Question your elders. All of them.

The metaphorical work water cooler. Where ever it is in the office, it is the gathering place for criticizing our employer. We discuss how our fellow employees have been treated, how thing could be better, and even our relative salaries.

We also criticize our government leaders. We have ample candidates to choose from (well, except maybe in Chicago), and we are given the opportunity to toss out the stinky ones. We even have whole television stations dedicated to finding and highlighting the flaws of our President.6c82a0ed48fb4a95c1c3dfb0861433a5

We criticize our community elders, our parents, the talking heads on TV, and we have even – just recently and in the wake of the priest sex scandals – begun scrutinizing and criticizing our religious leaders.

Yet why is it that any criticism of a union leaders is considered an attack on the working class or worse and attack against America. Why can’t criticizing union leaders be an active and accepted part of the American dialog?

It’s not because the middle class is made up of union members. In fact only 11% of all Americans are members of a union which breaks down to 4% of Americans are in private unions and 7% are government employees. So who is the working class? Well, it’s everyone above the poverty line and everyone below the so-rich-they-don’t-need-to-work line.

Looking at the bottom first, the percentage of Americans living below the poverty rate in this country has held pretty constant at 15% over the last 50 years. So the working class is above the bottom 15% of American wage earners. Looking at the top, we may have some debate. The 99%ers, or Occupy Movement stated that only the top 1% is richer than requiring work. However, we can be more conservative and say that everyone below the 90% line still gets up every morning, drives to work and puts in a full day.

So everyone in between that top 10% and the bottom 15%, or the middle 75% of Americans is working class. But again, only 11% is unionized. Let that sink in. The union is not the middle class, it is in fact less than 15% of the middle class. It is also very privileged, and it is supported by the greater middle class who pays for union benefits they do not receive through higher taxes, yet unfunded pensions, reduced government services, strikes, and over-billed government engineering projects.

The greater middle class, to which my family and likely your family belongs, has every right to criticize, scrutinize, and question the use of our tax dollars. And when one small slice of the group is getting disproportionate attention, we are all welcome at the discussion table.

Support your teachers – I do. But question their union leaders. I’d love to see our teachers better paid, but I’d also like to see nurses, doctors, musicians, scientists, curators, and baristas better paid. In fact I would like to see everyone who does a good job and is nice get a raise. However, in a world of limited resources, not everyone can get everything. Before you jump on the unconditional support for Karen Lewis band wagon, ask yourself, how much of what you love about Chicago are you willing to give up for it?

Criticizing the union and our union leaders, is not un-American. It is in fact what makes America strong. Find an opinion, learn to politely articulate it, and bravely join the discussion. In the mean time, I will be doing the same.

Editorial note…
The original headline of this piece was “Union criticism fits fairly into the civic dialog”. That headline was boring, pedantic and preachy and I was embarrassed . Believe me it happens. It is my job to make this blog both fun and thoughtful. Man, my apologies.

Teach a man to fish and you’ll get … happier story tellers

As we approach Thanksgiving, the national holiday of gluttony, it seems appropriate to talk about one of the finest adages that western civilization has given us is: Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime. This little nugget is right up there with the golden rule. Everyone learns it, and everyone knows it’s true. So when you ask most Americans which is a better method of supporting the less fortunate, it’s not a surprise that people answer correctly: teach him to fish.

Now that Saint Nick of Communism, Karl Marx, would have given you a different answer. In 1875 he wrote his most famous line: From each according to his ability, to each according to his need. This is the opposite idea. According to Marxism, if somebody needs fish, the guy that already knows how to fish should fish for them. Not surprisingly, most Americans disagree with this statement and with good evidence. The failure of communism in the 20th century illustrated that if you force a fisherman to give away his fish, eventually he will just stop fishing and get his fish for free like everyone else.

But if your Thanksgiving dinner includes some contemporary progressives, the conversation might include a third answer.

Me: Which is better, a fishing lesson or a fish dinner?

Liberal lawyer who makes his own beer: “A fishing lesson AND a fish dinner!”

