Scene: December 22, 2011. Elite group of Republicans from the House of Representatives meet with the Speaker in a secure location.
Boehner: (sigh) This is like being in the 5th grade again. BO-ner. BO-ner. BO-ner. Kids can (suppressing a sob) be so cruel.
Elite male Republican One (an older, white, wealthy, slightly addled man from a Southern state): I'll tell you what is cruel, Mr. Speaker. It's cruel to prolong the suffering of the unemployed, son. Bless their hearts. Some people are meant to work, and some aren't. Why give them hope? Why prolong the agony? They'll never get a job. Most of them are too old. (Pause.) Not that there's anything wrong with that.
(Polite giggles.)
Elite male Republican Two (a young, impossibly well-groomed man from a state that reveres cowboys): Well, wisdom is what you get when you've been around as long as you have, sir. You've seen the laziness that's turned our hallowed halls into a place to argue about, what? Nutrition? Thank God we managed to define pizza as a vegetable. What are we, the nanny state? What does that make us, the nannies? Well, wipe your little noses, folks. This is the U S of A, and you eat what you kill. Take your assault rifles and shoot something for dinner. (singing) Da-vey, Da-vey Crockett, king of the wild frontier. . .
Elite female Republican One (a brunette, with captivating eyes): Congressman, ...
Elite male Republican One: Shut up, Michelle. Go run for President.
Boehner: We gotta get back to business. Who's for the two month extention?
Elite Republicans, together: Booooooo.
Elite male Republican Two: I miss Cain.
Boehner: Don't say McCain around me. Bastard. Thinks he's SO big, Mr. Senator, Presidential loser, telling us what do.
Elite Republican: Har-umph. What, what, etc.
Elite male Republican Two: I said Cain, not McCain.
Boehner: Don't argue with me. I'm the Speaker. (gulp) You're supposed to do what I say. I'm your leader. (Suppressing a sob). You're mean. I hate you guys.
Elite Republicans: (together) Aw, John. No. He didn't mean anything by that.
Two hours later.
Boehner: So what are the poll numbers?
Elite female Republican: Obama's surging. Newtie's crashing. Mitt's in a cult. Ron Paul is yammering on about something or other, and I can pray gay away. With the help of my (uh) husband.
Elite Republicans: (loud guffaws)
Boehner: Okay, than it's settled. We'll hide in here until Friday, go home for Christmas, and blame Obama.
Elite male Republican Two: That'll make him a shoe-in.
(Silence)
Elite Republicans: NEVER, NEVER say that out loud. If the anybody finds out we're double agents, they'll vote us out of office.
Elite male Republican Two: (contrite) I know. Hey, Michelle. You forgot to mention. We have a 9% approval rating, and they blame us for everything!
Elite Republicans: (together) Praise Baby Jesus!
Thursday, December 22, 2011
Sunday, August 7, 2011
What the Standard & Poor's Downgrade of US Debt Means to You
You've probably heard that Standard & Poor's downgraded US debt. Even if you don't own a T-Bill, it's bad news for you. Even if you were a supporter of a reasonable approach to cutting US debt when your congressional representatives were not, you've been personally penalized by a company whose ability to assess risk has been shown to be sadly lacking.
The first part of your bad news is that US debt was downgraded by the same company that rated mortgage backed securities that were backed by dicey mortgages as AAA. Here's what that assessment means, in their own words.
'AAA' stress scenario.
An issuer or obligation rated 'AAA' should be able to withstand an extreme level of stress and still meet its financial
obligations. A historical example of such a scenario is the Great Depression in the U.S. . . .,(with) real GDP declined by 26.5%, . . .unemployment peaked at 24.9%, . . industrial production declined by 47% and home building dropped by 80%. . ., (t)he stock market dropped by 85% ...,(and) deflation of roughly 25%. . . .The 'AAA' stress scenario envisions a widespread collapse of consumer confidence. The financial system suffers major dislocations. Economic decline propagates around the globe.
