Every night when we turn on the news there are threats and evil forces surrounding us. It is Wall Street and the mortgage crisis, immigrants taking our jobs, and the disappearing middle class. It’s hard not to believe the hype. It’s hard not to believe that we are all victims of our circumstances, and that the world is hopelessly out of control and that Armageddon will come soon.
When we start to hear these hysterics, we need to employ a little skepticism. When the Wizard of Oz is spewing fire and the green vein on his forehead pulses with anger, we need to look around and see if Toto has exposed a little man behind a curtain. Fear is a tool of manipulation. The peddlers of fear usually want something from you. They want you to tune in at 10, buy their product, or vote for their candidate. We should greet these peddlers with the same skepticism that we greet car salesmen.
It is not that all horror stories are false. If the news tells me that there is a Hurricane in the Gulf of Mexico, I need to watch because my life and family depend on knowing what to do. The critical test is listening to what they want you to do about it. Do they want something from you? Do they want your money, your personal freedom, your rapt attention during commercial breaks?
The more afraid we are, the more power we cede to those who want to be in charge. We feel powerless and hopeless and that only someone stronger can save us all. Beware the stench of manipulation.
Many economists now believe we are either in or about to be in a recession. Recessions are not fun, but the media blows it way out of proportion. According to the news, I should start growing my own crops and livestock to survive the coming dark ages. Many people may lose their jobs, but in reality that will only be 1 or 2% of the working population and it will be temporary. Most people’s income will continue to rise, but maybe a little slower.
Yielding to fear and handing over money and freedom to massive government “fixes” is not the answer we need. What we need to do now is what we need to do every day. We need to work hard at our jobs and set money aside for a rainy day. In Atlas Shrugged, Ayn Rand wrote of her character Henry Rearden, “He had never known fear, because against any disaster he had held the omnipotent cure of being able to act.” It is individual action that we need not collective panic.
If we do not act, we become slaves to luck. We become objects manipulated by those in power. When it comes to life’s troubles we sometimes exhort personal responsibility, but we misunderstand it. American Heritage Dictionary defines responsibility as a duty, an obligation, or a burden. When we choose to act, the only burden is the effort of throwing off the shackles of dependence. Action brings freedom, safety, and security.
A leader or politician cannot bring us freedom. Freedom begins in our hearts and minds, and flows upward to curtail the ambitions of those who wish to use us for their gain. However, action turns to force when it moves outside of ourselves and to the coercion of others. Do not be fooled, forcing others to act is not the same as them choosing to act.
While we sympathize with their plight, the poor and the downtrodden are not victims of circumstances they are slaves to inaction. Whether it is addiction and sloth or fear and hopelessness, they have ceded their personal freedom and borne themselves into bondage. Their emancipation cannot be delivered, they must choose to take it up. We best help when we live the answers that they seek.
It is not mere personal responsibility that we need, but a new individualism. We need an individualism that recognizes personal action, not as a burden, but the narrow gate to personal freedom. We need an individualism that sneers at fear and hopelessness. An individualism repulsed by the brimstone breath of fear mongers. We do not need “enlightened” leaders to save us; we only need to act with daily discipline and contempt for coercion.
We need the audacity of Winston Churchill under the specter of the Nazi blitzkrieg. As the Third Reich roared across Europe like a tsunami, he stoked the fires of defiance in England with his call to action and rejection of fear.
“We shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender”
Recessions, crises and corruption come and go. They will always happen, and they will always end. There will always be those who try to manipulate us into believing that we are powerless over our own lives, and that we need only to hand over our personal freedom so that they can protect us. But, the new individualist knows that safety and security can only be found in the daily discipline of human action. Declare your independence. Turn off the TV, put your wallet away, and vote for the other guy. Become a new individualist.
As always, tell me what you think.
Thursday, April 24, 2008
Wednesday, April 16, 2008
School Daze
I was reminded this week of how wasteful the public school system is by an article in the Houston Chronicle. Klein Independent School District is trying to pass a bond measure to borrow money for new facilities. Part of the bond package is to replace two existing high schools.
What is the price tag for each high school? Only $130 Million per high school! Each school is supposed to house a close-knit 3,500 students. The schools are full of “necessities”, such as “natatoriums, black-box theaters, dance areas and extensive career and technology programs”. The natatorium is likely an indoor Olympic size swimming pool. A black-box theater allows for special stage productions in addition to a traditional school theater.
Adding to that high price is the fact that the school district already owns the land and it does not include the price of furnishings.
Are these costs out of whack, or is it simply that expensive to build a high school today? How much did schools cost 15 to 20 years ago? What has been the increase in construction costs?
For proper comparison, the price needs to be divided by the number of students the school is expected to educate. It wouldn’t be fair to compare a small town high school to large suburban schools without adjusting for student population. The price per student is around $37,100 for these new high schools.
According to an expert quoted in the article:
“The median cost-per-square-foot of a high school has increased from $104 in 1995 to $171 in 2007, he said. And rates continue to increase as much as 15 percent a year, experts said.”
So, in 1995 this school would have cost $22,600. The article also mentions the price of the high school I attended, Pearland High school, also a suburban Houston school, that was built in 1991. Filling the four year gap between 1991 and 1995, and adding two more years after 2007 to coincide with the actual groundbreaking date with the same rate of construction cost inflation between 1995 and 2007, this implies that my high school should have cost $17,600 per student.
From my memory, my high school was 5A (the largest classification in Texas) and held about 2,400 students my senior year when we started to run out of space. Using these numbers, it implies that my high school should have cost around $42 million.
What was the actual construction price of my high school according to the article? Only $12 million. This means that Klein’s school district has chosen to build these schools 3½ times more extravagant than Pearland did in 1991.
While the Klein High School numbers were rather shocking to me, I did a quick Google search assuming that this could not be the most outrageously expensive high school in America. I was not disappointed.
In suburban Boston, the town of Newton is building a high school for around 2,000 students. According to Boston Globe the costs have spiraled out of control up to $197 million. That is $98,500 per student. That price is just over 2½ times more expensive than Klein’s schools, and a mere 19 times more expensive per student than my high school. Surprisingly enough, the article does not mention any gold plated desks or diamond studded pencils.
The most heinous problem with this out of control spending is where the money is going. The costs for building a simple classroom have not increased so staggeringly. What has gone up is the enormous appetite of school officials for extracurricular facilities. While I have little doubt that all those things are fun for these students, I don’t really understand why the government needs society as a whole to pay for them. Having fun and forming hobbies is not the business of government.
I propose a state law that would limit school construction to having 40% of square footage to academic classroom space. The 40% is just an estimate and may seem high or low, but accounts for the need for hallways, offices, cafeterias, etc… There should also be room for extracurricular activities and vocational classes, but the school should not be dominated by hundreds of thousands of square feet of non-academic building space.
This bond package would include a 16% increase in school property taxes for Klein I.S.D. I complain about taxes, but the only way to keep taxes down is for the government to spend less. When millions of dollars of waste are included in all-or-nothing school bond packages, it puts voters in the unfair position of choosing between preventing waste and having crowded dilapidated schools.
As always, tell me what you think.
What is the price tag for each high school? Only $130 Million per high school! Each school is supposed to house a close-knit 3,500 students. The schools are full of “necessities”, such as “natatoriums, black-box theaters, dance areas and extensive career and technology programs”. The natatorium is likely an indoor Olympic size swimming pool. A black-box theater allows for special stage productions in addition to a traditional school theater.
Adding to that high price is the fact that the school district already owns the land and it does not include the price of furnishings.
Are these costs out of whack, or is it simply that expensive to build a high school today? How much did schools cost 15 to 20 years ago? What has been the increase in construction costs?
For proper comparison, the price needs to be divided by the number of students the school is expected to educate. It wouldn’t be fair to compare a small town high school to large suburban schools without adjusting for student population. The price per student is around $37,100 for these new high schools.
According to an expert quoted in the article:
“The median cost-per-square-foot of a high school has increased from $104 in 1995 to $171 in 2007, he said. And rates continue to increase as much as 15 percent a year, experts said.”
So, in 1995 this school would have cost $22,600. The article also mentions the price of the high school I attended, Pearland High school, also a suburban Houston school, that was built in 1991. Filling the four year gap between 1991 and 1995, and adding two more years after 2007 to coincide with the actual groundbreaking date with the same rate of construction cost inflation between 1995 and 2007, this implies that my high school should have cost $17,600 per student.
From my memory, my high school was 5A (the largest classification in Texas) and held about 2,400 students my senior year when we started to run out of space. Using these numbers, it implies that my high school should have cost around $42 million.
What was the actual construction price of my high school according to the article? Only $12 million. This means that Klein’s school district has chosen to build these schools 3½ times more extravagant than Pearland did in 1991.
While the Klein High School numbers were rather shocking to me, I did a quick Google search assuming that this could not be the most outrageously expensive high school in America. I was not disappointed.
