Economics

Crash course in personal, civic economics

What kids in high school really need to learn is personal and civic economics. You can’t help but notice how so many people don’t understand even the basics of finance related to bother their personal lives and to the public matters that affect them.

For example, there’s a local story about the governor wanting to replace off-duty detail cops with civilian flaggers, partly because of the cost of the detail cops compared to civilians. One of the arguments in favor of keeping the cops is that the cost doesn’t come from taxpayer funds but from the utilities using them. Well, who do you think ends up paying the utilities? Those costs get passed along to the consumer. Or when legislators respond to the economic crisis and declining tax revenues by raising taxes, like meal taxes and sales taxes! All that will do is keep people out of stores and restaurants, decreasing revenues even further. When my costs increase and recession hits, most people don’t have the luxury of demanding a raise from their boss even as the company struggles. Yet, I hardly see anyone raising a stink over these inanities. Even more, I see my fellow voters putting the same economically clueless jokers back into power every election.

But even in personal matters, many people seem to not understand basic economics. I can’t count how many times I’ve seen one of those lifehacking, productivity blogs tout a tutorial on keeping a checking book or on building a nest egg as if they were imparting secret knowledge. But the sad reality is that many people, young and old, don’t know the basics.

This is why I think every senior in high school should be required to take two courses: personal economics and civic economics. While home economics has come to be known for teaching you how to bake a cake and sew throw pillows, a personal economics course would teach some important life skills: maintaining a checkbook, saving for retirement, getting and keeping credit including credit cards, buying a car, finding a house, choosing a mortgage (and making sure you understand the paperwork), and so on. These are skills that almost everyone will need and so few people have, unless they learn through hard-earned experience. Or they have particularly prescient and conscientious parents.

I certainly wish I’d been more discerning with credit card debt and student loans in my early twenties. Those two areas alone have set me up for a lifetime of financial ostacles to overcome.

Then there’s what I call civic economics. It’s not just about public policy and government, but more about finances that go beyond me and my family. How does the stock market work? What is the banking system? What is the consumer’s place in the grand scheme of things between industry and government? Where does money come from? How do taxes affect the economy? Of course, it’s readily apparent that this course wold be greatly affected by the instructor’s political bent, liberal or conservative. But maybe here, some good textbooks would be able to offset some of that.

In any case, I think schools would do well to offer some practical education in areas that will affect every single student for the rest of his life. You can’t say that for trigonometry.

Photo credit: Flickr.com user Betsssssy. Used under a Creative Commons license.

Even in a depression, the Massachusetts solon wants to tax & spend

If there’s a silver lining to the current economic crisis, it’s that there’s no money in the budget for the usual pork-barrel spending and apparently little interest in new taxes to pay for them. At least the liberal leadership in Massachusetts’ Legislature doesn’t have the appetite for it, although the rank-and-file are still seem hungry for it.

DeLeo’s bare-bones budget has had one predictable outcome, whetting the appetites of rank-and-file lawmakers for a broad-based tax hike. State Rep. Brian Wallace (D-South Boston) said there is a growing acceptance of some kind of tax increase in the Legislature, because it’s the only way to restore their pet projects.

Said Wallace: “We’re going to have to do something with taxes, I think. It’s not a question of if, it’s a question of when.”

Or you could, you know, do without. When times are tough and there’s not enough money for everything we want, a normal family cuts not only luxuries but even necessities that can be deferred. But not the Massachusetts Legislature. they couldn’t possibly do without, say, the Quinn bill, a boondoggle that gives raises to cops for going back to school, yet the programs are essentially diploma mills—no real school work required—and results in law enforcement officers getting lifetime raises of 10, 20, or 25 percent. Raises that also inflate their eventual pensions.

Or, for example, studying the winter moth caterpillar. I could be convinced to see the value of studying this pest so we can prevent infestations… when we can afford it. But right now even $150,000 is too much to pay.

How about something potentially even more devastating, like $850,000 for homosexuality indoctrination programs in public schools? On Friday, MassResistance reported that funding for these programs had been cut from the budget, but then later updated the report to say that amendments have been filed—at the urging of the homosexual lobby—to restore the funding. I won’t lie to you: Even in the best of times this is a bad use of money, but now, there is no excuse for it. Morally, we can’t afford it ever. Financially, we certainly can’t afford it now.

But the tax-and-spend crowd have forgotten what it means to do without. They have become gluttons at the taxpayers’ expense and blindly propose new taxes that will force us ever deeper into an economic depression to satisfy the lobbyists’ and pressure groups’ desires to re-engineer our society at any cost and to keep the money spigot flowing to their political friends and campaign funders.

