New York Branch.
As the quid pro quo for agreeing to Governor Andrew Cuomo’s demand for his higher minimum wage, the New York Senate Republicans browbeat him into accepting a tax credit for businesses who hire at that new minimum wage.
Leaving aside the anti-hiring outcomes of minimum wage increases, as a result of this foot-shooting everyone in New York now gets to pay a piece of that higher wage, not just the businesses and their customers.
Brilliant, guys.
But do accelerate mortgage lending regardless of credit risk. That’s the conflicting position Fed Governor Elizabeth Duke seems to be taking.
She doesn’t want to return to the days of easy mortgages that obtained in 2005-2006, a run of money that the graph below illustrates.
But she adds
But I also don’t think it would be a good idea to go back to the quite restrictive credit conditions of the early 1980s[.]
Hmm….
The Wall Street Journal points out that
[t]he drop in purchase mortgages—loans for buying a home rather than refinancing an existing loan—has been most pronounced among borrowers with low credit scores. Originations have dropped by 30% for borrowers with credit scores above 780 between 2007 and 2012, but they’ve dropped by 90% for borrowers with credit scores between 620 and 680.
And
[T]he trend…”has disturbing implications for potential new households” because younger borrowers typically have credit scores that are more than 50 points below older borrowers[.]
What does this mean? It means that poorer credit risks have a harder time getting loans than better credit risks. What’s the downside of that?
Is Duke still holding out for the CRA debacle that anyone should be able to get easy credit for no better reason than that they exist?
The problem, says Duke, is that the economy may actually be worse off if the pendulum stays stuck at too tight…. The ability of newly formed households that are more likely to have lower incomes and credit scores to get loans “will make a big difference in the shape of the recovery[.] Without first-time homebuyers, the move-up market will be sluggish, new and existing home sales will be more subdued, and purchase mortgage volumes will return only slowly.”
But this is a static view. A dynamic analysis shows pretty clearly that this is just a path to a new equilibrium, at which point the pipeline of first-time buyers will be back at a “normal” level; they’ll just be older, with better incomes, and with those two characteristics established, more stable, and so better, credit risks.
Owning a home is certainly the American dream, and it remains a worthy dream. But it’s not an inalienable right. Those who work hard, develop good credit—and manage their finances so as to maintain that good credit—do get mortgages today. Those who don’t haven’t done anything to earn the same rewards as those worked hard.
It’s just that simple. Even a Federal Banker ought to be able to keep up with that.
Recall that the Department of Transportation under President Barack Obama warned a week or two ago that nearly 150 control towers at small regional airports will close down, ostensibly due to sequester budget cuts. DoT also warned of furloughs at major airports, cynically noting that resulting delays could be “very painful for the flying public.”
To alleviate this, Senator Jerry Moran (R, KS) proposed replacing the $50 million of Obama Sequester cuts from the FAA with savings from unspent balances, a kind agency slush fund that all agencies squirrel away against various exigencies, and by reducing other low-priority spending.
Enter, stage left, Senate Majority Leader Harry Reid (D, NV). He pulled Moran’s amendment and refused to allow it to come to the floor for a vote.
Thus, as The Wall Street Journal puts it,
…in the weeks ahead travelers will likely experience the frustration of flight delays, cancellations and closed airports. It won’t happen by accident or out of fiscal necessity, but because Washington Democrats refuse to prioritize federal spending.
Under Obamacare, writes Emily Chasan in The Wall Street Journal, employers will be required by 2018 to pay a tax of 40% on health care plans that President Barack Obama and his minion, Health and Human Services Secretary Kathleen Sebelius, decide for themselves are somehow “excessively rich” in the benefits they pay out.
The excuse these two and other Progressives make for this is that these Cadillac plans, with their low deductibles and “generous” medical coverage, will encourage overuse of our health-care system. Sure. Everyone needs to be covered. But only to a government-approved degree. And never mind that those low deductibles make the policy purchasers ineligible for Health Savings Accounts—Progressives don’t want Americans to have those, anyway.
But these folks also ignore—or don’t understand—another aspect of their interference. Competition in a free market for health insurance, including an ability for insurers to charge risk-based premiums, and for health services would address that “overuse” concern much more efficiently than a 2000 page law with its tens of thousands of pages of HHS rules ever could. Such an environment would directly impact the costs born both by suppliers and their customers/patients.
The competition would drive down the prices charged, and risk-based premiums within that environment would enable insurers to bill for the coverage offered in accordance with the actual likelihood of payout. Yes, some high-risk coverages would get more expensive, but the vast majority of coverages, by not having to be priced so as to subsidize those high risks, would get a lot cheaper.
Also, customers and patients would gravitate to the combination of policy coverage and medical service usage that actually interested them, instead of having to buy a government-approved policy that included things only a bureaucrat could love. An equilibrium would develop that had customers and patients getting the policies and services they wanted at prices that suited them with insurers and providers offering those services and policies at prices that would let them stay in business.
There’s no need of a tax to manage demand and supply. Americans are fully capable of doing that for themselves in a free, competitive market.
I decided to look at real incomes, in terms of what we actually can buy with our paychecks, compared to the purchasing power our grandparents had. Here’s a coarse summary.
Median household income in 1950 was $3,300/yr (~$18,500 in 2009 dollars). The median new house price then was $12,800 (~$73,200 in 2009 dollars), and that house was 980 sq ft small. It took four years of that 1950 income to buy the house (assuming an all cash payment).
In 2009 (post housing bubble burst, with its more plausible prices than those of the peak in 2006-ish), median household income was $49,800, the median price of a new house was $215,000, and that house encompassed 2300 sq ft. It took a shade over four years of that 2009 income to buy the house (again assuming an all cash payment).
That doesn’t seem like a big change, which itself might be surprising. What actually was bought when that house was bought, though? We’ve already seen that the same four years of income bought a much bigger house in 2009.
That 1950 house often came with central heating—in the form of a furnace in the basement that was manually fed with coal or wood. Really upscale homes had a supply of heating oil.
The 2009 house routinely came with central heating—gas or electric, and automatically controlled with a thermostat, often programmable. More upscale homes had multiple thermostats to control the temperatures of individual areas of the house. The 2009 house also came with central air conditioning, controlled from that same thermostat setup. 1950 houses didn’t have air conditioning at all beyond open windows and fans.
The 2009 house also came pre-wired for multiple telephones (one to a house in 1950, with add-on wiring, often), and frequently it was pre-wired for Ethernet—which didn’t exist in 1950. The 2009 home also came with a dishwasher and a refrigerator already installed. Ovens—electric or automatically lighting gas—separate from the ranges (cooktops, also electric or automatically lighting gas) were common, as were built-in microwaves.
In 1950, fridges were extra, and the dishwasher was wifey, junior, or sis. Microwaves didn’t exist, and the cooking was done, typically, on a gas stove, which combined the oven and the range; although electric stoves were available. That gas range and oven were lit with a match, too, which led to more than one set of singed eyebrows when lighting off the oven.
Of course, no one paid cash for their house in 1950 or 2009. In 1950 a typical mortgage came with 25% down, and the loan was for 16-20 years. In 2009, mortgages could be had for 0% down, although 10%-20% were typical, and 30-year mortgages were routine.