Fiscal Cliff Notes

I can remember my freshman and sophmore years in high school. Back when I had acne and could still run. I used cliff notes to gain a better understanding of the book we were assigned in English class. I am sure that some of my readers can relate to cliff notes or similar commercial summaries. Instead of reading the whole book, cliff notes allowed students to read at the last minute and still pass.

In a way, the fiscal cliff reminds me of cliff notes. Congress does not want to do the work they were sent to do and are trying to pass legislation at the last minute. Yes, the stakes are more serious than a bad grade on an English test, but it seems like Congress is looking for a shortcut. If only there were cliff notes on achieving economic stability and fairness.

The reality is that there are no shortcuts to fixing our economy in the global environment that we live in today. Luckily, we can look at other economies and history to help us make fiscal policy decisions. Below are my cliff notes for the fiscal cliff. It is not enough to solve all of the complex problems we face, but it can provide a framework for how we should approach it.

(1) Effective January 1, 2013, tax rates will go up for every level of income. The payroll tax holiday will also expire and spending cuts to schools, public health, and defense will take place. It is estimated that almost 90% of Americans, mostly low and middle income, will face on average, a $3,500 increase in tax liability.

(2) Federal tax revenues have been at there lowest levels in sixty years. This is due to the fact that tax rates have never been lower and the Great Recession has put many people out of work, which has decreased the amount of people who pay taxes.

(3) The national debt is currently over $16 trillion. The first president to go over $1 trillion was Ronald Reagan and it has been estimated that the Bush tax cuts reduced revenue by $1.8 trillion from 2002 and 2009. The debt to GDP ratio is not at the highest level. In 1946, debt was 108% of GDP compared to 104% today.

(4) Since the 1980's, and with the late 90's as an exception when Clinton was president, the United States has run a consistent budget deficit. During the Bush presidency, two wars and the Prescription Drug Bill were expenditures that increased the national deficit. With President Obama as president, the main expenditure was the Stimulus Bill. Both of their tax cuts on incomes over $250,000 have had a significant impact on increasing the deficit.

(5) Entitlement spending on programs like Medicare, Medicaid, and Social Security is rising quickly. Because of the millions of baby boomers who are retiring and the fact that health care costs are rising at a much higher rate than other goods or services, this poses a fiscal challenge. The Affordable Care Act will help, but it will not be enough.

(6) Countries that enacted austerity have suffered more than any country should have to suffer. Deficit hawks in the United Kingdom have drastically cut spending and there has been little to show for it. Unemployment remained stagnant for five years and UK's GDP is smaller than before austerity.

(7) Despite the United States national debt, the US is still able to borrow at historically low costs. Furthermore, those who have warned of hyper-inflation have been proven wrong for years. Inflation has averaged 1.4% during Obama's presidency and it is projected to be 1.2% for the next 10 years.

(8) Income inequality has grown to unsustainable levels. The top 1% of incomes take home over 20% of total GDP wealth. CEO pay has increased 300% since 1990 compared to the 4% increase for the typical worker. Out of every developed country in the world, the United States has the highest level of income inequality. It may be appropriate that the "Great Gatsby" is going to be in theaters soon, because there has not been this much inequality since the Roaring 20's.

These eight fiscal cliff note summaries give some perspective. While it is important that we confront entitlement spending and lower the national debt to GDP ratio in the long run, the main focus should be on achieving growth.

The average middle class American should not have to shoulder the responsibility of paying down the deficit so that the wealthy can keep their tax rates at historically low levels. Moreover, we have seen the effects of austerity, or cutting discretionary spending that benefits low and middle income citizens. It is a prescription for economic malaise.

To achieve growth, we will need to spend on infrastructure, education, and research. These are the ways in which our businesses can remain competitive in a global economy. Spending in and by itself is not the problem. And while the debt has increased to its highest numerical value, US bonds still have incredibly marginal yields.

When Speaker John Boehner failed to rally his own GOP members to pass his "Plan-B," it was another sign of GOP infighting. They were unable to pass legislation that would have increased taxes on incomes of over $1 million. The extreme tea party wing have gained so much clout that it may mean the end for the Republican party. But more importantly, it may mean the end for a fiscal compromise.

