Lending Money to Sam

Scott Burns in the Austin American-Statesman today. Go read that and then come back to get the rest of the story. Or if you’d rather not, Burns asks if you would be willing to lend money to some guy named Sam who regularly spends quite a bit more than he takes in and has built up quite a large debt. However, his credit is so good that the lenders give him a sweet deal: interest-only payments and even that is at an unheard of 3% APR (averaged across his entire debt portfolio). He has some upcoming obligations to his parents and his wife’s parents that he made some time ago and are about to come due. They look to be pretty extensive.

Some other interesting information on Sam: He has a long credit history and a really good record of staying current. Yes, the current situation is not sustainable in the long run, but it works in the short term, and he’s doing some really good things with the money.  Sam also has a lot more earning potential than his current income. Several years ago, he and his wife were able to work things out to where they not only balanced their budget, they had a surplus.

Up to this point, I really have no concerns with loaning Sam more money. Yeah, he’s got problems, but he’s just proved that he can be responsible and if it comes right down to it, he can bring in more income. All he has to do is ask.

But then things started to get weird. Sam had been complaining for years that his wife was a spendthrift. Boy did he complain. Nevermind that Sam wasn’t shy about spending money on things he liked, but he had a point that they were building up some pretty good debt. But right about the time that he and the Mrs. got things worked out for that annual surplus, Sam started going a little crazy. He could have paid back some of that debt he’d been complaining about. He could have at least put the money back in the savings account he’d set up for his parents and in-laws. But he didn’t. Instead, he took a pay cut. Sam reasoned that if he had more money than he needed to pay for his current budget, he should give some of his income back. Sam has always been pretty generous, but it was really strange to me, with all the complaining that he did about the family debt, and even having to sock money away for mom and dad, that when he had the chance to pay it back, he didn’t take it.

Sam went downhill from there. He got attacked, and went on an expensive quest for retribution. Okay, I can kind of understand that. Then he picked a fight with someone else who had been a problem before but,  as it turns out was no threat anymore. Sam made up his own rationalizations for picking a second expensive fight. He started spying on his kids. He started beating up the neighbors and claiming that it was okay because he didn’t really hurt them. “I mean, there’ s no permanent damage, so that’s okay, right?”

Recently things have gotten very bad. Sam still complains bitterly about his wife’s spending (never his own) and the debt they’ve been racking up and insisting that she cut back, but absolutely refusing to even think about asking for a raise. He refuses to get a second job, or start a business, or even readjust things so that he has a bigger take-home pay. He’s even gone so far as to threaten not to pay even the paltry interest payments on the debt they already have. Yes, he does have to borrow to be able to make the payments, but he’s putting the family at risk of having to pay higher interest. With as much debt as they’ve built up, that’s just crazy talk. Sam’s gone off the deep end and his wife isn’t strong-willed enough to stand up to him.

The profligate spending doesn’t bother me as much as his irrational attempts to cut it. He’s even talking about kicking some of his kids out on the street and letting some of them go hungry, just so he can avoid asking his boss for a raise, all the while ranting about how his wife wants to burden their kids with a mountain of debt. Sam talks big about his debt, but if he were really serious about not leaving mountains of debt to the next generation, he would be more open to increasing income. His current stance is hypocritical and short-sighted. In my book, that equals either crazy or stupid.


Fourth of July Weekend–Saturday

As tempting as it might be to spend time on Sarah Palin’s and Michelle Bachman’s less than stellar understanding of Revolutionary War Era history (ironic considering their Tea Party affiliations), I’m actually here to opine on the Austin American-Statesman’s Opinion pages today.
In the letters we have several opinions on the Texas Legislature’s attempts to outlaw airport pat-down searches by the TSA, mostly related to traits of the legislators supporting the measure–“A precondition is that [they, legislators] be able to exercise sound judgment”–and qualities that seem lacking, “integrity, a sense of reality, and an ability to be incisive on key issues…think for themselves.” For me, I like legistlators who think for themselves instead of blindly following whatever foolishness spouted by their supposed electoral majority. Just because an idea is popular with the public (and I admit, I have sympathy for the idea, if not the implementation) doesn’t mean it’s a good idea. On the other hand, you know what is popular with the public and is also a good idea? JOBS! Not budget cutting, especially if that means laying off more competition for whatever jobs are in the system already. Most Republicans seem to think that the message of the 2010 elections was cutting government spending, when I think it was really about reducing unemployment.

Another letter proposed a solution to unemployment. It involved issuing Job Bonds, on the model of World War II’s War Bonds and using the proceeds to create jobs building and rebuilding infrastructure. Functionally, he’s just re-invented the American Recovery and Reinvestment Act (Obama’s Stimulus bill). The difference is in marketing the borrowed money specifically as job creation and marketing it specifically to Americans, employed and unemployed alike, as opposed to the usual, every-day borrow-from-China government debt. I don’t know, the Republicans don’t seem to be very much into borrowing money to help unemployed people these days. Tax breaks for the rich and unnecessary wars, yes, but helping the unemployed and other poor people, no. Maybe this kind of marketing would make it easier to sell. I wouldn’t bet on it.

