Saturday, February 28, 2009

The Economy, Raffles, & Horses

I really do not forward chain emails, there are so many, but occasionally one comes along that's worth the read. As is the case with most email chains, I don't have proper attribution, though this is all over the Internet and in emails. But in our frustration trying to grasp the complexities of the economy and our own finances right now, it's nice to have a brief moment of clarity and humor. In case you haven't seen it yet:
Young Chuck in Montana bought a horse from a farmer for $100. The farmer agreed to deliver the horse the next day.

The next day the farmer drove up and said, "Sorry son, but I have some bad news... the horse died."

Chuck replied, "Well, then just give me my money back."

The farmer said, "Can't do that. I went and spent it already."

Chuck said, "OK, then, just bring me the dead horse."

The farmer asked, "What ya going to do with him?"

Chuck said, "I'm going to raffle him off."

The farmer said, "You can't raffle off a dead horse!"

Chuck said, "Sure I can, watch me. I just won't tell anybody he's dead."

A month later, the farmer met up with Chuck and asked, "What happened with that dead horse?"

Chuck said, "I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $998."

The farmer said, "Didn't anyone complain?"

Chuck said, "Just the guy who won. So I gave him his two dollars back."

Friday, February 27, 2009

Would You Go To An 8.25% Off Sale?

Here's the crux of the problem with creating stimulative policy with tax cuts:

Would you go to an 8.25% Off Sale?

In this economic climate, the policy challenge is knowing how much incentive it will take to get qualified, capable buyers to take the risk of spending their cash now, to the benefit of the economy, rather than to horde their money cautiously.

The 8.25% figure is the sales tax rate in the north Houston area. So the idea we ponder here is what would happen if localities entirely suspended the sales tax. Sounds dramatic, bold, right?

But am I really going to run out and buy a new suit for $200 just because I don't have to pay 8.25% in taxes on it? The price tag of things never includes taxes anyway, and most shoppers never think about the sales tax when they compare prices or consider purchases (mostly I suppose because so few people know how to calculate percentages such as proper tip amounts in restaurants).

So this plan would fail and fail big to stimulate spending.

Now let's think about people who basically spend everything they earn in wages because they need it all for basic living expenses: basic clothing, kids' apparel and needs, car payment, gasoline, groceries, hair cuts, credit card payments, utilities, rent... the basics for our economy.

Now let's think about suspending the 7.65% Medicare and Social Security (FICA) withholding from that person's paycheck. (A similar measure would be to reduce or eliminate federal income tax withholding.) For monthly wages of $3,000, this measure would generate an additional $229.50 per month on an annual income of only $36,000.

Such a tax break or "holiday" would be effective immediately, and eliminating the withholding would take effect immediately in the economy, almost guaranteed to be spent entirely and immediately. Now that's stimulation.

At an annual income around $36,000, this measure would reach immediately around two-thirds of American workers.

Not all taxes are bad. Not all spending is bad. The question is what policy is effective in this moment? Don't let the politicians and pundits take your eye off the ball.

Thursday, February 26, 2009

The Best Things in Life

While we all now attempt to exercise our fair share of personal responsibility in our finances, it is an especially salient time to remember that the best things in life are (often) free.

Many communities have free events every week, and in large cities such as Houston, different parts of the city often have local events, from small neighborhoods to larger suburb cities or even micro-neighborhoods in the downtown area.

Here are two such events, both very different and appealing to different tastes. Of course in addition to this there are countless musician recitals at local colleges and churches, film festivals, area parks with nice amenities for kids, zoos, and in Houston, its world-class museums are now entirely free thanks to a giant grant from an estate. The museum district of any town should never be overlooked, nor should special arboretums and state and national parks.

Here are local events in Houston that caught my eye because they sound unique, fun, and free.

SpringFest to offer wine, art, music

The 11th Annual SpringFest, one of the largest wine exhibition and tasting events in Houston, will take place in Historic Old Town Spring Friday, March 6 through Sunday, March 8.

Wine enthusiasts are invited to attend this Texas-style event featuring local wineries showcasing top Texas wines, micro-brewed beer tastings, original art work from local artists, exhibits with furniture and art, and live entertainment featuring performances from Davin James, Shake Russell, Max Stalling, Todd Fritsch, jazz ensembles and more. The event is presented by Houston Press and KVST 99.7 FM.

Admission is free on Friday and Sunday; free Saturday until 4 p.m.; and $10 on Saturday after 4 p.m.

