Category Archives: Economy

What It Means To Be Poor In America

Mark Perry nudged me the other day.  We hear so much how bad it is in America.  That the middle class is “under attack” and only the Government can save them.  Further, the health care debate has pointed out that America spends more on health care than any other nation in the world.

Data from a report by two Swedish researches illuminates some very interesting facts:

  1. The ratio of people living in poverty is shrinking

1959 1999
Whites 18 10
Blacks 55 24
Hispanics 23(1972) 23
Total 22 12

2.  Being poor does not mean living without

Home Ownership 45.9
Car 72.8
2 or more cars 30.2
Air conditioning 76.6
Refrigerator 96.9
Washing machine 64.7
Drying cabinet/tumbler drier 55.6
Dishwasher 33.9
Garbage disposal 29.7
Microwave 73.3
Colour TV 97.3
2 or more colour TV sets 55.3
Cable or satellite TV 62.6
Wide screen TV 26.3
Video or DV 78
2 or more video and DVD players 25.3
Stereo 58.6
Telephone answering machine 35.3
Mobile phone 26.6
PC 24.6
Internet access 18

Lastly

3.  Being poor in America is better than being average in the EU

People Sq Feet per person
Europe, average 2.5 976.5 395.7
USA, poor  1993 2.8 1228 438.6
USA, all  1993 2.6 1875 721.2

What does this tell us?  It tells us that being poor in America means that you have a bigger house than the average European.  It tells us that whatever we have been doing, we should do more of it.  And that any modeling on Europe would be a mistake.

Riiight….

When you make a promise that can’t be tracked, you are then able to claim that you kept your promise:

WASHINGTON (Reuters) – President Barack Obama’s emergency spending measures last year saved up to 2 million U.S. jobs, the White House said on Wednesday…

The White House, using two different approaches to figure out the impact of the stimulus package, estimates that U.S. employment had been raised by between 1-1/2 and 2 million jobs by the end of 2009 as a result of the stimulus measures.

Awesome.  When they made a number up at the beginning of this mess, they did it because:

  1. They needed to sell this turd.
  2. They knew it was made up and couldn’t be tracked.

But serious, did they create jobs?  Let’s look here:

While Massachusetts recipients of federal stimulus money collectively report 12,374 jobs saved or created, a Globe review shows that number is wildly exaggerated. Organizations that received stimulus money miscounted jobs, filed erroneous figures, or claimed jobs for work that has not yet started.

But in interviews with recipients, the Globe found that several openly acknowledged creating far fewer jobs than they have been credited for.

One of the largest reported jobs figures comes from Bridgewater State College, which is listed as using $77,181 in stimulus money for 160 full-time work-study jobs for students. But Bridgewater State spokesman Bryan Baldwin said the college made a mistake and the actual number of new jobs was “almost nothing.’’ Bridgewater has submitted a correction, but it is not yet reflected in the report.

In other cases, federal money that recipients already receive annually – subsidies for affordable housing, for example – was reclassified this year as stimulus spending, and the existing jobs already supported by those programs were credited to stimulus spending. Some of these recipients said they did not even know the money they were getting was classified as stimulus funds until September, when federal officials told them they had to file reports.

…several organizations that offer Head Start preschool programs and other services in Georgia reported retaining hundreds of jobs based on raises they gave their employees. In one such case, the Central Savannah River Area Economic Opportunity Authority in Augusta reported saving 317 jobs. But that represents the number of Head Start workers who received 2.3 percent raises from the stimulus funds, said Chris Whitley, the authority’s fiscal officer….

And then, finally, this one, which, by the way, is perhaps the most damaging report I’ve seen out of the MSM.  For one, it’s ABC, for another it’s recent and for another, it’s pretty harsh:

The White House has abandoned its controversial method of counting jobs under President Barack Obama’s economic stimulus, making it impossible to track the number of jobs saved or created with the $787 billion in recovery money.