On that note, Senator John Cornyn is editorializing on the idea of a Balanced Budget amendment to the Constitution again. From a senator’s viewpoint, calling for a Constitutional Amendment is a great way to look tough on an issue without having to really do anything about it. It’s such an arduous process that there’s very little likelihood that anything will happen, so you don’t have to really worry about the consequences of your proposal and when it fails, there are plenty of other people to blame. He’s right that all the facts and opinions he cites in his piece haven’t changed the world view of the Democrats. He doesn’t mention that the same can be said of the Republicans.

He is probably also right that a Constitutional Amendment is necessary to change the behavior of Congress, Democrats and Republicans alike, though I’m not convinced it’s a good idea to outlaw deficit spending completely. He trots out the old chestnut about families and small businesses having to live within their means. In the long run he’s right, but sometimes even small businesses and families have to borrow money to make ends meet. It’s not most people’s preference, and needs to be done with great care, but it is a valid, and potentially even viable, option. Taking it completely off the table  for use by the federal government seems like a bad idea. I would also point out that when times are tight, borrowing money to invest in something that will generate income (like a business expansion, more education, etc.) can be a very good idea. That’s how a lot of small businesses come into being in the first place. Again, this is the basic idea behind the Recovery Act.

And finally, once you start talking about government debt, you have to talk about social security. The quote from the letter I’m responding to is a statement that the Social Security trust fund “is nothing but a pile of IOUs”. Okay, sure, though the term we usually use is “government bonds backed by the full faith and credit of the United States.” But, of course, that terminology doesn’t invoke the flimsiness the letter writer wants. I wish people wouldn’t do that. If they keep implying that US government debt is not going to be repaid, people will quit buying it. And we’re going to need them to continue to do so for the foreseeable future. Even the Republicans, for all their deficit rhetoric, still can’t propose a balanced budget (gosh, good think we don’t have a balanced budget amendment, huh?). Or perhaps just as bad, they still buy it, but demand a greater interest rate to offset the newly percieved risk. If we’re going to keep borrowing money, we should do what we can to keep the interest rates low. Bad mouthing our creditworthiness (and threatening not to raise the debt ceiling too, by the way) so that it will be even more expensive to keep borrowing doesn’t seem like “fiscal responsibility” to me.

That said, borrowing from the Social Security Trust Fund is a problem, not because the IOUs aren’t worth anything, but because when we need to access that money (to make Social Security payments beyond what we’re bringing in from payroll taxes) it’s going to have to come out of general tax revenue. Without a budget surplus to draw from, meeting these obligations is going to require spending cuts elsewhere or increased taxes, or even MORE debt. In 2001, what did the “party of fiscal responsibility” do with our budget surplus? Did they start paying down the “crushing” debt that we were “passing down to our children and grandchildren?” No they did not. Did they redeem any of the “IOUs” in the Social Security Trust Fund? No they did not. They cut taxes. I don’t believe the Republicans have any intention of ever paying down the national debt, fiscal responsibility rhetoric notwithstanding.

Super Bowl of Moderation

While many folks, quite understandably, are focused on the Big Game (not to infringe on anyone’s trademark), today I’m writing about the Austin American-Statesman’s Opinion Section.

First, you can always tell when Ken Herman has had a strong hand in writing the main editorial. Today, the tell-tale sign was all the Roman numerals. I’m not taking any position on whether this is good or bad, I’m just saying his style is recognizable.

Second there were some interesting things in the letters. Brandon Burkman asks “…what good job market are you talking about?” The answer is the hidden job market; the one where you hear about a job from someone you know before it gets posted and maybe before the company knows they need someone. If Brandon’s layoff package included outplacement services as mine did, he’s probably heard of this concept. This is how I got my job, so the good news is that it does work. The bad news is that it took me 13 months, so it may only be slightly better than the other job market.

Also in the letters were some thoughts on the State Budget. I’ve already shared some of my thoughts on this, but let me add my voice to the chorus of people who are okay with having taxes raised for genuinely important priorities like education funding.  As for the letter writer who published the address for the Bureau of the Public Debt, I have a few thoughts. One, I am in favor of people voluntarily sending money to the Federal Government to pay down the debt. Two, the Bureau of the Public Debt is, as previously noted, a Federal agency and has has exactly nothing to do with the Texas state budget or Texas state taxes, so this whole letter is one big non sequitur. Three, I wonder how many people who make such a big deal about the Federal Deficit and how horrible it is that we are burdening our children and grandchildren with debt have sent money to the Bureau of the Public Debt to help relieve their children and grandchildren of this burden? The ones who get air time spend a lot of time talking about not adding to the debt any further, but I haven’t heard a single one of them talk about how they’re going to pay down the debt they’ve already incurred. If someone can point me to evidence to the contrary, I’d like to see it.

