Saturday, May 28, 2011

When Do You Stop Helping Your Kids?

A lot of families must be facing this exact same problem:

A weak job market for college and high-school graduates is continuing to drive young adults back into the households and onto thepayrolls of their parents, a variety of surveys have confirmed.
Almost 60 percent of parents with non-student children between the ages of 18 and 39 have been helping their kids, according to a survey being released today by the National Endowment of Financial Education. A study released last month by found that more than half of all recent grads are living with their parents. And as much as 85 percent of the Class of 2011 expect to move back home, at least for a while, according to a study by market research firm Twentysomething Inc.
Parents and their adult offspring disagree about the reasons for all this intergenerational nesting, says Ted Beck, president of the endowment. The majority of “kids” believe that they are facing more economic pressures than their parents did; that’s a view Beck generally agrees with. “I think it’s more challenging for kids now,” he says. But most parents believe that they had it tougher when they were young than their kids do now. The disconnect can cause family friction.
The jobless recovery that we're in exacerbates these issues, but the memory of better times also hurts families that don't know how or when to cut the proverbial cord. When people in a society are used to a certain standard of living, having to struggle or deal with having less creates a situation where they balk at jumping into the labor market at a level below what they expect to subsist at.

We cannot find enough good teachers for our schools; we have a glut of people with college degrees who can't find jobs that will pay them enough to live the way they want to live (and pay back their college loans). Hence, you have younger people living with their parents so that, at whatever level their post-college salary happens to be, it doesn't see a massive chunk removed for things like rent and the like.

I question whether anyone really wants to live at home after college. That seems like quite a sacrifice to me, and one that people aren't making willingly. It has to be driven by a standard of living that isn't in sync with what a college graduate would expect. Does that mean that someone is going to connect the dots and conclude that a college degree isn't worth very much?
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Monday, May 23, 2011

Foreclosure Blight and the Responsibility of Banks

Banks have become homeowners, and so it stands to reason that banks should be treated like homeowners when it comes to blight:

[...] the foreclosure crisis is riddling communities with blight because no one wants to shoulder the responsibility of maintaining foreclosed homes.
"There's one on every block," said Elenes, a community organizer with the Alliance of Californians for Community Empowerment in Watts, a low-income South Los Angeles neighborhood pockmarked with foreclosed homes. "All we want is for the banks to step up and be good citizens."
Communities across the nation have made little progress in getting banks to maintain foreclosed properties, and as the ongoing crisis matures and bank-owned homes fall into advanced stages of disrepair, cities and residents are getting desperate. In a keenly watched move this month, Los Angeles forged a new strategy — it sued one of the world's major financial institutions, Deutsche Bank, to force it to take care of 166 properties, both vacant and renter-occupied, charging the blue-chip German giant has turned into the city's largest slumlord.
"The buck stops with the owner of record. We're saying, 'You are an owner like any other owner,'" said Julia Figueira-McDonough, deputy city attorney.

It's only fair. If you want to take away an asset, then that asset becomes your problem, not the problem of the people who live around your blighted property. A severely blighted property can drive down the value of the homes around it--and this creates a liability issue for banks. An entrepreneur could start a company specializing in preventing, maintaining, and rehabilitating blighted properties and the banks should be forced to use that sort of service in order to prevent creating "holes" in neighborhoods all over the country.
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Wednesday, May 18, 2011

A Permanent Cut of $2,300 per Year

The Center for Retirement Research says that the "Great Recession" has cost retirees a lot of money. As bad as that sounds, what's really bad about it is that about 700,000 people are going to be living much closer to the poverty line:
  • Workers between the ages of 25 and 34 in 2008 (the height of the recession) will see an average drop of 4.9 percent in retirement income after age 70 — a hit to their pocketbooks of roughly $3,000 a year. Furthermore, the slowdown in wage growth will accumulate over their entire careers.
  • Those between the ages of 55 to 64 in 2008 will see a 4.1 percent drop in retirement income, primarily in the form of lower Social Security benefits. This problem is compounded by the fact that many older workers who lost their jobs during the recession were forced into early retirement.
  • Future retirement income will fall the most for those with the highest incomes. Among the youngest age group, for example, those in the top 20 percent income bracket will lose $7,500 annually, while those in the bottom group will lose only $400 a year.
  • The decline in household income will increase the number of Americans living on limited incomes at age 70. Among people between the ages of 25 to 64 in 2008, the share with incomes below 125 percent of the federal poverty level at age 70 will increase 7.4 percent. That translates into an additional 711,000 adults living in or near poverty.
Economic instability sometimes comes with a permanent effect on members of society. It's not enough to talk about how we're "coming out" of a recession; some people are permanently damaged by hard times.

