SociologySociology

The Scientific Study of The Scientific Study of Societies, Social Groups and Societies, Social Groups and

Social interactionsSocial interactions

Sociological ImaginationSociological Imagination Teaching yourself to think about how Teaching yourself to think about how

societal institutions and social interactions societal institutions and social interactions are shaped by the social context.are shaped by the social context.

For instance: Will you get married and why?For instance: Will you get married and why?– Your image of love and marriage and the image Your image of love and marriage and the image

of most of the world are vastly different because of most of the world are vastly different because of your culture.of your culture.

– Ideas about love and marriage are socially Ideas about love and marriage are socially constructed. If you had to marry, without every constructed. If you had to marry, without every meeting the person you were to marry, someone meeting the person you were to marry, someone of your parent’s choice, would it work?of your parent’s choice, would it work?

Use your Sociological Use your Sociological ImaginationImagination

Why the Olympics?Why the Olympics? Why do people love/hate Obama?Why do people love/hate Obama? Why did George Zimmerman shoot Trayvon Why did George Zimmerman shoot Trayvon

Martin?Martin? Explain 911 attack from Al Qaeda’s perspective Explain 911 attack from Al Qaeda’s perspective

and/or our response from our’s?and/or our response from our’s? Why do all cultures have religion?Why do all cultures have religion? What’s happening in Syria and why? Which theory What’s happening in Syria and why? Which theory

explains it best?explains it best? Why are you here, right now, in Why are you here, right now, in thisthis room? room? Why did you choose that outfit? Why did you choose that outfit? Should they shut Strasburg down?Should they shut Strasburg down?

From a cultural perspectiveFrom a cultural perspective

Points of View: Points of View: not mutually exclusive, not mutually exclusive, different points of viewdifferent points of view

Functionalism:Functionalism: views social activity and views social activity and institutions as evolved to facilitates the institutions as evolved to facilitates the smooth operating of societies.smooth operating of societies.

Conflict TheoryConflict Theory: views societal institutions : views societal institutions as conservative, in which as conservative, in which power elitespower elites conflict with oppressed groups to maintain conflict with oppressed groups to maintain power. Social movement form to “fight the power. Social movement form to “fight the power.”(Think American Revolution, power.”(Think American Revolution, Protestant reformation, Al Qaeda, Civil Rights Protestant reformation, Al Qaeda, Civil Rights Movement.)Movement.)– Society is dynamic, constantly evolving.Society is dynamic, constantly evolving.

Points of ViewPoints of View

Feminist TheoryFeminist Theory: looks at the ways : looks at the ways society treats women.society treats women.

Symbolic InteractionsSymbolic Interactions: Looks at social : Looks at social interactions at the micro level. Language interactions at the micro level. Language and symbols are interpreted to facilitate and symbols are interpreted to facilitate interactions. (What do your interactions. (What do your clothes/language tell others about you?)clothes/language tell others about you?)

Rational Choice TheoryRational Choice Theory: People always : People always act in their own self-interest and try to do act in their own self-interest and try to do what’s best for them.what’s best for them.

Symbolic interactionSymbolic interaction

Change?Change?

Ethnic stuff.Ethnic stuff.

Ethnic group/ethnicity: Ethnic group/ethnicity: – shared cultural values and norms that shared cultural values and norms that

separate one group from another.separate one group from another.– Shared, distinct awareness of of Shared, distinct awareness of of

common cultural identity. Mormons?common cultural identity. Mormons? Ethnocentric: being centered around Ethnocentric: being centered around

one’s own ethnic group, not liking one’s own ethnic group, not liking others.others.

Race in societyRace in society Race:Race: socially constructed belief that biological difference socially constructed belief that biological difference

in skin color, hair and facial structure proved a difference in in skin color, hair and facial structure proved a difference in other more complex polygenetic qualities.other more complex polygenetic qualities.– Doesn’t mean there aren’t differences, only that those Doesn’t mean there aren’t differences, only that those

differences are caused socially, not biologically.differences are caused socially, not biologically. Eugenics:Eugenics: the pseudoscience that supported above. the pseudoscience that supported above. Self-fulfilling prophecySelf-fulfilling prophecy: when a belief creates the : when a belief creates the

predicted behaviors of a group. Labeling a group “angry” predicted behaviors of a group. Labeling a group “angry” makes them angry.makes them angry.

Stereotype threatStereotype threat: when a group that has a belief held : when a group that has a belief held about them then internalizes that belief themselves, then about them then internalizes that belief themselves, then perform differently on tests when made aware of their of perform differently on tests when made aware of their of status. VERY significant results.status. VERY significant results.

Just World PhenomenonJust World Phenomenon: tendency to believe world is : tendency to believe world is rational, bad things happen to bad people, makes us feel rational, bad things happen to bad people, makes us feel safe.safe.

How?How? Experiments: Experiments:

– Cause and Effect:Cause and Effect:– Butt pattingButt patting

Surveys: Surveys: – Correlations:Correlations:

poverty and low performance; poverty and low performance; Alabama and being Democrat;Alabama and being Democrat; Woman and voting for Obama or being Pro Choice.Woman and voting for Obama or being Pro Choice.

Ethnographies: actually living among social Ethnographies: actually living among social groups, recording complex social patterns.groups, recording complex social patterns.– Not generalizable to others.Not generalizable to others.– Sewar Children.Sewar Children.

What is What is CultureCulture?? The The Values, Norms and ArtifactsValues, Norms and Artifacts of a society. of a society.

– ValuesValues: abstract beliefs of the importance of different : abstract beliefs of the importance of different constructs: family, caring for others, the nation-state, constructs: family, caring for others, the nation-state, religion, yourself.religion, yourself.

– Norms:Norms: are unwritten rules a society about behaviors in are unwritten rules a society about behaviors in specific social situations, reinforced overtly or subtly. specific social situations, reinforced overtly or subtly.

– ArtifactsArtifacts: material goods created by societies. Iphones, : material goods created by societies. Iphones, chariots, sports stadia. What do they tell you about the chariots, sports stadia. What do they tell you about the society?society?

– Memes:Memes: Bits of culture that are passed on virally Bits of culture that are passed on virally through observation and imitation.through observation and imitation. ““that’s a clown question, bro”that’s a clown question, bro” Knuckle bumpKnuckle bump Hat on backwardHat on backward Baggie jeans/skinny jeans/mom jeansBaggie jeans/skinny jeans/mom jeans ““da bomb”da bomb”

How do you get your How do you get your culture?culture?

Through a process called Through a process called SocializationSocialization.. Socialization occurs through Socialization occurs through socialization socialization

agentsagents: family, friends, school, nation, : family, friends, school, nation, religion, etc.religion, etc.

Socialization occurs as agents reward or Socialization occurs as agents reward or punish you for “acting right.” May be overt punish you for “acting right.” May be overt or subtle.or subtle.– ““Look how nicely you share”Look how nicely you share”– ““What were you thinking?”What were you thinking?”– A sideway glance.A sideway glance.

Social Capital: The social Social Capital: The social knowledge and connections knowledge and connections

that enable people to that enable people to accomplish their goals and accomplish their goals and

extend their influence.extend their influence. This what you get from your family and This what you get from your family and

community that you use to succeed in your community that you use to succeed in your culture.culture.– MoneyMoney– EducationEducation– Cultural valuesCultural values– Good looksGood looks– Ability to get on with peopleAbility to get on with people– Social norms that have been socialized.Social norms that have been socialized.

PowerPower Power is the ability to force others to do what you Power is the ability to force others to do what you

want.want. Authority: the permission from society to exert Authority: the permission from society to exert

power.power. Traditional societiesTraditional societies

– Loosely defined bordersLoosely defined borders– Multiple ethnicities: often semi-autonomous (tributes)Multiple ethnicities: often semi-autonomous (tributes)

Nation StatesNation States– Well-defined, defended bordersWell-defined, defended borders– All nations todayAll nations today– More homogenousMore homogenous– Central government controls all of civil life.Central government controls all of civil life.

