AMA 29 – John Stapleford: Ethics & Public Policy – Part 1

John Stapleford - Bulls Bears Golden Calves

No, the above title is not a typo. According this week’s guest, John Stapleford, it is possible for ethics and public policy to have a direct correlation. Stapleford is not only a senior economist for Moody’s, professor emeritus of economic development at Eastern University and former director of the University of Delaware’s Bureau of Economic Research but is also the well-known author of Bulls, Bears & Golden Calves.

This book provides clear guidance for identifying and discussing important ethical issues connected to an economy’s organization and public policy issues from a faith-based foundation. Tune in to this two-part series and discover the crucial reasons why the study of economics should not be disconnected from ethical concerns.

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Jason Hartman: Let’s welcome John Stapleford to the show. He is a senior economist at and comes to us from… are you from Pennsylvania today?

John Stapleford: I am.

Jason Hartman: Fantastic. He is also a Professor Emeritus of economic development at Eastern University and former director of the University of Delaware’s Bureau of Economic Research. John holds a PHD in urban and regional economics from the University of Delaware and a master’s degree from the University of Southern Illinois. John, welcome to the show.

John Stapleford: Thank you Jason, glad to be here.

Jason Hartman: It’s great to have you on. Talk to us a little bit about the outlook from, if you would.

John Stapleford: Well, I think if you look at the most recent scenario from the president’s budget advisor and the [0:01:36.1] of budgets, we’re tracking along pretty [0:01:38.8]. We see the turning point. The turning point will absolutely occur sometime before the end of this year, but the turning points in employment and income, and some of the other areas of economy won’t occur until next year. And then as they’re projecting, once you pass the turning point, because this has been such a long and steep recession, it’s going to take a good long while to get back up to the levels of activity that you had before the recession.

Jason Hartman: So many are hailing that we are in a recovery mode now. If you turn on CNBC they’re cheering the new comeback in the DOW and so forth and in the different markets. What are your thoughts?

John Stapleford: Well, I’m glad the DOW is coming back, because it means if I did want to retire I could. There’s some signs that little shoots of grass are breaking through the dry ground. I think it’s going to take longer than some of the optimists might think, but when you look at things like the unemployment rates. We think the unemployment rate is still going to go up and hit over 10% at the peak level in the United States.

Any of these economic indicators, for your listeners just so they’re absolutely clear on this, all the things you read on the economy are based on sample data. That means that around any of these data points, whether it’s an unemployment rate or it’s the growth rate in GDP or consumer confidence, it’s based on sample data and it has a confident interval around it. So month to month changes really don’t mean much.

You need to look at changes over three or four months, and then in addition if you’re looking at something like, let’s say, the unemployment rate, you need to look at four or five other labor market characteristics to really get the full picture like what’s happening with initial claims for unemployment insurance, what’s happening to the number of discouraged workers, what’s happening to the number of people who are working part time for economic reasons.

So it’s an important thing to keep in mind, the fact that the unemployment rate dropped from 9.5% to 9.4% between June and July in the United States, it really is insignificant. And in fact, what had happened was the labor force declined because the population of discouraged workers increased. And so the total number of people who were unemployed fell, but not because they found jobs. It’s because they just dropped out of the labor force.

Jason Hartman: Right, and I know that the discouraged worker, part of that plan that fell off, that was changed the way they count that statistic under Clinton, I believe. Where if it’s over one year, you’re no longer counted. So someone could be very seriously unemployed, becoming absolutely destitute and they’re not counted as unemployed. Is that how that works?

John Stapleford: That’s a really good observation, and I’d have to go back and look at the current definition but I would be agasp to think that politicians would manipulate data to make themselves look better. It takes me aback.

Jason Hartman: Of course, that’s a sarcastic comment, for sure.

John Stapleford: Oh, no, no. Absolutely not. As you get older, you more and more realize how disposable politicians are.