Saturday, May 14, 2011

The Mississippi Refuses to be Tamed

The people in harm's way are mostly poor, but I have not seen much in the way of evidence that they don't understand what's happening to them:
Army engineers prepared Saturday to slowly open the gates of an emergency spillway along the rising Mississippi River, diverting floodwaters from Baton Rouge and New Orleans, yet inundating homes and farms in parts of Louisiana's populated Cajun country.
About 25,000 people and 11,000 structures could be in harm's way when the Morganza spillway is unlocked for the first time in 38 years on Saturday around 4 p.m. EDT.
"It will be a slow, controlled opening," said Ken Holder, spokesman for the U.S. Army Corps of Engineers, which manages the spillway.
Sheriffs and National Guardsmen were warning people in a door-to-door sweep through the area, and shelters were ready to accept up to 4,800 evacuees, Gov. Bobby Jindal said.
Some people living in the threatened stretch of countryside — an area known for small farms, fish camps and a drawling French dialect — have already started fleeing for higher ground.
There are entire communities that are coming together to battle these floods and to preserve and save whatever they can. Farmers are being hit hard by these floods:

The Mississippi was supposed to have been tamed by the lock and dam system. Instead, it continues to get out of hand, thanks to the weather, and it continues to frustrate people who live near it.

Tuesday, May 10, 2011

Another Refinancing Craze?

Americans are refinancing their homes these days, and I don't know if this is because they want to save themselves from foreclosure or help build up another bubble in the housing market:
Applications for U.S. home mortgages rose last week, helped by refinancing demand as interest rates fell for the third week in a row, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 4 percent in the week ended April 29.
The MBA's seasonally adjusted index of refinancing applications climbed 6 percent, while the gauge of loan requests for home purchases added 0.3 percent.
It makes sense on the surface--lower interest rates are triggering refinancing--but what does it mean in the long term? Is it really saving people money or are they getting involved in the creation of another housing bubble? Are strapped consumers taking "equity" out of a home that they are under water in (where possible) or are people taking what little equity they still have out of their home in order to compensate for lower wages and under-employment?

I don't think we ever really got a handle on the mortgage industry. I don't think it has been reformed, re-regulated and restructured in such a way as to benefit American homeowners and it could, I suppose, be so badly structure right now that any surge in refinancing might trigger the creation of another mini-bubble.

There are a vast number of homes on the market--adding in foreclosed homes puts the number at the high end of nine million previously owned homes being available for purchase. And, given all of that inventory, which has caused a drastic decrease in property values, why would you go and "reset" everything, given that no one really knows where the market is headed? Can you continually refinance yourself into oblivion if the value of your home doesn't stabilize? 

If I was a homeowner right now (got out a year ago and it wasn't pleasant), I'd think long and hard about any kind of refinancing arrangement. You might save yourself a little money. But you might end up dealing with an unscrupulous new lender that might engage in unethical or nefarious practices. There is a real problem in this country with banks taking away homes that that they cannot prove they own because the deeds and the financing paperwork are not squared away. Why would you wade into this mess and create another opportunity for a lender to take a mortgage (yours) and bundle it with others and then refinance or resell those loans?

Sounds like a recipe for disaster to me. And, for what? Saving a hundred bucks a month or not much more? Is that worth losing a home over?
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Thursday, May 5, 2011

A Dishonest Hit Job on Federal Spending for Homelessness

Never mind that we only spend $2.9 billion dollars per year battling homelessness--take a look at this argument:
The federal government's multi-agency approach to help the homeless is often confused, according to a recently released report that catalogues the hundreds of different ways the government squanders taxes through waste, overlap, fragmentation and bureaucracy.
The Government Accountability Office report found that in 2009, federal agencies spent about $2.9 billion on more than 20 programs that targeted homelessness. If that money were to be targeted toward the building of homes, at say, $200,000 per home, it could theoretically produce 145,000 houses.
"Take that money directly and give them sort of a voucher so they can go get housing on their own, or get some mental health benefits," Brian Darling, director of government studies at the Heritage Foundation suggested. "But the way it is now when you have all of these different government agencies administering the same program, you have government waste."
The headline for this Fox News opinion piece was "GAO Report Highlights Wasteful Spending on Ending Homelessness" and it implies that ALL of the "billions" being spent are wasteful. The GAO report says that there are some areas where there is duplication of effort. Eliminating those areas would save some money, but NOT the entire $2.9 billion being spent. This is the sort of deceitful argument that prevents people from getting a reasonable assessment of the problem.

In fact, the GAO report doesn't identify a specific dollar amount that could be saved by eliminating some of the duplication of effort costs. It merely outlines what could be done to save a limited amount of money between the various Federal agencies. 