Me: “I’m sorry, but that wasn’t an option.“

Fellow in thick glasses wearing a hat at the table: “Sure it is. How can you expect someone to learn anything on an empty stomach? Give him a nice plate of Dover sole – heck, make it fried carp for all I care – then get him a good night’s rest and tomorrow you can talk tackle!”

ME: “The question specifically implied that you have to choose one or the other. Assume that there is some physical impossibility in providing both.”

Lawyer’s wife: “Fizzie what? This is the real world. Of course we can do both!”

ME: “But they both cost money – especially in the real world. The purpose of the question was to determine which was a better use of the limited funds we have?”

Bernie Sanders (OMG, you are having Thanksgiving dinner with Bernie M-Fing Sanders!) : “Funds aren’t limited! Find some more. Look how frickin’ hungry that guy is. We need to get him some dinner!  We’ll borrow it if we have to!”

Me: “But even if we borrow the money, won’t he be hungry again in the morning?”

Hostess, getting annoyed: “So borrow some more money tomorrow and feed him again. What are you, some kind of monster? Help the fella out for chrissakes! You are not invited back next year.”

Herein lies the challenge. Americans know the right answer but when faced with making the decision, the right answer seems unkind and no one wants to be unkind. Further harshing the toke, the right answer appears to offer mercilessly little more than the opportunity to remain self-sufficient. Still, even a crappy fishing lesson is more appreciated than a five dollar gift certificate to Long John Silvers. One of the smartest men in America, Arthur Brooks said “the greatest controllable factor to happiness is earned success through work.” In other words that fellow even wants to catch his own fish!

I very nice looking fish dinner.
I very nice looking fish dinner.

Tough love may be harder to dish out than it is to receive. In an effort not to appear mean, we avoid requiring self-sufficiency and helping in-need people get there. Instead of investing in job training we throw borrowed money at stimulus programs, jobs bills, and extend unemployment incentives indefinitely. We make free fish dinners the standard and avoid delivering the fishing lesson to those who want it. We choose not to look into the wet eyes of the currently unemployed and say “I am sorry, but the job, house, or retirement you must accept is not as good as the one you had before – but it will return you to self-sufficiency,” even though we know that is the right answer, and things will improve for that guy. Instead, we leave the bad news for generations to come later, people who we don’t know and whose eyes we will never have to look into and apologize for anything.

It’s time we change the strategy. Government assisted training, and work for aid programs need to gradually replace welfare as the default safety net. We all know that it is better to teach a man to fish and we all know that giving him a fish has only temporary benefits. Americans often fail to understand that we can’t have both, but that must change. The current course will only grow the number of families reliant on government handouts while pushing increased expenses into the future. That’s not fair to those in-need today or those picking up the tab tomorrow.

An executioner walks into a bar…

Do you want to talk about the death penalty?  Because I do! before I continue, can you guess which side I will take? More importantly, can I make it interesting enough for you to read the whole thing.

Let’s see…

Lee Majors has absolutely nothing to do with this post.
The current argument against capital punishment is that it is either cruel or unusual. There is some mind-numbing article written along these lines every day. Maybe the drugs that are used hurt, or the windows that allow visitors to look in are embarrassing, or the FDA has only approved that particular drug for euthanizing chronically ill sea turtles.  Actually, these made-up examples make it sound way more interesting than it is. The truth is it’s all technical details that do not resonate with the American people. These arguments may be fodder for lawyers, but lets face it, lawyers are boring. In general no one cares.

So? Money shot follows…

The reason that Capital Punishment in the United States needs to be abolished is because our system makes mistakes. Not all the time, and maybe only rarely, but when there is a chance that the system has made a mistake, no punishment can be enacted that fails to offer a recourse. It’s that simple, and everyone should get behind this.

Think about it. If we throw a guy in jail for 30 years and 29 years into his sentence, we decide to check the DNA and find that – oops – he isn’t the guy that did it. We can let him out of jail. Society is going to owe him a huge apology and hopefully a whole lot of tax-payer funded comforts to make up for his time in jail, but he gets to have what’s left of his life back. Conversely, if we execute a convict only to discover after the fact that his DNA did not match what was found at the crime site, we have absolutely no way to correct even a portion of the societal wrong.