A part of me wants to go back those high school years when I had little responsibility. No bills, no worries, and no care for how Congress made its decisions. It is different now. As a small practitioner, I need Congress to do the right thing. Too bad they're not doing their homework.

The Newton Shooting and the Law

In a time that is traditionally set aside for the family and holiday spirit, fellow Americans are trying to cope with the task of planning the funerals of their young children. The shooting at Newton, Connecticut is a tragedy beyond what anyone could imagine. The lives of innocent elementary students were taken away suddenly and senselessly. 

This mass shooting did not only have an impact on the victims' families or the small town of Newton. The whole psyche of the nation has been affected in a traumatic way. I, who will one day have a family of my own, fear that my children will be brought into a world that is far different from when I was born.

While the nation grieves, there is the need to find answers. What could have been done to prevent this crime? Would it be prudent to immediately pass strict gun control laws? How about increasing the opportunity for low-income individuals to obtain mental health coverage? 

These "solutions" may increase the nation's safety, but cannot take away the pain of the victims and their families. Nevertheless, it is wise to have a discussion about current law related to gun control and mental health care. 

Gun Control

In June 26, 2008 there was a 2nd Amendment case, D.C. v. Heller, wherein a strict gun regulation law was struck down. The District of Columbia attempted to prohibit the use of handguns, unless it was registered and in the home of the owner, unloaded or locked away. The Supreme Court, in a 5-4 decision, held that "[the law] makes it impossible for citizens to use arms for the core lawful purpose of self-defense and is unconstitutional."

The National Rifle Association, or NRA, declared it a "major victory." The minority opinion disagreed with the NRA and stated that "the words 'the people' [in the 2nd Amendment] do not enlarge the right to keep and bear arms to encompass use or ownership of weapons outside the context of service in a well-regulated militia. 

In sum, the Court interpreted the 2nd Amendment to mean that every citizen has the right to defend himself/herself. The dissent's opinion, that the rights of gun ownership are supposed to be decided within the context of an 18th century world, when 95% of the population lived in rural areas, is simply an opinion, not the supreme law of the land.

The effect of this monumental 2nd Amendment case has been disappointing to gun enthusiasts and advocates. Since Heller, the Court has upheld most gun regulations that have attempted to expand on the requirements for those wanting to purchase weapons or ammunition. For example, a felon or a person committed to a mental institution may not legally purchase a firearm, and laws strengthening those policies are constitutional.

Heller may be more symbolic than anything but it sets precedent for future regulation. States are already thinking about legislation that could pass the scrutiny of that case. California is discussing legislation that will make it more difficult to purchase ammunition. Congress is considering laws that will curb the gun show "double standard", in which private sellers are able to bypass the requirements that all licensed dealers must meet before selling a firearm. 

In my opinion, we need to regulate ammunition to the same extent as guns. Adam Lanza had hundreds of rounds of ammunition. There is no purpose to have a large amount of ammunition to defend yourself. Do we need to place hundreds of ammunition boxes near the window, instead of a Christmas tree, to ward off potential criminals? I think not. We should also implement stricter background checks and require mandated educational classes to instruct people on gun safety prior to their purchase.

Mental Health

There is confusion among citizens about mental health. For far too long, there has been a stigma surrounding it. If a person is suffering from depression or bipolar disorder, individuals may misinterpret it as weakness. More education about mental illness needs to be a priority despite the fact that Adam Lanza may have had some variant of autism, a mental syndrome.

Almost 1/4 of the population will suffer from a mental illness and less than half will be treated. And since it is an illness, like any other common illness, a person suffering from post-traumatic disorder or depression needs to be treated.The Affordable Care Act ("ACA") has already attempted to cover more individuals that need this type of healthcare. Employers, both large and small, will have to offer policies that cover mental health. Moreover, the ACA will also invest in recruiting mental health professionals. That's a good start.

But more importantly, the conservative governors in the red states need to expand Medicaid to cover low-income individuals. So far, they have issued statements that they are unwilling to allow the implementation of the ACA. I find this both morally unacceptable and dangerous. Is it not possible that a low-income person suffering depression could resort to a mass shooting because of no treatment?

This is a time for reflection and prayer. But I also do not think that sending condolences is enough. We should have an honest conversation about how to prevent a tragedy of this magnitude in the future. As citizens of this great country, it our responsibility to those children that we find solutions.

