Tag Archives: Mortgages

Parents and the Two Income Trap

One of the dimensions of force in the education reform debate is child-care, with both parents and large employers viewing schools primarily as a way to turn children into adults with specifics skills, attitudes, and knowledge. Of the three dimensions of force (money, power, and childcare), childcare is the one with the least complex. While teachers and publishers battle each other for the chance to divert money away from children and to themselves, and while States and Districts squabble over political power, parents and large employers do not disagree about much. Both desire children to become productive members of society.

Importantly, both also suffer from a collective action problem. That is, the cost for making America’s education system world-class is high, and any individual parent or employer can opt-out by simply renting better childcare on their own. For employers this means paying slightly more for one of the competent workers, and for parents this means paying slightly more for one of the competent schools. The consequences for employers and employees of the first part of this is clear: a greater labor cost means a higher standard of living (and least in the short run) for competent workers, and greater automation and outsourcing to compensating for it, leading to a lower standard of living (at least in the short run) for those automated or outsourced out of a job.

The consequences for parents are more profound.

The K-12 education market in the United States is profoundly warped. Parents typically buy access to good schools through pay rent or mortgages in good school districts. Because the teaching profession has been lobotomized through low wages, sending children to many schools would be morally tantimount to child abuse. Bidding wars thus erupt to gain access to these good schools, in the forms of expensive mortgages and high rents. People who actually own this property (apartment managers, real estate developers, and mortgage holders) become rentiers who profit at the expense of parents trying to provide a better life for their children. (Thus, landowners are an important rentier class in the education debate, along with teachers and publishers).

This leads many parents to face what Elizabeth Warren called “the two income trap.” The bidding war for good schools, along with the breakdown of widespread sexual discrimination, encourages both men and women to work, and use the excess income to buy housing near a good school. This means that if the husband loses work for whatever reason, the wife cannot temporarily increase the family’s income by taking additional part-time work. Further, in the event of a medical emergency in the family, the wife cannot act as a “free” caregiver. In both cases, America’s two-earner encouraged by our bad schools increases the financial risks of families, and thus increases domestic violence, divorce, and economic ruin.

While the low quality of America’s teacher workforce is certainly one reason for this, others exist as well. America’s education management force is low quality as well. Further, peers matter — who a child goes to school with matters quite a lot. Parents (meaning parents who are actually engaged with and concerned for their child’s future) can reasonable expect a school to be better if fewer students from low-income households attend it. Thus, a brutal but effectve way to increase the quality of schools for many parents would be to exclude students from communities that historically are not focused on education. Brown v. Board of Education and other cases have made this policy untenable, however, leading to more low-income parents to be priced out of good schools because they now have economic competition from communities of comparative earning ability but with a broken pipeline to class mobility.

But in either case, the problems remain. And the economic stress bad schools place on parents mean that solutions that require paying teachers more — such as turning teaching into a profession — may be impractical.

Only fools pay their mortgages. Wise men have friends in the Treasury

I told you so:

When I first called Chase in October, a representative named Sarah said I didn’t qualify for a loan modification because I wasn’t yet 90 days past due. The only “loan modification” she could offer me was a “repayment plan” under which I paid $400 more per month for six months until I was current again.

“It sounds as if I would be better off waiting to fall 90 days behind,” I said. “I think I’ll wait for that.”

Only fools pay their mortgages. Wise men, whether their business is trucking or insurance, have spent their time nursing connections at the Treasury Department.

Props to Obama on Iraq and Mortgages

Obama’s “residual force” is of course a way to keep us in Iraq for years (like McCain wanted)

House Speaker Nancy Pelosi , D-Calif., suggested a smaller contingent of 15,000 to 20,000 troops, and said she wanted to study Obama’s proposal. “I don’t know what the justification is for the presence of 50,000 troops in Iraq,” Pelosi told MSNBC on Wednesday.

House Defense Appropriations Subcommittee Chairman John P. Murtha , D-Pa., said only a complete withdrawal would suffice. “I don’t think we need to leave anybody there,” he said. “They have got to be on their own. Their presence alone makes them vulnerable.”

Likewise, Obama’s “upper income” limit on mortgage deducations should slow the reemergence of the high end of the home price bubble

The tax increases would … [reduce] the value of such longstanding deductions as mortgage interest … for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.

Now for Obama to let GM go bankrupt and stop throwing away money on F-22s

Where Obama’s mortgage bailout will go

Instapundit links to this interesting article:

THE FORECLOSURE FIVE – New York Post
The beneficiaries of taxpayer charity will be highly concentrated in just five states – California, Nevada, Arizona, Florida and Michigan. That is not because the subsidized homeowners are poor Californians with $700,000 mortgages are not poor, but because they took on too much debt, often by refinancing in risky ways to “cash out” thousands more than the original loan. Nearly all subprime loans were for refinancing, not buying a home.

It turns out that the five states with by far the highest foreclosure rates have some things in common with each other, but very little in common with most other states.

I studied the latest available figures for state foreclosure rates, changes in home prices over one and five years, existing home sales, the percentage of mortgages that are underwater, and unemployment. Then I compared figures for the five most foreclosure-prone states with New York and also with the 25th-ranking median state.

One out of 76 homes in Nevada went into foreclosure in January, for example, compared with one out of 173 in California, with Arizona and Florida close behind. In New York, by contrast, only 1 out of 2,271 homes went into foreclosure.

Of course, real estate speculators existed in every state. Some of them doubtless did not realize that leveraging up to buy a house that one does not plan to live in for many years is about as wise as leveraging up to buy stock that one does not plan to live in for many years.

Certainly, those home-owners are just as sympathetic and deserving of a bailout as all those who borrowed tens or hundreds of thousands of dollars to buy stock.