Monthly Archives: December 2012

A Gun Culture In America

Bob Costas.  Jason Whitlock.

I’ve lived in a farm town, Minneapolis, back to the farm town and then a smaller one.  Back to the big city in Seattle only to go back to Minneapolis.  Then onto the suburbs of Raleigh.

When I read Jason Whitlock say that there is a a “Gun culture in America” I hear, and envision, the inner city population carrying guns to increase “street cred.”  I do not hear rural farmer owning guns to protect dogs, chickens and homes.

I have friends here in the burbs that carry.  There’s no desire to increase “cred.”

Am I wrong?

Unemployment Benefits: A Rational Course

I’ve long been an opponent of the unemployment policy usually advocated by our government.  In my moments of most extreme Libertarian I can make the case for no unemployment benefit system at all.  People, understanding that they won’t have a program to fall back on will make efforts to protect against the downside.  This might take the form of more aggressive saving or, perhaps, not getting fired in the first place.

However, not all terminations are due to performance, many are due to economic conditions out of the control of the employee.  Further, it’s unlikely that I’d be able to prevail in my rather “draconian” response to unemployment.  So, knowing that benefits are going to be provided, how best to work within the system to create the best outcome?

Other than its existence, I have two problems with unemployment benefits:

  1. The benefit too closely approximates the typical wage.
  2. The duration of the program is too long.

The system creates the wrong incentives.  In the first place, it reduces the value of working.  For example, if I lose my $10 an hour job and can pull $325 in benefits, the marginal value of me returning to work is $75.  [Maybe $125 or so – I seem to remember the first fifty is “free.]  So the value of working 40 hours moves from $400 to $75.  An hourly rate of $1.88.  In the second place, the system is built with the incentive to delay returning to the workplace until the benefits expire.

So, what to do?

It seems to me that if I had bought into building a system that worked, that is I agreed to set aside the ideology and build a program I might not 100% agree with, I would first define the goals.  It might go like this:

  1. Provide folks assistance to get through the transition to the next job.
  2. Return folks to the workforce as soon as possible.

And the method I would use to build the program that solves both of these goals would be this:

  1. Determine the mean time to return to work without the debilitating incentive of making money while not working.
  2. Pay the unemployed a lump sum regardless of employment status.
    1. Either literally pay the individual a lump sum in the form of one check.
    2. Guarantee weekly benefits for the duration of the identified mean regardless of employment status.

This satisfies the [dubious] requirement of the government providing assistance in the face of adversity while also removing the perverse incentive not to return to the workforce.  In fact, it might actually provide the incentive to return more quickly; who can pass-up on “double dipping.”

 

Oh For Pete’s Sake

I’m late on this; it’s been in my stack for awhile now.  But what in the world can be gained by the government suing Intrade?

Today, Americans were told that they must close their Intrade.com accounts. That happened because the federal government agency known as the “Commodity Futures Trading Commission” (CFTC) today sued the prediction market, where people from all over the world bet about things like who will win elections.

Intrade decided all its U.S. customers must now close their accounts and withdraw their money from the site.

I’m sure someone somewhere feels that I, the wilting consumer, must be protected from myself, but seriously.  How is this good?

What law are they breaking?

In English: the government says that many of the things Intrade allows people to predict – everything from what the price of gold will be in the future to whether the U.S. will go to war soon – are legally considered “commodity options,” and that Intrade broke the law because it isn’t licensed to trade those. The penalty is $140,000 per violation.

So, just get a license:

Why doesn’t Intrade just obey the complicated law and become a licensed exchange? They tried, but the CFTC won’t give them a license. When an established, licensed U.S. commodity exchange applied for permission to do what Intrade does, the CFTC turned them down, too.

The pompous CFTC enforcer claims that the regulation “is important for a number of reasons, including that it enables the CFTC to police market activity.”

This is the perfect microcosm that is the state of government today.  And Stossel sums it up perfectly:

Please. These regulations don’t help police market activity. When people make money on Intrade, Intrade sends them the money. There are no allegations of fraud. Customers are happy with Intrade, judging by increased activity on the site (over $50 million was bet about whether Obama or Romney would win.)

The market polices itself.

In a sane world, government would focus on preventing fraud, not on crushing innovative ideas.

Stossel goes on to point out that this isn’t just a democrat or republican problem, rather it’s the mindset that gentle flower that is the rugged American needs protection from …. from something, surely.  And THIS is the state of our future that I fear.  How to prove to, to convince, people that the future may not be “bad” with these rules, but it certainly is less better.

