Posted by on June 17, 2015

Back in my youth, I thought I understood the First Amendment, at least as it related to religious freedom.  It meant that jackbooted police officers could not burst in on peaceable worshippers and start arresting them.  It also meant, as I pointed out to my mother, that I couldn’t be forced to go to Saturday morning catechism lessons when I would much rather stay at home and watch cartoons.  In short, the government could not stop me from expressing my religious beliefs or force me to have any.  How this evolved into an obligation of Abercrombie & Fitch to hire a young Muslim women who insists on wearing a headscarf at work is a mystery to me.

For those who haven’t followed the case, here are the facts.  In 2008, Samantha Elauf, a young Muslim woman from Oklahoma, did well enough in an A&F interview to get a job, but she was rejected because she insisted on wearing a headscarf as an expression of her religion.  The headscarf was a violation of A&F’s corporate dress code.  There was no suggestion that the dress code was religiously biased or discriminatory, something that Elauf did not even allege.  On June 1st, the Supreme Court ruled for Elauf and against A&F, in an 8-1 decision, because the company failed to “reasonably accommodate” Elauf’s religious expression, which is given “favoured treatment” under the Civil Rights Act of 1964 and its accommodation did not impose “undue hardship” on the business.

It strikes me as reasonable that a company has the right to require a certain “look” of its employees, particularly when selling a style is precisely its business.  A prospective employee who doesn’t agree with this policy is, of course, free to work (and shop) elsewhere.  Which means that Elauf was fundamentally wrong when she stated, in a written statement released at the time of the decision, that “(o)bservance of my faith should not have prevented me from getting a job.”   Her desire to wear a headscarf did not prevent her from getting a job; after being turned down by A&F, she went on to work as a salesperson at two other retail chains and is now a merchandising manager at a third, all while wearing a headscarf.  I don’t see anywhere in the First Amendment where it says that anyone has a right to work at a particular company, a right that exists irrespective of that person’s desire, religiously motivated or not, to violate the company’s rules.  I also know that a company that makes a habit of rejecting high quality potential employees for frivolous reasons will soon find itself with the frivolous employees it deserves.

I am afraid that I fail to see why faith-related expression should be granted “favoured treatment.”  Certainly, there is no hint of this in the First Amendment, which takes a decidedly neutral stance on religion.  The desire of the Founding Fathers was to protect religious practice against government coercion, not to grant it special treatment.  It is also a stretch to read the Civil Rights Act of 1964 as intending to confer any such preference.  This Act outlaws employment discrimination on the basis of race, colour, religion or national origin.  But no such discrimination was even alleged in this case.  It is true that Elauf could not work at A&F while wearing a headscarf, but that is a sacrifice she would have made by her own free choice.  Religious conviction, I have been told, is demonstrated by making precisely such sacrifices, even more so than wearing certain headgear.  Ms. Elauf should count herself lucky that all she had to do was take a job at a lesser brand and not step into the Colosseum as the afternoon’s entertainment.

“Favoured treatment” is inherently unfair.  It is unfair to those who have no religious beliefs, but who may nonetheless want to express themselves in ways that do not enjoy the special protections granted religious expression.  It is also unfair to those who practise “religions” obscure or personal enough that I doubt they would be afforded the protections granted to “established” faiths.  The English have decided to grant special protection to Druids, provided that the beliefs are “deeply held.”   I doubt, however, that the Supreme Court would have come riding to the rescue of Elauf if she had expressed a strong belief in Wotan and insisted on coming to work dressed as a Goth.  “Favoured treatment” necessarily involves the courts in the unsavoury business of deciding which beliefs are deserving of preference and how deep is a person’s religiosity.

And look at the wording of these rules: “favoured treatment,” “undue hardship,” and “reasonable accommodation.”   In my professional career, I have always considered it a mark of failure when I negotiated a contract filled with weasel words like these.  Yet, this is the type of wording that is inevitable when the government wades into the arena of conflicting “rights,” such as it has done in this case.  The Founding Fathers wanted clear, bright lines to restrain arbitrary intrusions by the government.  This type of wording invites it.  And one of the major reasons they wanted to avoid this was precisely for the protection of things like religious freedom.  They knew all too well that arbitrary and ambiguous intrusions to “favour” anything could easily be turned in the opposite direction.

More on Student Loans

This subject has recently been in the headlines following the bankruptcy of Corinthian Colleges.  Corinthian went bankrupt after its access to student funding was cut off by the Federal government and it was fined $30 million for misrepresenting its placement success to students.  Since Corinthian was clearly an enterprise primarily designed to milk government subsidies – having received $1.3 billion in student aid in 2013 alone – it could not last long without access to the teat.  This will not be the last scandal to emerge from this sector.