There are those that like the “what about now” argument. This is applied to heinous monsters like John Wayne Gacy and James Eagan Holmes, the Colorado theater killer. The argument goes that they clearly did it and their crimes were so heinous that they clearly need to be put down. In these cases I kind of want to agree. But then I remind myself that these men were unanimously convicted and sentenced by the same pool of jurors that unanimously convicted and sentenced Rolando Cruz of the Jeanine Nicarico murder in 1983. Rolando Cruz spent 12 years on death row losing multiple appeals before Brian Dugan confessed to the killings and Cruz was sent home.

And just how often does the system accidentally make a mistake? Check this out!  Since 1973 when the death penalty was reinstated in Illinois, the state has put to death 12 inmates. Let that sink in. 12. Over that time Illinois has exonerated – reversed the guilty verdict and set free – 20 death row inmates. That means that in Illinois, since 1973, our system has made capital punishment mistakes 63% of the time! That is not a rare occurrence. That can only be described as most of the frickin’ time!

There is a certain cost that society is willing to bear to keep law and order. Part of that cost is that occasionally the wrong man goes to jail. It is unfortunate, but inevitable, and acceptable. But the other side of that token is that society owes it to those who pay that cost to offer recourse when a mistake is found.

A version of this post originally ran on Facebook in September 2015.

When I met the original Jenner


Although this is an economics and policy related blog, I may take the occasional Friday to write something lighthearted. Today’s story came back to me through all the recent press on Bruce and now Caitlyn Jenner.

As the accompanying souvenir suggests, I met Bruce Jenner in 1984. I had just gone away to college and left my high school job at Chuck E Cheese’s Pizza Time Theater. I was a good employee. In fact I was named employee of the month in my first month – a little like being named rookie of the year in a sport no one cares about. I worked every position in the place and not surprisingly, my favorite task was playing the costumed rat (yes, he is a rat). I was animated, good at pantomime, and shined in this role. If you know me, this isn’t a surprise.

After I went away to college, Pizza Time Theater, as the parent company was called, sponsored a city-wide Wellness Day with Rockford Memorial Hospital that involved a foot race and a fun run. They scheduled and likely paid Bruce Jenner to come support of it. With 20% unemployment, this was probably Rockford’s darkest period and Bruce Jenner was a big deal. Consequently, the management at the restaurant wanted to look their best. They called me and asked me to come back for the weekend and play the plushy role. In return, I would be paid my standard minimum wage and get my Greyhound bus fare reimbursed. I felt a little like a celebrity myself after that offer.

The late summer day of the event was one of the hottest on record with temperatures soaring over 100 degrees. My job was to don the full fake-fur (and not entirely pleasant smelling) rat costume and run the entire 1 mile fun run….And then return to the half way mark and do it again… and again and again until all 300 kids had crossed the finish line. With nothing on under the suit but a pair of teeny ‘80s running shorts, I did it. I ran the full mile once, and then did the half mile 4 more agonizing times. Following my final finish line cross, I collapsed and mimed a heart attack to some good laughs and deserved applause.

Still in costume I was escorted over to the VIP tent where I was finally allowed to take-off the huge inner tube lined suit. I was dripping wet, practically naked, and exhausted. And there was Bruce Jenner laughing heartily at my efforts. I wish I would have had a camera so I could have had a portrait with him, but selfies were years away. Instead I grabbed one chuck E Buck off the table and asked him to sign it. As he did, he said “Young man, you must be worn out. I don’t think I could have done that.” Coming from a decathlon gold medalist I took that as quite a compliment.

What do Chiraq and Paris have in common?


On Monday November 4th, Tyshawn Lee, a 9-year old child was lured into an alley and shot multiple times in the chest and head by a member of the Terror Dome faction of the P Stones. The killer apparently used some sort of bait, possibly candy, drew him around the corner, and then fired mercilessly, at point blank range, execution-style. Children are in general trusting of adults and the cold-hearted killer likely watched the boy’s eyes go wide with disbelief before going dark forever.

