Austerity: The Cure That Kills

Totally preventable suffering of real people, so that the moneylenders can get their pound of flesh. I'm don't really care if our rulers are stupid, evil, or (most likely) both. This is just horrible. The article concludes:

Why, Mr. Lains asks, should he and his fellow citizens suffer while the bondholders get their money back? “It’s not the fault of the Portuguese people,” he said. “The fault lies with the structure of the euro.”

People suffer, the economy craters, but the bankers must be paid off! Too bad no one that actually understands things gets to affect outcomes.

Horay Science!

Wine is good for you is one of those things we've been aware of for a while now, but specifics were not really clear. Well, here is one. And for the teetotalers out there: eat grapes I guess.

Hope He's Learned, But I've Doubts

This article by Noam Scheiber is a good (and a frustrating) piece to read. In the end we are left hanging with: has Obama learned, or is he just preparing for the next self-induced crisis?

I see little evidence that Obama has learned here, and that is the frustrating thing. His current posturing and positions seem good, but they are also necessary, in the same way that it was finally necessary for him to get aggressive toward Hillary on the campaign trail.

Maybe Democrats will win, and Obama will think that the GOP has been chastened and will now listen to reason. In fact, if Dems win, that seems far more likely than this continued, tough and sensible presidential offering we are witnessing.

Of course, this is only economic issues. Nevermind the still horrible civil liberties a issues, which are unchanging as ever.

Um...K

So the contraception "compromise" is in and so what? Doesn't change the outcome (women will still get contraception coverage) so it really isn't any different. The cost shifting is more-or-less meaningless as the church still pays for insurance, and that insurance will still have coverage, the church is, effectively, going to be paying for coverage. The insurance companies may redistribute the cost so that other people will pay more and the church pay less, but really, so what?

Mysteriously, however, the compromise made some people (well, pundits) happy. That really doesn't make sense. I'm happy, because, basically nothing changed, and similarly the bishops [should be] unhappy because...basically nothing changed. Their complaint wasn't that the cost was too much but that they oppose contraception (a patently stupid position, particularly for the anti-abortion crowd...who actually object to unapproved fucking and don't really care about women's or children's health at all). They oppose contraception, and were being forced to buy plans that provide contraception. Nothing changed except they pay a little less.

Meanwhile this bullshit problem would never exist if we had done health care properly (Medicare for everyone!) instead of enacting GOP health care reform.

Bad Settlement

From the "how does it affect me" files...

What should I do if I think I may qualify for a principal reduction or refinanced mortgage? Contact your lender/servicer and ask them to review your case.

So just ask [Wells Fargo} to review your case! And I'm sure they will be perfectly happy to help you and to get less money for themselves! Because banks aren't bad people!

I'm really not sure how it works that "depending on the banks that fucked everyone over to not continue fucking people over" constitutes a remotely sane idea. The banks must be laughing all the way to themselves.

Quick overview: if you're $50k underwater on your $175k mortgage but are up to date then you get a lower interest refi (iff the banks find you "worthy") but if you stopped paying a few months back, then you may get a $20k principal reduction, and if the bank illegally foreclosed on you--even if you were current and whether or not you were underwater...even had equity, even if you were in the last year of payments!--then you may get as much as $2k!

...So the people who got the best deal are those who are underwater and behind in payments, but haven't been foreclosed on yet? While those who had their houses stolen by the bank may get up to $2k, and those who are underwater but have managed to make ends meet get next to nothing? WTF?!?

Bank Bailout Redoux

Seems to be the real result of the great foreclosure fraud settlement. The banksters do rule our world.

SEPTA Nonsense

View Larger Map

I live fairly close to possibly the highest demand regional rail station SEPTA operates. It's a great station because 3-4 (depending on how you count) lines converge and go through it, and it's about a 25 min ride to downtown, 50 min to the airport, ~40 min to the sports complexes (drive times from this point are very similar).

Naturally, therefore, SEPTA wants to take advantage and build luxury mid-rise apartments a parking garage. I think park and ride is fine, and unlike some of the protesters, I don't think the parking garage is ugly, or will result in lots of crime. However, looking at the map what should be really clear is that this station is surrounded by residential with NO MAJOR ROADS.

All of the roads that lead here are narrow, 2-lane, 25 mph, and some with street parking and/or no painted lines! This is not an area to try and bring extra traffic to, not because [NIMBY] but because the roads don't support it, and while the plans do improve traffic in and out of the lot/across the bridge, they don't do anything about the feeder roads--because they can't.

