What To Expect When No One's Expecting

I like interesting information.  I like intriguing insights.  I like considering whether demographics really foretells our destiny.

Therefore, it was certain I was going to really like reading "What To Expect When No One's Expecting" by Jonathan Last.  Starting first and foremost with the title of the book. I think that's one of the better book titles in a long time. Last delivers on all counts in this book that is subtitled "America's Coming Demographic Disaster". However, in reading the book, lower birth rates are not so much America's problem as a challenge for the entire world.

The fact is that birth rates are falling globally. And below replacement (2.1 births per woman in the aggregate) birth rates (and the resulting smaller population that eventually follows it) have always brought about gloom, that eventually became doom, for every society that breached that important reproductive threshold over time.

To put this in perspective, there is not one country in the developed world that has a fertility rate exceeding 2.1 right now. In fact, only 3 percent of the world's population lives in a country that the birth rate is not declining. Some of the undeveloped world still has high fertility rates but they are dropping rapidly. And history has shown that once the fertility rate drops it is hard to get it going the other way.

Here is a sampling of the total fertility rates in major countries around the world as referenced in the book.

Let's take a look at a few of the factoids that are highlighted in the book that I found particularly informative and interesting.

• At Poland's current fertility rate of 1.32, the number of Poles will drop from 38 million today to 16.4 million in 2100. The 0-14 age group in Poland is 40% smaller than the cohort today in their prime reproductive years.  For Poland to maintain a stable population, it needs all the little girls in Poland under age 14 today to have four babies each during their lifetimes and to continue that bias for babies for the next generation as well.
• Germany is already shedding 100,000 in people every year due to its 1.36 fertility rate. In Russia, it is even worse.  Russia had 149.6 million people in 1995.  Today it only has 138 million.
• To show how fast the birth rates is falling in Russia, consider that in the last 16 years of the Soviet Union there were 36 million births.  In the 16 years since the fall of the Soviet Union, births in Russia have only totaled 22.3 million births.  One factor in this drop off is the fact that today there are 30% more abortions than births in Russia.
• In 1960, Venice, Italy had a population of 145,000.  By 2009, it has dropped to only 60,000.  On an average day, Venice has 60,000 visitors.  Therefore, if you visit Venice one out of every two people are tourists. 
• If current fertility rates persist in Europe, the total population will go from 738 million to 452 million by the end of the century.  
• In Japan there are more adult diapers sold now than there are baby diapers.
• By 2040, it is projected that there will be one Japanese citizen over the age of 100 for every birth.
• Due to sex-selective abortions and China's one-child policy, there are 123 boys born for every 100 girls in China.
• By 2050, at current demographic trends, China's population will be falling by 20 million people every 5 years.
• The overall U.S. fertility of 1.93 can be misleading.  There are vast differences when you slice and dice the numbers. The Hispanic fertility rate of the population was 2.35.  Whites are at 1.79 and Blacks at 1.96. Utah was at 2.60 (the highest state), Vermont was at 1.67 (the lowest state). Women who have not graduated from high school have fertility rate of 2.45. Women with graduate degrees are at 1.60.  The high fertility rate of Hispanics (as well as immigration) is a big reason why over half of the population increase in the U.S. between the 2000 and 2010 census was attributable to the increase in Hispanics in the country.

Why are birth rates falling the world over?

Last concludes there is no single reason. It is the confluence of a number of factors some of which are interrelated.

1. The increased use of contraceptives (in particular the birth control pill).
2. Abortion
3. Increased education by women
4. Later marriages
5. Higher divorce rates
6. Increased urbanization
7. High land costs
8. High education costs, particularly for college
9. Increase in secularism and the decrease in religious influences
10. Car seats, Social Security taxes and other factors that you never thought would mean fewer births

Why should we be concerned?

Economies need people.  They need them to invent things, build things and to buy things.  They need them to invest and innovate.  They need them to start new businesses.  They need them to pay taxes.  If you don't have a supply of new people replacing older people in a society you begin to shrink and you eventually shrivel away.  

When the old outnumber the young you are heading for big problems.  Who buys the real estate that has been built?  Does a 60-year want to start a business?  Most inventions and innovations have historically come from those in their 20's and 30's than in their 50's and 60's.  Thomas Edison invented the phonograph at age 30.  Alexander Graham Bell was 29 when he invented the telephone.  Steve Wozniak invented the Apple I computer at age 26. Larry Page and Sergey Brin were both age 25 when they incorporated Google.  If you don't replenish with enough young blood, you really do die as an economy and and as a society.

You get the picture?  

In the United States, if we stay on the current path, 1 out of every 5 Americans will be over age 65.  The population of these senior citizens will outnumber the population of age 14 and under by 13 million in the United States by 2050. It will be as if the whole country is very similar to the age structure in Florida today.

Do you get the picture?

Get Ready. Coming soon to a team near you!

Audition for the Miami Heat's Golden Oldies Hip-Hop Dance Team
Credit: NBA.com

There is so much great information and insights in "What To Expect When No One's Expecting" that I will have a follow-up post on the book in the near future.  Stay tuned and encourage someone to have a baby!

Moving On Up

Last week I wrote (before Bill O'Reilly said essentially the same) that the only sure way to change things for the African-American community is from the inside-out.  It seems all of the energy right now is focused on outside forces.

The protesters and polemicists who want to keep complaining and agitating about the verdict in the George Zimmerman trial would be well advised to look inward.

Where are the voices talking about the nearly three out of four African American children born out of wedlock? Where are the voices decrying the culture among black youths that seems to glorify drugs and violence?  Where are the voices speaking out about the fact that only 54 percent of African Americans are graduating from high school?