In suburban Boston, the town of Newton is building a high school for around 2,000 students. According to Boston Globe the costs have spiraled out of control up to $197 million. That is $98,500 per student. That price is just over 2½ times more expensive than Klein’s schools, and a mere 19 times more expensive per student than my high school. Surprisingly enough, the article does not mention any gold plated desks or diamond studded pencils.
The most heinous problem with this out of control spending is where the money is going. The costs for building a simple classroom have not increased so staggeringly. What has gone up is the enormous appetite of school officials for extracurricular facilities. While I have little doubt that all those things are fun for these students, I don’t really understand why the government needs society as a whole to pay for them. Having fun and forming hobbies is not the business of government.
I propose a state law that would limit school construction to having 40% of square footage to academic classroom space. The 40% is just an estimate and may seem high or low, but accounts for the need for hallways, offices, cafeterias, etc… There should also be room for extracurricular activities and vocational classes, but the school should not be dominated by hundreds of thousands of square feet of non-academic building space.
This bond package would include a 16% increase in school property taxes for Klein I.S.D. I complain about taxes, but the only way to keep taxes down is for the government to spend less. When millions of dollars of waste are included in all-or-nothing school bond packages, it puts voters in the unfair position of choosing between preventing waste and having crowded dilapidated schools.
As always, tell me what you think.
Wednesday, April 9, 2008
The Pen is Mightier than the Sword
Currently, George Bush has submitted a free trade agreement between Colombia and the United States to Congress for consideration. Because I believe in free trade, I support this bill, but this agreement has more to it than just economics.
Colombia is increasingly an island of freedom. To the east, they share a long border with Venezuela and the increasingly aggressive and socialist Hugo Chavez. To the southwest, they border Ecuador, which is currently led by a Chavez ally and sycophant, Rafael Correa.
For a number of years, Colombia has been fighting the far-left Marxist group known as the FARC. The FARC has been abducting killing hundreds of people a year in their decades-long struggle to turn Colombia into a communist country. Colombia’s current president Álvaro Uribe has won a number of victories against them and has pushed them deep into the jungle. Evidence recently turned up suggesting Hugo Chavez may have given as much as $300 million to support the FARC’s terrorist activities. Hugo Chavez publicly defends the FARC and massed his troops on the border, threatening war, when Colombia briefly crossed into Ecuador to bomb a FARC base.
While Chavez and Correa have been confiscating private property and closing businesses, Colombia has been cutting the size of their government. Their national deficit has shrunk in recent years to acceptable levels.
In a recent op-ed in the Wall Street Journal, Mary Anastasia O’Grady has some other interesting comments during an interview with Colombia’s trade minister Luis Plata.
“No sooner had Luis Plata sat down then he started talking about the Irish economic transformation -- from impoverished ugly duckling to swanky swan of Europe in just two decades -- and why a similar growth model is just what Colombia needs.”
If you recall I talked about the Irish miracle a while back. An excerpt:
“In 1985, the average Irish family made 40% less than their French and German counterparts. Today, because of the massive spending cuts and massive growth from that, the Irish make 40% more than the French and the Germans according to the IMF.”
Mr. Plata went on to say in the interview:
"We starting going to Ireland several years ago, he says, "because we were looking at countries around the world that had been successful in attracting foreign direct investment. What we found was that Ireland had lowered its corporate tax rate from 40% to 12.5%," and as a result "was attracting investment, had lowered tax evasion and had increased tax collection. We went back to Colombia and said, 'why don't we just bring [our corporate rate] from 38% to 12.5%.'"
Apparently, he was only able to get the government to adopt some of these reforms, but some is better than none.
Currently, Colombia is ranked as the 81st richest country in the world. This places them behind Mexico. True poverty is still common. I commend their president for taking a number of political risks for the long-term interests of his people. At the same time, he has successfully beaten back left-wing terrorist groups, but he increasingly faces threats from enemies of the United States.
Yet, the Democratic party has shamefully held up this trade bill. Hillary Clinton recently forced a campaign advisor to resign when it was discovered that he was also consulting in support of this trade agreement. What can we expect though from a party that receives so much money from unions who are against free trade any where, any time, any place for any reason? These choices held by them just do not match my values.
Our ally stands out the door step to a socialist dictator. They give no sympathy. Our ally stands against terrorists who kill and kidnap in hopes of one day installing a communist dictatorship. They give no cheer. Our ally is taking political risks to lift his country out of poverty. They only see a threat to American union membership. Our ally is the best hope and beacon of economic freedom in a darkening South America. They want to embarrass Bush one more time before he leaves office by defeating this bill.
We can show South America that the future is not made of Hugo Chavez’s red banners, and angry militarism. Chavez wants this bill to fail because he knows that Colombia’s success will loosen his grip on power. Tell your congressional representative to sign this free trade bill today, as I have already done. Chavez likes to rattle his saber, so we should unsheathe our pens and sign the bill.
As always, tell me what you think.
Colombia is increasingly an island of freedom. To the east, they share a long border with Venezuela and the increasingly aggressive and socialist Hugo Chavez. To the southwest, they border Ecuador, which is currently led by a Chavez ally and sycophant, Rafael Correa.
For a number of years, Colombia has been fighting the far-left Marxist group known as the FARC. The FARC has been abducting killing hundreds of people a year in their decades-long struggle to turn Colombia into a communist country. Colombia’s current president Álvaro Uribe has won a number of victories against them and has pushed them deep into the jungle. Evidence recently turned up suggesting Hugo Chavez may have given as much as $300 million to support the FARC’s terrorist activities. Hugo Chavez publicly defends the FARC and massed his troops on the border, threatening war, when Colombia briefly crossed into Ecuador to bomb a FARC base.
While Chavez and Correa have been confiscating private property and closing businesses, Colombia has been cutting the size of their government. Their national deficit has shrunk in recent years to acceptable levels.
In a recent op-ed in the Wall Street Journal, Mary Anastasia O’Grady has some other interesting comments during an interview with Colombia’s trade minister Luis Plata.
“No sooner had Luis Plata sat down then he started talking about the Irish economic transformation -- from impoverished ugly duckling to swanky swan of Europe in just two decades -- and why a similar growth model is just what Colombia needs.”
If you recall I talked about the Irish miracle a while back. An excerpt:
“In 1985, the average Irish family made 40% less than their French and German counterparts. Today, because of the massive spending cuts and massive growth from that, the Irish make 40% more than the French and the Germans according to the IMF.”
Mr. Plata went on to say in the interview:
"We starting going to Ireland several years ago, he says, "because we were looking at countries around the world that had been successful in attracting foreign direct investment. What we found was that Ireland had lowered its corporate tax rate from 40% to 12.5%," and as a result "was attracting investment, had lowered tax evasion and had increased tax collection. We went back to Colombia and said, 'why don't we just bring [our corporate rate] from 38% to 12.5%.'"
Apparently, he was only able to get the government to adopt some of these reforms, but some is better than none.
Currently, Colombia is ranked as the 81st richest country in the world. This places them behind Mexico. True poverty is still common. I commend their president for taking a number of political risks for the long-term interests of his people. At the same time, he has successfully beaten back left-wing terrorist groups, but he increasingly faces threats from enemies of the United States.
Yet, the Democratic party has shamefully held up this trade bill. Hillary Clinton recently forced a campaign advisor to resign when it was discovered that he was also consulting in support of this trade agreement. What can we expect though from a party that receives so much money from unions who are against free trade any where, any time, any place for any reason? These choices held by them just do not match my values.
Our ally stands out the door step to a socialist dictator. They give no sympathy. Our ally stands against terrorists who kill and kidnap in hopes of one day installing a communist dictatorship. They give no cheer. Our ally is taking political risks to lift his country out of poverty. They only see a threat to American union membership. Our ally is the best hope and beacon of economic freedom in a darkening South America. They want to embarrass Bush one more time before he leaves office by defeating this bill.
We can show South America that the future is not made of Hugo Chavez’s red banners, and angry militarism. Chavez wants this bill to fail because he knows that Colombia’s success will loosen his grip on power. Tell your congressional representative to sign this free trade bill today, as I have already done. Chavez likes to rattle his saber, so we should unsheathe our pens and sign the bill.
As always, tell me what you think.
Thursday, April 3, 2008
Notes from the County Convention
This past weekend I attended the Galveston County Senatorial District Convention as a delegate. It was a rather interesting and enjoyable experience. I was selected as an Alternate Delegate to the State Convention, which means that I can attend and if 38 other delegates or alternate delegates ahead of me fall ill or are otherwise occupied, I can actually vote on the party platform.
For those who have never been to District Convention, let me explain the basic format of the one I attended. This may or may not be exactly how a convention for your area would occur.
First, everyone just socialized for about an hour or so. We were supposed to sit with our precinct and I did. I met the former mayor of my city, a former city councilman, and a gentleman who had unsuccessfully run for city council. If you are ever interested in running for city council in your city let me know and I will pass on the information they told me. This socializing time was my favorite part. I am usually not an extraordinarily social person, but everyone liked to talk about politics, making conversation easy.