It’s time to say No. But has the Massachusetts taxpayer had enough? Can anything wake them from their slumber before it’s too late?

Dodd isn’t the only double-talker on AIG bonuses

A friend notes on the Dodd matter covered in the previous post that Sen Chris Dodd wasn’t actually part of the conference committee that prepared the bill that included the language that bonus contracts—such as those paid out by AIG—must be honored. So why is he falling on his sword? Maybe he lobbied for the provision, but who is he protecting?

All you have to do is look at the six Democrat who were signatories to the conference report. (Recall that no Republican voted for this report and that the bonus-contract enforcement provision was snuck into the conference report.): For the House, David Obey, Charlie Rangel, and Henry Waxman. For the Senate, Daniel Inouye, Max Baucus, and Harry Reid. (Download this PDF of the second half of the bill and page all the way to the end for the signatures.)

Which one of these guys did the deed and won’t ‘fess up now?

Dodd, White House pushed law for AIG to honor bonuses

Barack Obama was outraged—outraged!—that AIG executives were getting $400 million in bonuses after the US taxpayer bailed out the company with $170 billion—Billion!—and after it posted $60 billion in losses last quarter.

And yet AIG says that it was contractually obligated to pay these bonuses—never mind whether those were ridiculous contracts to begin with because Democrat Sen. Chris Dodd—at the urging of the White House— pushed a law requiring companies receiving bailout money to honor those contracts.

On Tuesday, Dodd denied knowledge of the amendment and then on Wednesday, he backtracked and said he thought it was just “innocent modifications,” blaming the amendment on “staffers” working with Treasury Department officials. And now he claims that even though many of the bonuses were awarded to AIG executives living in his state, he had no idea that AIG would benefit from the amendment and enrich his constituents. At this point, we can’t believe anything he says.

As for Obama, this is just more Hope and Change. As in after Obama’s economic policies are fully enacted, let’s Hope the American taxpayer is left with more than some spare Change.

Obama’s charitable deduction reduction hurts us all

As part of his proposed 2010 budget, President Obama trots out the old liberal playbook and takes a few more whacks at the “rich”, i.e. those who make more $250,000 per year. I put that in quotation marks because that category includes a very large proportion of the small business owners in this country, people who pour much of what they earn into their businesses and also into our society through charitable giving. They are not the enemy to be be denuded of property on which we, the “lower classes”, stake a claim out of jealousy and pettiness.

One element of the Obama budget’s attack on the “rich” is the reduction of the deduction for charitable giving. This will have an impact on many people who aren’t the so-called “wealthy” class. That’s because philanthropy by the wealthy is a backbone of charitable giving in this country. Yes, every gift matters, from the widow’s mite on up to the multi-million dollar gifts. But it’s those large gifts, the ones typically given by those in the top tax bracket, that often have the most far-ranging impact. Think of the hospitals whose emergency rooms or surgical centers or pediatric wards were paid for by large single donations. Think of the food pantries who raise support from many folks because a philanthropist offers to match every donation up to the tens of thousands of dollars. Think of the university laboratories researching disease cures, paid for by the generosity of wealthy alumni. Yes, those gifts of $10, $50, $100, or $1,000 given by the vast majority of people make up the bread and butter income of those charities, but it’s the very large gifts that enable the extraordinary actions of charities.

And while I can’t go into detail in this area—because I work for the fundraising office of an archdiocese—let me tell you that every parish, every diocese, every parochial school will likewise be affected by this. What happens to the Church’s presence in the world when generous donors can no longer afford to give?

That’s right, they can’t afford it. If you look at how the wealthy are already penalized for their earnings, you realize that if they want to sustain their legacy through their own companies and their families, if they want what they have built to survive beyond themselves, they rely on provisions within the ever-more byzantine tax code to offer incentives to support those charities.

So why would the liberals want to undermine such charitable giving? It’s not just the fact that so many of the leading Democrat politicians actually don’t give generously of their own wealth—think of the revelations of John Kerry’s minuscule charitable giving before he began looking at running for president or the Clintons’ infamous itemizing of their gifts of underwear and used shower curtains to charity. Or even Barack Obama, who gave much less than the national average to charity before he began his preparation for running for president in 2005. And these are all people whose income puts them among the ranks of the wealthy they so disparage.

No, it goes even deeper into ideology. Such an attitude betrays the big-government mindset of liberals who are convinced that only government funding—and thus oversight and control—can properly fulfill the role that charities have always filled. Even now many charities subsist to a large degree on fat government contracts to provide social services. So why should the wealthy be free to direct their own wealth to the charities for which they have an affinity, or which they believe do the greatest good, or which uphold the values they profess themselves, when the liberals could control all that money through government spending priorities. And when they control the money, they can push forward their efforts to re-engineer society to their own liking and ideology.

