Okay, let's break down this morning's economic numbers.
First up was mortgage application volume, tracked by the Mortgage Bankers' Association. Overall volume was up 7.5% in the latest week, after a 5.6% gain in the prior week. Evidence that housing demand is picking up, right?
Not so fast. First, the increase last week came even as mortgage rates rose from 5.15% to 5.24%, and were led by refinancing apps, which rose 12.7% compared with just a 1% gain in purchase apps. The nature of the refi beast is that people try to time the bottom. Anytime there's a jump in rates, you'll see these market-timers come off the sidelines in a last-gasp effort to catch rates near the bottom, as they tend to rise faster than they fall.
Second, there are still a ton of option ARM resets coming in the fourth quarter of this year and the next two years. Those people are desperate to get out of these negative-amortizing ARMs before the reset hits, so they file multiple apps with different lenders, hoping one of them will underwrite the loan. We saw this phenomenon earlier this year: many apps were filed, but not many loans were ultimately written. So we see lots of volume coming from a relatively small pool of borrowers who fill out multiple applications, none of which may result in a loan.
On to durable goods orders, which rose 4.9% in July, beating the forecast by nearly two percentage points. But most of the gain came from aircraft orders, which are volatile. Ex-transportation, orders rose, but less than forecast. And ex-aircraft, orders fell. Overall orders are still down more than 20% YOY, and the base-year data is pretty bad.
Finally, new home sales rose 9.6% in July, the most in over four years, and beat forecast by 8 percentage points. That is pretty good news, but let's examine why people are buying new homes when there are so many foreclosures on the market.
First, builders are building smaller units at a lower price point to compete with foreclosures. As evidence, the largest percentage of new homes for sale in July was in the $150-200k bracket, at 28% of the total. At the peak of the bubble in mid-2005, the largest percentage was in the $300k+ bracket, at 31%.
Why buy an 1,800 sq. ft. new home when I can buy a nearly-new foreclosure twice that size for around the same price? Two reasons. First, households are de-leveraging, and they're realizing that it costs a lot more to furnish, maintain, heat and cool a McMansion than a more reasonably-sized home. We're making do instead of splurging.
Second, many foreclosures have suffered neglect from being on the market unoccupied for a long period of time, or even damage inflicted by the outgoing homeowner or by vandals. So there may be a considerable investment required to make those homes liveable, whereas a new unit is move-in ready (and builders are still offering big incentives).
The bottom line is that, while new home sales are up of late, the months' supply - while improved since March - is still about twice normal levels, so builders will still have to be cautious for a while. Also, activity will slow as we head into the inclement weather months.
It pays to look beyond the headlines, as some of the apparent green shoots may be little more than dandelions.
Wednesday, August 26, 2009
Tuesday, August 25, 2009
A Missed Appointment
This is the economic post that I've been planning for about a week now, but haven't gotten around to yet. I'm glad I waited, as today is the perfect time for it. Why?
This morning, President Obama re-appointed Ben Bernanke as Chairman of the Fed.
The same Ben Bernanke who, less than 18 months ago, declared that "the subprime contagion can be contained, and is unlikely to spill over to the broader economy." (We'll get back to that quote shortly.)
The same Ben Bernanke who has grossed up the Fed's balance sheet to unprecedented proportions in a Ponzi scheme that makes Bernie Madoff look like a piker. How?
As a general rule, central banks are prohibited from printing currency to fund government spending. So as Congress appropriates massive amounts of money that we do not have, and that diminished tax revenues cannot possibly hope to support - now or in the near future - the Treasury issues record amounts of debt to fund the appropriations.
Now, there aren't enough buyers to gobble up all that debt without interest rates going through the roof, as investors, foreign and domestic, demand yields on Treasuries that reflect the risk premium of an increasingly risky borrower. (Think about the letter you're likely to get from your credit card company when you max out every card you have, and even go over the limit. You know, the one where they inform you that they've just raised your rate by 10%.)
China - the single largest foreign holder of US debt - has been systematically decreasing its Treasury holdings. There are fewer primary dealers on Wall Street to buy up Treasuries - no more Bear Stearns, no more Lehman, no more Merrill Lynch. So the demand just isn't there.
Now, as an aside, the increased aversion to risk on the part of big banks is supporting demand to a degree; the big banks still hold billions of dollars in "legacy assets" (new-speak for "toxic assets). And the Congress-forced relaxation of mark-to-market accounting rules means that they can lie about the value of those assets and breathe a little easier - for now. Until the assets eventually default and they have to write them off altogether.
So they're not lending, and they're not investing in risky assets anymore. They're hoarding cash, in the form of Treasuries, to pay the piper when the assets go to zero. But that can only last so long.
So the Fed's been buying up Treasuries, grossing up its balance sheet. Then, it'll pump reserves into the banking system, where the money trickles down to your pocket and mine. That's called monetization of the debt. And it's effectively an end-around to the legal restrictions on the central bank simply printing currency to fund the debt. It should be criminal, and Ben Bernanke should be sharing a cell with Bernie.
Instead, we're lauding his praises, thanks in no small part to his recent round of stumping to pat himself on the back for the way he's reacted to the financial crisis, in an effort to get himself re-appointed. The Fed chair is supposed to be independent from the politicians, and instead Ben's been campaigning like a ... well, like a politician.
And see, how he's reacted to the financial crisis isn't the biggest problem I have with Ben.
No, it's the fact that he's reacted at all.
See, given his quote from last year, cited above, I'd prefer a Fed chairman that, instead of reacting to a financial crisis, had the ability to foresee what so many of us foresaw, and avert a crisis, rather than react to one.
Now, Ben's a smart dude, and an astute student of past economic cycles. I've read his research on them, and he's studied them well. The trouble is, he has zero ability to apply what he's learned from past policy mistakes to forecasting future ones, and can only recognize a bubble after it's burst.
Nouriel Roubini called this crisis. So did Joe Stiglitz, though he was a proponent of the then-record-low interest rates that brought it on. So did Robert Shiller. So did Michael Gasior of AFS Seminars.
So did I.
And you know what? It's certainly possible for a central bank to do the same, and avert disaster. Let's look at an example, but first, let's talk about what the Fed's job is.
Per the Humphrey-Hawkins Act, the Fed has a dual policy mandate: control inflation and promote full employment. Those mandates run counter to each other. Stimulate the economy too much to create jobs, and you risk fueling inflation. Raise rates too much in an effort to control inflation, and you choke off growth, resulting in job cuts. It's a delicate balancing act.
In recent years - from about 1998 through today - the Fed, under Bernanke and his predecessor, Alan "Mr. Bubble" Greenspan, has erred on the accommodative side, bowing to political pressure to gain favor by keeping rates too low, thereby fueling growth beyond sustainable levels. Nobody seems to mind at the time; asset values are soaring at rates heretofore unseen, household wealth is growing, tax receipts are up, the fat cats in Washington are able to justify all the pork they want - life is good.
But what's really happening is that unsustainable growth is creating a bubble, be it in dot-com stocks or real estate. And bubbles burst. And when they do, calamity ensues.
Now to our example. Over the past couple of years, real estate prices in Australia were inflating rapidly. The Aussie central bank recognized this, and, fearing a bubble was forming, decided to temporarily suspend its own dual policy mandate, and focus instead on gently deflating a pending asset bubble before it could fully form - and thereby avoiding the catastrophic consequences thereof.
So the Aussie central bankers began taking a hard look at housing data. Recognizing how inefficient government is at collecting data on a timely basis, it charged the private sector - Australian banks and real estate firms - with assembling the data it needed. They looked at things like the ratio of home prices to income in order to assess the debt burden home buyers were taking on relative to their ability to repay, the amount of mortgage borrowing for investment - rather than owner-occupied - purchases, etc. All the things that led to the US housing bubble.
And when the data showed them what people like Roubini, Stiglitz, Shiller et al were able to figure out here in the US, they acted. They didn't react, they acted. Proactively.
They stubbornly kept rates high even as the Aussie economy was slowing, defying the politicians' outcry for easy-money policy to stimulate the economy. By so doing, they priced mortgages out of the reach of the un-creditworthy and the investors looking to make a quick buck flipping homes in an escalating-price environment, financed with cheap money.
And they slowed housing demand gradually, bringing prices back down to earth and averting catastrophe.
If the Aussie central bank can do it, so can the Fed. But not under Helicopter Ben Bernanke. And for that reason, this is one appointment that missed the mark in terms of what the US needs if it is to ever recover from this crisis, without forming a new bubble in the process.
This morning, President Obama re-appointed Ben Bernanke as Chairman of the Fed.
The same Ben Bernanke who, less than 18 months ago, declared that "the subprime contagion can be contained, and is unlikely to spill over to the broader economy." (We'll get back to that quote shortly.)
The same Ben Bernanke who has grossed up the Fed's balance sheet to unprecedented proportions in a Ponzi scheme that makes Bernie Madoff look like a piker. How?
As a general rule, central banks are prohibited from printing currency to fund government spending. So as Congress appropriates massive amounts of money that we do not have, and that diminished tax revenues cannot possibly hope to support - now or in the near future - the Treasury issues record amounts of debt to fund the appropriations.
Now, there aren't enough buyers to gobble up all that debt without interest rates going through the roof, as investors, foreign and domestic, demand yields on Treasuries that reflect the risk premium of an increasingly risky borrower. (Think about the letter you're likely to get from your credit card company when you max out every card you have, and even go over the limit. You know, the one where they inform you that they've just raised your rate by 10%.)
China - the single largest foreign holder of US debt - has been systematically decreasing its Treasury holdings. There are fewer primary dealers on Wall Street to buy up Treasuries - no more Bear Stearns, no more Lehman, no more Merrill Lynch. So the demand just isn't there.
Now, as an aside, the increased aversion to risk on the part of big banks is supporting demand to a degree; the big banks still hold billions of dollars in "legacy assets" (new-speak for "toxic assets). And the Congress-forced relaxation of mark-to-market accounting rules means that they can lie about the value of those assets and breathe a little easier - for now. Until the assets eventually default and they have to write them off altogether.
So they're not lending, and they're not investing in risky assets anymore. They're hoarding cash, in the form of Treasuries, to pay the piper when the assets go to zero. But that can only last so long.
So the Fed's been buying up Treasuries, grossing up its balance sheet. Then, it'll pump reserves into the banking system, where the money trickles down to your pocket and mine. That's called monetization of the debt. And it's effectively an end-around to the legal restrictions on the central bank simply printing currency to fund the debt. It should be criminal, and Ben Bernanke should be sharing a cell with Bernie.
Instead, we're lauding his praises, thanks in no small part to his recent round of stumping to pat himself on the back for the way he's reacted to the financial crisis, in an effort to get himself re-appointed. The Fed chair is supposed to be independent from the politicians, and instead Ben's been campaigning like a ... well, like a politician.
And see, how he's reacted to the financial crisis isn't the biggest problem I have with Ben.
No, it's the fact that he's reacted at all.
See, given his quote from last year, cited above, I'd prefer a Fed chairman that, instead of reacting to a financial crisis, had the ability to foresee what so many of us foresaw, and avert a crisis, rather than react to one.
Now, Ben's a smart dude, and an astute student of past economic cycles. I've read his research on them, and he's studied them well. The trouble is, he has zero ability to apply what he's learned from past policy mistakes to forecasting future ones, and can only recognize a bubble after it's burst.
Nouriel Roubini called this crisis. So did Joe Stiglitz, though he was a proponent of the then-record-low interest rates that brought it on. So did Robert Shiller. So did Michael Gasior of AFS Seminars.
So did I.
And you know what? It's certainly possible for a central bank to do the same, and avert disaster. Let's look at an example, but first, let's talk about what the Fed's job is.
Per the Humphrey-Hawkins Act, the Fed has a dual policy mandate: control inflation and promote full employment. Those mandates run counter to each other. Stimulate the economy too much to create jobs, and you risk fueling inflation. Raise rates too much in an effort to control inflation, and you choke off growth, resulting in job cuts. It's a delicate balancing act.
