economics

October 17, 2008April 18, 2020

Joe vs Sam on tax cuts

Sorry, this part would have been in the previous post had I seen it earlier — dlb

John Seery, a Professor of Politics at Pomona College, wrote an article for the Huffington Post that was published yesterday.

In it he talks about Sam the Gas Station Guy, who he met at his gym the other day. Sam is a small business owner. He owns more than 100 gas stations and 25 restaurant franchises in southern California and has over 800 employees.

While talking about the current political scene Sam, a life long Republican said he would be voting for Barack Obama.

“My gas station businesses are hurting. I make the same profit margin–5 to 8 cents per gallon–no matter whether the price of gas is $1.99 per gallon or $4.99. The big oil companies are the ones raking in the profits when prices go up, not me. I can make money on gas only through volume sales–and if people are hurting, I make less on gas. Or I start to lose money, like now. Where I make money, though, is when they come inside and buy discretionary items–food, drinks, lottery tickets. Right now, people aren’t buying. I know 20 of my gas station colleagues are about to declare bankruptcy. It’s bad.”
“So I’m fed up with the Republicans. Tax cuts for the rich, the war–all that stuff. The middle class needs help. I’m finally convinced. I’m going for Obama. First time in my life, I tell you.”
I asked him about paying higher taxes.
“I don’t care about that. If I’m making money, I don’t care. I’ll pay my taxes. But I’m not going to make any money if the middle-class guy doesn’t have money in his pocket to buy my gas or my food. I don’t need the big tax cut right now. That’s not going to bring the customers into my gas stations.“
Joe the Plumber Meets Sam the Gas Station Guy

So there you go.

That is a better said reason why I don’t like McCain’s and the GOP’s view on taxes. Small businesses aren’t going to make money if the middle-class guy doesn’t have money in his pocket. Cutting taxes for the rich and those who invest doesn’t put money in people’s pocket quick enough to help small businesses – if at all.

Cutting taxes for the middle class are jumper cables for a broken economy and we need jumper cables right now.

August 15, 2008April 18, 2020

What is wrong with Payday lending?

Here in Ohio a group funded by the payday lending business is pushing to get a measure on the ballot to repeal HB 545, which when signed in the spring capped the interest rate that can be charged on payday loans to 28%.

A payday loan is where someone needs some quick cash – under $800 – and goes to a payday lender. The user writes a check for the amount plus the fee for the loan that the lender then either cashes in 14 days or the borrow returns to the store and buys the check back. The fee amount is usually $15 per $100 loaned. It works out to be a 391% yearly interest rate.

The lenders are upset because HB 545 will cut into those fees and we’re told that they will have to close their stores – hurting the working poor who are the primary users of the service.

Pro HB 545 people counter that 391% is an outrage and the “service” can lead people in financial trouble into a worse cycle – needing to get more loans to pay off the previous ones. They equate payday lenders to predatory mortgage lenders that have caused all kinds of economic issues for many people.

I sit in the middle of the debate. Both sides have good arguments.

I too, think that 391% interest is inhuman no matter the reason but on the other hand it should be a person’s choice to either get the loan or for a lender to lend the money. $15 per $100 loaned is a lot better than $35 or more for a bounced check.

Could someone get stuck in a cycle of loans? Sure. I know from personal experience that it easy to do it. There was a time when I almost got sucked in, but I went 2 weeks without getting another loan and broke out. It was very hard to do – I remember it meant a lot of mac and cheese dinners and no outside entertainment.

On the other hand – crap happens. Sometimes bills come up outside of your pay check and I don’t know too many creditors who will wait until your next pay day. Many people only get paid every 2 weeks or maybe only once a month – in those circumstances if you already budgeted your money for current expenses – you can’t afford something unexpected.

Try to get a small loan from a bank. They put you through the same checks as if you were borrowing money for a house.

Traditional banks have overdraft protection but you have to have good credit to get it. Writing a bad check isn’t just dangerous fee wise but if you do it too many times you can get into legal trouble.

Also the fees associated with bouncing a check are outrageous – I know this from experience.

Several years ago I missed calculated my balance in my checking account by $3. Seven – yes I said seven – checks were bounced at $35 a pop putting me on the hook for $245 in fees alone besides the $180 in bounced checks. They took the small amount I had left in my savings account and closed my checking account, conveniently after the 7 bounces with through. I refused to pay the fees and they put me on the bad risk list keeping me from even getting a savings account. I figured I would wait them out the five years the black mark would be on my report but then they reissued the black mark after four years by sending another report to Chex Systems.

Payday lenders also provide other important services for those who don’t have bank accounts. Many of the lenders operate check cashing services. For those years I couldn’t open another bank account, payday lenders helped me by cashing my payroll check and letting me buy money orders to pay bills.

While I do think some regulation of payday lenders are needed, HB 545 hurts the consumer.

January 14, 2008April 18, 2020

It’s the real economy stupid

The recent trouble with the subprime mortage lending business showed a problem with the foundations of the US economy. I like it when I find blogs or articles by people able to explain the issues without a lot of jargon.

acerimusdux in a post on Daily Kos explains why 30 years of libertarian influenced laissez-faire fiscal policy has led to a failure to invest in America, and THAT is the most dangerous threat to our way of life.