The Bar Exam

Ever since I can remember, I knew that I wanted to be a lawyer. Maybe it was because my family loved going to the movies and I was enthralled with the legal characters that could win over jury with a persuasive argument on the big screen.

Or maybe it was because I have always had great respect for my uncle who was a tax attorney. His humble demeanor, great intelligence, and compassion were characteristics that I wanted to possess when I became an adult.

Or perhaps I was called to be an attorney because my interest for politics gave me the curiosity to look at a congressional website detailing the occupations of all of its members in the fifth grade. The 112th Congress, for example, had 200 members who declared law as their occupation.

Whatever the reason for my inspiration, I vividly remember my answer to the question, "what do you want to be when you grow up?" I, without missing a beat would reply, "a lawyer."

That's why Friday, November 16 was a memorable day. It was the end of a journey that I began after high school - but in a way - a path that began even before high school started.

The California bar examination is a three day exam, six hours each day. Since we had to be there early and wait for instructions after, it was an all day exam. But actually taking the exam may have been the easiest hurdle.

That is because my fellow July takers and I all began to study months before July 24. Before the ten hour Bar/Bri study days, we took the LSAT; completed law school applications; went through three years of law school classes and final exams; and fulfilled all of the necessary requirements to leave school with a postgraduate Juris Doctor degree. So in reality, the three days out of the five year process seemed quite infinitesimal.

Even if it seemed small, those three days would provide me the opportunity to practice the law as a licensed attorney.

On the night of the results, I screamed out loud with my fists clenched in celebration after Elizabeth told me that I passed. Even as I looked at the screen, it did not become real until she told me.

For those students who have not taken it yet and happen to also read my blog, I have a few pointers for you.

First, thanks for reading my blog. I know that it may be more painful than reading a casebook but at least you do not have to look for the issue, rule, and holding. There is not a final exam either.

Second, study with the right mental frame of my mind. Why did you go to law school? You aren't a masochist, you wanted to become an attorney. Remember that in our profession, attorneys read and write and then read and write. Think of bar prep as a preparation for your future practice and stay positive.

Third, do everything that you are told. I do not care if you get tired or think that you have done enough for the day. Complete every task assigned during bar prep and then do some more. You want to go in with complete confidence in your abilities because you will perform at your peak. And guess what? If you have a J.D., your best means that you can pass.

Fourth, embrace your faith or spirituality. It is no secret that in challenging times, we strengthen our relationship with God. Even if you do not believe in a Supreme Being, you can meditate or do something to make you focus on the bigger picture. In the end, there are more important things than an examination.

Fifth, allow your family and loved ones to help. I am a lucky man because my beautiful girlfriend, Elizabeth, did everything in her power to help us pass. She cooked, cleaned, did laundry, and was only a phone call or chat away. We shouldn't have to face the bar exam by ourselves and we do not have to. Reach out to whomever will help you succeed.

Sixth, take breaks during the day and on the weekends. Do not get burnt out. You will be working hard and that means your body and brain will need a rest. Go to the gym, a movie, or play some mini golf.

Seventh, on the day of the exam, enter the convention center with complete faith in what you have done during law school and bar prep. I listened to some motivational songs, remembered back to some of my favorite accomplishments, and was ready to give it my all. I had fun with it.

Tomorrow is the swearing-in ceremony. Let's hope I don't mess it up. I know that an attorney, a great attorney, would get it right.

Death to Twinkies!

In 1930, James Dewar, the manager of the Chicago Hostess Bakery plant, was probably tired. He spent most of his days overseeing the tedious production of the company's delicious cakes. Complete with strawberry filling, the variety of pastries produced in Chicago were certainly being enjoyed by people all over the country.

According to history, Mr. Dewar noticed one day that the Hostess shortcake pans were hardly being used during the short strawberry season. Instead of having the pans sit idly in the dust of the factory, Mr. Dewar began to inject smooth banana and vanilla creme filling into the cakes. These non-strawberry filled treats would later be named, "Twinkies." And this beloved snack would later contribute to the increased size of America's belly.

Today, the bankruptcy court judge presiding over the Hostess proceeding approved the winding down and liquidation of the company. The management at Hostess quickly placed blame, even before the judge made a decision. It was those greedy unions and their ridiculous demands for decent wages.