In recent years - from about 1998 through today - the Fed, under Bernanke and his predecessor, Alan "Mr. Bubble" Greenspan, has erred on the accommodative side, bowing to political pressure to gain favor by keeping rates too low, thereby fueling growth beyond sustainable levels. Nobody seems to mind at the time; asset values are soaring at rates heretofore unseen, household wealth is growing, tax receipts are up, the fat cats in Washington are able to justify all the pork they want - life is good.
But what's really happening is that unsustainable growth is creating a bubble, be it in dot-com stocks or real estate. And bubbles burst. And when they do, calamity ensues.
Now to our example. Over the past couple of years, real estate prices in Australia were inflating rapidly. The Aussie central bank recognized this, and, fearing a bubble was forming, decided to temporarily suspend its own dual policy mandate, and focus instead on gently deflating a pending asset bubble before it could fully form - and thereby avoiding the catastrophic consequences thereof.
So the Aussie central bankers began taking a hard look at housing data. Recognizing how inefficient government is at collecting data on a timely basis, it charged the private sector - Australian banks and real estate firms - with assembling the data it needed. They looked at things like the ratio of home prices to income in order to assess the debt burden home buyers were taking on relative to their ability to repay, the amount of mortgage borrowing for investment - rather than owner-occupied - purchases, etc. All the things that led to the US housing bubble.
And when the data showed them what people like Roubini, Stiglitz, Shiller et al were able to figure out here in the US, they acted. They didn't react, they acted. Proactively.
They stubbornly kept rates high even as the Aussie economy was slowing, defying the politicians' outcry for easy-money policy to stimulate the economy. By so doing, they priced mortgages out of the reach of the un-creditworthy and the investors looking to make a quick buck flipping homes in an escalating-price environment, financed with cheap money.
And they slowed housing demand gradually, bringing prices back down to earth and averting catastrophe.
If the Aussie central bank can do it, so can the Fed. But not under Helicopter Ben Bernanke. And for that reason, this is one appointment that missed the mark in terms of what the US needs if it is to ever recover from this crisis, without forming a new bubble in the process.
Monday, August 24, 2009
Okay, I'm Seeing the Light
... to a degree.
My pastor, Adam Hamilton, was asked to appear on Lou Dobbs' show to talk about health care. Adam has taught and written extensively on finding common ground in using civil discourse - emphasis on civil; look it up if you need to (and we all need to at times) - to address issues that face our world. His book on the topic is called, "Seeing Gray in a World of Black and White."
And, he tends to fall on what would be considered the liberal side - or at least the compassionate side - of most social issues. As an example, while he opposes abortion, he understands the plight of women facing the decision, having counseled many, and he treats the topic - and them - with compassion.
Anyway, this isn't really about him or his positions. After the CNN appearance, he was asked to follow up on three radio programs and another TV program. He appeared on Dobbs as the "proponent" in the typical "proponent-opponent" format, in spite of the fact that he is not in favor of the current plan as proposed. His agenda is merely to get people to discuss health care, in a civil manner, as he believes it is a moral issue.
And it is. While the people who say, "God wants health care reform" are speaking for God, and thus delusional at best, for those of us who believe in Him, it's a safe bet that God CARES about the issue, at the least. Jesus was, after all, a healer, among other things.
And that is Adam's entire point: health care is a moral issue. Here in Kansas City, all but one hospital that was started before 1950 was started by a church, and that was common in the US prior to the modern era.
So what's my point? Simple. After Adam appeared on Dobbs' show, stating his case that health care is a moral issue, and that we should address it as a people in a civil manner - even after stating that he wasn't in favor of the current bill as proposed - the e-mails started coming in.
From his own congregation.
Some thanked him for stating what they themselves believed. Some asked incredulously what he was thinking, even weighing in on such a divisive issue. (Like God wants us to not speak out on the divisive issues.)
And some said, "You can't be my pastor anymore - I'm leaving the church."
What??? Why?? Adam would never tell someone in the church with whom he disagreed, "I'm sorry, but you can't be my parishioner anymore - you have to leave the church."
And it occurred to me that maybe the people who've been saying that the people showing up at these town hall meetings, shouting down the Congresspersons there, are a bunch of loonies who just don't want to think and want the issue to go away, but don't even know why, may be right.
I didn't think it could be so, because I myself am opposed to government-run health care, and I don't consider myself a loony, and I'd never shout anyone down in a discussion on the matter, and I do know why I'm against it.
First, let me say I haven't read the bill. I know two people who claim to have. And in my opinion, they and only they have the right to carp about the actual bill, or to debate its merits. The rest of us are mere lemmings who have an opinion about something we haven't even seen. Shame on us for even giving it voice.
No, my beef is not with the bill, but with the concept. See, I don't believe that government can effectively and efficiently run anything - a railroad, a military, a retirement kitty ... a government. And yeah, the private sector's flawed. It's just not nearly AS flawed, and I have about $1.6 trillion reasons to believe that. So I really don't want them touching my health care.
And as I've stated before, I'm sick of them spending money we don't have, on bills they haven't read, because there's a mid-term election looming and the two-party system wants to maintain its power base. The Democrats and Republicans are in cahoots in that little venture.
I think it's telling that one Representative wrote an amendment stating that if there's to be a public option, all senators and representatives would be required to be covered under it. And all but two Democrats voted against the amendment. (I am not being partisan in picking on the Dems; it is they who clamored for a public option is all.) So if the very people calling for a public option want no part of it, why should I?
Anyway, back to Adam, civil discourse, and the town hall meetings. Okay, just because I'm a registered Republican, and labeled a conservative by some people who've never even met me and have no clue what I believe - in part because they're too busy stereotyping me for not being exactly like them to read what I actually have to say about what I believe - doesn't mean I'd be one of the people in the town hall meetings shouting people down.
So I stereotype, too. I assume that the people there are like me. Well, apparently, from Adam's experience, not all of them are. Apparently, the vocal minority are intolerant, partisan and loony. And that's unfortunate. That means both sides are uninformed and partisan, for the most part.
Adam has convened a number of local medical and insurance experts - big names in the local scene - to hold a civil (we hope) discussion at our church Tuesday night. I'm hoping he can pull it off; I fear it will get ugly. Info is here, including a link to a live webstream: http://www.cor.org/seasonal-special/health-care-forum/.
This is your opportunity to witness a discussion on this topic first-hand, not the bits and clips the media want you to see. As I said, I hope it remains civil.
My pastor, Adam Hamilton, was asked to appear on Lou Dobbs' show to talk about health care. Adam has taught and written extensively on finding common ground in using civil discourse - emphasis on civil; look it up if you need to (and we all need to at times) - to address issues that face our world. His book on the topic is called, "Seeing Gray in a World of Black and White."
And, he tends to fall on what would be considered the liberal side - or at least the compassionate side - of most social issues. As an example, while he opposes abortion, he understands the plight of women facing the decision, having counseled many, and he treats the topic - and them - with compassion.
Anyway, this isn't really about him or his positions. After the CNN appearance, he was asked to follow up on three radio programs and another TV program. He appeared on Dobbs as the "proponent" in the typical "proponent-opponent" format, in spite of the fact that he is not in favor of the current plan as proposed. His agenda is merely to get people to discuss health care, in a civil manner, as he believes it is a moral issue.
And it is. While the people who say, "God wants health care reform" are speaking for God, and thus delusional at best, for those of us who believe in Him, it's a safe bet that God CARES about the issue, at the least. Jesus was, after all, a healer, among other things.
And that is Adam's entire point: health care is a moral issue. Here in Kansas City, all but one hospital that was started before 1950 was started by a church, and that was common in the US prior to the modern era.
So what's my point? Simple. After Adam appeared on Dobbs' show, stating his case that health care is a moral issue, and that we should address it as a people in a civil manner - even after stating that he wasn't in favor of the current bill as proposed - the e-mails started coming in.
From his own congregation.
Some thanked him for stating what they themselves believed. Some asked incredulously what he was thinking, even weighing in on such a divisive issue. (Like God wants us to not speak out on the divisive issues.)
And some said, "You can't be my pastor anymore - I'm leaving the church."
What??? Why?? Adam would never tell someone in the church with whom he disagreed, "I'm sorry, but you can't be my parishioner anymore - you have to leave the church."
And it occurred to me that maybe the people who've been saying that the people showing up at these town hall meetings, shouting down the Congresspersons there, are a bunch of loonies who just don't want to think and want the issue to go away, but don't even know why, may be right.
I didn't think it could be so, because I myself am opposed to government-run health care, and I don't consider myself a loony, and I'd never shout anyone down in a discussion on the matter, and I do know why I'm against it.
First, let me say I haven't read the bill. I know two people who claim to have. And in my opinion, they and only they have the right to carp about the actual bill, or to debate its merits. The rest of us are mere lemmings who have an opinion about something we haven't even seen. Shame on us for even giving it voice.
No, my beef is not with the bill, but with the concept. See, I don't believe that government can effectively and efficiently run anything - a railroad, a military, a retirement kitty ... a government. And yeah, the private sector's flawed. It's just not nearly AS flawed, and I have about $1.6 trillion reasons to believe that. So I really don't want them touching my health care.
And as I've stated before, I'm sick of them spending money we don't have, on bills they haven't read, because there's a mid-term election looming and the two-party system wants to maintain its power base. The Democrats and Republicans are in cahoots in that little venture.
I think it's telling that one Representative wrote an amendment stating that if there's to be a public option, all senators and representatives would be required to be covered under it. And all but two Democrats voted against the amendment. (I am not being partisan in picking on the Dems; it is they who clamored for a public option is all.) So if the very people calling for a public option want no part of it, why should I?
Anyway, back to Adam, civil discourse, and the town hall meetings. Okay, just because I'm a registered Republican, and labeled a conservative by some people who've never even met me and have no clue what I believe - in part because they're too busy stereotyping me for not being exactly like them to read what I actually have to say about what I believe - doesn't mean I'd be one of the people in the town hall meetings shouting people down.
So I stereotype, too. I assume that the people there are like me. Well, apparently, from Adam's experience, not all of them are. Apparently, the vocal minority are intolerant, partisan and loony. And that's unfortunate. That means both sides are uninformed and partisan, for the most part.
Adam has convened a number of local medical and insurance experts - big names in the local scene - to hold a civil (we hope) discussion at our church Tuesday night. I'm hoping he can pull it off; I fear it will get ugly. Info is here, including a link to a live webstream: http://www.cor.org/seasonal-special/health-care-forum/.
This is your opportunity to witness a discussion on this topic first-hand, not the bits and clips the media want you to see. As I said, I hope it remains civil.
Sunday, August 23, 2009
The Best of Times, the Worst of Times
Sure, that could be the title of a post on this economy. But it's not. As promised, I'll get to that, soon. But there's something weighing a little more heavily on my mind today. You see, yesterday I moved my daughter - my only child - into her college dorm.
************
When I was growing up, and even when I was in college myself, I didn't know what I wanted to do with my life; not until graduate school would I decide. But I always knew that I wanted to be a father. And from the time I was 13, I knew I wanted a daughter.
That's when my sister was born. My older brother was aghast that Mom was expecting at the age of 39, with Dad being 50. I was ecstatic: I would finally get a younger sibling.
My baby sis and I were inseparable. Dad was too old to teach her to ride a bike, etc., so I did that. I was sort of her surrogate father. And, through those years, I butted heads with my Dad constantly. As a result of those experiences, I figured if I had a boy, we'd be at loggerheads through the teen years, whereas I knew that if I had a girl, I'd always be "Daddy."
(And that I am - just got a text from my daughter to "Daddy," in fact, saying good morning.)
Just before I started grad school, I married. About seven years later, Sydney was born. And from the beginning, she was beyond the daughter that I'd always hoped for.
