Category archives: Economics

Is Profiting from Hurricane Sandy Ethical?

by Rob Schwarzwalder

November 1, 2012

There is a telling story today in one of the nation’s premier business publications, Barron’s, called “Playing a Superstorm.” In it, we read about some home repair-oriented companies whose stock is rising in the wake of Hurricane Sandy. Of course, this makes perfect sense: Given the hurricane’s devastation, the value of firms with the resources needed to rebuild is at a premium. However, as the article notes, “These opportunities to scalp some profits out of the aftermath of the hurricane are likely fleeting, so act fast or do not act at all.”

Scalp some profits” - yikes! Profiting from disaster seems untoward. Yet in a market-based economy, such investments can animate economic growth in regions where it is most needed - places such as those destroyed by this week’s massive “Frankenstorm.”

Every action has three ethical dimensions: Its motivation, its implementation, and its effect. Those on the Left who insist on evaluating every action based on motivation (“greedy capitalists!”) rather than outcome (renewed businesses, reconstructed neighborhoods, etc.) are looking at only one aspect of a larger picture.

I’m not suggesting that motives are unimportant. Rather, at a time of national crisis, aspersing the intentions of those whose investments can help transform extensive damage into rebuilt lives seems a tired and useless exercise. The alternative - a government-run, command-and-control economic system - would never provide the diversity, quantity, or quality of products and services needed when disaster strikes. As scholar Jay Richards wrote in his book Money, Greed, and God, we must be wary of “contrasting capitalism with an unrealizable ideal rather than with its live alternatives” (watch Jay’s thoughtful FRC lecture on this theme here).

Ultimately, it’s about what the Founders called “ordered liberty,” the freedom to make reasonable, moral decisions in an open marketplace. To deny such liberty to image-bearers of God is an affront to human dignity. Our Founders understood this, which is why they valued the right to private property ownership so highly. We should maintain their commitment to free enterprise and opportunity with intentionality and energy; unless we do, when a future “Sandy” hits, we will lack the means to respond with the rapidity and resources they require.

Whither the Horror of Dependency?

by Cathy Ruse

October 29, 2012

Its worse than you think. Read George Will on demographer Nick Eberstadts recent study on changes in how the government transfers wealth over the last 50 years, especially under the rubric of disability.

Here are a few of the eye-popping particulars:

  • During most of FDRs 12 presidential years, income transfers were a third or less of federal spending. But between 1960 and 2010, entitlements exploded from 28 percent to 66 percent of federal spending.
  • The growth of entitlement spending over the past half-century has been distinctly greater under Republican administrations than Democrat.
  • The normalization of dependency helps explain the unprecedented exit from gainful work by adult men. Since 1948, male labor force participation has plummeted from 89 percent to 73 percent labor force participation ratios for men in the prime of life are lower in America than in Europe.
  • One reason for this is the gaming (defrauding) of disability entitlements: In 1960, 455,000 workers were receiving disability payments; in 2011 that number was 8.6 million nearly half of the 8.6 million were disabled because of mood disorders or ailments of the musculoskeletal system and the connective tissue.
  • In 1960, 134 Americans were engaged in gainful employment for every officially disabled worker; by December 2010 that number had dropped to just over 16.

Want More Jobs? Lets Build Stronger Families

by Rob Schwarzwalder

September 7, 2012

Strong families lead to a strong economy.

This thesis is proven substantially and repeatedly by FRCs Marriage and Religion Research Institute in studies of the effects of family formation on economic growth (see, for example, The Divorce Revolution Perpetually Reduces U.S. Economic Growth).

We are now witnessing the results of family dissolution inAmericas troubling employment situation. The intact family, in which a married mom and dad raise children and worship together weekly, results in a better education for the children and a higher incentive for a Dad, or if need be, for both parents, to provide for their family.

These facts augment this mornings disappointing job numbers, not only because those numbers reflect more than 25 percent fewer new jobs than had been anticipated, but also because a closer look shows them to indicate a growing undercurrent of hopelessness among job-seekers.

Heres how the Wall Street Journals Phil Izzo explains it:

The unemployment rate is calculated based on the number of unemployed people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The actively looking for work definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. That number declined by 250,000 in August, but it was overwhelmed by a 368,000 drop in the size of the labor force. That suggests that many of those 250,000 stopped looking for work not because they found a job, but because they dropped out of the labor force … (the labor force participation rate of) 63.5% is at the lowest levels since women first started entering the labor force in large numbers.