In college, I turned away from the party system when I experienced some very petty behavior by the people in charge of College Republicans. However, I was pleasantly surprised to find that everyone at my local convention was very nice, open to conversation, and happily answered my questions. The people seemed like average folks, not a bunch of country club Republicans.
After a little wait was a series of technical matters where we had to go through the legal formalities of voting to seat the delegates and elect the convention chairperson. You quickly grow to love and hate parliamentary procedure.
From time to time, the chairperson invited an elected Republican official to come speak. My State Rep. Larry Taylor, of whose voting record I am rather pleased, gave a great speech. My State Senator Mike Jackson, of whose voting record I am often displeased, stammered through a horribly ill-prepared speech. Two Republicans, Shelley Sekula-Gibbs and Pete Olson, in a primary run-off for Dem. Congressman Nick Lampson’s current seat also gave some mildly effective campaign speeches. Pete was a little more convincing from my perspective.
The last two-thirds of the convention was a refereed debate over the party platform for Galveston County. They supplied a packet of the platforms submitted for vote, which numbered over 200. If any delegate objected to a piece of the platform, they could move to strike it or amend it, and then the directed debate would ensue. Some people who spoke were eloquent, others confusing, and still others down right amusing because they were so over the top with passion, but short on good points. They were all greeted with cheers, polite applause or occasionally boos. Boos were mostly directed at the Paulites (supporters of Ron Paul), who advocated removing some references to God from the party platform. It was all in good fun, though. I would never describe it as tense.
For the state delegate selection process, I was not privy to their decision-making, but a few things became clear. Long time party loyalists got first dibs on being a delegate. Don’t be cynical of this choice though. There is very little that they could do to find out if you really were a Republican beyond your voter registration and your word that you were a Republican. They didn’t know me from Adam, so I understand them selecting people who have spent a lot of time working for the party.
Because there were more people wanting to be delegates and alternate delegates than there were slots available, we had to be interviewed for our credentials. I was in a room of about 25 people, of which 10 were interviewees like me. Most people either gave a little bit of party experience or a personal story for why they wanted to be a delegate. I was very glad that I had mentally prepared a few notes for why they should select me, because I only had about 5 minutes after I found out that I would be interviewed at all. My only regret is that I did not prepare more on paper. I think I could have moved up the list quite a bit if I had. Don’t think that you have to be a superstar to get selected. I think that around 5 of 6 people requesting to be delegates became delegates (including alternates).
As I mentioned before, if you want to be a part of a convention in the future, just prepare a little bit to get your thoughts organized and make a simple case for why you want to be a delegate. If zillions of people happen to show up one year it’s going to be more difficult if you haven’t spent much time working for the party, so don’t be disappointed if it doesn’t work out as easy as it did for me.
I’ll let you know how the state convention goes after I attend.
As always, tell me what you think.
For those who have never been to District Convention, let me explain the basic format of the one I attended. This may or may not be exactly how a convention for your area would occur.
First, everyone just socialized for about an hour or so. We were supposed to sit with our precinct and I did. I met the former mayor of my city, a former city councilman, and a gentleman who had unsuccessfully run for city council. If you are ever interested in running for city council in your city let me know and I will pass on the information they told me. This socializing time was my favorite part. I am usually not an extraordinarily social person, but everyone liked to talk about politics, making conversation easy.
In college, I turned away from the party system when I experienced some very petty behavior by the people in charge of College Republicans. However, I was pleasantly surprised to find that everyone at my local convention was very nice, open to conversation, and happily answered my questions. The people seemed like average folks, not a bunch of country club Republicans.
After a little wait was a series of technical matters where we had to go through the legal formalities of voting to seat the delegates and elect the convention chairperson. You quickly grow to love and hate parliamentary procedure.
From time to time, the chairperson invited an elected Republican official to come speak. My State Rep. Larry Taylor, of whose voting record I am rather pleased, gave a great speech. My State Senator Mike Jackson, of whose voting record I am often displeased, stammered through a horribly ill-prepared speech. Two Republicans, Shelley Sekula-Gibbs and Pete Olson, in a primary run-off for Dem. Congressman Nick Lampson’s current seat also gave some mildly effective campaign speeches. Pete was a little more convincing from my perspective.
The last two-thirds of the convention was a refereed debate over the party platform for Galveston County. They supplied a packet of the platforms submitted for vote, which numbered over 200. If any delegate objected to a piece of the platform, they could move to strike it or amend it, and then the directed debate would ensue. Some people who spoke were eloquent, others confusing, and still others down right amusing because they were so over the top with passion, but short on good points. They were all greeted with cheers, polite applause or occasionally boos. Boos were mostly directed at the Paulites (supporters of Ron Paul), who advocated removing some references to God from the party platform. It was all in good fun, though. I would never describe it as tense.
For the state delegate selection process, I was not privy to their decision-making, but a few things became clear. Long time party loyalists got first dibs on being a delegate. Don’t be cynical of this choice though. There is very little that they could do to find out if you really were a Republican beyond your voter registration and your word that you were a Republican. They didn’t know me from Adam, so I understand them selecting people who have spent a lot of time working for the party.
Because there were more people wanting to be delegates and alternate delegates than there were slots available, we had to be interviewed for our credentials. I was in a room of about 25 people, of which 10 were interviewees like me. Most people either gave a little bit of party experience or a personal story for why they wanted to be a delegate. I was very glad that I had mentally prepared a few notes for why they should select me, because I only had about 5 minutes after I found out that I would be interviewed at all. My only regret is that I did not prepare more on paper. I think I could have moved up the list quite a bit if I had. Don’t think that you have to be a superstar to get selected. I think that around 5 of 6 people requesting to be delegates became delegates (including alternates).
As I mentioned before, if you want to be a part of a convention in the future, just prepare a little bit to get your thoughts organized and make a simple case for why you want to be a delegate. If zillions of people happen to show up one year it’s going to be more difficult if you haven’t spent much time working for the party, so don’t be disappointed if it doesn’t work out as easy as it did for me.
I’ll let you know how the state convention goes after I attend.
As always, tell me what you think.
Thursday, March 27, 2008
I am a Liberal
What is a liberal? If you read various dictionaries it implies being open to new ideas. Politically, it is a derogatory term. We think of it as meaning someone who believes in socialist policies and tries to undermine Judeo-Christian values. Many economists like to call themselves “Classical Liberals”, because liberal used to mean someone who embraced the free market. The word was later stolen by socialists and the meaning changed.
Ironically, in France, left wing parties deride President Sarkozy as a “liberal”. Sarkozy has been pushing for free market reforms, cracking down on crime, and limits to immigration. This is not exactly the American idea of a liberal, but it does imply someone who is pushing new ideas.
I recently saw an interview with Hillary Clinton saying that she likes to call herself a Progressive, discarding Liberal because it has taken on such an ugly connotation. Well, Sen. Clinton, one woman’s trash is another man’s treasure. I consider myself a “Classical Liberal”, so maybe it’s time to drop the “Classical” part of my label and take the true meaning of the word back.
My friends, I am a Liberal.
If a conservative is someone who wants things to stay the same how can I honestly call myself a conservative when I have proposed so many radical changes in this newsletter? Let’s compare what I support against our so-called “Liberal” political party.
Democrats want to take us to universal health care. A new idea? Universal Health started in Germany in the late 1800’s. Health Savings Accounts were invented by John Goodman in the late 1900’s. They want us to keep doing health care the way it has always been done. I want to rip it out by the roots and start over with Health Savings Accounts. They are the conservatives, I am the liberal.
Democrats want to maintain the same failed education system that has been sliding downhill for 50 years. I want charter schools, vouchers, and home schooling. I want to free the underprivileged and undereducated from the shackles of a system that continues to fail them and keeps them in poverty. They want us to do education the way it has always been done. I am the liberal.
Democrats don’t want to touch social security. I want Swedish-style private accounts, and I want my future benefits to be cut to avoid the fiscal disaster coming down the road. They have buried their heads in the sand and they want us to do things the way they have always been done. I am the liberal.
Democrats scream bloody murder at any proposal to change any of our failed poverty programs. I have proposed Milton Friedman’s reverse income tax to help wean the poor off of government handouts. They want to do things the way they have always been done. I am the liberal.
Democrats promised to clean up earmarks, but got virtually nothing accomplished. I want to ban earmarks. They are doing things the way they have always been done. I am the liberal.
Democrats want us to plan nearly every inch of every building in our cities. This isn’t new, rulers have been indiscriminately bulldozing and rebuilding parts of cities for centuries. I want people, in a free market, to decide what to do with their property to keep home prices down so that every person can hope to achieve the American dream. They want to boss you around the way it has always been done. I am the liberal.
Democrats’ only idea for our tax system in the last 75 years has been to raise them every chance possible. I support a flat tax that eliminates the millions of tax breaks given out to special interest groups. I have supported moving the corporate tax burden onto high income earners so that our businesses don’t waste billions dodging taxes and they can crush their foreign competitors with the tax advantage. They, on the other hand, want to do things the way they have always been done. I am the liberal.
