The Collins Proposal

Today Senator Susan Collins introduced a compromise gun proposal to limit gun sales to people on certain terrorist watch lists. I support the proposal, even though I don’t think it goes far enough and even in spite of several seemingly reasonable arguments against it. I want to explain why.

First, there is the argument that this proposal would not have prevented Orlando or Newtown let alone the violence plaguing big cities like Chicago. That may be true, but it is not a reason to oppose the proposal for several reasons. The most consequential public policy victories of the last few decades were won not with a single sweeping piece of legislation but through incrementally building up smaller pieces to build a foundation and to make it clear that the fear, uncertainty, and doubt associated with a big change is unfounded. Examples of this include gay marriage rights and health care reform. If this policy is a good policy, opposing it on the grounds that it doesn’t go far enough is wrongheaded and simply allows the great to be the enemy of the good. It’s not my opinion that we should pass this compromise and move on, but that we should use it as a starting point and build towards other sensible reforms. Even a small bill with bipartisan support would help build trust for further discussions. It would also help eliminate the fear that passing any reform whatsoever is equivalent to stepping on the political third rail.

A more interesting challenge to the proposal is the argument that using a government list (like the terror watch lists) as the basis for exclusion from a constitutional right (like the second amendment) is a slide down the path to tyranny. This sounds sensible until you pick it apart. Virtually all constitutional rights have exclusions (e.g. you can’t yell “fire!” in a crowded theater nor can you utter hate speech.) If the concern is that due process may not be observed, that can be resolved by allowing for an appeals process from the list. While that may seem tantamount to being considered guilty until proven innocent, that opens the whole issue of the legitimacy of the lists to restrict other rights like free travel. In fact, I don’t think it’s that different from someone being declared mentally ill (which virtually everyone accepts as a reasonable basis for exclusion from the right to buy a gun). The analysis is done by a professional and is either accepted or not accepted by a court. I may be wrong on this, but these kinds of decisions are what the Supreme Court is for.

The last point – that more guns make us safer and therefore any restriction is bad – simply flies in the face of the data. There are good reasons why people want to own guns (I own one myself) but this one doesn’t pass muster. And while I agree that not all policies make us safer, I still support this one for the reasons above.

Speaking of the courts, it’s still important to add that the scope of the second amendment has been subject to different interpretations (including skeptics of all political stripes ranging from John Paul Stevens to Robert Bork.) To simply throw up our hands and say there is no possible restriction that is constitutional is simply incorrect.

Lies, Damn Lies, and Economic Statistics

The title of this article is a minor adjustment of a favorite saw of Mark Twain’s, but I can’t imagine he’d grudge me the use because the intent is the same as the original. Every times I read business or economic news I become more frustrated by ubiquitous (and to some degree iniquitous) use of three economic indicators. Here’s what they are, why they are wrong, and simple ways to fix them:

GDP

GDP is meant to measure the overall size of the economy and, for some reason, has now become a proxy for the overall health of the economy. If GDP is growing, things are good, right? Well, no. GDP can go up while the business sector is shrinking so long as the gap is made up for in government spending (even deficit spending.) After all, it’s just defined by this simple formula:

GDP = C + I + G + (Ex – Im)

Where C is consumer spending, I is business investment, G is government spending, and (Ex – Im) is net exports. But could it really go up while business is in decline? Sure. GDP growth in the US over the years 2012-2015 has averaged around 3.57%. Over roughly the same period, government deficit as a percentage of GDP has been 4.5% and the trade balance has remained negative. Which means that if you subtracted out the “unsustainable” or deficit part of government spending, you’d end up with a net negative GDP.

But there’s an even bigger problem. GDP can go up even while wealth and incomes consolidate to a smaller and smaller number of people. So if it’s being used to inform policy about when stimulus is needed or how taxes should raised, lowered, or structured it gives a complete false impression.

Still, GDP is a single, easily accessible number so you can see why it would be useful for sound bites and news articles, right? Maybe, but not so much since there are better numbers that do something pretty similar. Even just using median income (not average income) would be much better if you want to know how average families are actually feeling.

Unemployment

This is another frustrating one. The unemployment rate is supposed to show how easy it is for people to get jobs. Since there’s always some natural and seasonal churn in the economy it constantly needs to be adjusted and a number of around 4-5% is considered “full employment”. But this one is broken, too. It measures jobless claims as a percentage of the labor force. So it doesn’t take into account the long-term unemployed (who no longer file for benefits) or those who have given up looking since it’s just too hard.

A much better statistic to use is the labor participation rate. This is the ratio of people who are working to the overall population that’s of working age. Admittedly, it still doesn’t help identify patterns among undocumented workers, cash employment, and various other categories, but it’s a darn sight better than the unemployment rate if you only get one data point for measuring the employment situation. It would take some time to adjust since you need to know what “healthy” is, but so did unemployment rate (it isn’t obvious that 4% rather than 0% is “full” employment.)