This interpretation is based not on partisan projections, but data from the Bureau of Labor Statistics (BLS). Heres what the BLS said this morning about the true nature of the unemployment situation:

In August, 2.6 million persons were marginally attached to the labor force, essentially unchanged from a year earlier … There were 844,000 discouraged workers in August … Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.7 million persons marginally attached to the labor force in August had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

According to the BLS, there minimally are 23.1 million persons unemployed, underemployed, or too discouraged to look for work. These are federal, not conservative or Republican, statistics.

To bring it back to families: As Drs. Pat Fagan and Henry Potrykus demonstrate in their new paper, Non-Marriage Reduces U.S. Labor Participation:

The long decline of adult male labor participation represents a withdrawal of able-bodied workers from productive employment. A persistent ‘gap’ exists between the employment rates of married men and unmarried men … Given the cultural-demographic drift away from marriage the risk of (economic) depression will be exacerbated over time.

This paper shows how among working-age men, half of the current labor drop-off is caused by this gap and the population shift away from marriage.

Marriage and children incentivize work. Cohabitation, divorce, and fatherlessness create dependency on government, a fact born out by the fact that now roughly one in seven Americans are receiving food stamps.

Are there other factors, such as tax and trade policies? Sure. But even if we somehow get them completely right, we cannot we meet our need for stable growth, and cannot foster the intangible but essential belief that families and individuals can have a brighter financial future, without a family unit that is sound, secure, and vibrant.

Debt and Liberty

by Family Research Council

September 5, 2012

Debt is a major problem in America. Ballooning governmental and individual debt threaten our financial stability. Debt undermines one of the inalienable rights of our Declaration of Independence, liberty. The Scripture says in Proverbs 22:7 that the borrower is a slave to the lender. This connection between debt and slavery is important, though regularly overlooked in public policy and personal pocketbook decisions. Owing money to a financial institution is not nearly the same as slavery but there are parallels.

When individuals exchange freedom for temporary comfort it is a sacrifice of their liberty. Sadly many exchange financial freedom for what they consider to be indispensable luxuries such as televisions, automobiles, degrees, and clothing. These things are purchased by the borrower with a promise that he will work for the lender in the future to pay back the debt. Often times this promise has dire consequences for not just the borrower but for his family as well. Many marriages are harmed due to financial strains. And many people suffer a lower quality of life due to unwise or impulsive purchases.

One of the most costly sources of debt is college education. It has even received special attention as a separate category in FRCs recent Social Conservative Review. Many people begin new jobs and new families with high debt loads due to their education. At some of the most vulnerable points in their life they are burdened by creditors. Some say a college education is the path to get a good paying job which will then make you a happy and productive citizen. If someone cant afford college, then loan agencies (often the Federal Government) will be more than happy to help. Some students live at home or even go on government aid programs to help with the expenses. Unfortunately, in todays economy, students finish four or five years of college only to struggle to locate a full-time job after graduation. Regardless of the job they do eventually find, many graduates must then allocate a large portion of their take-home pay to cover their debt, or else pay it off over many years. As graduates feel the pressure of their debt, they bypass opportunities to gain valuable experience in their chosen field through an entrylevel job, because they must find a job any job- that will pay more.

Having gone to college as well as graduate school I am well aware of the temptation and the burden of debt. Thankfully my wife and I are currently debt-free although we have taken some careful measures to get there. Freedom from debt has allowed me to pursue my calling from the Lord to work as salt and light in our nations public policy arena. Having things immediately at the cost of enslavement by debt is not worth the price when compared to the value of liberty. I can give to my church or another charity, work at an entry level position in a field I enjoy, and slowly save for special purchases, without the constant burden of debt on my shoulders.

Being debt free means living differently than many of my peers, eating a sack lunch every day, driving older cars, and living in a very small apartment. But I still have one possession for which our founders pledged their lives, their fortunes and their sacred honor. Freedom. And that is worth more than anything a loan could buy.

Unemployment, Families, and the Child Tax Credit

by Rob Schwarzwalder

June 7, 2012

The Congressional Budget Office reports that the “amount of federal debt held by the public is projected later this year to surpass 70 percent of the nation’s annual economic output.” This comes on the heels of a very weak Bureau of Labor Statistics job report, which notes that for the month of April, “the unemployment rate was essentially unchanged at 8.2 percent.”

This unpleasantly abiding statistic likely is much too low. FRC’s Chris Gacek, an economics graduate of the prestigious Wharton School of Finance at the University of Pennsylvania, recently noted an Investor’s Business Daily article showing that when all the data are evaluated, actual unemployment stands at over 11 percent.

And consider this: “According to federal statistics, the unemployment rate of 18-29 year olds reached 12.1 percent in May and when those who have given up looking for work are added in, the rate skyrockets to 16.9 percent.” In tandem with explosive college debt, it is little wonder so many young Americans especially those without the benefit of college - have grave doubts about their future.

