Moneybeat: Perspective on parental leave

MARY REICHARD, HOST: Next up on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: It’s time to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. He’s head of the wealth management firm The Bahnsen Group and he’s here now.

David, good morning!

DAVID BAHNSEN, GUEST: Good morning, Nick, good to be with you.

EICHER: Before we get to listener questions this week, David, let’s talk jobs. On Friday, the Labor Department report for the month of January came out. It was noteworthy. More than half-a-million new jobs added—and that’s strong in and of itself. But it trounced expectations, employers added almost three times more jobs than were expected.

BAHNSEN: It would be impossible for someone to spin it into something that wasn’t overwhelmingly constructive. There are seasonal adjustments that make all this a little tricky: There were upward revisions to the last two jobs report that amounted to another 72,000 jobs on top of the 517,000 that were reported for the month of January. As you say, that was about triple what was expected. So across the board, it was a very positive report.

In November and December, those looking for something negative under the hood could see that there was a very slight decline in the average hours worked; that number picked up by 1.2% month over month in January. So I believe that the mismatch between the amount of open positions and the amount of people looking for work continues to be the issue, and it should be taken as a net positive in the present state of the economy.

EICHER: Also, David, the Federal Reserve hiked up interest rates last week, just a quarter point this time, but Fed chairman Jay Powell indicated there’s still more to come. This is eight in a row and it leads into a question sent in by Alan Hahn of Farmington Hills, Michigan, the Detroit area. He wants to know:

Why is the Fed continuing to raise rates and punishing the consumer when it seems “the problem” is too much spending by the federal government? In other words, isn’t this primarily a fiscal problem, not a monetary problem?

He concludes with appreciation, David, for your level-headed approach and advice.

BAHNSEN: Well, I’m not sure that those two are entirely separated. At the end of the day, the fiscal problem is also an argument for the Fed to be cutting rates, because the more the government borrows and spends the higher cost of debt they have. Eventually we’re going to see significant downward pressure and interest rates because as we’ve learned time and time again, the central bank has to end up enabling what happens out of fiscal activity and the government can’t afford the debt it’s taken on. So the Fed is not likely to raise rates much from here: I think the quarter point they just did was quite token, and the next quarter point may or may not happen. The futures market is predicting a 50/50 chance either way. I don’t see many increases after that. In fact, I happen to believe there will probably be some cuts by the end of the year, or shortly thereafter.

EICHER: So, let me toss this in, David, I saw lots of speculation on the business news wires last week after the softer rate increase and Jay Powell’s comments on Wednesday that there’s a better chance that the Fed will succeed in engineering a so-called “soft landing” and avoiding recession. What do you say?

BAHNSEN: I don’t want to accept the premise of the question, Nick, because I don’t think that they can engineer anything. I think our country might very well avoid recession. And I think we very well might end up with a soft landing. But I don’t think that’s the same as believing the Fed will engineer it. As if 12 people sitting around a conference table can engineer the economic interactions of 330 million people and control the varying degrees of supply and demand that go into economic output. It’s a very complicated endeavor, and we shouldn’t be trying to control it to the degree that we are.

But nevertheless, the question as to whether or not a recession is a foregone conclusion is one I’ve been tackling quite a bit over the last several weeks. I devoted an entire Dividend Cafe to both sides of the argument two weeks ago, and I continue to believe that nobody knows for sure right now. We’re seeing the ITSM services this month increase quite nicely when there had been a decline on the manufacturing side. See, in the jobs number—there’s just conflicting data there. And yet, there’s plenty of reason for people to hope we can avoid a severe recession.

EICHER: Here’s a question from listener Bretta McAllister asking about parental leave.

MCALLISTER: My name is Brenda, and I live in Western Massachusetts. Recently, quite a few members of my family have had babies, myself included, and our different companies that our husbands or spouses work for, provide different benefits for parental leave, some of them being as far as 12 weeks of parental leave after a baby is born. And I just have a hard time settling on how, as believers, we should look at this kind of leave. I know you talk a lot about the fact that the economy is driven by the production level instead of consumption. And so if workers are leaving the workforce for up to 12 weeks after a baby is born, is that not a good contribution to society? Or does the fact that a child is being brought in as another form of production, which might sound weird to say, is that also a good and the time that a family gets to spend together after that I just have had a hard time wrapping my mind around how I view those kinds of things. And we'd love to hear your take on it.

BAHNSEN: I believe that part of it depends on what it is we’re trying to solve for it. Are we asking about if the government should be mandating and subsidizing parental leave? Or if the government should be subsidizing paternal leave? I think those are sort of different questions. Certainly, I have no problem with the idea of there being leave for a mother after having a baby. I think it’s a wonderful thing for there to be extended time for a mother to be with her baby after delivery. But does the question have to do with the newer phenomena— and it really is quite new, maybe about 6 out of the last 6000 years— of paternity leave, where we’re asking for the father (who is obviously not involved in nursing and was not involved in delivery) to be subsidized with 12 weeks of paid leave from the workforce? I have different opinions there. And the reason is not only the kind of obvious natural and biological distinction.

Ultimately, I’m a traditionalist. I put a high value on history, and we should always strive to do better in some things we have historically not done effectively. There is a high burden of proof to assert that somehow it did not work out fine having dads return to work a little quicker than moms over the years. And so there’s something about forced paternity leave that I feel differently about.

The one thing I would ask is should we view the child as sort of a production of a good itself? And I certainly do not believe so. I think that what we’re talking about is just a different sphere of God’s kingdom. I believe in the sphere of family, the sphere of church, and that of the marketplace, and these are each distinct from one another. And each family is able to kind of wrestle through what makes the most sense for their situation. All things being equal, I tend to believe the government doesn’t need to be a huge part of that.

EICHER: One final question, this one from Brian Lawrence of Hamilton, Ontario, Canada … a question about American public policy on the economy. He says he remembers the “Contract with America” Republicans promised when they took control of Congress in the 90s … and it included a balanced budget amendment. He writes: “I realize you're an economist, not a political analyst or historian, but can you tell us what happened?”

BAHNSEN: Well, let me refresh everyone's memory about what did happen there because there was a part of their commitment that did come through and there was a part that did not. And the reason is that our United States Constitution requires a two thirds vote to change the constitution. So their specific verbiage back in the Gingrich 1990s Contract with America was to restore fiscal responsibility to an out-of-control Congress requiring them to live under the same budget constraints as families and businesses. And they proposed doing that with a line item veto, and then a balanced budget amendment. And the line item veto would allow the President to strike specific spending provisions and bills without having to veto the entire bill and then that could effectively eliminate unnecessary, wasteful spending that passed both the House and Senate. But the Balanced Budget Amendment never had the two thirds vote and yet, in fairness to both the Congress of the time and the Clinton administration, they did achieve a balanced budget for a couple of years and, in fact, ran a bit of a surplus largely on pre-911 defense cuts, but all also really excessive growth of revenue as the economy was expanding. So that's sort of the history of what happened. We have never had the two thirds vote in the Senate necessary to get a balanced budget amendment required. But they did pass the line item veto, which was somewhat effective at certain points in time. But I have to point out, it's hard for a line item veto to be very effective if the President of either party doesn't use it.

EICHER: All right, that’s all of our time for this week. If you have a question for David Bahnsen, please do send it to me at feedback@worldandeverything.com. It can be an email or an audio file attachment using your Voice Memo app on your smartphone. Regardless, the email address is feedback@worldandeverything.com.

David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group. Check out his latest project at fulltimebook.com. Three words: full, time, book—no spaces. fulltimebook.com.

David, thanks!

BAHNSEN: Thanks so much, Nick.

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