VW Bugs

VW “With three Volkswagen and two Audi dealerships in Las Vegas told to stop the sale order of its four-cylinder diesel vehicles, Volkswagen AG said Tuesday that a scandal over falsified U.S. vehicle emission tests could affect 11 million cars worldwide as investigations of its diesel models multiply.” [LVRJ]

There are some interesting layers to this story.  Let’s call layer one the “regulations” layer.  We do want to set standards for the emission of nitrous oxide, which accounts for about 5% of greenhouse gas created by human activity. And, the stuff tends to stick around:

“Nitrous oxide molecules stay in the atmosphere for an average of 114 years before being removed by a sink or destroyed through chemical reactions. The impact of 1 pound of N2O on warming the atmosphere is almost 300 times that of 1 pound of carbon dioxide.” [EPA]

Therefore, it sounds like a good idea to set some standards for light duty vehicle emissions. [GPO.gov pdf]  Volkswagen, desirous of selling its products – in this case four cylinder diesel powered cars – was subject to those vehicle emission standards, just like other diesel vehicles manufactured by Ford, Mercedes Benz, and BMW. [AutoTrader]  So, why would the corporation cheat? One important reason is that the company could not manufacture a car with the three legs of the stool: Performance, Fuel Economy, and Low Pollution – and maintain its profits. [Vox]

As everyone knows by now, the corporation decided to install defeat software which fudged the numbers when the cars were being tested for emissions. In short, they could get the performance levels they wanted, at profitability levels they wanted, and this done by sacrificing the pollution part of the equation.  This explains the wide difference between the results of the road tests and the lab tests.

“The Environmental Protection Agency alleges the automaker had designed software to let its diesel cars detect when they were being tested for emissions. The software, known as a “defeat device,” was installed in some 482,000 cars, spanning model years 2009 through 2015, regulators say.” [LVRJ]

Again, as everyone knows by now, this was patently illegal.  Patently illegal behavior by a company with sales revenues of $202.46 billion in 2014; gross income of $33.88 billion; and, a net income of $10.85 billion. [MktWtch] Prior to this debacle, VW’s ROE (return on equity) was at 11.84%, Ford reported 14.33%, and BMW’s ROE was 15.61% [YCharts]

Investors like watching the ROE because:

“Return on equity (ROE) measures the rate of return on the money invested by common stock owners and retained by the company thanks to previous profitable years. It demonstrates a company’s ability to generate profits from shareholders’ equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate growth. Return on equity is useful for comparing the profitability of companies within a sector or industry.” [YCharts]

VW’s earnings for 2015 were estimated as about $234 billion. Ford, by contrast, was expected to see about $150 billion for 2015.  On June 24, 2015 VW was selling at $218.40/share; things started to go south quickly after VW hit $162.40/share on September 18, 2015, and the stock is reported at $111.50 September 23, 2015.   We are now sliding into the second layer of the story.  It’s not just that VW stock took a dive after the cheating was reported – nor that the cheating caused investors to sell – it may very well be that the very thing the corporate management feared, which caused the cheating, was the proximate reason for the Big Slide.

The Management Layer.   VW’s annual report to investors opens with a general description of board operations, “We also receive a detailed monthly report from the Board of Management on the current business position and the forecast for the current year. Any variance in performance as against the plans and targets previously drawn were explained by the Board of Management in detail, either orally or in writing. We analyzed the reasons for the variances together with the Board of Management so as to enable countermeasures to be derived.” [VW pdf]

What we appear to have at this point is Management Speak for Shareholder Value management.  It’s probably safe to assume that the discussions of “current business position” included the old standbys sales, revenues, expenses, liabilities, and analyst expectations.  We can base this conjecture on the reference to the “forecast for the current year.”  Remove the gilding on “variance,” and “targets,” and we’re most likely talking about share prices predicated on earnings expectations. 

So, in order to keep the earnings expectations nice and high, and thereby secure higher share prices – the management decided to roll the dice and hope that no one caught on to the Defeat Device.  More simply stated: Shot. Into. Own. Feet.

If there were a better reason to chuck the Share Holder Theory of Management – or at least to modify it such that it doesn’t drive the decision making process into the nearest convenient ditch – this just might be the appropriate occasion.

Note that it is not that Volkswagen wasn’t a profitable company.  It had a perfectly acceptable RoE (11.84%) with earnings expected to be in the $230B range for 2015.  Nor did the 4 cylinder diesel engine cars constitute a major portion of its sales.  While the total number of cars involved isn’t clear yet, VW has shut down sales of the 2015 and 2016 “clean diesel” models, noting that 23% (7,400) of new cars sold in August were diesel. [NYT]  Volkswagen Group manufactured some 10.2 million vehicles in 2014. [Stat]  The North American production for 2015 was estimated at 0.64 million. [Stat]

It almost defies common sense to perceive how cheating on the emissions testing for a group of products which were not a major part of the American market was really supposed to enhance the bottom line.  Unless, we revert to the “every penny counts” mindset in maintaining a certain targeted profit level.  Let’s take an educated guess that it was more important for VW management to maintain profit (and thus share value) than it was for them to develop and produce cars with legal levels of emissions, acceptable standards for performance, and reasonable fuel efficiency.  They were more interested in making money than in making cars? More interested in short term profits and rolling those dice against long term losses?

It wasn’t that long ago that Volkswagen wanted to be the global leader in unit sales, but as a CNBC commentator put it: “Volkswagen is learning that getting ahead at all costs eventually catches up with you. So much for being the leader on a global basis on auto sales.”

