Category Archives: Economics

Miscellaneous economy stuff

A Step toward Downsizing the Federal Government

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Rightsizing is what the cool kids call it in their desperation to avoid notice, but what the House’s Republican Party’s Freedom Caucus is proposing represents a small, but needed, initial step toward downsizing our bloated Federal bureaucracy. Some of the State Department cuts being proposed include

  • State’s US Agency for Global Media would be reduced from $798 million to $734 million
  • State’s Democracy Fund and the United States Agency for International Development would be reduced from $355.7 million to $227.2 million
  • State’s US Global Health Programs would be reduced from $6.3 billion to $5.7 billion
  • State’s Global Environment Facility would be eliminated altogether, cutting $139.5 million

And so on.

In absolute terms, these are, individually, chump change cuts, for all that they represent significant reductions in each agency’s budget. They do, however, add up to $1.2 billion, including other State cuts not listed here, and so are an initial cut of 2% of the $58.5 billion 2022 State budget.

Over at the Energy Department, the Freedom Caucus is proposing elimination of the Aquatic Decarbonization and the Algae-Related Bioenergy Technologies, cutting $80 million from Energy’s 2023 $149 billion budget.

Freedom Caucus is proposing similar reductions for Agriculture.

I don’t often agree with the Freedom Caucus’ “my way or nothing” approach, but on matters regarding our nation’s morbidly obese Federal spending (and a deficit of $1.62 trillion just in the first 10 months of this fiscal year) and our resulting even more dangerously fat national debt, the Republican Party as a whole needs to stand tall on actual cuts.

Even if it means shutting down (some of) the Federal government next fall and winter. And spring. And summer. That, in itself, would result in badly needed spending cuts.

Vivek Ramaswamy’s Brief Thought on Taxation

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And my brief response. Ramaswamy has said in the past that he favors an estate tax as high as 59% on his theory that passing wealth from parents to children breeds inequality and “hereditary aristocracy.” Stipulate that’s reasonably accurate: he needs to show that he’s considered other means of preventing that aristocratic development and how those alternatives are inadequate to the task.

More importantly, though, is this underlying theory of his:

I do believe in a vision of bringing income taxes as low as possible, if one could collect it back on the back end[.]

Collect what back, exactly? The money in question belongs solely to the one who has, or had, the income. Money being retained by its owner rather tautologically leaves nothing for government to “collect back” at some later time; government has lost nothing and so has nothing to regain.

I Have a Question

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It seems that employers offering/allowing remote work at least some of the time, are better able to hire quickly than employers who require full-time presence in the office for work. The subheadline nicely sums up the article’s thesis.

Employers offering flexible work options are hiring at a faster pace than those requiring full-time office attendance

And the lede:

With employers fighting for a limited pool of office workers, those offering remote-friendly jobs appear to have the upper hand.

Upper hand compared to what? That brings me to my question, which is this: what’s the quality of work done by the part-time remote employee compared with that of the full-time in-the-office employee?

OK, a second question: what’s the quality of employee who works remotely at least some of the time compared with the employee who works in the office full time?

A bonus question: what’s the quality of the quickly hired employee, or the quality of the work done by him—the partial remote employee, for instance, but not exclusively so for this question—compared with the employee who’s hired after some time spent by the employer in the search?

Have a Plan and Stick to It

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Or not. Apartment buildings—aka multifamily buildings—have been a sound investment for sound investors, but the investments aren’t all that these days, because the investors aren’t all that these days.

Apartment-building values fell 14% for the year ended in June after rising 25% the previous year, according to data company CoStar.

But even at that, apartment building values still were up more than 7% on the two years. On the other hand,

[u]nlike office buildings and malls, which have been hit hard by remote work and e-commerce, rental apartments have low vacancy rates. The apartment sector’s main problem isn’t a lack of demand—rents have soared since 2020—it is interest rates.

Oh yeah. Debt and the associated interest vig. That’s where investors, who used to have a plan, stopped having serious plans, or walked away from the ones they had. There exists, today, $2 trillion in apartment building mortgage debt, double that of a decade ago. That, by itself, shouldn’t be a problem, but. But, but, but.

Most apartment loans are fixed-rate, long-term mortgages. During the pandemic, however, investors took out more shorter-term, floating-rate loans.

The warning signs were obvious, though: increasing lock-down and related government overreactions to the pandemic already were leading to increasing rent payment delinquincies, to say nothing of Federal government-mandated rent payment deferrals; inflation pressures from the Federal government’s panicky pandemic-related spendings and bailouts that were already predicting a need to raise interest rates; and on and on. Why move away from the stability of long-term mortgage borrowing, except in the hopefulness of being able to flip the property or keep raising (unpaid and increasingly unpayable) rents to cover the rising debt costs of floating rate loans, when the loans would need to be rolled, soon, into ever higher interest rate loans?

Even in investing, it’s optimal to dance with the girl what brung you, to stick to your original plan, no matter how many hot, can’t miss, deals show up.

Unionized Laziness

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The United Auto Workers union is bent on being the epitome of it. UAW’s President Shawn Fain:

I think we should push a 32-hour work week.

In return for working less, the union is willing to settle for

  • Increased paid time off
  • Double-digit raises

In an ideal world, Ford, General Motors, and Stellantis, along with the other major car companies that assemble their cars in the US, will have the stones to tell the union to take a hike. American companies are not job welfare entities, they exist to produce goods and services for consumers and to make profits for their owners.

If the union wants to have a light work week and big pay, it should start its own car company and operate within those parameters.