It is true that the union strikes made it difficult for the company to reorganize under Chapter 11, but the death of Hostess was long ago determined because of a number of non-union factors.

Hostess had already filed bankruptcy in 2004 and 2009, employed seven different CEOs in ten years, before private equity began to load the company with debt. Hostess had over $600 million of debt on the books before the unions were able to write on their picket signs. The total amount of debt was two-thirds of the complete asset value of Hostess.

Add the problems of consumer trends favoring healthier snacks, management's refusal to adapt to the market rate of labor, and leadership's failure to retool the business model; and you get the demise of a bakery company that has been around for over 70 years.

It is always easy to blame the workers, the unions, the blue-collar employees who are content in being a small part of the larger process in making a delectable product. But in blaming them, the Hostess executives associate themselves with the "severe" conservative agenda which holds working people in contempt.

The Republican House Majority leader Eric Cantor is a perfect example of an individual who disdains the working class. He issued a statement on Labor day 2012 stating, "we celebrate those who...built a business and earned their own success." I have nothing against business owners, but praising just them on labor day shows great disrespect to the labor class.

There is a wide-held belief that businesses would do better without unions. Let's examine whether this belief is backed by evidence.

Since 1970, union membership has gone from 1/3 of the workforce to less than 14 percent. What is the result of this decline? The top one percent of incomes increased 275% while middle class incomes went up just under 40%. This income inequality has had an effect on the whole economy. Because of the weak purchasing power of consumers, overall aggregate demand declined tremendously. If families cannot afford to purchase Twinkies, how is Hostess or an equivalent company supposed to sell its products?

Companies need to stop playing the blame game and realize that if the middle class does well, so does the whole country.

I am sure that James Dewar, once a delivery boy for a pastries company, would be disgusted with the turn of events regarding the Hostess bankruptcy. He could not have anticipated that the bakers would be the "ones responsible" for the end of Hostess. Although the Twinkies brand will live on, the respect for the people who made the Twinkies, Hostess bakers, will be discarded. Someone give me a sugary treat.

All on Red: How Wall Street Gambled Big and Lost

Most people go to Las Vegas to gamble. Surrounded by flashing lights and luxurious casinos, there is something alluring about sitting at a blackjack table for hours on end. I am sure that the free drinks might have something to do with it too.

But when I looked at a recent Reuters article, I read facts that reaffirmed my belief that people on Wall Street are different. They are not like most people. Instead of rolling the dice, they would rather "gamble" on complicated financial instruments or presidential elections. And with the results of this election over, it was clear. Wall Street crapped out.

In late July 2010, President Obama signed Dodd-Frank, a financial regulation law, named after the two Democrat legislators who sponsored the bill. It became immediately clear that the banks on Wall Street were not happy. One paper stated that, "within minutes of the bill signing, several Wall Street groups were leveling criticism at the new regulations, reflecting Mr. Obama’s increasingly fractious relations with corporate America."

Their criticism did not end with harsh words. In the presidential election, Wall Street gave over $150 million to Romney, or Super PACs whom supported Romney. Wall Street put it all on red and the ball ended up on blue. 

What caused the animosity between the financial services industry and the White House? Was it only because of the monumental financial reform bill?
 
You may have read that the financial crisis was brought on by the housing bubble. However, you may have missed the fact that the banks on Wall Street were the ones putting the batteries in the bubble machine. In creating collateralized mortgage obligations, or the securities that were later known as "toxic," the banks accomplished what they always do best - make sure that someone else bears the risk.

The main idea behind these securities was that it would be less risky. The banks would bundle up a bunch of mortgages, label them as high-risk or low-risk, and put them in their respective tranches. Investors would buy them according to how risk-averse they were. It was the perfect way to lend to prospective home buyers because it was supposed to spread the risk among a number of parties. Or so they thought.

With the help of rating agencies listing most of the securities as triple-A,  the prices of these "toxic" instruments went up as demand increased. The banks sold them faster than a casino sells drinks. Instead of having the borrowers pay the banks directly, the banks sold the complex securities to investors, whom were to be paid from the borrowers. The banks shifted the risk of default and foreclosure to the investors.

