Seven Sons

Did anyone else think Bobby Jindal looked and sounded like Kenneth the Page last night?

Jindal & Kenneth

The CNN feed cut out so I ended up watching on MSNBC, which had real-time focus group reaction lines for McCain and Obama voters.  Both of these stayed firmly in positive territory, often so high up on the graph they could barely be seen–and I was watching on a 46 inch TV.  More interesting was that the McCain voter line was often higher.  Even more interesting than that–for much of the speech the two lines occupied the same space, almost exactly.   Both groups liked what they were hearing and liked it a lot.  I hope the White House was watching and remembers next time they consider the need for broad-based bipartisanship.

Personally, I thought the speech was pitch perfect and his delivery was the best I’ve seen from him since the primaries.  He’s been on the job 35 days and already he has delivered one of the very few speeches in my lifetime that can be deemed truly presidential.  That was FDR-level work.  He could have mumbled nonsense and it still would have made the history books–our current national straits assure it.  But he rose to the challenge tonight and asked the country to do the same.  I know that’s been said before in this nation, but not in a long time.

What do these two men have in common?

a) they are both governors of the poorest- and third-poorest states in the country, respectively.

b) they are both governors of the two states most devastated by Hurricane Katrina, the most costly storm in U.S. History.

c) they are both refusing aid from the federal government for their poorest residents.

d) they are both aspirants for the Republican nomination for President in 2012 and as such are willing to inflict as much misery on the backs of the poor as necessary to appeal to the Limbaugh-fellating extremists who make up the Republican “base” these days.

Oh, who am I kidding? It’s all of the above, unfortunately.

     Okay,  I think it is pretty safe to say that I have never agreed with anything that any of the aforementioned nitwit CNBC analysts have ever said.  While we are a pack of tempermental bastards, they are a collection of immature, short-sighted, opportunistic, conservative, well, nitwits pretty well names them perfectly.

     However, I guess that like monkeys with typewriters and infinite time, one of them gets it right once in a blue moon.  Today, CNBC’s Rick Santelli had  a brilliant take

This subject has been boiling in my brain for a few weeks.  My wife and I are lucky to have a very nice upper income.  Hoever, we choose to live beneath our means.  If you go to one of those sites that helps you calculate how much house you can afford, we can afford about 3 times the value of our current home.  Why should those who live within their means bail out those who don’t?  Further, what about the renters?  Why should they bail out (through taxpaying) those who shouldn’t be homeowners but somehow are? Now, some of those homeowners who are in trouble got in trouble through no fault of their own.  But I don’t see a realistic way of sorting out the wheat from the chaff.  And, unlike Mr. Santelli, I do see the danger to the 92% of homeowners who pay their mortgages on time that the collapsing housing market presents.    

     All that said, the bottom line is the Obama  administration’s first stab at this is completely wrong.  Santelli (and sadly, Rush) get this one right.  It is the government rewarding bad behavior.  Here is how to solve this.  A bailout now with a built in pay back later.  The current plan would reduce the mortgage payments of homeowners in trouble to no more than 31% of their monthly income. My plan is as follows.  Suppose this means that  the mortgage has to be reduced from $200,000 to $150,000.  The federal government would take a lien on the  house for $50,000.  Eventually, the housing markets across the country will recover and begin appreciating again.  When the property was eventually sold, the government would receive 1/2 of any appreciation from the $150,000 figure.  In about 5 or 6 years, I would also start charging a 1% annual interest rate to preserve some of the value of the government’s lien.  Each time the house was sold, 1/2 the equity of any amount of the previous lien would go to the government until the lien was fully paid off.

     In my example, the lien would be $50,000.  The family lives there another 5 years and then sells the house for $170,000.  Normally, they would realize a profit of $20,000 over the  the $150,000 value of the home at its government-backed refinancing.  Instead, the homeowner would keep $10,000 and $10,000 would go to the government.  The new property owner would have a house worth $170,000 that had an additional $40,000 lien on it.  When that homeowner eventually sold, half of that homeowner’s profit would go towards the lien.  The lien could be paid off early with no penalty.

     I am aware that this is rather simplistic solution and that I don’t know enough of the mechanics of the  real estate market to get all the details right.  You have to figure out how to get the second and third buyer to be will to by a house at the value of the home and accept the continued lien.  Still, I think you could create a reasonable fair system along this basis that wouldn’t leave the responsible folks feeling like they’ve been suckers.

Nate Silver over at FiveThirtyEight.com posted this earlier today, and I think I’ve never seen economic growth tracked as clearly in one chart as I have here. He nicked the data straight from the Census Bureau, there’s nothing statistically complex about it. But it pretty clearly sums up my own conclusions about why the Democratic Party is the real party of growth, at least in its post-1992 form. It’s really not that complex, though we seem to make it so: pursue reasonably pro-growth economic policies and tax the richest Americans at considerably higher rates, though not at the extreme rates of the 1950s and 1960s.

