A Case for Replacing a Government Safety Net with Private Charity

A client just left and I just have to tell you what she said.

Elena (name changed) is a social worker. In 2005, she wanted to buy a house but couldn't afford one.

But then at work one day, she attended a presentation to the social workers by a representative of the quasi-governmental entity Fannie Mae. (Perhaps it was Freddie Mac; she wasn't sure.)

The presenter explained that the federal government wanted more minorities to own a home, so income, asset, and down payment requirements would be relaxed. It might only require 1% to 3% down--the borrower had almost no skin in the game.

Off the record, the presenter told the group that because banks want to stay on the right side of the government and because many banks package and resell their loans in bulk, lenders often weren't verifying income and employment.

Elena ran out and found a house she loved--for $470,000. She knew she couldn't really afford it but, if they weren't checking income and assets, she figured she'd lie on her loan application to ensure she got it: She claimed to earn more and have more savings than she really had. Her loan was approved, requiring just 5% down.

In 2006, the value of her home had increased and Elena took out a second mortgage to redo the kitchen and buy an SUV.

In late 2009, her house was worth $140,000 less than what she paid for it and she only had $35,000 of her money in it. So she simply stopped paying her mortgage, forestalled moving out as long as she could with coaching from a non-profit "homeowner's advocacy organization." Part of that was to start and drag out loan modification/renegotiations with the bank. In November, 2010, facing imminent foreclosure (the sheriff was going to take her keys,) she walked away from her debt and declared bankruptcy.

Elena came to me for career counseling because, "I need to make more money than I'm making as a social worker." Why? Because she wants to move from the apartment she's renting and buy another house!

No surprise, I told her I don't feel comfortable working with her.

The popular 2010 movie Inside Job blames the mortgage meltdown exclusively on bankers. Yes they share responsibility but despite it being politically incorrect, isn't it fairer and a crucial lesson to all Americans to describe the meltdown's causes more fairly: to add that Fannie/Freddie encouraged lending to unqualified borrowers, and that countless people knowingly bought more home than they could afford, often submitting fraudulent loan applications?

Hearing Elena's story makes me wonder whether greater good would accrue from replacing our government-run safety net. Perhaps it's just too hard for the government to develop and monitor a process that applies to 300,000,000 people without inordinate fraud, waste, and abuse.

Instead, building on a recent post, I'm wondering whether the many billions of dollars spent on the government safety net should be returned to the taxpayers tax-free if the taxpayer donates it to the charity of his or her choice. That way, the invisible hand of the market, millions of decisionmakers, would likely make wiser charitable choices and, in turn, provide a better safety net.

What do you think?

A Replacement for Judaism

The Jewish religion is dying:

• The birth rate among Jews is well below the replacement rate.
• More than half of Jews intermarry.
• 2/3 of those interrmarried couples raise their children not-Jewish.
• Anti-Israel sentiment and fear of antisemitism are deterring ever more Jews from self-identifying as Jewish.
• Jewish religious services are incompatible with most modern Jews' desires. Typically, services are two to three hours long, much in Hebrew. Not surprisingly most Jews today, in both the U.S. and Israel, are non-observant, except perhaps attending Rosh Hashanah and/or Yom Kippur services and/or attending a Passover seder.
• Most Jews are agnostic or, like me, atheist: not interested in praying to an "almighty God" who would allow earthquakes that kill thousands, Holocausts that kill millions, and horrifically painful cancers that kill billions, including infants.

I believe Judaism needs to be converted from a religion to a cultural affinity group, what I call Secular Judaism. Most Jews, if they're honest, prefer the company of other Jews, just as other cultural, racial, and ethnic groups prefer people from similar backgrounds. People may publicly claim to celebrate diversity but look at their choices of friends and it's clear that, more often than not, birds of a feather flock together.

Most Jews, for example, like that Jews, on average, are intelligent, expressive, and committed to making a difference, whether in science, non-profits, business, or the arts. Most Jews' spiritual needs get largely or completely met through secular humanism.

So I believe the traditional hub of Jewish life, the synagogue, needs to be replaced with secular alternatives, for example, Jewish community centers such as the one in San Francisco and informal meeting places such as those that can be created and managed online at MeetUps.

Tools like Facebook and Twitter can create live and virtual secular Jewish events and conversations. I also think that entities such as JDate could broaden their mission from dating to friends to chavera (a sort of substitute family) to mentor/protege matching.