Democrats fight free trade with same arguments the Mercantilists used in 16th century. I support free trade anywhere, anytime, and any place. It increases wealth in the United States and it will bring income to the most desperately poor countries on earth. There is a veritable consensus amongst economists that both countries always win with free trade. Democrats are chained to their union donors and want to do things the way they used to be done hundreds of years ago. I am the liberal.
The word of the year seems to be “Change”. Boldly leading us towards the status quo is not change. Fixing your gaze on the ideas of the past is not change. I want to do what has not been done. I want to do things that have not been tried. I am the liberal, not them.
We have been unjustifiably labeled “conservatives” as if we were the ones holding back progress. We have worn the scarlet C for too long. How long do the policies of the “liberal” party have to fail before we call them old ideas. The intellectual Amish of the Democratic party are not liberal at all. To paraphrase a quote from economist Robert Murphy,
“If [they] ignored advances in other scientific fields as much as they do in economics, we'd see weathermen advising readers to offer sacrifices to the rain gods.”
In the great time span of human history, freedom of the individual and small government are still radically new ideas. They are liberal ideas. I believe in these liberal ideas because I AM A LIBERAL.
Are you a liberal?
As always, tell me what you think.
Ironically, in France, left wing parties deride President Sarkozy as a “liberal”. Sarkozy has been pushing for free market reforms, cracking down on crime, and limits to immigration. This is not exactly the American idea of a liberal, but it does imply someone who is pushing new ideas.
I recently saw an interview with Hillary Clinton saying that she likes to call herself a Progressive, discarding Liberal because it has taken on such an ugly connotation. Well, Sen. Clinton, one woman’s trash is another man’s treasure. I consider myself a “Classical Liberal”, so maybe it’s time to drop the “Classical” part of my label and take the true meaning of the word back.
My friends, I am a Liberal.
If a conservative is someone who wants things to stay the same how can I honestly call myself a conservative when I have proposed so many radical changes in this newsletter? Let’s compare what I support against our so-called “Liberal” political party.
Democrats want to take us to universal health care. A new idea? Universal Health started in Germany in the late 1800’s. Health Savings Accounts were invented by John Goodman in the late 1900’s. They want us to keep doing health care the way it has always been done. I want to rip it out by the roots and start over with Health Savings Accounts. They are the conservatives, I am the liberal.
Democrats want to maintain the same failed education system that has been sliding downhill for 50 years. I want charter schools, vouchers, and home schooling. I want to free the underprivileged and undereducated from the shackles of a system that continues to fail them and keeps them in poverty. They want us to do education the way it has always been done. I am the liberal.
Democrats don’t want to touch social security. I want Swedish-style private accounts, and I want my future benefits to be cut to avoid the fiscal disaster coming down the road. They have buried their heads in the sand and they want us to do things the way they have always been done. I am the liberal.
Democrats scream bloody murder at any proposal to change any of our failed poverty programs. I have proposed Milton Friedman’s reverse income tax to help wean the poor off of government handouts. They want to do things the way they have always been done. I am the liberal.
Democrats promised to clean up earmarks, but got virtually nothing accomplished. I want to ban earmarks. They are doing things the way they have always been done. I am the liberal.
Democrats want us to plan nearly every inch of every building in our cities. This isn’t new, rulers have been indiscriminately bulldozing and rebuilding parts of cities for centuries. I want people, in a free market, to decide what to do with their property to keep home prices down so that every person can hope to achieve the American dream. They want to boss you around the way it has always been done. I am the liberal.
Democrats’ only idea for our tax system in the last 75 years has been to raise them every chance possible. I support a flat tax that eliminates the millions of tax breaks given out to special interest groups. I have supported moving the corporate tax burden onto high income earners so that our businesses don’t waste billions dodging taxes and they can crush their foreign competitors with the tax advantage. They, on the other hand, want to do things the way they have always been done. I am the liberal.
Democrats fight free trade with same arguments the Mercantilists used in 16th century. I support free trade anywhere, anytime, and any place. It increases wealth in the United States and it will bring income to the most desperately poor countries on earth. There is a veritable consensus amongst economists that both countries always win with free trade. Democrats are chained to their union donors and want to do things the way they used to be done hundreds of years ago. I am the liberal.
The word of the year seems to be “Change”. Boldly leading us towards the status quo is not change. Fixing your gaze on the ideas of the past is not change. I want to do what has not been done. I want to do things that have not been tried. I am the liberal, not them.
We have been unjustifiably labeled “conservatives” as if we were the ones holding back progress. We have worn the scarlet C for too long. How long do the policies of the “liberal” party have to fail before we call them old ideas. The intellectual Amish of the Democratic party are not liberal at all. To paraphrase a quote from economist Robert Murphy,
“If [they] ignored advances in other scientific fields as much as they do in economics, we'd see weathermen advising readers to offer sacrifices to the rain gods.”
In the great time span of human history, freedom of the individual and small government are still radically new ideas. They are liberal ideas. I believe in these liberal ideas because I AM A LIBERAL.
Are you a liberal?
As always, tell me what you think.
Monday, March 17, 2008
Updates on Housing Bubble and Health Care
Friends,
From time to time I feel the need to prove that I am not the only one who believes what I write and that other smart people feel the same way.
Housing Bubble
Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist.
His recent article (March 17th) at Bloomberg.com echoes many of my sentiments that I referenced on my blog a few weeks ago (Feb. 27th) concerning the fact that land regulations are the root of the U.S. housing mess. Excerpts from his article include:
“…a recent study by Cato Institute scholar Randal O'Toole that draws on broad economic literature documents that the price swings are, in fact, not so difficult to understand. Out-of- control government regulation started the mess.”
“When land use is constrained, supply can't respond to higher prices, forcing prices to climb even higher. This is exactly the impetus that can start a catastrophe like the current episode. ``It's a regular cycle,'' O'Toole told me last week. ``States adopted land-use regulations, and then their real estate prices skyrocketed and then crashed. Early movers like California have seen the cycle a number of times.''
“The evidence is clear. Regulations that inhibit the supply response to higher prices are the primary culprit in this mess. “
“For the long term, draconian land-use regulations must be reconsidered by local and state governments. If not, it will only be a matter of time before we experience this all over again.“
I wrote:
“Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.”
“My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.”
Clearly, I should be charging more for this newsletter :)
Health Care
Shawn Tully, editor-at-large for Fortune magazine wrote a column called “Why McCain has the best health-care plan”
He wrote:
“McCain's main pillar is the elimination of a tax break that employees receive if their employer provides their health care.”
“So what types of policies would they buy? Employees (and their families) with corporate plans - about 150 million Americans - would probably rush toward high-deductible, low-premium insurance, and use what's left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts,”
I wrote several months ago:
“I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan.”
Also in the article, he explains that McCain’s plan includes ideas that we should be able to purchase insurance across state lines. On first glance, I agree with this, and I may write something in the future about it.
As always, tell me what you think.
From time to time I feel the need to prove that I am not the only one who believes what I write and that other smart people feel the same way.
Housing Bubble
Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist.
His recent article (March 17th) at Bloomberg.com echoes many of my sentiments that I referenced on my blog a few weeks ago (Feb. 27th) concerning the fact that land regulations are the root of the U.S. housing mess. Excerpts from his article include:
“…a recent study by Cato Institute scholar Randal O'Toole that draws on broad economic literature documents that the price swings are, in fact, not so difficult to understand. Out-of- control government regulation started the mess.”
“When land use is constrained, supply can't respond to higher prices, forcing prices to climb even higher. This is exactly the impetus that can start a catastrophe like the current episode. ``It's a regular cycle,'' O'Toole told me last week. ``States adopted land-use regulations, and then their real estate prices skyrocketed and then crashed. Early movers like California have seen the cycle a number of times.''
“The evidence is clear. Regulations that inhibit the supply response to higher prices are the primary culprit in this mess. “
“For the long term, draconian land-use regulations must be reconsidered by local and state governments. If not, it will only be a matter of time before we experience this all over again.“
I wrote:
“Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.”
“My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.”
Clearly, I should be charging more for this newsletter :)
Health Care
Shawn Tully, editor-at-large for Fortune magazine wrote a column called “Why McCain has the best health-care plan”
He wrote:
“McCain's main pillar is the elimination of a tax break that employees receive if their employer provides their health care.”
“So what types of policies would they buy? Employees (and their families) with corporate plans - about 150 million Americans - would probably rush toward high-deductible, low-premium insurance, and use what's left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts,”
I wrote several months ago:
“I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan.”
Also in the article, he explains that McCain’s plan includes ideas that we should be able to purchase insurance across state lines. On first glance, I agree with this, and I may write something in the future about it.
As always, tell me what you think.
Thursday, March 13, 2008
Apparently, We're All Stupid
Talking about Home Schooling must have hit some nerves because I had the most e-mail feedback I’ve gotten since writing these letters.