Poor Tyshawn was a pawn in a game the P Stones and their rival, the Gangster Disciples, are playing. The game-play is to terrorize rival gang members and the community while the goal is to force residents to take a side. If you pick the wrong side horrible things will happen. But if you refuse to fight, even worse things can happen.

As a parent of a child of similar age, this story brings me to tears. This can’t happen! When our children can be assassinated by gang insurgents, our way of life is under attack. As good-hearted Chicagoans who love our city, we must find the courage and fortitude to empower our law enforcement community to stop this violence before more children die. We need bravery from the men and women of the South Side. We need them to forego the code of silence and point law enforcement in the right direction as we bring these killers to justice and help all of us restore order to their community. We are all in this together.

Last Friday, eight Islamic extremists assisted by at least three others launched an attack killing nearly 150 innocents in beautiful and formerly peaceful Paris. This follows twin suicide bombings in Beirut the day before, a Russian passenger liner blown out of the air the week before, and a long list of other Islamic terrorists attacks against innocents. In all cases, the dead were regular people doing nothing but going about their daily business. If you want the whole list, here it is.

Paris was targeted because it is high profile and France is an easy target.   The refugee crisis has opened borders, the people are largely trusting, and they are relatively unsophisticated in terror intelligence compared to the UK and the US. Their “French culture is better” attitude and their laws against religious expression are irritating (not just to Muslim residents), and they have been designated “most hated country in Europe” by the Islamic State. But that’s still nothing compared their ISIS’s hatred of the leader of Western ideals: given the opportunity, they would prefer to spill blood on US soil more so than any other.

By whatever name, Islamic State, ISIS, ISIL, or Daesh, this organization is a gang. They are terrorizing innocents in an effort to oppress and control populations of innocent people.  Their enemy is all Western governments who believes it has a right to interfere with their ideology, in this case its calling to worship as they wish, exert ownership over their daughters and wives, kill their neighbors for worshiping the wrong god (or the right god wrongly), turn back the clock on technology, sell illegal heroine, and put an end to Israel. In many ways, this hatred of the West is their reason for being, and whatever we do, these radicals will  poke, kick, kill, and slaughter, begging for us to try to stop them. For – as they believe – when that war finally comes, their god will ensure a quick death to their enemies.

And as they continue their affront, America’s repeated response is to distance ourselves from the engagement. The single most empowering event in the history of ISIS was the American exit from Iraq. Just as ISIS was gaining regional relevance we gave them a terrific graduation present by refusing to come to the aid of the democracy-friendly Syrian rebels. Before a year passed, they had created one of the biggest states (caliphates) in The Middle East, and established beheading Westerners as the national sport.  Now we have Hillary Clinton saying in last night’s debate that “this is not our fight” and suggesting that the incompetent militaries in Iraq and Syria should be able to handle it with us offering little more than a pat on the back.  Although politically expedient, this strategy constitutes dangerous isolationism that will only put the US National Security at additional risk.

The majority of Middle East residents want peace and the removal of the gangs that threaten their lives. They also know that the only way to overcome these villains is collaboratively where they provide the intelligence and the US supports them with military force. Without our support, they cannot possibly defeat ISIS. Yet we continue to ignore their requests for help.

If we continue this course, ISIS will continue its attack on our allies in an effort to engage America. They will launch opportunistic attacks around the world as they continue to seek the chink in our armor. Innocents – and innocent children – will die with each attack, and the death toll will grow overseas. Eventually they will figure out how to hit us at home and we will pay a dear price. History will punish us for not acting earlier.

The victims of gang violence are too often targeted because they represent well-meaning intentions of their Chicago communities. In a similar way, the attacks of ISIS are intended to terrorize the family of nations that share western values and in particular the United States. We must protect the members of the besieged Chicago neighborhoods by eliminating the gangs who terrorize them. By the same token, we cannot sit on the sidelines as ISIS continues to attack the world and searches for an opportunity to deal real damage to the United States. We need our government to act forcibly and rapidly if we wish to stop the slaughter of innocents.