Failed StatesFailed States

Often in regions that HAD traditional Often in regions that HAD traditional states (Kingdoms, Empires) but are states (Kingdoms, Empires) but are now Nation-states.now Nation-states.

Often many ethnicities within Often many ethnicities within Borders drawn for them by exiting Borders drawn for them by exiting imperialists.imperialists.

Word Trend: DemocracyWord Trend: Democracy

119 of 192 countries deemed 119 of 192 countries deemed democracies.democracies.

2.3 Billion still live in countries 2.3 Billion still live in countries considered “not free.”considered “not free.”

Most Western Nations are “liberal Most Western Nations are “liberal democracies”:democracies”:– Multiparty electionsMultiparty elections– Free market, competitive capitalismFree market, competitive capitalism– If winners, then losers?If winners, then losers?

U.S. GovernmentU.S. Government

The U.S. is a The U.S. is a representative representative democracydemocracy: elected officials : elected officials represent the general represent the general cultural cultural valuesvalues of the voters who elect them. of the voters who elect them.

Voters with similar cultures tend to Voters with similar cultures tend to cluster in the same areas, developing cluster in the same areas, developing cultural sub-nations.cultural sub-nations.– Arlington ALWAYS votes Democratic.Arlington ALWAYS votes Democratic.

Competing InterestsCompeting Interests

U.S. system is one of competing U.S. system is one of competing interests:interests:– Businesses, Unions, Single issue groups: Businesses, Unions, Single issue groups:

Abortion, Women’s rights, farm workers, Abortion, Women’s rights, farm workers, NRANRA

– Left out: those without money.Left out: those without money. Internet is widening the Net and Internet is widening the Net and

reducing the power of moneyreducing the power of money

Today’s Democracies either Today’s Democracies either have a Multiparty of Two-Party have a Multiparty of Two-Party

systemsystem Parliamentary SystemsParliamentary Systems..

– Members of Parliament elect the Prime Members of Parliament elect the Prime Minister.Minister.

– Have many political parties that form Have many political parties that form coalitions to select the Prime Ministercoalitions to select the Prime Minister

– Multiparty systems creates a wide Multiparty systems creates a wide variety of political thought within variety of political thought within legislature, legislature, compromised required.compromised required.

Compare the Two based on Compare the Two based on Influence from Interest GroupsInfluence from Interest GroupsA Billion Spent of Presidential A Billion Spent of Presidential

PACsPACs Our’sOur’s Britain’sBritain’s

United States: Two party United States: Two party systemsystem

More likely to develop wide schisms More likely to develop wide schisms between political parties.between political parties.

Compromise required for actions. The Wider Compromise required for actions. The Wider the schism, the less likelihood for action.the schism, the less likelihood for action.– House of Reps (435): a simple majority of 218 House of Reps (435): a simple majority of 218

required to pass anythingrequired to pass anything– In Senate (100): a Super Majority of 60 Required In Senate (100): a Super Majority of 60 Required

these days. (filibuster)these days. (filibuster)– To override Presidential veto:2/3 of each. Party To override Presidential veto:2/3 of each. Party

of the President MATTERS. of the President MATTERS.

So, Is the U.S. less democratic So, Is the U.S. less democratic than Parliamentary systems?than Parliamentary systems?

Probably not, its system is just different.Probably not, its system is just different. There are many competing interests.There are many competing interests. Unions, Interest Groups like Unions and the Unions, Interest Groups like Unions and the

NRA, Lobbyists, and PACs all vie with CASH NRA, Lobbyists, and PACs all vie with CASH and influence to influence the elections and and influence to influence the elections and electorate in local, state and federal offices.electorate in local, state and federal offices.

Those without money and who don’t vote Those without money and who don’t vote are left out: poor, homeless, young etc.are left out: poor, homeless, young etc.

The United States has tens of The United States has tens of thousands of elected offices and the thousands of elected offices and the combination provides lots of combination provides lots of representationsrepresentations..

U.S. Democracy: Voting U.S. Democracy: Voting PatternsPatterns

Increasing distrust of government and Increasing distrust of government and whether or not your vote matters, whether or not your vote matters, reducing vote.reducing vote.

U.S. has an awful turnout: 38U.S. has an awful turnout: 38thth in world in world– U.S. U.S. 48%48%– Europe Europe 7474– AsiaAsia 7070– S. AmericaS. America 6262– MexicoMexico 6060– AfricaAfrica 5555

In 2008In 2008

Women Obama 54% McCain 46Women Obama 54% McCain 46 Men Obama 43 McCain 57Men Obama 43 McCain 57 18-49 Obama 2 to 118-49 Obama 2 to 1 Women vote in larger numbers 55% to 45%Women vote in larger numbers 55% to 45% This year Republicans having been working This year Republicans having been working

hard to limit voting of constituencies that hard to limit voting of constituencies that traditionaly vote Democratic. (Immigrants, traditionaly vote Democratic. (Immigrants, poor Blacks)poor Blacks)

Republicans have been more successful at Republicans have been more successful at electing local politicians and judges.electing local politicians and judges.

Women in the Power Elite?Women in the Power Elite?

U. S. ranks 71U. S. ranks 71stst in World in women in in World in women in power positions.power positions.– Tied with Turkmenistan and RwandaTied with Turkmenistan and Rwanda

Not offered by two parties as candidates.Not offered by two parties as candidates. Traditional power elites have been White, Traditional power elites have been White,

Protestant, Wealthy, Males.Protestant, Wealthy, Males.– Felt a responsibility of that status.Felt a responsibility of that status.– Very unrepresentative of population.Very unrepresentative of population.

Today: as independents have increased, Today: as independents have increased, more economic diversity in candidates.more economic diversity in candidates.

Does Money Buy Elections?Does Money Buy Elections?

Citizens United vs. Federal Citizens United vs. Federal Election BoardElection Board

In a Supreme Court decision it was In a Supreme Court decision it was ruled that corporations have the same ruled that corporations have the same right of free speech as individuals.right of free speech as individuals.

Money=Speech. Therefore, Money=Speech. Therefore, corporations can give as much money corporations can give as much money as they want to PACs, that fund many as they want to PACs, that fund many election campaigns.election campaigns.

Obama/AlitoObama/Alito

The Big SortThe Big Sort

In the U.S., people tend to move into In the U.S., people tend to move into regions and neighborhoods with regions and neighborhoods with similar thinking people: similar thinking people:

For instance, “the People’s Republic For instance, “the People’s Republic of Arlington barely even nominates of Arlington barely even nominates Republicans for office.Republicans for office.

Gerrymandering even makes the Gerrymandering even makes the ‘regional cultures” more pronounced.‘regional cultures” more pronounced.

The Supreme CourtThe Supreme Court

One of the biggest results of this years One of the biggest results of this years election is the possible replacement of 3 election is the possible replacement of 3 judges on the Court having significant judges on the Court having significant influence on law for the next 20-30 influence on law for the next 20-30 years. Could be significant in years. Could be significant in Roe v. Roe v. Wade.Wade.– Scalia: very conservative: 76Scalia: very conservative: 76– Ginsberg: very liberal; 79 Ginsberg: very liberal; 79 – Kennedy: moderately conservative, swing Kennedy: moderately conservative, swing

vote in recent years. 76vote in recent years. 76

Psychological concepts to Psychological concepts to NoteNote Group PolarizationGroup Polarization:: Psychological concept that the more you Psychological concept that the more you

are with groups of people with a specific value, the more like the group you are with groups of people with a specific value, the more like the group you will become.will become.– Immigrants to a community will become more like the culture than they Immigrants to a community will become more like the culture than they

were before. were before. – The culture changes the people more than the people change the The culture changes the people more than the people change the

culture.culture.

In Group Out Group BiasIn Group Out Group Bias: : Once established as an out Once established as an out group, in groups form negative stereotypes about the outgroup, confirming group, in groups form negative stereotypes about the outgroup, confirming biases and scapegoatingbiases and scapegoating

Belief Bias:Belief Bias: twist logic to make ideas fit you existing twist logic to make ideas fit you existing belief.belief.

