Debt bill passes the House

Last major roadblock cleared. From Politico:

With the government running on fumes, Congress and the White House moved quickly Monday toward expanding Treasury’s borrowing authority and putting in motion an ambitious plan promising between $2.1 trillion to $2.4 trillion in deficit reduction over the next 10 years.The hastily-written 74-page bill—never reviewed by a legislative committee and rushed to the floor— cleared the House on a 269-161 vote late Monday. The Senate is poised to act Tuesday—the very day of the threatened default. But passage seems all but certain given the margin in the House and unified support of Senate leaders of both parties.

Read more here.

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UPDATE: Senate passes, Pres. Obama signs debt ceiling bill to avoid default.

No debt vote yet

Even though party leaders have arrived at a "deal," voting has not yet occurred in the House or Senate on the measure. While the House is scheduled to vote tonight on the bill (after markets close, lest we forget the TARP fiasco) there are signs that members on both sides are not playing ball:

House Minority Leader Nancy Pelosi, D-Calif., said, "You'll have to ask the speaker. He has the majority." Democrats met for over two hours on the debt ceiling compromise Monday afternoon in the Capitol. Vice President Joe Biden offered a personal appeal to lawmakers to support it—Democratic support is expected to be crucial to getting it over the goal line.

Minority Leader Pelosi's comment, made at 2:35 p.m., likely indicates strong push-back from the House Progressive Caucus. Let's hope this gets done soon so we can all move on happily--at least until after 2012 when this nonsense likely comes up again. For a play-by-play on the debt ceiling negotiations, see the National Journal.

Do we all really have to be lawyers?

I recently received an interesting question from one of my 2L colleagues: "Do I really want or need to practice law?" Naturally, the first thing that came out of my mouth, "Why on earth would you have spent so much time going through the essential motions only to end up doing something else?" But, upon further reflection, I realize that I may have been slightly narrow-minded. Maybe law students, particularly those who come into law school just because it is the "next best thing to do," need a greater amount of guidance from career counseling offices to navigate the ever-changing and dramatically complex job landscape. Let me explain.

First, there are other "career options" that are quite obvious--eg, public service, non-legal advocacy work, etc. It is obviously not uncommon for politicians to be lawyers, for example (our president is one). But there are many non-obvious career paths for someone who has gone through the intellectual quest that is law school, and in my mind, career services offices ought to expand their knowledge of these areas in order to help students. For instance, one might consider business or entrepreneurship. I did a fairly quick google search for what appears to be dozens of available positions in this field, many of which do not require any special degree other than "some graduate level work." Why aren't students looking at these jobs?

I understand the position of others (including some who write for this blog) who opine that law schools should attempt to narrow the field of applicants, and tailor curriculum in a manner sufficient to more adequately prepare students for legal practice. All other things equal, I would agree. But legal education is a business (a big business) that is expanding and not going away any time soon. It is driven by rankings, and powered by the federal government's continual willingness to foot the bill for thousands of students who have about as much a chance of paying it back within three decades as Gigli does of becoming a cult classic.

So why not change the approach? A J.D. should be a general degree like an MBA, and schools should try to incorporate a wider cross-disclipinary focus into the basic curriculum. Good idea? Mabye, maybe not? Let's hear your thoughts.

Law School in America v. Canada, Eh?

From the McGill Tribune:

The situation in Canada is drastically different, and certainly more promising for prospective students. Much of what ails the American market has been preempted in Canada by an entirely distinct system in which there are both fewer schools and less divergence in terms of academic quality.

"The situation's a lot better in Canada because we have far fewer law schools," says Leeann Beggs, director of career services in the Faculty of Law at Queen's University in Kingston, Ontario. "The likelihood that you're going to get into your profession is very good."

While there are almost 200 American law schools, there are only 20 in Canada, all of which are highly competitive and prestigious. Because they are essentially "all tier one schools," Beggs says, it is very difficult to be admitted, but students can also be assured they will receive a high-quality legal education once they are there. Before passing the bar, law students are expected to article, or work and learn at a law firm in some sort of legal apprenticeship. Furthermore, there seems to be no sort of legal outsourcing being practised in Canada.

