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Social-Light » 2009 » April

April 1, 2009

Bailing Out our Youth…

posted by: Jim @ 4:16 am

As an entrepreneur with a decent understanding of finance, I must say the size of current government spending and the proposed deficit is alarming—particularly because we’re borrowing the money which will increase our national deficit to a whopping $9.3 Trillion as stated by the Congressional Budget Office. The federal government is depending on China and other countries to bailout corporate America and to stimulate our economy but what if they decide mid stream that this is not in their best interest—what if they stopped loaning us money? Or better yet, what is the cost of this level of borrowing to our children? The current strategy is dependent on a number of variables and it is the unknown and unintended consequences that I believe will truly define our ability to be successful. Ron Paul and other conservatives who are in opposition to the bailout are accurate in their view that in a free market economy, we would allow those companies who make bad management decisions to fail. The obvious lesson to others is that taking on significant risk can have devastating consequences; companies should be a bit more conservative in their approach to creating value. We are doomed to repeat the same behaviors and mistakes that led to the economic collapse without enforcing consequences. By definition, the inherent forces of a free market economy will reward those who have planned well and penalize those who have miscalculated. But if you bail out corporations, you create a financial option that mitigates downside risks and allows for unconstrained upside potential—we should anticipate that companies will have a higher risk profile under these circumstances. Inherent in our current solution is an incentive to replicate the behavior that got us here—we should let the market forces clean up this mess and the stiff penalties suffered would be the deterrent necessary to keep the checks and balances in place.

Competing with the conservative perspective however, is the liberal view that we must do everything in our power to prevent the markets from falling to protect the individuals on Main Street. As a native of Bridgeport, CT who grew up in subsidized housing and benefited from social welfare programs like food stamps, I am acutely aware how today’s economy is impacting low income communities. If companies fail, then unemployment skyrockets, foreclosures increase and the dependence on social welfare programs places additional financial strain on the federal government. We have begun to see the downward spiral. The U.S. Labor Department reports an 8.1 percent rise in unemployment as of February and according to the Mortgage Bankers Association of America, U.S. home foreclosures are at their highest level in 30 years. It is clear that we have to do something and that it will cost us money so why not be proactive in implementing a solution that stimulates the economy to reverse the current crisis we find ourselves in? Building confidence in the economy, increasing consumer spending, improving access to credit are steps that would certainly stabilize things in the short-term. The federal government is the only entity that has the ability to address these challenges and financial stimulus is the appropriate response to the current situation.

How do you reconcile these two perspectives; the conservative focus on the free market vs. the liberal perspective on the social challenge Americans are confronted with on a daily basis? The solution is a compromise of perspectives and requires a commitment by all Americans working collaboratively to return our economy to a strong and vibrant state. Everyone’s concern should be focused on how we get out of the current economic crisis rather than how we got into it. As Americans we must ask ourselves what can we do individually and collectively to assist in reversing our current course—particularly if we want to stop sending our tax dollars to companies like AIG to pay for corporate bonuses.

So what can I do…how can I help? Given that the current administration is taking the liberal path, a further review of the current crisis and how it impacts families in local communities is in order. Foreclosures, unemployment and lack of credit markets are devastating for families and particularly for children. Complete disruption of a child’s normal routine is the likely result when their parent’s home is foreclosed upon. Today’s youth already face a growing number of social crises that make navigating adolescence difficult and impede the path to successful, independent living. Consider these findings compiled on negative youth outcomes:

  • Over 1.23 million high school students failed to graduate on time;
  • More than 32 million youth were under juvenile court jurisdiction;
  • An estimated 3.75 million teenagers contracted STDS; and
  • Approximately 900,000 girls under the age of 19 became pregnant

These statistics are not only startling but also illustrative of the measurable effects of failed education policies, unstable home units, increased crime, and media oversaturated with sexual imagery. Negative youth outcomes have severe economic consequences to society. Juvenile crime, teenage pregnancies, and high school dropouts cost taxpayers billions of dollars a year and contribute to a weakening American labor pool. Estimates place federal government spending on youth development between $60 billion - $120 billion depending on what service you include in your analysis. A review by the Carnegie Council on how negative youth outcomes impact society provides context for the true costs:

American society pays heavily for such outcomes. We pay in the diminished economic productivity of future generations. We pay the increasing bills for crime, welfare, and health care. We pay the immense social cost of living with millions of alienated people. And we pay the moral cost of knowing that we are producing millions of young adolescents who face predictably bleak and unfulfilling lives.

We have an opportunity to not only stimulate our economy but also an obligation to do so in a responsible way that addresses the challenges our children are facing on a day to day basis. As President Obama has outlined in his policy on education, our society needs to focus on rebuilding our schools and developing twenty-first century skills for our children. What are tactical items that we as Americans and the administration can do to address this need and further the administration’s goal? Here are three recommendations not presented in any particular order of importance:

  • Attract top talent: Incentives for students and young professionals that are passionate from the top universities and Corporate America who find themselves without the traditional marketplace for their skill set. Loan forgiveness, housing incentives and other programs that encourage commitments by America’s top talent are the type of incentives that will stimulate innovative solutions in the areas of education and developing 21st century skills in our youth. The current economic crisis is analogous to a corporate turnaround (but more complicated)…individuals with strong academic and professional backgrounds would prove a valuable asset to right the ship and there is currently an abundance of capacity; truly an opportunity for some win-win proposals.
  • Invest in Service Integration and Technology: The issue with the youth development market is that it is very fragmented with lots of suppliers and people throwing money into a black hole with no oversight. As a result, an inefficient use of capital is created. By focusing on improving the marketplace, we get more bang for our buck at a time when capital is very scarce. We have to use the resources already allocated in a more efficient way as a fundamental building block to improving youth development. Integrated solutions that scale through the use of technology reduce the cost of service but require strong governance. Industry standards, consistent performance metrics and effective oversight are critical elements as we seek to implement innovative solutions to the current challenges confronting local communities.
  • Encourage Parental Responsibility: Children need two active parents who serve as productive and positive role models in their lives—surrogate parenting through social welfare must become the exception not the norm. Fathers must be more active in their children’s lives and serve as equal co-parents. Rush Limbaugh might be on to something when he spoke at CPAC about the correlation between welfare and the lack of involvement of fathers in their children’s lives, “The fact that they have destroyed poor families by breaking up those families by offering welfare checks to women to keep having babies no more father needed”. I do not know how to accomplish this goal but given the high divorce rate and single parent households, a review of antiquated child custody laws seems a reasonable first step. We must adopt a policy of equal parents and enforce shared responsibility of both mothers and fathers—because when we do not, the government will pick up the tab and I think the statistics shared above illustrate that this approach is not the most effective.

President Obama, as a fellow Occidental Alum who is deeply concerned about the issues impacting local communities, I am committed to the cause and supporting your vision of the future. You are an inspiration for all Americans, but particularly for African-American youth who come from the inner city. President Obama represents and has raised the standard for African-American males–father, husband, professional, community organizer, a true inspiration. I hope to contribute to your focus on rebuilding America by working in the three areas listed above. As an African-American father, I too join you in improving the quality of family for our children. I hope the ideas expressed in this letter are viewed as constructive and provide additional thoughts on opportunities to assist in rebuilding America.

Your presidency provides evidence that it is possible to change your circumstance and I hope the “Yes We Can” slogan that was the centerpiece of your presidential campaign becomes the battle cry for those students currently outside the American dream—to develop a belief that with focus and dedication they can be much more than they are today. I hope the administration heeds President Clinton’s advice to establish predicable systems that have a strong correlation between ones input and expected output.

Yes We Can and Yes We Will!