Confirmation Bias:Confirmation Bias: seek information that confirms, seek information that confirms, ignore contrary.ignore contrary.

Electoral CollegeElectoral College The President is elected by the electoral college, which is The President is elected by the electoral college, which is

filled by electors that come from all the states.filled by electors that come from all the states. Each state gets its number of electors based on its Each state gets its number of electors based on its

representatives (population) and Senators (2 each representatives (population) and Senators (2 each regardless of population)regardless of population)

This system gives states with small population more weight This system gives states with small population more weight than they deserve (based on pop.) because each state gets than they deserve (based on pop.) because each state gets credit for their two senators.credit for their two senators.

Wyoming 3 Electors for 568,000 people;Wyoming 3 Electors for 568,000 people;Kansas get 6 for a population of 3 millionKansas get 6 for a population of 3 million6 x more people, 2x the electors.6 x more people, 2x the electors.

So Sometimes(3), Presidents are elected with a minority of So Sometimes(3), Presidents are elected with a minority of votes: George W. Bush, for instance.votes: George W. Bush, for instance.

Gore: 48.33%Gore: 48.33%Bush 47.8%Bush 47.8%Nader 2.75%Nader 2.75%

Real DebateReal Debate Republicans: PrivateRepublicans: Private

– Free Market/Limited government:Free Market/Limited government:– let markets determine rights and privileges.let markets determine rights and privileges.– Minimal Regulation on Business activities.Minimal Regulation on Business activities.– Small Taxes, Small Benefits, small governmentSmall Taxes, Small Benefits, small government– Limited protections for poor, unemployed.Limited protections for poor, unemployed.– Social conservative: no Gay marriage, no abortion (rape/incest).Social conservative: no Gay marriage, no abortion (rape/incest).– Limited control of business uses of the environment.Limited control of business uses of the environment.– Strong militaryStrong military

DemocratsDemocrats: Public: Public– Welfare/Socialist StateWelfare/Socialist State– Not communist: Social protections.Not communist: Social protections.– Government actively involved in helping communities/people: Public/Private Partnerships.Government actively involved in helping communities/people: Public/Private Partnerships.

““We built it”We built it”– Regulate business to stop abuses.Regulate business to stop abuses.– Higher taxes for Bigger benefits, more protection for poor, elderly, unemployed.Higher taxes for Bigger benefits, more protection for poor, elderly, unemployed.

RetirementRetirement Health careHealth care UnemploymentUnemployment Help the poorHelp the poor Socially Progressive: Pro Gay marriage; Pro Choice; Socially Progressive: Pro Gay marriage; Pro Choice; Environmental protectionsEnvironmental protections

Electoral CollegeElectoral College

It requires It requires 270270 Electoral votes to be elected Electoral votes to be elected President.President.

Real Clear Politics (mid August): About 237 votes Real Clear Politics (mid August): About 237 votes will probably go to Obama (California and New will probably go to Obama (California and New York always vote Democratic.)York always vote Democratic.)

About 191 will go to the Romney: (Since the 60s, About 191 will go to the Romney: (Since the 60s, Republicans usually get the solid South.)Republicans usually get the solid South.)

There are about 110 swing state votes left.There are about 110 swing state votes left. Romney needs to sweep most to win. (79 out of Romney needs to sweep most to win. (79 out of

100)100) Obama can win with Florida only. Or several Obama can win with Florida only. Or several

combinations of smaller states.combinations of smaller states.

These Swing States Will These Swing States Will determine the 2012 Presidentdetermine the 2012 President

Electoral Votes in Swing Will Electoral Votes in Swing Will determine Presidencydetermine Presidency

Fla 29Fla 29 Ohio 18Ohio 18 North Car 15North Car 15 Virginia 13Virginia 13 Colorado 9Colorado 9 Wisconsin 10 Wisconsin 10

(Ryan)(Ryan)

Iowa 6Iowa 6 NH 4NH 4 Nevada 6Nevada 6 Total 110Total 110 Obama Needs 33Obama Needs 33 Romney needs 79Romney needs 79

Obama needs 23 to Win, Romney 79

America’s Cultural NationsAmerica’s Cultural Nations: Colin Woodward : Colin Woodward suggests America is made up of 11 cultural nations suggests America is made up of 11 cultural nations with widely different cultural beliefs established by with widely different cultural beliefs established by their histories. These cultural differences explain their histories. These cultural differences explain

why we are so divided politically. (and always have why we are so divided politically. (and always have been)been)

American Nations: Colin American Nations: Colin WoodwardWoodward

RememberRemember

These are Broad cultural trends. These are Broad cultural trends. They say NOTHING about and They say NOTHING about and individual. Woodward attempts to individual. Woodward attempts to explain regional values and voting explain regional values and voting patterns based on the cultures of patterns based on the cultures of these regions.these regions.

Yankeedom: New England, Yankeedom: New England, Upper Midwest: Mich, N Ohio, Upper Midwest: Mich, N Ohio,

Wisc. Wisc. N.IndN.IndUtopian: City on Utopian: City on the Hill.the Hill.– Collectivists: Collectivists:

planned communityplanned community

– Egalitarian: no elitesEgalitarian: no elites– PredestinedPredestined– Education Imp., literacy Education Imp., literacy

for Bible reading, for Bible reading, business; Ivy league business; Ivy league schoolsschools

– Progressive use of Progressive use of government to help government to help communitycommunity

Yankeedom: New EnglandYankeedom: New England Belief in Science, evolution Belief in Science, evolution

and global warmingand global warming Public Protestants Hoped Public Protestants Hoped

God would favor God would favor community;community;

Chosen People: needs to Chosen People: needs to be reflected by policies.be reflected by policies.

Allegorical biblical Allegorical biblical interpretationinterpretation

Became more religiously Became more religiously tolerant over time (UU)tolerant over time (UU)

Women’s vote, Women’s vote, Abolitionists, Gay Marriage Abolitionists, Gay Marriage movement all started here.movement all started here.

New England: ProgressiveNew England: Progressive

American Revolution Began hereAmerican Revolution Began here Abolition began here.Abolition began here. American higher education began hereAmerican higher education began here Transcendentalists movement began Transcendentalists movement began

here.here. Utopian Movements began here.Utopian Movements began here. Women’s Suffrage movement began hereWomen’s Suffrage movement began here Universal health care began hereUniversal health care began here Gay Marriage first legalized here.Gay Marriage first legalized here.

Midlanders: Pa, Del, Md, Midlanders: Pa, Del, Md, Northern Va; some midwest, Northern Va; some midwest,

Iowa, MissouriIowa, Missouri Established by German Established by German Protestant refugees: Protestant refugees: Pacifists.Pacifists.– QuakersQuakers– AmishAmish– MennonitesMennonites

Very tolerant of others.Very tolerant of others. Strong community values.Strong community values. Valued educationValued education

– Ben FranklinBen Franklin– First LibraryFirst Library– Many newspapersMany newspapers

Public ProtestantsPublic Protestants Progressive, Unions.Progressive, Unions.

New Netherlands: New York New Netherlands: New York city and environscity and environs

The business district, whatever The business district, whatever is good for business.is good for business.

Welcomed all; think New York Welcomed all; think New York CityCity

Always been multiethnic (first Always been multiethnic (first to welcome Jewish people)to welcome Jewish people)

Supports established Federal Supports established Federal power: likes stability and power: likes stability and control. Good for business. control. Good for business.

Financed and built most of Financed and built most of early nations infrastructure: early nations infrastructure: Vanderbilt, Rockefeller, J.P. Vanderbilt, Rockefeller, J.P. Morgan.Morgan.

Home of the Industrial Home of the Industrial revolution (at least the revolution (at least the financing)financing)

Progressive Movement Started Progressive Movement Started here and Yankeedom as a here and Yankeedom as a response to Industrial abuse.response to Industrial abuse.