Meanwhile, the Republican Party continues to hump Reagan’s dead corpse and pretend He-Who-Must-Not-Be-Named wasn’t a “real” conservative. He carried forth Reagan’s agenda as clearly as anyone could hope to, at least domestically. Wake up, GOP. I miss when you actually had sane politicians.

The Financial Times carried an article this week that suggests tracking tick-by-tick stock market transactions for the purpose of predicting financial bubbles. I suspect that if this is done with elegant simplicity (for example, just putting all the data out there on the web in real time and letting investors and academics manipulate the data) it could possibly work. I also suspect it would change the dynamics of the market. A more transparent market should tend towards less volatility, and over a long period of time that should mean fewer recessions.

I would love to apply the same analytical strategy to figuring out how governments can apply inverse financial pressure to the economy without relying solely on the federal funds rate or a central bank. It is obvious today that in a recession the demand for government services goes up at exactly the same time that revenues go down. Furthermore, while additional public spending is exactly what is needed, most governments below the federal level can’t run a deficit or print money. This leads to a vicious cycle and constant downward pressure on the economy.

How about these ideas to get rid of this cycle once and for all?

- Bongo Bucks: In a recession, have state and local governments print their own money, legal tender within their borders.  It has been done before. Unemployment benefits, tax refunds and other government remittances can be paid partially in local currency. People will spend a higher percentage of their disposable income locally (big box stores don’t count) and stimulate the economy on a more local scale, which can have a multiplier effect.

- Hedge Nationalization: If governments were to enter the markets (including stocks, real estate, commodities) and trade in quantities invesely proportional to the changing price of the instrument, it would have the effect of smoothing out the markets. This would be a kindof strategic petroleum reserve, but for other types of commodities. Obviously dedicated capitalists don’t want the markets smoothed out when they are going up, but wouldn’t that be better in the long run? Or maybe the government just starts kicking in a buying when the market trends down? I see lots of problems with this idea of course, but I wanted to throw it out there for a discussion starter.

Danica. Danica. I’m having a real hard time figuring out how I’m suppose to react to this. Well. . . not that hard.

I have to remind myself. that she’s about three apples high. But still those are impressive legs for someone who’s so. . . Fun Sized.

But still. . . the reaction. I mean I wonder if this is a distraction tactic for her fellow IRL racers? A nearly naked cash grab to pay her traffic fines? I wonder who she’s paid by to do it. Certainly IRL could use the traffic given the struggles they’ve had over the years.

Regardless. Here’s to bump drafting.

The city of San Diego is likely to enforce water restrictions this summer. Some highlights from the article:

• Each household will be allocated a water usage based on a baseline year, possibly 2006 or 2007 or both.
• If you use more than your baseline, you’ll pay rates up to 5 times the going rate.
• There will probably be a waiver system for people to appeal their allocation.
• It is possible the city will analyze sewer usage and enforce deeper cuts on irrigation water for landscaping.

The plan has some serious flaws. Many of these are pointed out by the comments on the web site cited above, and include the following:

• If you recently moved into a house that was unoccupied, rarely occupied or occupied by an old lady whose cats took more baths than her, you get nailed on your allocation.
• If you recently had a child (a newborn, or worse! a boomerang, or even worse! octuplets!!) then you aren’t given credit for the additional water you’ll require for real sanitation needs – baths, laundry, food prep (including warming all those bottles) and cleaning.
• If you have a drought-tolerant yard, use greywater on the roses and shut off the shower while you soap up (military style), while your neighbor lets their irrigation water run out of their fabulously green lawn and down the street past your house twice a day, the neighbor will end up with an allocation much higher than yours. Yes this is a personal example and the reason I’m peeved.

So why this plan? Because politicians can’t seem to grow the rocks they need to ask people to sacrifice – they have a very low threshold for whiny constituents who feel like they deserve to live their lifestyle at the expense of everyone else. 

In an effort to be a little more constructive than most of the commenters on the cited web site, I’ll offer this plan, based on the assumption that sanitary use of water in a city of 2.5 million is more critical than landscaping.

• Give every person in the city (adults and children) a water share. 
• Estimate the water supply for the year, lop off industrial usage, and divide the rest evenly among the shares.
• Optionally include a safety factor if the water supply gets even worse

People can use their share for showers, the vegetable garden, the pet llama or whatever they decide. This plan doesn’t provide an incentive for renters who don’t pay a water bill to conserve, but neither does the city’s plan. A financial kickback (rate reduction?) to property owners who can get lower water use from their renters might be a good idea. Then again those owners may be able to cut way back on their irrigation to offset renter usage.

Finally, since I love to solve things with technology, let’s propagate some real-time water meters to every household, and include remote displays (in the kitchen, bathroom, laundry, garage) that show instantaneous water usage in gallons/minute and $$$. It is well known that a good feedback system is the best way to get people to regulate themselves. The cost of such a system will pay for itself eventually.