Tag: economics

American Debt is No Accident

Post author By David
Post date August 19, 2008
7 Comments on American Debt is No Accident

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The fact that Americans have allowed themselves to be led down the rosy path of false economic hopes for a rosy tomorrow – where we can borrow now for anything we want with no thought for the fact that we are paying more by mortgaging our futures all the time – is not surprising. What caught my attention are the actual statistics of this fiscal malpractice and the stark proof that our financial institutions are trying to profit by keeping us individually on the brink of financial ruin.

Since the early 1980s, the value of home equity loans outstanding has ballooned to more than $1 trillion from $1 billion . . .

However, what has been a highly lucrative business for banks has become a disaster for many borrowers, who are falling behind on their payments at near record levels and could lose their homes.

The portion of people who have home equity lines more than 30 days past due stands 55 percent above its average since the American Bankers Association began tracking it around 1990; delinquencies on home equity loans are 45 percent higher. Hundreds of thousands are delinquent . . .

None of this would have been possible without a conscious effort by lenders, who have spent billions of dollars in advertising to change the language of home loans and with it Americans’ attitudes toward debt.

Aside from the precise numbers listed above, none of that information should surprise anyone with their eyes open to the economic situation of the country.

It might seem hard to believe, but not long ago people borrowed money to buy a home with the expectation that they would eventually pay off the debt. A mortgage had a finish line. . .

The newly mortgage-free even used to throw mortgage-burning parties to celebrate their financial freedom. . .

Now the idea of paying off the mortgage and owning a home outright is disappearing. . . banks now enable homeowners to keep borrowing. In fact, they encourage it. . .

As a result, the United States has become a nation of half-home owners. For the first time since World War II, the portion of home value that Americans own has fallen to less than 50 percent. In the 1980s, that figure was 70 percent. (emphasis added)

Let me translate that – we now own less of our own homes as a nation than we did 20 years ago. We have sold majority interest in the most valuable piece of property we have to our bankers for the sake of extra stuff which, while often nice to have, does not provide any of life’s necessities (shelter being a necessity while wave-runners, trampolines, nice furniture, and timeshares are not).

If the majority of our citizenry acts that way with their own money, it should not be surprising that our government does the same with public funds. (In the last 40 years, the only time our deficit spending has even tapered off was from 1998 to 2000.) Our public financial blinders have brought us to the attention of Nouriel Roubini:

After analyzing the markets that collapsed in the ’90s, Roubini set out to determine which country’s economy would be the next to succumb to the same pressures. His surprising answer: the United States’. “The United States,” Roubini remembers thinking, “looked like the biggest emerging market of all.” Of course, the United States wasn’t an emerging market; it was (and still is) the largest economy in the world. But Roubini was unnerved by what he saw in the U.S. economy, in particular its 2004 current-account deficit of $600 billion. He began writing extensively about the dangers of that deficit and then branched out, researching the various effects of the credit boom — including the biggest housing bubble in the nation’s history — that began after the Federal Reserve cut rates to close to zero in 2003. Roubini became convinced that the housing bubble was going to pop.

By late 2004 he had started to write about a “nightmare hard landing scenario for the United States.”

Anyone who is uncomfortable with the fallout of private homeowners beginning to default on their mortgages is going to be aghast at the results of the government declaring bankruptcy – and unless we change our thinking we’re going to have to declare bankruptcy – already we are faced with a debt that we are going to hate paying off. If we kept paying our current taxes and the government did nothing but pay debt at 0% interest it would take four years to pay it off and if we kept paying our mandatory spending programs it would take 10 years.

It’s about time our nation put both our public and our private financial houses in order.

Tags economics, fiscal restraint, government, national debt, New York Times

National technology

Ambitious Pronouncement

I’ve already stated that I believe the goal of using only energy from clean, renewable sources is attainable but I think the Green Prophet might be getting ahead of himself.

{Al Gore} said the goal of producing all of the nation’s electricity from “renewable energy and truly clean, carbon-free sources” within 10 years is not some farfetched vision, although he said it would require fundamental changes in political thinking and personal expectations.

“This goal is achievable, affordable and transformative.”

I would love to be proven wrong on this, but I’m skeptical of the 10 year time-frame. The only real question in my mind is, will Barack Obama endorse this idea before I publish this post?

I guess my personal expectations are among those that he predicted would require fundamental changes.

Tags Al Gore, economics, energy, environment, New York Times

National

Raising Fiscal Awareness

Considering the importance of importance of fiscal policy it seems to evade any serious media coverage in favor of more exciting topics. Ross Perot has launched perotcharts.com to make the information accessible to people. Former Comptroller General, David Walker, has been lecturing around the country about the cliff we are speeding towards and now Peter G. Peterson is pledging to spend $1 Billion in a media campaign to raise public awareness of the issue. (Remember how much a Billion is?)

Ready and waiting as people start to recognize the trainwreck ahead, Downsize D.C. has a campaign which helps people let their congressional leaders know that they are aware of this issue. I think many members of congress are aware of this, but they don’t want to address it because there are no easy answers or short soundbites.