Our relationship as Daddy and daughter was strengthened when I found myself playing "Mr. Mom" within a year or so of her birth. Her mother began working late, staying out late with friends on weekends, etc. So I'd take Sydney to daycare, pick her up after work, feed her, bathe her, play with her, and put her to bed. Every Thursday, I'd pick up McDonald's for lunch and go to her daycare for a "picnic" with her.
She still remembers that, and I love that she does.
That marriage eventually failed, not long after. It was those late nights, and I'll leave it at that.
But I was blessed that God guided into my life, shortly thereafter, a woman that has been the wife to me and the Mom to Sydney that we always needed. She, more than anyone, is responsible for the remarkable young woman Sydney's become.
The time in between then and now could fill a book. Suffice it to say that Sydney was never a speck of trouble, and grew from a smart, funny, fun-loving, cute little girl, to a smart, confident, funny, talented, beautiful young woman. I miss the little girl, but I so love the young woman.
She plays the viola beautifully - in fact, she's on a music scholarship, minoring in the subject - and this past spring and summer she's played several gigs with our praise band. It's been a blessing and a blast sharing our love of music together, and she's enjoyed playing with a "band."
For about a three-year stretch, starting when she was 13, we rode the MS150 together - a two-day, 150-mile charity bike ride. I had ridden it for a couple years, having gotten back into cycling after a decade's hiatus. Before I began training for the third year, she started asking me about it - how hard it was, etc. I saw an opening, and asked her if she wanted to try it. She said she did, but didn't think she could keep up. So I asked her if she'd try it on a tandem, and she said yes.
I bought a tandem on e-bay, and we started training. How often do you get one-on-one time with your teenager for anywhere from two to seven hours at a stretch? She would talk my ear off on those rides, telling me everything - all about her friends, her thoughts, the line-by-line dialog of that last movie she'd seen. Then we'd hit a hill, and I'd gasp, "Okay, pedal!" And she'd kick in the afterburners, usually forcing me to shift UP as we climbed. I was "captaindad," she was "superstoker" (the rider on front on a tandem is the captain, the rider on back is the stoker).
Eventually, a bulging disc in my upper back and her busy high school schedule forced us off the tandem. But that's about when we began playing music together - just as a duo at first, me on acoustic guitar and her on viola. So we continued to share a common love, and spend time together. She even began singing in our church's contemporary choir with me last summer, and will play her viola for the entire congregation - all 3,000 or so of them - in October.
We've experienced so much together, the three of us. Six trips to Hawaii. About ten cruises or so. Helicopter rides. Disney World. London. Paris. New York. Chicago. The Canadian Rockies. If I had to describe our life in two words, it would be "richly blessed." And she soaks life in like a sponge absorbs water. It's been incredible.
************
As Jude Law says in "The Holiday," I'm a major weeper. Remember my baby sis? I was an usher at her wedding, and I was a total blubbering wreck. As for Sydney, from the day she started kindergarten, when I'd think ahead to her starting college, I'd cry. Sometimes uncontrollably, in a panic, at the very thought.
Still, I've enjoyed every phase of her life, from the Gerber baby look-alike with the big blue eyes, to the deep-voiced toddler with the long curly locks and the most infectious belly laugh ever, to the bob-haired little girl who loved the camera, to the adventurous pre-teen, to the smart, funny teenager ... to the young woman she is today. I wish I could clone them all, and keep them all with me forever, at the same time. My own priceless collection of Sydneys.
Except I've got that. In my heart.
The trouble is, right now I've got something else in my heart: a Sydney-shaped hole.
Oh, she'll always be my little girl, and I'll always be her Daddy. I know this, because she tells me, every time she's seen a tear in my eye since her high school graduation, just a few short months (that feel like hours) ago.
And I'll love every new phase: the confident college student, perhaps studying abroad as a junior or senior; the successful young artist; the blushing bride; the loving young mother; the grown daughter who's helping care for her aging and ailing father, with the love and tenderness that has been in her heart since birth.
But right now, this is a bit hard. Her bedroom, just down the hall, stands empty - temporarily, for now, until the first weekend home. But a harbinger of the void to come.
Tomorrow, I promise to write about the political or economic spectrum, for those readers that follow this blog for that purpose. For now, please excuse me, but my monitor is suddenly blurry.
************
When I was growing up, and even when I was in college myself, I didn't know what I wanted to do with my life; not until graduate school would I decide. But I always knew that I wanted to be a father. And from the time I was 13, I knew I wanted a daughter.
That's when my sister was born. My older brother was aghast that Mom was expecting at the age of 39, with Dad being 50. I was ecstatic: I would finally get a younger sibling.
My baby sis and I were inseparable. Dad was too old to teach her to ride a bike, etc., so I did that. I was sort of her surrogate father. And, through those years, I butted heads with my Dad constantly. As a result of those experiences, I figured if I had a boy, we'd be at loggerheads through the teen years, whereas I knew that if I had a girl, I'd always be "Daddy."
(And that I am - just got a text from my daughter to "Daddy," in fact, saying good morning.)
Just before I started grad school, I married. About seven years later, Sydney was born. And from the beginning, she was beyond the daughter that I'd always hoped for.
Our relationship as Daddy and daughter was strengthened when I found myself playing "Mr. Mom" within a year or so of her birth. Her mother began working late, staying out late with friends on weekends, etc. So I'd take Sydney to daycare, pick her up after work, feed her, bathe her, play with her, and put her to bed. Every Thursday, I'd pick up McDonald's for lunch and go to her daycare for a "picnic" with her.
She still remembers that, and I love that she does.
That marriage eventually failed, not long after. It was those late nights, and I'll leave it at that.
But I was blessed that God guided into my life, shortly thereafter, a woman that has been the wife to me and the Mom to Sydney that we always needed. She, more than anyone, is responsible for the remarkable young woman Sydney's become.
The time in between then and now could fill a book. Suffice it to say that Sydney was never a speck of trouble, and grew from a smart, funny, fun-loving, cute little girl, to a smart, confident, funny, talented, beautiful young woman. I miss the little girl, but I so love the young woman.
She plays the viola beautifully - in fact, she's on a music scholarship, minoring in the subject - and this past spring and summer she's played several gigs with our praise band. It's been a blessing and a blast sharing our love of music together, and she's enjoyed playing with a "band."
For about a three-year stretch, starting when she was 13, we rode the MS150 together - a two-day, 150-mile charity bike ride. I had ridden it for a couple years, having gotten back into cycling after a decade's hiatus. Before I began training for the third year, she started asking me about it - how hard it was, etc. I saw an opening, and asked her if she wanted to try it. She said she did, but didn't think she could keep up. So I asked her if she'd try it on a tandem, and she said yes.
I bought a tandem on e-bay, and we started training. How often do you get one-on-one time with your teenager for anywhere from two to seven hours at a stretch? She would talk my ear off on those rides, telling me everything - all about her friends, her thoughts, the line-by-line dialog of that last movie she'd seen. Then we'd hit a hill, and I'd gasp, "Okay, pedal!" And she'd kick in the afterburners, usually forcing me to shift UP as we climbed. I was "captaindad," she was "superstoker" (the rider on front on a tandem is the captain, the rider on back is the stoker).
Eventually, a bulging disc in my upper back and her busy high school schedule forced us off the tandem. But that's about when we began playing music together - just as a duo at first, me on acoustic guitar and her on viola. So we continued to share a common love, and spend time together. She even began singing in our church's contemporary choir with me last summer, and will play her viola for the entire congregation - all 3,000 or so of them - in October.
We've experienced so much together, the three of us. Six trips to Hawaii. About ten cruises or so. Helicopter rides. Disney World. London. Paris. New York. Chicago. The Canadian Rockies. If I had to describe our life in two words, it would be "richly blessed." And she soaks life in like a sponge absorbs water. It's been incredible.
************
As Jude Law says in "The Holiday," I'm a major weeper. Remember my baby sis? I was an usher at her wedding, and I was a total blubbering wreck. As for Sydney, from the day she started kindergarten, when I'd think ahead to her starting college, I'd cry. Sometimes uncontrollably, in a panic, at the very thought.
Still, I've enjoyed every phase of her life, from the Gerber baby look-alike with the big blue eyes, to the deep-voiced toddler with the long curly locks and the most infectious belly laugh ever, to the bob-haired little girl who loved the camera, to the adventurous pre-teen, to the smart, funny teenager ... to the young woman she is today. I wish I could clone them all, and keep them all with me forever, at the same time. My own priceless collection of Sydneys.
Except I've got that. In my heart.
The trouble is, right now I've got something else in my heart: a Sydney-shaped hole.
Oh, she'll always be my little girl, and I'll always be her Daddy. I know this, because she tells me, every time she's seen a tear in my eye since her high school graduation, just a few short months (that feel like hours) ago.
And I'll love every new phase: the confident college student, perhaps studying abroad as a junior or senior; the successful young artist; the blushing bride; the loving young mother; the grown daughter who's helping care for her aging and ailing father, with the love and tenderness that has been in her heart since birth.
But right now, this is a bit hard. Her bedroom, just down the hall, stands empty - temporarily, for now, until the first weekend home. But a harbinger of the void to come.
Tomorrow, I promise to write about the political or economic spectrum, for those readers that follow this blog for that purpose. For now, please excuse me, but my monitor is suddenly blurry.
Tuesday, August 18, 2009
"Read My Lips ..."
Well, poo. Today's topic was going to be the Fed, but I'll have to skewer them later. (May not happen until next week, as the rest of this one will be my last chance to spend time with my daughter before she goes off to college.)
But then I got this little gem of an e-mail from our HR person at work:
"EBC [our flexible spending account provider] has sent me notification about possible changes to flexible spending accounts. Congress is considering eliminating flexible spending accounts, capping flexible spending account contributions, or prohibiting flexible spending accounts from reimbursing over-the-counter medical items as ways to help finance its developing health care reform legislation. These changes would allow the government to collect more taxes and offset some of the costs associated with health care reform. It would also take away money-saving benefits that we have access to currently. EBC is understandably opposed to these proposals. If you are also opposed to these changes EBC has set up a website with information on these proposals and ways to express concerns about these changes. The 'Action Center' at the website enables you to email a prewritten or personalized message to your state representatives and senators. The website is www.SaveMyFlexPlan.org."
Now, how is this not a tax on the lower and middle classes? After all, highly-compensated employees are required to opt out of FSA plans. So this will hurt the people who need it most. So much for soaking the rich.
And it'll also hurt the economy, by reducing discretionary spending. Many employees use medical FSAs to spread out payments for elective procedures from lasik to orthodontia. That way, they can have the procedure done, then pay for it over the course of the year by having it deducted from their pay. If they can't spread the costs - effectively writing themselves an interest-free loan - they might not buy the procedure. And elective medical procedures are part of discretionary spending.
Also, some employees use the accounts to supplement vision care insurance, which typically provides free glasses each year, but just the basics. Many people use the FSA to spread out the cost of upgrades, like nicer frames, polished lens edges, photochromatic treatment, etc. Again, spending will be reduced.
The good news in all this is that even though fewer people will be getting junior's teeth straightened, since they won't be doing lasik, they won't notice the crooked choppers.
Granted, the spending piece of this isn't the biggest problem with it. The biggest problem is the regressive tax aspect. Coming from a Democratic Congress, you'd think they'd take a different approach.
As for President Obama, he's looking more like a weather vane in a tornado every day. First it's "health care reform," then when the backlash from the right hits, it's "health insurance reform." Then, when the Blue Dogs howled, he dropped the government option. Then, when the far left cried, Gibbs said no, it's still on the table.
I increasingly get the impression that the President doesn't know what the plan should look like, or will cost, nor does he care. He just wants to pass health care reform - and I'm not sure he can even articulate why, the way he's been stammering through the town hall meetings.
Of course, I can. And so can Bill Clinton. It's that political imperative thing.
But I'd have more respect for this president if he'd put forth the plan he wants, sell it, and when the heat comes, from whatever direction, be a leader and stick to his guns, on principle.
Not only would I respect him more - even if I didn't agree with the plan - but I'd trust him. As it is, I can't trust a president or a Congress who say they're going to cut taxes for 95% of Americans, then seek to tax a benefit that the lowest earners on the wage scale use.
************
Want to know my tax idea?
With all these freaking bailouts, and mortgage modification programs, etc. -
I believe the rest of us should be able to claim all of the people who've been foreclosed on as our dependents. After I'll, if I'm making your mortgage payment, you're financially dependent on me. At last estimate, there will be 1.5 million foreclosures when all is said and done.
And, this plan would be good for the economy, as most people tend to spend their tax refunds. And with 1.5 million dependents, that's a heck of a refund.
What's not to like?
But then I got this little gem of an e-mail from our HR person at work:
"EBC [our flexible spending account provider] has sent me notification about possible changes to flexible spending accounts. Congress is considering eliminating flexible spending accounts, capping flexible spending account contributions, or prohibiting flexible spending accounts from reimbursing over-the-counter medical items as ways to help finance its developing health care reform legislation. These changes would allow the government to collect more taxes and offset some of the costs associated with health care reform. It would also take away money-saving benefits that we have access to currently. EBC is understandably opposed to these proposals. If you are also opposed to these changes EBC has set up a website with information on these proposals and ways to express concerns about these changes. The 'Action Center' at the website enables you to email a prewritten or personalized message to your state representatives and senators. The website is www.SaveMyFlexPlan.org."
Now, how is this not a tax on the lower and middle classes? After all, highly-compensated employees are required to opt out of FSA plans. So this will hurt the people who need it most. So much for soaking the rich.
And it'll also hurt the economy, by reducing discretionary spending. Many employees use medical FSAs to spread out payments for elective procedures from lasik to orthodontia. That way, they can have the procedure done, then pay for it over the course of the year by having it deducted from their pay. If they can't spread the costs - effectively writing themselves an interest-free loan - they might not buy the procedure. And elective medical procedures are part of discretionary spending.
Also, some employees use the accounts to supplement vision care insurance, which typically provides free glasses each year, but just the basics. Many people use the FSA to spread out the cost of upgrades, like nicer frames, polished lens edges, photochromatic treatment, etc. Again, spending will be reduced.
The good news in all this is that even though fewer people will be getting junior's teeth straightened, since they won't be doing lasik, they won't notice the crooked choppers.
Granted, the spending piece of this isn't the biggest problem with it. The biggest problem is the regressive tax aspect. Coming from a Democratic Congress, you'd think they'd take a different approach.
As for President Obama, he's looking more like a weather vane in a tornado every day. First it's "health care reform," then when the backlash from the right hits, it's "health insurance reform." Then, when the Blue Dogs howled, he dropped the government option. Then, when the far left cried, Gibbs said no, it's still on the table.
I increasingly get the impression that the President doesn't know what the plan should look like, or will cost, nor does he care. He just wants to pass health care reform - and I'm not sure he can even articulate why, the way he's been stammering through the town hall meetings.
Of course, I can. And so can Bill Clinton. It's that political imperative thing.
But I'd have more respect for this president if he'd put forth the plan he wants, sell it, and when the heat comes, from whatever direction, be a leader and stick to his guns, on principle.
Not only would I respect him more - even if I didn't agree with the plan - but I'd trust him. As it is, I can't trust a president or a Congress who say they're going to cut taxes for 95% of Americans, then seek to tax a benefit that the lowest earners on the wage scale use.
************
Want to know my tax idea?
With all these freaking bailouts, and mortgage modification programs, etc. -
I believe the rest of us should be able to claim all of the people who've been foreclosed on as our dependents. After I'll, if I'm making your mortgage payment, you're financially dependent on me. At last estimate, there will be 1.5 million foreclosures when all is said and done.
And, this plan would be good for the economy, as most people tend to spend their tax refunds. And with 1.5 million dependents, that's a heck of a refund.
What's not to like?
Monday, August 17, 2009
Assets & Liabilities
No, I’m not going to talk about accounting. I’m going to talk politics, and then a little of corporate America.
On the topic of Bill Clinton, about whom I ranted yesterday, it occurs to me that in his wife’s political career, he has been both her greatest asset, and her greatest liability. It is a most curious conundrum to me.
(The latest Bill-Hill flap, in case you haven’t heard, was an interview with the Secretary of State during her marathon tour of Africa, in which someone made the error of asking her what her husband thought about some issue in the particular country she happened to be in at the time. Of course, Bill upstaged her when he brought the two American journalists home from Korea – something that realistically any prominent American political figure could have pulled off, save perhaps George Bush, for whom foreign policy was his Achilles’ heel. But Kim Jong-Il just wanted to posture the importance of his little country, and have someone high on the global radar come get the ladies back. John McCain could have pulled it off as easily as Bill. Anyway, when she was asked the question, she snapped, “My husband is not the Secretary of State!” setting off a media frenzy that focused on the retort, not all the goodwill generated during the entire trip.)
So anyway, as I was thinking about the incident, I was reminded of the numerous gaffes he made during her campaign, and how he frequently upstaged her. We all knew he’d be a disaster as a “First Dude,” for that very reason. And his mess-ups on the campaign trail – plus concerns over whether he’d try to run the show if she were President – may well have cost her the election, along with bad campaign strategy and raising less money than her rival.
Yet, at the same time, who would Hillary Clinton be without Bill? On her own, she is smart and conniving, two things any successful politician must be. Yet, would she have attained the same status on the national stage had she not been the former First Lady? Would this Illinois native have been elected to a Senate seat from New York? I think not.
Heck, her stoic, Tammy Wynette-esque response to his affair with Monica Lewinsky may have made the tryst the best thing that ever happened to her, politically; after all, she’d been handed the all-important task of architecting a health care plan, and she bombed.
Again, I do think she’s very intelligent, and shrewd, and capable of hard work and good decisions, even if I disagree with her politics. But the presidency is a popularity contest, and I just don’t think she’d have attained the national stage without Bill’s popularity. Yet at the same time, she couldn’t take the final step on the stage’s podium, perhaps because of him. Interesting.
************
On to the current President. In a speech defending his health care agenda, two things bothered me. The first? He stammered an awful lot. You know, like people tend to do when they’re trying to make something up, or defend something that’s indefensible. And either of those possibilities gives me about a trillion reasons to be concerned about this bill.
The second is that he invoked his Grandmother, who died the day before he was elected to the highest office in the land. Addressing concerns voiced by some opponents that end-of-life counseling would mean taking health care away from the elderly and “killing Grandma” – a notion, by the way, upon which placing the focus does little good for the opposition in my opinion – the President dismissed those concerns as ridiculous, citing his love for his own Grandmother, who raised him, as evidence that he’d never adopt a plan that would harm someone’s dear granny.
Yeah, we’re talking about the same Grandmother to whom he referred as a “typical white woman” in discussing her racial stereotyping, which was probably the most ironic statement ever uttered. The same Grandmother he threw under the bus during the campaign by saying he could no more disown the radical, America-damning (by God, no less) Rev. Jeremiah Wright than he could his own Grandmother.
The same Grandmother whom he visited late in the campaign – and late in her life – when her health was failing. But that wasn’t important enough to bring the entire family, to let his daughters say their good-byes to great-Grandma.
Now, taking them to Ghana to learn about their African heritage, that was important (though they didn’t visit their other Grandma in Africa while they were there, either – and see my July 11 entry for more on that trip). And taking them to Hawaii after the election for an extended stay and some critical beach time – yeah, that was vital. And taking them to Montana the other day while he hawked health care reform – well, I’ll bet the girls had never been to Montana, and it is an awfully pretty state.
I just have a real problem with the way this guy uses family members to further a political point, but doesn’t match the rhetoric with action in the way he treats them. Like the way he invoked his African Grandmother frequently during the campaign, and in his book, but only stopped to visit her briefly on a trip to Africa during the campaign – just long enough for a photo op – then told her he had to scoot on to the next stop. Yet he had plenty of time for crowds in Germany and other countries as he courted the world.
It’s reminiscent of Greg Stillson, the presidential candidate in Stephen King’s novel, “The Dead Zone,” when he grabbed a young child and held him in front of him to shield his own body when the book’s protagonist opens fire on him in an assassination attempt – except in this case, Obama’s grabbing his own family members.
To me, it says that the most important thing to him is his political career. And I’d prefer my President believe that the most important thing is America, and its people.
************
Finally, as I was thinking about yesterday’s post, on the topic of Bill Clinton’s “political imperative” quote, it occurred to me that that’s what politicians are primarily concerned about: not the long-term health of America (and I mean health in the broad sense), but in the next election cycle.
And that made me think about what’s wrong with the stock market these days. The focus is no longer on the long-term success of a company, but on next quarter’s earnings. Do you understand why?
The textbook, B-school answer to “What is the responsibility of management?” is, “To maximize shareholder wealth.” But the nature of shareholders has changed.
We no longer view stocks as a long-term investment. We day-trade. We change our 401k allocations frequently. We look at our statement every month, and panic if the balance goes down. Why? Because we’ve been encouraged by Wall Street to do so, through its instrument of market destruction, Bubblevision (aka CNBC, if you haven’t been reading this blog for a while). Brokers profit on every trade, so if they can get you to trade more, they make more money.
So, back to politicians’ focus on the near-term – namely, the next election cycle. Have we, the people, been somehow duped into changing the nature of our constituentship, such that we expect, and even encourage, the short-term focus? Or is Washington just that corrupt and self-serving on its own, that the power-mad in Congress are singularly committed to keeping themselves ensconced in the seat of power? I wonder.
Is it them, or is it us? Either way, it has to change, it must change, or we as a nation are headed down the same perilous path of volatility and corruption as corporate America has traveled over the last decade or so.
And unlike the corporate America example, every one of us is paying for it.
On the topic of Bill Clinton, about whom I ranted yesterday, it occurs to me that in his wife’s political career, he has been both her greatest asset, and her greatest liability. It is a most curious conundrum to me.
(The latest Bill-Hill flap, in case you haven’t heard, was an interview with the Secretary of State during her marathon tour of Africa, in which someone made the error of asking her what her husband thought about some issue in the particular country she happened to be in at the time. Of course, Bill upstaged her when he brought the two American journalists home from Korea – something that realistically any prominent American political figure could have pulled off, save perhaps George Bush, for whom foreign policy was his Achilles’ heel. But Kim Jong-Il just wanted to posture the importance of his little country, and have someone high on the global radar come get the ladies back. John McCain could have pulled it off as easily as Bill. Anyway, when she was asked the question, she snapped, “My husband is not the Secretary of State!” setting off a media frenzy that focused on the retort, not all the goodwill generated during the entire trip.)
So anyway, as I was thinking about the incident, I was reminded of the numerous gaffes he made during her campaign, and how he frequently upstaged her. We all knew he’d be a disaster as a “First Dude,” for that very reason. And his mess-ups on the campaign trail – plus concerns over whether he’d try to run the show if she were President – may well have cost her the election, along with bad campaign strategy and raising less money than her rival.
Yet, at the same time, who would Hillary Clinton be without Bill? On her own, she is smart and conniving, two things any successful politician must be. Yet, would she have attained the same status on the national stage had she not been the former First Lady? Would this Illinois native have been elected to a Senate seat from New York? I think not.
Heck, her stoic, Tammy Wynette-esque response to his affair with Monica Lewinsky may have made the tryst the best thing that ever happened to her, politically; after all, she’d been handed the all-important task of architecting a health care plan, and she bombed.
Again, I do think she’s very intelligent, and shrewd, and capable of hard work and good decisions, even if I disagree with her politics. But the presidency is a popularity contest, and I just don’t think she’d have attained the national stage without Bill’s popularity. Yet at the same time, she couldn’t take the final step on the stage’s podium, perhaps because of him. Interesting.