"It's pretty tightly controlled who gets access to legal work here," Beggs says.

This is in direct contrast to the hundreds of American law schools, not all of which are accredited—some of which are online—that graduate thousands of new lawyers each year who must then fight for a diminishing number of entry-level jobs. As a result of the Canadian system, recent graduates in this country have a much better chance of gaining the employment they desire. They have already been singled out as the best and the brightest and are competing against a much smaller pool. Some expectations may have to be lowered in terms of starting salaries, says Beggs, but new lawyers should have no problem getting a foot in the door.

Some things are just better in Canada, I guess.

The Irony of Law School

From an international perspective.

Fuzzy Employment Statistics for Attorneys

Law schools cooking employment numbers to attract unwary law students for 40K+ per year in tuition. In other news, the sky is blue.

Country Roads

I love my home state of West Virginia. I love the beautiful hills, the wonderful people and, of course, the Sweet 16-bound Moutaineers. But I cannot ignore a troubling aspect that continues to plague the state's reputation: its economy and general business environment. A recent study ranked the Mountain State dead last in lawsuit environment:

A study conducted by the U.S. Chamber Institute for Legal Reform rates West Virginia as having the nation’s worst lawsuit climate in the United States. . . . The Lawsuit Climate 2010: Ranking the States survey measures how a state’s legal climate affects businesses. Survey respondents were made up of general counsels and senior attorneys or executives in companies with annual revenues of at least $100 million. According to the report, West Virginia was rated last in each of ten elements used to determine a state’s overall position.

So apart from being a lawyer's paradise, businesses tend to eschew locating within the state. And the large companies that have set up shop seem to experience stagnate growth relative to their peers. Various reasons have been advanced to explain why this is the case, including a lack of competitive pay for executives, a relatively antiquated corporate governance structure and now, as noted, the need for tort reform. In any case, it is tough to know how to enact sweeping and meaningful change.

Federalism Showdown

Idaho governor signs law requiring Idaho AG to sue the federal government if residents are forced to buy health insurance. AP

A Response from UT Law and a Clarification

A few days ago, we posted a story about the relative shortage of practical legal education opportunities at many U.S. law schools, as well as the according need for change. In that article, I cited an op-ed in the Daily Texan written by three University of Texas Law students on how UT Law does not currently offer a mandatory brief writing course for first years. A few other outlets--including the Legal Writing Prof Blog--picked up the story. Well, UT Law has chosen to respond to the articles. Specifically, Wayne Schiess, director of the Legal Writing program at UT Law, said in a statement to the Legal Writing Prof Blog:

It is true that the University of Texas School of Law has a first-year legal-writing curriculum without brief writing. When the law school administration removed credits from the required course five years ago, brief writing was lost. Needless to say, the legal-writing faculty thought it was a mistake. So we’ve been teaching a brief-writing elective that only some 1Ls can get into. We're optimistic that brief writing will return to the required first-year curriculum. Indeed, a proposal to do that comes before the faculty this week.

We applaud the changes the school is making. However, I want to emphasize that the article was not meant to single UT Law out. It is obviously a fine institution that provides its students with fantastic opportunities (so, Hook 'em Horns!). And thus, despite the intimations of numerous posters on message boards around the internet, I do not have a problem with UT Law as an academic institution; I do have a problem, however, with the law school system as a whole. If one takes a full glance at the article I wrote, as well as the February 2009 article it cited, one will see that many of us on this blog believe that we need substantial reform in the current law school model because it is simply failing students.

Informational Asymmetries, the Emperor's New Clothes and More Cries For Value

Early in 2009, we noted that the recession has exposed numerous deficiencies in the current legal education system. Accordingly, we argued for a systematic change in curriculum and focus. It appears that law students elsewhere are yearning for the same at their institutions. From The Daily Texan:

[C]riticisms [of the University of Texas Law School] are well-founded. In a survey of accredited law schools, Texas was the only school without a mandatory brief-writing course. In fact, only about half of first-year students surveyed reported being able to get into a brief-writing course. As a result, they will not be trained how to present arguments to a court — one of the most basic legal skills.