And another from an internationally renowned neurologist (a personal favorite topic):
Neuroscientist to speak March 18-19 at Lone Star College-North Harris

Dr. Janet Zadina, an internationally recognized reading specialist and cognitive neuroscientist, will speak March 18 and 19 at Lone Star College—North Harris, 2700 W.W. Thorne. Area teachers, counselors, and any professionals or community residents interested in hearing about brain research and education are invited to attend any or all of her four presentations, which will be offered free of charge.
The schedule is as follows:

* 9:30-11 a.m. March 18: “Anxiety and the Brain: Overcoming Hidden Stress Triggers,” Room CE-101 in the Continuing Education Building.

* 1-4 p.m. March 18: “Using Brain Research to Enhance and Energize Instruction,” Room CE-101 in the Continuing Education Building. ...

* 10-11 a.m. March 19: “Is It All In Their Head? How Brain Research Informs Our Understanding of Learning Differences,” Room CE-101 in the Continuing Education Building.


Wednesday, February 25, 2009

Privatizing Gains, Socializing Losses vs Socializing Gains, Privatizing Losses

I thought, like most Americans, that the president gave a very effective speech last night to congress and the nation. But something struck me this morning as I listened to the chattering heads the morning after. Much of the argument from Republicans is the direct inverse of the argument Democrats have been making for several years, namely: it's all about whether we privatize or socialize gains and losses.

The progressive argument states that corporations and their private shareholders/owners aim to privatize gains through profit as much as they can, while shifting "costs" or losses onto society in general. A clear example is pollution. If a company profits by manufacturing something that creates severe pollution that the company is allowed to dump into the air and water, then society bears a significant cost associated with the production of that product, and the company profits by not having to pay all the expenses associated with their production.

So then the pollutants often lead to higher incidents of asthma in children and adults near chemical plants, or higher rates of cancer, etc. -- and so social health programs (with public taxes, not at the company's expense) or individuals suffering then carry the burden of the "socialized cost." This is why Democrats often push for tighter regulations of private enterprise, to minimize the degree of socializing costs, shifting costs to the general public, in order to increase private profits.

The conservative argument postulates that a great economic danger is in privatizing losses while socializing gains, the exact inverse of the progressive argument - this is how we can tell now that we are on ideological terra firma with both arguments. The conservative argument is almost always made as an argument against the perils of taxes, and it's why progressives often accuse conservatives of thinking tax cuts are the solution to every problem.

In the conservative view, the nation does far greater harm to itself by privatizing losses and costs through excessive taxation in order to create socialized benefits. This is, however, the basic dynamic behind any taxation, whether it is to build roads and schools (albeit most conservatives do not oppose this) or to build and operate a "common defense" in the military. Conservatives, however, think there is danger in over-extending this dynamic to include what they feel are other ineffective social and other programs.

Neither position is absolutist of course, but they often stand on slippery slopes.

But here in this moment, in this time of great challenge, we need to be careful not to retreat to these easy diametric ideological positions and thereby miss the most practical circumstances and solutions that are key to our collective recovery.

The most salient question is the one posed by the president in another speech: the question is not, "Is government too big or too small?" as it was in the 80's and 90's. Rather, the question is, "Is government being effective." That's the question today. That's our question right now as a nation facing great challenge.

Reasonable people will disagree on that question. But make no mistake, that is the conversation we must be having.

Tuesday, February 24, 2009

Our Pets Need Us Now & We Need Them

In the current financial challenge, many pet owners (I prefer "guardians") are choosing to give up their pets to shelters to avoid the extra expense of another mouth to feed and dependent to bathe. I understand. However I worry that viewing pets as another "expense" short-changes the very people who need their pets now more than ever.

Many people don't really understand their pets. Perhaps the guardian has never had a pet before or doesn't know much about their behavior, despite how much Dog Whisperer they watch. And then there is the very real issue of the expense.

However pets provide humans a distinct form of companionship unparalleled by anything else in the world. Pets are "beyond words." They have a unique tie therefore that bypasses our frontal cortex and speech center and goes directly to our emotional center, often dabbling with our unconscious minds.

Our pets allow us to project onto them and to work through difficult feelings through our at-times-complex relationships with them. They don't mind. We only need to feed and shelter them (they even don't need clothes). That seems like something I would not want to surrender, especially in difficult times. I'd reach out for help from loved ones and strangers before I would give up my companion dog, about whom I often say, "We're now like an old married couple."

It is sometimes said that a society can be judged by how it treats the least among them. I believe that, and most especially about animals that we humans have bred over the years to be domesticated and whose only defense is a faithful human guardian.

