Category Archives: The Great Recession

Blight of Day

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Is Detroit’s new-found cause célèbre ignoring the past to cloud the future?

George Clooney had the Sudan.  Bono has Africa.  Anthony Bourdain – and much of the American media - apparently has Detroit.

Michigan’s So Not Grand Central Station: built in 1912 and on the national registry of historic places. It was closed in 1988 and is one of Detroit’s estimated 78,000 abandoned buildings.

In recent months, the city of Detroit has witnessed two narratives arise in Phoenix-like fashion from the economic ashes of the city, often in conjecture with themselves.  One is the purported economic revitalization of the city that gave birth to Motown and the American automotive industry.  It is a narrative fostered by Quicken Loans founder (and Cleveland Cavs owners) Dan Gilbert who, among others, has put millions into Detroit to try and restore its grandeur.  The other narrative, the so-called “ruin porn” seen in picture form below, depicts Detroit as a third-world ghetto.  A Somalia on the St. Clair River.

The former delights the denizens of Detroit with hopes of a better future.  The latter rankles them.  Gilbert himself expressed outrage when 60 Minutes balance their report on the Motor City between Gilbert’s altruism and the destruction of the out-lying portions of the city, comparing it to Dresden after the Allied bombing of World War II.  Gilbert tweeted a defiant message, stating “a city’s soul that will not die was the story & they missed it.”  But even a sympathetic, blue-collar soul as Bourdain, whose CNN show Parts Unknown highlighted the city last night, saw the need to balance Detroit’s attempts to pick itself up off the ground with the stark realities of a city undone.

The Fisher Body Plant: once part of the GM empire

Both narratives ignore the Chrysler in the room – how Detroit got to where it is today.

If the “ruin porn” industry renders pity without judgement, the acts of Dan Gilbert and others, as well-intended as they obviously are, seek a future for Detroit without acknowledging its past or present.  Not once in 60 Minutes‘ coverage did the story’s telejournalism deal with the political causes for Detroit’s decay - a corrupt, one-party institution burrowed like a tick into City Hall.  Equally, if differently, ignorant are the views of Gilbert et al who believe that once their plans to remove all of Detroit’s blight (78,000 buildings), capital will come easily rushing back into the city:

Gilbert is no fan of urban farming, though. When he envisions land cleared of  blight, he sees developers rushing in to build anew…

“When that blight is gone, maybe we don’t have to be talking about shrinking cities because it will be such a rush of people who want to get into low-value housing — when all the utilities are there and the land is pretty much close to free— not exactly free, but close to it — and all the utilities are there, it becomes very cheap for a builder/developer to develop a residential unit, and they are going to develop them and develop them in mass as soon as we get the structures down and maybe we don’t have to worry about raising peas or corn or whatever it is you do in the farm.”

The Highland Park Police Station: even Detroit’s police stations no longer want anything to do with the city

And what will cause developers (yet alone individuals or businesses) to return to a city with the highest property tax rate in the country?  What will encourage retail industries when Michigan’s sales tax is 6% on top of that?  Detroit’s backers can honestly claim that the city ranks no where near the top of the tax chain (Detroit ranks 92nd nationally; Minneapolis is 52nd by comparison).  But the tax climate is far from ideal, especially the dubbed ”most dangerous city in America” with a murder rate 10-times the national average.  Throw in a 58-minute response time for police, to attract businesses back, Detroit may literally need the fictional hero RoboCop (to whom a statue is being built - seriously).

There isn’t much evidence that Detroit is about to change its ways.

The Merrill Fountain at Palmer Park: has sat empty for 50 years since being moved from the Opera House. Vandals have stolen much of it.

The Merrill Fountain at Palmer Park: has sat empty for 50 years since being moved from the Opera House. Vandals have stolen much of it.

Since Governor Rick Snyder’s decision to appoint emergency manager Kevyn Orr last spring, Detroit’s journey to bankruptcy has been managed with minimal (some would say no) input from City Hall.  As the case has headed to court, where Orr has testified about Detroit’s long-term debts of $18 billion, city officials have fought the measure almost every step of the way.  The election of Mike Duggan as mayor, the former head of the Detroit Medical Center, has been advertised as the promotion of a turnaround artist.  But while Duggan had success revitalizing the city’s Medical Center, Duggan also ran on opposing Orr’s decisions and comes as a political protégé of former Wayne County Executive Edward McNamara – an official who backed the cartoonishly corrupt Kwame Kilpatrick and had FBI agents and state police raid his own office in November 2002, over alleged corruption in airport contracts and campaign fundraising.  Meet the new boss.

The American Hotel: built in 1926, the hotel is 11 stories high with over 300 rooms. It has remained vacant since the early 90′s.

Oh, there have been the requisite platitudes.  Duggan and Orr have broken bread in what was described as a “very good first meeting.”  And Duggan has said all the right things that a reformer would state, such as being “a huge believer in lean processing. If you are not excellent at making systems work, you cannot survive…”

But the inertia of the status quo has been apparent even after only one week from the election.  The Michigan House Appropriations Committee ranking Democrat Rep. Fred Durhal, Jr. is angry that Duggan hasn’t called him yet.  Metro Detroit AFL-CIO President Chris Michalakis essentially threw down a polite ultimatum that Duggan must “honor” his commitment to working families, while suggesting the labor doesn’t trust the new mayor.  Duggan claims he just wants a seat at the table as Detroit’s debts are solved, and if Synder and Orr are smart, they’ll allow it.

Wilbur Wright High School: closed in 2005, this building actually is among the few on this list that has been demolished. 10,000 buildings have been torn down in Detroit since 2010.

The decision to abrogate Detroit’s city government in the bankruptcy process may have been politically necessary (Detroit certainly hasn’t come to grips with its position despite many, many, many opportunities), but doing so has allowed Snyder and Orr to play the villain while the usual suspects who caused this economic disaster play the victim.  However, it’s also allowed Snyder to take all the credit too.  67% of Michigan voters approved the move back in March (including 41% of Detroit), and the decision has given Snyder a welcome bump in his approval rating.  That’s a short term political fix to a long-term structural problem.

Mike Duggan may be a product of the system that failed Detroit, but he’s viewed warily by both it.  Orr’s contract expires in the fall of 2014; Duggan and the City Council can vote whether or not to renew it – almost literally the only voice they have in the process.  If that’s the first time Duggan has to impact the process, he’ll have likely caved by then to labor, vote to end Orr’s tenure and – more importantly – work to undo reforms set in place.  Should Rick Snyder not return in 2015, an opportunity to address Detroit’s deeper fundamental problems will have passed and a new administration will slap a band-aid bailout on the city, and hope more journalists write about Dan Gilbert than urban hunters who live off of raccoon to supplement their meals.

Dead Skunk Plop

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Joe Doakes from Como Park emails:

Not as many people are filing for bankruptcy, only about 1 million people a year, down from an average of 1.5 million that has remained fairly steady for the past 20 years.