Last week I linked to a newspaper article concerning home-schooling and added a quote from the decision that I thought was a little scary. Over the weekend, I was able to read an article in Time Magazine and listen to a radio broadcast from Focus on the Family that discussed the California Appellate ruling. It definitely got me a little furious.
The two most common stereotypes that I hear about home-schooling are that the children are getting an inferior education and that the parents have suffocating religious beliefs. Do children who are home-schooled perform worse than their public school peers? Show me that data! Conjecture is insufficient. I found some data that overwhelmingly shows home-schooling offers superior performance, but I have yet to verify the numbers so I will bring it up at another time. Should we as a society determine which faiths and belief systems to suppress because they aren’t mainstream? If so, please explain to me why freedom of religion has been a failure.
This state appellate court effectively banned home-schooling in California and declared that there exists no constitutional right to home-schooling, which reversed the lower court’s decision upholding that right. The full decision can be found here.
Interestingly enough, the Supreme Court of Michigan in 1993 found in regards to another case also involving a claim that a parent’s religious beliefs allowed them to home school:
“the teacher certification requirement is an unconstitutional violation of the Free Exercise Clause of the First Amendment…”
“When rights under the Free Exercise Clause are combined with the constitutionally protected right of parents to direct the education of their children,…”
It seems that the Supreme Court of Michigan had a radically different viewpoint than California’s appellate court.
Traditionally, when a court is considering a case where constitutional rights are in the balance they allow other interested parties to submit arguments (called an Amicus curiae) on behalf of one side or the other so that the case does not rest solely on the limited abilities of the lawyers involved. However, this case involved child welfare, so no one was allowed to know that the case was going to be heard. So, in a secret hearing the court decided to strip Californians of what was previously described as a constitutional right. To me, this is rather egregious.
I have told people before that I have no intention of owning a gun until it becomes illegal. By the same logic, my belief in the virtue of home schooling has increased dramatically after this court’s attempt to take away the right to do so given their pernicious reasoning.
Quotes from the ruling:
“A primary purpose of the educational system is to train school children in good citizenship, patriotism and loyalty to the state and the nation as a means of protecting the public welfare.” P.5.
Is home schooling a threat to citizenship? Are these subversive radicals?
“…teachers shall be of good moral character and patriotic disposition, that certain studies plainly essential to good citizenship must be taught, and that nothing be taught which is manifestly inimical to the public welfare.’" P. 5
In this age of moral relativism who decides “good moral character”? Is that traditional morals or PC morals?
“[h]ome education, regardless of its worth, is not the legal equivalent of attendance in school in the absence of instruction by qualified private tutors.” P. 9
Regardless of its worth? If this court does not believe that the law needs to be enforced for the sake of quality education, what else could be their motivation? This court believes that consolidating the power to educate into the singular hand of the state is unto itself a desirable end. They do not care whether parents can teach their children adequately. Their sole concern is to ensure that the orthodoxy of the state does not face competition.
It is clear that they are afraid. They are afraid of you and me. They are afraid that if individuals are allowed to teach their own children that this will lessen our good citizenship, lessen our patriotism, and lessen our loyalty to the state. This sort of thinking should be a relic of the past.
For Texas, I am proposing a state constitutional amendment that guarantees the right of parents to determine the education of their child. My first draft of the amendment is this:
All legal guardians of minor children in the State of Texas have the right to determine the venue of education for their child, including their own home or property. Furthermore, the state may not limit the person or persons that provide education to the children of legal guardians, unless this educator has been convicted of significant criminal offense.
Note that the Texas constitution already has over 400 amendments, so this isn’t as dramatic as amending the US constitution.
As always, let me know what you think.
Last week I linked to a newspaper article concerning home-schooling and added a quote from the decision that I thought was a little scary. Over the weekend, I was able to read an article in Time Magazine and listen to a radio broadcast from Focus on the Family that discussed the California Appellate ruling. It definitely got me a little furious.
The two most common stereotypes that I hear about home-schooling are that the children are getting an inferior education and that the parents have suffocating religious beliefs. Do children who are home-schooled perform worse than their public school peers? Show me that data! Conjecture is insufficient. I found some data that overwhelmingly shows home-schooling offers superior performance, but I have yet to verify the numbers so I will bring it up at another time. Should we as a society determine which faiths and belief systems to suppress because they aren’t mainstream? If so, please explain to me why freedom of religion has been a failure.
This state appellate court effectively banned home-schooling in California and declared that there exists no constitutional right to home-schooling, which reversed the lower court’s decision upholding that right. The full decision can be found here.
Interestingly enough, the Supreme Court of Michigan in 1993 found in regards to another case also involving a claim that a parent’s religious beliefs allowed them to home school:
“the teacher certification requirement is an unconstitutional violation of the Free Exercise Clause of the First Amendment…”
“When rights under the Free Exercise Clause are combined with the constitutionally protected right of parents to direct the education of their children,…”
It seems that the Supreme Court of Michigan had a radically different viewpoint than California’s appellate court.
Traditionally, when a court is considering a case where constitutional rights are in the balance they allow other interested parties to submit arguments (called an Amicus curiae) on behalf of one side or the other so that the case does not rest solely on the limited abilities of the lawyers involved. However, this case involved child welfare, so no one was allowed to know that the case was going to be heard. So, in a secret hearing the court decided to strip Californians of what was previously described as a constitutional right. To me, this is rather egregious.
I have told people before that I have no intention of owning a gun until it becomes illegal. By the same logic, my belief in the virtue of home schooling has increased dramatically after this court’s attempt to take away the right to do so given their pernicious reasoning.
Quotes from the ruling:
“A primary purpose of the educational system is to train school children in good citizenship, patriotism and loyalty to the state and the nation as a means of protecting the public welfare.” P.5.
Is home schooling a threat to citizenship? Are these subversive radicals?
“…teachers shall be of good moral character and patriotic disposition, that certain studies plainly essential to good citizenship must be taught, and that nothing be taught which is manifestly inimical to the public welfare.’" P. 5
In this age of moral relativism who decides “good moral character”? Is that traditional morals or PC morals?
“[h]ome education, regardless of its worth, is not the legal equivalent of attendance in school in the absence of instruction by qualified private tutors.” P. 9
Regardless of its worth? If this court does not believe that the law needs to be enforced for the sake of quality education, what else could be their motivation? This court believes that consolidating the power to educate into the singular hand of the state is unto itself a desirable end. They do not care whether parents can teach their children adequately. Their sole concern is to ensure that the orthodoxy of the state does not face competition.
It is clear that they are afraid. They are afraid of you and me. They are afraid that if individuals are allowed to teach their own children that this will lessen our good citizenship, lessen our patriotism, and lessen our loyalty to the state. This sort of thinking should be a relic of the past.
For Texas, I am proposing a state constitutional amendment that guarantees the right of parents to determine the education of their child. My first draft of the amendment is this:
All legal guardians of minor children in the State of Texas have the right to determine the venue of education for their child, including their own home or property. Furthermore, the state may not limit the person or persons that provide education to the children of legal guardians, unless this educator has been convicted of significant criminal offense.
Note that the Texas constitution already has over 400 amendments, so this isn’t as dramatic as amending the US constitution.
As always, let me know what you think.
Friday, March 7, 2008
Elections and Decisions
As most of you know Texas had it’s primary election on Tuesday that 4th. I voted and went back to see what the delegate selection process looked like. Apparently, statewide interest in being a delegate was down this election cycle, which meant that the precinct’s typical 16 slots weren’t even filled. I will be a delegate to the Senatorial District Republican Convention. It will likely be tougher to become a state delegate, but I’ll let you know how it goes.
Only one person who gets this newsletter lives in a state that hasn’t held it’s primary yet (Pennsylvania), but I would recommend being a delegate just for the experience. Also, just as I plan to build a little resume in my head for why I should be selected as a state delegate, I would recommend the same thing for you at your local precinct.
A Note on Homeschooling
My wife knows a woman from her prior working experience who dropped out of high school when she was young and got her GED. Her husband has little to no college either and works at a refinery. This woman decided to home school her three boys. All three have done very well while attending a well-respected private university in Texas with large academic scholarships. What she was able to accomplish for her sons has always impressed me.
In California, as in several states, there are significant barriers to home schooling. In particular California has had a law to require home school teachers be credentialed. According to a recent article in the San Francisco Chronicle it seems that around 166,000 children in California were not being taught by “credentialed” parents according to the state. In a court case filed by the government, a family was home schooling their children under distance learning in conjunction with a private school. The private school would check on the children and learning environment four times a year.
The appeals court of California found that they had no constitutional right to home-schooling and that they were in violation of state truancy laws. What really struck me was not the interpretation of the existing law, but the comments made by the lead judge in the ruling.
Justice H. Walter Croskey wrote "A primary purpose of the educational system is to train school children in good citizenship, patriotism and loyalty to the state and the nation as a means of protecting the public welfare," (emphasis added).
The family is appealing to the California State Supreme Court. Hopefully, the high court will avoid fascist rhetoric in their decision.