Jason Hartman: Fair enough. I’m going to agree with you on that one, for sure. So the other thing that I’ve always been very concerned about when you look at unemployment rates is the underemployed. And the joke in California, which is sort of the sub-prime mortgage capital of the country, is that the mortgage broker who used to be making 40 thousand dollars a month is now working at Starbucks and delivering your pizza. There’s no real way to tally the underemployed, is there?

John Stapleford: Well, there is. And the way I do it when I look at metropolitan areas or states, I look at wages and personal incomes and wages of course are a part of personal income. And the whole thing is complicated not only by the underemployment that you refer to, but by the furloughs. There’s many people who are getting two week furloughs, which amounts to a 4% pay cut.

So in the unemployment rates they don’t show up because they’re still “employed”, but in fact they show up in the wage bill. In other words the wage component of personal income starts growing a lot more slowly than it has been in previous years. Which effects disposable income, which effects consumption, which effects retail trade and automobile sales and so forth.

So to me a more accurate way of tracking things is wages. And the other part of it Jason is people don’t realize, if you’re working at Macy’s or a large retail store and you’re working 15 hours a week, in the unemployment data you’re counted as employed. So in other words, they don’t adjust jobs to full time equivalent. So that’s another reason I tend to lean more towards wages like retail typically is around 12% of employment, but it’s only about 7% or 6% of total wages in any particular area.

Jason Hartman: And not to harp on the unemployment statistic here, but the other one that’s always concerned me is the fact that people are comparing today to the great depression. And they’re saying things like “during the great depression unemployment got up to 25% at the worst point” and today it’s much lower, so things really aren’t that bad. I agree that in many ways they’re not that bad. However, I’d also like to just take a look at the concept of the independent contractor, the sort of free agent, the freelancer. Whether it be in the real estate or mortgage business, big industries like that, or it be the graphic designer who works out of their house and it just doing contract work here and there but they’d much rather have a corporate job and have what I would consider full employment.

Running a real estate business myself for the past 12 years, I’ve seen independent contractors that make very little or no money for long stretches of time on commission only, yet they’re not counted as unemployed.

John Stapleford: Sure. Now, the proportion of employed folks in the United States who are self-employed has actually been relatively stable over the last 5 years. It has shifted from agriculture over into lots of other things, into the services area, but you’re right. And then how much do you like paying the FICA for both yourself and for yourself as an employer?

Jason Hartman: Right, two times.

John Stapleford: It’s like 13% of your money just right off the bat. Well that’s pretty fair. You make a good point, and I guess I would say as well, we have built into our economy today things that didn’t exist back in 1929, 1930 like the unemployment insurance, that are counter-typical. Unemployment insurance is one, but there’s food stamps, there’s a whole series of things that help to stabilize the economy that went around before. And one other aspect of this, we were talking about wages and personal income, transfer payments which is social security, Medicare and then some other things, Medicaid too, has gone from around 12% of personal income 15 years ago, it’s up to close to 18% of personal income or a little bit over today across the United States.

Well, one aspect of that is it smooths out the business cycle. That money, regardless of whether there are people that are unemployed, employed or whatever, that money is still falling out and it’s falling out to all the space. The downside of it is I guess a reasonable question, how long can you just transfer money from one group to another without killing the economy, but never the less, the whole payment transfer system wasn’t around 60-70 years ago.

Jason Hartman: Right, and the take away I’d like listeners to get from my comment in the comparison of unemployment to the great depression is back then, which you alluded to but I just want to make it clear, we really didn’t have all the independent contractors. People had more traditional industrial era jobs at that time, right?

John Stapleford: Right, and I’m not an expert on the data, but I find it very hard to believe that the data we have today is in any way comparable to what they had then. I’m sure they were just getting started on tracking all of these things. Now, another factor in here Jason, and there’s lots of factors you could take about, is married women in the labor force. And married women in the labor force just started accelerating in the 1970s and hit an all-time high a few years ago. That really wasn’t a major factor back in the 1930s. And so one of the questions is, if someone is unemployed are they the primary wage earner in the house or the secondary wage earner? And if they’re the secondary wage earner, it still hurts but it’s not as serious as the primary wage earner losing both their income and their benefit package. So a lot of compounding factors that make it difficult, in my mind, to make a comparison.