There is another letter about Politifact and Obamacare.  My thoughts on this letter are actually very tangential to the thrust of this letter, but I’m going to share them anyway. PolitiFact Texas recently delved into a statement from Gov. Rick Perry about how Texas pioneered space exploration and that even the first word spoken on the moon was “Houston.” PolitiFact Texas, for reasons that I don’t understand, decided that the most significant part of that statement was the “first word spoken on the moon” part. Personally, I think the United States really took the lead on pioneering space. They certainly paid the bills. I was really disappointed that Politifact Texas decided to fact check the least significant part of that statement.

Moving on, my third stop in the Opinion section is Ken Herman’s column, specifically the “roll call” at the Texas House where a few Representatives who are actually present go around pushing buttons to fraudulently mark their absent colleagues present. Does it bother anyone else that the House conducts business with an imaginary quorum? Another of Herman’s points is that the business they are conducting isn’t really all that significant at this stage of the session, still, for people who are so bent out of shape on voter fraud at the ballot box, they sure don’t seem to be too concerned about it in their own chamber. I say, the voting buttons legislators have to push have fingerprint readers in them. Vote fraud seems to be a lot more widespread inside the capitol building than it is outside of it.

Fourth, Gail Collins is a smart woman. “Remind me again why we aren’t fighting global warming? It’s win-win. Even if all the hordes of scientists are wrong in believing that human beings are causing climate change, the remedies would still be good for the environment and for energy independence.” Amen! The only thing that I would add, is that if global warming is a natural phenomenon, wouldn’t it be a great idea not to make it worse?

Finally, George Will. A few months ago, I was frustrated by a column he wrote on abortion rights where he claimed that in the Roe decision, the Supreme Court found a constitutional right to abortion in the penumbras of emanations of the Bill of Rights. I’m sorry, but that is just factually incorrect. Today, he says this: “If unemployment is above 9 percent in 2012, almost any Republican can win, and if there is a convincing recovery the party had better nominate someone who can energize the base.”

I think is wrong on this statement, too. Energizing the existing base is not going to be enough. Sarah Palin energized the Republican Base in 2008. That didn’t work out so well for the Republicans. Sarah Palin continues to energize what passes for the Republican Base today. Anyone who can energize the existing base of the GOP is going to scare away all the moderates, and if there is a convincing recovery, the GOP is going to need all the moderates it can get if they are to have any hope of winning.

Mr. Will supports his position with this fact: “Social conservatives are much of that base, are feeling neglected and are looking for someone like Santorum.” Let’s take that as true. Those social conservatives are not numerous enough to tip the scale, even if you “energized” them all into the voting booth. Republicans need a bigger base if they want to be a force in the future.

As a moderate, I can tell you that the Republican party is doing a lousy job of trying to woo me for my vote. The Democrats are doing much better.

Thought Experiments require some Thought

I was reading yesterday’s letters to the editor and one of them really caught my attention. It’s the letter titled Profiling on this page. In it the letter writer poses his thought experiment about an armed robber with witnesses and video tape identifying him as a white male in his 20s driving a silver sedan. The question posed is whether the policeman on the beat should stop silver sedans randomly or target those driven by white males.

I don’t know, but I suspect the letter writer would say that if he were a white male 20-year-old in such a scenario, he would accept being stopped by a policeman and I have no reason to think he’s actually wrong about that. I doubt any of us would be happy at being stopped on suspicion of a crime we didn’t commit, but I would agree with the letter writer that targetting white males makes more sense than randomly stopping silver sedans.

Then comes the remarkable part. After claiming that the TSA’s “approach is to either stop silver sedans randomly so as not to discriminate based on gender or skin color, or to stop every silver sedan, regardless of who is occupying the vehicle” he makes the unwarranted jump to “Our intelligence agencies are quite capable of identifying the characteristics of potential terrorists.” The reason why this is remarkable? There is a huge difference between an identified perpetrator and a potential perpetrator.

To demonstrate this difference, let me propose my own extension of the thought experiment. Imagine now that there are a string of, let’s say 20, armed robberies in which each perpetrator was a youngish white male. The police ought to be quite capable of identifying the characteristics of armed robbers. So rather than just wait for each new robbery to happen, wouldn’t it make lots of sense to start stopping white males to prevent the crime in the first place? And would the letter writer be so willing to accept his fate as a white male so quietly?

I suspect not. The letter writer has drawn a faulty analogy, comparing two situations that are not very alike at all in support of his thesis in favor of racial profiling.