GINI: Income Mobility and Disparity

Posted on October 27, 2011 | 5 comments

Much has been said during the last few years about income disparity.  And not just the disparity, but the mobility of people from one income group to another.

I’ve done some reading last night and this morning a thought struck me:

GINI measures the disparity in household income.  Consider Dick and Jane and their neighbors John and Mary.

Dick works in retail and is making $28,000 a year.  Jane works in service and makes $32,000 a year.

John works as a manager in a factory making $70,000.  Mary stays home and cares for their family.

The disparity between Dick and Jane vs. John and Mary is low.  Dick and Jane earn $60,000 a year while John and Mary earn $70,000.

Now, consider Dick and Jane get divorced.

The disparity between two households earning $28k and $32k compared to the one earning $70k is much higher, and the GINI goes up.  But nothing changed as far as economic earnings are concerned.  In fact, if you take this one step further, consider John and Mary also suffer divorce.  Now the incomes for FOUR households is:

  • $0
  • $28,000
  • $32,000
  • $70,000

A very disparate view when compared to the initial comparison of $60,000 and $70,000.

In the same way that the demographics of America impact life expectancy statistics [Japanese Americans live as long as native Japanese] I suspect that demographics impact the GINI.  I also suspect that this isn’t calculated into the analysis when people discuss the GINI.

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Posted in Economics, Technology

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From the Mouths of Babes

Posted on October 27, 2011 | Leave a comment

I was having lunch with my daughter the other day; a special treat for me.  She is 9 and her time is full.  If not school, then dance or friends.  The peaceful time of daughter and father is rare and precious.

I asked the waiter for the check.  And then she said something that hit me like a truck.  Gave me chills to the very core of my being:

Daddy, why do we have to pay for food?  We need it to live!  It should be free!

In my own HOME!

Suffice it to say that a copy of “The Law” will be given to her for her 10th birthday.

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Posted in Economics, Liberty, Life

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Hurricane Season 2011: August, September October

Posted on October 26, 2011 | Leave a comment

The hurricane season is near over.  Once Irene hit, I was kinda focused on the damage it did to North Carolina and then I, well, I kinda forgot about the season.  Didn’t seem to be any more storms.  Then I saw that Mexico is going to be hit and I remembered I haven’t posted an update for quite some time.

So, where were we?

The predictions for 2011 are:

  • Tropical Storms: 18
  • Hurricanes: 6-10
  • Major Storms: 3-6

Though August and September we are at:

  • Tropical Storms – 12
  • Hurricanes – 4
  • Major Hurricanes – 2

With November right around the corner, it’s looking like we’re gonna hit the lower end of the predictions this year.  Further, the National Hurricane Center is reporting that the accumulated cyclone activity. ACE, is right on track.

Another good year for the guessers.

 

 

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Posted in Technology

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OWS, 99% and ACORN

Posted on October 26, 2011 | Leave a comment

Fox News is reporting that former ACORN organizers and staffers are working behind the scenes at the various protests throughout New York City.  Further, these unscrupulous vermin are knocking on doors asking for money to support teachers and stuff all the while funneling that money to the movement.

And Fox is reporting this front page.

My reaction is:

Meh.

I hadn’t thought of it, but fi I’d been asked whether or not I thought ex-ACORN folks were working on the OWS protests, I would have guessed they were.  The bigger news would have been if these people had gotten real jobs and become part of the 53%.

THAT would have been news.

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Posted in Idiots on Parade, Lobby/PAC

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To Clarify The Left’s Position On “Immoral War”

Posted on October 25, 2011 | 17 comments

Children!  Children, gather ’round.  I wanna tell you the story of the Leftist.

When someone you disagree with enters into a war to overthrow a brutal dictator, you protest him, call him Hitler and burn him effigy.  It is IMMORAL to use force against a foreign nation in an attempt to overthrow an evil brutal dictator.

But.  But….if Barack Obama would like to do the same, it is okay if:

  1. He does it quickly.
  2. There is no #2.

See, if one President goes to the United Nations and obtains resolution after resolution forcing the evil bad-guy dictator to allow this or allow that, and the evil bad-guy dictator doesn’t, AND the President gathers a coalition of foreign nations to assist in the overthrow of that evil bad-guy dictator AND that President goes to, you know, CONGRESS, AND….AND Congress authorizes force to remove evil bad-guy dictator AND that evil bad-guy dictator is captured AND that evil bad-guy dictator is imprisoned with human right’s representatives on guard AND that evil bad-guy dictator is given a trial and found guilty; well, THAT is immoral and the President is a douche.

He is greedy and is Hitler.

