Great, Let's Do It

Naturally, I agree strongly with Martin Wolf here.  Commenters there don't seem to agree as much, but it always strikes me whenever I read an article in a financial section/magazine/paper that the comments are overwhelmingly right wing (and generally hacks at that: "Fiat currency is a fraud!"). 

I'm not sure why this is exactly, but I suspect that most of the people who read such articles are the same as the people who blew up the economy for everyone, but that are doing quite well now (while others continue to suffer).  It's kind of a shame, because most people do not and will not understand economics well enough to figure out that we are being screwed over for no good reason.  The things that will fix the economy sound outrageous to most people, but that's only because our economic system itself sounds (or would sound) outrageous to most people.

Can't Stand HOA's

The idea behind a home owners' association is really good.  For a lot less than it would normally cost an entire neighborhood can get things like lawn care and snow removal and other benefits.  But the rules that most HOA's add-on to that sensible base arrangement are nothing short of tyrannical. 

I can not begin to comprehend people who defend such antics.  Yea, the couple were maybe jerks in how they handled things, but $900 for a sign 4" too big?  That would piss me off too, and so I don't see their response as particularly untoward, but rather a clever protest (definitely passive aggressive...at least until the lawsuits). 

When I went looking for houses I very deliberately avoided HOA neighborhoods.  I don't want someone telling me acceptable grass height or whether I can make certain changes to the house/property (I already don't like the township rules for those things).  It seems to me the couple in that article would have been better served by doing likewise. 

Definitely a Problem

I don't know that the housing bubble is the correct analogy for the student loan clusterfuck, but I suppose it references something people have some sense of scale of.

There are some fixes that would be hugely beneficial: the ability to have student loan debt written off in bankruptcy, no federal backing for private loans, caps on annual loan amounts for federal backed loans (maybe $10k/year for tuition plus some sliding scale for living expenses of up to maybe $15k/year, with most places being limited to $5k or so), probably a few other things.

That doesn't really deal with the problem of existing/outstanding student loan debt.  I like the idea of a structured, massive, one-time forgiveness plan.  It could be something like the stimulus idea(s) I've put up here before, or just a dramatically enhanced version of the slightly-better-than-it-used-to-be student loan debt changes Obama put through (pay a max of a certain percentage of your income, and all outstanding debt forgiven after, I think, 20 years).  Making student loan payments fully deductible rather than just interest (yes, I know, I hate deductions, but it's how we roll)--also maybe raising the income limit at which you can no longer deduct--and lessening the payment forgiveness term to 15 years would be a start, reducing the max payment amount to 10% of income, or at least by a point or two would also be nice. 

Another Vampire Squid Article

I know people complain about epistemic closure (living in the bubble) on the right, but I often wonder if there is a similar but opposite phenomenon on the left.  Basically, if Obama and/or his people were to read this piece would they instantly discount it as valid because it is "left-wing"?  My feeling is that they do.  Just think: despite being correct always and forever Paul Krugman's ideas are not even brought up by the president...not even as a what if, as in what we should be doing if congress wasn't dysfunctional.

Well, yea, but...

I am far more libertarian when it comes to zoning laws than most people, so I too think that adding an in-law suite to a house should be perfectly fine, though I do understand why it mostly isn't.  That said, if you want to have them you can't say this:

Cherry Hill ordinances lump "mother-in-law suites" with auto-salvage businesses, junkyards, and heliports as impermissible in residential areas. The township wants to prevent single-family homes from conversion into duplexes or rental apartments, which makes sense. [emphasis added]

Um, no, it doesn't make sense. A house with an in-law suite is a duplex/house with apartment.  If one family owns a house, adds an in-law suite and then sells that house, the new owners can easily rent out the in-law suite as an apartment.  You cannot both want to have in-law suites and not have apartments.  The closest you can come is to limit them somehow (no more than 1 suite, and the size of the suite must account for less than 40% of the total square footage of livable space). 

Also, what about someone who wants to add an in-law suite for down the road, and is hoping that a few years of renters could help to offset the cost before mom/dad move in?