What [Alan] Greenspan glosses over here, is that for nearly 30 years now, our economic policymakers, of both parties, have operated under the misguided theory that savings would somehow automagically equal investment, by some mysterious operation of the “invisible hand” of the free market. As a result, we now have nearly 30 years of economic data which proves that this just ain’t so. Perhaps Greenspan, having held his influential position throughout parts of all 4 administrations which pursued these policies, and having used his position to aggressively promote these same policies, is incapable of giving a more honest assessment of their failure.
So when you hear or read economists and financial writers today talking about a global “savings glut”, consider that the only difference between a “savings glut” and an “investment deficit” seems to be one of interpretation. And ask, what evidence is there that the private markets have invested at an optimal level?
And likewise for those who say the government only needs to get out of the way for the private sector to invest. I would ask, as we have tried this now for nearly 30 years, where are our modern factories? Where is our modern production equipment? Where is our domestic industry? Why are we falling behind the rest of the developed world even in our transportation, communication, and health care systems?
It Ain’t All “Bubbles” Greenspan’s Fault

Failure to invest in America is about as bad as ignoring external threats. Reaganomics was a failure.

September 29, 2007April 18, 2020

Become a banker through Kiva

On the talk show Countdown with Keith Olbermann, there was an interview with President Bill Clinton about his world charity efforts through the Clinton Global Initiative. One of the programs Clinton wrote about in his recent book “Giving” was about the website Kiva.org

We let you loan to the working poor
Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can “sponsor a business” and help the world’s working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you’ve sponsored. As loans are repaid, you get your loan money back.
What We Do

It is called microfinance where people are looking for financing for their ideas and businesses but the amount needed isn’t the amount a typical bank would loan, if they would qualify, but if they could get it, it would make a huge difference in their lives.

It is a loan so you can get your money back and can loan it out again to another business if you want.

To me this is a classic application of the Humanist philosophy. People are responsible for their own actions and you show compassion for and interest in the human condition.

I plan on contributing and I hope you do too.

For more info:

Kiva.org

February 16, 2007April 18, 2020

The Bush who cried wolf

President Bush has a creditability problem. Here are a couple of examples.

Gosh, reading an economic report to Congress from President Bush, one wonders if he is back on the blow. Here is how an AP article put it on 2/13/07:

Looking back on last year, Bush said the economy turned in a solid performance despite the ill effects of the residential real estate bust.
The economy grew by 3.4 percent last year, as measured by gross domestic product from the fourth quarter of 2005 to the fourth quarter of 2006.
The president’s report projects that economic growth will slow to 2.9 percent this year, reflecting lingering fallout from the housing slump. Next year growth will pick up, with the economy expanding by 3.1 percent.
Bush pushes free trade as key to strong economy

Meanwhile, this week Chrysler announced the cutting of 13,000 jobs, US icon candymaker Hershey announced they would cut 1,500 jobs and move more production to a new plant in Mexico, and Coca-Cola plans to cut 3,500 jobs.

So growth in 2006 was 3.4 percent and is expected to be 2.6 percent in 2007 and then 3.1 percent in 2008? And 3 major employers are slashing payrolls.

I am not an expert but Bush’s report is NOT good news and neither is the economic forecast.

President Bush also now wants us to believe that Iran is supplying arms to Shiite militias in Iraq in a way that recalls the efforts the administration tried to “prove” the danger of Saddam Hussein as a pretext to invading that country. The mainstream media seem to have collective amnesia of that debacle and are reporting the “proof” about Iran without challenge.

The website Media Matters, as well as anyone with an IQ over 10, sees the parallel:

In reporting on the Bush administration’s allegations about Iran’s role in Iraq, media outlets have covered the matter in a muddled, incomplete manner, omitting any skeptical or critical analysis of these allegations, which suggests, in the words of washingtonpost.com’s Dan Froomkin, that “the lessons we should have learned from Iraq may not have been learned at all.”
Fool me twice? — NY Times, CBS, NBC report Bush allegations about Iran without context, skepticism

Froomkin, writing on the website “Nieman Watchdog” said:

You Can’t Be Too Skeptical of Authority
Don’t assume anything administration officials tell you is true. In fact, you are probably better off assuming anything they tell you is a lie.
Demand proof for their every assertion. Assume the proof is a lie. Demand that they prove that their proof is accurate.
Just because they say it, doesn’t mean it should be make the headlines. The absence of supporting evidence for their assertion — or a preponderance of evidence that contradicts the assertion — may be more newsworthy than the assertion itself.
Don’t print anonymous assertions. Demand that sources make themselves accountable for what they insist is true.
How the press can prevent another Iraq

Froomkin also listed the “provocation alone does not justify war” and that we need to find out what others outside the US think.

Knowing that Bush is such a religious person, I would also like to offer the classic fable by Aesop about the “Boy who cried wolf” that I learned in Sunday school.

The moral is if you lie enough times, when there is real danger you will not be believed. Bush wonders why people have a hard time believing his accusations about Iran.