The best animal welfare organization I know and have ever been a part of is The Animal Rescue League of Boston, where I am a member of the President's Council and from where I adopted Tank. It was founded in 1899 by Ms. Anna Harris Smith, whose philosophy was "Kindness Uplifts the World." Kindness is indeed an end unto itself.

From the ARL Boston website:
The Animal Rescue League of Boston believes that the power and beauty of the animal human bond is intrinsic to efforts to stop all forms of violence in our society.

A fundamental premise of the humane community is that if a child is taught to be kind to animals, there is a greater likelihood that the individual will mature into a person who respects not only humanity, but also all living things. This premise has been the subject of sociological studies and is expressed in literature and the arts. With a deep belief in this premise, Animal Rescue League of Boston founder Anna Harris Smith initiated a humane education program for children by establishing The Kindness Clubs in the neighborhoods of Boston.

I look forward to helping ARL Boston expand its effectiveness and mission across the nation so that more people can hear this philosophy and experience the many rewards of animal companions.

Saturday, February 21, 2009

Ask Not What Your Country Is Doing To You...

I had the displeasure this morning to attend a commercial real estate seminar for which the opening speaker was a real estate economist who profoundly misunderstood the bounds of his expertise.

After stating that he didn't care who was president, and that he wasn't a Democrat or Republican, but a "registered cynic," he proceeded to rant without statistics, studies, or citations about the frustrations of the current situation the nation faces, a la Rick Santelli's now infamous rant on CNBC this week on the floor of the CME. Cynic, indeed.

It has always been easy to be a cynic about politics. Too easy. Cynicism is a coward's way out. Sometimes I want to yell at people, "Ask not what your country is doing to you, ask what you are doing to your country." We are where we are. Who in America could not go on an hour-long tirade about how frustrated we are as Americans right now, about how profoundly messed up the country is right now, and about how much and how many ways we have failed as a collective in recent years? Who couldn't do that?

I don't have time for people who can only state the obvious in the middle of a crisis and cannot offer or assess credible potential solutions.

A client of mine is not a professional economist. But he cares about politics, and though our politics is different, he asked a provocative question a few days ago. He said, why doesn't the government let responsible individuals (presumably including those who were steered into usury loans) refinance their loans to current market value with a balloon payment for the remainder of the balance due in 30 years? It's really a provocative idea. I can tick off a handful of problems with it, but not enough to declare it DOA. Really I'd like to look into his idea more. Like I said, he and I probably wouldn't agree on much politically (at least at first, perhaps), but he commanded my respect by offering an idea and being able to articulate it, an indicator of earnest reflection.

But ranting from these others? C'mon. It's defeatist. It's unimaginative. It's unhelpful and probably destructive. So what are these otherwise smart people thinking when they launch into these toddler tirades on the platforms given them by their professions as they step outside the boundaries thereof? I am embarrassed for them.

So I wonder... I suggested a while back of the Chair of the House Banking Committee Barney Frank, it must hurt to be that smart. But these high profile rants by otherwise smart professionals make me wonder in those moments: Does it hurt to be that dumb? I hope so.

Well for the record, I'm frustrated too. Consider this post my rant.

In case you missed it, Santelli:

Monday, February 16, 2009

On "Garden Bathtubs"

I often say that home buyers have an "aspirational" orientation when looking for their next home. By that, I mean that buyers are not generally looking to buy a house that will feel like the last one and in which they will follow the same behaviors and patterns. Part of moving, psychologically, is the opportunity "step up" both in habit and status.

So one of the many curious items of value in any home on the market is the "garden tub." This tub is larger than a standard tub, deeper, and has a slanted back designed solely for a relaxing bath. Usually these are only in the Master Bath, are set in a corner, and often have windows above and ledges where people can place boutique shop candles, soaps, and little rolled up wash cloths like a fancy hotel.

But does anybody ever use them?

It doesn't matter. Regardless of whether people do use them, buyers want to imagine that they will use them. It's just a pleasant thought. We all want to think that we will manage to work in that Friday-night hot soaking bath with candles and a glass of wine. Sure, some people actually do this, and good for them. But whether someone does it or not is entirely beside the point because everyone wants to imagine themselves doing it.

And you can't imagine it if you don't have the tub. What a hope-crusher.

Even if you take a soaking bath in a garden tub once in a blue moon, you can bet that it will be a moment of great stress relief, a pleasure, and a great memory. Moreover, every morning and night when the owner is in the Master Bath, there will be the tub and the memory, and more importantly -- the hope -- that the moment will come again soon.

