Macro Roundup

“…Just two percent of all US counties account for half the nation’s homicides, he writes, and depending on the location as many as 95 percent of the victims are black or Hispanic….Mangual notes thatin 2018, Germany, England and Wales collectively had 3,197 homicides spread out over 142.2 million people, a rate of 2.24 per 100,000. That same year, there were a combined 337 killings among just 472,604 people in 11 inner city areas of Chicago, Baltimore, Detroit and St. Louis — a rate of 71.3 per 100,000….Many of the countries we are unfavorably compared to respond equally punitively to homicide convicts, who constitute a significant slice of our prison population,” In fact, he writes, the US justice system is actually lenient toward the worst offenders. According to a 2017 study on violent crime in Chicago, “on average, someone arrested for a homicide or shooting had nearly 12 prior arrests. Almost 20 percent of Chicago shooters and killers had more than 20 priors.” He cites a 2018 federal report that says 30 percent of convicted murderers and 64 percent of convicted rapists/sexual assailants nationwide were out in less than 10 years. The average state prisoner serves just 44 percent of his sentence before he is released.”…"Just 14.1 percent of state prisoners were incarcerated primarily for a drug offense, and the vast majority of them were in primarily for trafficking, as opposed to possession — an offense category that constitutes less than 4 percent of the state prison population.” Even that 4 percent includes inmates who likely committed more serious crimes but pled guilty to lesser charges such as drug possession, he argues. He points to a 2018 study in which a team of doctors and a criminologist looked at injuries to suspects during arrests. “The study analyzed more than 1 million calls for service, which resulted in more than 114,000 criminal arrests by officers in three midsized police departments — one in North Carolina, one in Arizona, and one in Louisiana,” he writes. “Police officers used physical force in just 1 in every 128 of those arrests, meaning that more than 99 percent of those arrests were completed without the use of any force whatsoever. Moreover, based on expert medical examinations of the medical records of arrestees, the study went on to find that 98 percent of the suspects subjected to physical force ‘sustained no or mild injury.’”…”

Brad Hamilton, "Why a small number of criminals perpetrate the worst crimes in America,"New York Post, August 6, 2022, https://nypost.com/2022/08/06/why-a-small-number-of-criminals-perpetrate-the-worst-crimes-in-america/

Why a small number of criminals perpetrate the worst crimes in America

In the summer of 2019, Brittany Hill was 24, and walking with her toddler daughter through Chicago’s Austin neighborhood when a sedan slowly approached, and two men opened fire.

Caught in a gang shootout, Hill shielded her child as bullets flew, hiding them both behind the bumper of a parked car. Though two men rushed to her aid, it was too late. Hill died at the hospital, and her daughter was left motherless at just one year old.

The horrific episode — captured on a Chicago police surveillance camera and “one of the most tragic videos I had ever seen,” according to New York criminologist Rafael A. Mangual — quickly led to the arrests of two men: Michael Washington, 39, and Eric Adams, 23.

Both had long records, but Washington’s stood out: nine felony convictions, including second-degree murder in 2004, and a previous attempted murder charge reduced to battery in a plea deal.

“What on earth were these guys — especially Washington — doing out on the street?” Mangual wondered. That question led him to investigate crime and punishment in America with his new book, “Criminal (In) Justice: What the Push for Decarceration and Depolicing Gets Wrong and Who It Hurts Most” (Center Street), out now.

Using a wide range of stats, Mangual shows that most American violent crime is perpetrated by a small number of criminals — primarily young men with long rap sheets — and that gun violence affects an equally small minority of Americans, mainly in New York, Chicago and other large metro areas.

Just two percent of all US counties account for half the nation’s homicides, he writes, and depending on the location as many as 95 percent of the victims are black or Hispanic.

“If you were to randomly drop 10,000 people over the United States, the overwhelming majority of them will land someplace with a murder rate close to zero,” he writes. “An unlucky few, however, will drop into neighborhoods with homicide rates rivaling those of some of the most dangerous places in the world.”

Among recent shooting victims was 16-year-old Kahlik Grier, gunned down in January 2021 in the stairwell of his Bronx apartment building. One of the suspects, Desire Louree, had been released from jail just a month before the murder.

“Louree had open cases for gun possession and attempted murder — the former from 2019, and the latter stemming from a 2020 shooting in Brooklyn,” Mangual writes.