It didn't end there. Before the fall of Lehman Brothers, some banks began to purchase credit default swaps. These instruments acted as insurance. The banks would pay a premium, and in the event of a mortgage default, the issuer of the swap would have to pay the bank. They were betting against the very securities that they were selling.

The bubble eventually burst when people realized that the values of homes across the country were inflated. More homeowners began to default on their loans and the securities bought by investors lost their face value. The consequence of these events led to the Great Recession, in which millions of Americans would become unemployed or underemployed.

When things began to settle, laissez-faire "fiscal conservatives" already had their fingers pointed to the ones responsible - the government and the indigent. Their main theory, the one you've probably heard from your conservative friend, is that Fannie Mae and Freddie Mac ("GSEs") encouraged subprime lending to people who couldn't afford it. It's these irresponsible borrowers and government enablers who shoulder the blame.

The problem with this conservative theory is that it doesn't have evidence or facts to support it. The primary holders of the "toxic" assets were the private banks. Moreover, many economists and authors pointed out that, "the GSEs’ overall purchases and guarantees were much less risky than Wall Street’s... their default rates were one fourth to one fifth those of Wall Street and other private financial firms." So, in effect, the banks ran wild, but somehow still found a way to persuade some Americans that it was the fault of poor people.

President Obama didn't buy it and he explained his position on financial services and the need for regulation. At times, he even called the Wall Street bankers "fat cats." The bankers must have had some self-image issues because they were deeply hurt. One Wall Street exec said it wasn't so much what the President did, but the "vibe they get."

Dodd-Frank was historic in its ambition and scope. It created the Consumer Financial Protection Bureau, the "Volcker rule," which will limit proprietary trading by the banks, credit default swaps regulations, and a number of other safeguards to protect financial stability. The legislation put Main Street back as America's number one priority, much to the dismay of Wall Street.

The gamble to oust President Obama may not have gone in Wall Street's favor. But I know they aren't done. They can spend just as much on challenging the law in the courts. I bet money that they'll try.

Binders Full of Lawsuits, with Women!

Shortly after Justice O'Connor retired, Justice Ginsburg said that she was "lonely" on the bench. She had just become the sole woman on the Supreme Court. Ginsburg expressed her belief that she and O'Connor had brought certain sensitivities to the court, a quality that the other justices could not because they did not grow up as women.

Fast forward to the Ledbetter v. Goodyear Tire & Rubber Co. case, were Ginsburg displayed a passionate dissent. Not only would she read the dissent but she called the 5-4 majority "acrimonious" and called for Congress to change the law. Congress listened to the "lonely" woman.

Justice Ginsburg must have been sensitive to Lilly Ledbetter's case because in a way, they shared similar roles. Both of them had experienced the solace of being the only woman in a profession full of men. Lilly Ledbetter, a district manager for Goodyear for a number of years, was the only woman out of 28 managers. That is  somewhat different than having only eight male colleagues on the bench. And Lilly Ledbetter also had to face extremely disproportionate pay in relation to her male counterparts.

After the Supreme Court reversed a three million jury verdict for Ledbetter, Democrat lawmakers sprung into action. Ginsburg's statement that the "ball was in Congress' court," sent a message. You better have your glove and bat ready because it is time to run onto the field of legislation. 

But what was the effect of the Ledbetter v. Goodyear case? How would Congress shape the new legislation? 

The Supreme Court held in Ledbetter v. Goodyear that the statute of limitations had barred her claim because she brought the action 180 days after the discriminatory act. The majority, five men, determined that the alleged discrimination occurred when they decided to set her pay far below her male counterparts. In strictly applying the statute, the court stated that the discrimination did not occur when she was actually paid. This precluded her from being able to recover under Title VII. 

Lawmakers from both the House and the Senate began to craft new language extending the statute of limitations and defining the discrimination in a more liberal way. The new legislation agreed upon, by mostly democrats, would allow women to bring a discrimination suit after they had learned of the pay discrimination, and would not time bar the suit in relation to the discriminatory act. Although it was passed before President Obama was elected, it would be the first piece of legislation signed by him.

Reactions from both sides were predictable. Democrats hit a home run, expanding the role of women in the workplace and Republicans were outraged that employers would now have to face more lawsuits from the damn plaintiff's bar. 

