Fuel Prices Grab Inordinate Attention

I caught a great interview on Marketplace with President Obama today. Ryssdal asked good questions and followed up on the answers.

One thing that stood out is that we're still carrying on about fuel prices. I know this is just something politicians must talk about, but why?

President Obama mentioned someone who has to commute 50 miles per day being severely affected by fuel prices. Let's do the arithmetic.

50 miles/trip * 2 trips/day * 20 days/ month = 2000 miles/month. That twice the typical 1000 miles per month. This person puts almost 100,000 miles on the car in four years, causing it to depreciate faster than average.

If they get 25 miles/gallon, that's 2000 miles/month / 25 miles/gallon = 80 gallons per month. So if fuel prices go from $4/gallon to $2/gallon, that's $160/mo savings. That's nothing compared to the maintenance, insurance, and depreciation on a car being driven 2,000 miles/mo.

Critics will say, "yeah, but what about the poor and near poor? What about people living so close to the edge that the $160 really affects their life?" Poverty is a problem. People spending over an hour each way in a car every day is another problem. Trying to find a way to keep to squeeze $160 out of fuel cost is an unreasonable approach to these real problems. People need to find ways to earn more money, reduce their commute, and use an inexpensive car for long commutes (to minimize depreciation).

I suspect the reason we focus on fuel, is we sit and watch the meter tick off gallons with nothing else to do. The same people who unnerved by this completely ignore that a reasonably late-model car losses >$160/mo in depreciation. They also may being paying interest on the car and hardly think about that.

A politician can't be expected to be the one to do it, but someone needs to show people worried about fuel costs that fuel costs aren't that big of a problem.

An Illinois and Wisconsin Politicians

I wonder if the juxtaposition in this e-mailing I received is intentional.
It looks like a stereotype of an Illinois politician and a Wisconsin politician, from a Wisconsin point of view. The Wisconsin guy is down to earth and friendly. He saying, "This weather feels like June, hey." The Illinois politician is containing his laughter at Wisconsin naivety about crooked politics. It's unfortunate Barrett's picture didn't get the top location.

Victorian Vestiges Presist in Dane County

Madison.com reports that a 29 year-old (at time of arrest) coach, Jason Hairston, at East High was sentenced to seven years in prison for having a sexual relationship with a student. It goes without saying that it's unacceptable to have a sexual relationship with a student or subordinate at work. Our response to this unacceptable behavior is ill-conceived and extremely expensive. It's expensive in terms the cost of locking someone up for seven years but also in the lost productivity and the lost respect for the law. If the young woman had been two years older, this would have been a civil and employment issue. Making this case a criminal issue on par with armed robbery undermines respect for the law.

I condemn the way Dane County and District Attorney Shelly Rusch's handled this. In 100 years historians going over our records will struggle to understand what we were thinking.

I can't imagine how hard it must be for Mr. Hairston's family to have his worst mistakes made public and to have him jailed for something that's easy for people to be sanctimonious about. To those people I say let the one who's never in his life made a mistake that really hurt someone cast the first stone at Jason.

"Encouraging News"

My Representative in Congress, Tammy Baldwin, is running for Senate. She is doing a great job, and I support her for Senate.

She sent out an e-mail today that listed some problems for the middle class and some approaches Congress has taken, which she calls "encouraging news".

Stated Problems:

• People's jobs have been "shipped overseas".
  
• Financial companies' abuses have caused middle-class people to lose money.
• Powerful interests manipulate "the system" to their benefit.
  

Stated Solutions:

• Gov't worked out a settlement with banks regarding a technicality that will result in about 1% of their customers receiving about $20,000 in loan forgiveness of some sort.
  
• Make sure the rich are playing as much in taxes as the middle class.
• Make Congressmen disclose if they're going to trade stocks they have inside info on.
• Help people winterize people's homes.

I cannot understand this approach. Suppose you're someone who believes in the stated problems. Your job is being "shipped overseas", and financial institutions are hitting you while you're down. Congress will winterize your home.

My point is not whether I agree with the problems and solutions. I agree with some and not others. I don't get this marketing approach though. If you start out with these large problems, it seems lame to say the actions Congress has taken are things like loan forgiveness (perhaps for people who couldn't pay anyway) and winterizing homes.

It seems to me that Republicans have a clearer marketing strategy: Evildoers are threatening you. We'll lock them up or kill them (without regard for the cost). That makes logical sense. I don't get this Democratic argument: Structural problems in the economy prevent you from succeeding. We'll winterize your home.

If you must pick a simple threat and solution to be elected, it seems like Democrats should work out a better narrative.