Particularly in more dense areas (cities and close in suburbs) adding an apartment/flat/in-law suite is an excellent idea, but even if it is only serving as the in-law suite for the original owner, it must be available as an apartment for that value to be realized.

Deductions are Insane

Yes, I will take advantage of as many deductions as I can (easily) manage.  No, that is not hypocritical. 

Our tax code is artificially complex and inordinately stupid.  Deductions are very, very unfair for multiple reasons, but the biggest are that wealthy people get more breaks, and they encourage bad behavior (e.g. bigger houses with little down).

The regressive side probably bothers me most.  Someone with $27k in income (MAGI minus standard deduction) only gets $0.15 back for every extra dollar of deductions.  Someone with $102k in income gets $0.28 back for each extra dollar.  On top of that, higher income individuals can afford more house and more children (and pay more in state/local taxes), which means the size of their deductions are often much larger.

If we want people with kids to get something from the government, we should do that: pay everyone $2500/year/kid.  That way income doesn't matter, and we now have a big spending program that Republicans can go after.  Same with housing.  If we want people to buy a house, rather than rent (for whatever reason) we should just have the government send every homeowner a $4k check each year and lose the mortgage, PMI, and real estate tax credits.

I'm actually kind of surprised that the state/local income tax thing doesn't come under more fire from red state (Republican) politicians.  Basically if you live in a low tax state you are subsidizing people in CA and NJ.  Why is that remotely fair?  (Yes, I know, red states tend to get far more back in federal outlays than they put in, unlike high tax blue states, but this still seems like an easy break for them to target, especially since the entire GOP tax ideology is illogical.)

Obama: Tragic Hero?

Maybe just tragic.  I get what David is saying, but I think it's not quite right.  I agree that Obama's continued fetish for a bipartisan Washington is tragic, but not because Republican's are such assholes and he refuses to recognize that.  I think that the Republican positioning makes sense.  It is problematic in our political system, but when I vote for someone (as opposed to against someone else) I do so hoping that they will fight for things they (and I) believe in.  Republicans do so.

Yes, most people in this country voted for Democrats, which should mean that we get Democratic governance, but there are lots of people who voted for Republicans, and they don't want Democratic governance.  If we had a parliamentary government, that wouldn't really matter because Democrats would just do whatever they wanted, and if things went well, they would continue to be in power.  If things were to go poorly then we the people would toss them out, replace them with Republicans who would then have a go.

We don't have a parliament, however.  We have a Congress made up of a dysfunctional Senate and a heavily gerrymandered House.  Compromise is ostensibly necessary for anything to get accomplished...particularly for Democrats.

My impression from Obama isn't so much that compromise is necessary and good for a functioning government but rather that compromise produces the best results.  But it doesn't.  There are many health care systems in the world, and we know which work better and worse.  The compromise plan that is Obamacare will not be even close to a best performing system.  It will be a bit better than what we have had, but that's it.  If we wanted a good system, then it would have been Medicare for everyone.

Our government requires compromise, but that is because our system of allotting congress critters and the congresses themselves are dysfunctional.  Seeking compromise as an end in and of itself is really quite stupid.

What Would Really Happen If...

The helicopter drop occurred?

Imagine every American who filed a tax return this year got a magical, fed-created refund of $100k...

Obviously the extra $20-30T in cash money would create real inflation, and in some places there would likely be shortages of some items (which would likely mean a serious jump in employment to meet demand and therefore recovery, Huzzah!).  The dollar would also certainly weaken vs. other currencies, possibly by quite a bit. 

I would guess that, in particular, the housing and construction markets would rebound strongly, since that is enough in many places to buy a house outright, and covers lots of renovation and other work that people would like to do.

I would also guess that gasoline prices would surge, possibly to over $6/gallon, and that heating oil would see a temporary spike.  Precious metals would probably go through the roof on the combined front of some people buying jewelery, and other people trying to hedge against the now fairly certain inflation (pawn shops may sell out of gold/silver/platinum jewelery all together).

