Missing Something Important

I've seen a few posts on how housing starts have dropped, but since population is still growing this is unsustainable and will undergo a serious correction. Matt Yglesias follows up here with a surprisingly bad (though not, I suppose for MattY haters) graph. People per new housing start is a really bad ratio. If the population suddenly stopped growing, then we would need no new housing starts and so that would stop and that ratio would skyrocket, but would be completely and totally sustainable.

The appropriate graph, and one I haven't seen anywhere, would be population to total housing (including condos, apartments) ratio. That ratio should be more or less constant. Increasing wealth will shift it to more housing per person as there would be less sharing and more second/vacation home ownership, but as more wealth also often means slower population growth it could end up shifting both sides of the fraction. Still, that is the relevant graph.

And so long as that ratio stays above trend there is no reason for new housing starts to pick up in any meaningful way. Moreover, so long as the pickup leads--even a little--the return to trend, there is no reason to expect a major housing correction.

Lastly, of course, even though housing has national trending and inside the US mobility makes for some balance, housing is a local phenomenon, so some places could pick up while others stagnate for a century.

Wherefore College

I enjoyed college. More, I think that it is a rather important and quite powerful force in advancing societies. I seem to be hearing and reading quite a bit lately about whether college is necessary. Largely this has to do with whether it is financially worthwhile, but there have been some pieces that are a bit...unusual.

First: yes, it is certainly possible to achieve happiness and even great success without going to college or receiving a degree. It is far easier, however, for people who do go to college. There are many necessary jobs out there that do not require college degrees. There are also plenty of positions that do not really need a college educated person, but that often use that as a screen...there are arguably good reasons for this. There is also the world of entrepreneurship. This is a bit of a mixed bag in that anyone can do it, but very few can actually do it. It is only a few that have success as entrepreneurs, and an exceptional few that are actually going to be able to have success as an entrepreneur without college...this is particularly true when it comes to any scientific/engineering endeavor.

Second: college is way too expensive and students (and their parents) are accruing way too much debt, but it is still worth it when looking at overall statistics. So while picking up $120k in loans to get a fine arts degree probably won't pan out, rolling up $50k for a chemical engineering degree (most) certainly will. College grads can get better, higher paying jobs. College grads also have a broader knowledge base from which to strike out on their own.

How to fix? First no federally backed loans, only federal loans and public loans. If banks want to have student loans the fed shouldn't pick up the tab for defaulters. Second these federal student loans should be limited to the total cost for state universities in the state the students come from. So when I was living in Kansas, I should not have been eligible for federally backed loans (to anywhere) in excess of the ~$8k/year that it cost then to attend KU. Students who want to go to NYU need to cover the difference in cost with private, not federally backed student loans. Third, all federal repayment plans should be forced to end after 15 years, and should be pegged to never exceed some fraction of the student's income...say 20%. So for people who take full loans to attend state schools, but have trouble getting work, or getting work that pays well enough to cover the true cost of the loan will still be free and clear of student loan debt 15 years after starting repayment.

Alternative Sarah Palin

A very good read about Sarah Palin and something to consider. I do think it ignores the fact that her character flaws were pretty much all she had when she got pushed into the national spotlight. She didn't have a cause to pursue for America. She didn't have an axe to grind at the national level that could propel her to take on e.g. Wall Street. So her flaws were what was left and that was who she became in the run up to the 2008 elections.

David Hume's Birthday

Missed it, but here is some snippet reading. Not sure if it is where I got the idea planted but Hume says

I have long entertained a suspicion, with regard to the decisions of philosophers upon all subjects, and found in myself a greater inclination to dispute, than assent to their conclusions. There is one mistake, to which they seem liable, almost without exception; they confine too much their principles, and make no account of that vast variety, which nature has so much affected in all her operations. When a philosopher has once laid hold of a favourite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, and reduces to it every phænomenon, though by the most violent and absurd reasoning.

It should be read for what it is, but to me it is a reminder that all our thought has an emotional bias. Belief in objectivity is in fact an emotional/moral stance.

Also End the Nickel

...Is how I should have ended the "End the Penny" post. I'm quite alright with no more nickles and no more pennies, and I would really like for them to stop printing paper dollars and switch over entirely to dollar coins (really, we could use some $2 coins as well once paper singles are gone, but that's just me getting greedy).

Our Bad Taxation

I was playing with the US Taxpayer Receipt tool, which I like. You can enter your own tax info, or you can choose an income level. I did both just to see, then I went and figured what my taxes would be at the different income levels. The 25k and 35k levels I can't really compare with what my deductions would be because I wouldn't have my house if my income were at those levels. First thing to note is that Medicare and Social Security are the same (as they should be), so the real comparison is on the income tax...

