In Part I of “Employing the Poor” I made the argument that economic growth is the single greatest factor in helping the poor climb out of poverty. I also pointed out that this should be the primary concern of just policy-makers.

In part II, I would like to look at macroeconomics and compare countries that did and did not pursue economic growth. In addition, I will look at individual states in the United States and see how they have faired in recent years.

As we do this, we will encounter some common threads, namely that the countries that grow the quickest (thereby helping the poor the most) are also the ones that pursue more free-market economic policies. The same thing applies to individual states in the United States.

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I think most people reading this will agree that one of the most virtuous things a society should strive for is to provide meaningful, sustainable incomes to the largest number of people.

Most people should agree that it is truly a great thing to see the poor or middle class lift themselves up through honest employment, especially from dead-end situations that provide little hope.

So, we should probably agree that government policies should be aimed 1)providing the most amount of jobs and opportunity 2)helping the poor and middle class attain jobs that allow class mobility and 3)concentrating on economic self-actualization (it is better to teach a man how to fish than to give him free fish).

So, what is the single most important way to promote these policies? Economic growth. There are no two ways about it: the economies that grow the fastest are also the ones that provide the most job growth, the most mobility and the most opportunities for economic self-actualization.

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Here are two real cases of the poor in the United States and the current housing crisis.

Case one is a single mother from Nicaragua who has lived in the Miami area since the 1980s. She used to live in a modest one-bedroom apartment, paying $900 per month for rent. She works as a receptionist, speaks good English and makes a decent living, in the range of $2800 per month before taxes. She was pretty thrifty and had about $20,000 in savings (including some money given to her by her former husband). During the housing boom in 2005-2006 (when houses were increasing in value in Miami at 30 percent a year) she took an offer to buy a $200,000 townhouse with no money down. The bank gave her a loan without really looking at her income (yes, this did happen in those days). Once she had the house, she needed new furniture, so she bought a new living room set, bedroom set and new big screen TV.

Those of you with a mortgage are doing the math and seeing that a before-tax income of $2800 per month with a $2000 per month housing payment (including taxes and insurance) does not add up if she wanted her and her two kids to eat and pay utilities, car insurance, car payments, etc. But this woman saw real estate increasing at 30 percent a year and thought, worst case, she could hold the house for a few years and then sell it at a profit. She thought her savings would help her make up the difference until she could sell.

Well, you can imagine what happened. By 2007, her townhouse was worth $180,000, then by 2008 it was at $150,000. The woman’s savings were completely blown. She delayed foreclosure for months but was finally kicked out of the house. She is now in a smaller apartment and has had to sell most of her furniture. The $20,000 she had in the bank is gone. She still has her job but her future is considerably more grim than it was before she decided to take up the dream of home ownership.

The second family involves a husband and wife (also from Nicaragua) who both work. They also live in a small $900 apartment. Neither of them speak English, so they have more modest jobs. Together, they earn about $3000 per month before taxes. They have been able to save about $15,000, which they keep in the bank. A lot of their other savings are sent to family members in Nicaragua.

I talked to these people when the housing boom started and asked them if they were going to buy a house. They said, “no way, we couldn’t afford it.” They stayed in their apartment and missed the boom, and continued to save a few hundred dollars a month. They kept their savings and did not put their kids through the mental torture of buying a house they couldn’t afford, moving and then being kicked out of the house.

So, you say, why did the first woman make such a bad decision? Well, we are all responsible for our own actions, and this woman is responsible for hers. But there is an important point here. It was government policies intended to “help the poor” that caused the woman to buy a house she could not afford. One lesson we learn here is that the best way to help the poor is to let them work and save and not offer them free handouts. Free usually ends up being very expensive indeed.
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in Brian’s post below, Michelle asks me about my conversion story. I think this article explains it as well as I can.

Here is the key excerpt:

The moment my grandfather got up to offer the opening prayer, something happened to me. It was as if a small cloud floated down onto my body. I was suddenly infused with joy, pure joy. I remember looking around at the people in the chapel and feeling nothing but love for them. I felt a concentration of my senses and a keen reminder that I needed to listen carefully to the service.

Family members talked about the importance of baptism, and I found myself following their words as if my very life depended upon it. At one point, a speaker reminded people in the audience that everybody should be baptized, and I had to literally stop myself from getting up and declaring I wanted to be baptized.

The rest of the day I walked around in a kind of a daze. I was so happy, so at peace.

You need to read the entire article to understand this quotation in context. I hope you enjoy the story.