An issuer or obligation rated 'AAA' should be able to withstand an extreme level of stress and still meet its financial
obligations. A historical example of such a scenario is the Great Depression in the U.S. . . .,(with) real GDP declined by 26.5%, . . .unemployment peaked at 24.9%, . . industrial production declined by 47% and home building dropped by 80%. . ., (t)he stock market dropped by 85% ...,(and) deflation of roughly 25%. . . .The 'AAA' stress scenario envisions a widespread collapse of consumer confidence. The financial system suffers major dislocations. Economic decline propagates around the globe.
Over a year ago, I discussed why investors' reliance on these ratings was a significant cause for the financial meltdown. Ratings agencies, unlike banks and insurance companies, however, bore little public blame for the catastrophic losses.
Now, how is a reasonable person to interpret what a downgrade on US debt from AAA to AA+ means? You saw what AAA means. Basically, Standard and Poor's assured mortgage backed securities investors that the issuers would pay interest to them even if there were a Depression. Oopsie.
That same company has now said it's possible that US Treasury bills notes and bonds may NOT be repaid even if there is a Depression. Considering the fact that Congress came within a day of default to agree on a repayment plan, the downgrade may not seem all that unreasonable.
But then, they are the company that gave a AAA to those pesky mortgage securities, aren't they?
That aside for the time being, Standard and Poor's has now rated US debt as AA+. Here is what a AA means. Remember, a AA+ is slightly better than this rating.
AA: An obligor rated 'AA' has very strong capacity to meet its financial commitments. It differs from the
highest-rated obligors only to a small degree.
highest-rated obligors only to a small degree.
'AA' stress scenario.
An issuer or obligation rated 'AA' should be able to withstand a severe level of stress and still meet its financial obligations. Such a scenario could include GDP declines of up to 15%, unemployment levels of up to 20%, and stock market declines of up to 70%.
An issuer or obligation rated 'AA' should be able to withstand a severe level of stress and still meet its financial obligations. Such a scenario could include GDP declines of up to 15%, unemployment levels of up to 20%, and stock market declines of up to 70%.
Well, for starters, 2010 US GDP growth was 2.8%. The first six months of 2011, GDP growth has been .9%. By my calculations .9% is about 66% less than 2.8%, far worse than15%, and we're still paying. Unemployment is 9.1%. S&P thinks unemployment can double, and we'll keep paying. The stock market, as measured by the S&P 500 Index, dropped by about 50% from summer 2008 to early 2009. They think we'd keep paying if it had dropped 20% more than it did.
So, it was the THREAT of US debt default, not the inability to pay that caused this downgrade.
It's up to you whether you think it's appropriate for a ratings agency to consider political shenanigans as a reason to downgrade debt ratings.
But, back to you. Why do you care? You're not in DC.
With this downgrade, those who lend us money, like China, Japan, the UK and countries who export oil to us (in that order), can reasonably charge us more for those loans. After all, we threatened to default and one of our own ratings agencies said lending us money is riskier than it used to be.
That extra interest we pay is an added expense to our country, making the debt problem worse. And, with higher interest rates, people who buy houses, borrow money from banks, credit cards, etc., (all of us that don't live on a cash basis) will pay more, too.
All politics is local. Playing around with the debt ceiling is going to cost you.
So, if your representatives and senators voted against raising the debt ceiling, they are costing you real money. If they want to actually help you, ask them to use their influence to talk to Standard and Poor's about the wisdom of using politics to rate our debt.
Friday, July 22, 2011
The age of financial idiocy
To discuss the current economic debate in this country may be seen as beyond the scope of a local financial writer. But, as Speaker Tip O'Neill wisely said, "All politics is local." That would, in my view, include all political debate about economics.
As we witness the inability of Congress to agree upon whether to raise the debt ceiling, the failure of which would, by estimates of The Economist, be approximately $86 billion, one wonders why our representatives would play Russian roulette with the financial good name of our country. In order to answer that question, we need only look in our own back yard.
