Posts tagged with: USD

and112812blogNear the top of the list of things I despise is companies that take advantage of the plight of the poor and desperate. But just above that on my list is something I hate even more: being poor and desperate. That’s why I loathe payday lending companies that charge usurious interest rates—and why I’m not yet ready to see them abolished.

Here’s how payday lending works. If you have a job (and pay stub to prove it), a payday lending company will allow you to write and cash a post-dated check. For this service the company will charge an absurd interest rate. A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400 percent. So if you need $100, you write the check for $115 and they’ll give you $100 in cash. Two weeks later they cash your check or you can renew or “rollover” the amount—for an exorbitant fee.

Why would anyone agree to such terms? Because they have no other choice. About twenty years ago I made some terrible choices and found myself in a serious financial bind. The amount I needed wasn’t much—about $200—but without it I wouldn’t have been able to pay my rent. I took out a payday loan that cost me $30 every two weeks. It took about eight weeks to get clear of the loan, resulting in a cost of $120 to borrow $200 for two months.

If you’re middle class and think of it in terms of interest rate, that repayment cost sounds appalling usurious. And it is. But as the poor will tell you, man does not live on APR alone. Having to pay an extra $120 was cheaper than having to find a new place to live. Yes, it was a bad deal. But it was better than all my other choices.

That is why I believe every serious critique of payday lending needs to be accompanied by a serious proposal to help those who are trapped by such “poverty problems.” An excellent example of an alternative approach is the one offered by Wesley Memorial United Methodist Church in Richmond, Virginia. One of their church members, Nina McCarthy, was initially trapped in the vicious payday lending circle:
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The largest initiative to combat poverty by funding public schools has occurred in Camden, New Jersey, the poorest small city in America. New Jersey spends about 60 percent more on education per pupil than the national average according to 2012 census figures, or about $19,000 in 2013. In Camden, per pupil spending was more than $25,000 in 2013, making it one of the highest spending districts in the nation.

But as Reason.com notes, all that extra money hasn’t changed the fact that Camden’s public schools are among in the worst in the nation, notorious for their abysmal test scores, the frequent occurrence of in-school violence, dilapidated buildings, and an on-time graduation rate of just 61 percent.

As Bridget Cusato-Rosa, Principal of Freedom Prep Charter School, says in the mini-documentary about the effort,

A lack of resources is not our problem. I actually despise that argument. I think it’s a scapegoat. ‘We need more money. If we had more money, we could do this, or do this.’ It’s just a Band-Aid for the problem. Why not address the real issue, which is what’s broken right in front of you?

government-regulation-in-business-red-tapeWhat is the annual cost of regulations for America?

The short answer is that no one knows for sure. The officially reported regulatory costs as reported by the Office of Management and Budget (OMB) total up to $128.7 billion. But the real costs of regulation is impossible since, as the Nobel-winning economist James Buchanan said, “Cost cannot be measured by someone other than the decision-maker because there is no way that subjective experience can be directly observed.”

Still, we can attempt to estimate the costs based on factors that can be measured. Clyde Wayne Crews Jr. of the Competitive Enterprise Institute provides an example of such an estimate. His findings:
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Yesterday, in a short, videotaped preview of his upcoming State of the Union address, President Obama unveiled a new proposal: Make two years of community college free for all students who meet certain eligibility standards.

Here is what you should know about the proposal.

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As the most widely observed cultural holiday in the world, Christmas is a time of produces many things — joy, happiness, gratitude, reverence. And numbers. Lots of peculiar, often large, numbers. Here are a few to contemplate this season:

christmasnumbers$35.03 – Average amount U.S. consumers spent on real Christmas trees in 2013.

$81.30 – Average amount U.S. consumers spent on fake Christmas trees in 2013.

33,000,000 – Number of real Christmas trees sold in the U.S. each year.

9,500,000 – Number of fake Christmas trees sold each year.

7 – Average growing time in years for a Christmas tree.

350 million – Number of Christmas trees currently growing on Christmas tree farms.

319 million – Current population of the United State.

$27.21 — The energy costs of lighting a six-foot Christmas tree, lit 12 hours a day for 40 days, decorated with various light types.

$1,000,000,000 – Estimated value of U.S. imports of Christmas tree ornaments from China between January and September 2014.

$24,000,000,000 – Estimated retail sales by the nation’s department stores (including leased departments) in December 2013. This represents an estimated 40.9 percent jump from the previous month when retail sales were estimated at 17.3 billion.

800,000 – Number of new employees hired to compensate for the holiday rush in 2013.

37.5% — Estimated percentage of charitable giving that occurs between Thanksgiving and New Year’s.

$781 – Average amount people in the U.S. estimated they’ll spent in on Christmas presents in 2014.

108,000,000 — Average number of homes Santa Claus has to visit on December 25 (assuming there is at least one “nice” child in each).

Abolition-of-Slavery-dayTomorrow is the International Day for the Abolition of Slavery, a commemoration of the date of the adoption, by the General Assembly, of the United Nations Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others (resolution 317(IV) of 2 December 1949). As part of the effort to help eradicate modern slavery and human trafficking across the world by 2020, Catholic, Anglican, Muslim, Hindu, Buddhist, Jewish, and Orthodox leaders will gather at the Vatican tomorrow to sign a Joint Declaration of Religious Leaders Against Modern Slavery.

Here are some things you should know about the modern slave trade:

What is modern-day slavery?

