QUOTE OF THE DAY
New Geography: More Bubble Trouble in California
Just six years since the last housing bubble, California is blowing up another. This may seem like good news to homeowners and speculators alike but it could further accelerate the demise of the state's middle class and push more businesses out of the state.
On its face, a real estate turnaround should be a strong sign of an economic recovery. In Southern California, home sales have jumped 14 percent over last year and the median price is up 16 percent, some 25 percent in Orange County. We may not quite be at 2007 super-bubble levels but we're getting there, particularly in the more desirable areas.
Yet, before opening the champagne, we need to look at some of the downsides of this asset recovery. We are not seeing much new construction, particularly of single-family homes, so the supply is not being replenished as inventory sinks. Meanwhile, many of the homebuyers are not families seeking residences, but flippers, Wall Street types and foreign investors. A remarkable one-in-three Southern California home purchasers paid with cash, up from 27 percent from last year.
It's clear that this increase is not being fueled primarily by income growth among middle-class Californians; these "prices are rising disconnected from household incomes," notes one analyst. Indeed, California incomes have been dropping somewhat more rapidly, down $2,600 per household from 2007-11, according to the American Community Survey, compared with a $200 drop nationwide. California incomes are still 13 percent higher than the national average, but a lot less so than in the past, particularly given the much higher costs and taxation.
Tallahassee: Proposed bill would benefit charter schools
A Florida House panel is working on a bill that would ease the expansion of public charter schools.
The bill would require school districts to offer unused buildings to charter schools free of charge. It would also speed up the charter school application process and prevent school districts from capping the enrollment of charter schools operating in their territory.
The legislative debate comes as the proliferation of charter schools has stoked tensions among Leon County School Board members, who fear they divert resources from traditional public schools.
Jim Horne is president of the Florida Charter School Alliance and a lobbyist whose clients include Charter Schools USA, the company that operates the newly opened Governors Charter Academy in Tallahassee.
Horne, a former education commissioner and early supporter of charter schools, said thousands of students on waiting lists are a sign that charter schools need to expand to meet the demand from parents.
FortWayne.com: Pence rules out Indiana Medicaid expansion in current form
Gov. Mike Pence said Wednesday that he has ruled out expanding Medicaid under the federal health care law unless Indiana gets approval to use state health savings accounts for the expansion.
Pence told reporters that the only way he would approve a Medicaid expansion would be if the state is given the choice of using its Healthy Indiana plan to cover new enrollees.
"It was important to me that we do fully fund Medicaid, but we did not fund a Medicaid expansion, nor do I think that under the current framework for Medicaid that it would be advisable for Indiana to do that," he said.
Democratic lawmakers are pushing for the state to approve the expansion, and House Ways and Means Chairman Tim Brown, R-Crawfordsville, has said he is considering paying for the expansion in the House version of the budget.
Pence's announcement came two days after Ohio Gov. John Kasich bucked a trend among Republican governors of flatly opposing the federal health care law and said he would expand Medicaid in his state.
Pence declared his intentions in a call with U.S. Department of Health and Human Services Secretary Kathleen Sebelius this week. He also told her that Indiana does not plan to build a "hybrid" health exchange with the federal government.
Forbes: Chrysler and Farmers Both Living Off Taxpayers
Now you know that Dodge’s Super Bowl commercial featuring Paul Harvey’s “So God Made a Farmer” speech is one of the most acclaimed advertisements of all time, and “the toast of Madison Avenue,” according to AdWeek. But do you know the rest of the story?
The purpose of the 1978 speech was to stir sympathy for the plight of farmers, and as a piece of prose poetry the address was a wonder, conjuring up in a few simple words hope, tragedy, resilience, ingenuity, reverence and community spirit: “According to Harvey, God said, ‘I need somebody willing to sit up all night with a newborn colt. And watch it die. Then dry his eyes and say, “Maybe next year.” I need somebody who can shape an ax handle from a persimmon sprout, shoe a horse with a hunk of car tire, who can make harness out of haywire, feed sacks and shoe scraps. And who, planting time and harvest season, will finish his forty-hour week by Tuesday noon, then, pain’n from ‘tractor back,’ put in another seventy-two hours.” So God made a farmer.’
Marvelous, soaring stuff. But Chrysler and its Dodge brand didn’t revive the Harvey speech because of their interest in literature. They’re interested in branding. The proper response to the commercial’s message is a wary cynicism.
Because these days farming has little to do with God and even less to do with the can-do spirit of American individualism. In fact it’s a hugely capital-intensive business, meaning it requires massive investment to be competitive, meaning it’s a game of giants. These agribusiness monsters can and do use their influence — and the abiding myth promulgated by show business that farming is still an 1880s style business with Ma and Pa against the elements — against you, the taxpayer. The one who’s getting milked before dawn is you, except the Tom Joads of Archer Daniels Midland don’t bother to get up at 4:30. They have their Congressional machinery do the job automatically. Farm subsidies averaged $20.1 billion a year from 2006 to 2010, according to a study by Vincent H. Smith, professor of economics at Montana State University.
