Thursday, October 30, 2008

The Relationship Between Politics and Economics

With less than a week to go till the election, we see the economy going through a roller coaster ride of sorts. Seems like one day it's up by 900 and the next it's down by the same. With these sudden changes in the economy so close to the election, one might wonder does politics play a role in the economy?

An article from Politico1 talks about this relationship. The article states that in the past the stock market has not been driven by election day events. It seems like this year may yield different results, especially when you factor in the recent bailout packages that have occurred. The next president will have to manage the aftermath of all of this on top of the economic plans each has promised in their election campaigns.

Speaking of those economic plans, many believe that they will also be a driving force behind the economy mainly because of the vast differences between both candidates' plans. There are three big issues that both candidates wildly differ on when it comes to the economy: taxation, trade, and union membership.

Both candidates state that they are advocating tax cuts, but in different ways. McCain is for giving tax cuts directly to the people while Obama wants to give a tax credit to the people on their income tax form. For more details on Obama's plan see our post on Tax Cut or Income Redistribution.

In the past, Obama has been a critic of NAFTA and other free trade agreements according to an article from The Nation2. Putting requirements on free trade will hurt American goods being imported into other countries consequently hurting the businesses that make the goods. This could be devastating to companies such as IBM and Caterpillar that rely heavily on overseas business. McCain, however, has always been a proponent of free trade and will either keep the status quo or reduce the requirements on free trade.

Labor unions have had their place in our economy for generations. In the past, they have instituted such changes as child labor laws and the eight-hour day. However, in today's global economy, they tend to make corporations less competitive. In an article from The Heritage Foundation3, the writer states that labor unions now add to costs and discourage productivity. Obama wants to make union membership easier by doing away with secret ballots, according to a Fox News article4. This will drive union membership to an all time high causing a massive increase in salaries for already struggling companies. McCain is an anti-union guy and would probably do away with them all together if he could.

As you can see both of these candidates differ greatly on their economic ideals. Could this be causing a lot of the uncertainty we have seen in the markets? I think so. While there might be no direct connection between politics and economics, there is certainly a long term effect that comes from the policies that our politicians make today.

1. Will the election drive the Dow? The Politico. October 22, 2008.
2. Obama Goes Soft on Free Trade. The Nation. June 18, 2008.
3. Do Americans today still need labor unions? The Heritage Foundation. April 1, 2008.
4. Secret Ballots May End in Union Elections If Obama Becomes President. Fox News. May 19, 2008

Wednesday, October 15, 2008

Sex and Money

Too often, opponents of sex education in schools make a slippery slope argument when talking about teen sex. (We promise this does have something to do with economics). The argument goes like this: "Handing out condoms in schools will encourage teen sexual activity, therefore, handing out condoms is a bad idea."

True, it is a fallacious argument, but that doesn't mean that the conclusion is necessarily wrong. You have to look at incentives. Most teens will either have sex or not have sex regardless of whether or not they are using birth control. However, a small few would be afraid to have sex because they might get pregnant. With the possibility that they could have sex and have far less risk of getting pregnant, they might be open to the risk versus the reward. In other words, there is no absolute that birth control is completely neutral in regard to teen decision-making. This is all the more reason to allow parents, who know their children better than anyone else, to make the decisions about sex education with their children.

Opponents of this view would argue that it’s best to cover all the bases. For what purpose? To reduce teenage pregnancies? While proponents consider sex education to be one of the primary tools to help teens avoid unintended pregnancies1, it has certainly had an opposite effect since being instituted. In fact, pregnancy in teenage girls had been declining in the late 50's and early 60's2 when sex education was being called for to solve a so-called teenage "crisis". So, after the government implemented sex education programs, what were the results? The pregnancy rate among 15 to 19 year old females rose from approximately 68 per thousand in 1970 to approximately 96 per thousand by 1980.3

More recently, the rate declined to 75 pregnancies per thousand females aged 15 to 19.4 Although this is a decrease from the 1990's, it is still higher than the years prior to sex education programs. So, what could have caused the recent declines in teen pregnancy? Sex education was provided throughout this time. Abortion was legal throughout this time. Perhaps the decrease is due to more widespread abstinence programs like True Love Waits, or better education about HIV transmission. Maybe some improvement in sex education played a role. However, we are still not getting the desired results after 30+ years of this public policy.

Sargent Shriver, former head of the Office of Economic Opportunity, which led the early charge for more sex education and "family planning" clinics, testified candidly to a congressional committee in 1978:

"Just as venereal disease has skyrocketed 350% in the last 15 years when we have had more clinics, more pills, and more sex education than ever in history, teen-age pregnancy has risen."5

Am I saying that sex education was the cause of the rise in pregnancies? No. Since correlation is not causation, there is no proof that sex education is the cause. However, it is obvious that sex education programs do not succeed in their goal of reducing teenage pregnancies and the spreading of sexually transmitted diseases.

Describing these sexual education programs, a congressional committee report said:

"The primary objective of Federal efforts in family life and sex education has been to reduce unwanted pregnancy rates among teenagers, while the primary goal of most sex educators appears to be encouragement of healthy attitudes about sex and sexuality."6

An article in the Chicago Sun Times stated,

"A popular sex instructional program for junior high school students, aged 13 and 14, shows film strips of four naked couples, two homo-sexual and two heterosexual, performing a variety of sexually explicit acts, and teachers are warned with a cautionary note from the sex educators not to show the material to parents or friends: "Many of the materials of this program shown to people outside the context of the program itself can evoke misunderstanding and difficulties."7

Dissenters can always dismiss this evidence as "right wing propaganda", but the fact is that sex education programs have not reduced teen pregnancies or sexually transmitted diseases which is their purpose. Instead, they preempt parents' decisions as to when and how their children are introduced to sex. Perhaps it was inappropriate for the former head of the Office of Economic Opportunity to lead the original charge for sex education. However, now that taxpayers are funding efforts to reduce teen pregnancy, they should demand that lawmakers provide a more effective alternative. To date, the most effective way to prevent pregnancy and the spreading of STD's is abstinence. For this reason, we support teaching abstinence and the limitations of traditional birth control (such as condoms) as part of sex education.

For more information about abstinence education and comprehensive sex education visit or the possible role of money with certain sex education groups here. Also, check out the economic implications of teen pregnancy.

1. Theodore Ooms, Teenage Pregnancy in a Family Context, pp. 39-40, cited in Thomas Sowell, The Vision of the Anointed.
2. ibid. Jacqueline Kasun, The War against Population, p. 144.
3. ibid. Jacqueline Kasun, The War against Population, pp. 142, 144.
4. Guttmacher Institute, U.S. Teenage Pregnancy Statistics: National and State Trends and Trends by Race and Ethnicity, accessed Sept. 12, 2006.
5. Thomas Sowell, The Vision of the Anointed, p. 18.
6. ibid. Fertility and Contraception in the United States: Report Prepared by the Select Committee on Population (Washington, D.C.: U.S. Government Printing Office, 1978), p. 5.
7. ibid. Suzanne Fields, " 'War' Pits Parents vs. Public Policy," Chicago Sun Times, October 17, 1992, p. 19.