Practically speaking, garden tubs are a status symbol because they are a luxury of space. With a garden tub, the Master Bath will also feature a separate shower, and so the package creates a "luxury of space," not economy of space as would be a standard tub and shower together. The tub creates additional open space from the bottom of the tub (the floor) to ceiling that always remains open, and so opens up the feel of the Master Bath. Tub/shower combinations with a curtain or sliding doors close off the space, kill any hope of a relaxing bath, and close out light -- a triple-whammy.

So sometimes buyers' desires and choices may not appear logical. But usually upon sufficient reflection (and after witnessing the same choices and desires time and time again), the underlying logic of human nature can shine through.

Buy American

I do not understand the "free traders." They are legion and on all sides of the ideological spectrum. They say that protectionism is entirely bad, and that so-called "free" trade is the economic panacea for all nations.

It's pure bunk.

If you did not catch last night's 60 Minutes with Nucor Steel, a steel recycler in America whose workers' salaries are tied to production, then I will try to find You-Tube footage for you tomorrow.

Any American with any heart or sense of patriotism at all could not watch this segment and come away feeling like a "free trader." As the CEO says basically, "Free trade is not free. It's an academic luxury. If you want to study it at Harvard, go ahead. But it has no practical application in the real world."

I agree. I don't understand how a system that causes our nation to have unending trade deficits year after year after year after year can be such a fantastic phenomenon. I'm so glad that the "Buy American" provisions in the stimulus bill the president will sign in Denver on Tuesday contains this provision for bill-authorized acquisitions of steel.

You see I have studied free trade at Harvard. And I agree with steel-workers that it has no practical application in the real world as currently practiced. We have a right, more a patriotic duty, to advance our nation's economic interests where possible. To say otherwise is simply un-American.

Sunday, February 15, 2009

$15K Home Buyer Credit GONE

Sometimes when I don't write for a while it's because I'm too angry to write. I try not to write when I'm angry.

Apparently the conference committee on the stimulus bill stripped out the $15,000 home buyer credit to all home buyers. This makes no sense.

In fact, it is so out-of-touch with the economic conditions on the ground to strip this out, I don't feel a need to even begin to refute it here. Most of my readers will understand. This is how "the sausage" gets made in Washington DC.

I will have more to say on this when I can have a more measured tone, but it's taken me a few days just to get to this post.

The silver lining is that this element of the package can be revisited as a stand alone bill or as part of a subsequent bill, so all is not lost. And there are still many other good measures in the bill that will have a stimulative effect. But let there be no doubt, the compromise by committee has made for a weaker bill that has a weaker chance of actually being effective.

Expect to see a lot more debate on measures that were cut and new measures as we go forward. I suspect this bill is not nearly enough to turn the current situation around, though it is a good start. Especially here in Houston, we should view it with cautious optimism.

Sunday, February 08, 2009

The Surging Populist Rage

In this morning's New York Times, the invaluable social critic Frank Rich writes about a familiar theme on this blog, namely the catastrophic policies set forth by both parties in the 1999 repeal of the depression era reform bill "The Glass Steagall Act" and the even more disastrous foundation for our current crisis, "The Commodities Futures and Modernization Act of 2000." From Rich:

Key players in the Obama economic team beyond Geithner are also tied to Rubin or Citigroup or both, from Larry Summers, the administration’s top economic adviser, to Gary Gensler, the newly named nominee to run the Commodity Futures Trading Commission and a Treasury undersecretary in the Clinton administration. Back then, Summers and Gensler joined hands with Phil Gramm to ward off regulation of the derivative markets that have since brought the banking system to ruin. We must take it on faith that they have subsequently had judgment transplants.
Truly any American should be concerned that the usual suspects of the 1990's whose policies caused so much international turmoil at the time, and whose policies (along with Chairman Alan Greenspan) set the stage for the gathering storm of the past eight years that culminated in this crisis of our own making we face today. Chillingly, Rich suggests that these players may not be fully rehabilitated.

A welcome outlier to this club is Paul Volcker, the former Federal Reserve chairman chosen to direct Obama’s Economic Recovery Advisory Board. But Bloomberg reported last week that Summers is already freezing Volcker out of many of his deliberations on economic policy. This sounds like the arrogant Summers who was fired as president of Harvard, not the chastened new Summers advertised at the time of his appointment. A team of rivals is not his thing.