But, if the other President is Barack Obama, well, then we can target the evil bad-guy dictator in an assassination attempt, never go to Congress, the UN or any other body, watch as he is strung up on the hood of a truck like a deer, beat and shot without trial THEN allowed to have his body, decaying, be placed on public display for all to see while crooning:

We came, we saw, he died.

THAT is a foreign policy success, and the President is macho.

The Left is without morals.  They have none.  Which is why they try to legislate morals to force ME to abide by ’em.  They demand the rich donate to charity, but never do the same.  They demand that the Right care for the poor, but never do the same.  They scream that the Right engages in immoral wars, yet don’t care that they are the worst offenders.

They legislate others to do what they themselves can’t or won’t.

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Posted in Diplomacy, Government, Liberty, Politics: International, Raising Men, States Behaving Badly

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Dear 99% – With Love, The 1%

Posted on October 25, 2011 | Leave a comment

Here’s an interesting illustration for the 99% camping out in tent cities all across our nation:

Reed Hastings was soaking in a hot tub with a friend last month when he shared a secret: his company, Netflix, was about to announce a plan to divide its movie rental service into two — one offering streaming movies over the Internet, the other offering old-fashioned DVDs in the mail.

“That is awful,” the friend, who was also a Netflix subscriber, told him under a starry sky in the Bay Area, according to Mr. Hastings. “I don’t want to deal with two accounts.”

Mr. Hastings ignored the warning, believing that chief executives should generally discount what their friends say.

He has since regretted it. Subscribers revolted and many dropped the service. The plan further tarnished a once widely respected Internet service that had already been wounded by an unpopular price increase in the summer. Mr. Hastings was forced to reverse the planned split — but not the price increase — three weeks later and apologized.

On Monday, the company revealed the damage that had been done. It told investors that it ended the third quarter of the year with 800,000 fewer subscribers in the United States than in the previous quarter, its first decline in years. The stock plummeted more than 25 percent in after-hours trading

The market works.

Even the 99% can impact the 1%.

Learn and implement.

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Posted in Economics

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Payday Loans

Posted on October 24, 2011 | Leave a comment

I like to listen to Clark Howard.  If you can get past the obnoxious campy “always-in-a-good” aspect of his delivery, the advice he gives is normally really strong.  Good conservative kinda stuff.

However, every time he talks about payday loans I get all hot-n-bothered.

See, Clark thinks that the industry should be shut down or regulated.  He feels that charging someone 10-20% on money for 1-3 weeks is out of the world crazy.  And, I admit, that kinda rate, even if you call the loan a “1 month loan” is way high.

But look at the numbers.  See what happens when you assume a 10% default rate:

Number of Borrowers Amount Borrowed Default Rate
100 $100.00 10.00%
Total Amount Lent $10,000.00
Loans Unpayed 10
Money Lost $1,000.00
Fee to Cover Money Lost $11.11
Loan + Fee $111.11
Repayment % 11.11%
Effective Annual % Rate 133.33%
Profit $0.00

If the lender accepts ZERO profit, the effective annual rate is 133.33%.

Now look what happens if the lender actually wants to realize a profit on his money:

Number of Borrowers Amount Borrowed Default Rate
100 $100.00 10.00%
Total Amount Lent $10,000.00
Loans Unpayed 10
Money Lost $1,000.00
Fee to Cover Money Lost $11.11
Loan + Fee $111.11
Repayment % 11.11%
Effective Annual % Rate 133.33%
Profit $0.00
Desired Profit Margin 1.00%
Profit $100.00
Fee + Profit per good loan $12.22
Loan + Fee + Profit $112.22
Repayment % 12.22%
Effective Annual % Rate 146.67%

The rate jumps to 146.67 for a 1% profit margin. Consider that; do you know anyone willing to risk 10k large in the hope of getting back $100.00?  Me either.

So, let’s look at 5%:

Desired Profit Margin 5.00%
Profit $500.00
Fee + Profit per good loan $16.67
Loan + Fee + Profit $116.67
Repayment % 16.67%
Effective Annual % Rate 200.00%

Wow!  If our lender would like to realize a 5% profit rate, he would have to charge an effective interest rate of 200%!  But wait, what if the default rate isn’t 10%, what if it’s 15%?

Desired Profit Margin 5.00%
Profit $500.00
Fee + Profit per good loan $23.53
Loan + Fee + Profit $123.53
Repayment % 23.53%
Effective Annual % Rate 282.35%

The annual rate soars to 282%!

The problem isn’t the payday lender.  Not at all.  The problem is the borrower population.  The rest is just numbers.

So, if Clark just asked the right questions he would walk away with a better understanding of the situation.  And just think, this profit margin and annual rate assumes a PERFECT efficiency in administration costs.  No labor, insurance, rent or processing.  ALL of which add to the cost before profit that the borrower has to pay.