There are 300 million people in the whole country, 80 million of whom are children that can’t file.

If 1.5 million go broke year after year and I’m 50 years old, then 75 million people – nearly 25% of the country – has gone bankrupt in my lifetime.

Wow, how much better can The New Economy get?

Joe Doakes

Can? Much.

Will? Ugh.

Our Innumerate Overlords

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When Representative Ryan Winkler talks, people listen.

And then the smart people snicker.

He tweeted this yesterday:

Of course, he had the point of the op-ed all wrong.  Read it for yourself.

The point is that low wages aren’t the sole cause of poverty.  In the great scheme of things, they aren’t even especially important, in and of themselves.

Much more important?  When there is no opportunity to earn higher wages.

How does that happen?

To further address the point, though, I’d like to ask Rep. Winkler (or his defenders) this question:  at what minimum wage hourly rate will poverty disappear?

Put a number on it.

That’s the question I’d like to ask.  In fact, I asked it.

Hopefully we’ll see an answer.

I’m sure we will.

Continue reading →

Chart Your Own Recovery!

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How many jobs a month do we have to add to bring the level of employment back to pre-recession levels?

How long will it take to get back to pre-recession employment at current – or any – rate of job “creation?”

Check it out for yourself!

Hint – at the current rate (169,000 a month, before adjustments), we’re ten years away.  Although the calculator doesn’t distinguish between full-time and part-time jobs – although under the Obama notion of “recovery” the same number of jobs doesn’t mean the same kind of prosperity.

And They Say DFLers Don’t Get Economics

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Let’s say, hypothetically, that you live in a city.

And in that city there are 19 big companies.   They have everything that makes up a big enterprise – a CEO, executives, management, stores, labs, manufacturing plants – in your city.

And then the economy picks up.  And the 19 big companies hire more people, because a good economy means good sales, which means you gotta develop, build and sell all of those 19 sets of products!

So what’s the measure of the good economy?  ”19″?  The number of big companies in your town?

We’ll come back to that.

Then, driven by high wages and the need to be competitive, the 19 companies outsource their manufacturing to the Philippines.  All the people in your town that earned a living from building things for those 19 companies are out of work.

How’s the economy measure?  Still a “19?”

And then the price of R and D rises, and the companies relocated their R&D labs to India and Singapore and Slovenia.  All your researchers are out of work.

Is your city still a “19?”

And then the economy tanks.  Stores scale back and lay people off, managers get RIFFed, the work force plunges.  Your town’s unemployment lines are getting longer and longer…

…but there are still 19 CEOs and corporate boards in town.  They administer companies that do their R&D and manufacturing elsewhere, and sell to whomever can afford the products through stores that are ever dingier and more understaffed.

But those 19 CEOs are still in your town.  So the town’s economy is healthy.  Right?

If you said “what, are you kidding?”, you might be a conservative.

If you didn’t, you probably think this piece by Dave Mindeman at MnpAct makes perfect sense.

North Dakota and Wisconsin taunt our borders with new signs that say – Our State Is OPEN For Business!

Everybody seems to be overlooking the basics here.

Sure taxes have some effect on business decisions….so do a lot of other things. Let’s look how Minnesota compares.

Now, let me make sure I reiterate; Mindeman is one of that tiny minority of Twin Cities leftybloggers that don’t need to be under police surveillance.

But when he says “let’s look how Minnesota compares”, what he really means is “let’s cherry-pick some non-sequiturs as absurd as the fictional list of company CEOs in my example above”.

No, literally:

The Facts: Minnesota has 19 Fortune 500 companies. Five are in the top 100. Fourteen in the top 300. United Health ranks the highest at #22. Minnesota ranks 17th in the nation for total GDP. We rank #14 in GDP per capita. Our current unemployment rate is 5.3%. Our high school graduation rate is 91.6% (National average is 85.4%) Persons with at least a Bachelor’s Degree – 31.8% (National Average – 28.2%) Median Housing Value – $201,400 (National Average – $186,200)

Let’s leave aside for a moment the factors that have nothing to do with measuring economic health (graduation rates are nice, and might – maybe - predict the future, economically.  Or they might not.  But if 100% of your town has masters degrees, but they’re all in Women’s Studies so the unemployment rate is 100%, what’s the real (hypothetical) measurement?);

We’ve got 19 Fortune 500 companies.  Bully.

Now – are those companies creating jobs in Minnesota?   Is 3M building new plants in Minnesota?   In fact, they literally exported one plant, with hundreds of jobs that used to be on the East Side of Saint Paul, to South Carolina.  And do you remember when they used to do R&D in the Twin Cities?  Welcome to Austin!

Medtronic?  Aren’t they contracting?  Well, here they are.  In Tennessee?  Not so much.

Boston Scientific?  Well, they’re not expanding anywhere – but it’s here in MN that they’re contracting fastest.

When was the last time Ecolab built a plant in Minnesota?  (Trick question; it was the seventies).

It’s not just big Fortune 500s, of course; Red Wing Shoes is eyeing a move.  Jostens is shifting jobs from Owatonna to Texas, the first of what will likely be many moves to lower-tax states.  We talked about the iron mill that’ll be built in North Dakota rather than the Range last week.

But we have 19 headquarters here.  Right?

Well, doy.  Of course we do.  If you’re a Fortune 500 CEO, where would you rather live – around Lake Minnetonka, the Guthrie, the Ordway, with Cathedral Hill restaurants and Galleria shoppping, or up in some holler in Mississippi, sweating through your underwear? It’s a no-brainer.  And that creates jobs – for management, for MBAs and upper management, sure – and their administrators and financial planners, and bartenders and caddies and nannies and gardeners, too.

But where are you going to build the plant, and create the jobs, especially for the people who aren’t management?  Who  don’t have the MBA and the BMW and the career spent networking among the corporate elite and the decades of experience in a field?

You did see the paragraph about all the “Minnesota” companies building plants elsewhere, right?

Mindeman:

So, how do we compare with our neighbors?

Vs. North Dakota: Sure North Dakota has a very low unemployment rate. A big surplus. And most of all an oil boom. But North Dakota doesn’t have a single company in the state on the Fortune 500 list.  Not one single business.

Remember that next time you run into an unemployed Ford Plant worker; “hey, you’ve got no job, but at least we’ve got lots of headquarters here!”.

Of course Minnesota has the Fortune 500s.  Minnesota benefitted from what mattered to people, and companies, when population patterns were largely set, back in the 1800s and early 1900s;  proximity to resources, plus water, rail and eventually road communication, which led to an urban center; this center became the center the upper-midwest region, the part of the country west of Chicago and north of Omaha and Saint Louis and east of Denver.   The era when the big Fortune 500s we currently have were largely formed.  An  era that, according to some thinkers on the subject, is on its tail end, and will be over someday soon.