I wrote recently about the fact that the Superintendent of Portland Public Schools, despite an unemployment rate of almost 9% and the worst recession since the Great Depression, said that it was her goal "to persuade voters to approve new construction until all the schools have received the overhauls the district says they need." She did not say that she would pull in her belt and approve what they truly needed, but issued a rubber stamp for everything that she thought they needed. It was as if she were living in different economic times than the rest of us.
On the day the City of Portland budget was adopted, I pointed out that 36% of our budget was spent to achieve equity for 14% of our citizens. Despite a dismal record of actually having improved the situation for the disenfranchised segment of our population, the budget allotted more money and added further layers of government to an already cumbersome and inefficient system, as its citizens struggle with a depressed housing and employment market. To justify these additional expenditures, the city relied on a study that concluded that fully 2/3 of our minority population experiences discrimination when looking for a place to rent, in spite of the fact that not one one of our city officials had read, or had access to the data, on which the decision to approve city housing appropriations was made.
When we tolerate such inept management of our local resources, why would we be surprised that national politians would behave differently? The lack of outrage expressed to those who caution against the potentially disasterous effect that failure to pay our bills would have upon our citizens, our services and those who lend us the money we spend, is consistent with the way we respond to our local politicans. Who is it among us that does not understand that, if we threaten not to repay our loan, our lenders will want to charge us more in the future?
The consequences of such unprecedented action will not be confined to Washington D.C. The cost of borrowing money, for everyone from the US Treasury to a small business that is trying to expand and hire new workers, will go up immediately. Those rising costs will damage employment, which is already tenuously improving after years of outsourcing and downsizing.
The question we should be asking ourselves is at what point did we find ourselves so entrenched in our ideologies that we cannot compromise? Does anyone except those who represent us really think that, in order to get out of debt, we must NOT cut expenses and raise taxes?
The people I know who are in debt certainly are trying to increase their income and cut their expenses. Why is this so difficult for those whom we elect to understand?
And, more importantly, why are we not telling them exactly how we feel about their reckless behavior?
As we witness the inability of Congress to agree upon whether to raise the debt ceiling, the failure of which would, by estimates of The Economist, be approximately $86 billion, one wonders why our representatives would play Russian roulette with the financial good name of our country. In order to answer that question, we need only look in our own back yard.
I wrote recently about the fact that the Superintendent of Portland Public Schools, despite an unemployment rate of almost 9% and the worst recession since the Great Depression, said that it was her goal "to persuade voters to approve new construction until all the schools have received the overhauls the district says they need." She did not say that she would pull in her belt and approve what they truly needed, but issued a rubber stamp for everything that she thought they needed. It was as if she were living in different economic times than the rest of us.
On the day the City of Portland budget was adopted, I pointed out that 36% of our budget was spent to achieve equity for 14% of our citizens. Despite a dismal record of actually having improved the situation for the disenfranchised segment of our population, the budget allotted more money and added further layers of government to an already cumbersome and inefficient system, as its citizens struggle with a depressed housing and employment market. To justify these additional expenditures, the city relied on a study that concluded that fully 2/3 of our minority population experiences discrimination when looking for a place to rent, in spite of the fact that not one one of our city officials had read, or had access to the data, on which the decision to approve city housing appropriations was made.
When we tolerate such inept management of our local resources, why would we be surprised that national politians would behave differently? The lack of outrage expressed to those who caution against the potentially disasterous effect that failure to pay our bills would have upon our citizens, our services and those who lend us the money we spend, is consistent with the way we respond to our local politicans. Who is it among us that does not understand that, if we threaten not to repay our loan, our lenders will want to charge us more in the future?
The consequences of such unprecedented action will not be confined to Washington D.C. The cost of borrowing money, for everyone from the US Treasury to a small business that is trying to expand and hire new workers, will go up immediately. Those rising costs will damage employment, which is already tenuously improving after years of outsourcing and downsizing.
The question we should be asking ourselves is at what point did we find ourselves so entrenched in our ideologies that we cannot compromise? Does anyone except those who represent us really think that, in order to get out of debt, we must NOT cut expenses and raise taxes?
The people I know who are in debt certainly are trying to increase their income and cut their expenses. Why is this so difficult for those whom we elect to understand?
