Personal Finance Concerns Go Beyond Politics

NYT says Americans' wariness about their economic circumstances may allow Romney to convince them he could fix their problems.  Polling numbers apparently show many people not having their act together financially.

• 67% - Worried about paying for their housing
• 20% - Owe more on their house than it's worth
• 40% - Will have trouble paying for their kids' eduction
• 33% - High gasoline prices ($200/mo per car roughly on average) are causing problems

These are amazing statistics.  Are houses' valuation is based on what the market will bear, and apparently that means prices that people can't afford.  Most people bought or rented a house they can't afford?  That seems hard to believe.

The next most shocking statistic is about fuel prices.  If the average car is driven 1000 miles/mo and gets 20 miles/gallon, that's 50 gallons/mo.  At $4/gallon, that's $200/mo.  $200/mo can make or break someone's financial world?  If a family with two cars received $400 more per month, i.e. free gasoline, it would change their financial circumstances?  Maybe this refers to people who use their cars way more than average for business or a special circumstance.  I wish the NYT probed further.

I also wish they had probed why 40% of Americans have had to alter expectations for the type of college they can afford for their children.  What changed between their old expectations and today's?  The stock market has recovered from the crisis three years ago.  Contributions to a typical college fund made during the crisis have nearly doubled. 

I am not trying to make light of the suffering behind these numbers.  They point to a problem bigger than what all the branches of all levels of government combined could do.

Issue of Public Unions is Complicated for Madison

Last February I got a couple of anonymous comments asking why I didn't address the labor protests in Madison at that time.

The main reason is that the Madison vs the rest of the state conflict is not just ideological. Everyone in the state pays taxes, but Wisconsin spends and inordinate amount of that money here in Madison. So all of Madison gets an economic boost at the expense of the rest of the state. Madison is economically successful because of all the knowledgeable people from the university and because of the Wisconsin work ethic. All the government money spent here helps too. Although no one in my immediate family works for the government, many of our clients work for the government. The tide of government money indirectly lifts all boats in Madison. This is not fair to the rest of the state. It would be nice to see government offices spread around the state and linked using IT.

Then there is the issue of the merits of labor unions. I completely rejected Governor Walker's argument that weakening the unions would save money for the state to help balance the budget. The unions were already agreeing to the pay cuts, so it wasn't necessary to dismantle them. My main criticism of unions is that they stifle innovation. They discourage giving people wide authority over a cost center and ability to innovate even if involves hiring and firing people or giving large bonuses based on managers' personal judgment. I am hoping future politicians use the weakened state of unions to shake things up and give great pay for great results, not to nickle-and-dime money out of employees.

It's easy for people to claim critics of unions don't care about helping the poor. Unions can help the poor, but they can also encourage mediocrity. We need to find ways to help the needy without the negative side effects of unions.

Taxes and Jobs

I heard a piece on Marketplace this evening about small business owner's reaction to the "Buffet Rule" increasing taxes on families earning more than a million dollars per year.

The question is whether a tax change would affect hiring and other investment behavior.

Within reasonable tax rates, it's absurd to say tax rates affect hiring and investment. The only reason for business expenses is they earn money. People are taxed on what they earn after expesnes.

You could use the same logical error to say increasing taxes causes hiring and investment since the value of the write-offs increase with tax rate.

This is all absurd. Between state and federal taxes even people with modest earnings set aside a third of what they earn. It's legitimate to ask if we want to take any more. It's legitimate to ask if social services and a military larger that most other militaries combined are worth the cost. If every one, not just business owners, had to write checks for a third of their income people would reevaluate the size of government. But let's not pretend like the issue of taxes is about "jobs".