Demographics and Future Economics

The WSJ published one of the most comprehensive articles I've ever seen on modern U.S. demographics on May 1, 2008 (page A3: "Surge in U.S. Hispanic Population Driven by Births, Not Immigration"). Here is one section from the article:

According to the Pew Research Center, whites are projected to make up only 45% of the working-age population in 2050, down from 68% in 2005. The center projects that the share of Hispanics in the working-age population will rise to 31% from 14%. The ratio of senior citizens to working-age people age 25 to 64 will grow to 411 seniors per 1,000 working-age people in 2030 from 250 per 1,000 in 2010, according to Dowell Myers, a demographer at the University of Southern California.

"If you are pro-economic growth, you must be pro-immigration and pro-Hispanic, because we don't have the workers," says Donald Terry, a senior official at the Inter-American Development Bank in Washington.

I won't pass up this opportunity to paraphrase Julian Bond, the most inspiring civil rights leader living today. He has said that integration and more cross-cultural understanding are essential, because today, benefits like Social Security are paid by people with names like Smith, Blake, and McAllister. In the future, however, they will be covered by people with names like Sanchez, Akeem, and Priya. Therefore, the children of the Smiths, Blakes, and McAllisters have a direct stake in seeing that the Sanchez families do well so everyone can continue having a cohesive financial net.

One issue not discussed is that many immigrants do not learn English, which limits their earning and career potential. In some neighborhoods in San Jose, I have knocked on a client's door, and will see about five people watching Telemundo in a small apartment. It is the six year old daughter, not the parent, that comes to me asking whom I want to see in English. Our ability to integrate that six year old girl is crucial to California's success, because she will have a difficult choice when she is older. Will she move away from her family into a more affluent neighborhood as her earning capacity increases, or will she stay in a poorer, less integrated neighborhood so she can assist her family? The decision to seek economic opportunities in society sometimes entails leaving the neighborhood in which you grew up. That's an easy choice if you know your parents can take care of themselves. But what if they don't speak English?

There is another, more troubling issue--any country that guarantees gun rights must ensure that its entire population is sufficiently optimistic about the future. Intuitively, people who have access to guns but no belief in a better future will pose problems.

At the end of the day, most governments "bribe" their citizens to avoid being overthrown--the question is whether such bribery takes place in the form of a promise of an unbridled, open future that leads to innovation, or in the form of enforcing a re-distributive income policy that provides expensive benefits like subsidized housing, free health care, and even free food (some governments pay for bread lines for the poor). In a capitalist system with a Second Amendment, this policy preference is no small question. If there continues to be widespread income inequality, the winds will inevitably shift to benefits and bigger government rather than less government and more freedom. And if that's the case, why not just accelerate the process and adopt European-style governance, which has more experience with administering this kind of large government? (The EU, of course, is imitating the U.S., indicating that it doesn't believe its system is working perfectly, either.)

U.S. Population Map: http://www.usgcrp.gov/usgcrp/Library/nationalassessment/images/PopMap-o.jpg

Scott Burns and Taxes

Financial journalist Scott Burns used to work for the Dallas Morning News, and now he has his own website. His most recent column explored taxes and had some interesting facts:

http://assetbuilder.com/blogs/scott_burns/archive/2008/05/02/the-truth-about-income-taxes.aspx

Here is an excerpt (published under fair use guidelines in good faith under 17 USC 504(c)(2)--these excerpts also incorporate facts publicly available)

Only 953,000 taxpayers--- about 1 percent of the total who paid taxes--- paid at the top 35 percent tax rate in 2005. They paid $315.4 billion in taxes on their $1,094 billion in income.

The most common marginal tax rate is 15 percent. That’s the rate paid by 54.4 million taxpayers...The second most common marginal tax rate is 10 percent. About 25.5 million taxpayers pay taxes at that rate...So of the two-thirds of all households that pay anything in income taxes, about three-quarters pay at 15 percent or less.

Another 22 million, 3.7 million and 1.5 million households pay income taxes at marginal rates of 25, 28 and 33 percent, respectively. In the year 2000 this top 25 percent of all taxpaying filers paid a whopping 83.6 percent of all income taxes. By 2005 they paid 85.6 percent of all taxes...

You were in the top 25 percent of taxpayers in 2005 if your taxable income exceeded $61,055.

Millions of Americans have no idea what fat cats they are.

Copyright: Scott Burns, "The Truth about Income Taxes" (2008), www.assetbuilder.com blog

Barry Goldwater

Mr. Goldwater is known as a true conservative. Here is one of his famous quotes:

I would remind you that extremism in the defense of liberty is no vice. And let me remind you also that moderation in the pursuit of justice is no virtue.

It's a sad day when the Democrats appear to be pro-war, while the Republicans appear to be against fiscal responsibility. The two-party system is failing America.

CA Demographics, 2008 Population Growth

Some people were contesting my earlier statement that California, for the first time in years, was losing population. They were technically correct--it appears that CA is still experiencing population growth, but at a reduced rate. My overall point remains the same--with fewer people, California will most likely receive less tax revenue. See this link:

http://www.ebudget.ca.gov/BudgetSummary/ImagePages/FG-DEM-01.html

The budget website is quite interesting to review. Tax dollars are being sent into K-12 education services more than any other area:

http://www.ebudget.ca.gov/agencies.html

http://www.ebudget.ca.gov/StateAgencyBudgets/6010/6110/spr.html

So the next time California teachers ask you for more money, keep in mind that most of your tax dollars already go to their schools, especially if you pay property taxes. As a result of these outlays, which are very hard to reduce, California is one of the few states projected to have budget gaps between two and eleven billion dollars in 2009. The only other states in this ignominious category? Florida, Nevada, New Jersey, and Arizona. See

http://www.ncsl.org/bookstore/productDetail.htm?prodid=0151010153pdf

Something must be done about our K-12 schools. Vouchers, anyone? (At least for a start...)