Example $50k: married 1 child, does not itemize: $260 in taxes
If I made $50k: single, no dependents, $19k deductions: $3,800 in taxes

Example $60k: single, 1 child, does not itemize: $4,200 in taxes
If I made$60k: single, no dependents, $19k deductions: $6,000 in taxes

Example $80k: married, 2 children, does not itemize: $3,800
If I made $80k: single, no dependents, $19k deductions: $11,100

And this is set up to underestimate the taxes I would actually pay at each level with the large deduction. I don't really like dependent deductions (as I've stated here before), but the one that really killed me is the marriage deduction.

If you take a look at two married couples. Both couples bring in $80k, with one couple doing it on a single income and the other doing it on two equal incomes. At the very least, both couples should be paying the same amount in taxes...and if they joint file they do, but in reality the couple with both working and bringing in $40k each should have two workers each paying less in taxes. The other couple gets the luxury of having one of them not out working, which can be very nice even without children but is a huge benefit if they do/were to have children. The couple bringing in $80k on a single income should pay higher taxes.

This is why I think all income taxes should be individual. No married, single, married filing separately, head of household, no dependents, no deductions. Just an income box and then the resulting taxes. Now I think that would require a shifting/re-balancing of the tax levels and brackets (I like a bottom rate of 0% up to ~$25k and a top rate of 50-60% starting at $500k-$1M). Everyone files. The two married couples above would pay very different taxes, and the examples would even out (not entirely as an average $80k couple is doing it on two incomes).

End the Penny

People have a goofy emotional attachment to coinage...particularly the pretty much useless penny. Therefore it is good to read this article from the New Yorker. I just wanted to clarify something. The statement made:

...eliminating pennies would increase our reliance on nickels, which now cost almost ten cents to manufacture and so generate even more negative seigniorage, per coin, than pennies do.

is just flat out wrong. There would be almost zero increase in nickel usage, and what increase there would be would be necessarily less than the increase in dime and less still than any increase in quarter use. Its actually pretty simple statistics.

Completely random coin gathering would yield a ratio of pennies:nickles:dimes:quarters of 5:1:2:3.75 if you remove pennies from the list the ratio would be 1:2:3.75 (n:d:q). In a given handful of change eliminating the 4 pennies may mean you get an extra nickel, but it could mean you get an extra dime, which would mean you lose a nickel, or you could get an extra quarter and lose two dimes...it could also mean that you end up at an even dollar and lose ALL coins from change. The real kicker is that if all merchants were to round up you wouldn't even see the occasional shifts mentioned above: 96c back would become 95c and 39c back would become 35c...the exact same non-penny change.

It seemed an odd thing to get so very, very wrong.

The Wisdom of the Masses

There is a very difficult aspect of politics, and democracy: the understanding of the people. In a world where everyone had perfect knowledge, then their own beliefs would dictate their opinions on any of a number of issues. We don't have perfect knowledge. More, the imperfections vary in size and distribution. So whenever you read a poll that asks opinion but really requires that those being polled have a fairly sound knowledge base, you need to take results with a grain of salt. Since there have been plenty of recent polls that indicate that the general public has no clue what government spends money on, public opinion on how it should reduce deficits is pretty meaningless in terms of whether it should dictate policy.

Unfortunately, politics doesn't care how poorly informed the populace is. It only cares about the opinion of [voters]. So that poll is very important to the politicians and therefore becomes important to policy despite the fact that it could be a monumentally bad idea to have policies derived from the opinions of the uninformed.*

*This is more important with respect to energy and climate issues.

Past Utopia

It does seem common to look to the past and see a better world that we have abandoned. Whether it is the disillusioned Tea Party member with a shaky grasp of the constitution and the US of the 19th century or some group trying to help isolated/tribal peoples.

It's almost like a weird variety of backwards optimism: look back to times that were in fact much worse, but see the good things only. I suspect it is because things don't seem to be going well in many ways right now. Really, though, as bad as things seem right now, an unemployed American today is much better off than a industrial laborer 100+ years ago. It is certainly true that the poor in many places are still very badly off by America 100+ years ago standards, but even in those cases most people are better off today than they would be in the same place a century ago (not all, most).

100 years from now, this will most likely hold true again. US debt/deficits, the growth of China's economy, the European monetary union becoming the world standard currency (or it's becoming completely undone by present backwards thinking), oil itself going the way of the dinosaurs, none of that will lead to a worse world a century down the line.