The DOW Jones Industrial Average

The DOW is the most commonly reported stock market index and it’s also the worst. No serious analyst thinks the DOW is a good measure of the market for a few reasons.

First, it’s small. It only includes a limited number of stocks and those stocks are of the biggest companies out there. If you believe that small business can have ups and downs independent of big business (and the data would support you if you do), the DOW provides a very incomplete view.

Second, it’s price weighted. Each component of the index is weighted by price rather than by market capitalization. This is a problem since price per share is market cap divided by the number of shares and the number of shares is completely arbitrary because a company can just pick how many shares to have outstanding through splits and reverse-splits. Net net, this means a company with a high share price can have a disproportionate impact on the DOW just by having a high share price even if it’s a relatively small part of the overall economy.

For all that, using the DOW to report on the market is probably a less of a big deal than GDP or unemployment since the DOW and broader indexes like the S&P 500 move together roughly 98.5% of the time and never, to my knowledge, move in completely different directions over any significant time frame. Having said that, it’s also the easiest to fix since indexes like the S&P 500 are already widely reported and are much more accurate.

Why we need to give (a little) more.

While many bridle when the tax bill comes, the US is still perhaps the lowest tax country of the rich industrialized nations according to the Wall Street Journal. And the difference is striking. It’s at least 3-4% of GDP less than countries like Canada and Australia (which are also pretty low) and double digit percentages less than Europe and most other countries to which you’d want to be compared in terms of lifestyle.

If you take that high level figure and consider that a much higher percentage of the money we do collect goes to military spending (which I’m not arguing against), you can see at a high level why the government isn’t able to afford the level of social services that these other countries do. Could we make up for it by running better, more efficient programs? Possibly, but what I think is actually happening here is that we’ve effectively “outsourced” social services to the nonprofit sector. And some support is given to this by the fact that the amount of money in the nonprofit sector at large is tantalizingly close to the difference in taxation.

America is the most generous country in terms of charitable giving. Gifts to charity have amounted to approximately 2% of GDP for the last 40 years according to the Chronicle of Philanthropy. That’s about half the tax gap and when you consider the lost tax revenue of those gifts (since gifts are tax deductible) and the gifts that aren’t reported (in kind, volunteer, etc.), you get to pretty much an exact fit between the US and the next tax tier of nations. Figure in our other budget priorities and we’re still pretty far below.

I realize that spending isn’t a perfect proxy for quality of services. There’s also a big philosophical difference between government-run programs (e.g. service consistency, economies of scale) and individual organizations running programs (e.g. competitive markets, new ideas) and, as I said, there’s always room to do things better. But at a high level we shouldn’t expect comparable services for a fraction of the price tag.

In other news, government at all levels is cutting back or withholding funds normally destined for these programs. Illinois is something of a test case in this, having had no state budget for more than 6 months and one of the worst state fiscal outlooks in the country, but others will follow.

In a bizarre sense, this is something of an opportunity. America’s model of charitable giving can also be seen as sort of an “opt in tax” that also allows the payer/donor to have a say in how funds are spent, something you don’t normally get to do with tax dollars. If we don’t do anything, we could be destined for a social service crisis. If we do, we might take this opportunity to learn more about the organizations working on the causes we care about and step up giving even just a little to cover the gap. A higher level of involvement can be rewarding in many ways and if it creates an effective “market” for services, that could actually be a win.

In any case, we should all try to dig just a little deeper this year. Our fellow Americans really need it.

Let’s Cure Violence

This week, the US had two more mass shootings. While it is possible that the shooting in San Bernardino may be linked to terrorism, it’s still part of a depressing cycle of violence, which, as President Obama pointed out, has no parallel in the developed world. The very fact that the killing of 14 people might not be part of a terrorist act or genocide is a bigger problem than that it might be. And at home in Chicago, we’re still staggering after the release of a video that showed the police shooting of LaQuan McDonald.

These incidents continue to happen with grim regularity. More young Americans die from gunshots than car crashes. But inevitably when one of these events happens, after everyone has had their moments of silence and sworn it will never happen again (which should be a form of perjury at this point), a futile political debate about gun control begins and eventually ends with the same status quo.

I have my own opinions about gun control, which are largely in line with those voiced by former Supreme Court Justice John Paul Stevens in his excellent Six Amendments. While gun rights activists have a point that we haven’t found a control policy that works completely (nor is it likely that gun control alone would eliminate the problem – consider the Rwandan genocide which was done almost entirely with machetes), gun reformers have a stronger point that the second amendment has only relatively recently been construed to block virtually all experimentation with such policies and that the new construction is arguably against the framers’ intent (guns in the hands of a “well regulated militia”).