Thomas Paine

So many people have mangled Thomas Paine's famous saying, I feel the need to quote it properly. See Rights of Man (1791):

When it can be said by any country in the world, my poor are happy, neither ignorance nor distress is to be found among them, my jails are empty of prisoners, my streets of beggars, the aged are not in want, the taxes are not oppressive, the rational world is my friend because I am the friend of happiness. When these things can be said, then may that country boast its constitution and government. Independence is my happiness, the world is my country and my religion is to do good.

Actually, the incorrect quotation does sound better: "The World is my country, all mankind are my brethren, and to do good is my religion."

The Anti-Imperalist League

Yes, such a group actually existed back in the day, and Mark Twain was a member. Below is part of the Anti-Imperialist League's mission statement, which refers to the American annexation of the Philippines and the Philippine-American War:

We deny that the obligation of all citizens to support their Government in times of grave National peril applies to the present situation. If an Administration may with impunity ignore the issues upon which it was chosen, deliberately create a condition of war anywhere on the face of the globe, debauch the civil service for spoils to promote the adventure, organize a truth suppressing censorship and demand of all citizens a suspension of judgment and their unanimous support while it chooses to continue the fighting, representative government itself is imperiled.

We hold, with Abraham Lincoln, that "no man is good enough to govern another man without that man's consent. When the white man governs himself, that is self-government, but when he governs himself and also governs another man, that is more than self-government--that is despotism." "Our reliance is in the love of liberty which God has planted in us. Our defense is in the spirit which prizes liberty as the heritage of all men in all lands. Those who deny freedom to others deserve it not for themselves, and under a just God cannot long retain it."

Boston, 1899

Two Reading Tips: Money and China

National Geographic Magazine is probably one of the most overlooked publications in the U.S. This month's (April 2008) issue focuses on China and is absolutely fantastic. In addition to the articles and pictures, there is a detailed map of modern-day China.

I also read a newer publication, Lapham's Quarterly, Vol 1, No. 2, titled, About Money. All of the articles in the Spring volume's journal are about--you guessed it--money. There are too many interesting tidbits to quote everything, but the writers include everyone from Alexis de Tocqueville to Orson Welles. I especially enjoyed the Benjamin Franklin and Jim Cramer pieces. Here are some quotes from the journal:

Thomas Jefferson: "Money, not morality, is the principle of commercial nations."

Roger Starr: "It is not the accumulation of money which is vicious, but overconsumption...[the very poor] are "dehumanized because his relative poverty deprives him of the human responsibility of choice."

Henry Ford(!): "The automobile business was not on what I would call an honest basis, to say nothing of being, from a manufacturing standpoint, on a scientific basis, but it was no worse than business in general." "How much gasoline it [a car] used was of no great moment..." (In 1922, oil was around $3.50 a barrel)

James Boswell: "In civilized society, personal merit will not serve you so much as money will. Sir, you may make the experiment. Go into the street, and give one man a lecture on morality, and another a shilling, and see which one will respect you the most."

Tocqueville: "What grips the heart most powerfully is not the peaceful possession of a precious object but the imperfectly satisfied desire to possess it and the constant fear of losing it."

Elias Cannetti: "What is that happens in an inflation? The unit of money suddenly loses its identity. The crowd it is part of starts growing and, the larger it becomes, the smaller becomes the worth of each unit...Just as one can go on counting upward to any figure, so money can be devalued to any depth... [Are you listening, Bernanke?] An inflation cancels out distinctions between men which had seemed eternal and brings together in the same inflation crowd people who before would scarcely have nodded to each other in the street."

Upton Sinclair: "The assumption [in the entertainment business] was that they would live happily ever after, though never was it shown how that miracle would be achieved, and though the divorce rate in America was continually increasing."

Andrew Carnegie: In bestowing charity, the main consideration should be to help those who will help themselves; to provide part of the means by which those who desire to improve may do so; to give who desire to use the aids by which they may rise; to assist, but rarely or never to do all. Neither the individual nor the race is improved by alms-giving. Those worthy of assistance, except in rare cases, seldom require assistance."

Sallust: "Growing love of money, and the lust for power which followed it, engendered every kind of evil. Avarice destroyed honor, integrity, and every other virtue, and instead taught men to be proud and cruel, to neglect religion, and to hold nothing too sacred to sell."

Jack Weatherford: "Compared with the physical force of the military and the spiritual authority of religion, money offered a third and completely novel way to organize society. Without regard to rank, class, or standing, anyone with the proper coin could buy a goat or a turnip, a jug of wine or a basket of fish, a parcel of land for a vineyard or a pinch of salt to flavor dinner...In the global economy that is still emerging, the power of money will supersede that of any nation, combination of nations, or international organization now in existence. The newly ascended financial elites hold no brief or loyalty for any particular country, and the third revolution in the history of money threatens to erode the value of kinship, religion, occupation, and citizenship as the defining components of civil and social life."

Tim Parks: "The real scandal of money, and particularly usury, as we have already said, is that it does not respect traditional hierarchies. The merest artisan can make a fortune and start strutting around in expensive crimson. The feudal order breaks down."