Despite mounting a vigorous defense of its earlier count of more than 640,000 jobs credited to the stimulus, even after numerous errors were identified, the Obama administration now is making it easier to give the stimulus credit for hiring. It’s no longer about counting a job as saved or created; now it’s a matter of counting jobs funded by the stimulus.

That means that any stimulus money used to cover payroll will be included in the jobs credited to the program, including pay raises for existing employees and pay for people who never were in jeopardy of losing their positions.
“There were no jobs created. It was just shuffling around of the funds,’’ said Susan Kelly, director of property management for Boston Land Co., which reported retaining 26 jobs with $2.7 million in rental subsidies for its affordable housing developments in Waltham.

Take a look at some of those numbers.  The first, in Boston, claims that they created 160 full-time jobs with 7 large.  Did ANYONE check into that?  And then the idea of counting jobs as saved simply because those people got a raise is insane.  How does THAT make sense?  And finally, we get the goods from the White House.  In order to make their made up number, they are going to have to change their made up rules.  And why not?  It’s their rules to begin with.

Remarkable.

Freedom Fries

As always, I have Brad and Britt on the radio for the morning commute.  I listen because they are local and because I need to convince myself that I listen to both sides.  As such, I normally am shaking my head at the discussion and the mind-set I get from Greensboro.

This morning was different.  The subject was France and whether or not it’s better to live in France or the USA.  Normally, the left says that the French model is better but given the choice, they don’t wanna live there.  As if they subconsciously understand that you don’t get both the “good life” France offers and the freedom and benefits of such that America offers.

Brad and Britt both agreed that it is much MUCH better to live in America than France.  Again, this isn’t surprising, this follows the leftist road map.  But as the conversation continued, I was pleasantly surprised at WHY they would not like to live in France.  For example, they idea of “strikes and riots when the price of milk goes up a by a nickel” was pure genius in its simplicity in capturing the French culture.  But it got even better.  When describing the summer break, Britt correctly wondered “who is gonna do the work?”.  And not to leave Brad out, he weighed in with this “given the chance to make a life in America vs being taken care of but tracked, I would take America ANYDAY!”

This was just a wonderful way to start the morning.  It gave me hope that we ARE a center-right nation.  That we know the chance, the opportunity, to strike out and make our way is a fundamental and uniquely American principle.  That we get freedom.  That being provided for has its price.

Yet it’s this wonderful news that frustrates me from the marketing side of me.  I am convinced that a conservative approach to finance and economics is the way to prosperity and advancement.  But the right is SO poor at spreading the message that we get painted as greedy industrialists.  And we never EVER learn from that.  No one wants to hear that minimum wage laws should be abolished.  “How greedy can you get?  Slave wages for the poor!”  It resonates.  It sticks.  Never mind that unemployment goes up, cost of goods go up and innovation and choice are restricted.

And who doesn’t wanna provide less expensive yet better medical care to everyone?  We ALL do.  The problem is, there is a wrong way and a right way.  Restricting that market is the wrong way.  Opening it up is the right way.

But we never get the message out.  We just sit back and “can’t be bothered by that”.  It’s the same reason you never see serious economists enter into debate about the most commonly accepted financial principles; because it is so basic and understood, that to debate it is beneath all serious members.  It would be akin to debating that 2 is greater than 1.

Anyway, Brad, Britt….well said.  And welcome to the center-right society!

Living Hasn't Been Cheaper

Apparently this is bad news:

NEW YORK, Jan 7 (Reuters) – The U.S. apartment vacancy rate rose to an almost 30-year high of 8 percent in the fourth quarter, and rents dropped in the biggest one-year slump in 2009, according to real estate research company Reis Inc.

The report reflects the job market, which so far has stubbornly refused to follow positive economic indicators such as the stock market rebound and improved manufacturing demand.

But that’s only 1 way of looking at it.  Another, of course, is to report that it hasn’t been cheaper to rent in years!  I find it strange that we report falling home prices as bad, when, in fact, it results in allowing more and more people to afford a home of their own.

The world is a funny place.