Tags economics, fiscal restraint, government, money, New York Times

culture technology

Energy Optimist

Considering that our homes use much more energy than our cars – it’s always nice to see improvements in how we can generate or use energy. I was reminded of that when I saw two articles on better/cheaper ways to harness the power of the sun. One would generate power from energy gathered at windows rather than needing full solar panels. The other promises the possibility of printing cheap solar collectors with special ink (no indication of how the enrergy being collected could be stored for use).

The more I think about such technologies the more optimistic I become that human enginuity will eventually allow is to lower our energy usage and raise our energy production from clean and limteless resources such as wind, solar, and gravity (hydro-electric dams which generate power from the force of falling water) to the point that we will no londer need to rely on fossil fuels. Such a transition should also be welcomed by anyone who thinks we have passed peak oil production or who is worried about manmade global warming.

Tags economics, energy, environment

culture

Transit Oriented Development

Post author By David
Post date June 19, 2008
10 Comments on Transit Oriented Development

The idea that we need more transit friendly ways to develop our urban and suburban areas is nto new to me. I have long believed it. The idea that government restrictions hinder as often as they help is also easy for me to accept. That’s why I was interested to read about the ways that existing zoning laws often impede smart development.

Many of us will abandon our big gas-guzzling vehicles and forsake new land-guzzling, auto-dependent suburban developments in favor of commuter hubs and “new urbanism” communities clustered near mass-transit stations.

We’ll live sensibly for a change. . . We won’t go kicking and screaming, either. Just give it a little more time. Let the air pollution and traffic congestion and gas pumps that ring up $50, $60, $70 in a blur sink in, and we’ll embrace smart growth and new urbanism and commuter hubs like grandmas hug babies and babies hug puppies.

It’s already starting to happen . . . But there’s still one big obstacle . . . If commuter hubs and bus stop/train station developments are going to become the norm, if we’re going to change our wasteful ways and ease the burden on our environment and pocketbooks, local governments have to lead, or at least get out of the way.

“High density” can no longer be dirty words. Commercial and residential zones must be melded. Those tired old requirements of two parking spaces for every doorstep have to go.

My ideals for my family living situation include a large yard and I begin to wonder if that conflicts with my ideals for smarter growth and a more transit-centric lifestyle.

I think I’ll try to tackle that issue with some ideas of how to meld the two ideals – not just for me, but in general municipal planning. Any thoughts for me to consider?

Tags community, economics, ideas, transit, transportation

National

Charting Government Fiscal Irresponsibility

Post author By David
Post date June 16, 2008
9 Comments on Charting Government Fiscal Irresponsibility

While trying to find out how Tiger Woods did in the playoff round of the U.S. Open today (he birdied the last hole to force sudden death and then won on the first sudden death playoff hole) I stumbled upon news of the launching of PerotCharts.com. This website is a project of Ross Perot which provides important information that every person in the U.S. needs to understand (and every member of Congress needs to accept). Helping Ross Perot is David Walker who was the Comptroller General of the United States until recently – he was the person responsible for creating government fiscal projections and he seems to be tired of having his numbers spun by politicians for their own gain at our national peril.

Using data from the government itself, Perot Charts shows the fiscal cliff that we are facing and on “chart” 34 of a 35 chart Fiscal Challenges presentation there are four suggestions for how to begin correcting our dire situation:

- Restructure existing entitlement programs
- Raise payroll taxes and/or income taxes
- Borrow more money each year to make up the shortfall
- Cut discretionary spending even further

Of those four suggestions, we should be implementing at least 2 if not 3 of them (restructuring entitlement programs, cutting discretionary spending, and finding ways to raise revenue as well). What we don’t need is to borrow more – that only exacerbates the problem.

Tags David Walker, economics, entitlements, fiscal restraint, government, sports

culture life

Overload

Post author By David
Post date June 14, 2008
No Comments on Overload

These last couple of days have been overwhelming. I can hardly keep up with everything I need to do – which is why I failed to post. I’m still trying to catch up so this is mostly a chance for me prove that I have not disappeared. It is also a chance for me to point to the Radio West show from yesterday, The Case for the Independent Farm.

I was very excited when I started listening to the show. It really makes you take a fresh look at agriculture as a business and also at how the production of our true necessities (such as food) affects our lives and our lifestyles so broadly. I am hoping to break the whole show down and share more of what I learned from it. Until then, here’s one nugget:

The encouragement {in agriculture} is to do more work with less people, hence the myth that modern farming is efficient – well it’s more efficient per man hour but it’s not more efficient per acre, if anything it’s much less efficient per acre but we tend to measure efficiency in man hours and capital rather than in land which is the one variable that we probably won’t ever have any more of. – George Pyle, author of Raising Less Corn, More Hell

Tags busy, economics, Radio West, subsidies

National

What Is A Billion

I got a forwarded email about putting some perspective on what “a Billion” is and how easily politicians throw around numbers on that order of magnitude. Here’s a summary from the email that attempts to put some perspective on the “one billion” figure:

A billion seconds ago it was 1959.