Jason Hartman: Sure, yeah. That’s a very good point. I remember looking through William Bennett’s book The Leading Index of Cultural Indicators. And one of the interesting points in there, as I recall, and this was years ago I was looking at it, was that both the husband and the wife had to be working to support the household as you got into the 70s and 80s because the tax burden increased so much. Whereas before the tax burden was much lower and other costs were lower too. It’s sort of hard to make sense of that. You’re right. I don’t know what to think of that or take away from it.

John Stapleford: Well one factor in there, because I’ve looked in pretty close detail at the black family, and the labor force participation rate for black males used to be equal to white males, and the black family up to 1950 was still mostly married couple families, and the black out of wedlock birthrate is now up around 70% of all births are out of wedlock, which doesn’t bode well for the portion of black children who don’t grow up in married couple families. And there’s two factors they’re driving at. One of them is the great society programs which really took the steam out of the role of the black male and the importance of being in the labor markets, because the black male labor force participation rate has plummeted with that.

And then in addition, over this last at least 30 years like we talked about, black males have been competing against married white females coming into the labor market. So they’ve been hit from two sides. There is a third factor, which of course is that the pool of marriageable black males is very low compared to marriageable white males. In other words single, unemployed full time because more black men have been killed. So they have a higher mortality rate, in addition they have a lower labor force participation rate, there’s more discouraged workers as you had mentioned previously and there’s more that are incarcerated.

So you take all those things together and you end up with not a complete breakdown, but a really rapid loss of the proportion of black children in married couple families. And all the research literature whether it’s liberals or conservatives doing the research says growing up in a single parent family is not the greatest thing for children.

Jason Hartman: Yeah, I would certainly agree with that. One of the interesting things about that, even cutting across racial lines is the aid to families with dependent children. And you’ve just got to wonder if the government and sort of the great society programs you’ve mentioned, have incentivized the breakup of the nuclear family. Have they done that through the tax program? Through fiscal policy?

John Stapleford: Well you only look as incentives at the margin and you have to assume that people are rational. And initially the great society programs, NAFBC in the early 1970s, and when you took the whole package with Medicaid and food stamps and section 8 housing, and go down the list, you actually would have needed at that time like a 13-14 dollar an hour job to be equal to that package. Now then it got slowly cut back over time, and of course they had the temporary welfare reform. And when you say was this providing an incentive to people?

The welfare reform, and these numbers are close. They may not be right on target, but before welfare reform I think we had around 14 million people in the welfare system, the AFDC. Afterwards we’re down to around 3 million. When you have that kind of drop in the population of those on welfare just because you’re putting requirements on you have to stay in school or you have to work, it must mean there were people who were taking advantage of that system.

Jason Hartman: Well that’s the problem with government programs is everybody starts looking for the loopholes and the ways to sort of exploit the system. We just got through this cash for clunkers things, and on both sides of the aisle the car dealerships are complaining.

John Stapleford: Jason, if you look at congressional budget office reports on things like the earn income tax credit report or food stamps, typically about a third of the payments given are fraud. And I’m sure Medicare is the same way, and I think that applies across the income distribution. In other words, I think high income people, about a third of them are ripping the government off, and I think the rest of people probably about a third. I think there’s probably a relatively constant corruption factor. And it just comes from the fact that hey, we live in a fallen world and that’s human nature.

So, you’ve got to expect it. And the only thing you can do is to design the programs as carefully as you can to try to minimize it. You’ll never get rid of it. There’s a huge black market for food stamps, for example. So you say you can’t buy liquor with your food stamps, well they sell the food stamps, get the money and buy liquor or drugs.