The reduction of the charitable giving deduction for the “wealthy” will have negative consequences for all of us, not just the wealthy, just as class warfare based in greed and jealousy will continue to erode society’s bonds and raise more fractures and fault lines.

Photo caption: An illustration of James 1:27 via Wikimedia Commons. Used with permission.

“Gold-plated” solar-powered trash cans: Stimulating the economy?

Barack Obama’s pork-filled so-called stimulus bill is so full of big government waste, you could spend all day documenting it. Here’s one example from Massachusetts. How about nearly $22 million for solar-powered trash-compacting garbage bins for state parks. These modern marvels cost $3,600 each.

How many jobs are going to get “stimulated” by this boondoggle? The Mass.-based company that makes employs 23 people, although they bins are actually assembled in Vermont. Will we double the number of employees? that would be $1 million per job. What a bargain.

Oh, but the state hacks behind this plan claim that we’ll also be saving money.

BigBelly Solar trash compactors are designed to do more than prevent litterbugs, state officials said. A solar-powered battery compacts the rubbish, cutting fuel costs by decreasing how often state workers must pick up the trash.

And how much in gas savings are we expected to believe are going to be realized from having to empty these trash cans half as often? How many years will it take to recoup the cost of buying, installing, and let’s not forget maintaining (fixing broken ones, replacing dead batteries, etc.) $22 million worth of this “shovel-ready” project?

I’m beginning to think “shovel-ready” doesn’t refer to projects ready to spring into action once they’re funded. I think it refers to how much b** has been shoveled to convince us that this stimulus bill was a good idea. Apparently, not enough for some of us.

Photo credit: BigBelly Solar

Arnold: Drop your principles; embrace mine

The headline says it all here: “Schwarzenegger to Stimulus Opponents: Economy More Important Than Principles”. For some people, perhaps some politicians, so-called “principles” are merely malleable positions espoused for the purpose of scoring political victories, easily jettisoned when the shifting tides of politics dictate. But for the rest of us, principles are closely held beliefs, based on considered cogitation, that define our approach to the world as a reality.

In other words, if they really are principles then they are not in conflict with what we truly believe to be the best way to, in this example, fix the economy. Principles are supposed to be our fundamental approach to the world.

What we can do with less of are political games of one-upmanship designed to elevate the players and score media points. You know, like attacking your supposed fellow-travelers in your party for favorable quotes in the media.

The stimulus feeding frenzy has begun

It’s becoming apparent that the stimulus bill will stimulate little more than political cronyism and special interest spending designed to get the pols re-elected. For instance, even before the stimulus bill was passed, Mass. Gov. Deval Patrick had already spent $500,000 on a “spending czar” and an accounting firm to help spend Massachusetts’ cut of the massive pork barrel spending bill. Is everyone else on Beacon Hill so busy?

Even worse, the Patrick administration admits that the infrastructure projects will create only between 9 and 14 jobs per $1 million spent. At that rate, in order to regain the jobs lost in January alone, we’d have to spend $55 billion. That seems somewhat inefficient.

And now that the bill has been passed? Boston Herald reporter Jay Fitzgerald gets it right: “Let the feeding frenzy begin.” After all, the real currency of political power is the amount of money you can funnel to companies and workers in your district and our pols are going to ensure they get as much of our tax dollars as they can. Does anyone doubt that sometime in the next 12 months we’re going to be reading news reports about corruption, misappropriation, and special favors related to this money? Mark my words.

$2,000,000,000 for 150 jobs

So what do we get in the stimulus bill? How about a $2 billion boondoggle of a “green” power plant in Illinois, creating 150 jobs. The FutureGen plant was started under the Bush administration as a public-private partnership, the costs ballooned, the technology became obsolete, and the Bush Department of Energy decided to kill it.

Now, like a zero-emission zombie, the FutureGen plant is back, hungrier than ever for a piece of the “porkulus”. A hefty $2-billion piece.

After FutureGen was abandoned, disgraced Illinois Governor Rod Blagojevich paid Cassidy and Associates, a major Washington, D.C. lobbying firm, $468,000 in public funds to lobby to restart the project. The Illinois delegation in Congress has also been pushing hard for the FutureGen earmark, despite the fact that the Obama administration has been vocal about their opposition to earmarks in the stimulus, and has even specfically said they are oppposed to including funding for FutureGen in the bill.