A Lesson in the Tender Mercies Of Organized Labor

November results for car makers:

Ford’s U.S. sales surge 33% in December

GM handed in a 6.1% sales decline

Chrysler…reported a 4% dip

Toyota Motor Corp. said its U.S. sales increased 32.3%

Gawd, it is SO nice to be right.

How Cities Benefit by Labor Unions

How does a public pension fund respond after losing more than $70 billion of its $260 billion fund?

“It is important for you to know that the current credit crisis does not directly affect your retirement benefits, which are securely protected by law, or our ability to pay benefits.”

Translation: Not to worry; the taxpayers will have to bail us out.

Excellent.

And what does it mean to tax payers when said fund loses more than $70 billion of its $260 billion fund?

In the end, taxpayers stand to pay plenty for all this, either through increased taxes or diminished public services — closed libraries and shelters for battered women, fewer trash pickups, shuttered courts, slower police and fire response times, more potholes, early county jail prisoner releases and much more — if local governments see layoffs and furloughs as their only way out.

This is your bed, California.  I really REALLY hope that only YOU have to lie in it.

Government Regulation at Work

As the Obama administration becomes more and more involved in the day-to-day business of more and more businesses, you have to wonder what his real goal is?  If it is to drive the best and brightest from the industry in question, well, then this should be seen as a sign of success:

NEW YORK (Reuters) – A top executive at American International Group Inc has resigned because of pay curbs imposed by the Obama Administration’s pay czar, the insurer said on Wednesday.

Anastasia Kelly, AIG’s vice chairman for legal, human resources, corporate affairs and corporate communications, resigned effective December 30 for “good reason” and is eligible for severance pay under the terms of the company’s executive severance plan, the insurer said.

Kelly stands to be paid about $2.8 million in severance, according to a source familiar with the matter.

Kelly’s resignation comes after Kenneth Feinberg, who is charged with monitoring pay levels at companies that received taxpayer funds, imposed pay caps for AIG’s top executives.

Earlier this month, Feinberg set the compensation structures for the 26th through 100th highest-paid employees at four firms, including AIG, limiting most cash salaries to $500,000.

And she’s not the only one.  Apparently there are other top execs ready to walk:

She was among five executives reported by The Wall Street Journal to have notified the insurer that they were prepared to resign and collect severance benefits if their pay was cut sharply by Feinberg. Chief Executive Robert Benmosche separately also had considered quitting because of the pay constraints, the Journal has reported.

And the impact to the bank:

Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said no AIG employee was irreplaceable.

“We have been duped into thinking that these AIG employees have some kind of secret code that no other employee could discover if they were hired to replace them and therefore they are able to basically hold the company ransom,” Hurley said.

Imagine if the government bailed out the Minnesota Vikings.  And then, in order to make them competitive, demanded that the team could only pay their QB $500,000.  Brett Favre walks.  The Vikes finish 3-13.  As it stands today, they are the number 2 seed and a decent bet at playing in their 5th Super Bowl.

Hope for Change.

Where Are All the Jobs Going?

When we look backwards, it’s easy.  We see that as we lost steel working jobs and coal mining jobs to various other countries around the world, we found other more value added jobs here.  We became technology leaders in fields such as IT and medical care.

However, looking forward is much harder.  Both in vision and on the soul.  We literally can’t see the type of industry that we will identify and advance in.  That industry that will provide the new jobs of tomorrow.  Further, we view tomorrow with trepidation wondering what role this new world order has in store for us.

It’s valid.  Life is somewhat hard.  It requires grown up planning and grown up work.  It requires sacrifice, often times significant.  But fear can not stop advancement.  And advancement initiates creative destruction.  My advice; learn smelting.  Because stone is a thing of the past:

Hat tip:  Mark Perry at Carpe Diem

"This One Time…..In Band Camp…"

I’m relatively new to really REALLY watching politics.  I guess, in the past, I didn’t care.  Mostly I was single, renting and didn’t make enough money to care about taxes.  The last decade has seen that ALL change.  I am no longer single, I have children, own a home, make more money and am seriously considering starting my own business.  I also spend more time at home than I used to spend before all the changes aforementioned.   Combine this with the very compelling story of last year’s election; first time in many years that a  President or Vice President wasn’t running, and you have good drama.  AND we would have the opportunity to see America’s first woman or black Presidential candidate.  All good political drama.