As The Wall Street Journal reports, the Obama Administration has immediately responded that Corinthian students will not be held accountable for their loans, which could amount to up to $3.5 billion in loan forgiveness for them alone.   More broadly, the Education Department has announced that it will adopt a policy, based on an obscure provision of law, of forgiving the debt of any student who can document that he or she was lured into paying tuition through a violation of a state law, such as laws against false advertisement.  It is a virtual certainty that the Education Department in any Democratic administration will use this rule to wipe out a significant portion of the $1.3 trillion student loan bubble, handing the losses to the taxpaying public.  Following an established pattern, what Senator Elizabeth Warren and her fellow Democrats have failed to do with legislation, the Administration will accomplish by fiat.

Meanwhile, one of my teenage heroes, George F. Will, has done a great short video for Prager University.  It is his take on the commencement address that should be delivered to recent graduates.   It follows up on many of the themes highlighted in this blog, right down to the use of the term “sub-prime.”  It is well worth the 6 minutes you would have to spend watching it.

Finally, if you want to observe the world of contemporary university life in all of its surreal glory, then I suggest you read “My Title IX Inquisition” by Laura Kipnis, a professor at Northwestern University.  (The article is behind a subscription wall here, but there are several summaries freely available, including here).   Although it is very tempting to greet Kipnis with cries of “so shall ye reap,” her article indicates that she may well be that rarest of creatures: a self-professed feminist university professor whose head is not firmly lodged in her hind quarters.  Some notable quotes:

“When it comes to campus sexual politics, however, the group most constrained from speaking – even those with tenure – is men.  No male academic in his right mind would write what I did.  Men have been effectively muzzled…”

“I also believe that unconstrained intellectual debate – once the ideal of university life, now on life support – is essential to a functioning democratic society.  And that should concern us all.  I also find it beyond depressing to witness young women on campuses – including aspiring intellectuals! – trying to induce university powers to shield them from the umbrages of life and calling it feminism.”

The Absurdity of It All

We have recently had two excellent examples of governmental spending absurdity.

The first appeared in the Economist.  The article “Made to measure” describes efforts to automate sewing.  It turns out that this is a particularly difficult thing to do, which has given me a new-found respect for my maternal grandmother.  But progress is being made, in part thanks to a $1.3 million grant from DARPA, the legendary Department of Defence advanced research and development agency.  But why is DARPA backing research into automated sewing, you might ask?  The answer is a 1941 law that requires the US military to buy its uniforms from US suppliers, whose labour costs make this an expensive exercise compared to buying in places like Vietnam and Sri Lanka, where Walmart does its shopping.

There is only one problem with this picture: the 1941 law was adopted, without doubt, to protect employment in America.  The point of the technology, however, is to make US manufacturing of military uniforms economically viable by replacing seamstresses and seamsters – now, there is a word I didn’t know existed – with machines.  Which leads me to conclude that the eggheads at DARPA have been taking lessons from the American officer who stated in 1968 that the only way to save the village of Bên Tre in Vietnam was to destroy it.

And then we have Senator Elizabeth Warren, who is making more and more appearances in this blog, not with approval.  She is a leader in the battle against the Trans-Pacific Partnership trade deal with Asian countries.  As Peter Orszag has pointed out in a BloombergView article, her opposition to this trade-liberalizing treaty is a little difficult to square with her support of a $300 million dredging and expansion of Boston harbour in her home state of Massachusetts.  Why does the harbour need expansion?  So it can handle the large container ships that the $5.2 billion expansion of the Panama Canal will allow to steam directly from Asia to Boston, where they, if Warren gets her way, will be met by custom officers presenting bills for import duties.

They obviously don’t teach irony at Harvard Law School.

Greek Pensions

We have all been reading a lot about the continued failure of Greece and its creditors to agree a deal. One of the sticking points is pension reform, which might bring up images of valiant Greek politicians trying to protect vulnerable old ladies from heartless creditors.  Before choosing sides, however, you should read this article from David Stockman’s Contra Corner.   It lays out a few statistics on Greek pensions, such as:

  • Years of work for a full pension: Germany 45, Greece 35
  • Proportion of wages as pensions: Germany 46%, Greece 80%

And the list goes on, even though it does not include the myriad special deals for people like government employees, including the ones that the Greeks were earlier required to fire from their bloated, patronage-ridden public sector.  Which is why pension expenditures in Greece account for the highest percentage of GDP in Europe and why the rest of the Europeans, and especially the Germans, are mightily sick of hearing about the “democratic will” and “dignity” of the Greek people.