With contributions from Dan Rice: President, Thayer Leader Development Group at West Point; Co-Author “West Point Leadership: Profiles of Courage”

Union practices voting to strike. Ice skating next.

On Monday the Chicago Teachers Union (CTU) conducted a practice vote and reported that 97% of teachers are willing to vote yes on a strike. This meeting was held in secret and the details of what happened are otherwise unknown, but here is what we do know.

  • The source of this information is CTU. There is no way to corroborate anything about this meeting, there is no law that says they have to tell the truth, and they have an incentive to say that it went a certain way. The results could have very well been 97% or they could have been 100% or they could have been 32%.
  • We might not know the details of the vote, but we do know CTU has an incentive to report that the percentage of teachers supporting a strike is very high. From their perspective, a number that approaches 100% sends a message that the danger of a strike is very real and brings them a stronger position at the negotiating table.
  • On the other side of that coin, the union has an incentive to report that the results were not quite 100% in favor of the strike because that would send the indication that the vote was not legitimate. As I suggested earlier, maybe the result of the vote was 97% or maybe this was the Goldilocks of numbers – just right. However, as the next two points illustrate, it is likely that the number was even higher.
  • Teachers union votes tend to operate on the “rising vote method.” That means that everyone is gathered in the large room, the position is read and all those supporting it are asked to stand. This allows everyone to see – and point at – those few who are opposed. This can be very uncomfortable and there are documented cases of supporters turning aggressive toward opposers. Such fears ensure that elections run this way are unanimous – or close to it.
  • This practice election actually offered an incentive for everyone to vote “yes”. If a teacher was in favor of a strike, he or she would vote “yes.” But if he or she were opposed to a strike, and knew that strong vote could prevent one, he or she would also vote “yes.”
  • Yesterday’s vote was supposedly based on the “state of negotiations between CPS and CTU.” That may have been focused on raises and benefits, it could have been based on air conditioning and improved janitorial services, or it could have been about a return of smoking privileges to the teachers lounge and pizza party Fridays. By not sharing with the public what the issues were, the CTU hopes we will assume they were addressing the most serious issues, but the truth is, we have no idea. Common sense suggests that the issue selection was chosen in favor of the desired outcome.
  • It may be in some teachers personal best interest to strike – or it may not. Some teachers oppose strikes because they do not get paid while on strike which can be devastating to their families (as it was to my single mother). Some teachers don’t support strikes because they are less interested in their wealth than they are with the time they spend in the classroom. Others choose not to support them for political reasons. As with any issue facing a large group of people, opinions run the gamut.
  • ct-karen-lewis-ctu-reelection-met-1007-20151006 (1)
    The new, more-attractive and less-intimidating Karen Lewis

    However, it is in Karen Lewis’s best interest to lead a strike. She seemed to relish the spotlight last time around, and now she has a new appearance to show off. A favorable contract quietly negotiated might be good for teachers, but it will not return the spotlight that was stolen from her when her illness made her forfeit a momentous mayoral campaign last year. We can assume that she will be back to take on Rahm again next cycle, and a bold second strike will be an asset in recognition and fund raising.

CPS and the Mayor’s office are aware of everything written above and will discount this practice vote as a public relations stunt. CTU is aware of this but hopes that it will start unifying the front and maybe – just maybe – start swaying public opinion in their favor. The pawn has been played.

You can support your teachers and you should. But this does not mean you must unconditionally support the union. CTU, CPS, the Mayor, and Karen Lewis really do play this like a game. The facts are real, the implications are real, and our kids’ educations are real, but when an issue is this emotional both sides will try every trick they can to pluck at your heart strings. Fools swallow this hook, line, and sinker. Don’t be a fool. Observe objectively. Listen, read the opposing sides’ positions, and make up your own mind.

Economics. It’s a science!

Supply and demand chart drawn on a blackboard.
Supply and demand chart: the simple foundation of a powerful predictive methodology.