Jason Hartman: And the same is true, since we kind of focus on the housing angle, is you look at rent control programs that have been done in various cities in California and New York and so forth, and it always gives rise to this grey market or totally black market where people are doing deals under the table… there was even a Seinfeld episode about it where Jerry’s neighbor died, this older lady that lived in his apartment, and Elaine wanted to rent the place and they were doing pay-offs… it was ridiculous.

John Stapleford: The other thing too is that in cities where they have rent control or expensive rent control, homelessness increases. Because the incentives of rent control are, number one, if you’re the landlord, you don’t maintain your unit, number two, if you’re a developer, you don’t put up new rental units. You can’t get the market price, so the supply of housing actually goes down over time and homelessness increases.
Adam Smith’s contention was that people are self-interested. He didn’t say self-interest is good. He just said hey, it’s the way people are. And from a Judeo-Christian perspective, that’s the same position that the Bible takes. It says well, people are fallen. Find a way to deal with it. Don’t expect people to act like saints. There are exceptions, like, probably you.

Jason Hartman: Right, there you go. Sure. And then so that’s the invisible hand as described, right? Talk to us a little bit about the housing market if you would. Knowing that all real estate is local, and that markets differ greatly across the nation and your thoughts on Case-Shiller. I noticed that on the website you’ve got a very prominent link talking about Case-Shiller. There’s been some debate about the accuracy, and nothing is perfect of course. I remember listening to one BBC program where there was a person representing Case-Shiller and someone representing another index, and they were kind of debating the merits of each. Both had an argument really, I thought.

John Stapleford: I don’t think the problem today is a lack of data. I think the problem is a lack of conceptual framework. The reason the housing bust occurred and the bubble occurred and the reason for this housing correction is the complete absence of the application of a very basic housing market economic framework to what was going on. So is the Case-Shiller right? All of them have their limitations as you’ve said.

The multi-listing for example, you’re only picking up the houses that are moving and right now at least a third of those houses are foreclosures. So what does that do to your data? What does that do to the average price that you have in data that’s based on the multi-list? And you look at, if your listeners are familiar with Zillow, if you really believe that that was that is a zip code level or the neighborhood level or the census block level, whatever that we have accurate data on with what’s happening in the housing market, if we did why do we pay people to do assessments?

Why do we pay realtors to go out and tell us what the market value of our house is? I think the more important thing is the conceptual framework that allows you to figure out the big picture. And when I say that, I mean what are the four or five factors that drive the demand for housing, and what are the four or five factors that drive the supply housing and what’s happening to those things? And it is absolutely clear, when you look at those factors back in 2004, 2005 and we were talking about this on, the demographics weren’t there for the tremendous run-up in house prices. They weren’t there. You didn’t have a baby boom coming into housing markets. It was all based on easy money.

Jason Hartman: I would call it a mortgage induced housing boom, or a federal reserve induced housing boom.

John Stapleford: MIHC. But you’re exactly right. Not many people stood back from it. Even some of the “experts” said oh well, people really value their housing and there’s a huge federal subsidy housing because you can write off your mortgage interest and so forth, and real income is rising. But really, real income isn’t rising that rapidly and interest rates weren’t that low underneath the whole thing. The factors weren’t there, and the rate of withdraws from the housing stock because of deterioration or whatever is very steady. Over time the rate of renovation, rehabilitation is very steady. And so it’s the demographics. If you don’t have net-in migration, and from coastal California you actually had net-out migration from older people.

Jason Hartman: Oh sure. You have it in Florida now too, by the way.

John Stapleford: But even before the bubble burst in California, what was going on was people were looking for lower cost of living areas like in Bakersfield or wherever.

Jason Hartman: Well and they were going to Arizona, Nevada.

John Stapleford: Rather than get into hemming and hauling over what’s the best most representative housing data, step back and look at it comprehensively through sound conceptual framework. That will get people who are in the real estate industry much further down the line.

Jason Hartman: So give us the points. You said four or five sort of key factors that made up that conceptual framework. Of course you talked about employment, in and out migration, what are the other ones?