The Left Coast: coastal area of The Left Coast: coastal area of California, Oregon and California, Oregon and

WashingtonWashington Very similar to Very similar to

Yankeedom, settled by Yankeedom, settled by New Englanders New Englanders (Progressive) and (Progressive) and Borderlanders (fierce Borderlanders (fierce independents)independents)

Proud trendsettersProud trendsetters Progressive in PoliticsProgressive in Politics Think: U. Berkley, Portland, Think: U. Berkley, Portland,

Seattle.Seattle. Education very importantEducation very important Environmentalist, Environmentalist,

Hollywood limousine Hollywood limousine liberalsliberals

Tidewater: Coastal Va. No. Tidewater: Coastal Va. No. CarolinaCarolina

Old VirginnyOld Virginny Hierarchal status: like English Hierarchal status: like English

nobility.nobility. Hierarchy:Hierarchy:

– White tobacco farmers.White tobacco farmers.– freed indentured, poor whites; freed indentured, poor whites; – African-Americans.African-Americans.

Education for Aristocrats only Education for Aristocrats only (UVA, Private colleges): not (UVA, Private colleges): not much spending on public much spending on public education.education.

No federal involvement: No federal involvement: Thomas Thomas Jefferson/antifederalists.Jefferson/antifederalists.

Little spending on Little spending on infrastructure well into the infrastructure well into the 1960s1960s

Borderlanders: Greater Borderlanders: Greater Appalachia: W.Va, West Va. W. Appalachia: W.Va, West Va. W.

Carolina, W. Ga, Ozarks, Carolina, W. Ga, Ozarks, Kentucky, So Ohio, S. Indiana, Kentucky, So Ohio, S. Indiana,

TennTenn Scots Irish: escaping Scots Irish: escaping English abuse.English abuse.

Highly ClannishHighly Clannish Belief Local Control by Belief Local Control by

elders.elders. Warrior Class, VERY Warrior Class, VERY

INDEPENDENTINDEPENDENT Education less imp. Know Education less imp. Know

your letters.your letters. Frontiersman: cities not Frontiersman: cities not

planned, random, no planned, random, no schoolsschools

Think: Guns, God and Think: Guns, God and NascarNascar

Borderlanders: Appalachia, W. Borderlanders: Appalachia, W. Ga. Kentucky, Tennesee, Ga. Kentucky, Tennesee,

Arkansas, S. Missouri.Arkansas, S. Missouri. Fought as much against Tidewater elite in Fought as much against Tidewater elite in

Revolution as British.Revolution as British. Used Whiskey as currency: Whisky Used Whiskey as currency: Whisky

Rebellion, Bootleggers.Rebellion, Bootleggers. NOT slave owners, generally. Fought NOT slave owners, generally. Fought

equally North and South in CW.equally North and South in CW. Area ecology raped by New York Area ecology raped by New York

Industrialists need for timber, then coal, Industrialists need for timber, then coal, fueled anti Yankee sentiments. (and Civil fueled anti Yankee sentiments. (and Civil War, reconstruction)War, reconstruction)

Been impoverished since the beginning.Been impoverished since the beginning.

Borderlanders: Greater Borderlanders: Greater AppalachiaAppalachia

Private Protestant,Private Protestant,– Personal redemption;Personal redemption;– Emotional, Emotional, – Literal interpretation of Literal interpretation of

BibleBible Belief in rapture, return to Belief in rapture, return to

Jerusalem for 2Jerusalem for 2ndnd coming. coming. Question scientific theories Question scientific theories

like evolution and global like evolution and global warmingwarming

Social conservatives: Guns, Social conservatives: Guns, Gods and NASCAR, anti Gay Gods and NASCAR, anti Gay Marriage, Pro Life;Marriage, Pro Life;

State’s Rights. Resent State’s Rights. Resent interference from interference from “carbetbaggers”“carbetbaggers”

Creation MuseumCreation Museum Petersburg, Ky.Petersburg, Ky.

Deep SouthDeep South: Ga. S. Carolina, : Ga. S. Carolina, Ala., Mississippi, Louisiana, Ala., Mississippi, Louisiana,

TexasTexas Plantation Cotton chattel slavery: Plantation Cotton chattel slavery: from sugar islands and Ga.from sugar islands and Ga.

Deeply hierarchal social order:Deeply hierarchal social order:– Aristocratic whites, Aristocratic whites, – poor whites,poor whites,– blacks. blacks. – More radicalMore radical than Tidewater than Tidewater

South shall rise again! Civil War: South shall rise again! Civil War: war of Yankee aggression.war of Yankee aggression.

State’s Rights.State’s Rights. Feds are carpetbaggers;Feds are carpetbaggers; Blacks and poor whites in direct Blacks and poor whites in direct

economic competition: economic competition: sharecropperssharecroppers

No education for blacks and poor No education for blacks and poor whites. No need. No Money for whites. No need. No Money for schoolsschools

Under economic stress since Civil Under economic stress since Civil War.War.

Deep SouthDeep South Emotional, private Emotional, private

Protestants. Personal Protestants. Personal redemption.redemption.

Literal interpretation Literal interpretation of Bibleof Bible

Belief in Rapture: Belief in Rapture: return to Jerusalem for return to Jerusalem for 22ndnd coming. coming.

Question scientific Question scientific theories: Evolution, theories: Evolution, global warming. Pro global warming. Pro Gun, Pro Life Gun, Pro Life (one abortion (one abortion clinic surviving in Mississippi, clinic surviving in Mississippi, home of Roe.V Wadehome of Roe.V Wade. . Texas v. Texas v. NY)NY)

Gone With the WindGone With the Wind

Not that long agoNot that long ago

Far West: Nevada, Wyoming, Far West: Nevada, Wyoming, Idaho, Dakotas, Montana, Utah, Idaho, Dakotas, Montana, Utah,

ColoradoColorado Sparsely populated.Sparsely populated. Not overly religious compared Not overly religious compared

with Dixie (except Utah)with Dixie (except Utah) Controlled politically Controlled politically

Mining, corporate Mining, corporate interests and mega interests and mega ranchersranchers

Much land owned by Feds, Much land owned by Feds, resented.resented.

Formed out of Railroad tracts Formed out of Railroad tracts sold to farmers from East.sold to farmers from East.

Can go either direction: some Can go either direction: some battlegrounds states, differ battlegrounds states, differ with Dixie and Borderlanders with Dixie and Borderlanders on some issues.on some issues.

EPA is a pain vs. EPA is a pain vs. Environmentalists.Environmentalists.

Belief in individualism. Pro Belief in individualism. Pro Gun.Gun.

El Norte: Parts of Texas, El Norte: Parts of Texas, Nevada, Ariz. New Mexico, Nevada, Ariz. New Mexico,

Colorado, Calif.Colorado, Calif. Here before English, Here before English,

left over from Spanish left over from Spanish Conquest.Conquest.

Closer culturally to Closer culturally to Northern Mexicans Northern Mexicans than whites or So. than whites or So. Mexicans.Mexicans.

Never had much Never had much political power: that’s political power: that’s changing. Areas they changing. Areas they live, controlled by live, controlled by whites.whites.

Caesar Chaves: United Caesar Chaves: United Farm Workers.Farm Workers.

The Republican Coalition: The Republican Coalition: historically conservativehistorically conservative

Tidewater: hierarchal Tidewater: hierarchal Greater Appalachia/Borderlanders: fiercly independent, Greater Appalachia/Borderlanders: fiercly independent,

clannish.clannish. Deep South: VERY anti Yankee, hierarchal.Deep South: VERY anti Yankee, hierarchal. (Mostly) Far West: independent. Guns. Federal Lands.(Mostly) Far West: independent. Guns. Federal Lands. Consistently votes anti-federal, State’s and local rights.Consistently votes anti-federal, State’s and local rights.

– Small GovernmentSmall Government– Against ObamacareAgainst Obamacare– Suspicious of welfareSuspicious of welfare– Less regulation of industry (right to work states)Less regulation of industry (right to work states)

Socially conservative: Socially conservative: – anti-Gay marriage, anti-Gay marriage, – pro Life, pro Life, – Anti-immigrant.Anti-immigrant.– Question Science: evolution, global warming. Question Science: evolution, global warming. – Strong supporters of Israeli control of Jerusalem, Holy Land.Strong supporters of Israeli control of Jerusalem, Holy Land.