There is nothing that irks me more than people discounting economics as “only theoritcal” or “not real”. Sure there are economists toiling away on pure economic theories. But economics as it is used by the government, President, and press to set and analyze policy is by definition very real! Even Keynes himself referred to his theories as Applied Economics. The price of gasoline changes due to a blockade of the Strait of Hormuz. That’s real economic theory in action. Jobs are destroyed in times of falling GDP and built in times of rising GDP – also explained and predicted by real economic theory.

It is only through an understanding of economic principles that one can judge the success or failure of economic policies. Here’s an example. In 2008 George W Bush sent out checks of 300 and 600 dollars to American taxpayers in spite of the fact that his very own economic advisers tried to talk him out of it.

After the fact, the economy was no better off, but W still touted this as something great he did – “Look! I made everyone wealthier, aheh aheh (imagine his laugh).” But the economists who told him not to do it and those who independently watched the economy all agreed that it did nothing. It did not grow the GDP, real jobs were not created, and increases in consumer spending were not noted.

If you don’t know your economics, it might be easy to accept W’s argument. “Hey yeah, I got that check. And paying bills was easier that month. Good for him.” But, we need to be smarter. We need to know the difference between economic policies that are good for the country and those that are good for the candidate. There is no such thing as a free lunch. Whatever he gave you has to be paid for by someone – likely our children. Don’t be fooled.

Besides, who thinks its cool to borrow from their kids?

Discussing same-sex marriage

I stand in favor of same-sex marriage and equal rights for homosexuals, including adoption and reproduction. I have many gay friends and have attended all of their weddings. Those were some great parties! As a result I have historically been intolerant of religious conservatives who do not share my view.  From my perspective as a non-believer, there was no consequence to them and their enmity just seemed mean spirited if not wholly bigoted. Furthermore, I was intolerant of the argument that this is a religious freedom issue.  It made no logical or Constitutional sense that one person deserves the freedom to worship while another person is denied the freedom to marry (or buy a cake without prejudice).

But I have come to the realization that to some believers, there is a reasonable foothold for opposing same-sex marriage. They believe there is a consequence for their support and it is based in their respect for the laws of their church and more importantly in the penalties for breaking those laws.  They believe acting to support that which their church opposes will cause them real harm. Of course from a secular perspective it is difficult to understand what that harm could be. Yet the church is clear: obey our laws or your internal well-being in danger: you will go to hell (no kidding).

Most of us went to church as children and were educated with two sets of laws. There is the law of the land – or the government – and there is the “law of God”. The law of the land promises penalties for violation, including fines and jail, but the “law of God” promises penalties in the form of the disapproval of our peers and punishment in the afterlife. To many people, these are just as powerful.

Ideally the law of the land and the law of the church would correspond perfectly, but on a few issues they do not. Some believers manage the conflict by cherry picking the church’s laws that work for them. But others do not believe they have the right to decide which of the Church’s laws can be ignored. A good number of religious Americans believe that you follow the rules of the church as dictated or there are severe penalties. We are not in a position to tell them that they are wrong, and I believe the Constitution supports that.

I continue to disagree with my religious friends who cannot support same-sex marriage, but I no longer question their motives. I accept that they have been educated by a wrathful teacher and have genuine fear of breaking their church’s laws. My hope is that their religious leaders come to a more rational, fair, and contemporary position. In the meantime, I think the religious right would be well-served to re-frame the discussion to underscore the penalties they genuinely fear rather than relying on a lopsided and prejudice-charged argument of religious freedom.

My Christian Guilt (gone)

First Presbyterian Church In Rockford Illinois

Although I am a non-believer, I enjoy talking about, reading about, and writing about religion. This may strike some as hypocritical, but on the contrary, a belief in god is not a requirement for caring about religion. In fact there is a joke at the University of Chicago’s Divinity school that being an atheist is a requirement for receiving one’s PHD.

I was raised in a Christian house, went to church every Sunday and Wednesday, was the youngest (and highest revenue generating) usher in my church’s history (there is absolutely no data to back up this claim), sang in choir from the earliest age until I went to college, and was fully confirmed. The dwindled congregation of First Presbyterian has since disbanded and the building has been sold to a performing arts organization, but I can still walk the halls of that grand building in my head and see the details of every room, corner, and hiding place.

