Economics and Rising Crime Rates

Looks like there’s going to be more work for defense lawyers, and that’s a real shame.

Hey, we like working as much as the next guy, but we’d rather have a lower crime rate.  After Obama’s little press conference yesterday, though, we can’t help but think that the crime rate is going to go up.  Because the economy is going to continue to suck.

Of course there’s a whole lot more to crime rates than just the economy.  The gang crimes of the crack epidemic flourished during boom years, after all, driven not by poverty but by the turf battles and growing pains of an exciting new industry, like a dot-com bubble with guns instead of IPOs.  While wages were rising in the 50s, the crime rate was rising twice as fast.  And a tanking economy does not always coincide with rising crime rates — they dropped about a third during the Great Depression.

Demographics are a much larger factor, especially in violent crimes, which surge and recede with the unmarried young male population.  That population is responsible for about half of all crimes that get committed.  Cultural attitudes also play a big role — different communities of our wonderfully heterogeneous country can have markedly different views of what is right and wrong, and what is tolerable in others — so that population shifts and evolving community attitudes bring about noticeable drops or rises in local crime rates.

But although the economy is not the biggest factor, it still does have an effect on crime rates.  Financial crimes seem to bloom in downturns, partly out of reckless desperation, and partly because frauds are easier to conceal when everything is going up.  It also affects violent crimes committed by people other than the young-male demographic, for whom economic stress can lead to domestic strife.  For some of those feeling the lack of opportunity the most, opportunistic crimes lose some stigma and are more likely to be seen as options.

It would be foolish to claim any cause and effect between a down economy and the crime rate.  But a down economy — especially a long-term downturn — certainly amplifies the effects of more direct factors like demographics.

Well, the at-risk demographics have been swelling for a few years now, and we’re starting to see an effect on the statistics.  It’s likely that critical mass has been reached, or will be fairly soon.  Cultural shifts work in both directions, but in recent years they’ve been balancing out in favor of less, not more, homogeneity.  (It’s not that particular communities are more or less likely to commit crimes; it’s just that greater cultural diversity correlates strongly with deviation from the singular norm of the law.)  The amplifying effect of a long-term crap economy is most likely to be significant in precisely these circumstances.

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So why do we think the economy’s going to stay down for a while?  Because it’s the message the Obama administration has been sending lately.  What the president said after yesterday’s gloomy jobs report only solidified this impression.

The news was what one expects of a Friday government report — given how journalism works, Friday’s the best day to release bad news.  And the administration had some pretty bad news to report yesterday.

The “recovery” is anything but.  Although the latest recession officially ended a couple of years ago, hiring has not increased, wages remain stagnant, productivity is less-than-stellar — and even if more stuff was being produced, consumers aren’t showing any inclination to buy it.

The Labor Department’s own data shows a massive rise in unemployment that is symptomatic of the deeper problems in the economy.  Unemployment among men and women 20 and older has doubled since 2007, to 9.2%.  Black unemployment is around 16%.  While those with a bachelor’s degree have seen only a modest increase in unemployment since 2007, from a little more than 2% to a little less than 5%, those with only a high-school diploma or an associate’s degree are now at 10%.  Those who didn’t finish high school went from about 7% unemployed in 2007 to 15% now.

(With crime demographics in mind, forget about what might come.  These are bad already.)

Most tellingly, for those who are unemployed, the length of unemployment has only worsened.  Job-seekers who remained out of work more than 6 months were less than 20% of the unemployed population until 2009, when their numbers started shooting up dramatically.  Right now, they account for about 45% of the unemployed.

Apart from unemployment, there are other symptoms of a deeper problem:  Wages are down, with no sign of coming back.  Temp work, a leading indicator of hiring trends, has been steadily going down for months.  Manufacturing and retail jobs are stagnant, while construction and financial services jobs are still being cut.