In total GDP, North Dakota ranks 50th out of 51 US economies – and although they do better in per capita rank (20th); of what value is a low GDP with a total population that would fit into Hennepin County?

Leaving aside that Mindeman brushes aside an amazing statistical anomaly – a state that was poor, with a low, agriculture-related GDP fifteen years ago, that is now batting thirty spaces above its weight, in league with the big, inflation-adjusted coastal economies – like it’s no big thing, he gets the real question backwards.

What could Hennepin County – whose unemployment and crime lead the state, whose schools are among the worst in the state, whose achievement gap is a state disgrace, and whose major city is rapidly fulfilling Joel Kotkin’s predictions of the obsolescence of the big central city – do if they used their resources, their inherent dynamism and their talents as wisely as North Dakota has?

North Dakota may be having an economic “boom”, [Why the scare quotes, Dave?  It's a boom.  No bones about it!] but why would any business consider a major move to a state that has a total market of about 800,000 people and a GDP that is about 1/8 of Minnesota’s? Really?

So many problems with that statement.  So many confirmations that DFLers just don’t get economics.  Where to start?

Mindeman is reliably imprecise when has asks “why would any business” move to North Dakota.

Any business?

Best Buy?  3M?  Starkey Hearing?  They’re not going to move to North Dakota.  What’d be the point?

You want to start a trucking company?  You’ll be making money hand over fist.  A machine shop in Minot?  You’ll be working three shifts seven days a week the moment you open your doors.  A house-cleaning service?  Accounting firm?  Security company?  Contract law firm?  Gas station?  Hotel?  You’ll have more business than you can handle.

Mindeman runs through all the neighboring states – focusing especially on the relative dearth of Fortune 500s in Iowa and the Dakotas – and asks:

Again, is that the type of market that can attract major business?

Why the obsession with “major” businesses?

The “Fortune 500″ is an arbitrary set of companies (or was – it hasn’t actually been published in ten years), set by the editorial staff of a magazine.  It focuses, by definition, on the 500 biggest companies, in terms of sales, profits, assets, market value, and employees.

Not growth.  Not innovation.  Just sheer size.

Are these companies the major sources of American economic dynamism?  Of innovation, strength, or even new hiring?  No.  They are not.  Small business is.

Sure there are plenty of people moving out of Minnesota and heading south, but that has been a weather trend that has been going on for decades. Our population is holding better than any of the states that border us.

Another factoid that Mindeman sails past like a mile marker on 94 headed west for good.

Why have people been leaving for decades?  Why is Minnesota on the cusp of losing a Congressional seat?

If you think it’s the weather – the Dakotas are growing.

Let’s put the question this way; if you’re a financial researcher with an MBA, your best shot at a job is in one of the big metro areas, with a big company.  Ditto if you work in political non-profits – you go where the politics are.  Big cities.

But if you’re a person with a high school education, maybe with a child to support and some bills to pay, which state would you rather be in right now – North Dakota or Minnesota?

Republican talking points are only so much hot air.

Minnesota’s quality of life is thriving and we are the Midwest model for business.

That’s what the facts say.

And maybe in a future post Mindeman will explain exactly why, in terms other than “CEOs per acre”.

Maybe.

Bleeding Slower

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Joe Doakes from Como Park emails:

Fewer people are applying for unemployment.  So there must more jobs, right?  Yes, the article says: “The job market has also improved over the past six months. Net job gains have averaged of 208,000 a month from November through April. That’s up from only 138,000 a month in the previous six months.” No wonder I keep seeing so many Help Wanted signs.

But then the writer follows up with this:  “Still, much of the job growth has come from fewer layoffs—not increased hiring.”

 

Screeech.  Hold on, what’s that?  How can Growth come from Layoffs instead of Hiring?  You didn’t get laid off, so that’s the same as being hired?

 

Turns out employers are still laying off people and aren’t hiring full time because of Obamacare and tax increases, but they are hiring part-time workers who don’t get Obamacare.  Those McJobs are the heros of this story.  People taking McJobs don’t apply for unemployment.  That’s your hopeful sign?

And the article doesn’t even mention discouraged workers.  Instead it says: “Applications are a proxy for layoffs. Weekly applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy.”  Okay, I can buy that applications are a proxy for layoffs.  When you get laid off, you go apply for unemployment.  Makes sense.  And I can believe there aren’t many layoffs coming anymore, most of the fat was wrung out of the system years ago.  So yes, very few layoffs after five years of lean is the same rate as very few layoffs when times are booming.  All that adds up to “we’re bottoming out” not “prosperity is right around the corner.”

And then, this howler:  “Wages rose 3.6 percent in April.  That’s comfortably ahead of the 1.5% inflation rate.”  My wages sure as Hell didn’t go up, but my grocery bill did and gas is back up to $3.77 today.

 

I’m actually impressed the Associated Press has managed to stuff so many ridiculous claims into one article and pass it off as good news.

 

Joe doakes

The U6 number – counting the percentage of unemployed and underemployed – is up, even as the number of unemployed dropped a bit. The average amount of time worked in a week dropped. That means the job creation is all part-time.

This isn’t a recovery. This is blood clotting and an infection forming.

Canaries In Coal Mines And All That

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Joe Doakes from Como Park emails:

There are companies that buy, sell and trade gold (major banks and investment firms, generally). The actual gold bars are stored by Comex, which stands for Commodity Exchange, and is part of the New York Stock Exchange. Remember the Bruce Willis movie where the bad guys faked bombs in schools to divert cops while the bad guys stole the gold bricks from Wall Street? That’s what we’re talking about – huge supplies of actual gold bricks being stored in vaults for their owners.

Owner who are now pulling the gold out in record amounts. Giant withdrawals. Trillions of dollars worth.

Did they have unexpected expenses to pay? Losses to cover? Fine, that’s what it’s there for.

Or are they grabbing their gold before the economy collapses because they know something we don’t? Not fine, that’s what we’re all afraid of.

I’d stock up on bullets and whiskey but there are no bullets for sale. Which means more money for whiskey, I guess. So that’s not all bad!

Joe Doakes

Como Park

Look!  Guns and abortion!

This Is Your Obama Economy, April Edition

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The topline number has all the mainstream media bobbleheads a-tingling; unemployment is “down to 7.6%”.

It’s wind in sails, of course; the labor participation rate has dropped to 63.3%, the lowest it’s been in ten years of measuring, and the lowest it’s been so far in this recession.

Which means the actual share of the work force above the age of 16 actually working is 58.49%.

That number is…:

  • Almost 2.5% lower than the day Barack Obama took office (60.58%)
  • Statistically the same as October, 2010 (58.5%), when unemployment peaked at 10%.
  • Marginally up from December of 2010 (58.2%), when the recession bottomed out (and which looks like a statistical fluke, coming between two months in the 58.5% range)
  • Marginally better than the low-points in this calculation (58.18, in November 2010 and July 2011, when the unemployment rates were 9.8% and 9.1%, respectively).