Modern-day slavery, also referred to as “trafficking in persons,” or “human trafficking,” describes the act of recruiting, harboring, transporting, providing, or obtaining a person for compelled labor or commercial sex acts through the use of force, fraud, or coercion.

How many people today are enslaved?
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save-to-winPeople who play the lottery with an income of less than $20,000 annually spent an average of $46 per month on lottery tickets. That comes out to more than $550 per year and it is nearly double the amount spent in any other income bracket.

Those who have the least spend an inordinate percentage of their income every year on lottery tickets (estimates vary from 4-9 percent). Yet while it is irrational for those in poverty to waste their limited resources on a one in 176 million chance, there is something almost rational in the reasoning for doing so. In 2012, The Atlantic’s Derek Thompson noted that,

For the desperately poor, lotteries perform a role not unlike the obverse of insurance. Rather than pay a small sum of money in exchange for the guarantee of protection that you’ll need in the future, you pay a small sum of money in exchange for the small probability that you’ll win money to help your lot right away. It is, for lack of a better term, a kind of aspirational insurance.

But what if the poor could pay a small sum to themselves (in the form of savings) and still reap the “aspirational insurance” benefits of the lottery? As the New York Times reports, some credit unions and non-profits are doing just that:
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baby expensiveThe cost of raising kids in the United States has reportedly gone up, averaging $245,340 per child according to a recent report by the U.S. Department of Agriculture, which factors in costs for housing, food, clothing, healthcare, education, toys, and more.

From the Associated Press:

A child born in 2013 will cost a middle-income American family an average of $245,340 until he or she reaches the age of 18, with families living in the Northeast taking on a greater burden, according to a report out Monday. And that doesn’t include college — or expenses if a child lives at home after age 17.

In response to these estimates, much of the reporting has aimed to paint an even grimmer picture for prospective parents, emphasizing other factors such as the likely trajectory of declining wages and rising costs in areas like healthcare and education.

Taken together, it’s enough to make your average spoiled youngster run in the opposite direction. And indeed, many actively are. As Jonathan Last details extensively in his book, What to Expect When No One’s Expecting: America’s Coming Demographic Disaster, birthrates in the Western world are in a free fall, with more and more adults opting for fewer and fewer kids, if any at all, and making such decisions later and later in life.

For those of us who shudder at the prospect of a world with fewer children, and who increasingly encounter negative attitudes about child-bearing and -rearing amongst our peers, many of whom are in their child-bearing “primes,” one wonders how we might respond with a compelling financial case for having children amid such supposedly grim prospects. (more…)

cherrypieShould we always take the side of the individual consumer?

That’s the question Rod Dreher asks in a recent post on “Amazon and the Cost of Consumerism.” It’s a good question, one that people have been asking for centuries. The best answer that has been provided—as is usually the case when it comes to economic questions—was provided by the nineteenth-century French journalist Frédéric Bastiat.

Bastiat argues, rather brilliantly, that,

consumption is the great end and purpose of political economy; that good and evil, morality and immorality, harmony and discord, everything finds its meaning in the consumer, for he represents mankind.

He summarizes his argument as follows:

There is a fundamental antagonism between the seller and the buyer.

The former wants the goods on the market to be scarce, in short supply, and expensive.

The latter wants them abundant, in plentiful supply, and cheap.

Our laws, which should at least be neutral, take the side of the seller against the buyer, of the producer against the consumer, of high prices against low prices, of scarcity against abundance.

They operate, if not intentionally, at least logically, on the assumption that a nation is rich when it is lacking in everything.

Bastiat uses this as the basis of his argument that the interests of the consumer, rather than the producer, align more closely with the interests of mankind (see addendum below for more on this reasoning). Producers want scarcity since it increases their profits. If they can’t produce scarcity in the market, they’ll seek out government protections that create artificial scarcity (which is why those who are pro-business are rarely pro-market).

Book publishers don’t like the fact that Amazon is reducing the scarcity of their product, because it lowers the cost. But what is the result from the consumer side? The lower prices allow consumers to consume more books than they otherwise would be able to afford.
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gaplogoThe furniture store Ikea has announced they will begin to base their minimum pay on what’s considered to be a “living wage” in each local area, rather than on what competitors are paying. Similarly, the clothing retailer Gap says it will set $9 as the minimum hourly rate for its United States work force this year and then establish a minimum of $10 next year.

This makes good business sense — but will lead to a lot of bad economic reasoning.

A prime example is the latest column by Slate’s business and economic writer, Jordan Weissmann:

Notably, Ikea isn’t raising prices on its furniture to pay for the raise. Instead, the company’s management says it believes the pay hike will help them compete for and keep talent, which is of course good for business. The Gap used a similar justification when it announced it would raise its own minimum to $10 by 2015.

Which I think hints at something about what would likely happen if the U.S. raised the federal minimum. Conservatives who argue that higher pay floors kill jobs tend to assume that businesses are already running at pretty much peak efficiency, and so forcing them to spend more on labor will lead to less hiring. But left-leaning economists see it differently. They tend to argue that increasing wages can lead to savings for business by reducing worker turnover, for instance, and forcing managers to make better use of their staff.

Both the conservatives and the left-leaning economists are largely correct. Higher pay floors do tend to kill jobs and increasing wages can lead to savings for business by reducing worker turnover. But where Weissmann and other liberals go wrong is in assuming that businesses can still prevent worker turnover when the minimum wage is increased.
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