************
On to the current President. In a speech defending his health care agenda, two things bothered me. The first? He stammered an awful lot. You know, like people tend to do when they’re trying to make something up, or defend something that’s indefensible. And either of those possibilities gives me about a trillion reasons to be concerned about this bill.
The second is that he invoked his Grandmother, who died the day before he was elected to the highest office in the land. Addressing concerns voiced by some opponents that end-of-life counseling would mean taking health care away from the elderly and “killing Grandma” – a notion, by the way, upon which placing the focus does little good for the opposition in my opinion – the President dismissed those concerns as ridiculous, citing his love for his own Grandmother, who raised him, as evidence that he’d never adopt a plan that would harm someone’s dear granny.
Yeah, we’re talking about the same Grandmother to whom he referred as a “typical white woman” in discussing her racial stereotyping, which was probably the most ironic statement ever uttered. The same Grandmother he threw under the bus during the campaign by saying he could no more disown the radical, America-damning (by God, no less) Rev. Jeremiah Wright than he could his own Grandmother.
The same Grandmother whom he visited late in the campaign – and late in her life – when her health was failing. But that wasn’t important enough to bring the entire family, to let his daughters say their good-byes to great-Grandma.
Now, taking them to Ghana to learn about their African heritage, that was important (though they didn’t visit their other Grandma in Africa while they were there, either – and see my July 11 entry for more on that trip). And taking them to Hawaii after the election for an extended stay and some critical beach time – yeah, that was vital. And taking them to Montana the other day while he hawked health care reform – well, I’ll bet the girls had never been to Montana, and it is an awfully pretty state.
I just have a real problem with the way this guy uses family members to further a political point, but doesn’t match the rhetoric with action in the way he treats them. Like the way he invoked his African Grandmother frequently during the campaign, and in his book, but only stopped to visit her briefly on a trip to Africa during the campaign – just long enough for a photo op – then told her he had to scoot on to the next stop. Yet he had plenty of time for crowds in Germany and other countries as he courted the world.
It’s reminiscent of Greg Stillson, the presidential candidate in Stephen King’s novel, “The Dead Zone,” when he grabbed a young child and held him in front of him to shield his own body when the book’s protagonist opens fire on him in an assassination attempt – except in this case, Obama’s grabbing his own family members.
To me, it says that the most important thing to him is his political career. And I’d prefer my President believe that the most important thing is America, and its people.
************
Finally, as I was thinking about yesterday’s post, on the topic of Bill Clinton’s “political imperative” quote, it occurred to me that that’s what politicians are primarily concerned about: not the long-term health of America (and I mean health in the broad sense), but in the next election cycle.
And that made me think about what’s wrong with the stock market these days. The focus is no longer on the long-term success of a company, but on next quarter’s earnings. Do you understand why?
The textbook, B-school answer to “What is the responsibility of management?” is, “To maximize shareholder wealth.” But the nature of shareholders has changed.
We no longer view stocks as a long-term investment. We day-trade. We change our 401k allocations frequently. We look at our statement every month, and panic if the balance goes down. Why? Because we’ve been encouraged by Wall Street to do so, through its instrument of market destruction, Bubblevision (aka CNBC, if you haven’t been reading this blog for a while). Brokers profit on every trade, so if they can get you to trade more, they make more money.
So, back to politicians’ focus on the near-term – namely, the next election cycle. Have we, the people, been somehow duped into changing the nature of our constituentship, such that we expect, and even encourage, the short-term focus? Or is Washington just that corrupt and self-serving on its own, that the power-mad in Congress are singularly committed to keeping themselves ensconced in the seat of power? I wonder.
Is it them, or is it us? Either way, it has to change, it must change, or we as a nation are headed down the same perilous path of volatility and corruption as corporate America has traveled over the last decade or so.
And unlike the corporate America example, every one of us is paying for it.
Sunday, August 16, 2009
More on Health Care Reform
I heard this quote this morning from a speech that former President Bill Clinton made, and it frightened the heck out of me:
"It is politically imperative for the Democrats to pass a health care bill this year."
If you don't find that chilling, the spin doctors in DC have succeeded in turning you into a zombie.
Let's "unpack" the quote, as my pastor would say. The word "political" should be to most thinking Americans as the word "religious" is to most Christians. I'm not "religious;" I have faith. And I'm not political, nor do I ever want to be.
To be political is to do things for the sake of furthering one's agenda, whether they're the right thing to do or not. I once had several board members who were political, and they wanted me to do something that was good for them personally, but bad for the company. They had phone conversations between board meetings to coordinate their strategy and votes, and then working in concert, they'd hijack board meeting agendas to put forth their own. That is being political.
Of course, an imperative is something that one must do. So something that's politically imperative is something that must be done for political gain, to further one's agenda.
Or in this case, one party's agenda.
Why did Mr. Clinton say "this year?" Simple: mid-terms elections are next year. From that fact, we can divine the political agenda that he believes must be furthered: keep the party's majority in Congress, along with the White House. In other words, maintain one-party control over the United States of America.
Now, to some, that's not a problem at all. They hate Republicans, and would love to have a Karl Rove-ian permanent majority in Washington. But single-party control, no matter the party, has seldom been good for America.
However, regardless the side you're on, the spooky part of Mr. Clinton's quote is the notion that he considers the best path to maintaining single-party control of America the expenditure of trillions of taxpayer dollars - on top of an already record deficit that threatens to kill this country, forget about the health of its citizens - on a bill nobody's read, and that the CBO has announced will increase, not reduce, health care costs.
In other words, the former President believes that Congress should use taxpayer money to further the Democrats' control in Washington. He might as well advocate directly raiding the federal budget and dumping the money into Dems' campaign coffers. I'm just bloody glad he hasn't thought of it. Yet.
That is the mindset we must replace in Washington.
Am I against health care reform? No. The current system is far from perfect. Too many people don't have access. Costs are out of control. Health care costs are the single fastest-rising component of discretionary spending costs, and that hurts us economically. I'm sick of having to shop my company's health care plan out every other year because our new provider, who low-balled us to get our business, raised premiums by double-digit percentages for years two and three.
So start with tort reform. Stop the insane lawsuits that force docs to practice defensive medicine. But the lawyers' lobby owns Washington - heck, our President is himself a lawyer - so tort reform will never happen.
Totally revamp and streamline the process for approving new meds, and allow more competition among big pharma, so my Mom doesn't have to buy her inhaler from Chile.
Regulate the insurance biz at the national level, instead of the states, and even though I'm a free-market guy, bust their control over hospitals and doctors.
And take Medicare and Medicaid away from Congress so they can no longer dip their fingers in the cookie jar.
What don't I like about the proposed plan? Admittedly, I haven't read it. But a friend read the first 500 pages (putting him about 499 pages ahead of Arlen Specter), and listed some highlights. And I was not enamored.
But my biggest problem is that I don't trust Washington to run anything. Let me give you a little example of why.
I'm on a monthly billing plan with the dry cleaner I patronize. It's very convenient: I drop off, I pick up, I'm in and out, and I get a monthly bill which I pay electronically. No pausing to swipe my debit card when I pick up my duds.
Last week, I got a letter telling me that due to some new corporate privacy regulations intended to prevent identity theft (they're affiliated with Procter & Gamble, a big corporation), they're going to have to temporarily suspend monthly billing while they spend a bunch of money to revamp their record-keeping and billing software.
In the interim, I can pay when I pick up - or, I can fill out this handy form, including my credit card number, and they'll automatically charge me when I pick up my cleaning.
Now, they've never had my card number before. Just my name and address, so they could send me the bill. Since I paid using Quicken's billpay service, they would have had my bank account number, but nothing else.
If I fill out this form, they'll have my name, my address, my credit card number, the security code and the expiration date. Everything they need to steal my identity as that cardholder.
And this safeguards my privacy how, exactly?
The next morning, when I dropped off my clothes, I talked to the proprietor about it. She wasn't happy. And when I asked, "This is due to a new government regulation, right?" she responded in the affirmative.
And that, dear friends, is why I don't want to entrust government with my health care. If they cannot efficiently handle my dirty clothes, I'm not letting them anywhere near my spleen.
One final thought: I am sick and tired of hearing how "God wants health care reform." That's no different than Fred Phelps invoking His name to spew forth his bile. Health care is not a God-given human right, or people in the Old Testament would not have gotten sick. There've always been, sad to say, poor people who couldn't afford health care. Seeking access for them is a noble cause, as is seeking access to food for all, and we humans should put our time and money into helping provide for both, through good charitable works.
But neither is a God-given right, like the right to life or liberty (we were created alive and free; we were also created hungry). So let's leave God out of this until He tells us otherwise.
"It is politically imperative for the Democrats to pass a health care bill this year."
If you don't find that chilling, the spin doctors in DC have succeeded in turning you into a zombie.
Let's "unpack" the quote, as my pastor would say. The word "political" should be to most thinking Americans as the word "religious" is to most Christians. I'm not "religious;" I have faith. And I'm not political, nor do I ever want to be.
To be political is to do things for the sake of furthering one's agenda, whether they're the right thing to do or not. I once had several board members who were political, and they wanted me to do something that was good for them personally, but bad for the company. They had phone conversations between board meetings to coordinate their strategy and votes, and then working in concert, they'd hijack board meeting agendas to put forth their own. That is being political.
Of course, an imperative is something that one must do. So something that's politically imperative is something that must be done for political gain, to further one's agenda.
Or in this case, one party's agenda.
Why did Mr. Clinton say "this year?" Simple: mid-terms elections are next year. From that fact, we can divine the political agenda that he believes must be furthered: keep the party's majority in Congress, along with the White House. In other words, maintain one-party control over the United States of America.
Now, to some, that's not a problem at all. They hate Republicans, and would love to have a Karl Rove-ian permanent majority in Washington. But single-party control, no matter the party, has seldom been good for America.
However, regardless the side you're on, the spooky part of Mr. Clinton's quote is the notion that he considers the best path to maintaining single-party control of America the expenditure of trillions of taxpayer dollars - on top of an already record deficit that threatens to kill this country, forget about the health of its citizens - on a bill nobody's read, and that the CBO has announced will increase, not reduce, health care costs.
In other words, the former President believes that Congress should use taxpayer money to further the Democrats' control in Washington. He might as well advocate directly raiding the federal budget and dumping the money into Dems' campaign coffers. I'm just bloody glad he hasn't thought of it. Yet.
That is the mindset we must replace in Washington.
Am I against health care reform? No. The current system is far from perfect. Too many people don't have access. Costs are out of control. Health care costs are the single fastest-rising component of discretionary spending costs, and that hurts us economically. I'm sick of having to shop my company's health care plan out every other year because our new provider, who low-balled us to get our business, raised premiums by double-digit percentages for years two and three.
So start with tort reform. Stop the insane lawsuits that force docs to practice defensive medicine. But the lawyers' lobby owns Washington - heck, our President is himself a lawyer - so tort reform will never happen.
Totally revamp and streamline the process for approving new meds, and allow more competition among big pharma, so my Mom doesn't have to buy her inhaler from Chile.
Regulate the insurance biz at the national level, instead of the states, and even though I'm a free-market guy, bust their control over hospitals and doctors.
And take Medicare and Medicaid away from Congress so they can no longer dip their fingers in the cookie jar.
What don't I like about the proposed plan? Admittedly, I haven't read it. But a friend read the first 500 pages (putting him about 499 pages ahead of Arlen Specter), and listed some highlights. And I was not enamored.
But my biggest problem is that I don't trust Washington to run anything. Let me give you a little example of why.
I'm on a monthly billing plan with the dry cleaner I patronize. It's very convenient: I drop off, I pick up, I'm in and out, and I get a monthly bill which I pay electronically. No pausing to swipe my debit card when I pick up my duds.
Last week, I got a letter telling me that due to some new corporate privacy regulations intended to prevent identity theft (they're affiliated with Procter & Gamble, a big corporation), they're going to have to temporarily suspend monthly billing while they spend a bunch of money to revamp their record-keeping and billing software.