Reading yesterday’s jobs report, there is not a single significant area that doesn’t suck.  As BoA/Merrill economist Ethan Harris told the WSJ, “that doesn’t happen very often — usually there’s some little ray of hope.  The only silver lining is it might motivate Washington to get its act together.”

Sorry, Ethan, but that’s not likely to happen.

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Why not?  Because the Keynesians rule the roost at the moment.  When they look at these job numbers, their response is to say we need to raise the debt ceiling so the government can spend more money to create jobs.

That’s not how it works.  You don’t create jobs by fiat, or even by handing out cash.  Increased non-productive government spending only decreases private consumption.  When that spending has to be paid for with debt or rising taxes, it kills private-sector confidence in the future, so  investment and hiring stagnate, and nothing grows.

Just compare the Keynesian approach taken throughout the 1930s, which first killed the recovery that was already starting after the 1929 crash, and then continued the depression until WWII.  Reduced government spending after the war inspired confidence in the private sector that investment would be worthwhile, and the economy took off.

The Keynesians have been calling the shots for four years, and now they’re calling for more of the same.  Government spending has skyrocketed these past four years, so much so that suggestions of returning to the fairly bloated spending of 2007 is being called “austerity.”  We’ve hit the debt ceiling.  And it hasn’t worked.  The economy has not rebounded as it should have after the recession.  Doubling down on a failed policy isn’t how you fix things.

The government can fix things by giving private industry an incentive to invest in new products, new ventures and new industries — taking risks.  When there is no confidence in the government’s taxation, its spending, and its debts, nobody is going to be taking any risks.  “Stimulus” handouts aren’t going to be invested; they’re going to be hoarded.  Make-work jobs from government programs are only going to last as long as the government is paying the bills, but they won’t create long-term jobs, because they can’t create the demand.

All people need is hope, really.  An expectation that it might just be worthwhile to take a risk.  Once they have hope, instead of worry, the economy will grow, and jobs will return.

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Obama, of all people, should be giving hope.  But instead, he  is sending signals of despair.  He’s starting to sound more and more like Jimmy Carter in the late ‘70s.

No longer preaching the gospel of hope, Obama is now making existentialist noises of defeatism.  In his press conference, he showed up very late, spoke very briefly, and left without taking a question.  He’s staying the course that’s been hurting the economy for years.

The distinct impression we’re getting from the administration these days is summed up well by Michael Franc.  As he put it yesterday, the administration is basically sending the message that

the economy stinks, but there’s nothing the president or anyone else can do about it. Why? Because there has been a “structural change” in the economy. The moral of this argument: “Get used to 10 percent unemployment, 15 percent underemployment, and bid a fond adieu to the American dream.”

You know what, there really has been a structural change in the economy.  The demand for some things has gone away, perhaps for good.  We’ve seen it in the legal profession, it’s happened to the financial sector, and it’s going on in manufacturing.  But that doesn’t mean we should just suck it up and get used to it.  Innovation and risk-taking create new industries and fill new demands.  An administration that fostered confidence in the future is all that’s needed to spur new investment and long-term job creation.

But it looks like we’re going to have to wait for a different administration before that happens.

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So the economy is not going anywhere soon.  It’s going to stay in the toilet at least until another administration has had time to let the private sector recover.  Best-case scenario, that’s at least three more years of this.

And with an ever-increasing demographic shift that’s looking to push crime rates up, the stagnant economy is only going to accelerate the growth in crime.

So all you law students bemoaning the lack of jobs in the private sector?  Take your school’s criminal justice clinic.  Looks like we’ll be needing you in a bit.

EDIT — 4 Aug 2011: White House spokesman Jay Carney now states that “The White House does not create jobs.” This hasn’t been widely reported for some reason, but it is a remarkable admission that the Keynesian approach is wrong. Perhaps the administration is starting to realize that what hurts economies is uncertainty, and government attempts to fix things or redistribute them only increase the uncertainty. What government can do — and what it properly should do — is increase certainty by ensuring that risk-taking and innovation won’t be penalized, and by helping to ensure honest dealing in the marketplace.