It takes a lot of lipstick to make this look like anything but a pig.

EMT for the 313

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Speramus Meliora; Resurget Cineribus

“We Hope For Better Things; It Shall Rise From the Ashes.” – City of Detroit’s motto.

Those words were written in 1805 to memorialize a Detroit school burned to the ground.  208 years later, Detroit still hopes for divine intervention, this time from the Michigan capitol.

Michigan Gov. Rick Snyder’s proclamation of a “financial emergency” in Detroit was the culmination of a decades-long municipal car wreck.  Between 2000 and 2010, the city lost 237,500 inhabitants — an estimated 1/4th of the population.  One in 20 homes were foreclosed upon during the height of the recession.  The city remains $327 million in the red with $14.9 billion in unfunded city pension plans.  By comparison, the entire state of Michigan’s biennial budget is $49 billion.

While Detroit has been slowly crashing into a wall of economic reality, a busload of corrupt and incompetent city officials have rubber-necked their way past the myriad of issues confronting the city.  In the last decade, Detroit saw 131 convictions of government officials, a number defined by the reign of ousted Mayor Kwame Kilpatrick.  Even the federal government last year withheld millions in grants from Detroit over concerns of corruption.  The city’s reaction?  We’re not as bad as Chicago when it comes to corruption, so what’s the big deal?

The Roosevelt Warehouse or Detroit School Book Depository. A fire in 1987 did some damage to the building but was abandoned despite most of the inventory being usable. No effort to recover science and sports equipment, scissors, crayons, and books was ever made and now all sit on the floor in ruin

Synder’s appointment of an “emergency manager” to oversee the Detroit budget and pension plans has elicited howls of protests from the usual suspects:

“[Emergency managers] can unilaterally tear up union contracts, take over pension funds, make and repeal laws, sell public assets, the list goes on,” he said in an earlier interview with The Huffington Post. “Imposition of the EM must be understood in the context of the many other methods conservatives are using today to suppress democracy –- especially among people of color and people in poverty.”

But the decision to go the EM route has also gained critics on the Right, with one National Review writer declaring Snyder’s decision, in hyperbolic form, a “uniquely American way to dictatorship.”

The Emergency Manager legislation has gone through a number of iterations over the years, including one version, Public Act 4, that was opposed by the unions and defeated on the ballot last November.  PA 4 would have allowed EMs to effectively run cities, with their authority superseding that of city officials.  Instead, with PA 4 defeated, Snyder is falling back on the format of an older PA – one that while still not allowing EMs to be fired by the city, doesn’t grant them the power to abrogate collective bargaining or dissolve local governments.

The United Artists Theater. The theater is actually part of an 18-story high rise built in 1928. The historic building was such an embarrassment that the exterior was refurbished before the Super Bowl in 2006. The interior remains as seen.

Despite the fact that no one will be declared dictator, or even Pontifex Maximus, Snyder’s decision has prompted Detroit’s City Council to fight tooth-and-nail against any EM, filing an appeal against the state.  One official who isn’t planning on fighting Lansing is surprisingly Detroit’s Mayor Dave Bing.  Like the rest of the city government, Bing isn’t happy about Snyder’s power play, but unlike the rest, Bing is willing to work with any EM.  Speaking at a City Hall press conference, Bing stated that “we need to stop BSing ourselves,” a quote perhaps applicable to more than just an acknowledgment that an emergency manager would be imposed on Detroit whether they liked it or not.

An emergency manager invites micro concerns – with 83 cents of every Detroit police and fire payroll dollar being spent on pensions by 2017, what use is an EM without the ability to unilateral restructure pension and/or contracts?  But the macro concerns of the decision are far more troubling.  How do you save a city that won’t save itself?

The Lee Plaza Hotel lobby. The Lee Plaza is on the United States National Register of Historic Places.

H.L. Menchken famously declared that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”  Detroit has certainly being getting it “good and hard” for decades, and like an S&M enthusiast whose forgotten their safe-word, doesn’t know how to stop.  Bankruptcy may be an option, but it doesn’t address the billions in underfunded liabilities.  And considering all bankruptcy would do is force Detroit and its creditors to negotiate, there’s not much more that an EM would do for the situation except provide a political scapegoat for the necessary hard choices to come.  It should be little wonder that Mayor Dave Bing isn’t fighting Snyder’s executive decision – he’s probably relieved someone else will being taking the slings and arrows (in Detroit; statewide, the move is very popular).

Yet what happens after the dust settles?  Even if Snyder’s EM hacks Detroit’s budget into the black, will the political machinery or populace live with the decisions?  Or, having avoided any connection to the policies implemented to take Detroit on the long road to fiscal solvency, will the business of City Hall simply revert to usual?

Snyder’s technocrat lean may be well-intended, but in the case of Detroit, is only delaying the city and its voters coming to terms with their decisions.  Although on the plus side, Snyder’s move is the first job created in Detroit in years.

Liberté, égalité, vacances

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France’s continued Hollande from reality gets a rude wake-up call from America.

With an unemployment rate that’s been hovering around 10% for nearly four years, unemployment benefits that somehow manage to be the most generous in Europe and yet exclude thousands of eligible non-workers, and an attempted tax bracket of 75% on top earners, France clearly isn’t economically serious about domestic jobs.  That hasn’t stopped them from being seriously upset at the lack of foreign capital coming to their rescue.  Or when that same foreign capital criticizes the famous French non-work ethic.

When Goodyear Tire & Rubber Co’s Amiens Nord plant faced being closed,  threatening 1,250 jobs, Paris attempted to mediate a sale to Illinois-based Titan International.  Unable to get the French unions to move on any of their conditions, Titan’s owner, Maurice Taylor (last seen running for the Republican presidential nomination in 1996), fired off his answer on any potential purchase:

“The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three and work for three,” Taylor wrote on February 8 in the letter in English addressed to the minister, Arnaud Montebourg.

“I told this to the French union workers to their faces. They told me that’s the French way!” Taylor added in the letter, which was posted by business daily Les Echos on its website on Wednesday and which the ministry confirmed was genuine.

“How stupid do you think we are?” he asked at one point.

“Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour wage and ship all the tires France needs,” he said. “You can keep the so-called workers.”

Taylor’s jab on going to China or India has to chafe Arnaud Montebourg, France’s Minister of Industrial Renewal, whose industrial policy has thus far been to scapegoat low-wage competitors.  Montebourg even blocked Indian steelmaker ArcelorMittal from buying a French plant in 2012, apparently proving that beggers can be chosers.

Who needs employers?

Taylor’s brusque reply may dominate the headlines (who are we kidding with ‘may’?), but the real story is France slowly coming to terms with, well, their unemployment terms.