The international layer.  Diesel powered cars are much more popular in Europe than in the U.S.  Thus, economists are trying to sort out what the impact will be on the Eurozone economy [Express]  The company is now facing litigation in Italy over fuel economy related issues. [Telegraph]  And, there are reports that the EU is looking at stricter rules to close the gap between laboratory and road test results. [EuObs]  Ironically, a company that didn’t want to play by the rules may find itself facing a more rigid regulatory regime in the very part of the planet where it had 25% of the market.  As of yesterday, there were calls for greater scrutiny of all automobile manufactures in Europe. [MrktWtch

Perhaps even more ironically, a company that wanted to increase its value managed to cause a 30 billion Euro drop in market cap in two days. [MrktWtch]  The CEO has resigned, the Chancellor of Germany is calling for a prompt investigation, [Telegraph] and the UK is entering the lists for a probe of what went so ridiculously wrong. [Guardian]

What went wrong?  What’s been going wrong for a while now – the story sounds entirely too familiar?  Financial institutions which sold and then bet on the value of financial products on which they could not place a value (Lehman Brothers et al.) in the U.S. in 2007-2008? Subprime CDOs?   Bankers colluded to fiddle with the LIBOR rate?  Does it sound like the same motivation as seen in the Worldcom and Enron?  It’s founded in the same swamp land all the other egregious examples have inhabited – greed.

Perhaps it’s too easy to forget that money isn’t the root of all evil; it’s the LOVE of money, or  that “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” [1T 6:10]  There will be sorrows aplenty – in the regulation layer, the management layer, and on the international scene.  There is a relatively fine line between seeking economic growth and downright avarice, and when it’s crossed the results can be catastrophic.  The question becomes: How many more times do we have to see this play before we get the point?

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Sound and Fury Signifying Something: Nevada Republicans vote against funding Planned Parenthood

Planned Parenthood Stand

It doesn’t take much imagination to guess how Nevada’s Republican Representatives in Congress voted on H.R. 3134, the bill to defund Planned Parenthood.  Yes, they all voted in favor of the resolution. [LTN]  This would primarily impact three centers in the Las Vegas metropolitan area (2), and one in Reno.  Let’s be clear about what the Nevada Republicans wanted to “de-fund.”  Those public funds come from two programs. Medicaid, a health care program for lower-income Americans, and Title X, a federal family planning program which also serves lower-income individuals  constitute most of the funding appropriated, with Medicaid getting the largest portion.   What is almost beyond understanding is why the resolution was necessary – other than as a vehicle for political grandstanding:

“The 1977 Hyde Amendment dictated that federal Medicaid funds could only be used to fund abortions in cases of rape, incest or to protect the life of the mother. However, some states have expanded cases in which they will provide funds. Currently, 17 states allow funds to be used for “medically necessary” abortions. In those cases that these states count as medically necessary but that are not permitted by the federal guidelines, states cover the cost alone.” [KNPR]

Thus, in essence, what the Republican contingent from Nevada is saying is that they do not wish to adhere to the Hyde Amendment, and instead wish to deny Medicaid funding for abortions resulting from rape, incest, or to protect the life of the mother.  If this isn’t a radical position it would be hard to imagine what might be.

We could go a step further and say that what the Nevada Republicans are saying is that a wealthy woman who would obviously not qualify for Medicaid is perfectly free to have any medical procedure she can afford – BUT lower-income women who depend on the services of clinics such as those established by Planned Parenthood have NO options in cases of rape, incest, or the need to protect the very life of the mother.  Again, if this isn’t elitist, it’s hard to imagine what would be.

Another element which makes this entire issue devolve into the inane is that there are, in fact, sliding scale payment and free clinics in Nevada which offer some family planning and medical services.  In the Reno area there are about ten such clinics, but only one which provides “abortion referrals.” That would be the Planned Parenthood clinic.  Of the 29 free or reduced cost clinics in the Clark County area only two advertise either abortion services or abortion referrals. Planned Parenthood. One advertises post abortion services, and other referrals.   However, if one is a radical advocate for forced birth, then defunding the only abortion procedure providers would be a desirable thing?

For those who believe that abortions should be “safe, legal, and rare” the notion that de-funding will be some kind of blessing is illogical, irrational, and perhaps even deadly.

Nevada’s Republican Representatives, no matter the political spin they may attempt to apply, have aligned themselves with the Forced Birth radicals, and in doing so have decided that low-income women should be forced to carry pregnancies to term even if they are (1) the result of rape; (2) incest; (3) or are perilous to the life of the mother.

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Distracted to Distraction?

carnival barker What are there? Some 412 days until the next general election, and the broadcast media is behaving like that is going to happen any moment? Perhaps we might call the campaign thus far, as presented by the beltway media and associated punditry, “The Click Bait Campaign?”  There are as many explanations for why the campaign appearances and speeches by Democratic candidates (Clinton, Sanders, etc.) aren’t getting the press coverage garnered by the Republican Clown Car as there are Punditatti to express them.  But while the press-gangs muse about whether Secretary Clinton is seen as “reliable,” or if Senator Sanders is perceived as “electable,” of if candidate Fiorina is “crisp and effective”… or if candidate Trump is “serious”… we’re missing some issues that deserve far more attention than the National ADHD click bait coverage is giving us.  Here’s what I’m waiting to hear more about.

