Archive for the ‘Housing’ Category
Cannonball is a clever five minute video that provides a unique perspective on the Great Recession and one popular response to it. You can watch it at this link or below.
[vimeo] http://vimeo.com/9696629 [/vimeo]
A recent issue of an online journal, the Economics Journal Watch, included an article titled: “Economic Enlightenment in Relation to College-going, Ideology, and Other Variables: A Zogby Survey of Americans.”
Drawing on the results of a Zogby poll, the authors of the article concluded the following:
Economic enlightenment is not correlated with going to college, at least among the 4835 Americans who completed a Zogby International online survey. Economic enlightenment is highest among those self-identifying “conservative” and “libertarian,” and descends through “moderate,” “liberal,” and “progressive.”
Wow—is it true that college doesn’t contribute to economic enlightenment—and even more importantly that conservatives are more enlightened than progressives?
The question that immediately springs to mind is: what defines economic enlightenment? And here is where it gets fun. The Zogby survey which generated the data for the article included 21 questions on economics, 16 of which involved a question that required an answer in the following form:
1. Strongly Agree
2. Somewhat Agree
3. Somewhat Disagree
4. Strongly Disagree
5. Not sure
Of the 16 questions, the authors of the paper decided to focus on only 8 in their attempt to define economic enlightenment. They “omitted 8 of the economic questions in that format because they are not as useful in gauging economic enlightenment, either because the question is too vague or too narrowly factual, or because the enlightened answer is too uncertain or arguable.”
So—here are the eight questions that the authors used to define economic enlightenment and the answers that defined unenlightened. And, yes, I am taking this right from the article.
1. Restrictions on housing development make housing less affordable.
2. Mandatory licensing of professional services increases the prices of those services.
3. Overall, the standard of living is higher today than it was 30 years ago.
4. Rent control leads to housing shortages.
5. A company with the largest market share is a monopoly.
6. Third-world workers working for American companies overseas are being exploited.
7. Free trade leads to unemployment.
8. Minimum wage laws raise unemployment.
Pretty unbiased, huh. Clearly only an unenlightened person would think that free trade causes unemployment, or that multinationals exploit workers. And only an unenlightened person would think that raising the minimum wage helps workers.
And remember these are the questions that are supposed to have clear cut, unambiguous answers.
There are in fact grounds for challenging the “correct” or “enlightened” answers to all of the questions—or at least demanding a clarification of what is the critical issue underlying the question. For example, rent control doesn’t reduce housing supply for the simple reason that new housing is normally not covered by rent control. A company that dominates a market might not be a monopoly in a technical sense but could well exercise monopoly like power. As for comparing our standard of living now with 30 years ago—real wages are certainly lower.
This is downright embarrassing, what else can one say.
How about this for fun—if you have ideas for better questions send them along as comments. Lets see if we can collectively create something a bit more useful.
Finally, if you have some extra time you might want to check out the results of a recent national survey by the Pew Center for the People and the Press “that tests reactions to words and phrases frequently used in current political discourse.” Among other things, the survey results revealed that:
“Socialism” is a negative for most Americans, but certainly not all Americans. “Capitalism” is regarded positively by a majority of the public, though it is a thin majority. There are certain segments of the public – notably, young people and Democrats – where both “isms” are rated about equally.
Young people are more positive about “socialism” and more negative about “capitalism” than are older Americans. Among those younger than 30, identical percentages react positively to the words “socialism” and “capitalism” — 43% each.
The editors of Fortune magazine had hired the cartoonist Chris Ware to design the cover of the magazine’s May 2010 issue, which includes its annual listing of the country’s top 500 corporations as ranked by revenue.
They were no doubt hoping to get a cover that resonated with some of the magazine’s past cover glamor–You can see examples of past Fortune magazine covers here.
Well, Ware produced a stunner, but his inclusion of exploited Mexican factory workers, Guantanamo Bay prisoners, and a number of funny hits on corporate greed and federal bailouts was clearly not what the editors had hoped for. So, they rejected it.
But you can still see it. You will need to expand its size (by clicking on it to get a larger view and then clicking once again to get an even larger view) by going here.
Everyone is angry about the big salaries CEOs have been drawing despite the Great Recession that has left almost everyone else struggling and scared.
The anger is understandable—check out the AFL-CIO’s executive paywatch site. There you will see the following:
Bank of America Corp.
JPMorgan Chase & Co.
The Goldman Sachs Group Inc.
It helps to put these compensation numbers in a bit of perspective. If you were to earn $100,000 a year, it would take you 90 years of work to make $9 million dollars, which is still less than what any of the above made in just one year.