The Wall Street Journal estimates that the FutureGen would generate about 2,675 new jobs—and only 150 of those are permanent. Congress would be spending just shy of $750,000 per new job.

Sen. Tom Coburn had introduced an amendment to kill the project in President Obama’s home state. I don’t know if the amendment was successful. Anyone?

Regardless of the fate of this particular pork-barrel project, you can be assured that there’s a lot more where that came from hidden among the aid to states and infrastructure spending that makes up a huge chunk of the bill.

And yet, there are still some people out there who think the stimulus is just another check coming in the mail from the U.S. Treasury. Sorry folks, not this time. In Democrat parlance, economic stimulus means stimulating government spending and jobs, rather than cutting costs and letting people keep their own money to invest and spend. (And since when did it become evil to save and invest your money rather than waste it?)

In any case, in the face of the worst economy in 80 years the party of the president who ran on “hope and change” shows that it’s the same old tax-and-spend game.

Great Depression, 2008-style

There are so many things wrong with this New York Times story that tells us the sob story that mothers are having to sacrifice buying designer jeans so their kids can have more stuff this Christmas. Yes, my dad tells me tales of his mom forgoing designer fashions during the Depression; it was such a hard time for everyone.

The article starts with this anecdote of a woman who is buying her daughter a mess of Christmas presents, but will have to forgo the designer jeans she wants to buy herself. (Click through to see the photo of the Christmas gifts for her daughter.) Then it tells us that the economy is so bad that “for millions of mothers across the nation, this holiday season is turning into a time of sacrifice.” No, they’re not worrying about whether they can put food on the table, heat the house, or even keep a roof over their kids’ heads.

Weathering the first severe economic downturn of their adult lives, these women are discovering that a practice they once indulged without thinking about it, shopping a bit for themselves at the holidays, has to give way to their children’s wish lists.

We’re so steeped in our consumerist lifestyles, so obsessed with buying stuff we don’t need and can’t afford that being unable to buy stuff for ourselves at Christmas is considered a major sacrifice.

“I want her to be able to look back,” Ms. Hunt declared, “and say, ‘Even though they were tough times, my mom was still able to give me stuff.’”

Right, because what really endures for kids is the memory of the stuff your mom is able to buy you.

Note, too, that there’s no mention of a dad for Ms. Hunt’s kid. But the Times doesn’t forget them, being quick to point out that it’s moms who are enduring this horrible burden of being unable to buy stuff themselves the most. Yes, because dads don’t sacrifice. Nope, in our culture, it’s only moms who really sacrifice. Dads just go to work and then go out drinking with their buddies and go play golf and then plop themselves in front of the TV. They don’t sacrifice anything.

In what world is being unable to buy something for yourself during your Christmas shopping any kind of sacrifice? I guess in the world of the yuppies that the Times considers its audience.

And if our economy is dependent on people buying stuff for themselves they don’t need and can’t afford, then maybe it’s time for a little shakeup and a re-ordering of priorities.

Just a little thought to share with you all on this Black Weekend (formerly known as Thanksgiving weekend or the First Sunday of Advent).

Photo credit: Flickr user litherland. Used under a Creative Commons license.

In bad economy, children are first to go

Because children aren’t a blessing, they’re a burden, those who make it their business to ensure there’re fewer kids to feed are offering free contraceptives to those feeling pinched by the economy:

With the economy spiraling downward, one nonprofit wants to make sure someone doesn’t accidentally have another mouth to feed.

[…] As an incentive not to skimp on protection, new patients who sign up before Dec. 30 will receive three free months of birth control. Existing patients can get the deal if they recommend a friend.

“Cutting back on contraception because of cost can lead to the high price of unintended pregnancy,” said Lianne Cook, executive director of Health Quarters.

With winter on the way and people struggling to buy food and heat their homes, Cook said birth control can often take a back seat to basic needs.

“We don’t like people to think of it as a luxury,” she said. “But it can be a fairly sizable expense each month.”

The article says that Health Quarters, located in Beverly, Mass., offers the full range of services including so-called emergency contraception, which is often just a form of very early chemical abortion. And it’s funded by your state and federal tax dollars.

Yes, that’s just what people need in a tough economy: birth control. Reminds me of Planned Parenthood’s reaction to the ethnic cleansing and rape camps in Bosnia: donations of vacuum-suction abortion machines. Or to the earthquake in Pakistan a couple of years ago: More contraceptives and abortion. One-track minds.

Photo credit: Ceridwen at Wikimedia Commons via a Creative Commons license.

If it’s Friday it must be a Roman transit strike

A co-worker is in Rome this week and we’ve been keeping touch over IM. He told me today that, gosh, there’s a transit strike this Friday and he hopes it doesn’t put a crimp in his plans. I told him that Italians have transit strikes every few weeks, mostly when they want a long weekend.