What do you think about home schooling? Tell me what you think.
Only one person who gets this newsletter lives in a state that hasn’t held it’s primary yet (Pennsylvania), but I would recommend being a delegate just for the experience. Also, just as I plan to build a little resume in my head for why I should be selected as a state delegate, I would recommend the same thing for you at your local precinct.
A Note on Homeschooling
My wife knows a woman from her prior working experience who dropped out of high school when she was young and got her GED. Her husband has little to no college either and works at a refinery. This woman decided to home school her three boys. All three have done very well while attending a well-respected private university in Texas with large academic scholarships. What she was able to accomplish for her sons has always impressed me.
In California, as in several states, there are significant barriers to home schooling. In particular California has had a law to require home school teachers be credentialed. According to a recent article in the San Francisco Chronicle it seems that around 166,000 children in California were not being taught by “credentialed” parents according to the state. In a court case filed by the government, a family was home schooling their children under distance learning in conjunction with a private school. The private school would check on the children and learning environment four times a year.
The appeals court of California found that they had no constitutional right to home-schooling and that they were in violation of state truancy laws. What really struck me was not the interpretation of the existing law, but the comments made by the lead judge in the ruling.
Justice H. Walter Croskey wrote "A primary purpose of the educational system is to train school children in good citizenship, patriotism and loyalty to the state and the nation as a means of protecting the public welfare," (emphasis added).
The family is appealing to the California State Supreme Court. Hopefully, the high court will avoid fascist rhetoric in their decision.
What do you think about home schooling? Tell me what you think.
Wednesday, February 27, 2008
Housing Crisis Will Get Worse, Much Worse
Home prices in certain cities like L.A. and Miami have dropped quite a bit recently, but I believe that the pain has only begun. When it is all said and done, home prices in these two cities may drop by as much as 41% and 44% respectively. This will financially destroy thousands upon thousands of people.
I don’t usually buy into hysteria, but I think that the data and the logic are there. Also, let me caution those that live outside of the West Coast, Arizona, Las Vegas, Florida, and the urban Northeast. I have found virtually no evidence that any bubble exists at all for you. To explain this bubble, let me start with a little background.
How did the housing bubble happen?
The housing bubble happened for three reasons:
1) The federal reserve has been lowering interest rates for 25 years now and those interest rates trickle down into the mortgage rates. The lower the interest rates, the more house we can all afford. The more house we all can afford, the higher home prices will go.
2) Subprime, no down payments, and adjustable rate mortgages allowed people in high cost cities to overextend themselves. Companies relied on default rates to price the interest rates on these loans. These default rates were masked by continually rising home prices. That is, fewer people walk away from a mortgage when they have rapidly rising equity in their home. They sell quickly instead of foreclosing.
3) Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.
Why has the bubble burst?
The bubble busted in three different waves, and I think a third fourth is coming. The first wave came when the amount of capital (or money) needed to maintain this upward climb simply started to run out. There is a limit to the amount of resources we put into real estate. Eventually we have to start thinking about other priorities. The second and third waves came with the nature of mortgage lending. Adjustable Rate Mortgage rates suddenly jumped and many people, especially those who intended to flip a house with an ARM, could no longer afford their mortgage and had to default. Those with other exotic loans who could no longer afford them had to default as well because home prices were no longer rising fast enough to avoid foreclosure. The fourth wave is coming, and I will talk about it later.
How did you calculate this?
According to the S&P/ Case Shiller home price index which measures home prices in 20 large metropolitan areas throughtout the U.S., home prices in LA have already dropped almost 15%. In Miami, Phoenix, San Diego, and Tampa the price drops are even more shocking at 18.9%, 17.5%, 17.5% and 15.9% respectively. So, it may be surprising to hear that I believe that prices will continue to fall much further.
First, I looked at the stock market bubbles in the S&P and the NASDAQ in and around 1999. When I graphed the data, I was a little surprised to see that there seemed to be a modest growth trend for many years and then suddenly a sharp upward turn, hitting a peek, and then a sharp slide back to down to where that growth rate pointed before the bubble. It was true for the S&P and the NASDAQ.
I graphed the historical data available for the S&P/Case Shiller home price index as well. It appeared that, so far, home prices in many of these “bubble” markets looked almost exactly like the S&P and NASDAQ bubbles. I then calculated the home price growth rate between 1987 and 2002 (before the bubble). I then projected that growth rate out to Jan. 2008 to see what the home price “should be”. This is what the projection portends for certain markets:
Miami -32%
Los Angeles -31%
Tampa - FL -28%
Las Vegas -28%
Washington -24%
These drops are in addition to the drops that have already occurred.
It won’t be that bad will it?
I have seen several articles claim that home prices won’t fall dramatically, that there will be a “soft-landing”. They claim that as prices fall many people just won’t try to sell their houses. When fewer people try to sell their houses, the supply of homes for sale drops which causes buyers to compete for the remaining supply.
Hopefully, this is true, but I suspect that it will not be enough. Earlier I mentioned how many economists believe that smart growth urban planning have limited the supply of housing which has driven home prices sky high. This is only part of the economic story.
Not only has supply of homes been limited, but the supply curve has become more inelastic. In laymen’s terms, this means that even small changes in demand lead to big price swings. The very nature of the market that lead to rapid price spikes, like when homes in Pheonix and Las Vegas shot up by over 40% in a single year, can lead to rapid price drops.
The other thing working against this “soft-landing” theory are the number of foreclosures. Many people can pull their homes off of the market, but the hoards of foreclosures will limit the ability of the market to absorb all of the homes for sale.
What about this "fourth wave"?
There are two components to the fourth wave. Most of the focus on mortgage borrowing is on initial mortgages, but there are also millions of Americans who have borrowed from their home equity. These people are at risk of foreclosure if prices plummet and they get into a situation where they have to sell their home, like extended unemployment.
The unemployment picture in many states most affected by the housing bubble is growing dramatically worse.
California Unemployment 9 months ago 4.8% Today 6.1%
Nevada 9 months ago 4.3% Today 5.8%
Arizona 3 months ago 3.3% Today 4.7%
Florida 9 months ago 3.3% Today 4.7%
Compared to states where the bubble never hit:
Texas Unemployment 9 months ago 4.3% Today 4.5%
North Carolina 9 months ago 4.5% Today 5.0%
What can we do?
My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.
And, of course, don’t buy houses in any of these bubble markets.
I don’t usually buy into hysteria, but I think that the data and the logic are there. Also, let me caution those that live outside of the West Coast, Arizona, Las Vegas, Florida, and the urban Northeast. I have found virtually no evidence that any bubble exists at all for you. To explain this bubble, let me start with a little background.
How did the housing bubble happen?
The housing bubble happened for three reasons:
1) The federal reserve has been lowering interest rates for 25 years now and those interest rates trickle down into the mortgage rates. The lower the interest rates, the more house we can all afford. The more house we all can afford, the higher home prices will go.
2) Subprime, no down payments, and adjustable rate mortgages allowed people in high cost cities to overextend themselves. Companies relied on default rates to price the interest rates on these loans. These default rates were masked by continually rising home prices. That is, fewer people walk away from a mortgage when they have rapidly rising equity in their home. They sell quickly instead of foreclosing.
3) Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.
Why has the bubble burst?
The bubble busted in three different waves, and I think a third fourth is coming. The first wave came when the amount of capital (or money) needed to maintain this upward climb simply started to run out. There is a limit to the amount of resources we put into real estate. Eventually we have to start thinking about other priorities. The second and third waves came with the nature of mortgage lending. Adjustable Rate Mortgage rates suddenly jumped and many people, especially those who intended to flip a house with an ARM, could no longer afford their mortgage and had to default. Those with other exotic loans who could no longer afford them had to default as well because home prices were no longer rising fast enough to avoid foreclosure. The fourth wave is coming, and I will talk about it later.
How did you calculate this?
According to the S&P/ Case Shiller home price index which measures home prices in 20 large metropolitan areas throughtout the U.S., home prices in LA have already dropped almost 15%. In Miami, Phoenix, San Diego, and Tampa the price drops are even more shocking at 18.9%, 17.5%, 17.5% and 15.9% respectively. So, it may be surprising to hear that I believe that prices will continue to fall much further.
First, I looked at the stock market bubbles in the S&P and the NASDAQ in and around 1999. When I graphed the data, I was a little surprised to see that there seemed to be a modest growth trend for many years and then suddenly a sharp upward turn, hitting a peek, and then a sharp slide back to down to where that growth rate pointed before the bubble. It was true for the S&P and the NASDAQ.
I graphed the historical data available for the S&P/Case Shiller home price index as well. It appeared that, so far, home prices in many of these “bubble” markets looked almost exactly like the S&P and NASDAQ bubbles. I then calculated the home price growth rate between 1987 and 2002 (before the bubble). I then projected that growth rate out to Jan. 2008 to see what the home price “should be”. This is what the projection portends for certain markets:
Miami -32%
Los Angeles -31%
Tampa - FL -28%
Las Vegas -28%
Washington -24%
These drops are in addition to the drops that have already occurred.