Hillary Plays It Fast and Loose (Again)

Here is a shocking article from the WSJ about the Clinton Foundation’s misuse of charitable funds to support Hillary’s political ambitions.  The article points out that the foundation, contrary to common practice, has been staffed by political operatives, who draw handsome salaries while being “warehoused” between Clinton political campaigns.  The article gives a long list of Clinton groupies who have flitted back and forth through this revolving door and who are now assuming senior posts in Hillary’s 2016 campaign.  (Among these is a woman called Bari Lurie, who is identified as the chief of staff to Chelsea Clinton.  Yes, that is correct, Chelsea Clinton actually has a chief of staff, but if this doesn’t make you nauseous enough, then I suggest you read this article.  If the contents don’t get you, then the photos certainly will.[1])

If these accusations are well founded, including the author’s comment that the foundation “spends an extraordinary portion of its funds on travel and staff,” then this issue deserves a lot more air time.

A Job Is Not a Job Is Not a Job

One of the really good things that David Stockman does in his Contra Corner blog is dissecting incoming economic statistics.  One of his favourite targets is the monthly non-farm employment figures produced by the US Bureau of Labor Statistics.  Here is his take on the May figures.

I won’t summarize the entire article, which is worth a read.  His general thrust is that many of the new jobs trumpeted by the Obama administration, Keynesian economists and the Federal Reserve are in fact “job-lettes.”  For example, of the 3.3 million new jobs created since the pre-recession peak, 1.6 million of them are in the leisure and hospitality sectors (ie., waiters, bell-boys, and ticket takers, as well as the employees of the exploding nail salon industry, where employment has nearly quadrupled since 2000).  A combination of low pay and limited hours produce average annual earnings in these sectors of less than $20,000.

Another big slug of employment growth is in sectors that Stockman deems “fiscally dependent” and therefore unsustainable, in his view, given the US debt position.  This category obviously includes government employees, but less obviously the education and medical sectors, which are massively dependent on government transfers.  These jobs are full time, but also relatively low pay.

Stockman contrasts this with the “goods producing sector,” which produces full-time jobs at a living wage, but where employment is still 2.4 million below its pre-recession peak.   All of this is summarized in a single statistic, which is the total number of labour hours worked in the economy.  This shows that total labour inputs into our economy are still marginally below their Q2 2007 peak, even though the US population has grown by about 20 million since this time.

Stockman’s narrative explains very well a couple of the economic mysteries of our times.  The first is slow wage growth despite a low headline unemployment rate.  This is not surprising if today’s unemployment rate is flattered by low-quality jobs; these marginally employed people would happily move into better jobs, which limits the negotiating power of higher-wage employees.  The narrative also helps explain the low growth of labour productivity.  If much of the new labour input is in sectors with low productivity, then this will bring down the overall average, even if sectoral productivity is advancing.  (The mathematics of this are a bit like the famous gibe from New Zealand’s former Prime Minister Robert Muldoon: “New Zealanders who emigrate to Australia raise the average IQ of both countries.”)

For Stockman, this calls into question the Federal Reserve’s extremely aggressive monetary policies.  It shows how little has been accomplished by these policies, at the great costs of inflating asset bubbles and exacerbating income inequality (which even the Federal Reserve and George Stiglitz are finally acknowledging).

Obamacare

One of the amazing things about the Obamacare debate is the survey “evidence” produced by supporters of the law.  Here is a recent example.  The surveys ask people who have received health coverage over the exchanges, which are designed to provide insurance at a subsidized rate (including an effectively infinite subsidy to the previously uninsurable), whether they are happy with the gift.   The only thing that these surveys test is whether we have a bunch of ingrates among us.  Which we don’t.  So I guess that is good news.

But there is growing evidence – discussed here and here and here – that these rates are about to get much less attractive.

As I have pointed out before – in “Between Two Generations” here and “Lemmings Revolt” here – the economics of the Affordable Care Act are heavily dependent on the healthy subsidizing the sickly through a premium policy that does not allow insurers to discriminate between the two groups.  When insurance companies initially set their rates, they had to guess about the mix of the former versus the latter.  They guessed wrong.  Now that they have experience with an insurance “population” that is worse than expected, significantly higher premiums are coming.  As one company spokesperson put it: “This year, health plans have a full year of claims data to understand the health needs of the [health insurance] exchange population, and these enrollees are generally older and often managing multiple chronic conditions.”

Frankly, none of this should be surprising to anyone who didn’t sleep through his Economics 101 class.

FIFA

The bribery scandal in the Fédération Internationale de Football Association (FIFA), the governing body for world football (or “soccer” to my American audience), has gotten a huge amount of coverage recently.  Only two comments from my side.  The first is to echo a WSJ editorial comment that we can thank FIFA for putting one question to rest: if you ever wondered what the planet would look like if it were run by the world community on a “one-country, one-vote” principle, then wonder no more.  It would look like FIFA.