It looks bad, but a closer look reveals an industry that really isn’t as predatory as we like to think.

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Posted in Economics, Politics: National

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A Win Win For Me

Posted on October 24, 2011 | 4 comments

The State of Minnesota is reporting that they may soon have a record number of job openings available for state government jobs:

The executive director of the Minnesota State Retirement System, Dave Bergstrom, said Monday that 2,733 state employees have retired as of this month, up 675 from the record 2,058 who retired in 2010.

This news should cause much happiness and relief for the State, right?  As more and more people feel comfortable leaving the work force, younger folks can move up and be replaced at THEIR level by new job market entrants.  This is the nature of things.  Further, it may spell a growing confidence that we have seen the worst when it comes to our economic doldrums.

However, the State doesn’t see it that way:

However, State Demographer Tom Gillaspy said the wave of retirements does pose some problems for state government, which is faced with replacing senior employees with unique skills in subjects like school finance, tax collections and building roads in Minnesota’s hard climate.

Now, to be sure, from the perspective of Minnesota State executives, this IS a problem.  Finding quality staff to replace senior staff is definitely an issue.  Both in the government sector and in the  private sector.  However, from MY perspective, the fact that we have people less good at school finances and tax collections is a most wonderful condition.

The harder the State finds it to take and spend my money, the happier I am.

By the way, how, in this jobless recovery, is THIS possible:

The retirements could also bring into focus the state’s difficulty hiring top quality replacements, given that pay and promotions in state government now lag the private sector and academia, Gillaspy said.

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Posted in Economy, Government

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Buffet Is A Smart Man

Posted on October 23, 2011 | 2 comments

I was looking through articles and news about Warren Buffet, his compensation and his taxes.  He makes a remarkable amount of money.  And I have great admiration for the man.  His simple down to earth nature, his favorite activity is to have a bowl of popcorn and watch the Corn Huskers play football.  I like his common sense approach to business, I think he once mentioned that if he had purchased the Red Sox, he wouldn’t try and manage how Ted Williams approached hitting.

No, tax policy aside, I have great regard for the man.  And even in the tax debate, he showed a glimpse of his genius:

Becky: OK, there were a couple of emails that came in that people that said if you think the government should be able to tax more money, why don’t you just give your money away to the government instead of charity.

Buffett: Well, that’s a choice and it’s an option that… If I had to give it to a single individual, or make some young Buffett a multi-billionaire, or give it to the government, I’d absolutely give it to the government. I think that on balance the Gates Foundation, my daughter’s foundation, my two sons’ foundations, will do a better job with lower administrative costs and better selection of beneficiaries than the government.

Indeed.  I have little doubt that Buffet’s three children would do a better job with that money.

My only question is this:

Why does Buffet reserve the right to keep and spend his money as he sees fit but denies that same right to all other people?

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Posted in Economy, Government, Liberty

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Warren Buffet Wants Tax Rates To Rise

Posted on October 23, 2011 | 5 comments

Warren Buffet is now famous for claiming that his secretary pays more in taxes than he does.  Forget for a second that she doesn’t literally pay more.  Also forget for a second that she most certainly doesn’t pay the rate that Buffet claims she does.

Instead, focus on Buffet.  And his salary:

Warren Buffett, the billionaire chief executive officer of Berkshire Hathaway Inc. (BRK/A), was paid a $100,000 salary for a 30th straight year after warning that excessive executive compensation can hurt shareholders.

Buffett, 80, received no bonus in 2010 and he doesn’t get stock options or grants, the Omaha, Nebraska-based firm said today in a filing. Buffett’s personal and home-security services paid for by Berkshire cost $349,946. The company’s compensation committee has determined salaries since 2004. Buffett, Berkshire’s chairman and largest shareholder, formerly recommended his own salary to the board.

It’s reasonable to conclude that Buffet will earn another $100,000 next year.  Plus, of course, the security compensation.  So, if he gets his way and Obama and the Democrats raise the marginal tax rate from the 35% it is now to what ever they wanna move it to, guess what happens to Buffet’s tax burden?

It remains almost exactly the same.

See, Buffet makes his money in other ways than a simple paycheck:

  • Buffett’s adjusted gross income last year was $62,855,038
  • Buffett’s taxable income last year was $39,814,784
  • Buffett paid $15,300 in payroll taxes last year
  • Buffett’s federal tax bill came to $6,923,494, or 17.4% of his taxable income last year
So, if we DOUBLE the current top marginal rate, Buffet is only impacted on the first $100,000 + whatever the security compensation costs him.  The rest, the $39,400,000 or so left over, won’t be impacted.
Don’t be fooled.  Buffet doesn’t wanna pay more taxes.  He wants OTHER people to pay more taxes.

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Posted in Liberty, Politics: National

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