On top of this the cost is something insane (in the neighborhood of $100k/parking space added), and SEPTA refuses to even attempt simple fixes to the problem that the garage is supposed to address (lowering fares from further out, increasing parking tolls). It's a giant clusterfuck of a bad idea that just won't die (though it has been pushed back).

The ideal solution would be luxury mid-rise (even low-rise) apartments or condos, which could, if done right, sell for a mint. They could also help to accelerate the revitalization of the nearby downtowns (there are 3). Oh, and the closed bar/restaurant in the station--the one SEPTA wants $6k/mo rent for--could conceivably be opened and operated at a profit as well.

This is Infuriating

I think the thing that pisses me off the most when I read bits like this is this truly bizarre notion that polarization has something to do with liberal vs. conservative:

Over the past century, DW-Nominate has revealed a steady increase in congressional polarization. Democrats have moved to the left, while Republicans have moved to the right. But Republicans have moved a lot farther than Democrats.

But that is bullshit. Yes, the parties have become more polarized, but not because one is moving right and the other left. Both parties are moving right, and the perfect example is the health care reform. All the Democrats coming together and voting for it, while all Republicans vote against is a sign of how polarized the parties are.

This was a GOP/conservative think tank developed policy. It was the conservative solution for universal health care. Democrats hated this 20 years ago, so the mere fact that they now ALL voted for it is a sign that they have moved RIGHT, not left. It is also an impressive sign of just how polarized the parties are that zero Repubs will vote for their own fucking policy just because it is being brought up under Democratic control!

Both parties have moved right on policy. From a left-right, policy stand point Obama is more conservative than Nixon. But on that chart, which deals with polarization, he looks far, far more liberal. This wrong-headed conflation of left-right politics and party polarization problematic...

The Dems move right to capture more support from "moderate republicans" and the Repubs to further differentiate themselves from Democrats. But the public will generally consider Dems to be liberal and Repubs to be conservative, so their movement actually skews left vs. right in the minds of most [voters].

This makes legit policy discussion virtually meaningless since people will just assume that how liberal/conservative something is can just be determined by who votes for it. This then makes any notion of compromise nearly impossible, since GOPers don't want voters to think they are liberal, they have zero motivation to vote for anything that will happen with Democrats in control...even if it is something that people (their constituents) will like!

Cap Gains and Inflation

I noted earlier that the cap gains not being inflation adjusted is an (potentially major) issue. I've since thought about it more and no longer think so. The thinking goes something like this:

I buy a [house, stock, painting, ...] worth a total of $100k. I keep it for 20 years, during which inflation averages 2.5%. I sell it for $250k, a $150k gain, but only an $87k gain when adjusting my original $100k investment for inflation. That's a pretty big difference in income to pay taxes on and I can see why [rich] people would say it is unfair, but the thing is: bullshit!

If I take that same $100k dollars and sock it away in a savings account that pays interest averaging 2.5% over that same time frame, then I end up with ~$164k...but every one of those dollars was (well, should have been) reported on tax forms in each of those intervening years, so I was, in fact, taxed on all $64k of interest. Moreover, I was taxed at my marginal income tax rate which, assuming I am working throughout, is likely to be higher than the cap gains rate!

So even without an adjustment for inflation, low cap gains rate distorts the tax code, and tilts toward wealth, and away from income (and savings). Capital gains should be considered and taxed as normal income. Period.

Saver's Shouldn't Give a Damn

About any of the things in this post. At all. ROI makes a bit of difference at the margins, but mostly the reason we want to have decent ROI is because we expect there to be inflation that eats away at the value of cash. As such, a crappy economy and low interest rates and low to no inflation don't actually mean a damned thing to "savers". It matters to people looking for work, and what jobs are available, but savers are all going to be just fine.

...Unless the whole economy blows up, in which case only the savers that are also "Doomsday Preppers" will be ok.

I hear this "savers are punished" for ____ crap all over, and it's just that: crap. The only things that could seriously punish savers are:

1) Inflation/investment mismatch (e.g. fixed income/bonds/safe investments eaten up by big inflation, or buying an overpriced house that then devalues)
2) The economy no longer existing and only food and bullets having any real value. Seriously, if US$ become worthless, then that will mean a world where the only things of value will be things of value (no, not gold, but yes food and water...and maybe iron depending on how long it lasts)

So any big banker/rich prognosticator who talks about this crap, should only be listened to if he/she has a stocked bunker on an isolated patch of arable land with a water supply, that is not susceptible to natural disasters.

Komen Needs a Cure For Stupid

Oh, well. Hopefully this means I will stop seeing pink crap everywhere. In the meantime, read this and donate to Planned Parenthood.