But putting that to the side, there are other things we can and should do which have a provable effect on violence reduction. One such idea comes from Dr Gary Slutkin, the visionary founder of Cure Violence. His organization uses approaches from the field of infectious diseases to treat violence as a public health problem rather than a matter of criminal or even economic justice. While it sounds a bit far out, his results are dramatic, bringing down violence in neighborhoods by 40-70%. And his approach can be applied to police violence as well. It is also endorsed by mayors, police chiefs, and communities leaders around the country and around the globe. His TED MED talk is here:



Other approaches, including investments in mental health, after school programs, and early childhood education also pay tremendous dividends in reducing violence and none of these should be as controversial as gun control (some of my Chicago favorites include UCAN, Erikson Institute, and Off The Street Club). Virtually no one would argue against these kinds of programs. The only real question is are we willing to pay for them.

As President Obama said, it’s unlikely that we’d see a nation with no violence (especially when some of that violence is potential a result of extremism imported from abroad), but by supporting organizations like Cure Violence and other strong neighborhood programs we could make a mighty dent in it. I’m making a pledge today and I hope you will join me.

Literacy in Chicago

I was listening to NPR on my way to work this morning and there was a story about how difficult it is to get a good job when your basic literacy skills aren’t strong. While that may seem obvious, what was striking about the piece was that they reported that more that 13% of the working population of Chicago falls into that category. If, like me, you feel like literacy is a basic human right, then I invite you to do something about it by clicking the button below.

Do Public Good

If we all take action instead of just linking and tweeting, maybe we can live in a city where everyone has the basic skills they need to thrive.

Charity Tickers

When you are thinking about investing in a public company, something you often think about is the news coverage surrounding the company. Are there insights about CEO? How is the public responding a product? How is the company responding to any issues that have surfaced about them? This information isn’t quantitative, but it often provides useful guidance.

I’ve been wondering if a similar idea could be applied to public charities. They often have the same considerations: there is robust coverage in the media of management teams, response to services, etc., and that same knowledge could be helpful to inform donors or potential donors.

In the for-profit world, this data can be crawled/aggregated using a unique, easy to read text string that works for both humans and computers: the ticker. For example, in an article about Google, you’ll might see the company name displayed as Google (NASDAQ: GOOG) or just as a hyperlink with the ticker embedded. Those article get picked up and included in research sites like Yahoo! Finance. Tickers have become so ubiquitous that no one even thinks about them any more.

Why wouldn’t something like that work in the public charity world? Like public companies, there are comprehensive data sets available to make finding tickers trivial and aggregating the media mentions useful. That kind of aggregation would be helpful in providing context to any given article as well as in evaluating the organization over all.

In some cases, it may be possible to do without tickers, for example “Red Cross” is a reasonably unique phrase that may be possible to parse out of articles automatically, but most organizations don’t have that luxury. Take Open Books, for example, which could refer to my friends in River North, but could also be Open Book in Minneapolis (dedicated to literary and book arts) or Open Book Players, a performing arts organization in Maine, to name but two. Even Red Cross isn’t as unique as it at first appears: there are hundreds of regional chapter organizations (e.g. Red Cross of Greater Chicago) among other potential false matches.

If instead an article said something like “Open Books (OBOO) is doing amazing things…” that ambiguity would go away. There would be no doubt that the amazing things being done were by a Chicago-based literacy organization rather than a Maine-based theatrical one (or vice versa). For media outlets, it could result in more impressions for archival content as well as a richer user experience as well.

Three Paper Books

While I’ve been up here in Maine, I’ve been able to reacquaint myself with an old pleasure – reading printed books. There is both a technical reason for this (an increasing amount of research that shows that electronic readers are bad for sleep) as well as an aesthetic one. But it’s also led me to read three books that I can’t see being replicated as e-books any time soon:

One Fish Two Fish

One Fish Two Fish Red Fish Blue Fish

Children’s books remain a perennial favorite at Open Books’ used book store and for good reason. Beautiful pictures, big formats and, of course, the fact that a mashed peanut butter and jelly sandwich does not mean their doom or a $600 replacement bill. While custom apps can provide some of the images that e-reader apps can’t, the need to build custom apps immediately lets out people who are just great writers and illustrators and don’t have the time, money or skills to build their own apps.

Seacoast Maine

Seacoast Maine: People and Places

With photos by George Tice and text by my friend and former neighbor Martin Dibner, this is an evocative ramble along the titular Maine coast (no spoilers there.) I particularly like this cover image since Amazon couldn’t even get a photo of the cover, let alone what lies inside.

S.

S.

Perhaps most interesting of all is S. This novel is based on the concept of a relationship between two people developing via an exchange in the margin notes of a book. There’s another underlying mystery that gets explored through wonderful inclusions like postcards, vintage feeling newspaper articles, etc. While I’m not done with the book yet and can’t yet say what I think of the story, the production is stunning and well worth a look through.