Americans have had enough of such arrogance, whether in the public or private sectors, whether Democrat or Republican.

My greatest concern is about "the arrogant" Larry Summers. And while I have to honor a confidentiality oath, I can say that Summers is one of the creepiest people I have ever met and listened to in person, when he was President of Harvard University. One gets the sense that this man's sense of self-supremacy is unlimited and untempered even by recent years' evidence of his past failures. He is brilliant, the youngest professor ever to be tenured at Harvard University, practically at the moment he received his PhD. But academic brilliance does not translate into policy brilliance, which is fraught with unintended consequences if implemented poorly. This man rose too far too fast and was handed policy reigns when he should have been relegated to an advisory position and nothing more.

In 1999, he succeeded Rubin as Secretary of the Treasury. A year later, he was, with Alan Greenspan and Rubin, a leading advocate of the derivatives deregulation. Also during his stint in the Clinton administration, Summers was successful in pushing for capital gains tax cuts.

Larry Summers also deserves credit for advocating Washington Consensus policies during the Asian Financial Crisis. He eschewed Keynesian policies in favor of fiscal austerity, forcing the Korean government to raise its interest rates and balance its budget in the midst of a recession, policies criticized by liberal economists such as Paul Krugman and Joseph Stiglitz.[2] According to the book The Chastening, by Paul Blustein, during this crisis, Summers, along with Paul Wolfowitz, pushed for regime change in Indonesia. On May 4, 1998, when the Indonesian government began to raise fuel prices as part of an IMF program in exchange for hard currency, students started to protest, and in the ensuing riots, hundreds burned to death as blazes swept shopping centers in Jakarta.[2]

During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[4] Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets. [5] It was later conclusively revealed that Enron traders were the cause of the California electricity crisis.

Here's a taste of the 1990's shenanigans by Summers and his ilk, and now ask yourself whether you want these "thinkers" in charge of turning around the American economic crisis we face.

Many critics of trade liberalization... see the Washington Consensus as a way to open the labor market of underdeveloped economies to exploitation by companies from more developed economies. The prescribed reductions in tariffs and other trade barriers allow the free movement of goods across borders according to market forces, but labor is not permitted to move freely due to the requirements of a visa or a work permit. This creates an economic climate where goods are manufactured using cheap labor in underdeveloped economies and then exported to rich First World economies for sale at what the critics argue are huge markups, with the balance of the markup said to accrue to large Multinational corporations. The criticism is that workers in the Third World economy nevertheless remain poor, as any pay raises they may have received over what they made before trade liberalization are said to be offset by inflation, whereas workers in the First World country become unemployed, while the wealthy owners of the multinational grow even more wealthy.

[C]ritics further claim that First World countries impose what the critics describe as the consensus's neoliberal policies on economically vulnerable countries through organizations such as the World Bank and the International Monetary Fund and by political pressure and bribery. They argue that the Washington Consensus has not, in fact, led to any great economic boom in Latin America, but rather to severe economic crises and the accumulation of crippling external debts that render the target country beholden to the First World.

Bear in mind that all the globalization of that decade still led to unending massive trade deficits that helped mushroom the national debt more in the last eight years than in all prior American history combined. Now our foreign debt is held by Japan and China, and our economy is subject to enormous economic and political threats by our adversaries. To me, that is not good policy, Professor Summers.

I had the good fortune to hear a small-room lecture by a past-president of a small Latin American nation, a man who experienced the ravages of the IMF first-hand and was ousted from his position because of his own country's crisis. This stuff is not theory.

Further alarming is Rich's claim that Paul Volcker, Alan Greenspan's predecessor whose leadership of the Fed laid the policy groundwork to save America from its last economic crisis in the late 70's to early 80's, is being "shut out" by Larry Summers today. Here's Volcker's previous work:

Paul Volcker, a Democrat[4], was appointed Chairman of the Federal Reserve in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan.[5]

Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.
While our current crisis is different in nature to be sure, it is no less urgent and its eventual solutions will be no less controversial than the policies Volcker implemented in the early 80's to arrest the inflationary spiral of that time.