Buffett Rule

There are some good points against such a rule in this Forbes article. Notably the inflation issue, which is a huge problem for long held cap gains. Also it was helpful for me to see some of the distinction. What it doesn't deal with, however, is the major issue that the Buffett Rule is supposed to solve, namely: It isn't fair that multi-millionaires and billionaires receiving (many) millions in cap gains per year but next to nothing else are taxed at a ridiculously low level.

I'm sure that there are better fixes available (some combination of corporate/debt tax rewriting), and it could be that the Buffett rule on its own is a bad plan, but so too is keeping things like they are.

Note: reinstatement of the estate tax to pre-Bush levels actually helps a lot, and combined with an inflation adjusted cap gains rate of 25%, reduction of the corporate rate to 20% (closing all loopholes), and probably something else...not gonna happen.

If I Had $1,000,000...

...I might buy you a monkey.
Really, though, $1M as a lump sum after taxes is something I could make real use of: pay off debt (mine, family's, others) and do a few things with my house, then bank some. (I probably wouldn't be nearly this effective, but, I like my job, and don't care as much to maximize. )

For $2M I'd be pretty much set for life.

At $5M, so too would be my family and others.

Beyond that, it's really, really hard to keep coming up with things to spend money on that aren't ridiculous, or so extravagant that I really couldn't justify it. So I'd probably give it all away.

Mittens made $17M after taxes in each of the last two years. I cannot comprehend the level of greed it takes to see that income as anything other than an opportunity for some serious charitable giving, or something to start businesses/companies with or...something other than personal wealth enrichment and exhibition. I just don't get it.

As a side note, the lady writing at the link shows just how much easier life gets as you get more money: at $1M she manages ~$34k/year, in passive income, but doesn't buy a bunch of things for herself. If she were to double that, she could more than double her income, or she could use some fraction to buy some security, something like establishing her dwelling so that her expenses would be lower (and still have much more income).

Citizens United

I wonder if any of the conservative justices that voted for Citizens United now regret their decision.

Apple Cult is Still Appropriate

It wasn't talking about the entire user base.

The whole Apple Cult thing has to do with a very small subset of their customers who post comments, create blogs, and otherwise worship Apple products. There is pretty much some subset of people like that for most commercial products, but the Apple ones were particularly annoying to most tech geeks, and so received a whole lot of ire.

Things have changed somewhat. The iPhone was for a couple years the best smartphone on the market, and plenty of geeks (who still are likely to see macbooks as a waste of a nice chasis) bought them. But there is still an oddness among many Apple fans that extends to their far more mediocre products, and a reverence for Steve Jobs that is a bit over the top. (I would say that Jobs had a brilliant mind for bringing form and function together, but I don't think there was a single product that didn't have at least one glaring problem, for 90% of their product line it would at the least provide rather poor value.)

Capital Gains

Last night David Brooks in all his ridiculous idiocy stated that Obama raising the cap gains tax to 30% would be a disaster because there is much more sensitivity to tax rates in investment than there is in labor. Also yesterday, Atrios commented on Romney's comment on being unemployed. Then clarified a bit.

First off, David Brooks is a moron. Second, I may be misunderstanding something in the tax code, but from what I can tell, if someone has a giant pile of cash, and they invest it and get a 10% rate of return, then after cap gains that goes down to an 8.5% ROI. If capital gains goes up to 30% then it goes down to 7% ROI. But if, in response to higher taxes, that rich person stops investing then their ROI goes to...0%.

Now, zero is worse than 7% by a lot, so people with giant piles of cash are not going to react to higher cap gains taxes by reducing or eliminating their investments. They will bitch, to be sure, but otherwise...they may invest more aggressively to offset the difference. They may not change at all, but lobby congress harder. They may be less willing to take certain risk because the potential rewards have been reduced, and this is, I think, what effect low cap gains rate defenders are talking about.

But this effect is highly uncertain. If some hold off, but others become more aggressive to offset, then the net effect could be anything: more, less, or the same level (and distribution) of investment.

And the other complaint: that the rich worked and earned and now they are being taxed again is bullshit for two reasons. One - they aren't being taxed again, the new income that they get from their wealth is being taxed. Two - many of these wealthy people didn't work and earn their wealth. Some inherited it, most--no matter how capable and hard working--were simply lucky in one way or another (hard work and ingenuity are no match for luck if you seek to get rich). For every Jobs or Gates there are plenty of people every bit as smart and driven, who simply had bad timing or that were born to the wrong people or in the wrong place...and to anyone who says that those people should overcome: fuck you, you callous, thoughtless, heartless, inhuman jerk.

