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by Wayne Lusvardi | Pasadena "Demography is destiny" is a phrase attributed to the 19th Century French father of sociology August Comte. And California's current budget crisis is due to the destiny of its demography and the loss of what is called "the culture wars" as much or more as it is to anything else. If such is the case, all the ballot propositions, budget cuts, and other proposed bureaucratic revenue raising machinations will have little effect in solving the long-term structural budget deficit in California. First off, you might ask how does something as material as California's budget crisis have anything to do with something as esoteric as social culture? By culture I mean "the power to name reality" as sociologist James David Hunter puts it. Law is not the opposite of culture but a powerful justifier and sacralizer. What the law names as reality can have a powerful influence on not only social things such as what is "marriage," but on material things like government budgets. And in our modern society what is legally considered a "family" and state budgets are interconnected in ways that neither side in the recent California "gay marriage" controversy or the State Supreme Court want to acknowledge. David Goldman writing in the May 2009 issue of First Things Magazine convincingly advances the proposition that America’s housing market and financial system collapsed because we lost the demographic culture wars even while social conservatives were prevailing in the same-sex marriage wars. Goldman aptly describes what happened with our financial meltdown as follows:

Think of it this way: Credit markets derive from the cycle of human life. Young people need to borrow capital to start families and businesses; old people need to earn income on the capital they have saved. We invest our retirement savings in the formation of new households. All the armamentarium of modern capital markets boils down to investing in a new generation so that they will provide for us when we are old.

To understand the bleeding in the housing market, then, we need to examine the population of prospective homebuyers whose millions of individual decisions determine whether the economy will recover. Families with children are the fulcrum of the housing market. Because single-parent families tend to be poor, the buying power is concentrated in two-parent families with children.

Now, consider this fact: America’s population has risen from 200 million to 300 million since 1970, while the total number of two-parent families with children is the same today as it was when Richard Nixon took office, at 25 million. In 1973, the United States had 36 million housing units with three or more bedrooms, not many more than the number of two-parent families with children—which means that the supply of family homes was roughly in line with the number of families. By 2005, the number of housing units with three or more bedrooms had doubled to 72 million, though America had the same number of two-parent families with children.

The number of two-parent families with children, the kind of household that requires and can afford a large home, has remained essentially stagnant since 1963, according to the Census Bureau. Between 1963 and 2005, to be sure, the total number of what the Census Bureau categorizes as families grew from 47 million to 77 million. But most of the increase is due to families without children, including what are sometimes rather strangely called “one-person families.”

In place of traditional two-parent families with children, America has seen enormous growth in one-parent families and childless families. The number of one-parent families with children has tripled. Dependent children formed half the U.S. population in 1960, and they add up to only 30 percent today. The dependent elderly doubled as a proportion of the population, from 15 percent in 1960 to 30 percent today.

If capital markets derive from the cycle of human life, what happens if the cycle goes wrong? Investors may be unreasonably panicked about the future, and governments can allay this panic by guaranteeing bank deposits, increasing incentives to invest, and so forth. But something different is in play when investors are reasonably panicked. What if there really is something wrong with our future—if the next generation fails to appear in sufficient numbers? The answer is that we get poorer.

The declining demographics of the traditional American family raise a dismal possibility: Perhaps the world is poorer now because the present generation did not bother to rear a new generation. All else is bookkeeping and ultimately trivial...

...From 1954 to 1970, for example, half or more of households contained two parents and one or more children under the age of eighteen. In fact as well as in popular culture, the two-parent nuclear family formed the normative American household. By 1981, when Ronald Reagan took office, two-parent households had fallen to just over two-fifths of the total. Today, less than a third of American households constitute a two-parent nuclear family with children.

Like the U.S., California, despite rampant immigration by family-oriented Hispanics, saw a leveling off of intact nuclear families from 2000 to 2007, the period over which the U.S. Census Bureau maintains data online. The number of Two Parent Families with Children grew from 4,117,036 in 2000 to only 4,218,469 in 2007, a minus half percent (-0.5%) decline relative to total population. Two Parent Families with Children constituted 35.8% of all state households in 2000 and 34.7% in 2007, a 1.1% decline. Meanwhile state population grew 8.1% over the same seven year period. Contrary to popular notions by some social conservatives, non-family households in California grew slightly in total numbers but remained the same proportion of the population - 10.5% - from 2000 to 2007. What apparently has grown in California are the number of single parent families due to divorce and out-of-wedlock births, not childless households. Unmarried partner households (same sex) only represented 0.9% of all households in 2007. Goldman is the forecaster of future shocks to California when he writes that demand for large-lot single family homes will drop nationally from 56 million today to 34 million in 2025—a whopping reduction of 40 percent. California's "golden" housing market will not be immune to the laws of such demographics and its housing values will deflate, and with it its huge state budget. In other words, it just isn't the short-term effects of the recent-past "housing Bubble" that is causing a temporary state budget crisis. There is a Great California Economic Earthquake to come. According to Goldman only some limited things, such as immigration and inculcating youth with a work ethic, can be done to offset the coming Great California Earthquake of real estate wealth destruction. The recent inflating of the real estate Bubble by Wall Street was only an effort to forestall the inevitable and only worsened things. While Californians were waging a contentious "culture war" over same-sex marriage, and our courts prevaricated about whether gay marriage was a legal "right," California was experiencing the foreshocks of the coming Great California Economic Earthquake. But there was no cultural seismometer at Cal Tech to measure the preliminary shock wave. And instead of sending out messages to earthquake proof our families, our homes, our churches, and our state treasury, sociologists (our cultural seismologists) in California turned into radical social engineers advocating affordable housing  while working out of President Barack Obama's alma mater Occidental College. Likewise, conservative religious activists took up the cause of "faith-based affordable (luxury) housing," under the absurd banner of Biblical justice. Presumably, "affordable" Cadillacs would be advocated next. Local politicians rushed to embrace "Inclusionary Housing" policies to buy votes without recognizing such policies will artificially inflate housing prices in the coming falling market. None of them have a clue that in the future affordable housing will be a non-issue. The sociologist Daniel Patrick Moynihan once wrote:

The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself.

What California has to return to is the central conservative truth that only culture can save it from economic and social ruination. The misguided liberal truth that politics and the courts can social engineer marriage for those who don't procreate, raise children or form households is a cultural and economic dead end. The courts need to simply rule for civil unions for gays and preserve traditional marriage for those who can potentially bear and raise children. The legislature needs to devise more family-oriented economic measures and policies. The next Governor needs to be a champion for a new work ethic and a new family-based economy. Liberal religious elites need to see that they have helped lose the "culture war" by diverting our attention from our central truths and that over-individualistic rights cannot save a society from itself. As David Goldman writes: "Without life, there is no wealth; without families, there is no economic future. The value of future income streams traded in capital markets will fall in accordance with our impoverished demography. We cannot pursue the acquisition of wealth and the provision of upward mobility except through the reconquest of the American polity on behalf of the American family." CRO copyright 2009 Wayne Lusvardi Formerly with Metropolitan Water District of So. Calif., Lusvardi has written on water issues in, Privatization Watch (Reason Public Policy Institute) and the L.A. Business Journal. The views expressed are his own.

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