The root cause of our sky-high murder problem, he argues, is “the antisocial dispositions of violent criminals and a street culture that elevates violence as both a legitimate means of dispute resolution and a basis for respect.”

A key example is convicted killer Thaddeus “T.J.” Jimenez. After being awarded $25 million in 2012 over a wrongful conviction, he had a golden chance to give up the thug’s life in Chicago.

“Jimenez could have gone anywhere in the world to lead one of the many lives his newfound wealth would have sustained,” writes Mangual, “Instead, he went back to his West Side Chicago neighborhood and doubled down on the gangbanger lifestyle.”

In 2015, Jimenez shot a man twice as he was getting out of his car. “So far as I can tell, the victim was not robbed, and there was no indication that he owed Jimenez a cent — let alone an amount large enough to matter to someone recently graced with an eight-figure windfall.”

Mangual also examines a commonly accepted belief — among liberals but also some conservatives — that America locks up too many people. Despite comprising just five percent of the world’s population, the argument goes, we have 25 percent of its inmates, and something must be done to reduce those numbers.

But it is wrong to base the “mass incarceration” theory on the large number of people we imprison compared with other developed nations, because America has vastly more violent inmates who kill or maim with guns, he writes.

Mangual notes that in 2018, Germany, England and Wales collectively had 3,197 homicides spread out over 142.2 million people, a rate of 2.24 per 100,000. That same year, there were a combined 337 killings among just 472,604 people in 11 inner city areas of Chicago, Baltimore, Detroit and St. Louis — a rate of 71.3 per 100,000.

“This gap in homicide victimization rates goes a long way toward explaining America’s comparatively higher incarceration rate, particularly given the fact that many of the countries we are unfavorably compared to respond equally punitively to homicide convicts, who constitute a significant slice of our prison population,” he writes.

Weapons offenses, he adds, “account for similar percentages of the UK’s and US’s adult prison populations, but with somewhere in the range of 400 million firearms in the US compared to just 4 million in the UK, the US simply has a greater number of gun offenders.”

He also pushes back on the theory that our prison population is overly bloated with minor drug-use offenders being unfairly held behind bars.

“Notwithstanding the widely held belief that incarceration is driven by the drug war, just 14.1 percent of state prisoners were incarcerated primarily for a drug offense, and the vast majority of them were in primarily for trafficking, as opposed to possession — an offense category that constitutes less than 4 percent of the state prison population.”

Even that 4 percent includes inmates who likely committed more serious crimes but pled guilty to lesser charges such as drug possession, he argues.

In fact, he writes, the US justice system is actually lenient toward the worst offenders.

According to a 2017 study on violent crime in Chicago, “on average, someone arrested for a homicide or shooting had nearly 12 prior arrests. Almost 20 percent of Chicago shooters and killers had more than 20 priors.” He cites a 2018 federal report that says 30 percent of convicted murderers and 64 percent of convicted rapists/sexual assailants nationwide were out in less than 10 years.

“Contrary to the widespread belief that we regularly lock offenders away and throw away the key … the average state prisoner serves just 44 percent of his sentence before he is released.”

And what about the epidemic of police violence?

It’s not happening, Mangual claims.

He’s not discounting the horror of cops who kill, and he points to the shocking clips of a Minnesota cop shooting Philando Castile in 2016 during a traffic stop and of a New York officer subduing Eric Garner in 2014 during an arrest for selling cigarettes.

“It would be hard for anyone to watch those videos and not be disturbed by the sounds of men gasping for what would turn out to be their final breaths — and in the case of Castile, to watch a man die in front of a four-year-old child, who will have to deal with the trauma of having witnessed something even battle-hardened soldiers struggle to live with.”

But these and other videos of cop abuse contributed “to the increasingly widespread sense that police uses of force were far more common than they actually were.” Actually, he writes, such violence is rare.

He points to a 2018 study in which a team of doctors and a criminologist looked at injuries to suspects during arrests.

“The study analyzed more than 1 million calls for service, which resulted in more than 114,000 criminal arrests by officers in three midsized police departments — one in North Carolina, one in Arizona, and one in Louisiana,” he writes.

“Police officers used physical force in just 1 in every 128 of those arrests, meaning that more than 99 percent of those arrests were completed without the use of any force whatsoever. Moreover, based on expert medical examinations of the medical records of arrestees, the study went on to find that 98 percent of the suspects subjected to physical force ‘sustained no or mild injury.’”