Despite the reputation of being exceptionally generous, which they are, France’s unemployment benefits are reaching fewer and fewer unemployed.  Even as unemployment has increased, the percentage of beneficiaries has decreased – 44.8% of those eligible receive benefits, down from 48.5% in 2009.  Many eligible are being turned away, a situation brought to greater public awareness when an eligible beneficiary set himself on fire in protest for being declined.

Why are even eligible beneficiaries being told ‘non’?  Because as the French government auditor, the Cour des comptes (think of it as the French CBO), recently stated, the system of benefits is “unsustainable”:

The current funding system is expected to reach a deficit of 5 billion in 2013. According to the Cour, the French system is largely to blame for the deficit, as it is much more generous than similar benefits programs in neighboring countries. For example, the current allocation is between 63 and 93 percent of the previous incomes of the unemployed. In addition, the minimum compensation length for unemployment benefits in France is two years, compared to one year in Germany.

Such debts helped France’s credit rating fall to AA1, despite President Hollande’s pledge to reduce the deficit by the end of 2013.  With familiar rhetoric coming from another left-leaning politician, it’s little wonder what Maurice Taylor chose to acknowledge in his letter:

Socialist President Francois Hollande may take some comfort in the view Taylor expressed of Washington: “The U.S. government is not much better than the French,” he wrote…

Just Keep Repeating To Yourself…

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…that raising taxes in a recession isn’t face-palmingly stupid:

“In case you haven’t seen a sales report these days, February (month-to-date) sales are a total disaster,” wrote Murray in a February 12 email to executives. “The worst start to a month I have seen in my (about) 7 years with the company.”

The recent hike in payroll taxes is dragging down sales for discount retailers like Wal-Mart. With less disposable cash in their wallets, lower-income shoppers have less to spend.

The bad news comes on the heels of a lackluster January for the major retailer.

“Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?” wrote Walmart Vice President for U.S. Replenishment Cameron Geiger in a February 1 email to Walmart executives. “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?”

If we – the “middle class” – have 5% less money between payroll taxes and Obamacare, then that’s 5% less to spend at Walmart.  Or Patagonia, or MPR’s pledge drive, or what have you.

Most of us know this.

Democrats in DC and Saint Paul, it seems, do not.

Prudence

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Joe Doakes from Como Park writes:

I like this analogy, from Instapundit

***

Don’t think that zero is as low as interest rates can go: money as a store of value is also threatened.

Primitive man often faced an interest rate of -%50 per hour, if he caught some meat for instance, and was trying to get it into the bellies of his family it spoiled or was snatched by competitors. Now you can store your income and wealth in financial instruments and only buy meat when you want to eat it, or keep it in the fridge or freezer for even greater convenience. We take all this for granted, but as near-zero nominal interest rates come to be paired with rising inflation–an outcome that is pretty much guaranteed under QE3–even coin and currency will no longer keep stored value from wasting away. We are heading into difficulties that should be a thing of the past, and its not just bedbugs and resistant disease. Government is squandering EVERYTHING.

***

So we need to invest in stuff that won’t spoil, that people will be willing to trade for after the economy collapses. Honestly, gold bullion doesn’t strike me as useful for everyday living. More useful, durable stuff would be:

Whiskey

Bullets

Toilet paper

I’m pretty much good to go.

Joe Doakes

Como Park

Americans at large – other than Mormons – have never really taken the possibility of complete collapse seriously.

It’s looking smarter and smarter.

I bet I just got onto a DHS watchlist, didn’t I?

The Democrats’ Big Lie

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You see it in Presidential statements, in Bill Clinton’s pro-Obama ad, and all over the place:

“Deregulation and tax cuts are what got us into this mess in the first place”.

It’s a Big Lie, and they’re repeating it over and over and over, in hopes that they can lop off not only the low-information voters, but maybe a few “moderates” and “Independents” who don’t pay much attention beyond the sound bites.

The melt-down in the financial industry was caused by the socialization of risk and privatization of reward – by the government.

The melt-down had nothing to do with tax cuts.  Democrats say that the deficit was exacerbated by the Bush tax cuts – which is true, if you believe that spending is inviolate and must be paid for rather than cut.

“But non-discretionary spending is, well, non-discretionary”.  Only if you don’t have the guts to change the laws.

Long story short:  the Democrats are lying to you, in hopes that enough of you are uninformed or incurious enough to buy their BS.

There’s really no more artful way to put it.  And I’m getting tired of trying to be artful about it.

No, You Are Not Better Off Than You Were Four Years Ago

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Not a freaking chance in the world.

Three years and seven months into the Obama administration, there’s no longer any reasonable doubt that we’re living through the worst presidential exercise of economic stewardship since Franklin Delano Roosevelt’s rabid progressivism known as the New Deal locked the Federal Reserve-created, Herbert Hoover-enhanced Great Depression into place for eight additional years. In 1932, the year before FDR was inaugurated, the unemployment rate was 23.6%. In 1940, it was still 14.6%. In between, it never fell below 12%. The economy only recovered because of the military build-up required to win World War II.

I heard Kruger on NPR on Friday – spouting his “Recovery” claims without any pushback from the hosts.

The media is doing its best to floss the narrative to a fine sheen.

Today, as Mort Zuckerman accurately contended in a Friday evening Wall Street Journal op-ed, “we are experiencing, in effect, a modern-day depression,” where “dependent millions” relying on food stamps and swelling the disability rolls “are the invisible counterparts of the soup kitchens and bread lines of the 1930s.” Zuckerman, James Pethokoukis at the American Enterprise Institute, and Amy Payne at the Heritage Foundation have accumulated separate litanies of awful statistics, largely focusing on deep drops in labor force participation and sharp increases in discouragement. Collectively, they completely repudiate Krueger’s and Solis’s aforementioned recovery assertions.

Read the whole thing.

And make sure your less-informed friends, relatives and neighbors read it too.

Unintended Consequences, Part I

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It was four years ago this summer that we first started trying to take stock of the City of St. Paul’s new “vacant building” policy.

Under this policy – passed in the spring of 2008 by the St. Paul City Council, with little fanfare – vacant homes that have been classified as Category II (needs work) or Category III (teardowns) need to be brought up to current building codes to get their certificate of occupancy restored.  Which, with a house built in 1920, is going to be $100,000-200,000 worth of work.  In Saint Paul, that’s on top of a house that probably got foreclosed with a bubbled-up $200,000+ mortgage which, in a distressed neighborhood like the East Side, the North End or Frogtown, is on a property that sits on a block with several other foreclosures, in a neighborhood with many more, and might go for $50,000 today.

So sales prices have plummeted – median home prices in Saint Paul crashed by nearly half from 2007 to 2011.

And as those prices plummet, the odds of getting a refinance dwindle away to nothing, increasing the likelihood of more foreclosures.

You were warned.