But, to a large extent, our anger at these people and their earnings is all very acceptable to those who profit from the status quo. That is one reason that the media is willing to give visibility to (or actually encourage) the public anger over the issue. Lowering executive salaries will do little to change the dynamics of a system that resists labor law reform, promotes free trade agreements, champions war spending, seeks privatization, ignores income inequality, and welcomes cuts in public services, etc.
Yes, we should be mad, but we need to focus our anger at the structures that really shape our lives. In this regard, it is depressing to read what Andrew Kohut, president of Pew Research Center, has to say about the results of a series of recent Pew surveys.
In short, the surveys show that people are increasingly blaming the government for our problems and viewing a smaller, less interventionist public sector as the answer to our problems. While existing government programs and policies are far from perfect, this perspective is a recipe for far greater suffering. Afterall, the smaller the government, the more powerful business becomes.
Here is a sample of what Pew found:
By almost every conceivable measure, Americans are less positive and more critical of their government these days. . . .
As in the past, poor performance is the most persistent criticism of the federal government. But increasingly Americans say that government has the wrong priorities and that has a negative effect on their day-to-day lives. Sixty-two percent say that government policies unfairly benefit some groups, while nearly as many (56%) say that government does not do enough to help average Americans.
There is also growing concern about the size and power of the federal government. The public is now evenly divided over whether federal government programs should be maintained to deal with important problems or cut back greatly to reduce the power of government.
A desire for smaller government is particularly evident since Barack Obama took office. In four surveys over the past year, about half have consistently said they would rather have a smaller government with fewer services, while about 40% have consistently preferred a bigger government providing more services. In October 2008, shortly before the presidential election, the public was evenly split on this question.
The public is now divided over whether it is a good idea for the government to exert more control over the economy than it has in recent years. Just 40% say this is a good idea, while a 51% majority says it is not. Last March, by 54% to 37%, more people said it was a good idea for the government to exert more control over the economy. The exception here is the undiminished support for the government to more strictly regulate the way major financial companies do business. This is favored by a 61% to 31% margin.
We have a lot of work to do.
Ben Bernanke has recently been reappointed chair of the Federal Reserve Board. Time Magazine has proclaimed him 2009 Person of the Year. He has received almost universal praise for his aggressive actions to halt the collapse of our credit system.
But conveniently overlooked in all hoopla is the fact that Bernanke long denied the existence much less the danger of a housing bubble (while his policies were blowing it up) and then was slow to acknowledge the seriousness of the crisis that resulted from the bubble’s collapse.
Thus, Bernanke’s actions (or lack of them) played a critical role in creating the crisis that he finally was forced to confront. Is that a record worthy of Person of the Year honors much less reappointment?
Here are a few quotes that help set the record straight (see the full list compiled by the Center for Economic and Policy Research here):
7/1/05 – Interview on CNBC
INTERVIEWER: Ben, there’s been a lot of talk about a housing bubble, particularly, you know [inaudible] from all sorts of places. Can you give us your view as to whether or not there is a housing bubble out there?
BERNANKE: Well, unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong. We’ve got a growing economy, jobs, incomes. We’ve got very low mortgage rates. We’ve got demographics supporting housing growth. We’ve got restricted supply in some places. So it’s certainly understandable that prices would go up some. I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.
7/1/05 – Interview on CNBC
INTERVIEWER: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?
BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.
1/10/08 – Response to a Question after Speech in Washington, D.C.
The Federal Reserve is not currently forecasting a recession.
2/27/08 – Testimony before the Senate Banking Committee
I expect there will be some failures [among smaller regional banks]… Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.
6/10/08 – Remarks before a bankers’ conference in Chatham, Massachusetts
The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.
As reported by the DailyMail:
Poor people who are desperate for cash have been advised to go forth and shoplift from major stores – by an Anglican priest.
The Rev Tim Jones said in his Sunday sermon that stealing from successful shops was preferable to burglary, robbery or prostitution.
He told parishioners it would not break the eighth commandment ‘thou shalt not steal’ because it ‘is permissible for those who are in desperate situations to take food that they might not starve’. . . .
‘My advice, as a Christian priest, is to shoplift,’ he told his stunned congregation at St Lawrence and St Hilda in York.
‘I do not offer such advice because I think that stealing is a good thing, or because I think it is harmless, for it is neither.
‘I would ask that they do not steal from small family businesses, but from large national businesses, knowing that the costs are ultimately passed on to the rest of us in the form of higher prices.
‘I would ask them not to take any more than they need. I offer the advice with a heavy heart. Let my words not be misrepresented as a simplistic call for people to shoplift.
‘The observation that shoplifting is the best option that some people are left with is a grim indictment of who we are.
‘Rather, this is a call for our society no longer to treat its most vulnerable people with indifference and contempt.
