Mr. Rogers' solution to urban poverty

Remember Mr. Rogers?  My kids would sit in rapt attention watching his show on public television.  For some reason, his soothing voice and always-nice patter drove adults crazy, much like the purple dinosaur that succeeded him as toddler favorite.  The theme song for the show, It’s a Beautiful Day in the Neighborhood, might well describe the Rochester, NY suburb in which I now live. 

Nice neighborhoods create a terrific environment for kids.  Growing up, my brothers and I went to good schools, had a strong family culture and always felt safe.  Eighty-six percent of my high school graduating class went on to college. 

Last week, NPR reported on a study by a Harvard University team, led by Professor Raj Chetty.  Titled the “Moving to Opportunity Study (MOS)”, the team reports on new data about neighborhoods and how they affect economic prospects.   This study was a follow up to the Equality of Opportunity Project, a study that examined the factors leading to equality of opportunity in the 50 largest cities in the U.S.  Their conclusion, which I first discussed in a blog post in February 2104 (Confessionsof a Former Yuppie), was that cities with less segregation, more stable families and better education tended to have greater social mobility.

The MOS dug deeper.  In the 1990’s, the federal Department of Housing and Development (HUD) provided vouchers to 4600 families in poor neighborhoods that enabled them to move to better neighborhoods.  A follow up by HUD, reported by the National Bureau of Economics after 10 to 15 years, found improved health among those who moved to better neighborhoods.  However, their economic prospects hadn’t improved.

But, the Harvard team found that, after 20 years, the children of those families were performing better in measures of economic self-sufficiency.  For example, they were 30% more likely to have gone to college and their annual incomes were 30% higher than their peers in the neighborhoods they had left behind. 

Further, the study validated that the earlier a child moved out of poor neighborhoods, the better they did.  “Every year matters,” avers Dr. Chetty.

This study tracks with other studies done at both Princeton and Stanford, reported by CityLab last year.  It seems clear, or perhaps intuitive, that one’s surroundings affect behavior, values and other attributes leading to economic well-being. 

Perhaps that’s what made me think of Mr. Rogers’ Neighborhood.  It was a positive environment that emphasized emotional development, self-worth, values and the behaviors that contribute to well-being.

Even in poor neighborhoods, there are attributes of households that lead to success.  As I discussed in a post in March of last year (Movin’ on Up: How George JeffersonSucceeded), a study – the Early Childhood LongitudinalStudy (ECLS) – attributed success to the level of the mother’s education, the number of books in the household and two parent families, among many other factors.  Black children underperformed all others but if one controls for the other factors, black children performed as well as their white and Asian peers. 

In other words, there was no difference in the performance of white and black children from two parent families with a well-educated mother and a home full of books.

Those in government and the non-profit community concerned with social welfare and income inequality would do well to consider these data when formulating solutions.  It is unlikely that a one-size-fits-all central planning approach to these challenges will succeed.  As a friend of mine, Germaine Smith-Baugh, CEO of the Urban League of Broward County, puts it:  “Give me a family and I’ll give you a block.  Give me a block and I’ll give you a neighborhood.  Give me a neighborhood and I’ll give you a community.”

Mr. Rogers would have agreed.

WHO WILL LEAD?

Why both liberals and conservatives should hate the Fed

The Federal Reserve Bank

Most people don’t wake up in the morning thinking about the Federal Reserve System, the nation’s central bank.  Frankly, I don’t either.  But, when I think about it these days, I really hate what they’ve done to our economic prospects. 

Here’s why.

The Fed’s normal tools for modulating the economy – raising or lowering short-term interest rates – have exhausted their usefulness. Lower rates should stimulate the economy by reducing the cost of borrowing. But, when the economy wasn’t growing even with zero interest, what do you do?

Quantitative Easing (QE) was intended to stimulate the economy by supporting the acquisition of financeable assets through a policy of buying bonds like Treasuries and mortgage backed securities.  These purchases on a massive scale created low long-term interest rates with a goal of supporting the acquisition of financeable assets.  And it worked!

So, why do conservatives hate the program?  Because the increased supply of money hasn’t flowed through banks to increase the available capital for businesses to invest in growth.

Many blame the banks.  However, we should remember that we’ve told banks to cease the risky practices that led to the financial crisis.  Through the Dodd-Frank financial reform, we increased oversight of their lending activities. Also, international agreements negotiated in Basel, Switzerland required banks to increase the amount of capital they retain on their balance sheets, thereby decreasing capital available for lending. 

