s not been made available, and what now 5-years-old data has been shared on recidivism suggests no statistical difference when “failure to appear in court” warrants are removed.

I hope that every time rent-control has been tried, its failure has been because it’s simply not been implemented right. I hope that this time it’ll be different, that a few tweaks will make it work, and that new renters won’t find all the most desirable affordable spaces taken out of inventory, and landlords won’t skimp on basic improvements for existing rent-controlled apartments, the way it has gone pretty much every time rent control has ever been tried.

I hope it’s actually true that among the highest and best uses of City Council time is to conduct and tolerate circus-like demonstrations in favor of, or protesting, various national and global issues which will never be decided within City limits, because I know that a great deal more “pack City Hall” events to “make statements” are in our near future.

I also hope their imagined economic model works, that lots of new taxes can be imposed on surgically-defined entities and segments without much unintended blowback, like regressive price increases on consumer goods and services, reductions in the number of people employed within Seattle city limits, companies or small businesses picking up and moving, reductions in levels of investment in new initiatives and resultant revenue-generation for our city, likelihood of attracting innovators here, or prices kept affordable on basic items like groceries, delivery and fuel. I hope shoplifting becomes less of a problem for retailers like Uwaijimaya and Bartells through our compassion, lenience and surging investments in housing.

I hope the MIT PhD candidate made lots of errors when he found that upzoning actually often sends prices upward, not downward.

I would be ecstatic to be pleasantly surprised about all this, so I do root for their success and not their failure, as they are our new duly elected lawmakers. We may even get a chance to see how well their model and formula all works through a national or global recession, which by and large is not something within our local control here in Seattle; we may only have a few months to a couple years to establish the set of programs we want when that arrives.

Though I disagree with a large number of proscribed policies this new group of lawmakers has espoused, we do fully align on many of the goals sought — i.e., far fewer people homeless, a safer city for all (at least I assume we align there), greater opportunity for all, fewer people addicted and living in tents, cars and RVs, a green city that protects its environment and welcomes newcomers with affordability, and much more.

The new Council absolutely has a chance (and no question, the votes) to fully establish the vision they want. That’s why I’m rooting for their success and for my fears to be dead wrong.

Meanwhile, we will don the labcoats. Because this is going to be an interesting several years of experimentation with a lot of things no city in this nation has really tried. We will be in the vanguard, we will be pioneering our own way, and it will be ambitious. Maybe it’s different here. We will watch and see how the various metrics respond: crime and public safety rates, within-city-limits employment, levels of addiction, care for our green spaces, ecology, mental health, affordability, activity of repeat offenders, public health and more, all play out. If human behavior really is as they imagine it, we’re in for some major improvements.