Mangual also argues that eliminating cash bail for suspects arrested for non-violent crimes has been a mistake in states like New York, which keeps letting more dangerous criminals back out on the street.

Instead, we should use a risk-evaluating formula — rather than weighing up the seriousness of a charge or trying to reduce the prison population — when figuring out who should get bail and who should be denied.

“A fairer and more accurate way for judges to assess a given defendant’s risk is through a validated algorithmic risk assessment tool (RAT), which calculates risk based on attaching weights to a variety of factors like criminal history and age,” he writes. In other words, those who are older, have a job and/or ties to the community, and have no violent criminal history should be given more leniency when deciding bail.

“A recent study by the Center for Court Innovation illustrated the predictive accuracy of such a tool — even across racial groups, which is a crucial criterion, given the opposition of some reformers who claim that racial bias is built into the algorithms.”

“People of good will can certainly disagree about the extent to which our criminal justice system flawed, and they can disagree about how to go about improving that system,” he writes.

But the idea that it “regularly brutalizes disfavored groups via overly draconian sentences and unjustifiably violent policing is nothing short of defamatory.”

“…To pay for the full $4.1 trillion of excess spending, the unexpected boost in the price level needs to be larger: in the range of 19%, rather than 11% (though even this larger number assumes, perhaps too optimistically, that the government will not have more spending surges in the future). Starting in July 2022, the required price-level accommodation can be accomplished by 9.4% inflation over one year, 5.7% average inflation over two years, or 3.5% average inflation over five years. All these intervals are followed by 2% inflation. The result for five years is not far from the bond market’s current breakeven inflation rate over a five‑year horizon. That is, the fiscal approach accords with expected inflation rates inferred from five‑year yields on conventional and indexed Treasury bonds. So, a plausible argument is that the surge in federal spending triggered by the COVID-19 shock led to a permanent, unexpected rise in the price level by about 19%. This increase in the price level is a mechanism for financing the extra COVID-related spending. In a reasonable scenario, the CPI inflation rate comes down fairly quickly from its current value of 8.5% and averages around 3.5% over the next five years. While the inflation rate eventually returns to 2%, the upward surge in the price level is permanent….”
Robert Barro, "Understanding Recent US Inflation,"Project Syndicate, August 30, 2022, https://www.project-syndicate.org/commentary/us-inflation-fiscal-policy-likely-culprit-by-robert-j-barro-2022-08

Understanding Recent US Inflation

When considering what caused the sharp increase in the US inflation rate from late 2020 to today, my initial instinct was to focus on aggressive monetary policy, following Milton Friedman’s famous dictum that, “inflation is always and everywhere a monetary phenomenon.” But while monetary policy is important, aggressive fiscal policy may have been more important this time.

From March 2020 to March 2022, the US Federal Reserve kept short-term nominal interest rates at zero while also using quantitative easing to expand its balance sheet from $4 trillion to an eventual $9 trillion. It is now generally acknowledged that the Fed was way behind the curve after late 2020, if not earlier. Because it did not raise its policy rate until the spring of 2022, it failed to keep nominal interest rates ahead of inflation, and thus lost control.

The problem with arguing that monetary policy was the sole source of the recent inflation is that the Fed was similarly aggressive during the Great Recession and its aftermath, from 2008 onward. Short-term nominal interest rates were fixed at zero for what turned out to be a seven-year period (early 2009 to late 2015). The Fed’s balance sheet grew from $900 billion in August 2008 to more than $4 trillion - which seemed like a big number at the time. Yet inflation remained tame - averaging around 2% per year from 2009 to 2019 - and inflation expectations remained anchored at about the same value.

Why were the inflation results so different from 2020 on? An obvious difference between the two periods is the dramatic fiscal expansion that began in the spring of 2020 in response to the COVID-related recession, and which included federal transfers that dwarfed those associated with the Great Recession.

To see how fiscal expansion translates into inflation, start with the volume of federal spending since the second quarter of 2020. The quarterly data up to the first quarter of 2022 show cumulative excess federal spending (above a pre-COVID baseline spending of $5 trillion per year) of $4.1 trillion - or 18% of 2021 GDP. The main spending surges (at annual rates) reflect outlays of $9 trillion in the second quarter of 2020 and $7 trillion in the third quarter of 2020, under President Donald Trump, followed by $8 trillion each in the first and second quarters of 2021, under President Joe Biden.