And, more importantly, why are we not telling them exactly how we feel about their reckless behavior?
Sunday, June 26, 2011
The best job in Portland
About a month ago, we raised the point that the $21,600 Portland Public School Superintendent Carole Smith paid to research firm Davis, Hibbits and Midghall was a waste of money. After all, that was the firm that advised the school board to inflate the recent school bond issue by $178 million, so all the schools would get something, whether they needed it or not. As the bond issue fell to defeat, I thought that perhaps the reason that the research firm made that recommendation was because they're making so much money to know that the rest of us are climbing out of the worst recession since The Great Depression.
Last week, while discussing the fact that the City of Portland spends 36% of its budget attempting to achieve equity for 14% of its citizens, I neglected to cite the findings of another study at the heart of the $88.5 million (over 90% of the money we spend to achieve equity) Portland Housing Bureau. City Commissioner Nick Fish substantiates this expenditure by citing a study revealing that 66% of our 14% minority population "face discrimination when they look for a place to rent in Portland."
That would put us on par with Mobile, Alabama in the early 1960s.
While Commissioner Fish finds this situation "appalling," I find the fact that the Commissioner refuses to make the study public more appalling. Basically, he's saying, "Believe me."
Is it because he's read the study? No. City officials paid $13,000 for the study, but have not actually read it.
Okay. He's not saying, "Believe me." He's saying, "Believe them."
"Them" is the Fair Housing Council of Oregon. Commissioner Fish has chosen not to ask for the study because that would, according to Willamette Week, "jeopardize its ability to do future audits by revealing its methods."
In summary, the city paid $13,000 for a study that is clearly statistically unsound with a conclusion that has been grossly exaggerated that has not been read by city management in order to justify spending $88.5 million of our $2.797 billion budget.
Do you want the best job in Portland?
Do research studies for the city. You don't have to be right and you don't have to show anyone your work All you have to do is conclude that the city should spend more money. And make sure and bill them for your work.
kittyok@earthlink.net
Last week, while discussing the fact that the City of Portland spends 36% of its budget attempting to achieve equity for 14% of its citizens, I neglected to cite the findings of another study at the heart of the $88.5 million (over 90% of the money we spend to achieve equity) Portland Housing Bureau. City Commissioner Nick Fish substantiates this expenditure by citing a study revealing that 66% of our 14% minority population "face discrimination when they look for a place to rent in Portland."
That would put us on par with Mobile, Alabama in the early 1960s.
While Commissioner Fish finds this situation "appalling," I find the fact that the Commissioner refuses to make the study public more appalling. Basically, he's saying, "Believe me."
Is it because he's read the study? No. City officials paid $13,000 for the study, but have not actually read it.
Okay. He's not saying, "Believe me." He's saying, "Believe them."
"Them" is the Fair Housing Council of Oregon. Commissioner Fish has chosen not to ask for the study because that would, according to Willamette Week, "jeopardize its ability to do future audits by revealing its methods."
In summary, the city paid $13,000 for a study that is clearly statistically unsound with a conclusion that has been grossly exaggerated that has not been read by city management in order to justify spending $88.5 million of our $2.797 billion budget.
Do you want the best job in Portland?
Do research studies for the city. You don't have to be right and you don't have to show anyone your work All you have to do is conclude that the city should spend more money. And make sure and bill them for your work.
kittyok@earthlink.net
Thursday, June 16, 2011
Portland budget to be adopted today
The Portland City Council will adopt our new budget today on June 16. With a couple of candidates announcing their run for Mayor, this is a good time to see whether we agree with how our money is spent.
In this series, we’ll review the city budget and discuss one goal per article, whether that goal was achieved, and how much was spent on it.
The Numbers
The total budget is $2,797,348,621. It’s up $21 million, about ¾ of one percent, from last year.
Where we get the money
27% ($751 million) - money that was left after the city paid last year’s expenses (“Beginning Balance”)
20% ($574 million) - borrowed money (bonds)
19% ($520 million) - fees and service charges
16% ($452 million) - taxes
10% ($280 million) - paid to the city through government programs
6% ($154 million) - license and permits
2% ($66 million) - other sources
The amount the city is getting from other government programs is down considerably, as lower tax revenues have necessitated spending cuts during the economic slowdown.