In the interim, I can pay when I pick up - or, I can fill out this handy form, including my credit card number, and they'll automatically charge me when I pick up my cleaning.
Now, they've never had my card number before. Just my name and address, so they could send me the bill. Since I paid using Quicken's billpay service, they would have had my bank account number, but nothing else.
If I fill out this form, they'll have my name, my address, my credit card number, the security code and the expiration date. Everything they need to steal my identity as that cardholder.
And this safeguards my privacy how, exactly?
The next morning, when I dropped off my clothes, I talked to the proprietor about it. She wasn't happy. And when I asked, "This is due to a new government regulation, right?" she responded in the affirmative.
And that, dear friends, is why I don't want to entrust government with my health care. If they cannot efficiently handle my dirty clothes, I'm not letting them anywhere near my spleen.
One final thought: I am sick and tired of hearing how "God wants health care reform." That's no different than Fred Phelps invoking His name to spew forth his bile. Health care is not a God-given human right, or people in the Old Testament would not have gotten sick. There've always been, sad to say, poor people who couldn't afford health care. Seeking access for them is a noble cause, as is seeking access to food for all, and we humans should put our time and money into helping provide for both, through good charitable works.
But neither is a God-given right, like the right to life or liberty (we were created alive and free; we were also created hungry). So let's leave God out of this until He tells us otherwise.
Saturday, August 15, 2009
It's An Outrage!
A manufactured one, at least.
This post is a response to the fussing and fighting that's going on at all these town hall meetings regarding the Obama health care plan.
And I don't mean to pick on Obama, but he is the President, and this is his plan.
The first meeting I recall seeing footage of was the one in Pennsylvania, featuring former Kansas Governor (thank God!) and now HHS Secretary Kathleen Sebelius and Pennsylvania Senator Arlen Specter, the former Democrat turned RINO turned Democrat. One woman in the audience dressed the Beltway pair down - very eloquently, I thought, and while firmly, respectfully. Her ire seemed to be over the fact that Senator Specter and his ilk appear to be all too happy to spend their taxpayer-funded salaries voting on bills they haven't read, bills that will appropriate billions upon trillions of taxpayer dollars.
Seems like a fair gripe to me. Maybe because it's one I make every day.
After that, though, things turned ugly.
People started shouting. Shouting down the Washingtonians, who, despite their continued lying, cheating, stealing, voting-on-bills-without-reading-them, and general thieving from the tax kitty, still have a right to be heard. Up to a point.
Then, the accusations began. The Dick Armey Brigade is feeding the protests against health care reform. The Obama Administration is feeding the backlash against them.
Know what I think? I think they're both right.
I don't want to start sounding conspiracy theorist, but I think both sides are sending their henchmen to these staged town hall meetings in an effort to portray, in all its ugliness, the great partisan divide that consumes this nation. In so doing, they proliferate it, which serves the two-party agenda that keeps this country divided, and keeps them in power, since no viable third-party alternative can emerge. That keeps the Ted Kennedy's and the Orrin Hatch's in jobs that are probably the only jobs they could get.
The more divided they depict us as being, the more divisive we become. That further delineates the gulf between left and right, further vilifies each side in the minds of the other, and widens the gulf. And win, lose or draw for one party or the other, in a red-state, blue-state world, it increases the odds of holding one's position, gerrymandering aside.
So what's the solution? Throw the entire lot of bums out, I say. Start afresh. Screw party politics. Vote against all your own guys, just to shake things up, or get behind a viable third party. (By "viable," I do not mean Ralph Nader. More like Ron Paul.)
Vote your current bum out. If you think he or she has your best interest at heart, you probably also think that I'm from the government, and I'm here to help you.
And protest to your heart's content. Screw the media lemmings, who repeat what Washington stuffs down their throats. Engage in challenging but respectful discourse, in whatever forum. Exercise your right to be heard; Lord knows Washington isn't interested in what you have to say, but doggonit, say it anyway.
And don't let the suckers sell you down the river. For God's sake, not that. Make them explain why your job has to go away, why you're not getting that scholarship, while your taxes are going up while they get their automatic pay raise.
Then, and only then, can you sleep at night, if you can at all. And if you can, send me your secret. I'd love to know it.
This post is a response to the fussing and fighting that's going on at all these town hall meetings regarding the Obama health care plan.
And I don't mean to pick on Obama, but he is the President, and this is his plan.
The first meeting I recall seeing footage of was the one in Pennsylvania, featuring former Kansas Governor (thank God!) and now HHS Secretary Kathleen Sebelius and Pennsylvania Senator Arlen Specter, the former Democrat turned RINO turned Democrat. One woman in the audience dressed the Beltway pair down - very eloquently, I thought, and while firmly, respectfully. Her ire seemed to be over the fact that Senator Specter and his ilk appear to be all too happy to spend their taxpayer-funded salaries voting on bills they haven't read, bills that will appropriate billions upon trillions of taxpayer dollars.
Seems like a fair gripe to me. Maybe because it's one I make every day.
After that, though, things turned ugly.
People started shouting. Shouting down the Washingtonians, who, despite their continued lying, cheating, stealing, voting-on-bills-without-reading-them, and general thieving from the tax kitty, still have a right to be heard. Up to a point.
Then, the accusations began. The Dick Armey Brigade is feeding the protests against health care reform. The Obama Administration is feeding the backlash against them.
Know what I think? I think they're both right.
I don't want to start sounding conspiracy theorist, but I think both sides are sending their henchmen to these staged town hall meetings in an effort to portray, in all its ugliness, the great partisan divide that consumes this nation. In so doing, they proliferate it, which serves the two-party agenda that keeps this country divided, and keeps them in power, since no viable third-party alternative can emerge. That keeps the Ted Kennedy's and the Orrin Hatch's in jobs that are probably the only jobs they could get.
The more divided they depict us as being, the more divisive we become. That further delineates the gulf between left and right, further vilifies each side in the minds of the other, and widens the gulf. And win, lose or draw for one party or the other, in a red-state, blue-state world, it increases the odds of holding one's position, gerrymandering aside.
So what's the solution? Throw the entire lot of bums out, I say. Start afresh. Screw party politics. Vote against all your own guys, just to shake things up, or get behind a viable third party. (By "viable," I do not mean Ralph Nader. More like Ron Paul.)
Vote your current bum out. If you think he or she has your best interest at heart, you probably also think that I'm from the government, and I'm here to help you.
And protest to your heart's content. Screw the media lemmings, who repeat what Washington stuffs down their throats. Engage in challenging but respectful discourse, in whatever forum. Exercise your right to be heard; Lord knows Washington isn't interested in what you have to say, but doggonit, say it anyway.
And don't let the suckers sell you down the river. For God's sake, not that. Make them explain why your job has to go away, why you're not getting that scholarship, while your taxes are going up while they get their automatic pay raise.
Then, and only then, can you sleep at night, if you can at all. And if you can, send me your secret. I'd love to know it.
Thursday, August 13, 2009
A Clunker of a Plan
Okay, so it's been a darn long time since I've posted. My apologies; I've been busy. I'll get around to posting with what one of these days but suffice it to say it has to do with music, missions, and my daughter heading off to college in about a week.
But I really need to vent about this ill-conceived Cash for Clunkers program. Yeesh - talk about a waste of our hard-earned dollars.
Let's take it one spin-laden talking point at a time, shall we? We'll just debunk them as we go.
"It will stimulate the economy by boosting auto sales."
Poppycock. First, "stimuli" like this only serve to temporarily and artificially boost demand. Anyone that was going to buy a car in the next several months hit the bid on this deal, made out better than they would have otherwise, and are laughing all the way to the bank. (Until they get their tax bill.) What happens is that demand gets front-loaded by such an incentive, and people buy sooner rather than later. Then, the stimulus ends, and demand falls off a cliff - lower than where it was pre-stimulus, because future months' buyers have already jumped into the market, having been "stimulated" to do so, and there's no demand left.
Oh, sure – the incentive undoubtedly brought in a few people who otherwise had no intention of trading in their clunker for a new gas miser. But really, in an economy that’s shedding jobs faster than my head is shedding hair, how many Americans are going to trade in a paid-for car to take on a new car payment? Few. As evidence of this, since the program has been tripled to $3 billion, reports show that showroom traffic is waning, and that there's less demand for new cars.
And furthermore, the program's temporary boost to July's auto sales was insufficient to offset a broad decline in retail sales ex-autos, resulting in a decline in overall retail sales for the month. So much for "stimulus."
Then there's the fact that spending at the pump was down in July, thanks to 250,000 people owning less thirsty cars. But if we're buying less gas, we're also buying fewer Snickers, less Mountain Dew, Skoal, air fresheners and all that other crap people buy when they fill the tank.
“It will ‘green up’ America, reducing our dependence on foreign oil.”
You cannot convince me that this government is seriously concerned about greening up America, other than the extent to which pandering to the “green” lobby will green up their own pockets. "We're concerned about the earth legacy we're leaving our children," they cry, even as they pass trillion-dollar, 1,000-page bills they haven't read that will prove more toxic to our children and grandchildren than chlorofluorocarbons. My kid’s at greater risk of having to learn Mandarin Chinese and get run over by a tank for protesting against Chinese rule than she is dying from exposure to pollution or freezing to death thanks to global warming.
As for reducing our dependence on foreign oil, 250,000 more fuel-efficient cars are not going to do that by any significant extent. When is Caterpillar going to start building battery-powered heavy equipment? When are the airlines going to start flying propeller planes again? The impact of this program on our oil consumption is a drop in the bucket.
The program’s requirements allow the maximum $4,500 credit if you buy a vehicle that gets 10 mpg better than your clunker trade-in, which has to get less than 18 mpg to qualify. You can get a $3,500 credit if the new car gets 4 mpg better than your trade-in.
So let’s say you own a 1999 Jeep Grand Cherokee Limited with the big V-8 engine, like I do. That sucker drinks gas at the rate of 15 mpg. So it qualifies. Now, I can get a $3,500 credit for trading it in, if the new car gets 4 mpg better – 19 mpg, just 1 mpg above the fuel-inefficient “clunker” threshold! That’ll green up America! Let’s see, what vehicle could I buy that gets 19 mpg? How about a Honda Pilot, which is every bit as big as the Cherokee, just a bit less thirsty? Yep, another big ol’ SUV on the road. How green.
Now, let’s see what the program’s total gas savings will be. Let’s assume that all 750,000 cars under the expanded $3 billion program sell. That implies an average $4,000 credit, which means half the people traded for a car that gets 10 mpg better than the clunker, and half for a car that gets between 4 and 10 mpg better. For the sake of argument, let’s split the difference and say the people who got the $3,500 credit get 7 mpg better now – half the difference between 4 and 10. And since ten more than 18 is 28, and there aren’t a whole lot of cars that get better than 28 mpg overall, let’s be generous and say the people who got the $4,500 credit get 13 mpg better now, on average. (Granted, some people could be getting as little as 12 mpg now – but how many Hummer drivers are going to trade for a Smart Car?)
So half our participants are getting 7 mpg better than they were before, and half are getting 13 mpg better, for an average of 10 mpg improvement. Assume the average driver puts 15,000 miles a year on his or her car, which is around the book-value assumption. And 750,000 cars participated in the program.
If the average clunker got 15 mpg, and the average new car purchased under the program gets 25 mpg, and the average driver drives 15,000 miles a year, they’ll save 400 gallons of gas. If 750,000 people do this, the total annual savings will be 300 million gallons of gas – woo hoo!
Except – y’know what? That is less than one day’s total US gasoline consumption – one day! At this rate, the government would have to use more than a half-trillion taxpayer dollars to “stimulate” ourselves toward reducing our dependence on foreign oil by half.
“It will replace clunkers with outdated safety equipment with newer, safer cars, reducing traffic fatalities and serious injuries, and lowering insurance costs.”