John Stapleford: Real income, Household formation, and of course the whole demographic thing, which net-in migration is part of a housing formation. And looking at the overall labor market, because young people who, a person like me, we’ve been in our house now 20 years and it’s unlikely that we’ll move until we downsize to a condo or a coffin. But young people are the ones who are mobile, 18-29 and they move to dynamic labor markets. They don’t move for amenities.

Amenities may be a factor in there but the elderly people will be more aware of amenities when they move as retirees. But young people, they’re looking for places where if they lose a job they can find another job quickly. So what’s the level, what’s the rate of net-in migration and does the labor market say that this level of in-migration is going to sustain itself or continue and then what’s the income distribution of the people coming in? Because more educated people are more mobile than less educated people. And more educated people move to metropolitan areas where there’s already a high level of education. Which says that those who have will get more, and those who don’t have won’t get it.

And the metropolitan areas in the country who have highly educated labor force are the areas that are the healthiest. All I’m saying is a very simple microeconomic demand model. What are the factors that cause the shift in demand, change in population, and that’s the household formation and the migration, income, prices, the substitutes, the complements, so of course we keep track of rent in a metropolitan area, and if the rents are going up rapidly, that would encourage people to think about shifting over to ownership. Inflation, can you buy a house and will it appreciate? And then the regulations of government. Will government ever, one of the largest subsidies the federal government gives out is for unauthorized housing. And will that sooner or later come under attack?

Jason Hartman: And that’s the home mortgage interest deduction you’re referring to, right?

John Stapleford: The home mortgage interest and property tax deduction. The two of them together, it’s huge. I think the last time I looked it might have been 130 billion dollars. And it would be very hard to touch it but they may say any mortgage amount of 200 thousand dollars, the interest is deductible. And above that it’s not.

Jason Hartman: I don’t think they’re going to get to that point. I remember years ago in California, well it wasn’t California per say but it applied particularly to California and other expensive areas. They limited it at one million dollars in mortgage amount, and so if you’re in the high, high upper end and you’re looking at a four million dollar property, you can’t deduct that whole mortgage anymore. But that’s such a sacred cow. There’s just too many voters that own homes.

John Stapleford: You’re right Jason, but also you’d have the national association of home builders coming after you.

Jason Hartman: The national association of realtors.

John Stapleford: And like it or not, this subsidy has made residential construction a very essential part of our economy in the United States. You’d also be messing with the underpinnings of… and when you look, like I was looking at the DuPont companies for example, when the housing industry goes bust and the automobile industry goes bust, the DuPont company really hurts because they sell a lot of fiber for carpeting, and you go down the list of things.

Jason Hartman: Right. There’s so many ancillary businesses that are effected, and that’s why housing is so important obviously.

John Stapleford: Yeah, there’s a lot of people who would be feeling the pain.

Jason Hartman: Absolutely. And I just wanted to mention on your earlier comment, when you talk about those dynamic cities, those employment cities, Richard Florida wrote a book called The Rise of the Creative Class. And we kind of refer to those around here as the creative class cities: Denver, Austin, those are two examples of markets that we think are pretty interesting for investors right now. And they’re creative class cities. Very educated.

John Stapleford: Yeah, those two books are very interesting.

Jason Hartman: Yeah, interesting concept.

John Stapleford: But it’s never been proven empirically, and it’s been tested three or four times. And if you look at his books, the data is a bunch of scattered diagrams – it’s not statistical tests of relationships. It’s more… I think it appeals to some people because they say kind of nerdy oddball people who do strange things, boy we really need them. They’re a source of innovation and growth. Well, what you need is people with human capital. And human capital, and this is confirmed again and again in economic literature, human capital is not just formal education, a bachelor’s degree, plus. It’s also the years that you spent in a particular occupation and the demand has to be there for this type of work.

