On Crime And A Lack of Punishment

Clayton Cramer has an interesting contrarian notion over at PJM challenging longheld assumptions about crime being related to unemployment rates and how we’ve got it all terribly wrong:

Crime and unemployment: everyone knows that they go together. Right? Unemployed people, desperate for enough money to pay their bills, buy groceries, and get medical care (since those heartless Republicans think “don’t get sick” is a health care plan), must turn to crime. At the very least, disheartened men sitting at home are going to lose their tempers, get into fights, and shoot their spouses.

Like most conventional wisdom among the elites, it turns out not to be true.

Mr. Cramer proceeds with several charts showing the declining crime rate in several violent categories which I’m not disputing.  What I contend is that what he’s calling a lack of correlation is based on a lack of causation.  Which may be lulling him into a false sense of security about his fellow man.  Something that’s not taken into account here is how the availability of easy revolving credit can effect these numbers.

Can we examine the credit histories of America’s Most Wanted?

Think about how when gas jumped up to over $4.00 a gallon a couple of summers ago and you had an increase in “drive-offs”.  People who make less than $15 an hour, simply cannot afford the gas to drive back and forth from work.  Well, they can’t afford to pay *cash* for it.  The working poor.

So everything is getting charged to the Visa or Mastercard with the expectation that making minimum monthly payments allows you to afford your lifestyle and not turn to crime.  Revolving credit allows you to weather the storm of temporary unemployment, underemployment or outside factors beyond your control like gas and food prices.  As long as you have available credit, you’ll charge it and in a worst case scenario file bankruptcy on it.

Robbing people, breaking into cars or homes and assaulting people for money is a risky and dangerous business.

Committing crimes in person opens you to all of the legal consequences of the criminal courts.  If you commit theft with a revolving credit facility that you have no intention of ever paying back the worst you are going to face will be a screaming wife, a frowny salesperson at Rooms-to-Go and a Chapter 7 Trustee.

The number of Americans filing for bankruptcy rose 14% in the last year. More consumers declared bankruptcy in the 2010 fiscal year than in any year since 2005, when changes to federal bankruptcy law caused a spike in filings.

Tough choice between the two.  99 weeks of unemployment pay gives you a two year cushion to help steer you in the direction of the latter.  In fact, our infinite Unemployment Bailout is essentially bailing out the Credit Card companies if we figure that these people would have filed bankruptcy two years ago.

Let’s also not ignore that the person who is unemployed or underemployed is the person whose dependent may be the criminal and whose financial support effects their decisions.  Assuming that violent, “street-level” crime is a young man’s game.  A young man who still lives at home with one parent.

Our economy is not going to get any better as long as credit keeps getting offered to people not qualified to receive it.  Have Bank of America and Chase learned that basic lesson yet?

With incomes generally flat to declining (in real terms) and interest rates at or below historic norms for better than a decade, it’s no wonder that Americans have become more reliant on credit to both smooth out the monthly cash burn as well as provide the extra funding for trips, home repairs, education, small discretionary purchases (cell phones and other personal technology) and other expenses that would have traditionally been drawn from income growth in decades past.

Many of these typical costs and expenses are the basis for driving our now largely service-based economy so in a sense, our overall economic growth has come partly as a result of our “access to” and “willingness to employ” credit.

Looking at the following chart although one could conclude that Americans are becoming more aware of the burdens of debt, cutting back to the tune of 9.43% on a year-over-year basis (nearly the most significant annual rate of decline on record), it’s more than likely the case that this contraction is occurring as a result of lenders simply continuing to pull back, limiting access to credit.

When available revolving credit dries up, your prisons will runneth over.  The Credit Card companies are happy to take your unemployment check but that money should not be sent out the door to make the same mistake all over again.

We’re a country that doesn’t make anything anymore.  We are simply employed to provide Customer Service to our decline.

On that note, I just may go to church this morning.

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