Where we spend the money
Expenses are just over $1.7 billion
25% ($425 million) - Public Utilities (water and sewage)
24% ($423 million) - Public Safety (police, fire and emergency communications)
18% ($301 million) - Community Development (zoning, permits, erosion control)
13% ($229 million) - City Support Services (city attorney, management and finance)
12% ($217 million) - Transportation & Parking
6% ($113 million) - Parks, Recreation, & Culture
1% ($18 million) - Elected Officials
The remaining $1 billion of the budget is allocated to:
Contingency $626 million
Ending Fund Balance $ 68 million
Debt Service $416 million
Cash Transfers $592 million
Intra-city Transfers -$780 million
Economic Assumptions
Slow growth, low inflation and a stabilized housing market
This budget assumes that we will not fall back into recession, and that inflation will not grow uncontrollably. The city presumes that the economy and the revenues it produces will grow, but very slowly. Both national and local economic indicators support these assumptions, but if unforeseen circumstances cause either a recession or high inflation, money the city collects from revenues will fall short of this budget’s projections.
The budget assumes “some much needed stabilization of the local housing market by the summer of 2012.” According to the real estate Multiple Listing Service, both average and sales prices in Portland have recently improved from falling by 29% from 2007, to falling by 27%, in other words we’ve recently recouped 2% of the nearly 30% we’d fallen. To conclude that recent local data are a sign of stabilization in the coming year is premature, particularly since local property values fell in the later stages of the housing correction.
Robert Shiller, co-creator of the S&P/Case-Shiller Home Price Indices, stated on June 9, 2011, "Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can't forecast the future because you have no comparison."
Therefore the risk that 2012 housing related revenues will fall short of budget projections is significant, since the basis for the anticipated housing recovery is anticipated is, at best, a “shot in the dark.”
Funding the library will be more expensive
A levy that provides some of the money used to operate the library expires next year. Portland property owners will be asked to renew the levy, which will cost more because interest rates are projected to rise. Virtually every reputable economist agrees that interest rates are likely to rise soon.
That extra interest (see Debt Service above) will probably increase city expenses by about $5 million. No library cost cutting plan to make up for this additional expense is currently in the budget.
Mayor’s Goals
In building this budget, the Mayor stated five key goals:
1. Return the City to full prosperity and invest in a stronger, more resilient City.
2. Help those hit hardest by the recession and provide support to the most vulnerable in our community.
3. Protect public safety services.
4. Increase the City's focus on equity to ensure that every Portlander has access to the most equal of opportunities.
5. Identify neighborhood nuisances and ensure more responsive City services.
Note that goals 2 and 4 are virtually identical. Since helping the vulnerable in our community is such a priority in this budget, we’ll start with examining how well we’re doing with achieving that goal, and how much we’re spending to do it.
Clearly, Portland is not a terribly diverse city. According to the US Census Bureau, as of 2000, the city of Portland is 78% white, 7% black, 7% Latino, 6% Asian and the rest American Indian and Pacific Islander. The non-white or Asian population is 16%. Achieving minority equity, the Mayor’s fourth stated goal, is laudable. Whether a new city office is the best way to achieve that goal is a debatable question.
New Program
The Office of Equity - $525 thousand
Mayor Adams intends to spend $525 thousand to create a new city agency to provide more equity for minorities.
How will this new department help?
How will this new department help?
Mayor Adams: “Well, we don’t know. So in terms of what is the Office of Equity going to do? Fundamentally, is figure out why Portlanders of color are actually seeing an increasing gap between white Portlanders, why that is and what we can do about it.”
Talk of the Office of Equity has prompted city commissioners to note that other city bureaus already address issues of fairness, equality and opportunity, and correctly so.