The national economy.  The candidate who can convince me that he or she understands the shape of the American economy is probably the one who will get my vote.  Surely someone can clarify and amplify the changes in the U.S. economy in the past forty years:

“Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent. More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.” [Bloomberg 2006]

Thus we  have an hour-glass economy, [Salmon, Reuters] one in which the wealth is concentrated at the upper end of the scale, and more occupations continue fall into the low-income levels. [Salon]  Senator Sanders has made continuous reference to the Income Inequality Gap, [Sanders] and Secretary Clinton has made this topic part of her repertoire on the campaign trail. [WSJ]

By February 2015 someone on the Republican side of the aisle noticed the Income Inequality gap (hour glass economy) [NYT] and Senator Marco Rubio attempted to slot into the issue by suggesting expanding the Child Tax Credit and cutting the tax brackets from seven to two (15% and 35%) unfortunately there’s no suggestion as to how to pay for this. Nor does he specify how to pay for expanding tax credits to childless adults; put simply, his arithmetic doesn’t work.  [NYT]  And, then there’s the rather tired Republican “promise” to create “flex funds” – another way of expressing the block grant anti-poverty programs proposal which lends itself nicely to eventual (and predictable) cuts to the grants by Congress.  In short, there’s nothing much new here: Credit Card Conservatism, and cuts to anti-poverty programs.  Meanwhile, we have the Limping Middle Class.

Perhaps we need a What To Watch For List?

  • Which candidates are speaking of a taxation system which rewards work and not just wealth?
  • Which candidates are addressing the decline in middle class income jobs in this country?
  • Which candidates are advocating equal pay for equal work? And/or an increase in funding for child care?
  • Which candidates are proposing an increase in the federal minimum wage?
  • Which candidates are suggesting we need to address the restoration of the manufacturing sector in this country?
  • Which candidates are supportive of workers’ rights to organize and form unions to bring more balance with multi-national corporations?
  • Which candidates are advocating funding for the improvement and maintenance of our national infrastructure?

It may be difficult to listen for these points since the media seems intent on speculating about the “electoral” effect of what candidates are proposing instead of explaining or clarifying the implications of their policy positions.  Meanwhile the media focuses on “Abortion!” or the “Planned Parenthood” hoax videos – the “Email,” the “Islamists!” the Whatever Will Get The Clicks of the Day.  A little over 412 days from now Americans will vote, and we’ll probably cast ballots based on the issue that is and remains the top American concern: It’s the Economy Stupid. Or, It’s the Stupid Economy.

Recommended: Robert Reich, “The Limping Middle Class,” New York Times, 9/03/11.  Danny Vinik, “Marco Rubio…”, New Republic, 1/14/15. Brendan Nyham, “Why Republicans are suddenly talking about economic inequality,” New York Times, 2/13/15.  Andrew Leonard, “The Hour Glass Economy,” Salon, 9/13/15.  Future of Jobs, “In an Hourglass Economy,” transcript, Marketplace.org, 8/2011. Bernard Starr, “Corporations Plan for a Post Middle Class America,” Business, Huffington Post, 4/6/12.  Mollie Reilly, “Thomas Piketty calls out Republican hypocrisy on income inequality,” Huffington Post, 3/11/15.

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Conflated Issues Inflated Fears

Inflation chart cause

There’s fear, right here in the outback, that raising the minimum wage will drive up inflation.  The Humboldt Sun (Sept. 18, 2015 p3)  includes a long LTE titled, “$15 minimum wage would stimulate inflation.”   The author writes:

“The government requires businesses to pay employees more by passing minimum wage legislation. This increase is not because workers are more productive, so it costs more to produce goods and services. Businesses might lay off workers to bring down labor costs, but that results in less output. Ultimately, they must raise the cost of consumer goods.”


There are several macro-economic concepts mashed into this, but let’s assume that the writer is speaking of the form of inflation diagrammed in Chart 2 above, “Cost-Push Inflation,”  defined as follows:

Cost-push inflation … occurs when prices of production process inputs increase. Rapid wage increases or rising raw material prices are common causes of this type of inflation. The sharp rise in the price of imported oil during the 1970s provides a typical example of cost-push inflation (illustrated in Chart 2). Rising energy prices caused the cost of producing and transporting goods to rise. Higher production costs led to a decrease in aggregate supply (from S0 to S1) and an increase in the overall price level because the equilibrium point moved from point Z to point Y. [SFFRB]

Cost-Push inflation might be presented as the Inflation Monster, IF it were the only kind of inflation possible – it isn’t.  There’s also Demand-Pull.  And we return to the San Francisco Federal Reserve for its basic definition:

“Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy’s productive capacity. One potential shock to aggregate demand might come from a central bank that rapidly increases the supply of money. See Chart 1 for an illustration of what will likely happen as a result of this shock. The increase in money in the economy will increase demand for goods and services from D0 to D1. In the short run, businesses cannot significantly increase production and supply (S) remains constant. The economy’s equilibrium moves from point A to point B and prices will tend to rise, resulting in inflation. [SFFRB]

And how does a central bank increase the supply of money? Monetary policy.  The textbook way, prior to September 2008, was that if the opportunity costs for holding noninterest-bearing bank reserves was the nominal short-term interest rate (federal funds rate), then we’d have a situation in which if the funds rate were low the quantity of reserves banks would want to hold would increase. [SFFed]  Note: the banks have an interest in putting reserves to work by lending them.  If a bank found itself with “excess” reserves the obvious thing to do would be to find borrowers and earn a return on the money. Thus the situation wherein the cost to the banks of borrowing money is essentially zero, in a post 2007-08 effort to support the financial markets and kick-start the economy.  Now what?

Why hasn’t there been some awesome Demand-Pull Inflation?  Monetary Policy. The situation has changed, although few outside the financial commentators have paid much notice.