The New "1/20" Rule
Here's where the new "populist rage" enters, as millions of Americans find themselves very recently out of work in the last three months alone. Again from Rich:
But we do know that the system has been fixed for too long. The gaping income inequality of the past decade — the top 1 percent of America’s earners received more than 20 percent of the total national income — has not been seen since the run-up to the Great Depression.
Yes, it's hard to believe, harder to fathom, that only 1% of the American population received more than 20% of the entire national income. When candidate Barack Obama said inartfully that he wanted to "spread the wealth," he wasn't talking about socialism. He was talking about this issue, about the need to rebuild the middle class, which brought this country to the peak of its economic and global power in the 20th century, so that more people can earn a better share of the nation's "pie," and so we can make it as big as we possibly can, together. That's not welfare. It's not socialism. It's how to build a healthy, diversified, and strong national democratic capitalist economy.

The strongest punch and thematic statement from Mr. Rich comes in his opening paragraphs this morning. And if the president, the senate, and the congress do not come to terms with this warning soon, it won't just be "the president's best-laid plans" that get "maimed."
SOMEDAY historians may look back at Tom Daschle’s flameout as a minor one-car (and chauffeur) accident. But that will depend on whether or not it’s followed by a multi-vehicle pileup that still could come. Even as President Obama refreshingly took responsibility for having “screwed up,” it’s not clear that he fully understands the huge forces that hit his young administration last week.

The tsunami of populist rage coursing through America is bigger than Daschle’s overdue tax bill, bigger than John Thain’s trash can, bigger than any bailed-out C.E.O.’s bonus. It’s even bigger than the Obama phenomenon itself. It could maim the president’s best-laid plans and what remains of our economy if he doesn’t get in front of the mounting public anger.

The Drama of the Coming Week: Cuts vs Cats

The best show since the Superbowl is sure to unfold in the coming week as President Obama barnstorms the country to sell the Stimulus Bill to a skeptical and beleaguered nation.

No doubt opponents of the bill will be highlighting "cats and dogs" in the bill to dramatize what they think is "waste," making what the president said is "the enemy of the essential," and seeking their own political benefit -- acts tantamount to treason given the urgency and enormity of the economic crisis we face. See last week's report of January job losses (in a post below) for a taste of what's accelerating. Every wasted moment equals thousands of more jobs lost.

At any rate, proponents will be holding up the cuts this week contained in the co-called senate "compromise" version of the bill announced on Friday. Courtesy of Senator Leahy's office, we get our first shot across the bow of cuts that are sure not to sit well with the public so long as we're going to spend hundreds of billions of debt money anyway:

Billion dollar cuts from the bill

$40 billion State Fiscal Stabilization

$16 billion School Construction

$7.5 billion of State Incentive Grants

$5.8 billion Health Prevention Activity

$4.5 billion GSA

$3.5 billion Higher Ed Construction (Eliminated)

$3.5 billion Federal Bldgs Greening

$2.25 Neighborhood Stabilization (Eliminate)

$2 billion broadband

$2 billion HIT Grants

$1.25 billion project based rental

$1 billion Head Start/Early Start

$1.2 billion in Retrofitting Project 8 Housing

$1 billion Energy Loan Guarantees

Multi-Million dollar cuts from the bill

$100 million FSA modernization

$50 million CSERES Research

$65 million Watershed Rehab

$30 million SD Salaries

$100 Distance Learning

$98 million School Nutrition

$50 million aquaculture

$100 million NIST

$100 million NOAA

$100 million Law Enforcement Wireless

$50 million Detention Trustee

$25 million Marshalls Construction

$100 million FBI Construction

$300 million Federal Prisons

$300 million BYRNE Formula

$140 million BYRNE Competitive

$10 million State and Local Law Enforcement

$50 million NASA

$50 million Aeronautics

$50 million Exploration

$50 million Cross Agency Support

$200 million NSF

$100 million Science

$300 million Fed Hybrid Vehicles

$50 million from DHS

$200 million TSA

$122 million for Coast Guard Cutters, modifies use

$25 million Fish and Wildlife

$55 million Historic Preservation

$20 million working capital fund

$200 million Superfund

$165 million Forest Svc Capital Improvement

$90 million State & Private Wildlife Fire Management

$75 million Smithsonian

$600 million Title I (NCLB)

I dunno... but it seems to me that given 600,000 job losses just last month, at an average of $50,000 each, means that American workers lost $30,000,000,000 ($30 billion) of annual personal income LAST MONTH.

I'm not sure, with this particular emergency stimulus bill and historic economic crisis continuing to spiral out of our grasp, that a billion here and a billion there for such things as local government, aerospace, education, and law enforcement really is worth all the dithering and grandstanding.

Friday, February 06, 2009

Not All Tax Cuts Are Bad

While "tax cuts" in the abstract are proven (yes, proven) to be less effective than "spending" for turning around an economy with cratering demand (more on that later), it is worth noting that not all tax cuts such as those included in the Senate and House versions of the stimulus bill are bad...