It’s starting to have an effect that the local leftymedia is starting to notice, even if they misattribute its caues.  The Daily Planet, a non-profit left-leaning news site, has a report from the East Side:

Active in her church, outdoors often with her home daycare, and prone to taking long walks, Carol Overland is one of those ladies who everybody in the neighborhood knows, or at least recognizes. She’s lived on St. Paul’s East side for 35 years.

In the last three years, she’s noticed something new. “They put up a blue sign or a white sign and it’ll say ‘Notice of Foreclosure,’” she said.

“There’s one house right up here,” she said, pointing. “There’s a house down here. There’s a house on Cottage. There’s two houses going down towards Ivy.”

It’s a piker, of course; one could find blocks around Payne and Maryland where half the houses were vacant, at one point.

A recent report by the interfaith non-profit ISAIAH titled “Lost Homes: How the foreclosure crisis has hit the East Side and North End of St. Paul,” describes the crisis. Members of the organization are pressuring city officials to implement solutions laid out in the report.

We’ll look at the “solutions” in the report tomorrow.

“There’s this silent, selective tornado that’s just touching down and—Bam. Bam. Bam,” said Jonathan Zielske, pastor at Hope Lutheran Church, near Overland’s home. “If it were a real tornado or a real flood, city officials would all rush and try to do something.”

A real tornado or flood is not controllable by humans.

This disaster, on the other hand? It’s got the fingerprints of the Saint Paul City Council, just as surely as those of Bank of America, all over it.

The coalition is pushing hardest for a foreclosure mediation program that would encourage bank representatives and foreclosure candidates to sit down with a third-party mediator and come up with a solution that works for everyone. They argue that mediation could prevent foreclosure for some homeowners and offer a graceful exit for others.

The solution would address charges that banks have pushed homeowners out only to resell homes at prices the original owners could have afforded.

In other words, the banks are “charged” with lending home-owners one amount – say, $200,000 – and then not writing that down to $110,000.

Who’d have thunk it?

More tomorrow.

This Is Your Obama Recovery: May Edition

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The economy created fewer than 100,000 jobs this past month – and the numbers for March and April have been revised down, to boot – but in fact May’s labor force participation rate “jumped” from 63.6% to 63.8%.

However, the unemployment rate – the percentage of those 63.8% of the workforce that’s trying to work – crept back up to 8.2%.

Put it all together, and on 58.57% of the workforce is actually working. Which is almost exactly two points lower than it was when Obama took office, and only 7/100 of a percent higher than in October of 2009, when unemployment was 10%.  It’s 6/100 of a percent higher than in December of 2009 – the putative nadir of the recession.

By all means, let’s talk about the President’s freaking birth certificate.

Hollande Vacation

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Hollande, looking sauced

Hollande, looking sauced

France goes on a holiday from financial reality and makes Sarkozy pack.

The future of the European Union (and worldwide markets) may hinge on the following question: Is François Hollande a “fool or a knave”?

Hollande, seeking to become France’s first Socialist President since François Mitterrand, won a narrow victory Sunday over Nicolas Sarkozy – ending the Fifth Republic’s brief and troubled flirtation with mildly conservative economic policies.  Hollande’s election was not only a victory for a Socialist Party in political disrepair but for his former domestic partner and 2007 Socialist nominee (remember, it’s France) Ségolène Royal.  Whether his win proves to be a defeat for the economics of the EU will have to wait to be seen.  As the UK’s Telegraph details, (having asked the above question about Hollande’s political motivations), France faces extraordinary fiscal challenges:

Today, the top corporate tax is 34.4 percent (compared to 15.8 percent in Germany) and France has a €96 billion budget shortfall, which caused it to lose its high credit rating. The absurd 35 hour week largely remains in effect. Here’s the most damning statistic: government spending now accounts of 56 percent of France’s GDP. It’s only higher in five other countries in the world – including Iraq and Cuba.

Keep in mind, these figures were after 5 years of Sarkozy’s supposedly “draconian” policies and political rule by his center-right Union pour un Mouvement Populaire (UMP).  Hollande, in theory, wants to undo the same policies through increased progressive taxation, including the creation of an additional 45% for income above 150,000 euros and capping tax loopholes at a maximum of €10,000 per year.

In an economic era defined by deficit spending and a general lack of funds, François Hollande seems intent to upend the Franco-German alliance that has sought to force austerity measures on the rest of the EU.  ”Germany doesn’t decide for all of Europe,” Hollande intoned during the campaign.  Yet what is the alternative?  A nation drowning in debt can no more spend it’s way solvent than a fat person can eat themselves thin.

Marine Le Pen should be proud.  The leader of the supposed ultra-conservative (more social nationalist) National Front and daughter of the 2002 run-off presidential candidate announced her intention to leave her ballot blank - a signal to the 18% who voted for her to ensure Sarkozy’s defeat.

Sarkozy would hardly be recognized as “conservative” across the Pond.  Three of his ministers were leftists.  He pushed for legislation to fight global warming.  He worked to help Socialist Dominique Strauss-Kahn become head of the IMF (when Straus-Kahn wasn’t trying to plow room service).  Far more damning, Sarkozy’s response to the 2008 economic meltdown was vintage Socialist – declaring that ”laissez-faire capitalism is over” and decrying “the dictatorship of the market.”  Yet, he raised the retirement age, cut taxes and attempted, unsuccessfully in the end, to ween France off the entitlement teat.

How the markets react may be the most important question in the aftermath of Hollande’s victory.  Coupled with the showing of Alexis Tsipras in Greece – whose policies mirror Hollande in a desire to tax the rich and delay debt repayments – the concern over the fate of he EU will renew Monday morning.  Greece had agreed to impose pension and wage cuts in return for two international rescues worth 240 billion euros.  Either the policy continues or the payments stop.  An end to payments would suggest an economic amputation from the Euro Zone, with Greece either leaving or being forced to abandon the Euro.  A Greek departure could easily start a domino effect in the EU and send worldwide markets into a tailspin.

Hollande may be forced to continue may of the policies he publicly campaigned against.  Short of a desire to commit economic suicide, he has little leverage to do otherwise.

This Is Not What Recovery Looks Like

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Unemployment is way way way back up in February, says Gallup:

Unemployment in the U.S. rose to nine percent in mid-February, up from 8.3 percent a month earlier, according to a new Gallup survey. The polling company said this suggests that it is “premature” to assume the economy will not feature prominently in the 2012 election season.

Cue Democrats sniveling “Republicans are rooting for a bad economy”.

No.  We are rooting for the biggest thing standing in the way of a good economy, our current Administration and Senate, being sent home in disgrace.

The World Tax is Flat

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Ask yourself, tax code, do you feel lucky? Do ya, punk?

 Rick Perry stabs the tax system in the heart.  But under the plan, is it dead or simply pining for the fjords?

Steve Forbes must feel like he’s stepped into a time machine.