So you look at, as you mentioned Austin, you’ve got a lot of high tech biochemical, computer, and the areas of the country that are doing well are loaded up on human capital. San Francisco… in the United States about 26% of the adults have a college degree, San Francisco has this up around 41%…

Jason Hartman: Right, but let me interrupt you for a moment here if I may. My question is there though, when you’re looking at investing and you’re looking at a renter population and you’re looking at in-migration, you also have to look at a place that’s affordable to live. And San Francisco is not affordable. And it’s got rent control on top of that, so it’s totally bad things. And taxes are high in California. So when you sort of cut San Francisco and New York, obviously those are world class cities, out of it… where do you get that highly educated workforce and those sort of dynamics and that human capital element that you mentioned for a low price?

John Stapleford: Yeah, let me come back to that question, and just jump on is housing in San Francisco affordable? What the research literature says is when you look at wage levels, when you adjust for the amenities that are in a metropolitan area, if you adjust for the industrial structure, if you adjust for the characteristics of workers, the cost of living in that metropolitan area will be picked up in the wages. On other words, a high cost area like San Francisco, and you’re actually right that it’s high cost.

Jason Hartman: It’s outrageous.

John Stapleford: In fact, you get some inflation and wages so compensate for the cost of living. The markets work.

Jason Hartman: Before you go into the next point, can I just ask you a question on that? So the question is though, not how does the typical San Franciscan afford their 800 thousand dollar little tiny condo versus the typical Austonian, I guess I just made up a word: Austonian. How did they afford their 400 thousand dollar four thousand square foot house on a half-acre of land? See? That’s a different light in my opinion. So it’s not really the same comparison because you get a different life for that relative cost of living, right?

John Stapleford: See, that’s your preferences. You think living in…

Jason Hartman: No, it’s not my preference. I live in a suburban area.

John Stapleford: I know, but what I’m saying is somehow you’re saying living in a 3-4 thousand square foot house is more attractive than living in a thousand foot condo when in fact in a thousand foot condo you’ve got four five star restaurants within two blocks. And people, at least the housing demand literature shows that people recognize these tradeoffs. And remember, housing consumption is a bundle of amenities and goods and services, not just the sticks and the stone, it’s not just the size of the lot. It’s the quality of schools, it’s the access to medical services, it’s the crime rates, it’s the whole…

Jason Hartman: Oh, absolutely. It’s a whole lifestyle.

John Stapleford: They have hedonic price indexes where they try to adjust to all of the things that we’ve mentioned, and they work okay. But people definitely trade off among the components of the housing bundle. So it’s apples and oranges to some extent to say the 1000 square foot until in San Francisco versus the 3000 square foot home in Austin.

Jason Hartman: Right, but that’s 100 dollars a square foot versus 800 dollars a square foot.

John Stapleford: Yeah, but you’re not just buying square feet.

Jason Hartman: I agree with you completely.

John Stapleford: In Philadelphia there’s two kosher vegetarian Chinese restaurants. They don’t have that in Austin.

Jason Hartman: Well in Austin they actually do. They don’t have kosher, but they have vegetarian for sure.

John Stapleford: I’m sure in San Francisco there’s things. And would that make me move somewhere? No. But it could have an influence on some people. They could really value that.

Jason Hartman: Look, I’m a single guy. I like urban environments. I don’t like suburbia personally, I’m just saying though that if I had a wife and three kids, I couldn’t live in that thousand square foot in San Francisco. So do you pay 8 times multiple to have more swanky dining near your house? I think there’s a point of diminishing return there where people stop paying for it, and then you look at the climate of the government in a place like San Francisco and I don’t know why we’re picking on San Francisco in particular, but we sort of led there. And sort of that anti-business climate. Yes, there’s a lot of innovation of course with the tech stuff, but businesses are being pushed out. I see smart, educated people…

I’m in Southern California, I see smart educated people leaving here constantly. It’s been going on for years.

John Stapleford: Yes, but in the case of San Francisco, the only reason it’s not growing is because you’re out of land. And that’s it. People love it there. The people who come there and stay there, they love it. And the amenities are super. It’s a beautiful place with a lot of interesting things. If you want to be a complete wacko, nobody will look at you twice. But the people who have been leaving California, I’m sure there are some young people who are then moving to areas like Denver where there’s some high tech growing.