Instead of rectifying the problem by meeting national practical skills standards, UT Law instead chooses to steer law students away from taking practical courses by offering grossly grade-inflated first-year electives on such totally impractical topics as Race and Gender in the Constitution.

The first-year curve in all courses is set at 3.3; the average in these “electives” is a 3.8. A student in Race and Gender in the Constitution commented, “The class is a complete joke and a waste of time, but the professor gives almost everyone A’s.” Since law students’ employment is determined by their first-year GPA, creating such an exception to the curve is unfair to other students and misleading to employers relying on the veracity of student transcripts. . . .

So law students can game the system and come out Order of the Coif, while not knowing a single thing about the basic exceptions to the hearsay rule? I can vouch for the fact that this is an absolutely accurate characterization of the system as it is constituted both at my institution, and as the authors noted, at others.

But more pertinently, law school seems (oddly enough) to present a sort of transparent information asymmetry cogently illustrated by the student in this article: in many respects, law schools fail to meet the demands and expectations students have upon entering and that employers have when hiring. Yet, it seems like we all know a little bit of what we are getting at the outset; the sales pitch is just all too compelling. In this sense, law school is more like an experience good that shouldn't demand any sort of warranty. But the problems are still exceedingly pervasive. As the authors noted with respect to their institution:

[There is a] deeper problem at UT Law that has drawn criticism from all corners of the legal industry: Lax institutional standards have marginalized the law school’s role in society of preparing its students to be competent, ethical lawyers.

I hate to say it, but this problem is not confined to UT Law. We need major reforms soon, because permitting students to become engulfed in massive amounts of debt with little to no guidance on how to be competent lawyers will (inevitably, I think) continue to dilute the profession's quality, and worse yet, harm students' lives. Law students ought to be more vocal in their cries for change like the authors in the noted article.

Bad Year in Legal Employment

The National Law Journal issued its annual Go-To Law School List, and the results reek of the recession. Even the top schools placed little more than half of their respective graduating classes into NLJ 250 firms. The top 10 law schools this year in terms of total percentage of the class placed:

1. Northwestern -- 55.9%

2. Columbia -- 54.4%

3. Stanford -- 54.1%

4. Chicago -- 53.1%

5. Virginia -- 52.8%

6. Michigan -- 51%

7. Penn -- 50.8%

8. NYU -- 50.1%

9. Berkeley -- 50%

10. Duke -- 49.8%

Obviously, schools like Harvard (47.6%) and Yale (35.3%) had smaller numbers because graduates of those schools tend to pursue the clerkship and academia routes more heavily. Check out the full rankings.

California Love: L.A. County Faces Erosion of Middle Class

Good news keeps pouring in. . . . LA Times

University fundraising falls 12 percent over last year

From the Washington Post

Is Law School a Good Investment?

Not according to the new research paper, "Mamas, Don't Let Your Babies Grow Up to Be Lawyers." From Economix:

The paper tries to measure the return on investment in a law school education, using three prototypical students (the “Also Ran,” the “Solid Performer” and the “Hot Prospect”). . . . The results are somewhat disheartening, especially considering the surging interest in law school during this tough job market.

Of course, there are a few problems with the methodology employed by the authors:

One big caveat with these types of rankings is that the inputs are different: The students who are accepted to Harvard — and then choose to attend — are probably different from the students who go to the University of Iowa, or for that matter, the University of Southern California, or Yale, or any other school.

Check out the article and the paper.

Similarly Situated?

A cool little gadget from the NYT: it tells you the unemployment rate for people in your age group (among other distinguishing features). If only they had one for law students...

2,000 Legal Jobs Lost

From Law.com:

According to a monthly jobs report released Friday by the U.S. Bureau of Labor Statistics, the nation lost 263,000 jobs in September as the unemployment rate reached 9.8 percent, the highest in 26 years.