WSJ: Obama's Colossal Politics
Who wouldn't want to live in Washington? It's a wonderful world, a place where every problem of life can be reduced to just two words. Gun control. Immigration reform. Climate control. The deficit, which of course can be solved in two words: a "balanced approach." Things so hard haven't been so simple since Tinker Bell taught children to fly in "Peter Pan," also with two words—pixie dust.
Gun control stands out. After the Newtown killings in December, President Obama channeled a national gun-control law through Joe Biden. There was no surprise that he would do so. "If there's just one life that can be saved," Mr. Obama said Monday in Minnesota, using standard Washington risk-benefit analysis, "then we have an obligation to try it."
And so the president will spread gun-control across the land. But consider the discrepancy between the Washington lawgivers and the nation receiving their unitary solutions. Congress has 535 members who work inside the Capitol Building, which you may notice is shaped like a bubble. The rest of the United States consists of 313.9 million individuals spread across a 50-state land mass of more than 9.6 million square miles.
No matter. Mr. Obama's Washington will try to write a gun law that applies in the same way everywhere for each of the nearly 314 million Americans.
CNBC: Beyond Food Trucks: More Businesses Go Mobile
Leave it to creative entrepreneurs to turn potential obstacles such as high overhead costs into assets.
Taking a cue from the explosive growth of food trucks, more small businesses are forgoing costly brick-and-mortar offices and instead running startups from their cars. "Lately, businesses-on-wheels have come to encompass hair salons, high-tech repair shops, and even makers of artificial limbs," the National Federation of Independent Business said in a recent post.
And businesses, running out of cars, have a particular allure for millenials, who are embracing nontraditional work environments and are used to operating pretty much anywhere with a smartphone and Wi-Fi connection.
Washington Post: Shackling the Spenders
The arguments against a constitutional amendment to require balanced budgets are various and, cumulatively, almost conclusive. Almost. The main arguments are:
The Constitution should be amended rarely and reluctantly. Constitutionalizing fiscal policy is a dubious undertaking. Unless carefully crafted, such an amendment might instead be a constant driver of tax increases. A carefully crafted amendment that minimizes this risk could not pass until Republicans have two-thirds majorities in both houses of Congress, which they have not had since 1871.
Furthermore, requiring a balanced budget would incite creative bookkeeping that would make a mockery of the amendment and the Constitution. For example, New York, which like 48 other states (all but Vermont) has some sort of requirement for a balanced budget, once balanced its by selling Attica Prison to itself: A state agency established to fund urban redevelopment borrowed $200 million in the bond market, gave the money to the state and took title to the prison. The state recorded as income the $200 million, declared the budget balanced, then rented the prison from the agency for a sum adequate to service the $200 million debt.
There is, however, one sufficient argument for a balanced-budget amendment. It is: George Mason University’s James Buchanan.
This Nobel laureate economist, who died last month at 93, pioneered the “public choice” school of analysis, the premise of which is in the title of his 1979 essay “Politics Without Romance.” Public choice theory applies economic analysis — essentially, the study of how incentives influence behavior — to politics.
Greek Reporter: Tax Hikes Backfire, Greece’s Revenues Plummet
Despite big tax hikes as part of austerity measures demanded by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month.
The government took in only 4.05 billion euros ($5.47 billion) in tax revenues in January, far short of its target of 4.36 billion euros ($5.89 billion), a $420 million shortfall in one month, and during an annual holiday sales period for shops who are bleeding customers and shutting down by the thousands.
If Greece fails to meet revenue targets it will trigger a correction clause at the end of each quarter of the year, setting off automatic spending cuts except for pensions and salaries. That could further harm already-depleted government services.
Finance Ministry officials attributed the decline in tax revenues to the drop in consumption, as revenues from Value Added Tax (VAT) shrank by 15 percent, while those from the special consumption taxes were also lower. Greeks hammered by big pay cuts, tax hikes and slashed pensions have cut back spending even on essential items, with supermarket sales falling 500 million euros, ($6763 million) in 2012.
The numbers could have been worse as the government gained revenues from doubled property taxes and big hikes in income taxes that have hit most Greeks except for tax cheats who continue to largely escape sacrifice or prosecution.
Direct tax revenues increased by about 9 to 10 percent in January compared with a year earlier. Given the country’s devastating recession, which has created a record 26.8 percent unemployment and is in its sixth year, the only options left for the government is to collect from tax evaders and improve tax collections, although tax hikes have led to many more Greeks trying to hide their income, statistics showed.
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