‘When people are released from prison, or find themselves suddenly without work or family support, then to leave them for weeks with inadequate or clumsy social support is monumental, catastrophic folly.
‘We create a situation which leaves some people little option but crime.’
The father of two, whose parish has a wide mix of social conditions, said his advice to people in dire circumstances is that ‘they should not hurt anybody and cope as best they can’.
He added: ‘The strong temptation is to burgle or rob people – family, friends, neighbours, strangers.
‘Others are tempted towards prostitution, a nightmare world of degradation and abuse for all concerned. Others are tempted towards suicide. Instead, I would rather that they shoplift.
‘The life of the poor in modern Britain is a constant struggle, a minefield of competing opportunities, competing responsibilities, obligations and requirements, a constant effort to achieve the impossible.
‘For many at the bottom of our social ladder, lawful, honest life can sometimes seem to be an apparent impossibility.’ . . .
It is often hard to know how our fellow Oregonians are doing — for a good look check out “Survey shows how recession has hit Oregon households” by Richard Read in The Oregonian, September 17, 2009.
The articles makes clear that there is a lot of suffering going on in Oregon, even more than in the nation as a whole. Some highlights:
- “Almost a third of Oregonians polled recently say they or a family member in their household have been laid off or lost a job in the past year.”
- “Forty-one percent say they or a family member at home have had work hours cut during the recession. Nearly a third have housed a family member or friend because of money.”
- “In other responses, 40 percent of Oregonians interviewed say they worry all or most of the time that their total family income will not be enough to meet expenses. That’s 6 percentage points higher than nationally and 9 points higher than last year, when the question was asked in Oregon during a similar survey.”
- “More than a quarter of Oregonians say they or a household member have had problems paying for necessities such as mortgage, rent, heating or food during the past 12 months. Fifty-six percent say that if they were suddenly unable to pay for necessities, they wouldn’t know where to go for help from the government or a charity.”
Economic conditions are bad; what should we do? In many ways the problem is not a lack of ideas—if we had power we could strengthen labor laws making it easier for workers to defend their rights; implement a single payer health system; nationalize the banks and re-direct funds to priority areas like mass transit and green technology; raise taxes on corporations and the wealthy to fund vital social services and programs; change trade laws to undercut corporate power. The list goes on.
No, the problem is more a lack of political power and will. People feel isolated and discouraged. How do we overcome that problem? History offers some important examples that deserve serious study. One is the experience of the 1930s Unemployed Councils.
By the end of 1931, Unemployed Councils in Portland had more than 3000 registered members. When individual efforts to work within the system failed, the Councils often took direction action in defense of their member’s interests. For example, after some 400 unemployed stormed City Hall, the city agreed to provide housing and shelter for over 1000 unemployed working people. [The picture below illustrates the work of the unemployed councils in Portland "reversing" an eviction]
If unemployed workers could come together in the midst of the depression and form a powerful national organization to fight for meaningful social changes for themselves and others, why can’t we help today’s hungry, homeless, and unemployed (modern day victims of social forces beyond their control) organize and work with other movements to demand change?
Here are some places to learn more about the Unemployed Councils:
If you are having trouble imagining the extent of the housing crisis, try these census bureau numbers (as reported by U.S.A. Today):
- A record 1 in 9 U.S. homes (14 million housing units) are vacant, “a glut created by the housing boom and subsequent collapse.”
- That number does not include an estimated 4.8 million seasonal or vacation homes, most of which are occupied only part of the year. The combined vacancy rate is almost 15%. This is higher than previous recession peaks: 11% in 1991 and 9.4% in 1984.
- Homes priced at $500,000 or more are just as likely to be empty as homes that cost less than $100,000.
Now try these numbers from the real estate website Zillow (as reported by the Los Angeles Times):
- Approximately 22% of American homeowners now owe more on their property than it’s worth.
- U.S. home prices were down 14% in the first quarter of this year compared with the first quarter last year.
- Those who bought their homes during the height of the bubble are in the most trouble; nearly 60% of mortgages issued in 2006 are now underwater.
A lot of personal tragedies lie behind these numbers. They also mean growing state and local government budget shortfalls with negative consequences for far more people.
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Are you one of those people who watch business news programs on TV and believe that the “experts” know what they are talking about? If so you need to watch this 8 minute segment from the March 4 Daily Show with Jon Stewart.
It starts with the now famous on-air comments of Rick Santelli (a CNBC analyst), who blasts the Obama administration for trying to directly help homeowners avoid foreclosure while somehow forgetting the huge bailouts that have already gone to the banks and investment houses. This leads Jon Stewart to examine CNBC investment advice and economic predictions in the period leading up to the current crisis. For the results (and laughs) check out: