Thursday, May 24, 2007

Disappearing Middle Class

Our satellite TV service includes a bunch of educational channels, including one from the University of California at Berkeley. A faculty member there named Harry Kreisler hosts an interview program called "Conversations with History" which I record, and often watch. I very much enjoyed one a few weeks back with Cosmologist James Peebles from Princeton. Another good one was with philosopher Hubert Dreyfus. A complete list of Kreisler's interviews are available via the link above.

The interview this week was with Elizabeth Warren, a professor of Law at Harvard. She has done extensive research and writing on the topic of personal bankruptcy in the US, and has been an advisor to some public officials on this topic.

Professor Warren said she went into this area of research with the assumption that most people who declared bankruptcy were undisciplined consumers who spent well beyond their means and used bankruptcy as an easy way to dump their debts. What she found was that the skyrocketing backruptcy rates were being driven by two elements: a) the dependence of families on two incomes because of the rising costs of goods, especially housing and education; and, b) the relaxation of consumer protection laws relative to credit which have been enacted as a result of extensive lobbying by the financial services industry. The consequence is that families are using more and more credit to fund middle class lifestyles, and when any burp in income happens (layoff, sickness, etc), the credit terms are so oppressive so as to drive people quickly to bankruptcy.

By the way, she tells an interesting story of an encounter with Hillary Clinton. When she was the First Lady, Mrs. Clinton invited Professor Warren for a brief chat about some of her research. The professor quickly made her point about the potential damaging impact of the new consumer financing bill working its way through Congress. Mrs. Clinton understood, and presumably expressed that concern to the President. When the bill made it's way to President Clinton's desk, it was vetoed. However, later as Senator Clinton, she voted for the same bill. As the professor said, it was dispairing to see that the power of lobbyists and the campaign contributions they direct, could cause this kind of behavior in a US Senator (trust me, this isn't a Hillary bashing -- this happens in politics all over our country).

She made a connection I hadn't thought of: people are spending a lot of money on housing because the price of the home you buy often reflects the quality of the school system. In other words, if you want your kids to go to a good school, the price of admission is an expensive home. This dynamic is widening the gulf between the haves and the have-nots in the society. While there is a growing number of families who can afford upscale housing in nice school systems, and still be able to build wealth and send their kids to college, an exploding number of families are barely able to afford their suburban homes, are building little wealth, and must send their kids off to college with student loans. Many of today's children will start their adult life already tens of thousands of dollars in debt, and their parents will be of little help because they are also strapped.

Professor Warren makes the case that the future of America depends on having a well-educated workforce, meaning through college, and that these dynamics are threatening that. I'm not so sure this is exactly true, although I believe we must have a competitive workforce in terms of skills and labor rates.

But I completely agree with her on one thing -- the middle class of our country is in danger of disappearing, and it is the middle class which currently funds just about everything in our society. As the economies of the world begin to normalize, the equalibrium point is only a little higher for most countries, but way below the standards Americans have enjoyed for the past 50 years.

Wednesday, May 16, 2007

Finding an Old Friend in Philly

I'm just back from a two-day 800 mile road trip to Philadelphia with pastor and friend Kevin Snyder. We were visiting his home church, First Baptist of Collingswood NJ to see if we could help them with some planning and organizing. On the morning of the second day, Kevin and his brother Jeff got up very early to get in a round of golf, and I decided to run back over into Philly. As we had crossed the Ben Franklin Bridge the evening before, I saw what looked to be a current vintage US Navy destroyer tied up to a pier, and hoped they were giving tours.

It turns out that the ship was the USS Winston Churchill (DDG-81). It had been in Philly for Navy Week, but sadly when I got there Tuesday morning, she had cast off and the pier was empty. So I thought I would just drive on down the waterfront and see what I could see at the Phildelphia Naval Yard, where there is a decent sized mothball fleet. Suddenly I saw the funnels (smokestacks for you landlubbers) of a large passenger ship. It was the SS United States!

I hadn't thought about this ship in years, but there was a time when I thought of it every day. When I was a kid, we had a model of the United States that was about three feet long, mounted on a stand. It was lit from the inside by a single white Christmas tree bulb. It sat on the chest of drawers, just a couple of feet from the foot of my bed and constantly visible from my upper bunk. The light was usually left on as a night light. Over the several years we lived in that place, I'm sure I looked over every feature of that ship a hundred times.

At some point, we moved and the ship didn't make the transition. I wonder what happened to it...

Anyway, it was a thrill to see the grand old ship again, even as a rusting hulk. The website says that it is now owned by Norwegian Cruise Lines, and they have plans to restore it to service. NCL did this once before, bringing a contemporary of the United States, the Isle de France, back to life as the SS Norway. The Norway sailed for many years. My mom sailed on her once, when cousin Cindy Swisher was the cruise director, and we saw the Norway once in Miami when we were sailing on another cruise ship. Today's mega cruise ships dwarfed what was once one of the largest ships in the world.

Unfortunately, the Norway suffered a boiler explosion a few years back. Few if any modern passenger ships are powered by high pressure steam turbines, and it sounds like a boiler room crew just made a mistake, which unfortunately cost them their lives. NCL has decided it wasn't worth repairing the ship. The rumor is that it sits off the coast of India waiting to be scrapped.

So I hope NCL does decide the bring the United States back in to service. I think I might make an effort to sail on her if she puts to sea again.

Good seeing you old girl.

Wednesday, May 2, 2007

Sharing America, Saving America

An old friend sent me a link to a presentation about population growth and immigration. This point of this presentation is simple: American cannot allow immigration to continue at current levels and maintain our way of life.

Some would say this is an outrageously selfish viewpoint. America is a land of plenty, these people would say, and we have a moral responsibility to share the bounty with the rest of the world. While I understand that perspective, I doubt that there are many people who really want to practice it. I expect that the Great Depression would seem like a time of plenty compared an America after a sudden massive influx of immigrants.

The current population of the More Developed Countries (MDCs) is 1.2 billion, of which 300 million, or 25% live in the United States. The natural population growth rate of the MDCs is 775,000/yr (0.6%), but net immigration is nearly 2 million, half of which is coming into the United States.

The population of the rest of the world, the Less Developed Countries (LDCs), is 5.4 billion, with a natural growth rate of 77 mllion/yr. This is 1.4% annual growth, or 22 times the rate of the more developed nations. Net immigration in the LDCs is negative 2 million, as one would expect.

How many of those 77 million new people each year should be allowed to come to the United States? If we're taking half of all immigrants now, should we be taking 38 million or so new folks each year? This would increase our annual growth rate to 3.21%/yr, or 50-fold. Meanwhile, the growth rate for the rest of the world would be lowered only 50%.

Let's put that in perspective. This 38 million is about the same as the population of the entire state of California. Or New York and Pennsylvania put together. It is more than three times the population of Ohio. Per Year.

Can you imagine what America would be like if an influx of this magnitude were allowed?

One of the characteristics of MDCs is a stable population. For many reasons, family sizes are smaller in MDCs, to the point that some countries are projected to have negative growth. For example, Sweden's natural growth rate is projected to be -0.1% by 2025. Even China, after a few decades of purposeful population control, is projected to achieve a natural growth rate of 0.2% by 2025.

Meanwhile, the people of the LDCs continue to pump out kids. While women in the US bear on average 2.1 children and in China 1.7; in Somalia the average is 6.8 and the natural population growth rate is 2.9% per year.

The mission of America is to not let the rest of the world pull us down unto poverty. Rather, I believe it is our mission to practice some tough love. For a country to get our assistance, I believe it must show that it has taken the appropriate steps to bring its population under control. China figured out how to do it -- it just takes the willpower.

All population data is from the US Census Bureau International Database.