“The change is that the Fed now pays interest on reserves. The opportunity cost of holding reserves is now the difference between the federal funds rate and the interest rate on reserves. The Fed will likely raise the interest rate on reserves as it raises the target federal funds rate (see Board of Governors 2011). Therefore, for banks, reserves at the Fed are close substitutes for Treasury bills in terms of return and safety. A Fed exchange of bank reserves that pay interest for a T-bill that carries a very similar interest rate has virtually no effect on the economy. Instead, what matters for the economy is the level of interest rates, which are affected by monetary policy.” [SFFed]

If Demand-Pull inflation is corralled by monetary policy which is based on the Federal Reserve now paying interest on reserves, doesn’t this argue against raising wages which will increase unit costs of production and hence raise consumer prices?  Not necessarily.

The author of the LTE maintains: “The Federal Reserve has held interest rates at near 0 percent for several years. Some claimed cheap loans would stimulate the economy. The problem is that banks have been fiscally conservative, with few loans and little interest rate to savers.”

A crucial part of this puzzle is the press release from October 6, 2008 from the Federal Reserve stating:

“The Federal Reserve Board on Monday announced that it will begin to pay interest on depository institutions’ required and excess reserve balances. The payment of interest on excess reserve balances will give the Federal Reserve greater scope to use its lending programs to address conditions in credit markets while also maintaining the federal funds rate close to the target established by the Federal Open Market Committee.”

Yes, the interest rate remained low, but the banks with excess reserves on hand had less incentive to loan out those reserves if they could simply leave them on the books and earn interest.  The Financial Services Regulatory Relief Act of 2006 allowing this situation  [S 2856 109th] was quite generous to the bankers, such as section 201 which “(1) authorize payment of interest on funds maintained by a depository institution at a Federal Reserve bank; and (2) authorize the Federal Reserve Board to reduce to 0% the reserves required to be maintained by a depository institution against its transaction accounts. (The current requirement ranges from 3% to 14%.)” [GovTrack]

While the Federal Reserve makes a nice scapegoat for those who believe in broader extensions of consumer credit, it really doesn’t do to belabor its role (or lack thereof) in stimulating the consumer end of the economy when Congress provided the vehicle by which the wall between brokers and bankers was breached (Title 1, Section 101) and compounded the issue by enacting authorization for banks to sit on reserves in order to earn interest (Title 2, Section 202).

And, here’s where the LTE author swims in shark territory – a monetary policy which encourages broader consumer lending would also be a factor in the creation of Demand-Push inflationary pressures.  A person really can’t have it both ways.

How much is too much?

There are, in both fact and theory TWO forms of inflation.  Nor can we assume that inflation is always a bad thing.  Most economists like an inflation rate of just under 3%. [Investopedia]  Why? Because the alternative – deflation —  is even worse.  During deflationary periods workers get laid off, consumers spend less, people hold off major purchases believing prices will fall further, and the spiral continues – downward.

Consumer Price Index 2005 to 2015 The blue line includes items like energy/food which are inherently more volatile, the line for all others shows a fairly consistent rate of inflation right around the 2.5% mark – remember 3% is the economist’s ideal. It’s also useful to note that the wide variances occur between January 2008 and January 2010 – when the U.S. economy was trembling before and  in the wake of the financial crash.

Consumer Price Index chart If fact, before we become too alarmed by inflationary trends we might want to take a look at the column highlighted above from the Bureau of Labor Statistics, and note that we are well below that 3% threshold.  In other words, it’s time to stop worrying excessively about inflation – both forms – and start being concerned with why wages and salaries have tended to stagnate over the past thirty years?  [Pew]

“…after adjusting for inflation, today’s average hourly wage has just about the same purchasing power as it did in 1979, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today.” [Pew] see also: [EPI]

Our local author is still alarmed, “Recent price spikes are more noticeable than the usual gradual increases.  That naturally leads to call for a minimum wage increase. But if granted, the inflation cycle will begin again.”  To which we’d have to ask:

  • What recent price spikes? The annual inflation rate as calculated by the BLS Consumer Price Index, the figures the economists use, has been less than 2.5% since 2006.  Further, the prices of gasoline has dropped from about $4.11 in July 2008 to $2.73 as of August 2015. [EIA]
  • If not those phantom price spikes, then what else could raise the call for an increase in the minimum wage?  The trends in stagnant wages and salaries?
  • What inflation cycle?  The annual increase in inflation hasn’t risen above 2.5% since 2006 and 3% is the threshold used by most economists to determine a “significant” increase.  During five of the last ten years we’ve experienced inflation of less than 2%.
  • However, let’s not assume that the author is referring to the here and now but to the ubiquitous “awfulness to come somewhere down the road about which we should be terribly alarmed.”  Is there anything in the statistical tables indicating that an increase in the federal minimum wage would yield inflation rates in excess of traditionally  held economic standards?  Given that the federal minimum wage has been raised 22 times since first authorized in 1938, has there been any drop in the real GDP per capita in the last 75 years? (Hint: no)

If it’s not consumer spending driving an inflation cycle in the modern economic environment – what is?  There is something about which we ought to be worried, but it’s not your father’s inflation cycle – it’s the climate created by the financialists:

“Both gross and net business debt have continued to rise since 2007, but the proceeds have been almost entirely recycled into financial engineering—including more than $2 trillion of stock buybacks and many trillions more of basically pointless M&A deals.

This diversion of the $2 trillion gain in business debt outstanding since 2007 to financial engineering is owing to the near zero after-tax cost of corporate debt. The latter has caused the enslavement of the C-suite to the instant gratification of rising share prices and stock options value in the Fed’s Wall Street casino.” [ZeroHedge]

Not to put too fine a point to it, but the brakes will be applied to any inflationary pressure by the bursting of the next financial bubble.