The Democratic Coalition: The Democratic Coalition: consistently Progressiveconsistently Progressive

Yankeedom: most progressive, communal.Yankeedom: most progressive, communal. New Netherlands: business and finance.New Netherlands: business and finance. Midlanders: toleration, communal.Midlanders: toleration, communal. Left Coast: progressive, new ideas.Left Coast: progressive, new ideas. Have voted progressive, regardless of Political Have voted progressive, regardless of Political

Party of time. (yesterday’s Republicans, today’s Party of time. (yesterday’s Republicans, today’s Democrats)Democrats)– Pro Gay Marriage;Pro Gay Marriage;– Pro ChoicePro Choice– Pro Obamacare or Single Payer.Pro Obamacare or Single Payer.– Pro Science.Pro Science.– Dream ActDream Act– For Government regulation of industry.For Government regulation of industry.– Federal government seen as allyFederal government seen as ally

Swing States are often split Swing States are often split culturallyculturally

Virginia:Virginia:– Northern Virginia is more midlander Northern Virginia is more midlander

culturally. Arlington/Alexandria should culturally. Arlington/Alexandria should be in New England. Fairfax be in New England. Fairfax Moderate/conservative. Moderate/conservative.

– Everything South is more Tidewater.Everything South is more Tidewater.– West is Borderlander.West is Borderlander.

Red and Blue 2012:Red and Blue 2012:Obama needs 23-50Obama needs 23-50Romney needs 79Romney needs 79

Predict based on Cultural Predict based on Cultural NaturesNatures

Obama needs 23, Romney 79Obama needs 23, Romney 79

RCP With PollsRCP With Polls

Real Clear Politics MapReal Clear Politics Map http://www.realclearpolitics.com/epolhttp://www.realclearpolitics.com/epol

ls/2012/president/2012_elections_elels/2012/president/2012_elections_electoral_college_map.htmlctoral_college_map.html

LA TimesLA Times

LA Times Electoral MapLA Times Electoral Map

Today’s Economic/Government Today’s Economic/Government TheoryTheory

Market Oriented StatesMarket Oriented States: : – Free markets work, Government stay out: Free markets work, Government stay out: Tea Tea

Party Republicans.Party Republicans. Welfare States/SocialismWelfare States/Socialism: :

– People’s needs are a social right:People’s needs are a social right:– Unemployment insurance, health care and Unemployment insurance, health care and

retirement guaranteed. retirement guaranteed. DemocratsDemocrats State CenteredState Centered: :

– The government should control, help and guide The government should control, help and guide economy: China.economy: China.

– Usually Single Party.Usually Single Party.

Economic SystemsEconomic Systems

Free Market CapitalismFree Market Capitalism: : – unregulated, investment and return unregulated, investment and return

system.system.– Winners get rich, losers try again.Winners get rich, losers try again.– Creative Destruction, some get wiped out Creative Destruction, some get wiped out

to make way for innovationto make way for innovation– Adam Smith: Adam Smith: Wealth of NationWealth of Nation (1776), (1776),

suggested this is the best system.suggested this is the best system.– Forced on South American countries in Forced on South American countries in

1980s and was very effective.1980s and was very effective.

Economic SystemEconomic System

Socialism: Socialism: – System of market capitalism, where the System of market capitalism, where the

government makes sure the losers have government makes sure the losers have economic protections through economic protections through unemployment insurance, health care, unemployment insurance, health care, guaranteed retirement, etc.guaranteed retirement, etc.

– Embraced Embraced by all the industrialized by all the industrialized EuropeanEuropean countries countries

– Supported by high tax rates. Supported by high tax rates. Question of sustainablility.Question of sustainablility.

Economic Theories in the Economic Theories in the Election and beyondElection and beyond

John Maynard KeynesJohn Maynard Keynes: Keynesian economics. : Keynesian economics. Economist from Depression.Economist from Depression.– Democratic visionDemocratic vision– Stimulus and Tarp were good ideas.Stimulus and Tarp were good ideas.

Friederich Hayek/ChicagoFriederich Hayek/Chicago school/Austrian school. school/Austrian school.– Tea Party Republicans.Tea Party Republicans.– Stimulus Bad: tax cuts GoodStimulus Bad: tax cuts Good– Lowering the budget deficits and National debt most Lowering the budget deficits and National debt most

important.important. Trickle-downTrickle-down: Reagan era,(Laffer curve).: Reagan era,(Laffer curve).

– Current Republican vision.Current Republican vision.– Reduced taxes on wealth and money will “trickle down” Reduced taxes on wealth and money will “trickle down”

through the economy.through the economy.– Economy will grow so big that tax revenues will incresase.Economy will grow so big that tax revenues will incresase.

http://www.youtube.com/watch?v=d0nERTFo-Skhttp://www.youtube.com/watch?v=d0nERTFo-Sk

If tax rates go up, you If tax rates go up, you eventually get less tax eventually get less tax

revenue, as economy shrinks.revenue, as economy shrinks.

Gross Domestic ProductGross Domestic Product

All the money (value) generated by our All the money (value) generated by our whole economy in a year.whole economy in a year.

U.S. :Approximately 15 Trillion, largest U.S. :Approximately 15 Trillion, largest in world, by far.in world, by far.

About the same as whole European About the same as whole European Union.Union.

China about 7 TrillionChina about 7 Trillion Per Capita (ppp) 45,000 U.S. (China Per Capita (ppp) 45,000 U.S. (China

8400)8400)

GDP Comparison: industrialized GDP Comparison: industrialized worldworld

Just to give you an idea: U.S. Just to give you an idea: U.S. about about

45K45K

2008 2008 Crash/Recession/DepressionCrash/Recession/Depression

Monetary vs. FiscalMonetary vs. Fiscal

Fiscal PolicyFiscal Policy: Spending is what the : Spending is what the government spends its money on: government spends its money on: defense and domestic.defense and domestic.

Right now:Right now:– Approximately 15 Trillion in debt.Approximately 15 Trillion in debt.– Running trillion dollar yearly deficits.Running trillion dollar yearly deficits.

Debt: how do we stand? By Debt: how do we stand? By 2030, 200% of GDP2030, 200% of GDP

Monetary PolicyMonetary Policy Is how much money flows into the Is how much money flows into the

economy and how fast it flows.economy and how fast it flows. Quantitative Easing: paying bills with Quantitative Easing: paying bills with

printed moneyprinted money Controlled by the Federal Reserve, an Controlled by the Federal Reserve, an

independent board.independent board. Sets interest rates (prime)Sets interest rates (prime) Prints moneyPrints money About 40% of the money we borrow we About 40% of the money we borrow we

borrow from the Fed, they print it. borrow from the Fed, they print it. – Watch for inflation, very low now.Watch for inflation, very low now.

KeynesianKeynesian

The Economy can be controlled The Economy can be controlled manipulating fiscal and monetary policy.manipulating fiscal and monetary policy.

A A recession recession is when the GDP shrinks.is when the GDP shrinks. Fixes:Fixes:

– Fiscal policy: spend more money (Obama)Fiscal policy: spend more money (Obama)– Monetary policy: lower interest rates and Monetary policy: lower interest rates and

print money. print money. – If prices go up (inflation), raise interest If prices go up (inflation), raise interest

rates.rates.

Keynesian Critics (Tea Party Keynesian Critics (Tea Party Republicans)Republicans)

Say that Keynesian practices distort Say that Keynesian practices distort the free markets, creating booms and the free markets, creating booms and busts, picking winners and losers.busts, picking winners and losers.

Left to itself, the Free Markets will Left to itself, the Free Markets will create the best, most efficient create the best, most efficient economy.economy.

There will be business cycles, but they There will be business cycles, but they will be moderate.will be moderate.

Worked in South America.Worked in South America.