Okay, I’ll give you that one – up to a point. I’m still safer in my Jeep than I’d be in a Smart Car or a Prius, or probably even a Corolla. And my insurance premiums on a ’99 are a darn sight lower than they’d be on any of those new models, despite their side-curtain air bags.
“People will be spending less on gas, and that means they’ll have more money in their pockets to spend on discretionary items, which will stimulate the economy and help lead to a consumer-led recovery.”
First, how much will I save in gas? Well, taking our aforementioned example of using 400 fewer gallons of gas, at today’s average pump price where I live of $2.59 for regular, I’ll save $1,036. That’s about $7.5 million saved per year under the entire program. Let’s assume every one of those dollars gets spent on discretionary items (which the July retail sales report proved did not happen, as overall sales fell even with the CFC stimulus).
That’s a boost to the consumer’s component of GDP – historically about two-thirds – of about 0.0001%. Awesome. Add in the stimulus from the cars being bought, and you’re at about a 0.2% boost. Better, but still not much. And let’s not forget that those cars would likely have been bought anyway.
And let’s also not forget that not all of that gas savings is going toward discretionary spending. In fact, not a dime of it is. Here’s why.
Let’s say I found one of those dealers who’ll match the CFC program’s incentive with an equal trade-in allowance. So using our average, I’m getting eight grand knocked off my new car. Let’s say the average new car price for the units purchased is $25,000 (that’s not far off the US average, and from what I know of the American consumer’s psyche, they’ll see the incentive as “found money,” and spend more on the new car than they otherwise would have, so it may be conservative).
So my net amount is $17,000. Add sales tax of 7.50%, and we’re at $18,275 – and I’m going to have to finance that. At the best 5-year new car rate in my neck of the woods of 6.50% (and that assumes an excellent credit score, which not all CFC participants have), and my monthly payment is $358.
So my annual gas savings will cover almost three month’s worth of car payments. Not counting the higher insurance premiums on a new car. Guess what’s going to happen to my discretionary spending, now that I have a net $3,200 a year in car payments that I didn’t have before? Add in a boost to insurance premiums of, say $400 a year, and that’s $3,600 a year, or $300 a month, less money in my pocket. So I’m going to hunker down even further, maybe even until the car’s paid off.
One could stretch, and say that since I’ll be making fewer trips to the gas station I’ll be buying fewer Snickers and less Mountain Dew. Three hundred dollars a month buys one heck of a lot of Snickers and Mountain Dew.
So, discretionary spending is going down as a result of this program. But the bright reader will say, “Aha!” (Bright people are always saying stuff like that.) “If those sales were going to happen anyway, then discretionary spending was going down anyway.”
Right you are. Thus this government program – which cost $3 billion unbudgeted taxpayer dollars and thus gets slapped right on top of the deficit, like all that Snickers and Mountain Dew consumption would get slapped right on top of the average American’s butt – has done zero to stimulate the economy. Zero.
Did it help car manufacturers and dealers? No. The sales were largely going to be made anyway. Did it help the banks? Heck, no – the loan amount they would have otherwise been earning interest on would have been $4,000 more, on average – that’s $4,000 per loan, times 750,000 loans, at an average of probably 7% interest over an average of four years. That’s nearly a half-billion dollars the banks are out.
(In case you haven’t heard, the banks could use all the earnings they can get right now.)
What about local communities and states? Nope, and nope. Less sales tax revenue, as the purchase price was $4,000 lower thanks to the incentive. Times 750,000 cars, the states and municipalities are out a cool $3 billion. And less gas tax revenue also, as people are spending less at the pump. And less sales tax revenue on the Snickers and Mountain Dew.
(They’ve especially been pushing the program hard in California. You know, that big state on the west coast that’s been issuing IOUs instead of tax refund checks because it is flat broke.)
Did it help gas stations? Nope. Will it help that nice young man who sold me a car wash today as I was filling up, and asked for my blog’s URL? I’m afraid not.
And speaking of nice young men, will it help the high school kid who is in the market for a cheap used car to get to and from work? Or the poor immigrant needing the same? No, it won’t – in fact, it will hurt them, and that is one of the unintended consequences of the Clunker program (its most apt name).
Total used car sales in the US last year were 36.5 million units. The average sales price was just under $8,000. We don’t know the standard deviation. But I don’t believe we can assume a bell-shaped curve; there are plenty of used cars for sale priced above $16,000, but none priced below zero. Looking at e-Bay auctions and the like, we don’t see a heck of a lot of cars priced below $3,000. But we do see plenty of used cars priced above $20,000. In other words, our population distribution is likely skewed to the higher side. So let’s just assume that the total number of used cars on the market priced below $3,000 is about 10% of the total – for argument’s sake let’s call it 3.5 million cars.
Why did we pick $3,000 as our threshold? Simple. If my car is worth $3,500, getting that amount for it under the Clunker program isn’t much of an incentive. If it’s worth less, I’m more inclined to hit the bid.
So let’s say 750,000 of those 3.5 million cars in that price bracket are destroyed, as the Clunker program is going to do. That’s a 21% reduction in supply. Guess what happens to the value of cars in that price bracket, now that the supply has dwindled, while the demand hasn’t (if anything it’s gone up, since there are a lot more people unemployed, underemployed, struggling with higher mortgage payments after their ARM reset, etc., in this economy?
That’s right, you remembered that day in Econ 101 – the quantity supplied goes down while the quantity demanded remains the same (or increases), and voila! The price goes up! Now, that $2,500 clunker is worth three grand – and said high school student or struggling immigrant or suddenly-out-of-work-and-fighting-to-survive-as-a-grocery-sacker cannot afford the car.
So, what next? Well, he loses that job, because he can’t get to it. He has less money to spend, and has to go on government assistance – which wasn’t budgeted. Taxes go up, consumption goes down, GDP suffers, joblessness rises.
Did it help the junkyards? You betcha! They’re the ones that will profit mightily from scrapping 750,000 cars that would have remained happily putt-putting down the highways and byways, that still have some good miles left in them, however thirsty those miles might be.
Just one question though: how much energy does it take to destroy 750,000 cars? And are the car-smashing machines powered by gas, electricity, what? Batteries, perhaps? Solar power? Wind? Just the “greenie” in me being curious, is all.
Did it help America? Well, it supposedly will help slow down global warming. So perhaps your great-great-great-great-great-great-great-great-great-grandkids will live one day longer before the next Ice Age freezes ‘em to death. Oh wait – it’s GLOBAL warming, right? And places like China and India are pumping chlorofluorocarbons into the atmosphere at a rate that dwarfs ours, and have neither the incentive nor the conscience to slow it down. So make that an extra half-day your descendants will live before hell freezes over.
But did it help America economically? First, let’s look at the aggregate. The GDP equation includes both personal consumption – what we consumers spend – and government spending, which we fund with our tax dollars. So we didn’t boost GDP – alright, we might have front-loaded some of the fourth quarter’s demand into the third (more on that later), but we didn’t actually boost it. All we did was shift the mix, taking from personal consumption and adding to government spending. It’s a zero-sum game.
And what of future quarters? And next year? That’s when the program begins to detract from GDP, as the government spending won’t be repeated, but it’ll be many months before auto demand returns to normal, with some 750,000 new units on the road. (Even for those who believe that ALL of these sales are purely incentive-driven, and would not have occurred otherwise, and therefore auto demand will return to normal after the program sunsets – 750,000 cars is less than 10% of annual US vehicle sales, and the very limited impact on GDP is as noted above.)
Okay, remember my cryptic “more on that later” when I talked about shifting demand into the third quarter? Here’s what I think one of the dirty little secrets is about this plan. Sorry for sounding conspiracy-theorist, but I tend to imagine some of the discussions that take place in those smoke-filled rooms in Washington, between politicians and their economic advisors and Fed guys and Treasury guys, and I imagine something like this:
Politician: “We have got to end this recession!”
Economist: “Well, it’s really out of our control …”
Politician: “I don’t care, dammit! Mid-term elections are coming up next year!”
Economist: “Well, the definition of the end of a recession is two quarters of positive GDP growth following two or more quarters of negative growth. But the people tend to believe whatever we and CNBC tell them, so if we had just one quarter of positive growth, they might buy into the ‘recovery’ myth, and start spending money again, and maybe sustain growth for a second quarter, and then … who knows?”
Politician: “Excellent! So other than spend an obscene amount of government money, which we’re already doing, how do we make absolutely sure that we get a quarter of positive growth?”
Economist: “Well, we’d have to front-load future demand for something … probably a big-ticket item … probably the biggest-ticket item there is, outside of a home, since we know the housing market is still in the crapper …”
And thus an idea was born.
So whose economy did we stimulate? China’s. The interest on three billion dollars is not insignificant. How do you say “You’re welcome” in Mandarin?
So much for the aggregate. What about you and me?
Well, if we hit the bid on CFC, we saved four grand on a new car. We’re saving a bit on gas. If we keep the car until after it’s paid for – a rarity in America these days, but possibly (and hopefully) the new reality – eventually we could even be money ahead. Assuming we don’t lose our jobs. But our discretionary spending has gone down, and as that filters into the aggregate, our job is even more at risk. But still, if we keep the new car until it’s a clunker, we could come out ahead.
Except on our taxes. You see, we’re already perilously close to seeing the US become so suicidally indebted, our debt is downgraded, as I’ve warned before (I think it’ll happen in 2010). Another three billion doesn’t sound like much on top of 11 trillion – but remember, it was one straw that got credit for breaking the camel’s back. And three billion for every employed person in the US is an extra $22 bucks in US debt, on average.
Not huge, but it would buy a week’s worth of Snickers and Mountain Dew.
But I really need to vent about this ill-conceived Cash for Clunkers program. Yeesh - talk about a waste of our hard-earned dollars.
Let's take it one spin-laden talking point at a time, shall we? We'll just debunk them as we go.
"It will stimulate the economy by boosting auto sales."
Poppycock. First, "stimuli" like this only serve to temporarily and artificially boost demand. Anyone that was going to buy a car in the next several months hit the bid on this deal, made out better than they would have otherwise, and are laughing all the way to the bank. (Until they get their tax bill.) What happens is that demand gets front-loaded by such an incentive, and people buy sooner rather than later. Then, the stimulus ends, and demand falls off a cliff - lower than where it was pre-stimulus, because future months' buyers have already jumped into the market, having been "stimulated" to do so, and there's no demand left.
Oh, sure – the incentive undoubtedly brought in a few people who otherwise had no intention of trading in their clunker for a new gas miser. But really, in an economy that’s shedding jobs faster than my head is shedding hair, how many Americans are going to trade in a paid-for car to take on a new car payment? Few. As evidence of this, since the program has been tripled to $3 billion, reports show that showroom traffic is waning, and that there's less demand for new cars.
And furthermore, the program's temporary boost to July's auto sales was insufficient to offset a broad decline in retail sales ex-autos, resulting in a decline in overall retail sales for the month. So much for "stimulus."
Then there's the fact that spending at the pump was down in July, thanks to 250,000 people owning less thirsty cars. But if we're buying less gas, we're also buying fewer Snickers, less Mountain Dew, Skoal, air fresheners and all that other crap people buy when they fill the tank.
“It will ‘green up’ America, reducing our dependence on foreign oil.”
You cannot convince me that this government is seriously concerned about greening up America, other than the extent to which pandering to the “green” lobby will green up their own pockets. "We're concerned about the earth legacy we're leaving our children," they cry, even as they pass trillion-dollar, 1,000-page bills they haven't read that will prove more toxic to our children and grandchildren than chlorofluorocarbons. My kid’s at greater risk of having to learn Mandarin Chinese and get run over by a tank for protesting against Chinese rule than she is dying from exposure to pollution or freezing to death thanks to global warming.
As for reducing our dependence on foreign oil, 250,000 more fuel-efficient cars are not going to do that by any significant extent. When is Caterpillar going to start building battery-powered heavy equipment? When are the airlines going to start flying propeller planes again? The impact of this program on our oil consumption is a drop in the bucket.