That said, there is one present problem that does have the possibility to turn things around dramatically and that is climate change. It could be that we end up better off despite global warming or, indeed, even because of it, but it could also be that shifting climate causes too much damage for us to recover from in time and that we face a serious contraction in global wealth, with the resulting starvation/war/displacement that will come with it.

Since I live in the US, there is a better chance that things will improve for me even if they are worse for the world at large, and even if they don't improve I'll still be better off than most of the world (well my descendants as I'm all but certain to be dead 100 yrs from now).

Common Sense

I liked reading this--and her book may be good, though I'm not compelled to read it. There exists wisdom that could be described as common sense, but not much. Even "common sense" teachings could be wrong from a different perspective: the "hand in the fire" example isn't quite right if your hand darts in and out quickly or if you are wearing an asbestos glove or if the fire is a low temperature one.

In fact the more "common" some bit of sense/wisdom/advice is the less likely it is to be useful when it comes to big questions. Uncommon sense makes for greatness. People who are able to see things differently and understand them differently and come up with better responses. This is true in business, personal life, and government. I'd rather a government that was great than one that was common.

Not Voting For Him in 2012

Just saying.

Bully Pulpit

Would it really hurt Obama that much to give a speech to the American people where he said what would be best for the country (not what was politically feasible, not the "starting point for negotiations" but what would actually be best...according to experts not politicians)? Then, after that, he were to say that politicians unwilling to do the right thing for the good of the country are weak, and are cowards, would that be bad?

I know that the chattering class of DC pundits will get all worked up about him being mean or some shit, but the president should lead. And if the members of the US House and Senate are going to continue to be more beholden to bankers and other moneyed interests than they are to the United States, then maybe that should be pointed out with all the harshness it deserves.

Does anyone really think that the American people would be upset with a president that did such a thing?

Um...Yes They Do

Matt Yglesias is a decent blogger, but this piece defies reason. I will grant that the exact cause and effect are murky, and that correlation does not prove causation, but housing prices historically--until the recent housing bubble--have tracked wages very well. Not general inflation, but wages.

This is for good reason: in a sensible marketplace (not a bubble) the amount of house a person can buy is very closely linked to their income. The mass of housing must, as a consequence, be priced to the income of the people who will be purchasing it. While house prices are more complex in that they are hyper-local, the wonders of large numbers takes care of the discrepancies between my neighborhood and the one 4 miles south.

If New York were to have the incredibly expensive housing it does but incomes that were half the national average, then the fact that no one could afford it would cause prices to crash as sellers tried to find a buyer. Rents would also plummet.

Now I will grant that there are other things that affect prices, and that the price to income ratio in New York is likely to always be higher than the national average due to land scarcity. Codes, accessibility, commute, along with land scarcity do affect prices, but those things don't change as much if at all, so the real determining factor for what housing will cost in an area is the income of the people that live there.

Maybe Matt really just means that housing prices and income actually are both tracking an area's productivity, which is true, but if that is what he was trying to say then he should have started with that and not the other garbage.

45% US Households Pay No Federal Income Tax

That number is too large, and the breakdown is very predictable. Lowest income households are the largest fraction, but there are plenty of higher earners who pay little to no taxes as well.

There are good and bad reasons to have tax credits/deductions, but ideally we shouldn't. Good reasons should be dealt with differently (public college should be free for in-state students), and bad reasons should, well, just be eliminated.

The vast majority of households should pay income taxes. I'd be willing to lop off the bottom 10-20% for zero liability, but it should be done as a tax bracket: the bottom bracket (up to, say, $15k) pays 0%. No dependents, no housing deduction, no deduction for other income taxes paid, no deduction for charitable contributions.

The simple removal of those would be bad for many people, however, so it would need to be done in conjunction with overall tax overhaul that would cause taxes for most people to not change too dramatically. For political reasons this is not likely to happen any time soon.

The US Government is not a Household

Part two I suppose, but really, just go read the rest of this:

There are several reasons why this is wrong but the one that causes the most confusion amongst the man on the street is not realizing your personal control over spending versus revenues is essentially the exact opposite of the governments control over spending versus revenues and that this is more or less by design.

Comment on Frum

As a big aside on the Obama/Ryan fanciful budget planning commentary going on, I've got something to say about this David Frum piece. It's a fine piece for what it is, but this caught my eye. Frum writes:

Those of us on the political right have different preferences. We believe that low rates for high earners accelerate economic growth. We believe that the cost of Medicare must be restrained. And I think we have a lot of good arguments on our side.