Hayek (Tea Party)Hayek (Tea Party) The government should stay out of the The government should stay out of the

economics business, sound policies aren’t economics business, sound policies aren’t sexy but they work.sexy but they work.

Keep government debt low, money will build Keep government debt low, money will build up in banks, lowering interest rates up in banks, lowering interest rates naturally.naturally.

If inflation starts, interest rates naturally will If inflation starts, interest rates naturally will go up, through market forces.go up, through market forces.

Regulations also distort market, let the Regulations also distort market, let the market control what businesses do. If they market control what businesses do. If they mess up, people won’t by their products, mess up, people won’t by their products, and they’ll go bankrupt. That fear will keep and they’ll go bankrupt. That fear will keep them in line.them in line.

Hayek Critics (Democrats)Hayek Critics (Democrats)

We tried this unregulated economy We tried this unregulated economy and got the Great Depression.and got the Great Depression.

Do you want to wait until we have a Do you want to wait until we have a mass die off from tainted food before mass die off from tainted food before the business that produced it goes the business that produced it goes out of business?out of business?

Trickle Down (Republicans)Trickle Down (Republicans)

Reagan Era scheme. (George H.W. Bush Reagan Era scheme. (George H.W. Bush called “voodoo economics”).called “voodoo economics”).

Reduce taxes on rich. The will then invest Reduce taxes on rich. The will then invest money and hire people and increase the money and hire people and increase the size of the GDP until the economy grows size of the GDP until the economy grows so much, the government will acutally so much, the government will acutally bring in more money in taxes.bring in more money in taxes.

Sort of a Keynesian plan, where Sort of a Keynesian plan, where government uses fiscal and monetary government uses fiscal and monetary policy to control the economy.policy to control the economy.

Trickle down Critics (including Trickle down Critics (including David Stockman, Reagan’s David Stockman, Reagan’s

budget chief)budget chief) It has never worked.It has never worked. It increases debt, without increasing It increases debt, without increasing

GDPGDP Only benefits the rich.Only benefits the rich.

Ryan BudgetRyan Budget

Large cuts in domestic spending to Large cuts in domestic spending to reduce debt and “bend the curve.”reduce debt and “bend the curve.”

Large Tax cuts for rich and middle Large Tax cuts for rich and middle class.class.

Change Medicare and Social Security to Change Medicare and Social Security to a more private, market-based plan.a more private, market-based plan.

Give seniors vouchers so that they can Give seniors vouchers so that they can buy their health insurance on private buy their health insurance on private market.market.

Reduce regulations on businesses.Reduce regulations on businesses.

Differences in Economic Differences in Economic Plans.Plans.

ObamaObama– Cut taxes on Middle Cut taxes on Middle

Class to stimulate Class to stimulate growth.growth. Economic growth will Economic growth will

increase revenue increase revenue enough to slow debtenough to slow debt

– Cut some spending but Cut some spending but leave entitlements leave entitlements largely uncutlargely uncut

– Cut defenseCut defense– AFA (Obamacare) bend AFA (Obamacare) bend

curve of Heath Care curve of Heath Care costs.costs.

RomneyRomney– Cut Taxes on Wealthy Cut Taxes on Wealthy

and Middle Classand Middle Class– Leave DefenseLeave Defense– Get rid of AFA Get rid of AFA

(Obamacare)(Obamacare)– Dramatically cut Dramatically cut

spending on spending on Entitlements:Entitlements: Social SecuritySocial Security MedicaidMedicaid Medicare (Ryan)Medicare (Ryan) UnemploymentUnemployment Welfare.Welfare.

PreObamacare Health CarePreObamacare Health Care

Seniors: covered by Medicare (government Seniors: covered by Medicare (government insurance.)insurance.)

Well-employed: covered in combination Well-employed: covered in combination with employers.with employers.– Typically 2/3 employer; 1/3 EmployeeTypically 2/3 employer; 1/3 Employee– If you lose your job, you lose insurance.If you lose your job, you lose insurance.

Working poor: uninsured, use emergency Working poor: uninsured, use emergency room.room.

Poor: covered by Medicaid (government Poor: covered by Medicaid (government insurance)insurance)

What to Do?What to Do?

Attempts to take the Attempts to take the 50 million 50 million uninsureduninsured and put them in a and put them in a subsidized private market for health subsidized private market for health insurance, so they don’t have to use the insurance, so they don’t have to use the emergency room as their primary health emergency room as their primary health provider.provider.

About 70% of bankruptcy are caused by About 70% of bankruptcy are caused by health related problems. Average bill for health related problems. Average bill for hospital care over $20,000. (includes those hospital care over $20,000. (includes those who don’t have insurance who don’t have insurance and those who and those who dodo, but can’t afford out of pocket costs., but can’t afford out of pocket costs.

CurrentlyCurrently

Medicare (65 +) 50 millionMedicare (65 +) 50 million Insured through employer 150 Insured through employer 150

Million Million Uninsured 50 millionUninsured 50 million Medicaid (poor) 60 MillionMedicaid (poor) 60 Million

Under Affordable Care ActUnder Affordable Care ActObamacareObamacare

Medicare: 50 MillionMedicare: 50 Million Insured: 200 MillionInsured: 200 Million Uninsured: small number paying Uninsured: small number paying

taxes/penalty.taxes/penalty. Medicaid: expanded to 80 million or Medicaid: expanded to 80 million or

so. so. (Many Red states saying they will not accept the (Many Red states saying they will not accept the Federal money designed to help.)Federal money designed to help.)

Eligibility by State: notice Eligibility by State: notice cultural trend?cultural trend?

Is Race an Issue?Is Race an Issue?

ObamacareObamacare

Seniors: Medicare: No Change.Seniors: Medicare: No Change. Well-employed Well-employed No ChangeNo Change, except, except

– Can take insurance with youCan take insurance with you– Can’t be denied: prexisting conditions.Can’t be denied: prexisting conditions.– Kids can stay until 27Kids can stay until 27– No lifetime capNo lifetime cap– Free well care, women’s careFree well care, women’s care– No discrimination for sexNo discrimination for sex

Obamacare:Obamacare:The MandateThe Mandate

Working poor/not insured (young and Working poor/not insured (young and fearless)fearless)::– Must buy health insurance from “exchanges”.Must buy health insurance from “exchanges”.– If can’t afford, government pays/helps.If can’t afford, government pays/helps.– If can afford, you have to buy or pay a “tax” If can afford, you have to buy or pay a “tax”

((Mandate)Mandate)– No more emergency room “tax” on the rest of No more emergency room “tax” on the rest of

us.us. Currently, unpaid “bills” are passed on to government Currently, unpaid “bills” are passed on to government

or rest of us in higher prices: $60 aspirins, etc.or rest of us in higher prices: $60 aspirins, etc.

ObamacareObamacare

Poor: covered by Medicaid.Poor: covered by Medicaid.– Increase in number by about 20 million Increase in number by about 20 million

expected.expected.

Ryan Plan: designed to bend Ryan Plan: designed to bend the curve in 10 years.the curve in 10 years.

SeniorsSeniors: given : given vouchersvouchers to pay for to pay for health insurance. health insurance. – If not enough, burden shifts to them.If not enough, burden shifts to them.– Vouchers indexed to inflation: currently health Vouchers indexed to inflation: currently health

insurance goes up twice that rate.insurance goes up twice that rate. Ryan assumes increases will decreast because of Ryan assumes increases will decreast because of

competition.competition. Well-employed:Well-employed: no change no change Working PoorWorking Poor: :

– back to emergency room, cost passed on. back to emergency room, cost passed on. – charitycharity

Poor:Poor: Medicaid reduced numbers qualify. Medicaid reduced numbers qualify.

Single Payer (Liberal Single Payer (Liberal position)position)

Health Care is right, not a commodity.Health Care is right, not a commodity. Everyone gets Medicare coverage.Everyone gets Medicare coverage. Done everywhere but here.Done everywhere but here. Very expensive, but government control Very expensive, but government control

means government control of pricesmeans government control of prices– See Japan, Britain, France.See Japan, Britain, France.

Ain’t gonna happen, too many interest Ain’t gonna happen, too many interest groups aligned against it.groups aligned against it.– Obama didn’t even try, angered liberal Obama didn’t even try, angered liberal

base.base.

Former Vs. Obamacare (ACA, Former Vs. Obamacare (ACA, 2014)2014)

Formerly:Formerly: Seniors: Medicare Seniors: Medicare

(50m)(50m) Well-employed: Well-employed:

employer employer based(120m)based(120m)

Uninsured: (50m)Uninsured: (50m)– go to emergency room,go to emergency room,– pay out of pocket, pay out of pocket, – deficits passed alongdeficits passed along

Poor: Medicaid (50m)Poor: Medicaid (50m)– VARIES BY STATEVARIES BY STATE

ObamacareObamacare:: Seniors: MedicareSeniors: Medicare Well-employed: Well-employed:

employer based. employer based. *Protecton laws.*Protecton laws.

Uninsured: Uninsured: Must buyMust buy, , government help government help working poor. working poor.

Poor: Medicaid.Poor: Medicaid.– ExpandedExpanded– Paid by fed.Paid by fed.

Major ComplaintsMajor Complaints

Government forcing people to buy a Government forcing people to buy a product. Health Care NOT a right!product. Health Care NOT a right!

Government will be able regulate Government will be able regulate industry, distorting economics, industry, distorting economics, inefficient. inefficient. – Death Panels!Death Panels!

Profit based health care:Profit based health care:– More effectiveMore effective– cheapercheaper

Major supportsMajor supports

Health care currently doesn’t cover Health care currently doesn’t cover everyone, it’s a right in an industrialized everyone, it’s a right in an industrialized economy.economy.

Health Insurance companies Health Insurance companies – work to maximize profits,work to maximize profits,

kick off sick, exclude those who are potentially more kick off sick, exclude those who are potentially more expensive, expensive,

charge whatever the market will bear.charge whatever the market will bear.

If government controls prices, it can reduce If government controls prices, it can reduce costs for nation.costs for nation.

If people want more, they can still buy it.If people want more, they can still buy it.

Here’s the Problem and Ryan’s Here’s the Problem and Ryan’s PointPoint

Medicare WILL bankrupt the country, Medicare WILL bankrupt the country, probably by 2030. probably by 2030. – He’s right, but what to do?He’s right, but what to do?

We spend 16-18% of GDP on Health We spend 16-18% of GDP on Health Care. Next closest about 12% and Care. Next closest about 12% and they cover everyone.they cover everyone.

Opponents to nationalized believe Opponents to nationalized believe our’s is better, not supported by our’s is better, not supported by statistics.statistics.

Ryan’s MedicareRyan’s Medicare Indexed to InflationIndexed to Inflation Offers option to stay on Offers option to stay on

current Medicare or current Medicare or Buy PrivatelyBuy Privately

Assumes cost decline Assumes cost decline because of because of competition.competition.

Higher cost for those Higher cost for those who can afford, lower who can afford, lower for those who can’t.for those who can’t.

Doesn’t start for 10 Doesn’t start for 10 years.years.

As percent of GDPAs percent of GDP

What’s Happening?What’s Happening?

http://http://theincidentaleconomist.com/theincidentaleconomist.com/wordpress/health-outcomes-wordpress/health-outcomes-

report-cards-by-country/report-cards-by-country/

The U.S. EcononmyThe U.S. Econonmy

How To Buy a HouseHow To Buy a House

Normally, when you buy a house you Normally, when you buy a house you mustmust -bring some of your own -bring some of your own money (5%) money (5%) -borrow money from -borrow money from the bank the the bank the repayment of which is repayment of which is called a called a mortgage.mortgage.

Your money

+

Mortgage Loan from

You buyHouse

PLUS

Regular mortgageRegular mortgage

You, then, repay the bank every You, then, repay the bank every month for your mortgage.month for your mortgage.

You make monthlyPayments to bank.

If you don’t pay the bank, the bank If you don’t pay the bank, the bank forecloses forecloses on you and takes your house on you and takes your house and sells it to someone else to get their and sells it to someone else to get their

Mortgage money back.Mortgage money back.

And you lose the money you put in:And you lose the money you put in:

Mortgage Back SecuritiesMortgage Back Securities

If enough people buy houses, the Banks If enough people buy houses, the Banks would run out of money to lend as would run out of money to lend as mortgages, so there needs to be a way for mortgages, so there needs to be a way for banks to get more money, so they can banks to get more money, so they can make more loans.make more loans.– So, the bank sells all their mortgages in big So, the bank sells all their mortgages in big

bundles of mortgages called bundles of mortgages called Mortgage Mortgage Backed SecuritiesBacked Securities: :

– They take fees for their effort, those are their They take fees for their effort, those are their profits.profits.

– More mortgages, more fees, more profits.More mortgages, more fees, more profits.

Fannie and FreddieFannie and Freddie

Fannie and Freddie are called Fannie and Freddie are called Secondary lenders. Secondary lenders. – They buy the Mortgaged Back Securities from They buy the Mortgaged Back Securities from

the banks.the banks.

Mortgage Back Securities

----

::::

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<Banks get their money back, to make new mortgages.

>>

^^^

SoSo

The more mortgages a bank places The more mortgages a bank places the more money in FEES they made:the more money in FEES they made:

And So Does Freddie and And So Does Freddie and FannieFannie

because they sell their because they sell their Mortgage Back SecuritiesMortgage Back Securities

Fannie and Freddie Sold the Mortgage Fannie and Freddie Sold the Mortgage Back Securities they bought from Banks Back Securities they bought from Banks to to INSTITUTIONAL INVESTORSINSTITUTIONAL INVESTORS: like : like big Insurance Companiesbig Insurance Companies, , Pension Pension FundsFunds, , Oil Rich NationsOil Rich Nations, OTHER , OTHER nationsnations, and , and Billionaires Billionaires and and

Fannie and Freddie Make Fees and they Fannie and Freddie Make Fees and they get richer and richer.get richer and richer.

UltimatelyUltimately

The money for House Mortgages The money for House Mortgages comes from these Institutional comes from these Institutional Investors who need long term return Investors who need long term return on their money:on their money:

Institutional investors>>>>>Fannie Institutional investors>>>>>Fannie and Freddie>>>To Mortgage and Freddie>>>To Mortgage Banker>>>>to house Banker>>>>to house buyer>>>>>House Sellerbuyer>>>>>House Seller

All in all, pretty safe system. All in all, pretty safe system. Most people repay because Most people repay because

regulations required:regulations required:*Buyers required to use some of their own money. No *Buyers required to use some of their own money. No moral Hazard.moral Hazard.*The Bank Checked the borrower’s credit history.*The Bank Checked the borrower’s credit history.*The Bank Made sure the borrower had a job that pays *The Bank Made sure the borrower had a job that pays enough to make the mortgage payment.enough to make the mortgage payment.

In the late 1990s In the late 1990s

Bill Clinton signed bill getting rid of Bill Clinton signed bill getting rid of Glass SteagallGlass Steagall

The DepressionThe Depression

Because of the Great Depression the Glass-Because of the Great Depression the Glass-Steagall Act was passed, to prevent Steagall Act was passed, to prevent commercial banks from making risky commercial banks from making risky investments.investments.– Commercial BanksCommercial Banks: take money from depositors : take money from depositors

and lend it to homeowners and consumers at and lend it to homeowners and consumers at interest. interest. Deposits are insured by government.Deposits are insured by government.

– Wall Street BanksWall Street Banks: take money from big money : take money from big money investors and invest it into business at high investors and invest it into business at high risk/high reward. risk/high reward. If you lose: toughIf you lose: tough

In 2000In 2000 George W. Bush is elected, George W. Bush is elected,

– He’s a free market capitalist and hates He’s a free market capitalist and hates regulations, regulations,

– So doesn’t strickly enforce regulations So doesn’t strickly enforce regulations against Wall Street Bankers.against Wall Street Bankers.