It's worth noting that many middle class earners who would get tripped by the AMT are not expecting to pay the AMT because they have not had to pay it in the past. So if the AMT were not eliminated, it would result in several million earners to have withheld too little in taxes and therefore come up short, or would have to withhold more in taxes from paychecks, thereby reducing disposable income.

So delaying the AMT is good policy. Tax cuts that produce immediate spending that otherwise would not have happened is still spending, and it's still good policy.

Tax cuts however that simply benefit the rich and would simply result in additional money cut from the government and staying protected in fat bank accounts would continue the economic crisis.

Another great good policy example: $15,000 refundable tax credit for (qualified) home buyers to get people buying new homes now and not waiting until it's too late.

Another great example: a multi-thousand dollar tax credit for anyone who gets a new air-conditioner (which will have a higher SEER rating, more efficient) or replaces single-pane windows, etc. This will cause middle and lower-class owners to consider replacing old A/C units for example that are at the end of their useful life and they will see a huge spike in efficiency in their bills and energy use -- not to mention getting a great break on a system that will need replacing regardless and creating jobs/saving jobs for the manufacturers and installers, etc. Not all tax cuts are bad. Not all public spending is good. Blah blah blah.

Homeowners and Landlords would do well to study the final bill (when it gets done) and take advantage of all provisions that give incentives for pulling forward spending that otherwise would be put off. This could include replacing old A/C units, replacing single-pane windows, replacing an old car (with a more efficient car at a low interest rate), and yes even buying a new house at a potentially lower-than-future market price and historically low fixed interest rate.

Not everyone has the ability to spend right now, and that's fine. But this nation desperately needs those who can spend to spend... without delay. Anything that causes spending right now, including pulling forward public spending for infrastructure, as well as private spending, etc., is going to help turn things around.

Right now (not in the long term): if we're spendin', we're survivin'.

Just sayin'...

Entire Major Cities & States Unemployed

It's hard to get our minds around certain statistics like today's announcement that 598,000 (let's just say 600,000 can we?) jobs were lost just last month. This shows definitively that the horrific job loss trend is indeed accelerating. (Every American should be pressuring their congress-critters to pass a stimulus bill asap - it's already past due.)

To put this in perspective, it is as if the following entire major cities were put out of work just last month:

U.S. Cities with Populations around 600,000:
  • Boston
  • El Paso
  • Milwaukee
  • Seattle
  • Nashville
  • Denver
  • Washington, D.C.

The following cities have far fewer than 600,000 people. Last month's job losses alone would have eliminated more than one job for every person in the following cities:

  • Las Vegas
  • Louisville
  • Portland, OR
  • Atlanta
  • Sacramento
  • Kansas City
  • Cleveland
  • Miami
  • Omaha
  • Oakland
  • Minneapolis
  • Raleigh
  • Arlington, TX
  • St. Louis
  • Tampa
  • Cincinnati
  • Pittsburgh
  • Newark
  • Plano, TX
  • New Orleans
  • Orlando

Obviously this is not an exhaustive list, and remember that city populations include children, the retired, and others not in the workforce.

There have been over 2 million jobs lost in the last three months.

There are only four U.S. cities with populations greater than 2 million:

  • Houston (2.2 M)
  • Chicago (2.8 M)
  • Los Angeles (3.8 M)
  • New York (8.2 M)

There are only fifteen U.S. states with populations over 2 million.

And there are 26 -- yes, twenty six -- U.S. states with populations less than 600,000 - the number of jobs lost in the U.S. just last month.

We are not having an academic or ideological discussion in this country about the imminent need for stimulus.

Wednesday, February 04, 2009

Bingo! $15,000 Home Buying Credit in Bill

Not all lobbying is bad. The National Association of Realtors, among others, have been pushing to expand the current $7500 refundable tax credit for first-time home buyers (no purchase in the past 3 years) enacted last fall to a full $15,000 home-buying credit for all home buyers. Now that is stimulative policy.

The new credit has been approved by the Senate and included in their version of the stimulative package. If the Senate approves the bill, then the Senate version must be reconciled in a joint committee with the House stimulative package passed last week - then the reconciled version would be voted on separately by each house of Congress - the House of Representatives and the Senate - before finally going to the President's desk for signing. So we've still got a ways to go, but this new provision should survive the process.