So, we succeeded in making banks less risky but decreased the capital flowing into the economy.  In terms an economist would use, we decreased the velocity of money. 

That’s why conservatives, read business people, hate theFed’s policy.  Growth has been floundering in the 2% range.  Take away the oil and gas boom and it would be closer to 1%.

Meanwhile, liberals -- led by the head cheerleader NY Times columnist Paul Krugman – embraced these policies.  More debt, more money in the economy the better, they said.  As for conservative fears about a collapsing dollar and inflation, we have seen no evidence.  Fools they must be, right?

Well, not exactly.  Sure inflation has been low for the last several years.  However, when viewed next to other currencies, the dollar has been weak.  And, a weak dollar increases the cost of buying foreign products.  In the last year, the Fed has ceased its bond-buying program while Europe and Japan have begun theirs.  Here’s what has happened to the dollar.

Dollar Index -- 5 year chart

What about the other effects of QE? 

The financeable assets that most benefited from the Fed’s policy have been real estate and the stock market.  Coupled with a tax code that rewards asset ownership, the policy has made the rich richer.  Liberal voices have decried income inequality without raising the connection between inequality and the Fed’s policies. 

If you want to find those most hurt by the Fed’s Zero Interest Rate Policy (ZIRP), look no further than savers who rely on interest for their income.  These include not just today’s retirees needing a low risk source of income but future retirees depending upon the success of those managing their pension funds in todays’ financial environment.

Further, policies that undermine business investment reduce employment opportunities, increase income inequality and reduce tax revenue to the government, thereby reducing its ability to fund programs that help those less fortunate. 

But, there is hope.  QE is over and ZIRP may be in its last days. And, as we emerge from a period of unprecedented Fed interference in the market, the government’s deficit has been reduced.  The end of the Bush tax cuts coupled with the cap on government spending pursuant to the budget deal struck by Congress and the President in 2011 have reduced the annual deficit.

Meanwhile, the Boston Consulting Group has projected that the US will be the manufacturing site of choice in the coming years owing to lower energy and transportation costs and favorable labor policies. 

It seems that the lesson here is: keep the government’s capital out of the market and our economy will soar.

WHO WILL LEAD?

A Wedding, a Birthday and American Exceptionalism

Monticello

It’s Thomas Jefferson’s birthday as I write this.  My wife and I just returned from a wonderful long weekend in Charlottesville, VA, the site of Jefferson’s home Monticello which we enjoyed visiting.  The occasion for the trip was not Jefferson’s birthday but rather my cousin’s wedding.

The weather was wonderful and the wedding celebration even more so.  As is often the case, I managed to find my way into an intellectual discussion in the midst of all this celebration.  I enjoy a debate that is respectful and where I have the opportunity to learn something new as was the case on this occasion. Standing a few feet from the Italian buffet, I was discussing American Exceptionalism with a well-traveled and obviously well read woman. 

She decries the use of the term.  Having lived overseas at various times in her life, she connects it to the boorish Ugly American who embarrasses us all.  She is undoubtedly correct in making that connection. Many conservative politicians have used the term to advance the idea that Americans are superior.  I agree with her in that I find Americans to be no more exceptional than citizens of other countries.

The term American Exceptionalism can be traced to the writings of Alexis de Tocqueville and refers to the notion that the United States was born of new ideas -- liberty, equal opportunity and laissez-faire economics.  In that sense, America was and remains exceptional.

Our economic progress has been the result of ideas embraced by both major political parties. Public investment in infrastructure, private investment in free enterprise and openness to immigration have created an economy that generates nearly a quarter of the world’s GDP despite having only 5% of its population. 

So, despite the xenophobia of established citizens and political efforts to slow the influx of immigrants, they keep coming.  The promise of an American way of life is as attractive today as it was in the 19^th and 20^th Centuries.

Our continued prosperity is derived from principles of Economic Freedom – free market capitalism, private property rights, the rule of law and predictable policy.  It’s no surprise that Jefferson’ study has a portrait of John Locke hanging on the wall to this day.  Locke was preeminent in the British Enlightenment of the 1690s.  He promoted then radical ideas that all citizens should be free to enjoy the fruits of their own labor, that innovators should enjoy the profits resulting from their inventions and that capitalism is the prime mover for prosperity. 