Crime is largely a function of poverty and poor home environments.  The absence of a father in the home is a significant factor in this equation. 

Failure to complete high school is almost a certain path to poverty in this day and age.  We are spending massive amounts of money on welfare and other programs to help the poor but you hear little about the massive failure of young African Americans to graduate from high school.  We are spending enormous sums of money on the symptoms but pay little attention to the underlying disease.

Why is this so important? It is because out of wedlock births and failure to graduate from high school are almost certain to lead to poverty.

William Galston, who was an advisor to President Clinton, has spent a good part of his career studying the causes of poverty.  He concluded that in order to avoid being poor you just needed to do three things, (1) graduate from high school, (2) wait until getting married to have children, (3) wait until age 20 to have children.  His research indicated that only 8 percent of young people who followed these rules ended up poor.  However, breaking just one of these rules means a 79 percent chance of ending up below the poverty line.

The New York Times recently reported on a recent study that also seems to reinforce the importance of these factors, among others, in income mobility (being able to move up the economic ladder).

The researchers found four broad factors that appeared to positively affect income mobility.

1. Poor families are more dispersed among mixed-income neighborhoods.
2. There are more two-parent households.
3. There are better elementary and high schools
4. There is more civic engagement, including membership in religious and community groups

The Times article say that what they found "surprised" the researchers? Really?  Isn't it obvious that you are going to fare better in life if you learn early to deal with many different types of people rather than live in a closed world, you have two parents, get a good education and go to church? Perhaps this is only a surprise to liberal academics and New York Times writers.

Here are two other conclusions that the researchers came to that also "surprised" them.

1. Larger tax credits for the poor and higher taxes on the affluent seemed to improve income mobility only slightly.
2. There was only modest or no correlation between income mobility and extreme wealth in a region. 

Again, should that be a surprise?  

The study also found that race did not play a part in lower income mobility. Both Black and White residents in in metro areas with large African-American populations had lower upward mobility.

There is no question that certain people are born into much more favorable circumstances than others.  In fact, as Warren Buffett has said (as quoted in his biography, The Snowball), anyone born in the United States won the birth lottery as compared to the rest of the world.

I’ve had it so good in this world, you know. The odds were fifty-to-one against me being born in the United States in 1930. I won the lottery the day I emerged from the womb by being in the United States instead of in some other country where my chances would have been way different.

Would you rather be poor in the United States or in Bangladesh, Burma or Burundi?  Poor is a relative term.

The point here is that we have no control over our birth.  Prince George was born last week and does not have any idea right now that he won the Super Lotto of birth lotteries.  DeShawn who was born in Grady Hospital in Atlanta on the same day is not so lucky.  Sumon in Bangladesh is unluckier still.

We also have little control over the behavior, bias and blather from other people.

What we can all do is take control of our place and position in life by doing all we can with what we have.  That starts with looking inside ourselves first before looking outside.  Understanding that we have more control over our life than anyone else.  Understanding that life is often not fair but we are in the best position to change other people's minds by our attitudes, actions and willingness to take accountability when it is necessary.

There is a ladder to success in America but too few African-Americans are taking the necessary steps.  One of the problems is that when an African-American speaks out about the issue they are called an "Uncle Tom" or worse as CNN's Don Lemon found out recently. 

Here is the transcript of what Lemon had to say which focused on five things that black people (young men in particular) need to think about doing if they want to fix the core problems in the Black community.  Notice how aligned these are with the research above on income mobility.

1. Hike up their pants and dress appropriately
2. Remove the n-word from their vocabulary
3. Take care of their communities
4. Finish high school
5. Lower the rate of children born out of wedlock

It is time for action and accountability in the African-American community.  Who is going to lead the way?  Thank you, Don Lemon, for stepping out.  Who else is willing to lead people up the ladder?

We certainly don't see it from Hollywood anymore.  We used to see examples on television like The Jeffersons, The Cosby Show and Room 222 with strong and successful black male role models.  What are we getting today?  Real Housewives of Atlanta and Basketball Wives lead the pack?  Can't liberal Hollywood do better than this?

"Moving On Up"

Theme Song of the TV show "The Jeffersons" (1975-1985)

The cast of The Jeffersons


Well we're movin on up, To the east side.
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.
Fish don't fry in the kitchen;
Beans don't burn on the grill.
Took a whole lotta tryin'
Just to get up that hill.
Now we're up in teh big leagues
Gettin' our turn at bat.
As long as we live, it's you and me baby
There ain't nothin wrong with that.
Well we're movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up
To the east side.
We finally got a piece of the pie.

Atlas Shrugged, Detroit Disregarded It

I have written several times about Ayn Rand's Atlas Shrugged.  Here is a post that I wrote about the book just before the movie Atlas Shrugged, Part II arrived in theaters last October.

If you ever wanted an example of life imitating art then consider this article by Daniel Hannan in The Telegraph that starts this way.

You thought Atlas Shrugged was fiction?

Look at this description of Detroit from today’s Observer:

What isn’t dumped is stolen. Factories and homes have largely been stripped of anything of value, so thieves now target cars’ catalytic converters. Illiteracy runs at around 47%; half the adults in some areas are unemployed. In many neighbourhoods, the only sign of activity is a slow trudge to the liquor store.

Now have a look at the uncannily prophetic description of Starnesville, a Mid-Western town in Ayn Rand’s dystopian novel, Atlas Shrugged. Starnesville had been home to the great Twentieth Century Motor Company, but declined as a result of socialism:

A few houses still stood within the skeleton of what had once been an industrial town. Everything that could move, had moved away; but some human beings had remained. The empty structures were vertical rubble; they had been eaten, not by time, but by men: boards torn out at random, missing patches of roofs, holes left in gutted cellars. It looked as if blind hands had seized whatever fitted the need of the moment, with no concept of remaining in existence the next morning. The inhabited houses were scattered at random among the ruins; the smoke of their chimneys was the only movement visible in town. A shell of concrete, which had been a schoolhouse, stood on the outskirts; it looked like a skull, with the empty sockets of glassless windows, with a few strands of hair still clinging to it, in the shape of broken wires.