Both are right to an extent. But, I feel that if we are to error; let us error on the side of equality in the workplace. When there is a woman's perspective at work, the company will be better suited to succeed.

I strongly disagree with Republican presidential candidate Rick Santorum's statement.  He recently said that the, "[Lilly Ledbetter Act] had nothing to do with changing the law with respect to pay for women or rights for women. It simply gave lawyers a longer time to sue..." 

Lawyers do not simply sue an employer for the hell of it. Lawyers have clients, and some of those clients may happen to be women who have faced discrimination. When most attorney's decide whether to take a case, he or she makes certain that the case has merit. Lawyers are bound to an oath of responsibility and despite what Senator Santorum says, will pursue a claim only if there sufficient evidence of discrimination.

Besides, this can only be good for employers. Businesses will take precaution in assessing the pay of employees and it will ensure that a person's  pay will be determined by their work, not their gender. There may be more discrimination suits initially, but the courts will delineate guidelines on when is the appropriate time to bring a suit in accordance with the Lilly Ledbetter Act.

Justice Ginsburg and Lilly Ledbetter may have shared adversity in explicating a woman's perspective to a group of men. But one thing is for sure; a whole country full of men have now heard a woman's opinion, and it is now the law of the land.

Negative Action: Why the Supreme Court Should Not Change Current Law

Chief Justice John Roberts was sworn in on September 29, 2005 with thunderous applause and praise. His appointment was seen as a win for conservatives and for originalism judicial philosophy. Despite the clear victory for traditional moral values, the Chief Justice expressed that his bipartisanship appointment proved that "judging is different from politics."

Boy, was he wrong. Politics soon became intertwined with the highest court when "Obamacare" was upheld.

The Affordable Care Act was arguably the most watched Supreme Court Decision in modern history. By the end of the day, after Chief Justice John Roberts sided with the court liberals, he was vilified and called a traitor. Rand Paul said, “just because a couple people on the Supreme Court declare something to be ‘constitutional’ does not make it so..." Actually Rand, it does.

Now, Justice Kennedy has the same opportunity to be scorned. His swing vote decision on the current affirmative action case, Fisher v. University of Texas, will give him an opportunity to put the judiciary branch in direct line with the political line of fire.

But like Roberts, Kennedy should not fear the conservative's wrath. He should keep current law in place or uphold the tradition of encouraging diversity in schools. I have first hand knowledge that a diversified school can lead to a better understanding of others and ourselves.

The first woman on the Supreme Court Justice believed this sentiment too when in 2003, Grutter v. Bollinger, she put in place the standard for how universities may consider race as a factor.

Justice O'Connor said race may be used in a flexible non mechanic way with a number of other factors by admissions offices when they determine who will be the next batch of students. This "holistic review" has worked and almost all universities want to keep the current system in place.

Besides schools wanting a diverse student body to ensure that the best and brightest students resembles the make up of the public, there is overwhelming evidence that race relations is still a problem today. A Newsweek poll suggests that minorities still feel that relations between race have stagnated or deteriorated.  

The Trayvon Martin incident has split opinions on racial lines, the Arizona immigration law has brought attention to racial profiling, and the birther issue has led to questions of blatant racism.

One way these problems can be addressed is to ensure that students learn besides students of other races, socioeconomic backgrounds, and religion. When universities accept students based upon factors of race and other criteria, it will allow friendships to be made and differences to be embraced. This will lead to progress in race relations.

I graduated high school from an affluent, mostly white school, in Temecula. When I stepped foot into my law school after attending UCI, I met people from a wide variety of backgrounds. I was challenged for the first time to rethink some of my ideas related to affirmative action. Now that I have graduated, I know that a diverse student body is indelible to a career in law. The American Bar Association agrees, filing an amicus curiae brief in Fisher v. University of Texas to voice its support of our current law.

Justice O'Connor said in 2003 that “we expect...that 25 years from now, the use or racial preferences will no longer be necessary.” If the court agrees with her, it should keep Grutter in place until 2028. I think there is still some time left.

When Justice Kennedy makes his decision he should remember the words of Justice O'Connor. He definitely shouldn't consider the political assault on John Roberts. Maybe then Roberts statement will be correct. The Supreme Court will never have to bow to political pressure.