References and Sources: Federal Reserve Bank of San Francisco, “What are some of the factors that contribute to a rise in inflation?’ October 2002.  John C. Williams, “Economic Research: Monetary Policy, Money, and Inflation,” Federal Reserve Bank of San Francisco, Economic Letters, July 9, 2012.  Bernard Shull, “The impact of financial reform on Federal Reserve Autonomy,” Levy Economics Institute of Bard College, working paper 735, November 2012. (pdf)  Douglas Rice, “Inflation: It’s a Good Thing,” Investopedia, May 22, 2009.  Bureau of Labor Statistics: Consumer Price Index, 12 month percentage change. (2015) “For most workers wages have barely budged for decades,” Pew Research Center, October 9, 2014.  EPI, wage stagnation in nine charts, January 6, 2015.  CBPP, “A guide to statistics on historical trends in Income Inequality,” revised July 15, 2015.  L.E. Hoglund, “Gasoline prices: cyclical trends and market developments,” Beyond the Numbers, BLS, May 2015. (pdf) EIA, “Petroleum and Other Liquids: Retail Prices all grades and formulations, August 2015.  Department of Labor, “Minimum Wage Mythbusters.”  CNN, “Minimum wage since 1938,” interactive graphic.  “Meet the New Recession Cycle,” Zero Hedge, April 4, 2015.

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Filed under Economy, financial regulation, income inequality, Minimum Wage, Nevada politics, Politics

Nevada’s Unfortunate Export

Guns In the last published annual report from the Nevada Department of Corrections FY 2013 (pdf) we discover that 24.87% of the men admitted into the Nevada prison system were being incarcerated for drug related offenses. Property crimes accounted for 24.24% of the admissions, sex crimes for 7.91%, and crimes of violence 36.79%.  DUIs and “other” accounted for approximately 6.2%.  Various trafficking crimes are included in Category A and Category B felony provisions in Nevada. 

A person can get into major trouble under Nevada law, as in Category A felony categorization territory, for trafficking in Schedule I drugs (28 grams or more) or trafficking in Schedule II drugs (400 grams).  Trafficking in persons is covered in Category B felonies, carrying penalties of from 1 to 20 years.  Sex trafficking can yield sentences between 3 to 20 years, with no probation or suspended sentences if the conviction involves a child.  What kind of trafficking won’t get a person into the Nevada prison system?

Gun trafficking.   Nevada does have some statutes pertaining to the transfer and sale of firearms. NRS 202.310 does provide that: “Any person in this state who sells or barters to a child who is under the age of 18 years, with reckless disregard of whether the child is under the age of 18 years, or with knowledge or reason to know that the child is under the age of 18 years, a pistol, revolver or a firearm capable of being concealed upon the person is guilty of a category B felony and shall be punished by imprisonment in the state prison for a minimum term of not less than 1 year and a maximum term of not more than 6 years, and may be further punished by a fine of not more than $5,000.”  We might want to come back to this provision sometime to discuss what constitutes “recklessness” in this instance, but for now it’s enough to know that it is unlawful to sell a gun to someone under the age of 18 without parental supervision.  There are other classifications of persons to whom firearms shall not be sold in this state.

NRS 202.362  Sale or disposal of firearm or ammunition to certain persons prohibited; penalty; exceptions. 1.  Except as otherwise provided in subsection 3, a person within this State shall not sell or otherwise dispose of any firearm or ammunition to another person if he or she has actual knowledge that the other person:  (a) Is under indictment for, or has been convicted of, a felony in this or any other state, or in any political subdivision thereof, or of a felony in violation of the laws of the United States of America, unless the other person has received a pardon and the pardon does not restrict his or her right to bear arms;  (b) Is a fugitive from justice;  (c) Has been adjudicated as mentally ill or has been committed to any mental health facility; or (d) Is illegally or unlawfully in the United States.  2.  A person who violates the provisions of subsection 1 is guilty of a category B felony and shall be punished by imprisonment in the state prison for a minimum term of not less than 1 year and a maximum term of not more than 10 years, and may be further punished by a fine of not more than $10,000. (emphasis added)

The requirement that the seller have “actual knowledge” of a person’s status with regard to a gun sale, obviously the “knowledge” of a seller is diminished by the fact that Nevada doesn’t require universal background checks, but the “actual” knowledge is further restrained by the fact that Nevada applies no penalties to those who lie in order to purchase guns.  Washington, Oregon, and California have criminal penalties for “buying a gun  using false information,” Nevada does not. [TTG] [Wash. 9.41.113] [Oregon 116.470] [AG CA pdf]

Indeed, Nevada has NO statutes which establish criminal penalties for buying a gun on behalf of someone who may not legally purchase one otherwise;  as seen above, the individual who buys the gun may be prosecuted but not the seller.  Nevada has NO statute(s) preventing someone from selling a firearm to some buyer who has a record of serious misdemeanors – only felonies will do.  And, since Nevada has no universal background check law there are no criminal penalties for selling a firearm to someone without having made a proper background check.  The result of all this?

As of 2009, Nevada had the 9th highest rate of “crime gun exports” in the country.  making Nevada a “net exporter” of guns used in serious crimes in other states – 781 such guns were imported into Nevada and 808 were “exported” to other states.  [TTG]  But! 204 crime guns came from California. Yes, and California has a total population of 38,802,500 while Nevada has 2,839,099. [Census] We have 7% of California’s population and we’re doing more than our share of exporting weapons used in crimes.