Beyond the town, on a distant hill, stood the factory of the Twentieth Century Motor Company. Its walls, roof lines and smokestacks looked trim, impregnable like a fortress. It would have seemed intact but for a silver water tank: the water tank was tipped sidewise.

They saw no trace of a road to the factory in the tangled miles of trees and hillsides. They drove to the door of the first house in sight that showed a feeble signal of rising smoke. The door was open. An old woman came shuffling out at the sound of the motor. She was bent and swollen, barefooted, dressed in a garment of flour sacking. She looked at the car without astonishment, without curiosity; it was the blank stare of a being who had lost the capacity to feel anything but exhaustion.

“Can you tell me the way to the factory?” asked Rearden.

The woman did not answer at once; she looked as if she would be unable to speak English. “What factory?” she asked.

Rearden pointed. “That one.”

“It’s closed.”

What is really incredible is that Ayn Rand wrote these passages in 1957.  At that time Detroit had the highest per capita income in the United States.  Today Detroit is in bankruptcy and Washington, DC has the highest per capita income in the country.  DC's average per capita income is actually 75% higher ($30,000 per year) than the national average.  It is also almost $17,000 higher than Connecticut which has the highest per capita income of the 50 states.  I don't think even Ayn Rand could have foreseen that much income disparity developing.

Interestingly, the last Republican mayor of Detroit (Louis Miriani) assumed office in 1957.  He was replaced by a Democrat in 1962 and the Democrats have ruled Detroit ever since.

A few facts about the hole  chasm that Detroit is in.

• Less than half of the residents of Detroit over the age of 16 are working

• An estimated 78,000 homes are unoccupied in the city,

• In 2011, half of the occupiers of the city's 305,000 properties did not pay their property taxes.

• 40% of the city's street lights don't work

• 2/3 of the city's ambulances are not in service

• The violent crime rate in Detroit is five times higher than the national average.

• The murder rate in Detroit is 11 times higher than it is in New York City.

• Two-thirds of the parks in the city of Detroit have been permanently closed down since 2008

• $9.2 billion out of total debt obligations of $18 billion for Detroit is owed to the city's retirees for pensions and health benefits but this number is probably understated due to unrealistic future return assumptions 

• Total property tax and income tax revenue for the 2012 fiscal year was less than $500 million.  The city brings in another $170 million in casino revenues.  The rest of the city's revenues are state and federal grants and water and sewer revenues

• There are about two retired city workers for every active worker on the payroll today

• The pension fund is estimated to need annual contributions of $200 million to $350 million. The city spent $177 million on retiree health costs last year. Compare those numbers to the tax revenues and you can readily see the problem

If the Atlas Shrugged parallel above is not enough for you, also consider this passage in the book that I wrote about last July.

You might remember Barack Obama's view of entrepreneurship and success from last year's campaign.

"If you’ve got a business -- you didn’t build that.  Somebody else made that happen."

Compare Obama's words to this dialogue in Atlas Shrugged that makes the same argument as to why the government is justified in heavily taxing and regulating a successful entrepreneur named Rearden...

“He didn’t invent iron ore and blast furnaces, did he?”

“Who?”

“Rearden. He didn’t invent smelting and chemistry and air compression. He couldn’t have invented his Metal but for thousands and thousands of other people. His Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.”

She said, puzzled, “But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?

Every time I read that passage it puts a chill up and down my spine.

The warning signs for Detroit have been there for many, many years. Atlas Shrugged a long time ago when it saw what was going on. The problem was that the people of Detroit disregarded it. That has brought them to where they are today.

I feel sorry for what lies ahead for the people and the pensioners of this late, great city. I lived just outside Detroit 50 years ago when it was in its heyday.  It is sad to see how far it has fallen.  However, you need more makers than takers in any society.  You can only borrow so much.  You can only withstand so much corruption. You can't continually put public sector unions ahead of the public interest. Eventually you hit the wall.

Detroit has hit the Wall.  Who was driving?

We need to pay close attention to what transpires in Detroit and the pain that results as this bankruptcy resolves itself.  It will not be pretty.  For example, before the bankruptcy filing the city was looking for a deal to cut pensions and health benefits by 90%!

I can only hope that we don't look at what has happened to Detroit, simply shrug, and continue doing the same things for our nation at large.

We should learn that when 'Atlas Shrugs' or 'Detroit Goes Down The Drain' it is time to pay attention.

Rights and Responsibilities

I was listening to the radio this morning on my commute to work and the Libertarian candidate for Mayor of Cincinnati was arguing for the legalization of drugs.

It brought to mind an earlier post I had written about the line between the subject of rights and freedoms on the one hand and responsibilities, costs and consequences on the other.

Let me state at the outset that I am all for freedom and liberty.  However, I am also a big believer in responsibility.  I think there is a lot to be said in allowing people to have the freedom to do what they want to do.  Let them smoke pot, drop out of high school, ride their motorcycle without a helmet, drink a 40 oz Big Gulp and refuse to buy health insurance if they want to.

Do whatever you want.  Just make sure that your choices don't infringe on my freedoms and my pocketbook.

It is pretty well documented that drugs are not good for you.  Marijauna, which has been legalized in small quantities in a few states, has a long list of negative side effects .  I saw many of these among my college classmates who smoked when I was in college.  Most prominent was the fact that what were once highly-motivated individuals became slacking loafers the more they smoked.  It was sad to see the downhill slide and that was a major reason that I never even tried the drug.

My anecdotal observations from 40 years ago are now borne out by recent research that long-term marijuana users tend to produce less of a chemical in the brain linked to motivation.

Note: I could find no attribution for the image but notice that it is off-balance.  I  wonder why?

It is becoming increasingly difficult for any individual to get a job in the private sector if they can't pass a drug test.  According to the Society for Human Resource Management, 57% of employers require all job candidates to take a pre-employment drug test.  So who supports the pot smoker if they can't get a job because they aren't "motivated" to get a job or they can't pass the drug test if they apply for one?  That is where the libertarian ideal runs into reality.  It is also where the actions of that person exercising their "freedom" starts encroaching on me.

In my earlier post, "Don't Spillover On Me, Don't Tread On Me", I cited this great insight from Steven E. Landsburg who teaches economics at the University of Rochester.


"Things tend to work out best when people have to live with the consequences of their own behavior"

or to put it another way

"Things tend to work out poorly when the consequences of our actions spill over onto other people"

A fundamental problem in our society is that we are good at making sure people get their rights and freedoms but we tend to shy away from holding people responsible for their actions.

If you want to smoke pot and cannot get a job, why should your actions mean that I should pay for your welfare benefits and food stamps?

If you ride a motorcycle without a helmet and you suffer a head injury, why should my health insurance premiums go up to pay for your irresponsibility?

If you don't buy health care insurance, why should the local hospital (and me and others) absorb the cost if you need to go to the emergency room?

Well-functioning societies require a balance of rights and responsibilities. They go hand in hand. You cannot keep handing out rights without also insuring that the requisite responsibilities are also in place.

I am not a fan of Obamacare but the legislation is absolutely not workable without an individual mandate.  You can't provide the right to gain insurance with no pre-exising condition exclusion if there is not the responsibility (and the penalty) to carry health insurance.  As it is, the penalty is much too low to enforce any responsibility (the higher of $95 or 1% of income).

If the Libertarians are really serious about decriminalizing drugs then they should be willing to pair this with tough rules on personal responsibility if that drug usage spills over on everybody else.  This means no welfare benefits,  food stamps or other benefits for those who fail a random drug test.  If you are arrested for driving under the influence you would pay with jail time.

Freedom is not free.  I like the ideals of libertarianism. I just want to hear more about protecting my freedom in the process.  That is something that neither the Democrats or the Republicans have done a very good job at in the past.

Patrick Henry once said 'Give me liberty or give me death!'

All I am saying is that if you give out some liberty how about matching it with a little responsibility as well?

The Elephant In The Room

In the aftermath of the George Zimmerman acquittal there is a lot of talk about racial bias in the judicial system.  I have heard many African-American commentators argue on cable tv that there is inherent bias throughout the police and justice system against African-Americans.  They cite the Zimmerman verdict as just one more example of that bias.

I agree with that general conclusion.  However, I think it is misplaced in trying to make that point in the Zimmerman case. I have no doubt there is bias at times if you want to use that word.  If you are black in America there is undoubtedly a greater chance that you will be pulled over in a car.  You will be looked at with greater suspicion in a convenience store.  You will find it harder to get a fair shake in a court room.

It is not right.  However, as I wrote recently, profiling and stereotyping are fundamental to the way the human brain operates.  It is not fair but that is the way the brain is wired.  We are too quick to jump to conclusions based on past experiences, emotions, events, associations and their consequences.

The elephant in the room that no one wants to talk about is why does that bias exist?  Why do we keep hearing about a police and a justice system that is unfair to African-Americans?

These statements are particularly interesting when you look at who is overseeing these systems today at the federal level.

The President of the United States is an African-American.

The Attorney General of the United States is an African-American.

They have both been in place for almost five years.  Why all this talk of institutional bias when you look who is on top of our governing and justice system today?

Here are the cities with the highest violent crime rates in the United States according to the FBI.  The majority of the cities are headed by an African-American.

1. Flint, Michigan (African-American Chief of Police, Alvern Lock)

2. Detroit, Michigan (African-American Chief of Police, James Craig)

3. Oakland, California (African-American Chief of Police, Howard Jordan stepped down in May and was replaced by an interim Chief who is white.)

4. St. Louis, MO ( White Chief of Police, Sam Dotson)

5. Memphis, TN (African American Chief of Police, Toney Armstrong)

Therefore, we hear about the bias of the "system" but that "system" is increasingly being overseen by African-Americans.  The old argument of institutional bias just does not add up as it might have at one time.  If the deck is stacked, who is stacking the deck?

We also hear outcries that Republicans are somehow responsible for bias in the system and they simply don't care about the plight of African-Americans.  However, if you look at the Mayors that oversee the 30 largest U.S. cities, only two are Republicans. (Gregory Ballard in Indianapolis and Betsy Price in Fort Worth.)

What is the real elephant in room?  Let's look at the crime statistics.  In order to do that I went to the  most recent Statistical Abstract of the United States.  It helps you better understand the dimensions of the issue.

First, it should be recognized that crime rates have decreased substantially in the last 15 to 20 years as this first chart demonstrates.  This is a very positive development especially in light of the challenging economic environment.

Blacks are much more likely to be victims of crime than Whites or Hispanics.

This is particularly the case for murder.  In fact, the chances of being murdered are over 5 times greater if you are Black than if you are White.  Note that there is currently no data for Hispanics in the next few charts because the federal government right now consider Hispanics to be an ethnicity rather than a race.  This will change next year in the collection of this data.

Who is committing these crimes?  Blacks commit almost 5 times as many violent crimes (murder, manslaughter, rape, robbery and aggravated assault) per 1,000 population as Whites according to FBI data based on arrests for violent crimes.

What about overall arrests that are made for both violent and property crimes?  The incidence of arrests for Blacks is over twice what it is for Whites on per capita basis.  In fact, this data suggests that, on average, there is one arrest each year for every 12 Blacks in the U.S.

What about hate crimes?  The Justice Department also tracks this data.  There are many more hate crime incidents perpetrated against Blacks than Whites.  However, these incidents pale in comparison to the hate that is spewed towards Jewish people.  How come we never hear about this?

In fact, Jewish people have almost six times the chance of being the victim of a hate crime as an African American and over four times the chances of a Muslim in this country!  For some reason these facts just never seem to make the evening news.

It is important to remember that the vast majority of crime is committed against people of the same race. Crime is a function of proximity and opportunity.  For example, from 1976 to 2005 according to this article in the Daily Beast, 94 percent of Black murder victims were killed by Black offenders.  At the same time, 86 percent of Whites were killed by other Whites.

However, what about interracial crime, white-on-black attacks and the reverse?

Patrick J.Buchanan wrote about this in a recent column.

After researching the FBI numbers for “Suicide of a Superpower,” this writer concluded: “An analysis of ‘single offender victimization figures’ from the FBI for 2007 finds blacks committed 433,934 crimes against whites, eight times the 55,685 whites committed against blacks.

Interracial rape is almost exclusively black on white – with 14,000 assaults on white women by African Americans in 2007. Not one case of a white sexual assault on a black female was found in the FBI study.”

Though blacks are outnumbered 5-to-1 in the population by whites, they commit eight times as many crimes against whites as the reverse. By those 2007 numbers, a black male was 40 times as likely to assault a white person as the reverse.

Today, 73 percent of all black kids are born out of wedlock. Growing up, these kids drop out, use drugs, are unemployed, commit crimes and are incarcerated at many times the rate of Asians and whites – or Hispanics, who are taking the jobs that used to go to young black Americans.

Buchanan points out the real elephant in the room.

As I stated above, discrimination and bias exists against Blacks in the criminal justice system and in their daily lives.  It is disingenuous for anyone to deny this. However, all of the energy of the African American community about this problem seems to be only directed outwards.  I don't see much energy devoted to looking inward for solutions to the problem. 

William Galston, who was an advisor to President Clinton, has spent a good part of his career studying the causes of poverty.  He concluded that in order to avoid being poor you just needed to do three things, (1) graduate from high school, (2) wait until getting married to have children, (3) wait until age 20 to have children.  His research indicated that only 8 percent of young people who followed these rules ended up poor.  However, breaking just one of these rules means a 79 percent chance of ending up below the poverty line.

Where are the voices talking about the nearly three out of four African American children born out of wedlock? Where are the voices decrying the culture among black youths that seems to glorify drugs and violence?  Where are the voices speaking out about the fact that only 54 percent of African Americans are graduating from high school?

Crime is largely a function of poverty and poor home environments.  The absence of a father in the home is a significant factor in this equation.  That is why I think it is especially ironic that there is so much energy being devoted to enabling gay marriages in this country but you hear almost nothing about encouraging African Americans to marry before having a child. 

Failure to complete high school is almost a certain path to poverty in this day and age.  We are spending massive amounts of money on welfare and other programs to help the poor but you hear little about the massive failure of young African Americans to graduate from high school.  We are spending enormous sums of money on the symptoms but pay little attention to the underlying disease.

If we look at the data above, and you consider the way the human brain works and the role heuristics plays in our thinking, bias, racial profiling and stereotyping is going to occur.  It is not right and it is not fair but that is the way the human brain is wired.  It is always looking for shortcuts based on past experience and associations.  A lot of the time this is very helpful in assessing things.  However, it can also lead to generalizations, stereotypes and bias that lead us astray.  

The only sure way to change that is from the inside-out in the African-American community.  Discrimination, bias and stereotyping are not unique to Blacks. For example, prior to the 1950's, Asians who lived in the United States were stereotyped as cheap, poor, uneducated laborers.  Products from Asia were derided as nothing more than cheap junk.  That stereotype no longer exists.  It literally has been turned on its head.

Today, students in high school and college cringe when they see Asian-Americans entering their classrooms on the first day of class.  American businesses have learned some hard lessons from their Asian counterparts.  The old stereotype is gone.  That change did not occur because people just started to think differently one day.  It changed because they were forced to change their thinking because of what they experienced and the behaviors and results they saw from greater and greater numbers of Asians they came in contact with.

Someone needs to start talking about the elephant in the room in the African-American community. My hope would be that it would be the President of the United States. I think that was the hope of most Americans when he took office.  We were looking for a uniter and all we got was a divider.  I still have hope.  It just doesn't look like he is going to change.  That might end up being the biggest disappointment of the Obama Presidency when all is said and done (unfortunately, that would be saying a lot).

A Slippery Slope

If you want a sturdy house you need to have a strong foundation.

If you want that house to stand strong you are well advised to not weaken that foundation in any way.  You should not be messing with the supporting pillars.  You risk bringing the whole house down.

I have serious concerns right now that we are seeing too many people in leadership positions in our government messing with the supporting foundational pillars of our country.  Those pillars are some of the most important institutions and ideals that define our system of government.

My fear is that this disregard starts to take us down a very slippery slope.

Credit:www.dailymail.co.uk

A few examples in just the last few months...

• Using the Internal Revenue Service to target political opponents.

• Using the National Security Agency for questionable data gathering in violation of the Fourth Amendment.

• Refusing to defend a duly enacted law of the United States (Defense of Marriage Act) before the U.S. Supreme Court.

• Delaying a critical section of a duly enacted law (employer mandate of Obamacare) that is clearly beyond the power of the executive branch.

• A Prosecuting Attorney in Florida castigating an individual acquitted in a court of law (George Zimmerman) for not taking the stand in his own defense which is the most fundamental legal constitutional right for any citizen.

• A state attorney, who when asked to describe an individual duly acquitted in a court of law of murder and manslaughter, called him "a murderer".

There are many more examples but these easily jumped to my mind in recent days.  

What is so troubling is that each of these examples seem to represent a direct attack on those supporting institutions and ideals that provide the needed legitimacy and order necessary for a well-functioning society.

My suggestion is that we need some real leaders to step up and move us away from the edge of the abyss that we are on.  The slope down to that abyss is very steep and very slippery and we need to be very, very careful about these core foundations holding us up if they are being disregarded and denigrated every other day.

Things sometimes may not go the way our government leaders want them to.  However, they must always show respect for the law and the process.  For if they don't, why should the people feel obligated to do the same? 

People have to trust in our basic foundational principles and know that our leaders are going to support and defend those principles through thick and thin.  If that trust is not there, what separates us from total anarchy? 

We may think Egypt is a long way away.  If we keep traveling this road, it gets uncomfortably closer every day.

Heuristics and the Human Mind

In the movie Up In The Air, which starred George Clooney as a outplacement consultant who leads an empty life flying around the country firing people, there is the following exchange between Clooney (Ryan Bingham) and Anna Kendrick (Natalie Keener) who plays a young consultant who Bingham is mentoring.

Ryan Bingham: [on getting through airport security] Never get behind old people. Their bodies are littered with hidden metal and they never seem to appreciate how little time they have left. Bingo, Asians. They pack light, travel efficiently, and they have a thing for slip on shoes. Gotta love 'em.

Natalie Keener: That's racist.

Ryan Bingham: I'm like my mother, I stereotype. It's faster.

The fact is that we all stereotype because all of our brains use shortcuts to make decisions. It is the way the brain is wired. These shortcut pathways make decision making easier. Our brain is a wondrous thing. Most of the calories we burn in a day go to fuel this enormous power plant. Therefore, the brain always tries to make decisions that use the least amount of effort and energy it can. These shortcuts are called heuristics.

It does not mean that the decisions based on these shortcuts are always right. But they have generally served the human species well for the most part because it helped us adapt and survive. We could make quicker and more efficient decisions even if we weren't right all the time. We learned that it was dangerous to go outside the cave at night because a higher percentage did not return as compared to when others left in daylight. We learned to avoid the plant with the funny looking berries. Uncle Abner made that mistake. Once we found a "safe" place we tended to stay there despite the fact that had we ventured over the hill we would have discovered an even better place.

If you are human you use heuristics, bias and stereotypes every day. If you don't know better you are going to start with a default position as you assess things. For example, if you are looking at a product you are not familiar with and you have two items to choose from, you are going to assume the expensive option is better. If you move to a new city and need to open a bank account, you are going to assume that the bank with 50 branches and the skyscraper downtown is better than the bank with one office. After all, if they got that big they must have done something right.

In both cases, a closer and detailed look may show you are totally wrong, but you will undoubtedly have an initial bias based on prior experience.  Your brain is not going to start from ground zero when there are already paths established previously to rely on.

All of this is important to remember as we consider the events that coincided to create the George Zimmerman-Trayvon Martin confrontation in Sanford, Florida. There is little doubt that what happened last year on that rainy night was a human tragedy. However, it all was a result of heuristics and the wiring of the human brain.

George Zimmerman and Trayvon Martin
Photo Credit: cnn.com

Consider what happened from George Zimmerman's perspective. His gated community neighborhood had reportedly suffered eight burglaries in the 14 months prior to the fatal night. This Reuters story from last year provides the background.

At least eight burglaries were reported within Twin Lakes in the 14 months prior to the Trayvon Martin shooting, according to the Sanford Police Department. Yet in a series of interviews, Twin Lakes residents said dozens of reports of attempted break-ins and would-be burglars casing homes had created an atmosphere of growing fear in the neighborhood.

In several of the incidents, witnesses identified the suspects to police as young black men. Twin Lakes is about 50 percent white, with an African-American and Hispanic population of about 20 percent each, roughly similar to the surrounding city of Sanford, according to U.S. Census data.

An African-American neighbor of Zimmerman's said this at the time.

“Let’s talk about the elephant in the room. I’m black, OK?” the woman said, declining to be identified because she anticipated backlash due to her race. She leaned in to look a reporter directly in the eyes. “There were black boys robbing houses in this neighborhood,” she said. “That’s why George was suspicious of Trayvon Martin.”

Therefore, if you understand heuristics it should not be any surprise that George Zimmerman would have "profiled" Trayvon Martin.  It was natural to question why a strange, young black man was doing out on a rainy night roaming through Zimmerman's gated community after the string of recent burglaries by similar young men.

It is easy to say that Zimmerman should not have jumped to that conclusion.  However, I doubt many of us, considering the facts and the background of events in that neighborhood, would have as our first thought upon seeing Trayvon be, "There goes a nice young man with a bag of skittles."

The same goes for Trayvon.  He had merely made a quick trip to the neighborhood convenience store and used a well traveled shortcut through the community to make the trip.  It was dark and he saw an older man eyeing him.  His life experience clearly seemed to be that he did not have a lot of trust in "creepy ass crackers".

It was completely understandable that Martin would have felt nervous and threatened if he thought Zimmerman was following him.  I also understand why his first thought in seeing Zimmerman in his car looking at him was not, "There is the wonderful neighborhood watch volunteer protecting the community from thugs and thieves.  I am sure glad he is there watching out for me and others who are living here."