The legal sector wasn't spared. When the data is seasonally adjusted, the sector shed another 2,000 jobs. When not seasonally adjusted, the legal industry lost 13,600 jobs, likely a result of the conclusion of most summer associate programs and the return of students to their law schools.

Click here for the article.

Judge Richard Posner . . . a Keynesian?

At the New Republic, Judge Richard Posner has confessed how the current financial crisis has caused him to become more attuned to the ideas of John Maynard Keynes and his vision of an interventionist economic policy where the government uses fiscal and monetary tools to counteract the cyclical--and, as this recent economic crisis perhaps illustrates, unpredictable--business cycle. As Judge Posner writes:

We have learned since September that the present generation of economists has not figured out how the economy works. The vast majority of them were blindsided by the housing bubble and the ensuing banking crisis; and misjudged the gravity of the economic downturn that resulted; and were perplexed by the inability of orthodox monetary policy administered by the Federal Reserve to prevent such a steep downturn; and could not agree on what, if anything, the government should do to halt it and put the economy on the road to recovery.

Central to Keynes' theory--the reason behind the now-apparent recovery, as the Judge writes--is that consumption is, after all, "the sole and end object of all economic activity." Sparing complicated mathematic explanations, this is partly because passive investments (i.e., income not necessarily infused into productive activity, but derived from savings) theoretically take some time to stimulate economic growth. Alternatively, active investments create income and essentially form what Keynes calls a "multiplier effect," further increasing the "incomes of people . . . on the receiving end [of any initial income spent on a given product]." Judge Posner uses this example:

When I buy a bottle of wine, the cost to me is income to the seller, and what he spends out of that income will be income to someone else, and so on. So the active investment that produced the income with which I bought the wine will have had a chain-reaction--what Keynes calls a "multiplier"--effect.

Consumption, in Keynes' theory, is the driving force of economic growth. And, as the Judge explains in this article, the government must effectively counterbalance times when consumption is lacking and hoarding is rampant. From this vantage point, Judge Posner notes that "[b]y now a majority of economists are in general agreement with the Obama administration's exceedingly Keynesian strategy for digging the economy out of its deep hole."

Keynes' theory, of course, presupposes business cycles. However, I have rarely seen consideration given to the structural imbalances in the capital structure of our economy. Many economists, in fact, quite convincingly show that reckless monetary policy obfuscates real interest rates, creating distortions in long-term demand for capital. In addition, persistent bailout guarantees and a hyper-expanding credit market have created perverse incentives for private market actors. Put another way, these instances may in some respect be attributed to bad government policy. So a question I must ask is that, even if Keynes' theory solves the structural distortions of the business cycle--a point which I am admittedly not equipped to debate--are there other policy measures directed at resolving potential core causes of the financial crisis that should be taken into account before we grant the government a medal of honor?

Check out Judge Posner's article.

The Taxman Cometh

Hello everyone, I will be (one of) your new bloggers here at BBL. I have a particular interest in tax law and economics so I found the following article interesting.

According to Bloomberg, Wegelin & Co., Switzerland's oldest bank, is requiring customers to dump their U.S. assets or close their accounts. As you might have guessed, Wegelin's decision has to do with the recent battle between UBS and the IRS. Essentially, Wegelin believes it will be less onerous to require its customers to dump their U.S. assets rather than comply with the ever increasing reporting requirements demanded by the I.R.S.

While the I.R.S. has a legitimate interest in collecting tax owed to it from U.S. citizens and certain foreign persons holding U.S. based assets, its efforts may cause more foreign banks to follow in the footsteps of Wegelin. And that my friends, is a bad thing.

Offshore financial institutions hold approximately $7 Trillion in assets. If these institutions start insisting their clients dump a certain asset class, the supply of that asset will increase and its price will tend to decline (assuming, like all economists, we ignore many of the realities of the universe). Thus, if offshore institutions start dumping lots of U.S. assets (likely a healthy chunk of that $7 Trillion dollars), U.S. asset prices will begin to decline.

