The economics of gun control

The economics of gun control

The gun control debate has emerged yet again in a desperate search for recourse after the radical Islamic terrorist attack in California earlier this month.

On Sunday, December 6, President Obama addressed the citizens of the United States from the Oval Office in response to the horrific attacks in San Bernardino, California just a few days earlier.

In addition to outlining strategies for defeating radical Islamists abroad, the President also called for tighter gun control measures at home, noting the assault rifles used by the San Bernardino murderers.  

Whether in response to the attacks themselves, or to the growing chorus for further gun control, headlines of record gun sales and permit applications quickly appeared around the nation.

Industry trends

The gun and ammunition manufacturing industry in the United States earns collective annual revenues of approximately $13 billion, and that figure stands to rise in the years ahead.  

Over the past five years, the industry has seen its share of volatility as incredible consumer sales surges followed high profile shootings and the associated calls for enhanced gun control legislation.  At the same time a slowdown in military sales occurred as US war efforts in Iraq and Afghanistan slowed and sequestration reduced military budgets.

Still, overall personal firearms ownership is on the rise.  After a record setting year in 2013 in which more than 21 million background checks were performed, the FBI’s National Instant Background Check System’s (NICS) current numbers indicate that 2015 is on track to eclipse that amount.  Even before the California terrorist attacks, the NICS shattered its Black Friday record after breaking records for six consecutive months through October of this year.

Investors seem to like the brisk sales and anticipate a continuation of elevated demand, bidding up the shares of two of the top manufacturers, Smith & Wesson and Sturm Ruger, to multiyear highs as they easily outperform the benchmark S&P 500 Index in 2015.

All of this in a nation that already leads the world in gun ownership.

While high profile ‘active shooter’ events and calls for increased gun control are definitely driving factors in sales spikes of recent years, studies show the dramatic upward trend in demand and overall ownership in the US actually began decades ago.

Policy debate

The gun control issue in the US historically serves as a reliable dividing line between Democrats and Republicans and has now entered the debate for 2016’s Presidential race. Typically, Democrats are in favor of increasing control measures such as ‘Gun Free Zones,’ expanded background checks for private sales, bans on military-style weapons and high-capacity magazines, or a National Gun Registry.  

In short; for Democrats, less guns equal less gun crime.

On the other side, Republicans generally view such proposals as threats to Americans’ Second Amendment right to bear arms, while also being ineffective at keeping guns out of the hands of would be criminals.  

Instead, the Republicans have argued to increase gun ownership and training among law-abiding citizens by reducing legal restrictions to purchasing and carrying firearms.

In short; more legal gun owners equal a deterrent to gun-wielding criminals.

Currently, of course, gun control policies vary considerably state by state.

For instance, in California state law bans the sale or transfer of ‘Assault Weapons,’ such as those used in the San Bernardino attack, and requires all gun purchases to be registered with the state’s Department of Justice Automated Firearms System.

Costs of compliance, including fees and possible psychological testing required by local jurisdictions, can exceed $300 just to be eligible for a handgun permit. Quite the contrary, the state of Colorado requires no permit to purchase handguns or long guns, no registration requirement, and ‘Assault Weapons’ are not banned within the state.

Over the past several years, many state legislatures around the country have expanded gun rights as they move closer to a model such as Colorado’s and away from the restrictive policies of a Californian model.

States such as North Carolina have made it easier to legally purchase guns and carry them in public places.  

This trend may be a result of the outsized Republican successes in local and state positions during the wave midterm elections of 2010 and 2014 in which they regained majorities in the US House of Representatives and US Senate, respectively, and gained control of many state legislatures and Governorships.

Such an expansion of gun rights at local and state levels across the country may be illustrative of which side is winning the policy debate in the minds of many American voters.

American trends

In today’s age of instant communication and 24/7 media coverage it is easy to view the multiple shooting tragedies of the last decade as an unprecedented and alarming rise in violence in America.

However, the facts belie this notion. According to the Harvard Journal of Law & Public Policy, since the 1990s, dramatic increases in American gun ownership have coincided with equally dramatic drops in rates of criminal violence.

Moreover, studies of gun deaths by the Pew Research Center have found that while gun-related homicides have seen marked declines over the last 30 years, almost half the public believes instances of gun violence are actually increasing.

The gulf between perception and reality could be explained in part by the understandable fear created by the sensational and seemingly unending media coverage of shooting events as they happen, as well as the sense of alarm raised by advocates for increased gun control.

Interestingly, it is the same media hype of shootings and a converse sense of alarm raised by gun rights advocates that could be fueling the record breaking demand for guns by everyday Americans.

Although instances such as the radical Islamist terror attack in San Bernardino have breathed new life into an ongoing national conversation on gun control in national media forums, local and regional legislative trends indicate it is the gun rights expansionists gaining the most ground in this debate.

As Americans look towards 2016, the biggest political risks they face will not likely be encroaching gun control or endangering expansion of gun rights.  

Instead the real risk will be a lack of willingness, by politicians and popular culture alike, to face head on the motivations of a worldwide movement for murder, of which San Bernardino was merely a preview.

Categories: North America, Security

About Author

Jeffrey Moore

Jeff Moore is a Senior Analyst with Global Risk Insights, and Founder & Owner of Moore Insight Inc., a political risk consultancy helping high net worth clients, independent asset managers, international business operators, and even political candidates add value by informed analysis of, and customized solutions for political risks to capital, business strategy, and target constituencies. His insights have been featured and sought by state, national, and international media as political risk mitigation becomes more important by the day. Previously Jeff worked as a capital reporter for traditional media, a research analyst in the N.C. Department of Commerce, and an economic policy aide in the N.C. Office of Governor. After receiving a degree in Political Science from the University of North Carolina, Jeff cut his teeth as an equity trader, successfully trading millions in capital through out the Great Financial Crisis and beyond.