On the other hand, there isn't reason to think that all commodities, goods, and/or services would see increased demand--particularly not sustained--and some may see slack: people trading cooking in for restaurant dining or hamburger for steak.  I mean, any given person can only eat so much.  In addition, most people have a tv and a microwave, and unless an appliance is in bad shape or just particularly lacking, there isn't a huge reason to replace it.  There may be lots of TV's sold right away, and that could create shortages, but once the rush is done, and everyone has the latest TV, sales would pretty much come back to normal. 

Also, lots of people would use the money either as seed for something (starting a business, going to school) or to pay off existing debt (actually not a great idea in this case) and these things do not necessarily produce inflation.  In fact if new businesses are started that are in competition with existing, then that could completely offset any increase in demand leading to pricing staying the same.

Assume this is a one-time jump and the fed removes this from circulation by selling off treasuries over a 10 year period. 

Now pare that back to $10k each...

$2-3T extra monetary base in our current situation is far less likely to create much inflation.  It may still weaken the dollar (strengthening exports, and domestic production).  And that amount of extra money in people's pockets would create more demand, though not necessarily enough to cause shortages, this would likely lead to an increase in employment, which would, hopefully, create enough extra demand to get the recovery going at a brisk pace.

This isn't enough, however, to make a large impact on housing--if it spurred recovery, then that would come back into improved housing/construction, but not this on its own.  It also isn't enough to make starting a new business as easy as it would be in the first case.

Because of the lower impact on housing, business starts, and inflation, using this for extra savings/debt reduction becomes a more attractive option, but that fights against the recovery, not for it.

Pare back further to $1k...

It seems this is an amount that would make a large difference to a very small subset of the population, but that would have a much, much smaller impact on the overall economy.  For most people this would do much less; either they would save (or pay off debt) or they would simply shift a future expected purchase back in time. 

I think the way to look at this is to see how much income and debt a person has and how much "free" money it would take to impact their behavior.

$10k/filer is probably the sweet spot between action and danger.  That is a very large amount of money to most people, but the total increase in the monetary base is not completely ridiculous.

Inequality and Economy

Joseph Stiglitz's longish OpEd on Inequality Holding Back the Recovery seems to be the big thing on a lot of progressive blogs.  Krugman responded with a light "but" (and then responded to responders).

First: Krugman is right, of course, in that economics is not a morality play and we can [theoretically] have an economy with full employment that features a handful of super rich and the rest of us as peons.  But...and there had to be a "but"...that result is a weaker economy than one with less inequality, even if it does feature full employment.

Second: if reducing inequality would increase the rate of recovery (Atrios' point, which Krugman agreed with).  Is that not the definition of inequality holding back the recovery?  If we are on a 2% growth trend with current inequality, but we would be on a 4% growth trend if we could put in place programs reducing inequality then inequality is slowing growth and hampering recovery.

Back to point the first...

In an extreme vision of the economy that Krugman postulates, with the very wealthy on top, and the vast majority of the rest of us engaged in activities that support their lifestyles, we are pretty clearly stuck in a bad situation.  People with enormous potential born to the lower caste are pretty much doomed to that fate, and society as a whole is worse off for that.  You get less innovation, exploration, culture and many other things that make for great societies.  In that situation you also foment crime, disease and rebellion (though how much and of which type depends pretty heavily on government and policing).  It is a dystopic vision, not because the economy is not recovered (again, it could be at full employment), but because it has stagnated on a grander scale.

PA Alcohol Privatization

Pennsylvania has some of the strangest alcohol related laws in the country.  Many places have wet and dry counties, or no sales on Sunday or before noon, or rules for who can sell what (e.g. grocery stores some places can sell 3.2 beer only, other places beer only, others beer and wine, and some can sell anything).  In many states hard liquor is only available in liquor stores, which may be state run.