But for the most part it’s people who are in their 50s and older who are looking for a lower cost of living. They may want to continue working for a while, but they’ve got to… we said the cost of living is reflect in your wages. If you get to the point where either your wages have peaked or you’re going to get out of labor market, you can’t sustain the cost of living in San Francisco. You’ve got to get out of there. Your social security isn’t going to keep up with it. So I would say that you may know some very smart young people who have moved out, but I’d say for the most part that the out-migration is the people who are moving on their way to get out of the labor market eventually.

Jason Hartman: Yeah. I know that during, I think it was 2005 when the California economy was theoretically booming, it was a housing based economy largely, but we had an out-migration for the first time I think since the early 90s of a very small number for a big huge state like California. It was only about 69 thousand people as I recall. That’s just a drop in the bucket, but the fact that it happened at all was amazing. And I don’t know how they do those out-migration stats, if they take into account just the net…

John Stapleford: IRS.

Jason Hartman: Okay, IRS.

John Stapleford: And the post office. Those are the two main sources.

Jason Hartman: Okay, so it doesn’t do… like if there’s a lot of illegal immigration into the state…

John Stapleford: No, it doesn’t pick that up.

Jason Hartman: Alright, good. So that’s better. I trust the statistic more now that you said that. Because I thought, if they’re just looking at a net number and you’ve got a million that came across the border, and then you’ve got a million and a half that moved out, that’s a completely different dynamic of course than we just mentioned.

John Stapleford: They do have people with counters based on all the major roads.

Jason Hartman: You’re kidding me. I’ve seen those a few times.

John Stapleford: The IRS, what they do with the IRS data is they can actually tell you of the people who move out of California, where did they go? And the people who moved into California, where did they come from? And that’s some of the data that, we give to clients because they find that very important. It’s very interesting Jason, some metropolitan areas have a reach that is only regional. It’s only very close to metropolitan area in terms of who’s moving in and who’s moving out. And then in other metropolitan areas, like places in Florida, they’re going and getting people from New York City and Chicago. So it’s a different kind of ballgame. What do you think, into California, which state is sending the most people in absolute migration into California?

Jason Hartman: Into California? I want to sarcastically say Mexico, but that’s not a state.

John Stapleford: Well actually now that I look at it you might be right. Because it’s Texas is number one, Arizona is number two and Nevada is number three. But that may be, you may be picking up Latinos. But over the last year, the data that we have in our system, the net migration for California, there was an out migration of 191 thousand folks.

Jason Hartman: And I remember I was reading an article some time last year talking about how the number of millionaires out in the Bay area, since we’re picking on San Francisco, has declined fairly substantially. And it wasn’t because of the stock market, it wasn’t because of anything except the fact that they’re moving to Nevada. Or at least establishing residency there, whatever that means.

John Stapleford: Right.

Jason Hartman: So that they don’t have to pay the state income tax. There again, you see government screwing things up in my opinion.

John Stapleford: Well, you know this because you work with these people, why does the government think they can outwit really bright professionals and the law when it comes to getting tax money out of rich people? Why does it think it can outwit the folks who go into the private sector and are working for these types of clients? They can’t.

Jason Hartman: I don’t know if they really think they can. I think a lot of it is a campaign platitudes or just bureaucrats that have never had a real job, run a business, made pay roll. Sorry to talk about the president that way, but that’s the reality of our situation. We have people that just buy votes, is all they’re doing. They look at things as a zero sum game. It just doesn’t make sense.

John Stapleford: No, but eventually when they implement things the results come home to roost and they realize oh, I actually created more harm than I did good.

Jason Hartman: Yeah, well that’s why so many of these well intentioned programs just don’t work well in real life. They just don’t.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by The Jason Hartman Foundation, all rights reserved.

For publication rights and media interviews, please visit or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

Transcribed by Ralph

The American Monetary Association Team

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