WI Should Have Accepted Federal Healthcare Money

It's unfortunate to read that Governor Walker turned down $37 million in federal money to help create healthcare exchanges. I'm unclear whether this means we don't have to implement the exchanges as fast or if this is pure politics.

Governor Walker says he wants to wait until the US Supreme Court rules on the constitutionality of the healthcare reform law. This seems like a bogus argument because they won't rule he exchanges illegal and the very argument that it's unconstitutional is flawed. I say it is flawed because before any of the reforms went into effect, paying customers subsidized those who couldn't pay and did not have insurance that would pay. The law says people need to buy insurance, pushing those costs from other paying customers to the people actually using the healthcare services. The only reason I can see it being unconstitutional, in my non-attorney opinion, is because the federal government is involved in it. That's a mere technicality since the condition existed prior to the health reform law.

I opposed the healthcare law in the form it passed. It would be a good idea to change it. It has done some good, but it risks creating problems when the rest of it is implemented.

Wisconsin rejecting the federal money, though, is foolish. We should try to make it work and try to pressure Washington to give us more autonomy and let us have a more privatized system. Governor Walker's rejection of the money is wrong and alienates pragmatists and moderates.

Madison Real Estate Assessments Decreased 3% last year

The headline story in the Wisconsin State Journal today is an article saying real estate prices in Madison declined 3% last year. It’s good that they’re reporting this in a city where the some bubble-clouded thinking persists. There are few points, though, where the article is could have investigated deeper.

1. The article attributes the decline to the recession. It does not address whether the national bubble could be playing a role.
2. The article accepts property assessment values as accurate (at revealing price fluctuations of neighborhoods) without giving any justification.
3. The headline says this is the first decline in 35 years, but it does not look at inflation-adjusted numbers. I suspect that adjusted for inflation there was at was other decrease in the past 35 years.
4. The article accepts the assumption that it’s good for houses to be expensive.

My impression is that the bubble is still present in Madison and just starting to deflate. Most residential properties on the market are priced such that they would not cash flow at today’s interest rates unless they were purchased with a down payment significantly greater than 20%, which to me is the hallmark of an RE bubble.

Assessed prices appear to lag actual prices, so I suspect the decline we have had so far is well over 3%.

If mortgage interest rates rise significantly, it will push prices lower. Since rates are expected to rise, I’m surprised this risk isn’t priced into the market.

All of this means Madison will be experiencing price declines similar to what Minneapolis experienced in a few years ago.

Daycare Subsidy Issues Runs Into Larger Societal Questions

My least favorite leftwing advocacy group sent me an e-mail about why it’s so important that the government fund childcare and preschool.

My husband and I have to work opposite shifts because child care is unaffordable. He works from 6am to 2:30pm, and I have to meet my husband at his job to drop off our son so that I can be to work by 3:00pm. I miss out on putting my son to bed.

It goes on to say they support subsidize that would allow both parents to work at the same time and the kid to spend all day in daycare.

This two-sentence anecdote really got my attention because childcare is something my family struggles with. We have no struggles in paying for it, fortunately, but we struggle with how much childcare we want to use and how to structure it. I leave for work at 7:30am. Early in the afternoon, our babysitter arrives and my wife goes to work. I arrive home before 7pm and relieve the babysitter. I put our baby to bed around 8pm. My wife gets home at various times, usually a little after 8pm.

We are fortunate to be able to afford any amount of daycare we want, but we specifically structured this so we would both get a good amount of time with our baby. I do not claim this is the best way to do it. It’s a system that works for our family at this time.

The e-mail calling for spending tax dollars to help move a kid who spends all day with his parents to a system where he spends most of the day away from them really catches my eye. The e-mail supposes that if this family had just a more money, they would use it to see their kids only briefly in the morning and briefly before bed. There may be many advantages to doing it this way, but we should think it through carefully before we subsidize it.

We also need to look at who is getting the subsidy. If one member of this family earns a solid living wage but their lifestyle requires two incomes and subsidized daycare, in my mind we’re subsidizing the fancy lifestyle as much as the daycare b/c the family could simply give up the lifestyle and pay for daycare themselves.

The funny thing is I support the key initiatives this e-mail is calling for: childcare funding for the poor, increased funding for preschool for the poor, and nutrition programs. In their call for more subsidies for the poor, though, they run into these hard questions about who should take care of our children. I imagine that most societies throughout human history have had a cultural model dictating who is responsible for taking care of the children. The US culture isn’t about dictating anything, so it’s up to the individual to work it out. Individuals need to take note and start working it out for themselves early. Otherwise you end up like the people quoted above who had kids, wanted someone else to take care of them, and didn’t realize they didn’t earn enough money to pay someone to care for their kids.