Parenting: Socio-Economic vs IQ – The Bell Curve

In considering the many ills that face society, there has been a large focus on the socio-economic status of the family or of the individual in the desire to explain the condition at hand.  For example, if a child grows up to become a criminal, we ask, “what was the socio-economic condition of that child or his parents?”

The idea behind this, of course, is that if we can isolate the failure to the economic inequality of society, then we can begin to “fix it” through governmental programs bent on promoting “equality.”

But what if there was another reason why people did the things they do?  In this section, I speak about Parenting as discussed in the book, “The Bell Curve.”

In the chapter regarding parenting, the first condition discussed is low birth weight babies.  Previously I have shown data that suggests that the SES status of the mother has little bearing on the determination of that condition in children.

But IQ:

 

As mentioned, the impact of the socio-economic status of the mother is nominal; the IQ of the mother is not.  A low IQ has a major impact on the chance of a baby being born with a low birth weight; SES – not as much.

After being born, the child must face life.  Specifically the prospect of being poor.  Initially, the authors held all variable constant and displayed the prospects of a child remaining poor in the fist 3 years of life based on the mother’s SES.  It didn’t look good.  But what happens if we include IQ:

No change.  The poverty rate of the child is equally determined by the SES and the IQ of the mother.  With the data showing such an exact match as both SES and IQ moved from low to high, I suspect that there is a case where one is determined by the other.

Again, following the sections in this chapter, the topic switches to the Home Index:

The Home Observation for Measurement of the Environment (HOME) Inventory is designed to measure the quality and extent of stimulation available to a child in the home environment. The Infant/Toddler HOME Inventory (IT-HOME) comprises 45 items that provide information from the child’s perspective on stimuli found to affect children’s cognitive development. Assessors make observations during home visits when the child is awake and engaged in activities typical for that time of the day and conduct an interview with a parent or guardian. The IT-HOME is organized into six subscales: (1) Responsivity: the extent of responsiveness of the parent to the child; (2) Acceptance: parental acceptance of suboptimal behavior and avoidance of restriction and punishment; (3) Organization: including regularity and predictability of the environment; (4) Learning Materials: provision of appropriate play and learning materials; (5) Involvement: extent of parental involvement; and (6) Variety in daily stimulation. For the IT-HOME, 18 items are based on observation, 15 on interview, and 12 on either observation or interview.

This index was applied to the population in the study and the result showed that the socio-economic status of the mother played a role in the HOME Index rating.  However, IQ played an even more significant role:

As you can see, a lower IQ is more devastating than a poor mother while I high IQ is more beneficial than a wealthy mother.

As the child grows, the development of the child can be impacted by the  conditions of the home, poverty and parenting skills are, of course, two of those conditions.  In an attempt to measure this development, the authors conducted a survey of 4 developmental indicators and if a child scored in the bottom decile for any of the 4, they scored a “Yes” on the “development index.”  If not, they scored a no.

The results:

The pattern is again, presented.  IQ at the low end is more detrimental than poverty while at the high end, IQ is more advantageous than being wealthy.  However, in this specific study that difference is marginal.

The final section of the chapter looks into the IQ of the child and tries to determine the significance of been raised in a home more exposed to the challenges of poverty vs. being raised in a more affluent home.  Additionally, the same investigation is conducted using the key variable of IQ:

The result is consistent with data already being demonstrated in this and other chapters.  The argument can be made that when isolating the socio-economic status of families and of mothers in the study the well being of the child generally suffers as that mother becomes poorer.  However, when all variables are held constant save IQ, those other factors are diminished to the point of being statistically insignificant.

IQ matters.

Homeless – Help Out or Help Up and Out

I saw the story the other day of that cop who took his own money and bought that guy a pair of boots:

After Officer Lawrence DePrimo knelt beside a barefoot man on a bitterly cold November night in Times Square, giving him a pair of boots, a photo of his random act of good will quickly took on a life of its own — becoming a symbol for a million acts of kindness that go unnoticed every day and a reminder that even in this tough, often anonymous city, people can still look out for one another.

Those boots cost him a hundo.

I like stories like this for two reasons:

  1. I think too often we’re inundated with only bad shit going on in the world.  That everybody is out to get everybody.  More good news would be a good thing.
  2. People ARE capable of giving individually.

Anyway, as I read the story, like I said, I felt good.  But I have to admit that when I got to the cost of the shoes I kinda reacted with a “Uh-oh.”

Sadly, as the story continues, we find that the boots are gone:

Since Mr. Hillman’s bare feet became famous, other people reported seeing him without shoes — one even after Officer DePrimo’s gift — and one woman said she had bought him a pair of shoes a year ago. Whatever the case, Mr. Hillman seemed accustomed to walking the pavement shoeless.