To assess how inflation responded to this spending, I draw from the “fiscal theory of the price level,” which has been advanced in research by the Hoover Institution’s John H. Cochrane. Suppose the government does not plan to finance any of its additional spending by cutting other spending or raising taxes. If there is no formal default on Treasury bonds, “revenue” must come from inflation above the normal or expected level, which in turn reduces the real (inflation-adjusted) value of outstanding government bonds. Specifically, the inflation above 2% per year since mid-2020 can be thought of as cumulating to an unexpected boost in the price level, and this accumulation of excess consumer price inflation from May 2020 to July 2022 turns out to be about 11%.

The net nominally denominated public debt corresponds roughly to the publicly held part of the debt, which was $21 trillion in mid-2020 - or 91% of 2021 GDP. This concept subtracts from the gross debt the amounts held by federal trust funds and agencies but not the parts held by the Fed - as is reasonable because the Fed’s holdings of Treasury and mortgage-backed securities are roughly balanced by the Fed’s nominal liabilities. (One also could adjust for the federal debt that is CPI-indexed, but this amount is only around 7% of the total.)

The unexpected 11% boost in the price level lowered the real value of the net public debt by $2.3 trillion (equivalent to a default on 11% of the debt), which corresponds to effective revenue for the federal government. (Because the increase in the price level was a surprise, it should not have affected the nominal interest rates that the government had to pay on its bonds.)

To pay for the full $4.1 trillion of excess spending, the unexpected boost in the price level needs to be larger: in the range of 19%, rather than 11% (though even this larger number assumes, perhaps too optimistically, that the government will not have more spending surges in the future). Starting in July 2022, the required price-level accommodation can be accomplished by 9.4% inflation over one year, 5.7% average inflation over two years, or 3.5% average inflation over five years.

All these intervals are followed by 2% inflation. The result for five years is not far from the bond market’s current breakeven inflation rate over a five‑year horizon. That is, the fiscal approach accords with expected inflation rates inferred from five‑year yields on conventional and indexed Treasury bonds.

So, a plausible argument is that the surge in federal spending triggered by the COVID-19 shock led to a permanent, unexpected rise in the price level by about 19%. This increase in the price level is a mechanism for financing the extra COVID-related spending. In a reasonable scenario, the CPI inflation rate comes down fairly quickly from its current value of 8.5% and averages around 3.5% over the next five years. While the inflation rate eventually returns to 2%, the upward surge in the price level is permanent.

The bottom line is that, although monetary policy was too aggressive for too long, the likely main culprit behind the recent high inflation was an extraordinarily expansionary fiscal policy.

"...Our most significant finding from correcting the census income calculations wasn’t the overstated inequality between top and bottom earners. It was the extraordinary equality of income among the bottom 60% of American households, regardless of employment status. In 2017, among working-age households, the bottom 20% earned only $6,941 on average, and only 36% were employed. But after transfer payments and taxes, those households had an average income of $48,806. The average working-age household in the second quintile earned $31,811 and 85% of them were employed. But after transfers and taxes, they had income of $50,492, a mere 3.5% more than the bottom quintile. The middle quintile earned $66,453 and 92% were employed. But after taxes and transfers, they kept only $61,350—just 26% more than the bottom quintile. Even these figures don’t tell the whole story. In the bottom quintile, there are on average only 1.92 people living in a household. The second and middle quintiles have 2.41 and 2.62 people respectively. After adjusting income for the number of people living in the household, the bottom-quintile household received $33,653 per capita. The second and middle quintile households had on average $29,497 and $32,574 per capita, respectively. The blockbuster finding is that on a per capita basis the average bottom quintile household received 14% more income than the average second-quintile household and 3.3% more than the average middle-income household...."

Phil Gramm and John Early, "Income Equality, Not Inequality, Is the Problem,"Wall Street Journal, August 29, 2022, https://www.wsj.com/articles/income-equality-not-inequality-is-the-problem-labor-force-participation-income-taxes-transfer-payments-middle-bottom-rich-household-size-census-11661781351

Income Equality, Not Inequality, Is the Problem

Contrary to conventional wisdom, the most dramatic and consequential change in the distribution of income in America in the past half-century isn’t rising income inequality but the extraordinary growth in income equality among the bottom 60% of household earners.