From The New York Times this evening:
Aides to the majority leader, Senator Harry Reid of Nevada, suggested that a final vote on the stimulus plan could come as early as Thursday. If the Senate approves the stimulus, the final legislation must still be reconciled with the $820 billion measure approved last week by the House.

The tax break for homebuyers, which the Senate approved by voice vote without opposition, was the second amendment in two days aimed at encouraging consumers to make major purchases.

Apparently the Senate bill also provides incentives for new car purchases:
On Tuesday, the Senate approved a tax incentive for car buyers, sponsored by Senator Barbara Mikulski, Democrat of Maryland, that would allow the deduction of sales tax and loan interest on purchases made this year.

One thing is beyond debate: the solution to stimulation is effective spending. Period. Whether the private sector uses incentives to spend when it otherwise would not, or whether the government uses its massive broad powers to spend and create and save jobs, stimulation depends on effective spending that creates jobs. That's how the virtuous cycle begins, if it is to begin at all. The risk is not going big enough or not being effective enough. So far I think both bill versions are shaping up to be reasonable all together, and President Obama was correct to say today that we must not let the perfect be the enemy of the necessary.

More on the housing credit:
The measure would give buyers a tax credit of 10 percent of the price of a primary residence purchased within the year, up to $15,000, and is designed to stabilize plummeting home prices that caused a wave of foreclosures and led to the near collapse of the financial system as Wall Street firms wrote down billions in losses on mortgage-backed assets.

While many potential home buyers still will not qualify for newly restrictive loan standards, such a credit should give incentive to those who do have qualified credit and want to take advantage of a good buying opportunity. While this market is not a buyer's market (mostly due to broad credit and economic troubles), there are good values to be had for able buyers.

And right now, we need every capable buyer to be in the market.

Sunday, February 01, 2009

Jennifer Hudson's Star Spangled Banner

Oh my. I watched Jennifer Hudson's performance of The Star Spangled Banner from tonight's Super Bowl three times... and cried each time. I am a big guy and not easily moved. Nor do I cry easily or often. But Ms. Hudson's performance was easily the best I have ever heard or seen of our national anthem. And I think in this particular moment in our nation's history, and with the crew of the recently downed aircraft including Captain Sully Sullenberger there, it was just a whole lot packed into those moments, and it came as an overwhelming surprise.

I cannot wait to get this for my car stereo. I don't know how the sound is on the following, but it was posted just after the performance obviously from a television screen, and at least it gives much of the flavor.

Wow. I always loved the anthem of course, but Jennifer Hudson has now made me a total sucker for it.

[UPDATE 10:33 PM CT] From the AP:
It was a completely different energy than the one offered two hours earlier by Hudson, who made her first public appearance since the October slayings in Chicago of her mother, brother and 7-year-old nephew. Her estranged brother-in-law has been charged in the killings.

Wearing a flowing white top with black leggings and a military-style dark jacket, the 27-year-old singer/actress looked apprehensive and took a deep breath before launching into the anthem.

Hudson, who clocked in at 2 minutes, 13 seconds, looked relieved when she was through.

When she returned to her dressing room, she anxiously asked pre-game show producer Rickey Minor "How did I do?"

"I told her 'Touchdown!'" Minor told The Associated Press after the performance.

"This was such an important performance, because it's the first time everyone has seen Jennifer. But she's in such a great place, with such great spirits and time can heal her wounds. She's on fire right now and totally grounded."

Minor, the music director for American Idol, has produced numerous Super Bowl pre-game performances, including Whitney Houston's 1991 anthem in Tampa that's considered the benchmark for singers. He said Hudson's two cell phones lit up "like slot machines" following her performance, and she received a moving text message from Jamie Foxx, her co-star in "Dreamgirls."

"His text said 'Amazing. It brought tears to my eyes,'" Minor said. "She's just getting so much love."

Although entertainers can perform live, Minor insisted that Hudson and Faith Hill, who sang "America the Beautiful" before the national anthem, use the tracks the NFL requires them to submit a week before the game.

Hudson made her performance personal.

"She's from the church," Minor said. "So we wanted to give it a gospel feel, use a little organ, rhythm and really give it a feel that matched Jennifer. We wanted her to emote the lyrics and connect with the song."

Hudson's now expected to resume her active work schedule. Hudson, who won an Oscar for best supporting actress for her role in "Dreamgirls," is scheduled to perform at next week's Grammy Awards, and her new video for "If This Isn't Love" is set to debut the week of Feb. 9.

Jennifer Hudson is quintessential Americana. And I think she's set the new "benchmark" for anthem singers.