I also went to a liberal arts college where I let go of my religious beliefs when I realized that the universe could be just as cool without the existence of a sentient creator. Yet, at the same time, my courses in philosophy, history and the study of ethics instilled a deep curiosity about religion.

So…I may have been able to shake my Christian guilt, but I am a sympathetic critic.

Predatory Lending can be a Good Thing

Predatory lending has been a hot button issue for the last ten years or so – especially since the financial crisis of the mid oughts. Stories of perpetual payments, families rendered homeless by parasitic schedules, and greater than 100% annual interest rates abound. Legislation has been quick to follow regulating or outlawing these establishments, and their proprietors have been branded the pariahs of the financial industry.payday-loans-sign

But the truth is, payday lenders are a valuable last resort to America’s poor. They offer an emergency solution to repair a child’s glasses so she can read at school, to fix a car quickly so one can make it to work, to make an sudden appliance repair so that everyone can wear clean clothes, or any number of other family emergencies.

Payday lenders charge exorbitant interest rates by mortgage loan standards, but they are not unreasonable by banking fee standards. Imagine the scenario where a mother needs to find 100 dollars to fix her child’s glasses. The darned kid should have been more careful with them, and now mom is in a tough spot, but kids are kids and these things happen. The local payday lending shop will lend her $100 dollars today but wants $110 in return next Friday which is the mother’s pay day. I think most of us would think this sounds like a reasonable agreement. We are occasionally willing to pay a $5 ATM fee for a $100 withdrawal – and that is getting the money from our own account. Paying twice that to have it lent for a week in an emergency situation seems acceptable.

But in order to compare that loan to those available in other situations requires that we look at that fee annualized – in order to compare apples to apples. When viewed through this lens, the annualized interest rate on this loan is 560%. That looks predatory, mean spirited and downright unfair. For comparison, this is about 100 times the rate of most home equity loans.

It is because of this comparison, that legislators and activists are quick to attack the payday loan industry. Recent regulations require that they cannot occupy locations in poor neighborhoods, cannot charge more than a certain interest rate, or must close their doors altogether. Forcing these operators out of the neighborhoods they serve simply increases the cost to borrowers who now have to travel or take time off of work to secure their loan. Capping interest rates forces the operators to increase transaction fees (so the end payment is the same) or stop offering certain types of risky loans. And forcing lenders to close their doors means that needed loans can’t possibly be made. Does anyone actually believe that people are better off having the last resort option taken off the table?

Now, there are real problems within this industry. There are borrowers who do not pay their loans on time and find themselves in trouble quickly. At these rates, a $100 loan can turn into a $200 debt in a couple months or thousands if let go for too long. Some borrowers may be borrowing for non-emergency situations such as entertainment, frivolous purchases, or drugs. Still others may not understand the math behind what they are signing up for. And finally, there are operators who are truly awful. But all of these are exceptions and and can be managed down to acceptable levels by smart legislation and good operators. At the end of the day, so-called predatory loan operators are offering opportunities to poor communities that have no access other financial solutions.

There is another issue here which revolves around the concept of “fair.” When someone is in financial trouble and facing penalties they often claim it is unfair, even if they are in that spot as a result of their own doing. Society is sympathetic to this argument and often makes excuses for them such as they were taken advantage of, they didn’t know what they were getting themselves into, or the lender made it too complicated (which is another way of saying the borrower is too stupid). There may be legislation required to ensure that things are clear, but people taking responsibility for their own finances is one of the costs of taking out a loan. No honest person borrows money without expecting to pay it back when they say they will (or face consequences).

Be wary when the mob with pitchforks tries to kill the monster by burning down the windmill, as they are often hiding the larger issue. Community banks have been driven out of poor neighborhoods due to 20 years of well-meaning but over-bearing regulation. In their absence payday lenders should be welcomed, nurtured, and regularly reviewed.