Would it shock you to find out that there already are programs in place that are eliminating duplication of effort? Here's what the GAO had to say [page 131]:
In keeping with GAO’s previous recommendations and the plan’s objective to increase coordination, it will be important for the federal agencies that have adopted the plan to develop implementation plans that include but are not limited to a project schedule, resource allocation, outreach measures, and a performance measurement strategy to evaluate their progress. The plan recognizes that collection, analysis, and reporting of quality, timely data on homelessness are essential for targeting interventions, tracking results, strategic planning, and resource allocation. As noted above, currently each federal program generally has distinct data requirements. The plan acknowledges that a common data standard and uniform performance measures across all federal programs that are targeted at homelessness would facilitate greater understanding and simplify local data management. Consistent with the plan, representatives with USICH noted that agencies are taking steps to improve and coordinate data, specifically citing the December 2010 announcement by the Department of Veterans Affairs to participate in Homeless Information Management Systems over the next 12 months.2 The formal coordination among agencies outlined in this plan may minimize fragmentation of federal programs and help address gaps in supportive services while linking housing and supportive services. The linking of these services is considered to be important for effectively delivering assistance to those experiencing homelessness.
The problem is no where near as bad as it sounds. And it's NOT wasting "billions" by any stretch of the imagination. The article on Fox News wants to put it out there in circulation that "billions" are being wasted so that if the political class decides to cut these programs they can fall back on media reports of wasteful spending. This gives them cover to shave small amounts of money from programs that are underfunded already and provide badly-needed services. 

So, what is the problem, then? Billions will NOT be saved if ALL of the problems in administering these programs were reformed. That's just not possible. Is it worthwhile to pursue the ideal and make changes that can save a little money? Absolutely. But spending money to help Veterans end homelessness is NOT wasteful government spending by any measure. And laying out a dishonest argument about scrapping these programs and handing out vouchers is ridiculous.

This is a non-starter. It would lead to more cuts and punish the homeless even further. When the first homeless person under this magical voucher plan would lose or abuse their voucher, the outrage from the media would be deafening.

We're Spending Next to Nothing on Homelessness

Back in March, the Government Accountability Office (GAO) had this to say [page 129] about duplication of efforts in fighting homelessness:
According to the Department of Housing and Urban Development (HUD), approximately 643,000 individuals and persons in families experienced homelessness on a single night in January 2009. [the graphic above shows other numbers, but it's less than a million homeless, I believe - WJS] Multiple federal programs provide assistance targeted to those experiencing homelessness or more broadly assist low-income populations. GAO reported that in 2009 federal agencies spent about $2.9 billion on over 20 programs targeted to address the various needs of persons experiencing homelessness. Some federal programs may offer similar types of services and serve similar populations, potentially leading to overlap or fragmentation. 
In June 2010, GAO recommended that the Departments of Education, Health and Human Services (HHS), and HUD develop a common vocabulary to better coordinate homeless services. GAO also recommended in July 2010 that HUD and HHS consider more formally linking their housing and supportive services programs. The agencies concurred with these recommendations and to date have taken some actions to address them.
I realize that there are programs at the state and local level as well, but the fact that we spend around $3 billion dollars on homelessness is a tragedy in and of itself. Spending $10 billion dollars would be a great place to start. If this kind of money was invested in solving the problem--not just temporarily housing people but actually helping to correct the problems and issues that cause their homelessness--we could eventually spend less money on the problem (since prevention and solving the problem itself are worthy goals.)

Arguing that we don't have the money is a specious argument. We need to spend more money fighting homelessness in order to avoid having to spend money on health care costs related to being homeless. There's no reason why investing in a solution to homelessness couldn't benefit our economy. If you stabilize one person's life and get them on the right path, their contributions back into society are more than worth what you invested in helping them.
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Monday, May 2, 2011

An Optimist's Tour of the Future

I'm glad Mark Stevenson is so enthusiastic about the future--there are great things to come.

Of particular interest to me was the subject of poverty and the poor--subjects that, at least according to the index of this book, are of little or no interest to Stevenson. If we are going to get a handle on the future, understanding the connection between information, the gadgets that deliver that information, and how those two things can become the tools of restive populations to overthrow their own governments is a subject worth studying.

It would seem that the future holds more Arab Springs. How does the trend of making information more readily available to all levels of society square with a future where we celebrate high-end gadgets that only a handful of elites can afford? I'm glad that there are knockoffs of Apple products out there that only cost a few hundred dollars. What happens if these same gadgets drop to twenty bucks a pop and equalize everything for all in terms of information sharing and distribution?

That would make a more relevant topic to discuss, at least in terms of what I'm interested in. Stevenson's book was probably written long before the Arab Spring; the shame of it is, the Arab Spring may have rendered it irrelevant. Under threat of slaughter, disenfranchised populations are throwing tyrants to the curb and information access is helping them. Is that the future for all of us?
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