And so, even today, America can claim to be exceptional for its adherence to the founders’ principles and for its diversity of thought and culture. 

 

The blessing circle

My cousin and his bride are both Italian Americans raised as Roman Catholics.  Our celebration lasted for three days.  On the last evening, the couple asked for the blessings of their friends and family.  Standing in a loose circle, we were all given the opportunity to offer our words of love to the newlyweds.  The blessings were officiated by a couple that ministers to a Unity Church.  He was raised in a Jewish household and she as a Roman Catholic.  The offerings included special remembrances (some offered in Italian) as well as a Baha’i prayer recited by an Iranian American and a Jewish recitation that preceded the groom breaking a glass followed by a shout of “Mazeltov!” by the assembled congregation.

How’s that for exceptional?

Somewhere Thomas Jefferson was smiling.

WHO WILL LEAD?

Lewinsky, Schilling and Fathers of Daughters

I’m an avid fan of TED, the self described “global community, welcoming people from every discipline and culture who seek a deeper understanding of the world.”  If you haven’t checked it, I strongly encourage you to do so.  You’ll find it to be a source of learning that is beyond comparison.

When last I logged in, a trending talk was titled “The Price of Shame”.  The speaker is Monica Lewinsky.  I admit that some sense of morbid curiosity compelled me to click through.  I am not alone.  When last I checked, more than 1.7 Million people had viewed her talk. 

Her presentation was intelligent, dispassionate and courageous.  Describing herself as “patient zero of losing a personal reputation on a global scale almost instantaneously”, she asks her audience if any among them never made a serious mistake when they were 22 years old.  Of course, no one raised his or her hand. 

Public shaming as a “blood sport” (her description) must stop, she avers. 

Of course, we know what she’s talking about.  We are all astounded by news reports of young adults and teenagers committing suicide after being verbally assaulted online.  A study by Walter Torres, PhDand Raymond Bergner, PhD in the American Journal of Psychiatry reports “Individuals who have been subjected to the most severe and public of humiliations frequently experience feelings of hopelessness and helplessness. Lacking the ability to make effective appeals on their own behalf, they have no discernible way back, no avenue to recover and have a better future. Furthermore, their status as a nobody in their former community can be excruciatingly painful and may sometimes become intolerable.”  The result can be extreme violence and/or suicide.

As I listened to her, I found myself thinking of Curt Schilling.  The World Series winning pitcher with the Diamondbacks and Red Sox made news earlier this month when he outed the online attackers of his daughter, Gabby.  He had tweeted his congratulations to his daughter who will pitch softball at a college in Rhode Island next year:  Congrats to Gabby Schilling who will pitch for the Salve Regina Seahawks next year!!

The responses as described by Mr. Schilling were infused "with the word[s] rape, bloody underwear and pretty much every other vulgar and defiling word you could likely fathom began to follow."

Schilling’s response reflected anything but “helplessness and hopelessness”.  He turned the tables on the attackers by publicly identifying them.  The Huffington Post reports that some were fired or suspended once their employers learned of their antics. 

Ms. Lewinsky’s father also came to her defense in the wake of the Clinton scandal.  He defended her truthfulness in a televised interview with Barbara Walters and later threatened to sue NBC when a character in the popular TV show Law & Order: SVU used her surname as a verb to describe a sexual act. 

Fathers play an important role in the lives of their daughters.  Aside from their traditional role as provider and protector of the household, the relationship has impact on daughters’ self-esteem.  "How Dad approaches life will serve as an example for his daughter to build off of in her own life, even if she chooses a different view of the world," says Michael Austin, associate professor of philosophy at Eastern Kentucky University and editor of Fatherhood - Philosophy for Everyone: The Dao of Daddy.

I have seen this dynamic at work.  My brother-in-law has played an important and sustained role as father, surrogate father or adjunct father to my wife, our niece, his daughter and now plays an important role in his 6 year-old granddaughter’s life. Clearly, there were many other influences on their lives.  However, what they have in common is that each of them are engaging women who exude confidence who approach life with a sense of humor and passion.

What is required of us is to make sure our children know that we love them, that we care enough to come to their defense and that we will.  It’s time for fathers everywhere to stand up and take action.  It’s time to follow the example of courage and LEADERSHIP exhibited by Ms. Lewinsky and the Schillings, Curt and Gabby.

WHO WILL LEAD?