In PA, wine and liquor are sold in state run "Wine and Spirits" stores operated by the liquor control board, and beer is sold by beer stores in cases (only).  Some "restaurants" are allowed to sell up to 2 six packs worth of beer.  Restaurant liquor licenses are so expensive and hard to get that PA has many restaurants which are BYOB (this is actually quite popular, but very strange to people not from here).  The LCB operates far too few wine and spirits shops in the state (600).

Something that simplifies things, and improves access would be great.  It could even include privatization.  That said, whatever ends up getting passed will just be another layer of complexity and will likely mean higher prices (particularly for spirits).

Oh, as for the other end of the anti-privatization...As much as it can be a bit of a pain in the ass, I'm pretty sure that people who want to get drunk don't have any problems doing so with the current situation.

Holy Bad Idea, Batman!

The frequency with which vehicle miles tax (VMT) pops up is insane.  It is a very, very bad idea (in our current situation, and maybe in any situation).  A higher gas tax in superior in almost every way imaginable...

1) We already have a gas tax, so increasing it incurs ~$0 in terms of collection costs.
2) There is no "government tracking" issue to deal with.
3) There is nearly zero fraud potential to deal with.
4) It appropriately encourages people to shift to higher mileage vehicles which:
   a) provides additional benefits in terms of lower carbon emissions and
   b) are generally lighter and do less damage to the roads than heavier vehicles.
5) Congestion pricing is built in, albeit very small by comparison.

There are maybe a couple downsides to a gas tax over a VMT.  One is that that congestion pricing is not really very good, but the VMT would almost have to be the [much more unpopular] GPS type to account for this.  The other really doesn't come up until we live in a more utopic society: basically if a very large fraction of cars don't use gas, then there will be less revenue from the gas tax, but we will still have road damage.  While I see this "problem" as a huge benefit, and one I think we should look forward to having to deal with, it is a long, long, long way off (and when it ever arrives some form of weight-adjusted VMT may be an appropriate solution).

Oh, and as for increasing the gas tax being politically difficult: I can't even begin to comprehend how it is that people think that the VMT will be [comparatively] popular.

And Yet The Comparisons Will Continue

It should be obvious to anyone with a half-functioning brain that the federal government is not a household and debt and expenditures do not work the same way, but we keep hearing (too often from people who should really know better) about tightening belts and "if you tried to run your house like the government..."

Weaponized Keynesianism

Ever since I read through the "Stimulus or Stymied" transcript I have to say I was very puzzled by Valerie Ramey, and not Krugman's critique, which I agree with, but don't really care about for this. 

Making a bomb provides nothing of secondary value to the economy.  Military goods are not for public consumption.  They also don't generally improve other aspects of our economy (the interstate highway system being a notable exception).  If we spend $1 billion making a bunch of bombs, that money did employ some people, so the multiplier isn't zero, but it isn't as big as if it were to spread to or enhance other economic activity.  (In fact, if a large fraction was employed elsewhere it could even be less than 1.)

On the other hand, if you improve transit then many other businesses and individuals can see a boost.  If you rehab the power grid to be more efficient and less prone to failure then there are huge potential economic gains as a result.  Massive military spending just doesn't do that.

I understand why she would chose military spending, for the study, but if you look at a "fiscal multiplier" as a measure of economic boost, then no one should expect military spending to be terribly large, particularly if this is to be used to generalize to other spending on things like infrastructure.

Yglesias makes something resembling this point when talking about the new, Japanese nationalist Abe.

Money and Happiness

A new paper comparing income to happiness, mostly as national GDP.

Wealthier countries having happier people makes sense: a wealthy country can afford to have a well fed, clothed, housed, and entertained populous. 

But at the same time the US serves as a counter example, and this also makes sense.  While GDP gains in many other advanced nations (e.g. most of Europe) have also lead to increases in social insurance (i.e. "welfare") programs, in the US the opposite has occurred.  We have had a big jump in GDP, but most programs for the poor have gotten less generous, and social security, medicare, and medicaid are constantly in danger of cuts by politicians [on the right...including Obama]. 