Making gun trafficking even more likely is the simple fact that Nevada has no restrictions on the sales of multiple guns. [SGL]  We know the exportation of “crime guns” drops when restrictions are placed on multiple sales because it worked in Virginia between 1993 and 2012. During that period Virginia imposed its “one gun per month” rule, and the odds the gun was purchased in that state (as compared to other southeastern states) dropped by 71% of guns recovered in NY, 72% for guns recovered in Massachusetts, and 66% for guns recovered in NY, NJ, CT, RI, and MA combined. [SGL]

Nevada would be a much better neighbor if the next session of the State Legislature would give serious consideration to:

  • Imposing criminal penalties for buying firearms for individuals who are not legally allowed to possess them.
  • Imposing criminal penalties on those who seek to purchase firearms in this state who provide false information to the seller.
  • Requiring universal background checks for the sale of all handguns.
  • Imposing criminal penalties for those who deliberately sell firearms without conducting a background check on the purchaser.
  • Limiting the number of firearms which can be purchased in any single transaction.

Trafficking guns should at least carry some of the same penalties we apply to those entering our prison system convicted of drug and sex trafficking?

References: Department of Corrections, State of Nevada, “Annual Statistical Abstract” (pdf) FY 2013.  Category A felonies, NV Legislature, (pdf), Category B felonies, NV Legislature, (pdf); Category C felonies, NV Legislature (pdf); Category D felonies, NV Legislature, (pdf); Category E felonies, NV Legislature (pdf); Nevada Revised Statutes 202;  Office of the Attorney General, State of California, “California Firearms Laws Summary,” (pdf);  Law Center to Prevent Gun Violence, “Multiple Purchases, Sales of Firearms Policy;”

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Domestic Violence is Everyone’s Business: Just Perhaps Not The State of Nevada’s Business?

Domestic violence costs $8.3 billion in expenses annually: a combination of higher medical costs ($5.8 billion) and lost productivity ($2.5 billion).” [Forbes]

In the same year this quotation appeared in Forbes magazine, the Nevada Network Against Domestic Violence reported 58,582 contacts concerning  domestic violence in the state. 37,439 of them were first time contacts, another 13,670 were “repeats,” and there were 7,473 follow up contacts. [FY2012-13 pdf]  In the next annual report there were a total of 61,229 contacts; 38,042 initial, 15,165 repeats, and 8,022 follow ups. [FY 2013-2014 pdf]  The calendar year report for 2014 shows  a total of 65,026 contacts, 40,927 first time, 15,534 repeats, and 8,565 follow ups. [CYR 2014 pdf]

DV victims total We also know that in calendar year 2014 the primary victims were most often women (38,145) as contrasted to men (2,782).  We can also infer from the numbers that they are in the age range 18-64, or during the years in which they are most likely to be employed.

Indeed, some 9,119 of the primary victims were someone’s full time or part time employee.  Perhaps what we can’t know is how many of those in the unemployed category were women who were isolated in abusive domestic

DV victims employment statussituations where they were forbidden to work outside the home, or in some instances to have only very tenuous contacts with those outside the house.

What we can know, and do, is that in national terms we are losing an estimated $2.5 Billion annually in lost productivity costs. Domestic violence contributes to lost wages and reduced earnings, it impeded  the victim’s job advancement, and compromises safety for the employees and their co-workers. [BBoston]   That $2.5 billion also includes time lost as the victims miss work, arrive late or have to leave work early to care for themselves or other family members.

A Fall 2000 report for the State Attorney General’s office (pdf)  outlines recommendations for employers to mitigate the effects of domestic violence: (1) condition perpetrators’ continuing employment on remaining non-violent; (2) intervene against stalkers in the workplace; (3) safeguard battered employees’ employment and careers by providing flexible schedules, leaves of absence, and establishing enlightened personnel policies; (4) provide employment security to battered employees; (5) provide available resources to support and advocate for battered employees.

A follow up report “Nevada Domestic Violence Prevention Council Domestic Violence and the Workplace:  A Toolkit for Employers,” (pdf) was issued by former Nevada Attorney General Catherine Cortez Masto.  This document links to the Workplaces Respond (to domestic and sexual violence) model policy guidelines to implement the recommendations set forth in the 2000 report.   The model policy guidelines would work well for moderate to large sized businesses, what isn’t clear is how many employers in Nevada have  clearly stated and implemented domestic violence prevention and mitigation policies in their personnel manuals. For that matter, it’s difficult to determine precisely what the state is doing – assuming that the state should function as as example for other entities to follow.

Let’s look at the  the model policy and compare it to the State Personnel Manual.  The Model Policy includes the following:

“[Employer] recognizes that victims of domestic violence, sexual assault, stalking and dating violence may need time off to obtain or attempt to obtain a restraining order or any other legal assistance to help ensure his or her health, safety, or welfare or that of his or her child. [Employer] will work in collaboration with the employee to provide reasonable and flexible leave options when an employee or his or her child is a victim of domestic violence, sexual assault, dating violence and/or stalking. [Employer] will work with employee to provide paid leave first before requiring an employee to utilize unpaid leave.”  [Model Policy]

Here’s an exercise. (1) Download the State of Nevada’s Employee Handbook. (pdf)  (2) Type <Cntrl F>  (3) Type “Domestic” in the inquiry box.”  If you don’t want to do this yourself then you’ll have to trust that I found 5 instances of the term “domestic” anywhere in the document.  The first concerns insurance benefits, the second concerns domestic partner benefits, the third concerns survivor benefits, the fourth is in the same paragraph as the third, and the fifth finally gets around to the issue at hand:

“ The personal safety and health of each employee is of primary importance. It is the responsibility of all employees to support safety and health programs by reporting any threats received or restraining orders granted against a disgruntled spouse, domestic partner, acquaintance, or others. You must report all incidents of direct or indirect threats and actual violent events to a supervisor, and the matter will be treated seriously. A direct or indirect threat and/or actual violence will be documented and reported to both the Attorney General’s office and the Department of Administration, Risk Management Division using the report form found on their website http://risk.nv.gov/LP/WV/. All incidents will be immediately investigated and appropriate action taken. (NAC 284.646-284.650)”

The link takes you to the Risk Management site.  In short, the Nevada policy manual for employees addresses workplace violence, but not necessarily violence which takes place “off campus.”  Yes, workplace violence should be taken seriously. Yes, domestic violence all too often translates to workplace violence; but NO the State of Nevada has not adopted personnel guidelines which would put a dent in those lost productivity, lost career advancement, lost earnings and wages columns that plague other institutions?