The second comment is to wonder out loud why the US Department of Justice is expending a huge amount of time, money and legal ingenuity pursuing legal action against FIFA.  Surely, these people have better things to do?  For example, the CCP Research Foundation has a project looking into the costs of financial misconduct in major banks from 2010 to the present.  The latest figures show over $100 billion of fines and other costs just for those two bad boys of finance, Bank of American and JP Morgan Chase.  Many of these fines are for conduct, such as the LIBOR scandal,  that occurred after the financial crisis, when the banks and their employees  had fair warning that a new sheriff was in town (supposedly).  Which shows that their deterrent effect is pretty small.

I have worked for many banks and I have spent a lot of time with their denizens.  I can tell you that fines paid by the shareholders of their employers have a surprisingly small impact on the calculations of bankers, whereas the prospect of spending a lot of time in a confined space with someone called Leroy or Billy Bob really focuses their minds.  If we want to stop this, then criminal prosecution is a much more effective way than causing shareholders to cough up a fortune.  If this can be done under current law, then the DOJ should be enforcing it; even if the prosecutions fail, they will have a strong deterrent effect.  If new laws are required, then the DOJ should be drafting them, as the Bank of England is now doing.

Sepp Blatter and his cronies can wait their turn.

Hillary Defies Me!

Almost immediately after I have come out in favour of a civics exam as a precondition to voting (see “Daydreaming” at the bottom of this blog), Hillary Clinton has come out in favour of automatically registering all Americans to vote.  I want to make voting tougher.  She wants to make it easier.  The nerve.

Of course, the usual suspects have lined up with Hillary, with articles like “Hillary Sides With Democracy” and “Make Voting a Birthright.”  I won’t rehash all of their arguments, the general quality of which can be seen from the arguments of Cass Sunstein in the second of these pieces.   Sunstein uses an analogy: “To be protected against unreasonable searches and seizures or to enjoy a right to a jury trial, there is no need to register with the authorities.”  Therefore, why do we require registration for the right to vote?

Well, Cass, there is a difference.  I do think that a very low threshold should apply to the protection of individuals against government force, such as searches, seizures and imprisonment.  I would even be willing to grant these rights automatically to groups whom not even Sunstein would allow to vote, such as non-citizens, children and maybe even pets (dogs, not cats).  However, before we grant people the right to indirectly exercise government force – which is what we do when we allow them to vote –we might consider whether a slightly higher threshold should apply.  No?

But the best of these articles is Jonathan Bernstein’s “Ignorant Citizens Can Be Good Citizens.”  Hillary should consider adopting this title as her campaign slogan.  The fact that Hillary finds enfranchising the lazy to be in her political interests says everything you need to know about her “base.”

Roger Barris, London

 

I Wish I Had Said That (And Sometimes Not)…

“Winning an argument against a smart person is hard.  Winning an argument against a stupid person is damn near impossible,” from anonymous, as recounted to me by my son Oscar

“People are losing patience, and I’m also just a person…The cow has to get off the ice, but she keeps slipping,” European Commission President Jean-Claude Juncker, showing his rhetorical gifts again

“We are debating social issues like abortion and gay rights.  They are a distraction and will only help elect Hillary,” former Republican New York Governor George Pataki, who has recently joined the field of potential Republican presidential nominees, offering some very sound advice

[1] A cheap shot.  I know.  I just couldn’t resist.

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Posted in: Economics, Policy, Politics

Comments

  1. Patrick
    June 17, 2015

    Leave a Reply

    Hello Roger,

    Thanks for posting your insighful comments.

    I am always confronted on how I should feel regarding the freedom of religion as I travel back to my home country of France. Headscarves are becoming more and more prevalent, and while I am happy to see them when I travel the orient, North Africa and the African continent, It just feels wrong to see them everywhere in the streets of Vence, Antibes or Nice.

    The way I feel about is pretty simple and best explained by this quote seen on a poster during my travels.

    “ RELIGION IS LIKE A PENIS. It’s ok to have one. It’s ok to be proud of it. HOWEVER do not pull it out in public, do not push it on children, do not write laws with it, do not think with it”…

    Have a great summer. 🙂

    • Roger
      June 18, 2015

      Leave a Reply

      Hi Pat and thanks for the comment. I like the quote and I had used it in the blog before, at the bottom here: http://www.economicmanblog.com/2015/03/18/apres-ski-part-1/. I totally agree with your sentiment. True piety, to the extent that I understand it, should be something highly personal. It is also extraordinary to me that anyone would worship a god petty enough to care what we wear on our heads, what we eat, etc., as opposed to how we think and act. Like many qualities, the more than someone feels the need for outward display, probably the less it truly exists.

      Good summer to you, too.

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