Normally, it is not such a big deal that U.S. assets are getting cheaper. However, we are currently in the midst of a financial crisis that was precipitated in large part by the fall of asset prices. It is difficult for U.S. financial institutions to raise sufficient capital and "get healthy" unless the value of their assets begins to increase. Dumping large quantities of U.S. assets onto the market will make any financial recovery just a bit more difficult.

Should the IRS continue to pursue its crack down on tax-shelters? It depends. Does the short term gain of more (badly needed) revenue outweigh the potential cost of propping up more financial institutions in the future? The I.R.S. and our current administration certainly seem to think so!

Pay As You Drive Auto Insurance: Be Afraid, Be Very Afraid

Please welcome the latest invasion of our privacy. It’s called Pay As You Drive (PAYD) auto insurance. The concept is a simple one: a customer’s premium is tailored to his/her driving habits. This includes the number of miles driven, and also often includes the style (i.e. speed and acceleration) and time of driving. Many insurance carriers allow their customers to voluntarily select a PAYD plan. For example, Progressive offers the “My Rate” Program, and the company’s website boasts that “[i]f you’re a safe and/or occasional driver, you could pay less for auto insurance- a lot less!” In return for the discounted auto insurance, however, customers sacrifice their privacy. GPS tracking devices are installed to register customers’ driving habits. Is a better rate on auto insurance really worth sacrificing the constitutionally protected right to privacy?

Although programs like Progressive’s “My Rate” are cause for concern (especially in this harsh economic climate where we’re all trying to save a buck), proposed legislation in California downright scares me. The proposal allows an insurer to offer self-reported estimated mileage plans (“EM”) and/or actual-mileage driven plans (“AMD”). An insurer may exclusively offer AMD plans, and, may, in turn, mandate the installation of GPS tracking devices. Insurance companies understandably wish to attain the most information possible so as to accurately measure a policyholder's risk. But, with increased technology, the question becomes how much is too much? We don’t want insurance companies knowing every detail of our personal life, no matter how helpful it may be for calculating risk.

There are not any direct constitutional issues, as the constitution obviously does not limit private companies and individuals. However, with PAYD, insurers will have access to information such as speed and style of driving (and maybe even location, although supposedly the location of the vehicle will be left out of the data collected), and it is hard to imagine that the government wouldn’t try to get its hands on such information. For example, if the government is prosecuting an individual for vehicular manslaughter, it would likely seek to subpoena the information collected by PAYD insurers--information that would be more readily available than it would generally be.

There are, to be sure, benefits that come along with PAYD auto insurance. At least theoretically, those with PAYD policies will curtail the amount they drive, and, thus, reduce carbon dioxide emissions. However, if the insurance market becomes dominated by AMD plans, our privacy will be seriously jeopardized. Do the potentially lower insurance rates and environmental benefits justify an infringement on our constitutional right to privacy?

How to Restart Your Career in a Down Economy

From time to time, we receive e-mails notifying us of upcoming events. We always appreciate the information and are more than happy to pass along information that may be useful to our readers.

The Association of the Bar of the City of New York has informed of us of one event that sounds particularly intriguing. It, along with Vault.com, will host a day long program called “Getting Back in the Game: How to Restart Your Career in a Down Economy.” The Association explains that this program is “designed to assist job-seeking attorneys in learning how best to market themselves whether they are looking to go to a firm, start their own practice or are considering an alternative legal career.” We understand things aren't pretty our there in the legal world and commend the New York City Bar and Vault.com for putting together what looks to be a stellar event.

Speakers will include Patricia Hynes (President of the New York City Bar), Brian Dalton (Senior Law Editor of Vault.com), David Lat (founding editor of Above The Law), T.J. Duane (Principal of Lateral Link), a hiring partner and recruiting director from major international law firms, and many other notable members of the legal community.

When: Tuesday, June 16, 2009, 9:30 a.m. to 4:30 p.m.

Where: New York City Bar Association, 42 West 44th Street

Check out the Association's website for further information as registration (along with a registration fee) is required.