Our social safety net is getting weaker as our country has gotten wealthier.  That is a recipe for unhappy people, even when people in general have more money.  Someone making $30k/year who doesn't have to worry about losing health care, her house, and having problems getting food for her child is going to be more content than someone making twice as much that has to concern herself with those things.  Even someone making $100k a year in the US can quickly find herself in dire straits if she looses his job.  Mortgage/rent can eat through savings fast, and a single visit to the ER can be thousands of dollars (and COBRA is not cheap). 

"The [Housing] Bottom is Here"

...Again.  This has been predicted every year since 2007.  Not sure how housing will recover with lots of unemployed people, lots of debt overhang and still stagnant wages.

That said, it does seem like there is lots of opportunity for willing and able people to do well with rental properties--not the huge funds but individuals owning a few smaller multifamily places, and maybe single family.

Not Sure Which is Worse

Ezra and MattY both wants liberals to calm down about the Austerity Bomb deal. Ezra says the White House won, and Matt that it lost.  In either case, liberals should definitely not be calm.  If this deal represents Obama winning, then there is no hope for liberal policy, because Obama will never pursue it.  If this deal represents Obama losing, then there is very little hope for liberal policy because Obama was in the strongest bargaining position he's had in at least 3.5 years, if not since the beginning of his presidency, and he couldn't manage a win?!?

Basically liberals are screwed, because even though liberal positions are overwhelmingly popular, and even though liberal positions would boost the economy and shrink the debt, there is no chance of them happening because we have a Democratic president who is either pathetically weak or a Republican.  (Note, my opinion is clearly the latter.)

Reminder: Obama is NOT a Liberal

Cannot be repeated often enough.  Obama is a "Moderate" Republican...at least to the extent that Ronald Regan was a moderate.

E Readers

I still just read books, in part because can do so during takeoff and landing.  Also, I'm paranoid about having my entire library (or a lot of it) wiped out or out of order for some reason.  Still, in a few decades, I wouldn't be surprised if Kindle meant book and people added content and stories.

Note: obviously, I'm playing with the site today.  No real reason other than curiosity.

Bush-Obama Tax Cuts

Similar to the Bush-Obama war on terror and the Romney-Obama health care plan.

That's what we have now.  The piddly shit top-end bit notwithstanding.  Obama seems to wish in his heart of hearts that Democrats were all more like Republicans.  As for the "liberals" who are either cheering or at least not fuming about this: you are a major part of the problem. 

One year and 5 year extensions on some good things in exchange for making the Bush tax cuts permanent is not a good trade off.  Extending the lower rates for another 5 years would have been a better deal.  Going over the cliff, blaming Republican intransigence and then negotiating a new tax cut would have been better politics.

Overweight and Healthy

There is a new study out saying that people who are slightly overweight (not obese) live longer than those who are not overweight.  It isn't really a surprising finding to me, nor is the reaction to it.  In particular it was pretty offensive to hear the [Harvard] doctor on NPR flat out rejecting the study as garbage. 

Scientists (as well as MD's) do, in fact, trash other scientists' work and findings.  Usually this happens when one scientist publishes something that directly refutes an other's work and findings.  This initial reaction is not meaningfully different than the way politicians react to the other side, and it is damaging to research overall...particularly in a time when an overlarge number of people are already inappropriately skeptical about science. 

The proper response (and the one that the doctor on NPR should have taken) was to say something like: "The study offers some interesting data, and it would be good to go further to look at possible specific cause and effects."

Having more or less body fat isn't really a "cause" of much of anything.  It highly correlates with quite a few medical issues (heart health, diabetes, ...), but it is this correlation that is the reason it is used as an indicator, and that is fine.  Just because correlation doesn't equal causation doesn't mean we should ignore correlation as indicators. 

By the same token, with respect to this study, if people who live longer are more likely to be a little overweight than not, then that could be an indicator that either something has changed in the environment, that something is up with our society, or that the measure of overweight is not as good as it should be.  That should be taken seriously, and obviously the Harvard doc doesn't take it seriously.