Back to my point.  I am really pretty new to political theater.  So, maybe as I say this, it’s really not so unusual.  Could even be par for the course.  But to me, this is absolutely stunning.  Not only in the hypocrisy of it all, but in the sheer ignorance of any semblance of economic thinking.

WASHINGTON (Reuters) – The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years.

Serious?  Banks are paying BACK their TARP funds and these guys are asking for, and getting, more money?  At least they’ll have to be smart in their use of it, right?

It also jettisoned a demand that the two companies cut the size of their mortgage-related investment portfolios next year, allowing them to provide even more support in the near term for a housing market recovering from its worst slump in decades.

Nope.  Business as usual; continue to sell money to people who can’t afford it.

So, how is it that some businesses are capped and controlled and can’t WAIT to get out from under government control while others seem unable to even WANT to get out?  Is it political or is it simply a way of life?  Is it really possible that the Obama administration is giving political favors to supporters or, perhaps, does he simply think that a fascist* banking system is the most effective method by which to establish financial systems?

The Treasury’s announcement came just hours after the companies said their chief executives would be paid up to $6 million on an annualized basis for 2009.

Fannie Mae and Freddie Mac are congressionally chartered companies that buy up mortgages from banks and other originators to keep mortgage markets liquid. Some of the debt is repackaged as securities and sold off to investors, and the government has been buying an increasing share.

Sadly, for Liberty loving people, it would seem that the answer is “Both”.  Obama is both paying political favors, $6 million to the CEOs, AND feels that economic fascism is the preferred method of financial systems.

Like I said, I am new to this.  Maybe this is business as usual.  But from the cheap seats, this is ugly.

*   From wiki:  Fascists promoted their ideology as a “Third Position” between capitalism and communism.  Italian Fascism involved corporatism, a political system in which the economy is collectively managed by employers, workers and state officials by formal mechanisms at national level.  Fascists advocated a new national class-based economic system, variously termed “national corporatism”, “national socialism” or “national syndicalism”.  The common aim of all fascist movements was elimination of the autonomy or, in some cases, the existence of large-scale capitalism.

Fascist governments exercised control over private property but did not nationalise it. They pursued economic policies to strengthen state power and spread ideology, such as consolidating trade unions to be state or party-controlled.

More of the Same

Wanna know why we are in the trouble we’re in right now?  People spent too much money.  Many times, money they didn’t even have.  They either bought a house they had no business buying or they refinanced that house and spent the money somewhere else.

Either way, we simply spent too much money.

And the only way that we are going to be able to get better is to let this thing play out.  The over spending, and the bubble that it created,  has GOT to play out, and get out, of the system.  Pure and simple.

Which makes me shake my head when I read this:

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a hardship letter.

See, the Government has set up a program that allows folks who are in trouble with their mortgage to get help.  Ignore, for a second if you can, the fact that the government has no business stepping and helping these people.  Focus instead on if the program works or not:

Only one in three homeowners who have signed up for the Obama administration’s mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government’s effort to stem the foreclosure crisis.

It doesn’t.  And how could it?

Lenders, however, say the majority of borrowers either don’t complete the paperwork or don’t make the payments. At Bank of America, for example, only a quarter of the 65,000 borrowers in trial modifications have sent back their paperwork.

The bank blamed “ineffective communications with customers, shortcomings in document maintenance, misunderstandings about program requirements, and the inability to comply by some borrowers,” according to written remarks from Jack Schakett, Bank of America’s credit loss mitigation strategies executive.

I mean seriously.  Can you imagine going to the DMV for help on your mortgage?  Can you imagine the confusion that must reign at these offices?

Government.  Sheesh