What can be done? Clearly, the federal government taxes, spends, and regulates too much. But for American families, relief is needed now practical financial help to make raising children, our greatest economic resource, a bit easier.

Thats why FRC is calling for the President and Congress to make the Child Tax Credit permanent and to increase it to $5,000 per child for every household. The data makes clear that strong families are the true engine of the economy, and letting Moms and Dads keep more of what they earn so their children can enjoy a higher quality of life makes both immediate and long-term sense.

In the short term, an expanded Child Tax Credit means families will spend more for their needs and wants, which itself stimulates the economy and fosters both higher growth and a larger, more rapid influx of federal revenues. Longer term, as the costs of having children become more affordable, the number of Americas children might also become more plentiful an especially significant economic benefit, as human capital is the single greatest contributor to Americas economy.

Alan Viard of the American Enterprise Institute and former senior economist at the Federal Reserve Bank of Dallashas written, The child care credit is not just another middle-income tax break. It plays an important role in encouraging work by providing tax relief for expenses that are closely linked to work. An improved and expanded credit can help offset the work disincentives of the income tax and boost economic growth.

Well said. Now, its up to policymakers to act.

Where Are the Dads? How Richmond, VA and FRC Are Working to Restore the Family

by Rob Schwarzwalder

June 5, 2012

Christianity Todays This Is Our City site is devoted to showcasing how Christians are helping to transform the lives of their fellow citizens in several cities around the nation. As the site notes, This Is Our City … seeks to spotlight in reporting, essays, and documentary video how … Christians are responding to their cities’ particular challenges with excellence, biblical faith, and hope.

As the articles in This Is Our City demonstrate, many of our cultures needs derive from the breakdown of the family. Recently, in Where Are the Dads? Treating Richmond’s Fatherless Epidemic, Katelyn Beaty writes about how believers in Virginias capital are building human capital through public health—one man at a time.

According to Beaty, The Richmond Family and Fatherhood Initiative (RFFI) uses ad campaigns, legislation, and partnerships with Richmond’s sizable Christian community to reach its goal: Decrease the nonmarital birthrate, reconnect fathers to their children, and foster strong two-parent families—all for the future health of Richmond.

The article quotes Danny Avula, the citys deputy health director, as saying, “If you look at health, education, and poverty indicators, people in stable families with a married mother and father have higher high-school graduation rates and income. It’s not only about the theological basis for the design of a man and a woman. When you look at outcomes, it’s a no-brainer.”

Mr. Avula sounds like hes been reading reports on fatherhood, marriage, and children found on FRCs Marriage and Religion Research Institute (MARRI) website. As Dr. Pat Fagan, MARRIs esteemed director, has written, the intact married family that worships weekly is the greatest generator of human and social positive outcomes and thus it is the core strength of the United States.

To learn more about the importance of fathers to children and of strong families to the economic, social, and moral well-being of our country go to the MARRI Web site and read some of the leading-edge research produced by Dr. Fagan and his team.

Two paths diverge in a partisan town

by Family Research Council

April 11, 2012

The poet Robert Frost once wrote of two paths diverging in a yellow wood. After pondering the merits of each way, he makes a choice.

While our Federal city isnt much of a yellow wood, there are two fiscal paths that diverge in front of our lawmakers. Based on projections from the Congressional Budget Office, President Obama’s budgetary path would substantially increase Federal social benefits as a share of GDPfrom about 16.7 in 2010 to 23.1 percent of GDP in 2085.

In contrast, the path proposed by House Budget Chairman Paul Ryan (R-WI) would prevent such an increase by fundamentally reforming Federal health care programs.

In a recent interview with the Christian Broadcasting Networks David Brody, Chairman Ryan articulated the differences:

We want to restore the American dream for everybody in American society so that every person has a chance at equal opportunity to make the most of their lives. The presidents vision, I believe, is to equalize the outcome of peoples lives - not to promote natural rights and equal opportunity, but new government granted rights and equality of outcome. Its a very different vision of what it used to be, and I really think thats where the president is trying to take this country.

While we can assume that the President intends no personal malice towards the American dream, his budget threatens to curtail and redefine it.

Economist and author, John D. Mueller has crunched the numbers on the Presidents budget and compared it to Chairman Ryans alternative. He projects that the U.S. birth rate will fall significantly under current law, from about 2.1 to about 1.75 children per couple in 2085. He further projects that would remain almost exactly at the replacement rate of 2.1 under the proposed Ryan budget, approximating the Social Security Trustees’ Intermediate Assumptions.

Join us today for a lunchtime lecture as Mueller releases his original research and why these birthrate projections even matter.