As bad as American unions are, they could be a lot worse. They could be like European unions.

We should have listened to Peter Schiff

When everyone else was blowing sunshine about the economy, Peter Schiff saw exactly what was coming. And he was saying it 2 years ago! Just as amazing is completely wrong everyone else was. Not just slightly wrong, but picking Washington Mutual and Merill Lynch and Bear Stearns to be big stocks and predicting the Dow at 16,000 by the end of 2008 and so on. They were all laughing at Schiff, but he’s got the last laugh now.

[Link via Signal v. Noise.]

Which party brought us this current crisis?

Oh those greedy Republicans and their fat cat buddies who are plundering the nation’s financial systems. Right? That’s what we’re told anyway.

But what if I told you that history paints a different picture. What if I told you that the current crisis, which has its root cause in mortgages extended to those who couldn’t afford them and then packaged on Wall Street as investment vehicles, began in the Clinton administration?

Here’s a New York Times headline from September 1999: “Fannie Mae Eases Credit To Aid Mortgage Lending”.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

Hindsight is 20/20, but this gave me the chills. Meanwhile, conservatives were the ones giving warnings about the disaster that befell us:

“From the perspective of many people, including me, this is another [savings & loan] industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. “If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the [savings & loan] industry.”

Wherever Peter Wallison is now, he’s entitled to a big “I told you so.”(He’s referring to the savings & loan crisis in the 1980s that required a government bailout similar to the one being proposed now.)

Even after the new looser lending practices went into effect, conservatives were warning about the coming disaster. In 2001, the Bush administration warned Congress that Fannie Mae and Freddie Mac were “potential problems” because a problem with either one would “cause strong repercussions in the financial markets.” In 2003, the White House warned that there was systemic risk that could go beyond the housing sector. So Bush proposed stronger regulations of the congressionally chartered public companies.

Yet Democrats, including Rep. Barney Frank of Massachusetts, now chairman of the House Financial Services Committee, pooh-poohed the Bush administration concerns. He said Fannie Mae and Freddie Mac were not in a crisis; that in fact the federal government should be encouraging to expand their lending practices to give mortgages to even more low-income, high-risk borrowers. He said, “The more people, in my judgment, exaggerate the threat of safety and soundness, the more people conjure up the threat of serious financial losses to the Treasury, which I do not see, I think see entities that are fundamentally sound financially … then the less we in terms of affordable housing.”

How affordable is all that housing now, Barney?

Let’s keep our priorities straight: We need to fix this crisis first, but when November rolls around and we’re deciding which party is going to have control and oversight of this country’s economy, we would do well to remember history and to remember which party had a Pollyanna attitude about the crisis we got hit with.

Here is a link to the YouTube video of a Fox News Special on the current financial crisis from which the information on the Bush warnings and Frank’s response came.

A tax cut is “unreasonable”

The Massachusetts Senate president wants the taxpayers to know who’s really in charge. And it’s not the taxpayers.

Sen. Therese Murray went before a Boston business community meeting this week to ask for their help to “educate” taxpayers on why it would be a bad idea to lower the state income tax rate in November, as a ballot question will ask them to do.

(Incidentally, it won’t “repeal” the tax, as the story claims, but lower it back to 5%, the rate it was before the state Legislature passed a “temporary” 18-month-long increase back in … 1989.)

Every time the topic of the Legislature keeping its promise comes up, we get the same song and dance. When economic times are tough, we’re told we just can’t afford it because revenues have dropped. But when times are good we’re told we can’t afford it because … times might get tough again. Murray is an expert at this soft shoe.

“We need the support of the business community to educate the public and make sure we don’t fall victim to a reckless vote in November,” she said yesterday morning at a packed breakfast meeting at the Hyatt Regency Boston hotel.

Ever notice how it’s a “reckless vote” whenever the voters might vote in a way that the liberals don’t like? Oh that messy democracy. Those silly voters think that they’re the ones in charge. But we know better, don’t we? Just ask the state Supreme Judicial Court and the attempt to have a “reckless vote” on the preservation of marriage.

As expected, the usual catalog of destruction is trotted out to scare voters.

The result, she said, would be widespread devastation.

“Revenues from our income tax represent $12 billion - that’s 60 percent of our total tax revenues and 40 percent of the entire state budget,” she said.

Without revenues from income taxes, school teachers and police officers would lose their jobs and road improvement projects would be stalled, she said.

Fearmongering

Photo is in the public domain. Wikimedia Commons.

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