Capital Gains are income and should be taxed as such. The arguments for treating them differently are real, but go both ways. Because of the risk and loss that occurs, taxing them more heavily may dissuade some investment, but because the owner of the giant pile of cash doesn't actually work in any real sense, the gains could just as easily be taxed more heavily. So in the end, I say treat as income. People who have cap gains as their primary income source but who aren't multi-millionaires will be taxed less heavily since their gains will be smaller, and the Romney's of the US will pay the full tax for their income.

Education Tax Credits/Deductions

I believe that there should be free options for college for all Americans. In the absence of that I would like to see many more student loan forgiveness possibilities. In the absence of that I would favor some pretty hefty tax credits/deductions for paying off student loans. But the absence of that too is what we have.

Student loans are tuition/fees/education expenses paid in the past, but are no longer deductible, so poorer students/families are penalized, while wealthy parents who can foot their children's bills get a tax break. The poorer individiuals get the benefit of the much smaller student loan interest deduction: only up to ~$2500, and not at all if AGI is >$75k. So M.D.'s with $125k in loans, but $150k in income get no breaks. (I think they can afford it, but that's another issue).

Since the first two just won't ever happen (as far as I can tell), the third issue is the only one with a chance to get real traction...

It is an incentive to pay off early. It allows lower income individuals to recoup tax breaks that the wealthy in this country get anyway. It would provide a pretty sizable stimulus to people most likely to spend extra money. In providing an incentive to pay off student loans it also could lower the default rate...particularly for higher income individuals like MD's. Since the US guarantees those returns (to private companies no less) then a lower default rate means some savings (no, not nearly offsetting, but some).

On the minus side, it would be pricey, and could encourage education expenses to accelerate (I would restrict to US backed/insured loans, which helps here). Better offsets, like by elimination or reduction of the mortgage interest tax deduction, are less likely than worse ones, like a increase in taxes on the wealthy, or simply none.

Wrong Again, Matt.

This type of thing still pisses me off. Yes, it's true that if I buy a house for $200k and live in it and then 10 years later it is worth $350k, and I sell it I wouldn't really have built wealth in one sense, because I then have to find somewhere else to live...but that's still short sighted. If I live in my house for 15 years, then my "rent" is fixed for that time, and my payments are effectively savings to purchase anew if I then sell and move. This is true even if every house appreciates at the same rate and from the same starting point:

Buy house A for $200k when house B is worth $200k have mortgage ($200k) plus everything... of $1500/mo.

Live there 10 years. Maintenance and taxes go up a bit, but much less than rent would have so maybe paying $1600/mo.

Sell house A for $300k (use ~$160k to pay off outstanding mortgage), have $140k left.

Buy house B for $300k using $140k down leaving a mortgage of...$160k! Depending on terms the "rent" here will be ~the same.

Meanwhile someone who rented at the same average rate over 10 years (rent control or started lower, but went higher) would have ~$0 extra to put into the purchase of house B and would have a subsequently higher rent. Wealth lost.

Aside from rent control and forced savings issues, once a mortgage is paid off suddenly lots of extra $ is available to...build wealth. Not having to pay as high a rent in the future is an excellent wealth building strategy.

Soda Machine Bans

Apparently don't make for slimmer students. I wonder if another tactic would work better: put them all on the school roof, on the far side from the roof entrance with no elevator access. Students wanting soda would have to climb stairs and get to the far side of the roof to get one. They may have to do so quickly to get done with lunch or back to class in time.

An added benefit would be the nurturing of entrepreneurial spirit: quick kids could buy extras and sell them at a profit to those too lazy/slow to make it.

Buy Long Sell Short

I think that one of the issues markets have is the inability to sell long. This popped into mind with respect to housing and now with gold. If it were easy for people to sell gold today at current prices and hold that sale for a few years to buy back, then I would bet the price of gold would drop very quickly.

Housing a few years back had a similar issue, and The Big Short shows a bit of that. But the book also makes clear the problem: while anyone can buy today and sell whenever, it is only a very small subset that can do the opposite. This produces an imbalance that makes it much easier for prices to rise than fall, so bubbles are much easier to inflate than burst. And when bubbles do burst since so few are shorting, there is no one to assist the subsequent crash that takes place.

On that last note: if I want to short sell, and I chose the peak to initially sell, then I may buy back when the market has come down by 2%, buying maybe from another short seller who will then buy back when it falls another 2% and so on. This way the market remains more active, with more people (short sellers) willing to buy at still too high prices because they sold at even higher ones.