It won’t be that bad will it?
I have seen several articles claim that home prices won’t fall dramatically, that there will be a “soft-landing”. They claim that as prices fall many people just won’t try to sell their houses. When fewer people try to sell their houses, the supply of homes for sale drops which causes buyers to compete for the remaining supply.
Hopefully, this is true, but I suspect that it will not be enough. Earlier I mentioned how many economists believe that smart growth urban planning have limited the supply of housing which has driven home prices sky high. This is only part of the economic story.
Not only has supply of homes been limited, but the supply curve has become more inelastic. In laymen’s terms, this means that even small changes in demand lead to big price swings. The very nature of the market that lead to rapid price spikes, like when homes in Pheonix and Las Vegas shot up by over 40% in a single year, can lead to rapid price drops.
The other thing working against this “soft-landing” theory are the number of foreclosures. Many people can pull their homes off of the market, but the hoards of foreclosures will limit the ability of the market to absorb all of the homes for sale.
What about this "fourth wave"?
There are two components to the fourth wave. Most of the focus on mortgage borrowing is on initial mortgages, but there are also millions of Americans who have borrowed from their home equity. These people are at risk of foreclosure if prices plummet and they get into a situation where they have to sell their home, like extended unemployment.
The unemployment picture in many states most affected by the housing bubble is growing dramatically worse.
California Unemployment 9 months ago 4.8% Today 6.1%
Nevada 9 months ago 4.3% Today 5.8%
Arizona 3 months ago 3.3% Today 4.7%
Florida 9 months ago 3.3% Today 4.7%
Compared to states where the bubble never hit:
Texas Unemployment 9 months ago 4.3% Today 4.5%
North Carolina 9 months ago 4.5% Today 5.0%
What can we do?
My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.
And, of course, don’t buy houses in any of these bubble markets.
Friday, February 22, 2008
Down on the Border
I had another letter-to-the-editor printed in the Houston Chronicle. The text of it is here –
Mexican President Felipe Calderon's recent decision to begin talking about partially privatizing Pemex provides an enormous opportunity for the United States to achieve progress on immigration and oil dependence. Calderon faces an uphill battle in the fight to allow foreign investment that could, coincidentally, help the United States secure more oil from a stable democratic government. We should help push this legislation over the top by offering a bilateral agreement in which we exchange a larger allocation of work visas or citizenships. This is a unique opportunity to get something more in return for opening our borders to immigrants from Mexico. More secure oil, more jobs for Houston companies and a reasonable compromise to face the realities of immigration.
If you recall, this relates back to my position I stated back in October of last year that part of the solution to immigration is to engage Mexico on a path to economic growth.
Mexican President Felipe Calderon's recent decision to begin talking about partially privatizing Pemex provides an enormous opportunity for the United States to achieve progress on immigration and oil dependence. Calderon faces an uphill battle in the fight to allow foreign investment that could, coincidentally, help the United States secure more oil from a stable democratic government. We should help push this legislation over the top by offering a bilateral agreement in which we exchange a larger allocation of work visas or citizenships. This is a unique opportunity to get something more in return for opening our borders to immigrants from Mexico. More secure oil, more jobs for Houston companies and a reasonable compromise to face the realities of immigration.
If you recall, this relates back to my position I stated back in October of last year that part of the solution to immigration is to engage Mexico on a path to economic growth.
Wednesday, February 13, 2008
Why the Free Market II
From the feedback I got, it seems that I was convincing on why not the controllers, but did not explain much in favor of the free market.
As I have stated before, we are the Free Market. It is the sum of all the individual decisions made by each person in society. We also need to be aware that not everyone who says they are in favor of the Free Market understands what they are saying. To merely reject Soviet Communism does not make one a believer in the free market. There are many on the political left who embrace some concepts of the Free Market, but they reject other parts of it and believe in broad limitations to it. Rejecting the truly free market does not make someone a Communist or a Socialist, but it does mean that you believe in control on some level. As I said last week, the Free Market is a rejection of control.
We usually think of the economy in terms of money, but this is the wrong perspective. If we were stuck on a deserted island, a briefcase full of money is worth no more than toilet paper. The real measure of the economy is the amount of goods and services we are able to produce. This is why economists talk about the Gross Domestic Product (or GDP). It is a measure of all the goods and services produced within the United States.
Our economy can grow in three ways.
1) Invention of a new product or service
2) Perfecting an existing product or process of making existing products
3) Discovering a new resource such as new oil deposits, new foods, new water supplies…
The free market is the best at achieving these three things.
Invention – Many dream of that one brilliant idea with which they can make their fortune. If that fortune did not exist, we would spend less time dreaming about new inventions. If we spend less time thinking about invention, fewer things will be invented. Kids dream of flying through the air like a bird, but the laws of physics eventually put this dream to rest. However, many adults still dream about inventions because nothing prevents the hope of making our fortune. We see a little craft we could make, a book we could write, a store we could open, or any of a million other possibilities. It would not just be fun to try; it is that we could make money too.
It is not that no one in other economic systems invents; it is that the reward is less so they think about it less. I showed evidence recently how countries with socialized medicine invent fewer medical breakthroughs. It is because they limit the rewards. No system rewards invention more than the free market.
Perfecting - We all do this every day. When we are at work or home, we figure out time and effort saving techniques. It can range from learning a short cut key in Microsoft’s Excel to a hip bump to shut a drawer. The primary way that we increase the economy, is to figure out how to produce more with the same amount of resources, or to produce the same using fewer resources. Our resources are our time, our labor, and the physical like wood and steel.
In a free market system, employers bidding for your services offer you wages and you take the best offer. If you are consistently discovering better ways to get more with less, employers will value that skill and reward you with higher wages. Sometimes people find new ways of doing things that offer a reward so large they leave their old job to start their own business. The phrase, “I could do it for half that price” has launched thousands and thousands of businesses.
However, the controllers often think that wages do not match their ideas of “fair”, so they try to set wages arbitrarily by a committee or law using some arcane formula. Teachers and government workers suffer under this practice and have less reward for perfecting resource saving techniques. No system gives as large an incentive to work on perfecting production of goods and services than the free market.
Discovery – Heroic figures fill the pages of American history taking enormous risks to make their fortune by setting out into the wilderness. Settlers went west in search of new land to farm. Miners rushed out to the Rockies in search of gold and silver. Wildcatters in Texas would bet their life savings to find oil. All of these people took huge risks to find new resources because the potential for reward was huge. Today we have people on the left who complain about “excess” profits and they want to take that reward away. If there is less reward, there is less incentive for discovery. No system gives as large an incentive to expand discovery as the free market.
The free market creates the largest incentives for invention, perfection, and discovery. Bigger incentives beget bigger ideas. No other system can match the growth of ideas and the growth of production than the free market. The more we embrace it the smarter and wealthier we will all become.
As I have stated before, we are the Free Market. It is the sum of all the individual decisions made by each person in society. We also need to be aware that not everyone who says they are in favor of the Free Market understands what they are saying. To merely reject Soviet Communism does not make one a believer in the free market. There are many on the political left who embrace some concepts of the Free Market, but they reject other parts of it and believe in broad limitations to it. Rejecting the truly free market does not make someone a Communist or a Socialist, but it does mean that you believe in control on some level. As I said last week, the Free Market is a rejection of control.
We usually think of the economy in terms of money, but this is the wrong perspective. If we were stuck on a deserted island, a briefcase full of money is worth no more than toilet paper. The real measure of the economy is the amount of goods and services we are able to produce. This is why economists talk about the Gross Domestic Product (or GDP). It is a measure of all the goods and services produced within the United States.
Our economy can grow in three ways.
1) Invention of a new product or service
2) Perfecting an existing product or process of making existing products
3) Discovering a new resource such as new oil deposits, new foods, new water supplies…
The free market is the best at achieving these three things.
Invention – Many dream of that one brilliant idea with which they can make their fortune. If that fortune did not exist, we would spend less time dreaming about new inventions. If we spend less time thinking about invention, fewer things will be invented. Kids dream of flying through the air like a bird, but the laws of physics eventually put this dream to rest. However, many adults still dream about inventions because nothing prevents the hope of making our fortune. We see a little craft we could make, a book we could write, a store we could open, or any of a million other possibilities. It would not just be fun to try; it is that we could make money too.
It is not that no one in other economic systems invents; it is that the reward is less so they think about it less. I showed evidence recently how countries with socialized medicine invent fewer medical breakthroughs. It is because they limit the rewards. No system rewards invention more than the free market.
Perfecting - We all do this every day. When we are at work or home, we figure out time and effort saving techniques. It can range from learning a short cut key in Microsoft’s Excel to a hip bump to shut a drawer. The primary way that we increase the economy, is to figure out how to produce more with the same amount of resources, or to produce the same using fewer resources. Our resources are our time, our labor, and the physical like wood and steel.