Comparing the Model Policy with the State Employee Handbook, the Model Policy calls for collaborative efforts to assist a victim of domestic violence get a restraining order or legal assistance.  The victim should give the employer a reasonable amount of time to juggle schedules or fill in when calling in, and the employer should make every effort to secure the legal protections which may be necessary.

The State Handbook does address what happens after the battery.

“If you are a full-time employee, you earn 10 hours (1¼ working days) of sick leave for each month of full-time service. Part-time employees earn a prorated amount based on full-time equivalent service. Sick leave can be used as soon as it is accrued. (NRS 284.355, NAC 284.113, 284.5415) You may only use sick leave for authorized reasons. Authorized reasons for using sick leave are: an inability to work because of illness or injury, incapacity due to pregnancy or childbirth, medical and dental appointments, family illness (subject to some limitations), and death in the immediate family.”

Apparently, about as close as the state gets to addressing the needs of a battered person to secure legal or technical assistance, is:

“An employee does not need to use this leave entitlement in one block. Leave can be taken intermittently or on a reduced leave schedule when medically necessary. Employees must make reasonable efforts to schedule leave for planned medical treatment so as not to unduly disrupt the employer’s operations. Leave due to qualifying exigencies may also be taken on an intermittent basis.”  (emphasis added)

If we put this all together we have a situation in which (1) Nevada obviously has issues regarding domestic violence in the State; (2) Domestic violence has ramifications beyond the medical and legal costs associated with it and has an impact on earning power, career advancement, and productivity; (3) Nevada has at least two publications endorsing and promoting positive measures employers may take to reduce the medical, legal, and economic impact of domestic violence; and (4) Nevada doesn’t include policies designed to assist victims of domestic violence in its own Personnel Manual.

What’s wrong with this picture?

References: Weller, “Covering Domestic Violence: A Guide for Informed Media Reporting in Nevada, (pdf)  State of Nevada Employee Handbook, Department of Administration, Division of Human Resource Management, (pdf)  National Resource Center – Workplaces Respond to Domestic and Sexual Violence, Model Workplace Policy.   Catherine Cortez Masto, AttyGen, “Nevada Domestic Violence Prevention Council Domestic Violence and the Workplace: A Toolkit for Employers.” (pdf) Nevada Network Against Domestic Violence: Statewide Statistics FY July 2013-June 2014. (pdf) NNADV Calendar Year Report Jan.-Dec. 2014 (pdf) NNADV. org general resources and web site; statistics.

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Filed under domestic abuse, Economy, Nevada, Nevada economy, Nevada politics, Women's Issues

Silver Bullets and Straw Man Arguments: Gun Legislation in Nevada (Updated)

OK Corral Here we go again.  Another spate of gun violence yields another editorial assault on common sense gun regulation from conservative sources, this time the editors of the Las Vegas Review Journal.  The title says it all, “Expanded gun background checks not a cure all.”  There are at least a couple of things wrong with this argument.  First, it’s a straw man argument. No one is claiming that universal background checks will cure the American violence problem.  The claim is that closing the gun-show loophole and requiring background checks for sales to non-family members will reduce the probability of gun violence.  Secondly, as the editorial itself acknowledges, background checks can prevent gun sales to domestic abusers.

Even this legislation, SB 175, didn’t really go far enough, and in some respects represents a step backward in terms of controlling access to firearms.  Those guilty of domestic violence, who are subject to an extended order of protection, are forbidden from purchasing or otherwise acquiring a firearm during the period the order of protection is in effect. To get this small attempt at controlling firearm access by domestic abusers, meant the NRA won state control of all gun related issues, county concealed carry permits in Clark County went by the wayside, and expanded language was added to liability in instances in which a “reasonable person might be afraid” for his or her life.

The second logical issue with the editorial is good old fashioned circular reasoning.  The authors logic appears to be that (1) effective background checks require efficient offender databases; (2) Nevada has an inefficient offender data base system; therefore (3) Nevada cannot have effective background checks.  This logic works IF one is prepared to skip blithely over the question of how to make the Nevada offender data base more efficient – and is perilously close to the old Undistributed Middle.

And then comes the perfectly predictable: “Regardless, as has been shown countless times, criminals are not going to follow any gun control law.”  So, if we extrapolate this to its obvious, and much referenced conclusion, there is no reason to enact sanctions against bank robbery and bear baiting because criminals are not going to follow the law?

Now back to the Domestic Violence issue.  What was gained by victims of domestic abuse in SB 175? Answer: Precious Little. [DB April 2015]  Under Section 5 of the bill a domestic abuser (the Adverse Party) was forbidden to purchase firearms for the duration of an extended order of protection.  Please recall that Nevada has two types of restraining orders, temporary and extended, and it can take up to 45 days to get an extended order. [NRS 33.031]   Meanwhile, the statistics are available for the period from April to June 2015. (pdf)

Between April and June 2015, there were 16,245 “contacts” made by authorities concerning domestic violence, and 10,637 were “first time,” another 3,537 were “repeats,” and there were 2,071 “follow up contacts.” Of the 10,637 victims 9,938 were women (93.4%), 699 were men (4.27%).  The age of the victim was not reported in 4,316 instances.  There were 1,479 female victims between the ages of 18-29; 2,577 female victims between the ages of 30-44; and, 1,193 female victims between the ages of 45-64.  Arrests were made in 1,490 cases, no arrest was made in 1,648 cases, and 135 cases are pending.  During the period between April and June 2015 there were 3,327 temporary orders of protection prepared.  2,402 temporary orders of protection/restraining orders were provided.