This paragraph is interesting for a couple reasons. First he states pretty much straight out that tax cuts for the rich and spending cuts that will negatively effect everyone else (specifically the elderly in this case) is the GOP ideal. This isn't really insightful or surprising, anyone who's been paying attention for the past 20+ years knows this. But the second bit here is very compelling.

He says that he thinks they've good arguments on their side. Not evidence. The thing is, that there is quite a bit of actual, honest to goodness evidence on whether higher taxes and more social services or lower taxes and fewer social services produces a better society. The evidence is very, very strongly against them. All they have to support their preferred policies are arguments. That should be devastating. The right has arguments, the left has evidence.

The evidence (from our own history, as well as taking a look at the many examples provided in countries throughout the world) is that higher taxation along with more government provided services produces a healthier, happier society. They can argue all they like. I have evidence on my side and evidence wins.

Equal Pay Day

Was actually yesterday, and there are some frustratingly amusing tips for working women to be found here. I've certainly commented on this before but to abbreviate...

Men and women should be paid the same for equal work.
Sexism is alive and well.
Male/Female salaries are likely never to be equal based on current methods for evaluation.
There are good reasons for this.
There are bad reasons for this (sexism mostly, in different ways).
There are make believe reasons for this.

It is possible that at some point in the future that home/work roles for males and females will have completely balanced out in perception if not in fact, at which point the number will (probably) finally be equal. I would love that to happen, but it won't in my lifetime. It just won't. What will happen in my lifetime, is that actual pay for actual work will balance out.

Sarcasm From CNN Money???

Hard to believe but here it is. Bankers are back to being masters of the universe it seems in most places, so it's nice to see this article.

It also includes a link to this older winner back when it was still very acceptable to bash bankers. Very refreshing...until I realize that nothing will come of this. Banksters rule our petty little lives.

He'll Still Win.

The fact remains that most Democrats are bad Democrats. Obama can sell out the entire Democratic party platform, and will still get votes from the vast majority of Democrats. Republicans can't do that as much (though, to be fair, the only part of the GOP platform that is in any way sound is: tax cuts for the rich).

So long as this is true Democratic politicians will continue to sell out their base for political gain from the right. The part where this becomes really frustrating, however, is when selling out the base makes things worse for the country in real sense, because that does more harm to election prospects than whatever few right of center votes the Dem manages to pick off. As such: cutting spending during a recession is bad, and should be called out as such. Tax cuts for the rich--almost any time but particularly when money is tight and the rich are doing quite well--is bad and should be avoided at all costs (it was not).

Is Obama a Secret Republican???

Hey, it's more credible than the Kenyan/Muslim bullshit. Let us do a rundown...

• Gitmo still open? Check.
• Still mired in wars? Check.
• GOP health care? Passed.
• Cheering spending cuts? Check.
• And defense spending? Pretty much untouched.
• Tax cuts for rich? Extended.
• Prosecution of torture? God no!
• Treatment of whistle blowers? Bradly Manning - strip!
• Unemployment 8-10%? Fire gov employees.
• More stimulus? Nah, cuts!
• The stimulus? Must have tax cuts!
• Banksters? Big bonuses for everyone!
• Regulation? Pfft.
  
• Gays serve in military? Thanks mostly to courts.
• How about marriage? Meh, courts can do that too.
• What about the court? Replaced the leftmost justice with a moderate, now it's more right leaning than ever...but the new justice is a woman, so minor win (Note: I really like Sotamayor and Kagan isn't necessarily bad, but likely worse than who she replaced).

Now, I liked Obama a lot when he was running and he hasn't had the easiest of times to deal with as president, and he has had the most dysfunctional Senate in history (seriously, it was worse than the present House), but all told, his messaging and his actions independent the legislation that got through and to him have been colossal fails to me. It's like someone took Bob Dole and gave him Clinton's charisma. I don't get it. I don't like it.

I knew going in that he seemed to have an odd fetish for compromise and bipartisanship like all too many people in D.C. but he also seemed quite smart, so he would know not to compromise with himself prior to sending a bill to the floor. He would know not to take GOP talking points as his own which just makes it harder to get things done. He would know that, in the end, Republicans were fighting him, not the positions, and he would have to make bills much more liberal, so as to get the compromise back, to get them to have a real stake in things. He would know that if the GOP can get what it wants while still opposing it and voting against it, then they would do just that.

He doesn't seem to know these things. He is either taking a long view that doesn't mind lots of present pain, or we have collectively mistaken calm for thoughtfulness.