Real government transfer payments to the bottom 20% of household earners surged by 269% between 1967 and 2017, while middle-income households saw their real earnings after taxes rise by only 154% during the same period. That has largely equalized the income of the bottom 60% of Americans. This government-created equality has caused the labor-force participation rate to collapse among working-age people in low-income households and unleashed a populist realignment that is unraveling the coalition that has dominated American politics since the 1930s.

On these pages, we have debunked the myth that income inequality is extreme and growing on a secular basis by showing that the Census Bureau measure of income fails to include two-thirds of all federal, state and local transfer payments as income to the recipients and fails to treat taxes paid as income lost to the taxpayer. The Census Bureau measure overstates current income inequality between the highest and lowest 20% of earners by more than 300% and claims that income inequality has risen by 21% since 1967, when in fact it has fallen by 3%.

Our most significant finding from correcting the census income calculations wasn’t the overstated inequality between top and bottom earners. It was the extraordinary equality of income among the bottom 60% of American households, regardless of employment status. In 2017, among working-age households, the bottom 20% earned only $6,941 on average, and only 36% were employed. But after transfer payments and taxes, those households had an average income of $48,806. The average working-age household in the second quintile earned $31,811 and 85% of them were employed. But after transfers and taxes, they had income of $50,492, a mere 3.5% more than the bottom quintile. The middle quintile earned $66,453 and 92% were employed. But after taxes and transfers, they kept only $61,350—just 26% more than the bottom quintile.

Even these figures don’t tell the whole story. In the bottom quintile, there are on average only 1.92 people living in a household. The second and middle quintiles have 2.41 and 2.62 people respectively. After adjusting income for the number of people living in the household, the bottom-quintile household received $33,653 per capita. The second and middle quintile households had on average $29,497 and $32,574 per capita, respectively. The blockbuster finding is that on a per capita basis the average bottom quintile household received 14% more income than the average second-quintile household and 3.3% more than the average middle-income household.

It should be noted that while per capita comparisons are widely used, they tend to overstate the effects of household size. Two people living together can achieve the same material well-being for less than they could living separately. The Organization for Economic Cooperation and Development has developed a measure widely used internationally to adjust for household size, and the Census Bureau has a similar adjustment it uses in its supplemental poverty measure. Since the results produced by the OECD and the Census Bureau adjustments are so similar, we simply use the average of the two below.

The nearby chart compares the after-tax, after-transfer incomes of the bottom three quintiles of American households with no adjustment for household size, on a per capita basis, and using the average of the OECD and census adjustments for household size. We found that the average bottom-quintile household has $2,401 (or 6.6%) more income than the second quintile and only $3,306 (or 7.8%) less than the middle-income quintile.

The average second-quintile household earned almost five times as much as the average household in the bottom quintile, because it had 2.4 times as many working-age members working and on average each worker worked 80% more hours. The average middle-quintile household earned almost 10 times as much and had 2.6 times the percentage of its working-age people working, each working twice as many hours. Yet the bottom 60% of American households received essentially the same income after accounting for taxes, transfer payments and household size.

Given the surge in transfer payments since the war on poverty, it isn’t surprising that the percentage of working-age people in the bottom quintile who actually worked plummeted from 68% in 1967 to 36% in 2017. With transfer payments giving recipients about as much for not working as they could earn working, only a mandatory work requirement as a condition for receiving means-tested benefits will bring them back into the labor market. While official statistics don’t count two-thirds of those transfer payments and don’t show the income equality they produce, Americans who work hard to make ends meet are aware of it. Despite Democratic politicians’ efforts to provoke resentment against the rich, when was the last time you heard working people complain that some people in America are rich? The hostility of working people is increasingly focused on a system where those who don’t break a sweat are about as well off as they are.

This justifiable resentment is the economic source of today’s American populism. It is ravaging the increasingly unstable Democratic political alliance between welfare recipients and blue-collar workers. It was already building in the 1980s, with what were then called Reagan Democrats, and it was fully manifested in the Trump blue-collar political base. It is now driving political realignment among Hispanic voters, who are disproportionately middle-income earners.

By eroding self-reliance, worker pride and labor-force participation, government-generated income equality undermines the very foundations of American prosperity. A democratic society won’t knowingly tolerate it.