Most groups need leaders but I believe the traditional Jewish leader, the rabbi, need be replaced by secular leaders, for example, the defacto leaders that would emerge from a regularly meeting group, or someone who took the initiative to start a group on meetup.com.

Another concept I believe is worth exploring is a hybrid religious/secular Sabbath service. Even most secular Jews doesn't mind listening to and maybe may even enjoy a few familiar prayers. The problem is that a service is two hours of prayers many in Hebrew and repetitions of praise to "Almighty God." It may be worth trying a service with a few of the most familiar, nostalgia-inducing prayers punctuating a Town Hall meeting-like weekly event around some topic of particular interest to Jews such as Israel/Palestine, intermarriage, or even a secular Tikkum Olam (heal the earth) topic such as capitalism versus socialism?

What do you think?

A Case for Near-Libertarian Government

My previous post made a case for redistributive "justice." Here I argue that, beyond a small amount, the liabilities of redistributing money from society's "haves" to its have-nots far outweigh its benefits. It:

• Encourages sloth. Every time unemployment payments are extended, most of my unemployed clients say something like, "Good. Now I don't have to look for work for another 13 weeks." Conversely, when President Clinton set a time limit for welfare recipients, when their welfare checks were about to run out, most of the seemingly unemployable people managed to find a job.

And of course, there's the example of the Soviet Union. Guaranteed jobs, equal pay, and full benefits resulted in legendarily poor quality (Remember the Russian cars: the Lada, Moscvich, and Volga?). It also resulted in legendarily poor quantity: long, long food lines and rationing. The average U.S.S.R. woman spent two hours a day, seven days a week in food lines.) The photo above is a U.S.S.R food ration coupon, sometimes required even for basics like sugar.

• Imposes high opportunity costs. Redistributive "justice" transfers wealth from the people and businesses with the greatest likelihood of creating jobs and life-enhancing innovations to the people with the lowest probability of doing so. Yes, in the short run, that results in more cash pumped into the economy--the poor spend a higher percentage of their money while the rich save more. But long-term, that's a negative: less saving means less money for banks to lend to businesses, which would create jobs and innovation.

Then there are the opportunity costs of the government's redistributive programs: an enormous amount of taxpayer money spent on programs already proven to be cost-ineffective programs from Head Start to job retraining; often $25,000 per job obtained and often the person doesn't hold the job for more than a few weeks. The total amount of waste, fraud, and abuse in government redistributive programs is, as reported in the Washington Post, incomprehensibly large.

That money would likely more wisely be left in taxpayers' pockets, thereby rewarding them for their productivity and allowing them to pump their money into more beneficial parts of the economy (the goods, services, and charities selected by the taxpayers) rather than the aforementioned money-down-the-drain programs.

• Sends a destructive societal message. It's Psychology 101: you get more of what you reward, less of what you punish. Redistributive "justice" is an appealing-sounding term concocted by its advocates, but it in fact means that society's productive members have their money wrested from them and given to those who are less productive. What sort of message does that send to all of us? To our children?

Note: Of course, some people are productive but don't earn money--for example, volunteers--but, on average, the pool of payers for redistributive justice are more productive, even if non-remunerative productivity is included.

Many people thus believe it's foolish to work hard--After all, if you don't work much, the government will take care of you: The National Review reports a study that found that an American family of three has to earn $60,000 a year to net the same income as someone who makes just $14,000 a year and thus qualifies for all sorts of government handouts. Can you not see why the millions of people who are not intrinsically motivated make the choice to sit on their butt? "Why work at some dumb-ass job when you can get the same money for hanging out?"

I suspect that if there were no safety net for the poor, many such people would become more self-reliant and those who didn't probably would be sufficiently helped by private charity. But candidly, I'm not very confident in the previous assertion.

That's why my current thinking is that the best political/economic system is a near-libertarian government: a modest military, modest regulation, and a humane safety net for the truly needy, with those programs provided not by the wildly and unavoidably inefficient, fraud- and waste-filled government, but by the private sector.

Perhaps the wisest approach to that is, a la Milton Friedman, to spend the money saved in cutting those cost-ineffective government programs on a negative income tax--cash to the poor--so the poor could spend the money on the services and products they deemed most cost-beneficial.

Dear readers, what do you think?

A Case for "Cushioned Capitalism" or "Libertarian Socialism"

I end each of my radio shows by saying: "We find comfort among those who agree with us; growth among those who don't."

In my own effort to keep growing, I thought that I--who lean libertarian--would do a thought experiment: make the best case I can for socialism.