The program’s requirements allow the maximum $4,500 credit if you buy a vehicle that gets 10 mpg better than your clunker trade-in, which has to get less than 18 mpg to qualify. You can get a $3,500 credit if the new car gets 4 mpg better than your trade-in.
So let’s say you own a 1999 Jeep Grand Cherokee Limited with the big V-8 engine, like I do. That sucker drinks gas at the rate of 15 mpg. So it qualifies. Now, I can get a $3,500 credit for trading it in, if the new car gets 4 mpg better – 19 mpg, just 1 mpg above the fuel-inefficient “clunker” threshold! That’ll green up America! Let’s see, what vehicle could I buy that gets 19 mpg? How about a Honda Pilot, which is every bit as big as the Cherokee, just a bit less thirsty? Yep, another big ol’ SUV on the road. How green.
Now, let’s see what the program’s total gas savings will be. Let’s assume that all 750,000 cars under the expanded $3 billion program sell. That implies an average $4,000 credit, which means half the people traded for a car that gets 10 mpg better than the clunker, and half for a car that gets between 4 and 10 mpg better. For the sake of argument, let’s split the difference and say the people who got the $3,500 credit get 7 mpg better now – half the difference between 4 and 10. And since ten more than 18 is 28, and there aren’t a whole lot of cars that get better than 28 mpg overall, let’s be generous and say the people who got the $4,500 credit get 13 mpg better now, on average. (Granted, some people could be getting as little as 12 mpg now – but how many Hummer drivers are going to trade for a Smart Car?)
So half our participants are getting 7 mpg better than they were before, and half are getting 13 mpg better, for an average of 10 mpg improvement. Assume the average driver puts 15,000 miles a year on his or her car, which is around the book-value assumption. And 750,000 cars participated in the program.
If the average clunker got 15 mpg, and the average new car purchased under the program gets 25 mpg, and the average driver drives 15,000 miles a year, they’ll save 400 gallons of gas. If 750,000 people do this, the total annual savings will be 300 million gallons of gas – woo hoo!
Except – y’know what? That is less than one day’s total US gasoline consumption – one day! At this rate, the government would have to use more than a half-trillion taxpayer dollars to “stimulate” ourselves toward reducing our dependence on foreign oil by half.
“It will replace clunkers with outdated safety equipment with newer, safer cars, reducing traffic fatalities and serious injuries, and lowering insurance costs.”
Okay, I’ll give you that one – up to a point. I’m still safer in my Jeep than I’d be in a Smart Car or a Prius, or probably even a Corolla. And my insurance premiums on a ’99 are a darn sight lower than they’d be on any of those new models, despite their side-curtain air bags.
“People will be spending less on gas, and that means they’ll have more money in their pockets to spend on discretionary items, which will stimulate the economy and help lead to a consumer-led recovery.”
First, how much will I save in gas? Well, taking our aforementioned example of using 400 fewer gallons of gas, at today’s average pump price where I live of $2.59 for regular, I’ll save $1,036. That’s about $7.5 million saved per year under the entire program. Let’s assume every one of those dollars gets spent on discretionary items (which the July retail sales report proved did not happen, as overall sales fell even with the CFC stimulus).
That’s a boost to the consumer’s component of GDP – historically about two-thirds – of about 0.0001%. Awesome. Add in the stimulus from the cars being bought, and you’re at about a 0.2% boost. Better, but still not much. And let’s not forget that those cars would likely have been bought anyway.
And let’s also not forget that not all of that gas savings is going toward discretionary spending. In fact, not a dime of it is. Here’s why.
Let’s say I found one of those dealers who’ll match the CFC program’s incentive with an equal trade-in allowance. So using our average, I’m getting eight grand knocked off my new car. Let’s say the average new car price for the units purchased is $25,000 (that’s not far off the US average, and from what I know of the American consumer’s psyche, they’ll see the incentive as “found money,” and spend more on the new car than they otherwise would have, so it may be conservative).
So my net amount is $17,000. Add sales tax of 7.50%, and we’re at $18,275 – and I’m going to have to finance that. At the best 5-year new car rate in my neck of the woods of 6.50% (and that assumes an excellent credit score, which not all CFC participants have), and my monthly payment is $358.
So my annual gas savings will cover almost three month’s worth of car payments. Not counting the higher insurance premiums on a new car. Guess what’s going to happen to my discretionary spending, now that I have a net $3,200 a year in car payments that I didn’t have before? Add in a boost to insurance premiums of, say $400 a year, and that’s $3,600 a year, or $300 a month, less money in my pocket. So I’m going to hunker down even further, maybe even until the car’s paid off.
One could stretch, and say that since I’ll be making fewer trips to the gas station I’ll be buying fewer Snickers and less Mountain Dew. Three hundred dollars a month buys one heck of a lot of Snickers and Mountain Dew.
So, discretionary spending is going down as a result of this program. But the bright reader will say, “Aha!” (Bright people are always saying stuff like that.) “If those sales were going to happen anyway, then discretionary spending was going down anyway.”
Right you are. Thus this government program – which cost $3 billion unbudgeted taxpayer dollars and thus gets slapped right on top of the deficit, like all that Snickers and Mountain Dew consumption would get slapped right on top of the average American’s butt – has done zero to stimulate the economy. Zero.
Did it help car manufacturers and dealers? No. The sales were largely going to be made anyway. Did it help the banks? Heck, no – the loan amount they would have otherwise been earning interest on would have been $4,000 more, on average – that’s $4,000 per loan, times 750,000 loans, at an average of probably 7% interest over an average of four years. That’s nearly a half-billion dollars the banks are out.
(In case you haven’t heard, the banks could use all the earnings they can get right now.)
What about local communities and states? Nope, and nope. Less sales tax revenue, as the purchase price was $4,000 lower thanks to the incentive. Times 750,000 cars, the states and municipalities are out a cool $3 billion. And less gas tax revenue also, as people are spending less at the pump. And less sales tax revenue on the Snickers and Mountain Dew.
(They’ve especially been pushing the program hard in California. You know, that big state on the west coast that’s been issuing IOUs instead of tax refund checks because it is flat broke.)
Did it help gas stations? Nope. Will it help that nice young man who sold me a car wash today as I was filling up, and asked for my blog’s URL? I’m afraid not.
And speaking of nice young men, will it help the high school kid who is in the market for a cheap used car to get to and from work? Or the poor immigrant needing the same? No, it won’t – in fact, it will hurt them, and that is one of the unintended consequences of the Clunker program (its most apt name).
Total used car sales in the US last year were 36.5 million units. The average sales price was just under $8,000. We don’t know the standard deviation. But I don’t believe we can assume a bell-shaped curve; there are plenty of used cars for sale priced above $16,000, but none priced below zero. Looking at e-Bay auctions and the like, we don’t see a heck of a lot of cars priced below $3,000. But we do see plenty of used cars priced above $20,000. In other words, our population distribution is likely skewed to the higher side. So let’s just assume that the total number of used cars on the market priced below $3,000 is about 10% of the total – for argument’s sake let’s call it 3.5 million cars.
Why did we pick $3,000 as our threshold? Simple. If my car is worth $3,500, getting that amount for it under the Clunker program isn’t much of an incentive. If it’s worth less, I’m more inclined to hit the bid.
So let’s say 750,000 of those 3.5 million cars in that price bracket are destroyed, as the Clunker program is going to do. That’s a 21% reduction in supply. Guess what happens to the value of cars in that price bracket, now that the supply has dwindled, while the demand hasn’t (if anything it’s gone up, since there are a lot more people unemployed, underemployed, struggling with higher mortgage payments after their ARM reset, etc., in this economy?
That’s right, you remembered that day in Econ 101 – the quantity supplied goes down while the quantity demanded remains the same (or increases), and voila! The price goes up! Now, that $2,500 clunker is worth three grand – and said high school student or struggling immigrant or suddenly-out-of-work-and-fighting-to-survive-as-a-grocery-sacker cannot afford the car.
So, what next? Well, he loses that job, because he can’t get to it. He has less money to spend, and has to go on government assistance – which wasn’t budgeted. Taxes go up, consumption goes down, GDP suffers, joblessness rises.
Did it help the junkyards? You betcha! They’re the ones that will profit mightily from scrapping 750,000 cars that would have remained happily putt-putting down the highways and byways, that still have some good miles left in them, however thirsty those miles might be.
Just one question though: how much energy does it take to destroy 750,000 cars? And are the car-smashing machines powered by gas, electricity, what? Batteries, perhaps? Solar power? Wind? Just the “greenie” in me being curious, is all.
Did it help America? Well, it supposedly will help slow down global warming. So perhaps your great-great-great-great-great-great-great-great-great-grandkids will live one day longer before the next Ice Age freezes ‘em to death. Oh wait – it’s GLOBAL warming, right? And places like China and India are pumping chlorofluorocarbons into the atmosphere at a rate that dwarfs ours, and have neither the incentive nor the conscience to slow it down. So make that an extra half-day your descendants will live before hell freezes over.
But did it help America economically? First, let’s look at the aggregate. The GDP equation includes both personal consumption – what we consumers spend – and government spending, which we fund with our tax dollars. So we didn’t boost GDP – alright, we might have front-loaded some of the fourth quarter’s demand into the third (more on that later), but we didn’t actually boost it. All we did was shift the mix, taking from personal consumption and adding to government spending. It’s a zero-sum game.
And what of future quarters? And next year? That’s when the program begins to detract from GDP, as the government spending won’t be repeated, but it’ll be many months before auto demand returns to normal, with some 750,000 new units on the road. (Even for those who believe that ALL of these sales are purely incentive-driven, and would not have occurred otherwise, and therefore auto demand will return to normal after the program sunsets – 750,000 cars is less than 10% of annual US vehicle sales, and the very limited impact on GDP is as noted above.)
Okay, remember my cryptic “more on that later” when I talked about shifting demand into the third quarter? Here’s what I think one of the dirty little secrets is about this plan. Sorry for sounding conspiracy-theorist, but I tend to imagine some of the discussions that take place in those smoke-filled rooms in Washington, between politicians and their economic advisors and Fed guys and Treasury guys, and I imagine something like this:
Politician: “We have got to end this recession!”
Economist: “Well, it’s really out of our control …”
Politician: “I don’t care, dammit! Mid-term elections are coming up next year!”
Economist: “Well, the definition of the end of a recession is two quarters of positive GDP growth following two or more quarters of negative growth. But the people tend to believe whatever we and CNBC tell them, so if we had just one quarter of positive growth, they might buy into the ‘recovery’ myth, and start spending money again, and maybe sustain growth for a second quarter, and then … who knows?”
Politician: “Excellent! So other than spend an obscene amount of government money, which we’re already doing, how do we make absolutely sure that we get a quarter of positive growth?”
Economist: “Well, we’d have to front-load future demand for something … probably a big-ticket item … probably the biggest-ticket item there is, outside of a home, since we know the housing market is still in the crapper …”
And thus an idea was born.
So whose economy did we stimulate? China’s. The interest on three billion dollars is not insignificant. How do you say “You’re welcome” in Mandarin?
So much for the aggregate. What about you and me?
Well, if we hit the bid on CFC, we saved four grand on a new car. We’re saving a bit on gas. If we keep the car until after it’s paid for – a rarity in America these days, but possibly (and hopefully) the new reality – eventually we could even be money ahead. Assuming we don’t lose our jobs. But our discretionary spending has gone down, and as that filters into the aggregate, our job is even more at risk. But still, if we keep the new car until it’s a clunker, we could come out ahead.
Except on our taxes. You see, we’re already perilously close to seeing the US become so suicidally indebted, our debt is downgraded, as I’ve warned before (I think it’ll happen in 2010). Another three billion doesn’t sound like much on top of 11 trillion – but remember, it was one straw that got credit for breaking the camel’s back. And three billion for every employed person in the US is an extra $22 bucks in US debt, on average.
Not huge, but it would buy a week’s worth of Snickers and Mountain Dew.
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