The 1996 & 2000 GOP presidential candidate briefly electrified the denizens of political wonkdom with his conception of a national flat tax to simplify – and eliminate – the current overcomplicated tax code over 15 years ago.  Forbes’ idea of broadening the tax base while reducing the individual tax burden proved a temporary hit – too much of one as most of his 1996 rivals embraced similar policies.  Unfortunately for flat tax advocates, the only candidate who didn’t rush towards the concept was nominee Bob Dole, and since then the tax as languished as more theory than practice despite its success in many former Soviet bloc countries.

That is until now, as Texas Governor Rick Perry has revived the concept, winning Forbes’ praise and liberal scorn.  The headlines have screamed about Perry’s new tax rate of 20%, but in most reports, the lead has been buried:

“The plan starts with giving Americans a choice between a new, flat tax rate of 20 percent or their current income tax rate,” Perry writes. “The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.”

 

The plan also drops the corporate tax rate to 20 percent and will temporarily lower the rate to 5.25 percent to promote companies working overseas to move to the U.S. along with implementing a “territorial tax system,” which will  tax in-country income.

 

The plan will eliminate the death tax and end taxes on Social Security, which would help an estimated 17 million Americans receiving benefits today. It would also cut taxes on qualified dividends and long-term capital gains.

The drop in corporate tax rate would put the U.S. as the lowest in the world (among major competitors; there are a number of nations with no corporate taxes).  And with most foreign economies unable or unwilling to respond in-kind with similar corporate tax rate cuts, the U.S. could be looking at an immediate repatriation of up to $1.4 trillion with the addition of a “territorial tax.”  Does that mean an immediate increase in jobs?  Not exactly, but a similar “repatriation holiday” for overseas corporations in 2004 spurred massive investments in capital and employment.

Lost in the corporate tax discussion has been Perry’s proposal to cap federal spending to 18% of GDP, or what would be roughly $2.54 trillion.  That’s under the projected 2012 revenues of $2.627 trillion and significantly under the Obama adminstration’s desired $3.729 trillion of spending.  Perry is obviously expecting that projected $1.4 trillion to soften the blow as increased income would (hopefully) spur GDP growth, raising Perry’s 18% beyond projected 2012 revenue levels.

The chief compliants from the right, much like with Herman Cain’s “999″ plan, are that Perry’s flat tax doesn’t go far enough.  Indeed, both leading economic fixes from the GOP field disembowel the current tax system but keep it wrapped together in some fiscal Eraserhead policy nightmare.  Both Cain and Perry’s proposals have foreign models to work from – Cain’s VATesque vision which has hindered Europe; Perry’s opt-out Hong Kong-like system which has worked well despite the complication of individuals being potentially able to switch back-and-forth from flat tax to the current system year to year.

Ultimately, Perry’s flat tax needs to be seen as the beginning of a new policy discussion, rather than as a destination.  A total overhaul of the tax code, while popular in spirit, likely polls poorly when the roughly 47% of Americans who don’t pay federal taxes figure out they might be forced to actually contribute to the system.  As proposed, few Americans will find themselves benefiting from the policy, but I think critics are thinking too short term and too little on the potential corporate effects of the plan.

Taxes Kill

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We’ve known it for decades; raising taxes in a recession is stupid, stupid, stupid.

But being a liberal means believing history just doesn’t apply to you:

CME Group Inc. is evaluating whether to move some operations to other states from Chicago to reduce its taxes, but it has not decided on an exact timeline, CEO Craig Donohue said Thursday.

“Our tax situation is untenable,” Donohue told Reuters, noting that CME is taxed more heavily than any of its global competitors. The company is talking with at least three states — Texas, Florida and Tennessee — about relocating some of its business to take advantage of lower tax rates there, Donohue said.

Illinois bucked the trend that New York and (to some extent) Calfornia recognized; that not only do you have to cut spending (because government is out of control) but that taxes inhibit revenue.

Chanting Points Memo: “Reagan Was A Moderate!”

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Two things that make me think “something’s just not right here”, and warrant some investigation:

  • Teenagers asking “so, are you going out Friday night?”
  • Liberals citing Reagan.

Lately, there’s been a plague of liberals, in print/blogs/on Twitter, stating without fear of contradiction (because, if you’re a Twin Cities liberal, nobody has ever contradicted you) that “today’s conservatives would never nominate Ronald Reagan”.

It’s a claim based on two dubious premises:

  • Reagan wasn’t especially tough on abortion
  • The claim that “Reagan raised taxes”

We dispensed with the second point last week; leaving aside that the “Reagan tax hikes” were entirely a result of Reagan keeping up his end of a bargain and the Democrats welching on theirs, Reagan’s tax cuts were 50% bigger, in terms of percent of the budget, than his tax hikes.  The fact that the hikes accounted for in absolute dollars than in percentage in fact proves the conservative point; Reagan’s tax cuts contributed to the economy reversing from the Carter era malaise to the mid-eighties boom – a boom that could absorb some hikes (whether it was a wise idea or not) – certainly better than it could have in the middle of a recession.

As to the abortion issue – that, again,shows how little the left understands the Tea Party.  Abortion is a key conservative issue – but when the economy is in the tank, it’s not the most important issue facing the Chief Executive.  As Reagan allocated political capital among his key priorities – the economy, defeating communism – his metaphorical “abortion” budget was squeezed down to “using the bully pulpit against the practice”…

…which is pretty much where today’s Tea Partiers are with the issue; mortally opposed, but focused on other things at the moment.

The lesson?  As your liberal friends start parrotting these memes, by all means set ‘em straight.

(Closed-circuit to liberal commenters: Go ahead.  Point out that “Reagan legalized abortion in California”.  I dare you)

“Housing At Any Cost” Costs A Lot

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Joe Doakes from Como Park writes:

If I am funding an agency whose mission is to promote home ownership among low-income clients but a substantial percentage of those clients are losing their homes and thereby ending up worse off than before they started – foreclosed, credit ruined and evicted – at what point should I conclude that the agency is a failure and stop throwing money down the rat-hole?

Joe is referring to the plethora of non-profits whose goal is to promote home ownership among low-income buyers – like this, and this and this.

It’s Economics 101;  you can not make something worth other than what people are naturally willing to pay for it without creating unintended, inevitably bad consequences.

Well, it was Economics 101.  In the era of Obama and Dayton, I think it must have been dropped from the curriculum to make time for GLBT economic sensitivity training.

Afflicting The Afflicted

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From the lefty playbook; compare apples to distributor caps, then use the results to give ones’ supporters the sense of victimizaiton that, you hope, will keep them chanting on cue.

So with this bit from the City Pages:

Minnesotans who can’t afford their rent outnumber those who can, according to a new study released today, landing us dead last in a ranking of affordable housing markets in the Midwest.

The statement is…well, just wierd.

Over half of Minnesotans can’t afford rent?

Rent…where?

Which half of Minnesotans?

Don’t worry – the point isn’t about thinking:

The National Low Income Housing Coalition released numbers today showing that Minnesotans need to be making, on average, $15.79 an hour in order to afford a decent two-bedroom apartment. Most of us are not.