The only two people who know what transpired that rainy night in Florida over a year ago were Zimmerman and Martin.  A jury of their peers saw and heard all the evidence and concluded that George Zimmerman was not guilty of anything that transpired that night under Florida's criminal statutes.  I was not there and did not hear all of the evidence.  I trust they made the correct decision.

I was also not there to hear all of the evidence in the O.J. Simpson and Casey Anthony murder trials.  From afar, those cases did not seem to have been decided correctly from my perspective.  But I was not there.  That is fast thinking on my part.  The jurors in those cases saw and heard all of the evidence.  They should have been thinking slow.  Therefore, I accept the verdicts of those juries just as I hope the Zimmerman verdict will be accepted by those who may not think justice has been served.  Is our justice system perfect?  No.  But it still is the fairest system of justice ever devised by mankind.

The one thing I am sure of is that Zimmerman and Martin were both guilty of not understanding heuristics.  As a result, their gut instincts led them to the wrong conclusion about each other.  I would hope that this case would be a lesson for us all to better understand the way our brain works.  Our brain does help us get the right answer in very quick fashion a lot of the times.  But it can just as easily lead us astray.

It is perhaps even more important today with the fast-paced nature and complexity of our society that we learn to slow down and think.  Really think slow, especially when we are in stressful situations as hard as that may be.

Daniel Kahneman, the noted psychologist who won the Nobel Prize in economics for his research involving heuristics and human decision making recently wrote a book, Thinking Fast and Slow, in which he stated,

"A remarkable aspect of your mental life is that you are rarely stumped.  The normal state of your mind is that you have intuitive feelings and opinions about almost everything that comes your way. You like or dislike people long before you know much about them; you trust or distrust strangers without knowing why; you feel that an enterprise is bound to succeed without analyzing it'"

Kahneman's point is that we can all think fast.  The real challenge for us is to think slow.  May that be the lesson that we  all learn from the tragedy of George Zimmerman and Trayvon Martin.

Pain and Gain in Housing

We live in a headline dominated world supported by 10 second sound bites and 140 character tweets.  Most people never get beyond the superficial to see the substance of anything.  In fact, a majority are probably not even getting to the surface of most issues, let alone any depth.

I started writing BeeLine to take that deeper dive.  My goal is to provide the perspective and context that you can't get from reading a headline or hearing that short sound bite.  Taking you on the shortest route to what you really need to know to understand what is current in our world.

A good example is the recent news in the headlines that housing is on the rebound with the highest level of pending sale contracts since 2006.

Existing Home Sales Surge in May

However, let's get beneath the surface on this headline.  Let's actually get beyond the curb appeal and get in the house.

At the same time that the news outlets were writing this headline based on data from the National Association of Realtors (NAR), Bloomberg was reporting that mortgage applications fell to their lowest level in nineteen months.

What gives?  How is that possible?  Shouldn't they be in sync?

If you look at the NAR data for May, 33% of existing home sales were for cash.  That's pretty incredible.  That also tells me that there are not a whole lot of first-time home buyers, who traditionally are the engine of home sales growth, driving this market.  After all, first-time home buyers are necessary to get the ball rolling by taking starter homes to clear the way for larger purchases up the chain.

Fritz Pfister, who is a realtor, and is very concerned about "The Disappearing First Time Home  Buyer" , puts it very well in TownhallFinance.com.

The Catch22 in housing: I won’t buy another home until my home is sold, but I won’t sell my home until I know where I’m moving. Life just isn’t fair sometimes, but without the first time home buyer in numbers many sellers won’t need worry about where they will be moving.

First time home buyers accounted for only 28% of sales in May, down from 34% a year prior, and from the 40% norm. That’s huge. This means there won’t be as many dominoes falling this summer.

Why is there a dwindling number of first time home buyers? The lack of jobs, increasing home prices, tighter lending guidelines, student loan debt, and rising interest rates are the primary culprits. Other than that, buying a home is easy.

Who is buying all the houses and using cash to do it?

Large Institutional Investors.

USA Today reported today that in April 10% of the houses sold in the nation's 100 busiest real estate markets were bought by institutional investors. They are buying them to rent to families with a longer term goal of selling at a gain down the road.

29% of the houses sold in Lakeland, Florida were sold to big investors.  In Miami and Las Vegas, 22% each.  In cities like Atlanta, Memphis and Charlotte, it is close to 20%.

In all, $10 billion has been "invested" in this sector by Wall Street.  The Blackstone Group alone has purchased 29,000 homes in 13 markets.  25,000 of them have been in the last year alone!

Where have the big investors gotten the cash? A big factor has been the Federal Reserve's zero interest policy (ZIRP) that has allowed many of the large Wall Street groups to borrow money at ridiculously low interest rates. This is not mortgage money. These are corporate borrowings that gives them the cash to buy these houses. At the same time, despite the low mortgage interest rates, many families cannot qualify so they are forced into the rental market.  The same with students and their student debt.

The result-Main Street takes the loss and Wall Street pockets the gain.

Does this sound familiar?  It is yet another example of The Redistribution of America.  If you have not read my blog post on this subject previously, you need to do that next.

Let me be clear.  I am not against anyone making a buck when they see a good opportunity.  And the fact is that many people had no business being in the houses they were with the mortgages they had on those houses in the 2005-2007 period.  Many people who bought houses should have been renting.

These big investors are also providing needed liquidity right now that is also helping the market recover.  However, it is all artificial and the table is tilted towards where both the big influence is as well as the big money.