A billion minutes ago Jesus was alive.

A billion hours ago our ancestors were living in the Stone Age.

A billion days ago no-one walked on the earth on two feet.

A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.

While this thought is still fresh in our brain, let’s take a look at New Orleans It’s amazing what you can learn with some simple division. Louisiana Senator, Mary Landrieu (D), is presently asking the Congress for $250 BILLION to rebuild New Orleans. Interesting number, what does it mean?

Well, if you are one of 484,674 residents of New Orleans (every man, woman, child), you each get $516,528.

Or, if you have one of the 188,251 homes in New Orleans , your home gets $1,329,787.

Or, if you are a family of four, your family gets $2,066,012.

The first two numbers got me thinking because if it was 1959 a billion seconds ago then it was 1000 B.C. a billion minutes ago. It turns out that a billion seconds is 31.7 years (so 1976) and a billion minutes is 1901 years (107 A.D.). If those numbers were calculated in 1992 then the 1959 number would be correct for a billion seconds and the billion minutes would have been nearly 60 years after Jesus died.

Despite that discrepancy, the value of $250 Billion dollars for New Orleans should open our eyes to the sloppy and generous spending practices of Washington. $250 Billion is nearly $1000 for every man, woman, and child in this country. Our government thinks that it can stimulate the entire national economy for less than it would take to rebuild New Orleans ($165 Billion vs $250 Billion). With numbers like that anyone should start being interested in making our government more fiscally conservative.

Tags economics, email, money, numbers, waste

National

Federalist Nos. 11 – 12

Federalist Nos. 11 – 12 follow the same overarching argument that many of their predecessors followed. It can be boiled down to the truths concerning economies of scale. A larger union has great advantages over a smaller nation in many aspects of government. Number 12, which deals with government revenue, reminded me of a few issues related to taxes that I had not remembered and a few that I had never considered.

One of the things that has always been a pet peeve of mine is the incessant focus on the necessity of an ever expanding economy. I was reminded of why that would be when I read:

The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity (speed) with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury.

Money is only valuable because of the fact that it acts as a lubricant in the mechanisms of commerce. Because of our ever expanding demands for government services and intervention the government has an ever increasing need to generate more and more revenue through taxation and that is best done by faster and faster monetary circulation – although they are not above inserting more otherwise worthless paper into the system to increase their revenue when they feel it is necessary.

What I had never considered was the following:

It is evident from the state of the country, from the habits of the people, from the experience we have had on the point itself, that it is impracticable to raise any very considerable sums by direct taxation. Tax laws have in vain been multiplied; new methods to enforce the collection have in vain been tried; the public expectation has been uniformly disappointed, and the treasuries of the States have remained empty. . . . No person acquainted with what happens in other countries will be surprised at this circumstance. In so opulent a nation as that of Britain, where direct taxes from superior wealth must be much more tolerable, and, from the vigor of the government, much more practicable, than in America, far the greatest part of the national revenue is derived from taxes of the indirect kind, from imposts, and from excises.

It is that understanding about the difficulty of collecting direct taxes (such as income tax) that led our founders to codify in the constitution that the federal government should not have the power to levy an income tax. Indeed, reading that statement makes the FairTax proposal look all the more enticing since it rests on indirect taxation.

If anyone doubts the reality of the assertion that direct taxes are harder to collect consider the amount of money and time that Americans spend each year in tax preparation in an effort to pay as little income tax as they can and then combine that with the amount of money and time the IRS spends trying to ensure that nobody failed to pay their allotted share of income tax. Now compare that vast sum with the amount of time and money that people spend trying to avoid indirect taxes like a sales tax.

That explains why the only patriotic thing to do with our stimulus checks is to spend them the day we get them if not before.

Tags documents, economics, federalist, taxes

National

Willing Suspension of Disbelief

Post author By David
Post date May 3, 2008
2 Comments on Willing Suspension of Disbelief

Reports from the CBO that a Universal Health Coverage Bill would be budget neutral are obviously based on the third kind of lie (namely statistics). Commonhealth sums up the effects of the bill like so:

The legislation:

gets rid of employer based insurance (employers that contribute to coverage would give employees that money at first, and eventually shift to a federal health coverage tax)

requires all Americans to have health insurance

offers subsidized coverage up to 400% FPL (Mass is up to 300%)

sets up purchasing pools (like the Connector)

Could someone please point out to me where this plan gives health care providers an incentive to provide efficient, high-quality care? It seems to me that insuring all our uninsured citizens will never pay for itself in a system that thrives on inefficiency – as the current system does. Adding inefficiency couldn’t possibly pay for itself.

Ending employer based insurance is potentially a good thing. Requiring everyone to buy insurance looks like an incentive for more inefficiency and even price gouging. And one of my senators is sponsoring this. I think he should have his head examined.

Tags economics, health care, issues, statistics