Two budgetary paths diverge in a partisan town. Taking the one less traveled by might make all the difference.

Register here for the live event, or to attend by webcast.

What is a Reagan Conservative?

by Family Research Council

February 1, 2012

Everyones grabbing at the Reagan mantle these days.

Under the Wikipedia entry What would Reagan do? one can find the following summary:

The phrase on occasion has been used by iconoclastic conservatives to claim the mantle of Reagan as they criticize mainline conservatives, by some liberal commentators as a way of chastising Republicans whom also they believe fall short of Reagan’s ideals and also by non-partisan public policy organizations that seek to emulate aspects of Reagan’s leadership.

But one Reagan historian doesnt find that surprising at all. Professor and author Paul Kengor notes that Reagan won the presidency in 1980 by defeating an incumbent in a landslide, winning 44 of 50 states, and then got reelected in 1984 by sweeping 49 of 50 states. Few presidents enjoyed such decisive success at the ballot box and, more broadly, in changingAmerica and the world for the better.

Tomorrow, Dr. Paul Kengor will address the question, What did Ronald Reagan believe? Or, even more specific: What would Reagan do if he were president right now?

Dr. Kengor will lay out the underlying thinking that formed the basis of Ronald Reagan’s political philosophy and the policies (foreign and domestic) that he pursued. Dr. Kengor will share what he calls his “Reagan Seven;” that is, seven beliefs that undergirded Reagan’s actions as president and as a public figure. These core principles get us closer to the crux of what Ronald Reagan’s conservatism was about, and what his GOP emulators today might take to heart.

To RSVP for tomorrows event, click here: What is a Reagan Conservative?

Demography Is Economic Destiny

by Rob Schwarzwalder

September 28, 2011

The cost for businesses to buy health coverage for workers rose the most this year since 2005 and may reach $32,175 for a family in 2021, according to a survey of private and public employers. So reports Bloomberg News.

This is not news any family wants to read. The last thing our recession-bound country needs are rising health care costs, particularly when we know these costs will be augmented dramatically should the Obama health care plan go into effect.

Buried within the Bloomberg article is a story that is underreported but finally seeping-out into the mainstream press: Contributing to the rise in premiums are … fewer young and healthy people in the insurance pool. This assertion is being made by the respected insurance association president Karen Ignagni, but it is verified by cold data. The Federal Bureau of Labor Statistics projects the following:

… by the end of the 2004 to 2014 period, most of the baby boomers will have turned fifty-five. Consequently, the age fifty-five and older segment of the labor force is expected to grow most rapidly, increasing by 11.3 million, or 49.1 percent. Because of the aging of the American population, this segment of the labor force will increase at almost five times the rate of the overall labor force (10 percent). The numbers of those twenty-five to fifty-four years of age in the labor force will grow by only 3.4 percent, a significantly lower growth than in the previous decade (8.8 percent). The growth rate of the youth labor force, workers between the ages of sixteen and twenty-four, will actually decrease between 2004 and 2014 by 0.5 percent.

What does this blizzard of mathematical factoids mean? Simply that we have a shrinking number of people entering the laborforce, one that cannot sustain our so-called entitlement programs (Social Security, Medicare, Medicaid) and that is too small to infuse the insurance pool with enough youth and health to keep it fiscally viable.

My colleagues Pat Fagan, Henry Potrykus and I have explained this in detail in Our Fiscal Crisis: We Cannot Tax, Spend, and Borrow Enough to Substitute for Marriage. We argue that our current economic slowdown, coupled with the increased numbers of dependent citizens, makes closing the deficit impossible for President Obama or anyone else who uses the present welfare state as the economic model to be sustained. It cannot be. This reality arises from two facts: 1) We have proportionately fewer children … (and) up to 20 percent of these children are unequipped to compete in the modern economy because of a lack of essential skills formed within the intact married family.

Whats the bottom line? Husbands and wives need to have more children and truly parent those children if our economy is going to thrive. However substantial our technology-driven productivity gains, they will not compensate for a steadily declining supply of capable, teachable young men and women.

According to the U.S. Census Bureau, the rate of population growth, referred to as the average annual percent change, is projected to decrease during the next six decades by about 50 percent, from 1.10 between 1990 and 1995 to 0.54 between 2040 and 2050. The decrease in the rate of growth is predominantly due to the aging of the population and, consequently, a dramatic increase in the number of deaths. In other words, we will have a larger population, but the rate of growth will slow to the point that existing citizens will live longer, not because of the size of our families.

For more on the crisis of Americas population and how it is grounded in the erosion of the family unit, visit the Marriage and Religion Research Institute at http://www.marri.frc.org/. Families are more critical to our nations economy, more than education or technology. As families fail, so fails our country.

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