When I was younger, I believed that one pretty much gets what one deserves. Now I believe that luck plays a large role in one's success. For example, I'd be far less successful if:

• I were born to retarded parents in Bangladesh, or
  
• I inherited genes predisposing me to low intelligence, laziness, and poor impulse control, or
  
• I inherited a horrible disease, or
• I inherited an unattractive face or propensity toward obesity. Alas, study after study shows that attractive, slim people derive career and personal advantages.

Then there's the luck of being at the right place at the right time:

• You met someone who gave you a great job.
• You happened upon someone who gave you a suggestion that turned your moribund idea into a successful invention.
  
• You happened upon someone who turned out to the perfect spouse and cheerleader for you, enabling you to be far more successful than you otherwise would have been.

Then there's the luck of being in the wrong place at the wrong time:

• Getting crippled by a car that ran a red light.
• You entered nursing school because the government projected high demand for nurses but by the time you graduated, the market had become saturated.

If I suffered even one of those pieces of bad luck, I would not have been as successful as I've been, no matter how hard I worked. From a cosmic justice perspective, it strikes me as unfair that because of something beyond one's control, they should suffer such diminished potential for success and contribution.

Therefore it seems appropriate that government help compensate for the unfairnesses that accrue to the winners and losers in the genetic and environmental lotteries. Socialism does that: everyone gets paid, gets the same benefits, etc.

But you say, "If everyone gets the same pay, benefits, etc., what incentive is there for people to work hard?" Of course, external incentives matter but I wonder if they matter as much as pure capitalists claim. Studies find that most, though certainly not all, people are motivated to work less by cash than by praise, wanting to a good job for its own sake, etc.

Whatever decrement in motivation would accrue from eliminating dollar incentives for quality work could at least in part be compensated for by a more concerted effort by parents, schools colleges, and media to emphasize the primacy of productivity and contribution to society.

Any residual decrement in productivity would be outweighed by everyone having a humane level of housing, food, health care, etc. From the aforementioned cosmic perspective, there's something wrong about a society in which some people have mansions and optimal health care while others are homeless and have minimal health care. Socialism addresses that.

That said, I'm not completely convinced that socialism is, net, better than capitalism. After all, I am well aware of how grossly inefficient and wasteful government is, and that many people are motivated to work harder and longer by money and competition. But I can't with utter confidence assert that pure capitalism is the wise way.

Perhaps the answer is an amalgam of socialism and libertarianism. In what I'm calling libertarian socialism, the government would pass a law mandating that all people get roughly equal pay, health care, housing, etc. but leave how that all would be accomplished to the private sector.

Or perhaps the right approach is America's status quo: what I call cushioned capitalism, capitalism with a humane safety net for the many people with the cards stacked against them in capitalism's ever more fierce competition.

Dear readers, your thoughts?

A Video Interview with Me on Why Higher Education is Overrated

Here's a 15-minute video interview of me on why I believe higher education is America's most overrated product.

Use a Rhyme, Win Each Time

Much as we don't like to admit it, we're affected by slogans, by bumper-sticker rhetoric.

A short slogan with a rhyme may be the most potent approach. Examples:

If the glove don't fit, you must acquit. (Johnnie Cochran on behalf of O.J. Simpson)

Mend it; don't end it. (Bill Clinton on behalf of welfare)

I like Ike (Eisenhower-for-president slogan.)

An apple a day keeps the doctor away.

Then there are the product slogans:

Tough-actin' Tinactin (athlete's foot remedy)

Ace is the place (hardware stores)

It takes a lickin' and keeps on tickin' (Timex watches)

The quicker picker-upper (Bounty)

Don't get mad; get Glad

Winston tastes good like a cigarette should.

Pop, pop, fizz, fizz. Oh what a relief it is. (Alka-Seltzer)

So when you're trying to promote something, whether it's your kid running for office ("It's a sin if Lynn doesn't win,") you and your beloved putting aside money for the wedding ("Honey Money") or you're naming your pizza joint, "Eatsa Pizza," come up with a slogan that rhymes--it'll enhance your chance. Invest in rhyme; the results are sublime. Use a rhyme; you'll win each time.

Top Careers for 2011 and Beyond

I've given these careers and fields a high overall score on job satisfaction, and compensation including benefits and job security.

These picks are a distillation of the many thousands of nuggets that have entered my brain: from my career counseling clients, colleagues, radio show guests and callers, friends, reading (and I'm a pretty voracious reader of career material,) plus self-generated thoughts.