Wall Street Banker

Some TermsSome Terms

GDPGDP: all the goods and services a : all the goods and services a country produces: its WEALTH.country produces: its WEALTH.

Fiscal PolicyFiscal Policy: How much money the : How much money the government taxes and spends.government taxes and spends.

Monetary PolicyMonetary Policy: set by the Federal : set by the Federal Reserve Bank: Reserve Bank: – How much money is in the Economy.How much money is in the Economy.– How high or low interest rates will be.How high or low interest rates will be.

After 911 Fear of Recession After 911 Fear of Recession (shrinking of GDP)(shrinking of GDP)

So, Bush wants to STIMULATE the So, Bush wants to STIMULATE the economy by increasing Real Estate economy by increasing Real Estate purchasing. (Irony alert: Keynesian)purchasing. (Irony alert: Keynesian)

The FED lowers interest rates, The FED lowers interest rates, making a new home owners payment making a new home owners payment to bank less:to bank less:– Monthly payment = Amount of Monthly payment = Amount of

mortgage and interest.mortgage and interest.

Wall Street Gets in the Wall Street Gets in the GameGame

Wall Street wanted to get into the Wall Street wanted to get into the lucrative housing Mortgage game.lucrative housing Mortgage game.

Created something called a Created something called a SUB SUB Prime Mortgage.Prime Mortgage.

No pesky regulations of bankingNo pesky regulations of banking

How Subprime Mortgages How Subprime Mortgages Differed from Conventional Differed from Conventional

OnesOnes No Down Payment Required. (Moral No Down Payment Required. (Moral

Hazard)Hazard) Bad Credit History OK! More risk, Bad Credit History OK! More risk,

more gain!more gain! Unverified Income: Liar Loans.Unverified Income: Liar Loans.

ARMS: Adjustable Rate, Sub ARMS: Adjustable Rate, Sub Prime MortgagesPrime Mortgages

In the first few years, these In the first few years, these mortgages had VERY low payments. mortgages had VERY low payments. (Anyone could afford)(Anyone could afford)

After the first few years, the Payments After the first few years, the Payments went WAY up. (Almost no one could went WAY up. (Almost no one could afford).afford).

The GimmickThe Gimmick: After the first few : After the first few years, you could borrow another years, you could borrow another mortgage with a low payment and mortgage with a low payment and pay off the first one.pay off the first one.

Sub Prime MortgagesSub Prime Mortgages

Original Mortgage: $500,000-payment Original Mortgage: $500,000-payment low for two years, then goes way up.low for two years, then goes way up.

Go to bank create another mortgage Go to bank create another mortgage for $500,000 with a low payment first for $500,000 with a low payment first few years: use money to pay off few years: use money to pay off Original one.Original one.

People often borrowed $550,000, paid People often borrowed $550,000, paid off original one, and kept the leftover off original one, and kept the leftover $50,000 to buy things with.$50,000 to buy things with.

Win Win WinWin Win Win

Everybody Wins:Everybody Wins:– Sellers have more buyers to buy their Sellers have more buyers to buy their

house (demand skyrockets)house (demand skyrockets)– Buyers with no way to pay back loan, Buyers with no way to pay back loan,

gets the American Dream.gets the American Dream.– Mortgage Bankers make fees everytime Mortgage Bankers make fees everytime

a loan is made or refinanced.a loan is made or refinanced.– The High, newly created demand, makes The High, newly created demand, makes

home prices for everyone go way up.home prices for everyone go way up.

But who would buy Mortgage But who would buy Mortgage Back Securities based on these Back Securities based on these

shady loans?shady loans? Wall Street, that’s who.Wall Street, that’s who. They funneled Trillions into the They funneled Trillions into the

Amerian housing market.Amerian housing market. The only way they could lose is if The only way they could lose is if

housing prices quit going up, or housing prices quit going up, or horrors, went down.horrors, went down.

Wall Street Would sell these Wall Street Would sell these “subprime” mortgage backed “subprime” mortgage backed

securities.securities. To “Insitutional investors”To “Insitutional investors”

– Insurance Companies (AIG)Insurance Companies (AIG)– Pension funds (Va Teachers retirement Pension funds (Va Teachers retirement

plan)plan)– Nation States: (Iceland, etc)Nation States: (Iceland, etc)– Mutual Funds (IRAs)Mutual Funds (IRAs)

Rating AgenciesRating Agencies

Rated this Junk: AAARated this Junk: AAA

In 2008In 2008

Prices for houses rose so high that Prices for houses rose so high that even with Sub Prime Mortgages, even with Sub Prime Mortgages, demand went down. (Predictable).demand went down. (Predictable).

When Demand dropped, Prices When Demand dropped, Prices dropped.dropped.

Dropped Fast.Dropped Fast.

Owners with Sub primesOwners with Sub primes

Walked away, leaving a glut of Walked away, leaving a glut of houses on the Market. (moral hazard)houses on the Market. (moral hazard)

Prices dropped further: 9 Trillion Prices dropped further: 9 Trillion dollars evaporated from economy.dollars evaporated from economy.

Anyone who made money from Anyone who made money from housing, was laid off. Unemployment housing, was laid off. Unemployment rates skyrocketed.rates skyrocketed.

Obama elected Preident.Obama elected Preident.

TARPTARP

Banks lost So much money that we Banks lost So much money that we were endanger of the entire banking were endanger of the entire banking system collapsing, wore that the system collapsing, wore that the Great Depression.Great Depression.

U.S. Government (and European U.S. Government (and European govts) bail out the banks to save the govts) bail out the banks to save the economy.economy.

Recession Reocurs because of Recession Reocurs because of out of work workers.out of work workers.

What to do?What to do?– Stimulate: spend money to keep the Stimulate: spend money to keep the

economy moving and raise taxes on economy moving and raise taxes on wealthy. orwealthy. or

– Cut spending: making everything Worse.Cut spending: making everything Worse.

Liquidity TrapLiquidity Trap

Businesses had money, but no one to Businesses had money, but no one to buy their goods. Money stopped buy their goods. Money stopped flowing through economy.flowing through economy.

People with Money were scared to People with Money were scared to spend so paid of debt and saved. spend so paid of debt and saved. Lowered demand further.Lowered demand further.

So, the spender of last resort is the So, the spender of last resort is the government.government.

Most Economist wanted to take Most Economist wanted to take a Keynesian Stimulus Coursea Keynesian Stimulus Course

Congress okayed about 800 Billion, Congress okayed about 800 Billion, about ½ what economist believed about ½ what economist believed would be necessary.would be necessary.

The national debt Ballooned The national debt Ballooned because of:because of:

Bush Tax cuts to EVERYONE, including Bush Tax cuts to EVERYONE, including wealthy.wealthy.

Bush Drugs for seniors.Bush Drugs for seniors. Two Wars: Afghanistan and Iraq.Two Wars: Afghanistan and Iraq. The lose of Tax Revenue because of The lose of Tax Revenue because of

Recession.Recession. The Stimulus package and Tarp (the The Stimulus package and Tarp (the

least expensive) to save the economy.least expensive) to save the economy.

This doesn’t include Medicaid This doesn’t include Medicaid Plan B, which was a trillion of Plan B, which was a trillion of

it.it.

Should we freak out?Should we freak out?Should we raise taxes?Should we raise taxes?

The DebateThe Debate Do you keep spending and cut taxes on the Do you keep spending and cut taxes on the

middle class spenders to get out of the middle class spenders to get out of the Recession?Recession?– Increases debt in the short termIncreases debt in the short term– Increases size of economy increasing tax Increases size of economy increasing tax

revenues and shrinking “relative size” of debt.revenues and shrinking “relative size” of debt. Do you cut the budget and slow spending Do you cut the budget and slow spending

from the government and CUT taxes from the government and CUT taxes further?further?– If we get debt down and Lower taxes on If we get debt down and Lower taxes on

Wealthy “investors” they will hirer workers to Wealthy “investors” they will hirer workers to stimulate the economy.stimulate the economy.