The fact is that bad things seem to happen when the federal government starts taking sides. Favoring one person, one group, one business or region compared to another. Providing an advantage to one side at the expense of another. Taking sides where it should not be taking sides. Picking winners and losers. Tilting the playing field to play favorites.

It happened when the federal government forced banks to lend to those who should not have otherwise qualified.  It is happening now as the Fed is keeping interest rates low to save debtors while destroying savers.

Government should not be on the playing field calling the plays. Its primary role should be making sure that the playing field is safe, that people are playing by the rules and that penalties are assessed when the play is out of bounds. This is what are Founding Fathers had in mind when they wrote our Constitution.

And despite what is always argued is the best of intentions, it always seems that Main Street feels the pain and Wall Street receives the gains.

Even if it involves...

Credit: Canvas by Kristen Swain on GlueArts.blogspot.com

1,379 Days Is Still Not Enough Time

The Obama Administration announced on the eve of the Independence Day holiday that it was delaying for one year the employer mandate provision of Obamacare.

This is the provision that requires all employers with more than 50 employees, working at least 30 hours a week, to provide their employees healthcare coverage or pay a  $2,000 per year penalty  tax per employee if they don't offer affordable health insurance to their workers.

I had written earlier this year that I thought it was possible that the Obama Administration would delay parts of the bill in that they would not be ready to implement provisions of the law.  That has become a reality.

A few observations...


The explanation of the one-year delay decreed by the President is supposed to allow the Internal Revenue Service time to figure out "how this mandate will work...it is important to do this right than to do it quickly."

In other words, there has not been enough time. Let's put this in context. World War II, from the bombing of Pearl Harbor to V-J Day was 1,347 days. Obamacare was signed into law on March 23, 2010. As of January 1, 2014 (the legislative effective date for the employer mandate) it will have been 1,379 days.

That's right. The Obama administration will have had more time to implement the provisions of Obamacare than it took the United States to totally defeat Germany, Italy and Japan in World War II! And they still say they have not had enough time to get Obamacare totally up and running?  Where is FDR and Harry ("The Buck Stops Here") Truman when you need a good Democrat to get something done?

Credit: EmersonKent.com

The language of the Affordable Care Act sets out in clear language in Section 1513 that its provisions "shall apply to months beginning after December 31, 2013." Why does the President of the United States believe he has the power to just ignore the plain dictates of the law? Remember this is a President who took an oath of office less than six months ago as follows...

"I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States."

Faithfully executing the office of President of the United States would seem to mean following the laws that he proposed, pushed for and signed.

As Ed Morrissey points out, George W. Bush, if you asked the Democrats, was supposed to be the Imperial President.

Waiving one mandate without the other not only offends the rule of law, it completely disrupts the delicate fiscal scheme that Congress created to keep costs in line. Democrats used to complain about the “imperial Presidency” of George W. Bush when he acted completely within his constitutional authority. This demonstration is a much clearer example of an administration that manipulates law for its own political purposes, even laws demanded by President Obama himself.

Credit: CostonsComplaint.com

There are several major implications of not enforcing the employer mandate under the law.

First, is the revenue implication.  The employer mandate penalty tax was expected to raise about $10 billion in revenues per year in its first year.  This is money that will no longer be available to help fund the program.  The books were never balanced on Obamacare to begin with.  It will be an even bigger drain on federal and state budgets.

Second, subsidies for health care insurance coverage in the exchanges are only supposed to be available to individuals who do not receive affordable insurance from an employer.  However, those employers have now been relieved of their obligations to provide coverage and also to provide any records on employment.  Therefore, the government now has no way of knowing who is eligible for subsidies and who is not.  The White House says that this will now be done on an "honor" system where the state exchanges will be required to take the word of the individual on both their eligibility for employer coverage as well as their income.  I know how this is going to work out.  And it is not good.

The bottom line is that Obamacare is going to have very little administrative or management oversight when it is implemented in January, 2014.  Expect a lot of fraud, free rides and fumbles along the way similar to most governmental programs we are familiar with.

I have no doubt that the information technology challenges facing the Obama Administration in constructing the data interfaces involving employer information were a major reason for the delay in the employer mandate.  However, the political implications were undoubtedly even more serious for them.

Consider the unemployment numbers that came out for June.  Mike Shedlock has done a great analysis.

The headline number sounded respectable with a gain in employment of 195,000 in the establishment survey and a gain of 160,000 in the household survey.  However, a look beneath the surface does not look good and the Obamacare employer mandate could not have helped.

If you look at the 160,000 household survey job gain number, it is composed of a gain of 486,000 in part-time jobs and a loss of 326,000 full-time jobs!

You have to ask yourself the question as to how many employers are cutting back employee hours below 30 hours to avoid Obamacare?  It would seem that the Obama Administration must have asked the same question.  The delay in the employer mandate may be their answer to this political problem.

By the way, there are now 8,226,000 workers who are working part-time but want full-time work.   There are also an all-time record of 28 million part-time workers in total.

For further information on this subject see my post from May, "The 29-Hour Work Week".

Credit: Federal Reserve, St. Louis

 

At this point, you have to ask what is next?  Will the Individual Mandate be delayed for a year as well?  It will be interesting to watch this play out as individuals assess the choices and costs of Obamacare beginning in October.   If the hue and cry from the voting public is large enough, anything can happen.

Stay tuned.  How long are Democrats are going to keep sailing on the S.S. Obamacare?  Right now the ship is listing badly.  Captain Obama will throw as many things overboard as he can to keep it from sinking.  However, you can be assured that all Congressional Democrats will not be willing to sacrifice themselves to keep it afloat if the waves of public opinion start overwhelming the ship.  Therein will determine the ultimate fate of Obamacare and whether this cruise ever reaches a safe port.