In a free market system, employers bidding for your services offer you wages and you take the best offer. If you are consistently discovering better ways to get more with less, employers will value that skill and reward you with higher wages. Sometimes people find new ways of doing things that offer a reward so large they leave their old job to start their own business. The phrase, “I could do it for half that price” has launched thousands and thousands of businesses.
However, the controllers often think that wages do not match their ideas of “fair”, so they try to set wages arbitrarily by a committee or law using some arcane formula. Teachers and government workers suffer under this practice and have less reward for perfecting resource saving techniques. No system gives as large an incentive to work on perfecting production of goods and services than the free market.
Discovery – Heroic figures fill the pages of American history taking enormous risks to make their fortune by setting out into the wilderness. Settlers went west in search of new land to farm. Miners rushed out to the Rockies in search of gold and silver. Wildcatters in Texas would bet their life savings to find oil. All of these people took huge risks to find new resources because the potential for reward was huge. Today we have people on the left who complain about “excess” profits and they want to take that reward away. If there is less reward, there is less incentive for discovery. No system gives as large an incentive to expand discovery as the free market.
The free market creates the largest incentives for invention, perfection, and discovery. Bigger incentives beget bigger ideas. No other system can match the growth of ideas and the growth of production than the free market. The more we embrace it the smarter and wealthier we will all become.
Friday, February 8, 2008
Why the Free Market
There are two choices on how to run a society. Either you try to control other people’s lives or you don’t. Choosing a free market is choosing not to control the economic affairs of others. The free market relies on few rules to control only those behaviors that cause real harm to your body or your property.
The rejoinder to this argument is that sometimes society needs to be planned. The free choices of individuals do not end up creating the society that we want. Therefore, we vote to correct the poor decisions that individuals make.
The glaring problem is who decides the society that we want. In a Democracy, the majority decides for the minority. In Venezuela, they have voted to allow Chavez to take property from the voting minority and shut down news organizations that disagree with him. In Russia, they vote for leaders who routinely take away rights and freedoms.
There have always been people like Hugo Chavez. They have convinced themselves that destiny has chosen them out of the ether to bring heaven down to Earth. They dream of utopia and work to build a Tower of Babel, vainly believing that control is the pathway to paradise.
For every tyrant who darkens the earth, there are a million others casting the shadow of their will over the choices of others around them. It can be a city councilman, a neighborhood association member, even a parent using their position to needlessly control others. It is one of the frailties of humanity to see things we don’t like and to blame everyone but ourselves. It is through hubris, a lack of humility, that we conceive that we are smarter and wiser than others we know. We think we have all the answers when we mostly don’t have a clue.
There are many times I see a vacant lot and think, “They should build a restaurant there, or a bank, or a hotel.” Should they really? I really have no idea whether it would be worthwhile for any of those things to be built. Usually, it is what I want, not what is best. I see a bad movie and think, “I could make a better movie than that!” Could I? I’ve never been to film school. I’ve never published even a short story. Isn’t it arrogant to think that I would be better than someone who has spent a lifetime in the film industry?
The world is a very complicated place, and in our heads, we hold a tiny fraction of the information needed to run it. It is ridiculous for me to think that I could do your job or your life better than you. How much more ridiculous is it then for me to look at a company or even a whole industry and think that I personally have enough information to set them straight. Unfortunately, this truth hasn’t stopped many from trying.
Throughout the centuries, they have worn different labels and excuses to exert control. Kings of Europe claimed divine right, and more ancient rulers claimed that Oracles and astrological events called them.
Amongst today’s most arrogant are the Socialists. They believe that a handful of people can fix every aspect of our economy by taking control. They believe that we as a people are collectively incompetent to run our affairs. Their utopia requires us to yield our feeble minds to their soaring intellects. Most people equate socialism with atheism, but this is not true. The Socialist must believe in a god, because when he wakes in the morning he sees the Almighty staring back in the mirror.
These controllers come in every stripe and color, but inside they are all the same. They have a dream and they want to force the rest of us to be a part of it. They mob around a new idea of utopia, dismissing defenders of individual freedom like me as out of touch. They lob their invective at the mention of consequences to their plans. I am the grinch, the thieving rich, the tree-killer, and the hard-hearted. It is vivid vitriol to silence dissent.
All of the plans of controllers are the same. They start with “Wouldn’t it be great if…” and end with terror or taxes to prod us to toe the line. Not all are so nightmarish as Nazi Germany or the Khmer Rouge of Cambodia. Many are like the annoyance of a hyper PTA president asking for ridiculously elaborate costumes for the annual play. They are all forms of control, and require your submission.
In our economy today, we see them hard at work to firm their grip. They try to run our health care, run our schools, run our retirement, and run the mail. They want to plan every building in our cities, plan every pill we take, and plan the weather 100 years from now. As Robert Burns would say, “The best-laid plans of mice and men often go awry.” We observe that they have failed our health, failed or schools, failed our cities, and fail our economy.
Belief in the free market is a rejection of control. The free market does not judge that one man’s dream is more valid than another, as long as you behave peacefully towards each other. It is a belief that no individual or group rises even to the level of tolerable incompetence at planning our society. Regardless of whether your name is followed by PhD or GED there is no difference, no one is smart enough to be in control.
The role of government is to allow your choices to find your dreams, not my control to fund my whims.
As always, tell me what you think.
The rejoinder to this argument is that sometimes society needs to be planned. The free choices of individuals do not end up creating the society that we want. Therefore, we vote to correct the poor decisions that individuals make.
The glaring problem is who decides the society that we want. In a Democracy, the majority decides for the minority. In Venezuela, they have voted to allow Chavez to take property from the voting minority and shut down news organizations that disagree with him. In Russia, they vote for leaders who routinely take away rights and freedoms.
There have always been people like Hugo Chavez. They have convinced themselves that destiny has chosen them out of the ether to bring heaven down to Earth. They dream of utopia and work to build a Tower of Babel, vainly believing that control is the pathway to paradise.
For every tyrant who darkens the earth, there are a million others casting the shadow of their will over the choices of others around them. It can be a city councilman, a neighborhood association member, even a parent using their position to needlessly control others. It is one of the frailties of humanity to see things we don’t like and to blame everyone but ourselves. It is through hubris, a lack of humility, that we conceive that we are smarter and wiser than others we know. We think we have all the answers when we mostly don’t have a clue.
There are many times I see a vacant lot and think, “They should build a restaurant there, or a bank, or a hotel.” Should they really? I really have no idea whether it would be worthwhile for any of those things to be built. Usually, it is what I want, not what is best. I see a bad movie and think, “I could make a better movie than that!” Could I? I’ve never been to film school. I’ve never published even a short story. Isn’t it arrogant to think that I would be better than someone who has spent a lifetime in the film industry?
The world is a very complicated place, and in our heads, we hold a tiny fraction of the information needed to run it. It is ridiculous for me to think that I could do your job or your life better than you. How much more ridiculous is it then for me to look at a company or even a whole industry and think that I personally have enough information to set them straight. Unfortunately, this truth hasn’t stopped many from trying.
Throughout the centuries, they have worn different labels and excuses to exert control. Kings of Europe claimed divine right, and more ancient rulers claimed that Oracles and astrological events called them.
Amongst today’s most arrogant are the Socialists. They believe that a handful of people can fix every aspect of our economy by taking control. They believe that we as a people are collectively incompetent to run our affairs. Their utopia requires us to yield our feeble minds to their soaring intellects. Most people equate socialism with atheism, but this is not true. The Socialist must believe in a god, because when he wakes in the morning he sees the Almighty staring back in the mirror.
These controllers come in every stripe and color, but inside they are all the same. They have a dream and they want to force the rest of us to be a part of it. They mob around a new idea of utopia, dismissing defenders of individual freedom like me as out of touch. They lob their invective at the mention of consequences to their plans. I am the grinch, the thieving rich, the tree-killer, and the hard-hearted. It is vivid vitriol to silence dissent.
All of the plans of controllers are the same. They start with “Wouldn’t it be great if…” and end with terror or taxes to prod us to toe the line. Not all are so nightmarish as Nazi Germany or the Khmer Rouge of Cambodia. Many are like the annoyance of a hyper PTA president asking for ridiculously elaborate costumes for the annual play. They are all forms of control, and require your submission.
In our economy today, we see them hard at work to firm their grip. They try to run our health care, run our schools, run our retirement, and run the mail. They want to plan every building in our cities, plan every pill we take, and plan the weather 100 years from now. As Robert Burns would say, “The best-laid plans of mice and men often go awry.” We observe that they have failed our health, failed or schools, failed our cities, and fail our economy.
Belief in the free market is a rejection of control. The free market does not judge that one man’s dream is more valid than another, as long as you behave peacefully towards each other. It is a belief that no individual or group rises even to the level of tolerable incompetence at planning our society. Regardless of whether your name is followed by PhD or GED there is no difference, no one is smart enough to be in control.
The role of government is to allow your choices to find your dreams, not my control to fund my whims.
As always, tell me what you think.
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