Assuming that law enforcement and the judicial system were functioning effectively, we had 2,402 cases in a three month period in which it was determined that the victim – most likely a woman – was deserving of a temporary order of protection.  However, the “adverse party” would be free to retain possession of firearms during the length of the temporary order, and for 45 days until an extended order of protection could be issued.

These numbers take on some urgency when put in the context of domestic violence in Nevada.  Back in 2012 25 of the 84 homicides within Las Vegas police jurisdiction were related to domestic violence, the numbers were worse in 2013 when 33 of 105 homicides were related to domestic disputes. [LVRJ]

More alarming still, the national report published by USA Today, on mass killings and family problems.  We have a “mass killing” about every two weeks (since 2006);  the FBI counted 172 between 2006 and 2011.  These numbers may be an undercount because of erroneous and excluded cases, leaving the FBI with a 57% accuracy rate.  And here comes the disturbing part:  Of those mass killings, in 53% the victims were family members. (Other 21%, Public 15%, Robbery/Burglary related 11%) A break up of some kind is the tipping point in 1 out of every 4 mass killings that aren’t connected to strangers, gang violence, or a robbery gone wrong. One in four victims were close family members, children, siblings, spouses, etc. In 77% of the mass killings the weapon used was a gun.  One-third of the victims were under the age of 18; and, 75% of the guns involved were handguns.

The USA Today report drilled down further: semi-automatic hand guns were involved in 49.6% of the shootings; handgun/revolver in 22.4%; and automatic pistols in 0.9%.  Single shot rifles were used in 9.5%; semi-automatic rifles in 8.6%; and automatic rifles in 0.4% of the cases. A shotgun was used in 8.6% of the deadly events.  One third of the perpetrators will be dead at the scene.

It’s certainly true, a domestic abuser will resort to whatever weapon may be at hand from guns to kitchen knives to baseball bats and to manual strangulation… however, as these statistics suggest the outcome is more likely to be deadly if a firearm is involved.

So, should the “little woman” be armed, does the gun in the home constitute an “equalizer?” The answer is no.

“A recent meta-analysis concluded what many people already knew: the availability of firearms is a strong risk factor for both homicide and suicide. But the study came to another conclusion that is rarely mentioned in the gun control debate: females are uniquely impacted by the availability of a firearm. Indeed, the study found that women with access to firearms become homicide victims at significantly higher rates than men.

It has long been recognized that higher rates of gun availability correlate with higher rates of female homicide. Women in the United States account for 84 percent of all female firearm victims in the developed world, even though they make up only a third of the developed world’s female population. And within American borders, women die at higher rates from suicide, homicide, and accidental firearm deaths in states where guns are more widely available This is true even after controlling for factors such as urbanization, alcohol use, education, poverty, and divorce rates.” [LATimes]

In another study, published in the American Journal of Public Health, researchers interviewed 417 women across 67 battered women’s shelters. Nearly a third of these women had lived in a household with a firearm. In two-thirds of the homes, their intimate partners had used the gun against them, usually threatening to kill (71.4 percent) them. A very small percentage of these women (7 percent) had used a gun successfully in self-defense, and primarily just to scare the attacking male partner away. Indeed, gun threats in the home against women by their intimate partners appear to be more common across the United States than self-defense uses of guns by women. [LATimes]

Another large case-control study compared women who were murdered by their intimate partner with a control group of battered women. Only 16 percent of the women who had been abused, but not murdered, had guns in their homes, whereas 51 percent of the murder victims did. In fact, not a single study to date has shown that the risk of any crime including burglary, robbery, home invasion, or spousal abuse against a female is decreased through gun ownership. Though there are examples of women using a gun to defend themselves, they are few and far between, and not statistically significant. [LATimes]

Thus much for the advocacy of yet more guns, and yet more permits to be able to conceal those guns?  And yet more reason to take note of the statistics on domestic violence, the presence of guns in unstable households, and the need to remove firearms from volatile domestic situations.

Questions Remain

  • When do the NRA talking points asserting there is no magic single solution to gun violence become stale and hackneyed?  When does the public come to understand that this is a straw man argument which does little good for the safety of the state and the families residing in this state?
  • When does the profoundly illogical argument that because something might be difficult, or even require more effort, that the desired outcome (less gun violence) is therefore impossible, become a clear example of circular reasoning and unfounded assertion?
  • When do we act on the statistics which strongly suggest that the presence of a firearm in a home increases the probability of lethal domestic violence and suicide? Not to mention tragic incidents involving children.
  • When do we take into consideration the fact that there are some 45 days under Nevada law during which a domestic abuser is free to retain firearms, indeed, free to obtain more “firepower” during that period?
  • What additional arguments must be made before those who advocate for zero restrictions on firearm ownership/possession understand that in a civilized society the temporary removal of firearms from a volatile domestic situation doesn’t mean there is a violation of a Constitutional right?

Update: The Violence Policy Center released its national report today. Nevada is 5th in the nation in female homicide rate.

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Filed under domestic abuse, Gun Issues, Nevada legislature, Nevada politics, Women's Issues