Well, yeah – most of “us” do, if by “us” you mean Minnesotans, who according to the Census have a median income of $56955 a year.

That’s only part of it, of course:

  • For 2-person families, it’s $ 61,457.  That’s about $30 an hour (our two incomes at $15-ish per hour)
  • for 3-person families, $74,371 – AKA $37 an hour (or two incomes at $18.50)
  • 4-person families’ median incomes in Minnesota are $86,099.
  • 5-person families average 83,143 – if you’re following along with the math, that’s like $42/hour, or two incomes at around $21.  But there we’re getting into three-bedroom apartment material.

Maybe by “us” the author, Jessica Lussenhop, means 20-something freelance “writers” who are trying to eke out a living at the City Pages.

The study considers paying up to 30 percent of one’s income on rent to be “affordable,” and the average fair market rent for a two-bedroom apartment is $821 a month. The number crunchers figured you need to make $15.79 an hour to make that work, but the mean wage in the state is only $11.61. That means about 55 percent of us are paying more than we can afford on rent.

If “55 percent of us” are living alone on $11 an hour in a two bedroom apartment, then 55 percent of us are too dumb to be living on their own for long.

You’re you’re working for $11 an  hour, how about moving into a one-bedroom place?  Or getting a roommate ($22 an hour between you; plenty of money for that fabled two-bedroom apartment)?

In the metro area, the average rent skews higher for a two-bedroom–about $924 a month–and vacancy rates are at an all-time low of 3 percent. But the least affordable counties in the state are Winona and Aitkin Counties, and the problem is worst in the greater state.

“Rents tend to be cheaper, but there’s a real shortage of good affordable rental housing,” says Minnesota Housing Partnership researcher Leigh Rosenberg.

Their “data“

The goal of the study, of course, is to create the impression that the average Minnesotan can’t afford to live in Minneosota – presumably without government subsidies.

Why Does Eric Pusey Hate Taxpayers And Property Owners?

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As Reagan once said, “It’s not that liberals lie.  It’s just that they say so many things that are not so”.

Now, if you’ve read this blog for a while, you know two things:

  1. I, among very few partisan bloggers in the Twin Cities, make a concerted effort to try not only to remain civil, but to create some sort of a productive, or at least neutral, relationship with leftybloggers – or at least the ones that are worth the effort.  And there are a few.  Rare, but few.
  2. It’s really not easy.  It gets frustrating, dealing with so much bad logic for so long.

Which brings us to this bit by Eric “Big E” Pusey, covering Senator Howe (R – Red Wing) and his effort to restructure the renters rebate.

The piece – and if you guessed it’d be entitled “Why Does Senator John Howe Hate Renters?”, you’re right, but you needn’t get cocky, since one out of four posts on every Minnesota leftyblog starts with some variation on “Why Does Someone Hate Something?” – starts: -

On the Senate floor today, Sen. John Howe (R-Red Wing) tried to explain how canceling the renter’s credit is a good idea. The Senate was debating the Republican’s $1 billion cutback’s bill. This is basically a tax increase on all renters.

“That’s a $170 tax increase on every renter in Minnesota,” Sen. Scott Dibble (DFL Mpls) said.

Well, no.  It’s a cutback on a rebate that renters get.

In Minnesota (if you don’t live here), renters are entitled – via a niggling, sliding, income-based formula – to a refund of a piece of the property taxes paid by their landlord on the property they’re renting.  On the one hand, if you’re poor – and up until about 18 years or so ago, I certainly was – it is an annual tradition in Minnesota; waiting for the rebate check.  When I was a single guy making $12K a year and paying out $300 amonth in rent in 1989, it was a nice little $400 bump.

Of course, that money comes from somewhere – the state’s gross property tax receipts, in this case.

And with that pool dropping, as property values decline and foreclosures continue mounting, it’s high time the state re-jiggered the formula.

Pusey doesn’t see it that way, naturally.  He quotes Howe’s speech to the Senate:

It’s [the renter's credit] actually encouraging people to stay in that renter mode, and not achieve what we want people to move forward. If we want to be “progressive”, we need to help people to achieve their dreams and their goals. And we shouldn’t hold them back. I view a renter’s credit as something that holds people back. It doesn’t encourage the type of behavior that we want. It doesn’t encourage the type of dreams and hopes that people can achieve to having their home ownership. And it runs counterproductive to other things that we do.

First of all, he keeps using the word “progressive.” To quote Inigo Montoya from the movie “Princess Bride”: “You keep using that word. I do not think it means what you think it means.”

(Entirely possible, but that doesn’t mean Pusey gets it right…)

Secondly, isn’t it the Republican mantra on taxes that people should keep more of their own money or something? So why is it a good idea to take away this tax break for renters? Oh … I get it … they’re not millionaires …

Pusey doesn’t get it.

People should keep their own money – poor, rich, and everyone in between, myself included.

But don’t  mistake the renters rebate for “people keeping their own money’; it’s a rental housing subsidy that gives tax revenues back to certain “targeted” constituencies – renters making less than $30K or so a year.  While landlords (and regular homeowners, who have nobody to pass the costs down to, even more so) get clobbered with property taxes (especially if you’re stuck living in a DFL-plagued city like Saint Paul), renters get a piece of that money directed back to them.

Wouldn’t it be better to just lower taxes, and let the rental market pass the savings down to the renter?

Indeed, the market for rental prices is affected by a dizzying number of variables, most of them tied, directly or indirectly, to big government.  “Affordable Housing” – houses and apartments that might not make it into Architectural Digest, but are inexpensive – is zoned out of existence by utopian City Councils from New York City to Saint Paul, to be replaced by tax-funded Public Housing and/or “affordable housing”, built and subsidized by taxpayers but not remotely “affordable” except maybe in the out-of-pocket cost to the government client “renter”.   The taxes to make more “affordable housing” combine to make housing, ironically, less affordable and, in bad times, contributing to a vicious cycle that forces out home owners (by foreclosure or tax fatigue), lowering property values, and thus tax revenues, thus requiring more tax increases…

At its worst, the “Renters Rebate” insulates the poor from the profligacy of city government; if they didn’t get part of the price of their over-taxed rental property rebated to them, perhaps they would take a closer look at the stupidity of their city and county governments, the same way the profligacy of the 2009-2010 DFL legislature and the 2009-2010 Congress made so many Americans do the same before the last election.

Look – the formula’s being re-jiggered.  People will still get rebate checks.  They’ll get smaller.

Perhaps it’s time those renters took a moment to ask where the money comes from, and why.

I wonder if Eric Pusey would care to help do that?

(And isn’t it hilarious that the Democrats call the Bush Tax cuts – which cut taxes across the board, from billionaires to minimum wage owners, a “subsidy” and “spending”, while the portion or the renter’s rent that goes into property taxes is not?)