Now, I don’t know Hillman’s story, of course.  The life he leads is violent and full of crime; those boots may have been stolen.  Or, Mr. Hillman may have reacted rationally and decided that the money gained from the shoes was more valuable than the shoes themselves, so he sold or returned ’em.  Again, I don’t know.

But it got me to thinking on the best way to help the folks who have found themselves in the precarious condition of living on the streets.

When I moved to Seattle all those years ago, my buddy and I asked the logical first question, “Where do we go out?”  Everyone told us Pioneer Square.  So we hit that neighborhood 4-5 or 6-7 nights that week.  It was a blast.  Rocking music scene, walking neighborhood with restaurants, bars, shopping and whatnot.  It was great.

But, during that week I was exposed to the folks on Seattle’s streets.  I suspect I had seen homelessness during my time at the University of Minnesota, but I was literally off the farm in rural Minnesota; Right on the Banks of the Plum Creek.  This was new to me.

Over the course of those nights there were two men who were always at the same corner, right in the best place and always seeming, I don’t know – comfortable.  So my buddy and I got to know ’em.  I smoked then and we would sit down and share a smoke.  When it was time for a slice of pizza or a sausage, we’d buy an extra couple and eat with ’em.  I never drank with those guys or gave ’em money, but we got to know them.

I would get a job in that neighborhood and would often walk out of my place and bring them food, take time to smoke and always stop and talk.  To say that we were “friends” probably wasn’t accurate; we never hung out or did anything together.  But then again, when “grandpa” didn’t show up for “work” one night, I found he’d been taken to the hospital.  I told my boss I had to go, she agreed, and I went to visit him.  So, eh, not friends but certainly a connection was present.

One afternoon I was talking to the younger man, slightly older than me at about 30 or so.  I told him that I thought he carried himself well, his conversations displayed a nimbleness and that he was funny and easy to like.  Finally I said that if he needed to, I’d “borrow him” the money for clothes, a tie and jacket and some shoes.  He could use my address and phone number and I’d take messages and I would run him through practice interviews.  “Just puttin’ it out there…..”

He kinda looked at me, not funny – after all, this wsn’t the random act of kindess of a stranger, but still.  And he shook his head, “Naw man, I don’t wanna job.  I’d have to punch in and punch out, do stuff other people told me to do, and then I’d just come here anyway.  I don’t mind my life, I’m not hungry or cold, I have friends and I make enough money – heck, I make 60-80 bucks a night.”

“But you don’t have a home,” I said.

He corrected me, “I don’t have a house.”

Point taken.  And so it was that he decided to live there.  On the corner.  Eating with strangers and other passerbys.  I kept on eating with him, smoking with him.  We remained “friends” until I move, or until I quit working full time down there in the square.  But it was a little different after that talk.  It was different in that he had made a choice.  In the same way I made a choice, to go to school, then to work and to pay rent and all that stuff.

I’m sure that he’s the exception to the rule, I’m sure that the 636,017 folks out of homes today would rather not be out that home.  That they would want to be back in a secure place, warm fed and safe.  And I know that, my friend’s place was unique.  Seattle is a remarkably safe city, hell, I’d walk home, 1-2 miles at 03:00 AM with a bartender’s take of cash in my pocket right THROUGH the heart of the city.  Not once did anything happen.

But it has always made me wonder how is it best to help the folks that find themselves down on their luck?  How many cases are there of otherwise fully capable functioning families or individuals who just got hit with a random life event that knocked ’em off their feet for a sec?  And yes, literally a free apartment, some food, clothes and a razor would get them back on track.  How many would need more than that, perhaps less?  I’m sure that a ton are mentally ill and unstable; there is no amount of money or care that will allow a hope at a traditional functioning life spent working, paying rent and caring for a self and a home.  But what then? And, of course, there is my “friend” in Seattle.  He has made a clear and rational decision to live on those street and finds himself in a perfectly happy place.

I don’t think anyone questions that “we” give assistance through “entitlements”.  Maybe I speak for myself, but I ask the question, “What is the most effective form of aid?  How will we know it’s working?  What will we do when it hasn’t?  Are we prepared to stop providing the assistance in the event it isn’t fulfilling our goal?”

Those are the questions I have.

Another Government Creation, Another Bailout?

In the same way that government created the housing bubble, the government has created the college-loan bubble.

Once upon a time, government officials decided it would help them keep their jobs if they could claim they had expanded the middle class.  Unfortunately, none of them really understood economics or even the historical factors that led to the emergence of the middle class in the first place.  But they did know two things:  Middle class people tended to own their own homes, and they sent their kids to college.

So in true cargo cult fashion, they decided to increase the middle class by promoting these markers of being middle class.  They threw the Federal government strongly behind promoting home ownership and college education.  A large part of this effort entailed offering easy debt financing for housing and education.  Because the whole point was to add poorer people to the middle class, their was a strong push to strip away traditional underwriting criteria for these loans (e.g. down payments, credit history, actual income to pay debt, etc.)

We know what happened in the housing market.  The government promoted home ownership with easy loans, and made these loans a favorite investment by giving them a preferential treatment in the capital requirements for banks.  And then the bubble burst, with the government taking the blame for the bubble.  Just kidding, the government blamed private lenders for their lax underwriting standards, conviniently forgetting that every President since Reagan had encouraged such laxity (they called it something else, like “giving access to the poor”, but it means the same thing).

What are the chances that we bail out all those kids who’ve majored in such “in demand” course work as Art History, Religious Studies, Women’s Studies and others?

I’d say pretty high.

America’s Vision of Prosperity

I’m pretty sure this explains a lot.  And why I’m continually surprised by conversations that I have with people out and about.  America is changing how she views the path to prosperity and security.

53% of democrats have a positive image of socialism.  While I’m sure few respondents don’t have an accurate definition of the word socialist or socialism, the idea is the same; “Someone else labors to my benefit.”

 

Of Taxes: Federal, State, Local And All

I suspect that even pedestrian news watchers have heard of the fiscal cliff by now.  I hold out very little hope, however, that even a basic understanding of what that means is had.  Which, I suppose, is par for the course.

However, here on the hallowed pages of TarHeel Red, it means that the federal government has some decisions to make.  We could, for example, go off the cliff.  Some think that not such a bad idea.  Me, for example.  I think that taking the hard steps required to cut spending, even defense spending, are long past due.  Sadly, I’m joined in this analysis by Hoard Dean.  I’m suspicious of the twist of fate that cause him to agree with me; I’m afraid to discover which of us has made the mistake in calculus.

However, there are other courses to take.  We could make permanent the Bush era tax cuts.  For everybody.  For some.  We could take this opportunity to cut spending even more, maybe even in a REAL way that real Americans understand.  For example, the local specialty beer shop around the corner sells individual bottles of goodness for $2 American.  I like to stop in and buy a six-pack every  other week.  My spend is $24 a month.

But let’s say that I budget an increase, I want to not only buy those 2 six-packs a month, but I wanna add the full liter of specialty beer.  I up my spend from 24 bucks to $31.  But then….then, well, Obama wins the election and my financial adviser says that I should cut back, so I say, “Okay.”  And instead of buying 12 beers a month I buy 14; an extra $4.

My man goes crazy, he’s out of his head crazy.  He demands to know how I agreed to cut the amount of money I spend on beer and THEN expanded it.  I tell him simple, “I had budgeted a $31 expenditure.  I reduced it to $28.  I cut out nearly 10%!”

Serious.  Politicians, all of ’em, dem and repub, look us in the eye and say this with a straight face.

Anyway.  The cliff.

Obama wants to raise the rate of taxation on the rich.  And when he says that, he means the rate of federal income tax.  He frames the question in terms of the federal income tax rate.  So, I usually speak about the federal income tax rate.  And this is what I say:

According to the CBO, in aggregate, the poorest 60% of us don’t pay a federal income tax.  Worse, the top quintile, the wealthiest 20%, pay more than 94% of federal incomes taxes according to the most recent numbers in 2009.

When Obama claims that the rich don’t pay their fair share, he’s not making sense.  The rich are paying dramatically more than their fair share.  However, I have folks that disagree with me.  And those that do point to this graph:

This graph, built by Citizens for Tax Justice, shows that as a % of income, we all typically pay about the same share of taxes.  For a time I couldn’t square the data.  The report from the CBO didn’t seem to jive with the data coming from CTJ.

Then I realized my mistake.  We’re talking about two different units.  The CBO data that I was using was reporting share of tax revenue.  The CTJ is using share of income.  When I used the “back of an envelope” – I had too, the CTJ data is in 2011 numbers and the CBO data is in 2009.  Further, I used the average of the quintiles and not the total population so my numbers may be off.  However, if the details can be run, I’d be interested in seeing that.  This is what I came up with:

Now we’re talking apples and apples.  I broke out the quintiles in that weird way that folks do; listing the first 4 and then breaking down the last by the “nest 10”, “the next 5”, “the next 4” and “the top 1.”  What this means is that if you gather than top quintile in one group you would see that they pay 93.93% of all taxes.  And this is on an earning of 50.0% of all income.

Holy moly.

The top 20% of Americans earn 50% of the income and yet pay 94% of the taxes.