• Optometry. This has long been one of my top-recommended careers. Yes an O.D. degree requires four years of post-bachelor's study or a six-year B.S./O.D. degree, but the career has major pluses. Optometrists, unlike many other health care providers, have a very high cure rate, they rarely get a middle-of-the-night emergency call, there's no blood, guts, nor communicable diseases, the aging population increases demand for optometrists, and optometrists make a six-figure income.
  

Note: optometrists are different from opticians, who dispense lenses and glasses, and from ophthalmologists who are MDs and do major surgery. Optometrists fit patients for lenses, diagnoses diseases, may prescribe some medications and eye exercises, and even do some minor surgeries.

• Grant/Proposal Writer. The government, foundations, and nonprofits, distribute money through a proposal submission process. So whether it's a desk manufacturer who'd like to sell to the state, a Native American Dance Troupe that would like a grant from the Feds, or a drug addict job training program that wants money from a nonprofit, all of them need grant writers.

• Fundraiser. Money is nonprofits' lifeblood. So nonprofits generally pay the highest salaries to fundraisers and, of course, to the executive director, who is also responsible for fundraising. So even if there are program cutbacks, nonprofits are likely to keep spending serious dollars on back-office development staff (those who research prospects to identify their hot buttons,) developers and maintainers of the donor database, fundraising event planners, and of course, pitchers: those with the moxie to extract big bucks from wealthy individuals and corporations.

• Adult Day Care (the entire field, not just direct care providers.) Most elders want to age in place, that is, in their homes, but they'd do well to have meals prepared and companions to eat and recreate with, someone to be sure they take their pills, etc. Less expensive than 24/7 assisted living, adult day care is growing in popularity with elders, their families, and long-term care insurers. Typically a bus picks the clients up in the morning and drops them back home after dinner. These facilities, like all businesses, employ a wide range of people: from accountants to HR people to CEOs, as well as, of course, cooks, janitors, nurses, patient supervisors, etc.
• Military. I believe the U.S. will enter a period of decreased foreign adventurism yet will continue to maintain a large headcount. Benefits are extraordinary: for example, free housing and education for the servicemember and family after just 90 days of service! Please know that the military offers an enormous range of careers beyond grunt: from artists to engineers.
• Health care administration. The 2,500-page ObamaCare programs will cover an additional 32-45,000,000 disproportionately low-income high health care users plus 12,000,000 more when Obama fulfills his promise to legalize illegal immigrants and their family members. All of that will profoundly affect health care in the U.S. Hospitals, physician group practices, health organizations such as Kaiser, Humana, Sutter, etc., will, for the foreseeable future, be employing large numbers of people to deal with the myriad required changes.

• Bilingual special education teachers, school psychologists, and speech therapists. Limited-English-proficient students are America's fastest growing category of students, and, by definition, they have extensive, often expensive, special needs. Unlike education for regular education kids, services to special education students are absolutely mandated by law, no matter how tough the economy or how great the cutbacks to other students. So funding will exist to pay for teachers, school psychologists, speech therapists, special bus drivers, etc., to provide the mandated "free and appropriate education" for all special education students.

• Federal manager. Despite the Tea Party win, the Keynesian administration and Senate remain in charge. That means the federal government will not shrink and, for non-star employees, the federal government, compliments of the taxpayer, continues to offer the best deal in town: surprisingly high salary and unsurprisingly excellent benefits, holidays, vacation, retirement, and job security. At this moment, there are 190 U.S. federal manager positions advertised on usajobs.gov. Half of them pay over $100,000.

• Welding. I've often read that this field has shortages, especially stainless-steel welding and welding in tight spaces--for example, inside oil refinery pipes. That's true not just in the U.S. A recent 60 Minutes reported a severe welder shortage in Brazil.

Self-employment ideas

I like these because they require short training and small investment, have high profit margins, are likely to survive a tough economy, and are minimally subject to trend risk--that is, demand is unlikely to wane.

• Parking-lot oil changing. Give an owner of a mall- or large employer parking lot a fee in exchange for allowing you to use a few of their parking spaces for changing oil while the car owners are shopping or at work.
• Gourmet salad and sandwich (including burrito) trucks or carts. I've been touting these for years. Last year, they caught on big-time on the coasts. I believe there's still room in high-foot-traffic locations in non-coastal cities.
• Wellness coaching. I believe the days of the "ten more pushups!" fitness trainer are waning. People are turning to wellness coaches who help them with all aspects of wellness: alcohol, drugs, and smoking, stress reduction, weight control, and yes, "Ten more pushups!"