In addition to the $618 thousand that funds Office of Human Relations and Diversity Development and Affirmative Action Office, there is an additional $95.057 million in city funding that address minority inequity issues. They are:
1. The Portland Housing Bureau - $88.5 million. Organized on July 1 of last year, the PHB “continues efforts to synthesize programs, consolidate policy and investment approaches, and chart a new and forward-looking path.” In other words, so far, it is thinking up programs and making policy.
“As it continues to chart its path, it is emphasizing equity in its program investments. An emerging equity agenda recognizes the historic and institutional barriers to housing, homeownership, and economic stability experienced by communities of color. PHB seeks to place a greater reliance on community-validated data (such as the Coalition of Communities of Color report) to understand unmet needs, and to more intentionally hold its partners accountable for removing barriers to serving members of minority communities in greater numbers.”
In other words, when it does do something, it will try to promote economic stability and housing for minorities. Perhaps it can tell the Office of Equity how to do this. Better yet, if it does its job, there will be no need for the Office of Equity.
Here’s how the PHB spends its money. $6.8 million for the administration and support staff , $2.376 million for economic opportunity, $5.74 million for homeowner access and retention, $13.47 million for housing access and stabilization, and $60.1 million for housing production and preservation. Programs total $88.5 million.
As mentioned previously, both home median and sales prices are down 27% from 2007, and the Portland price to rent ratio is 22.41. A price-to-rent ratio over 21 indicates the cost of owning a home is far greater than renting. This fact places Portland as the fourth most expensive city in the US to buy versus rent. That is likely the greatest barrier to home ownership in the city, regardless of the minority status of the buyer.
2. The Office of Neighborhood Involvement - $3.9 million The ONI also has a goal of “expanding civic engagement – applying an equity lens. As Portland grows and becomes more diverse, ONI seeks to continue to expand involvement and bring additional people and communities into the public dialogue. The City has also recognized that historical efforts to involve under engaged groups (people of color, people with disabilities, renters, people with low income) in City initiatives have not been very effective. In exploring solutions to this problem, ONI supports the existing neighborhood system's efforts to engage all neighbors. The support is through small grants, outreach, leadership training, and technical assistance…”
The budget allocates $3.9 million to the Neighborhood Resource Center, while recognizing that its “efforts to engage under engaged groups have not been effective.” All programs by the ONI total over $7 million.
3. The Portland Development Commission - $1 million The PDC seeks to “… achieve Portland’s vision of a diverse, sustainable community with … quality jobs and housing for all.”
Under its “Partners for Economic Progress Initiative,” the budget allocates $242 thousand that will “focus primarily on 2-3 economically challenged business areas, outside of urban renewal areas used to seed small-scale neighborhood economic development projects identified and developed by the community.”
Under its “Small and Neighborhood Business Technical Assistance” program, the budget includes $600 thousand to fill gaps in business technical assistance services with a focus on stabilizing and growing small businesses with modest incomes, businesses located in economically challenged areas, and businesses whose owners may need services provided in languages other than English.” This funding will provide “tailored business technical assistance to 100 targeted businesses.”
Under its “Economic Opportunity Initiative,” the budget includes $158 thousand to fund workforce development service to 148 low-income youth.”
Total expenditures under the Neighborhood Economic Development department are $1.689 million.
4. Office of the Mayor - $685 thousand The Mayor’s budget includes $450 thousand “to support youth initiatives that drive the city towards greater equity and economic stability.”
Under its “Cradle-to-Career Implementation,” the budget includes an additional $235 thousand “to address the chronic educational challenges and prolific disparities in our schools.”
5. Office of Management & Finance - $804 thousand This budget includes $129 thousand toward its “Minority Evaluator Program Staff” to “require that all evaluation panels for Requests for Proposals include at least one minority community member.”
Its “Future Connect Scholarship” program allocates $500 thousand to “create a pathway to an Associate's Degree by helping our youth with financial burden of attending college. It also serves as an incentive for the youth who are most at-risk of not graduating college on time.”
Its “East Portland SUN School Equity” program allocates $100 thousand for “programs to improve student’s academic success.” Since “Douglas High … is the only high-poverty index school in the region without a SUN program,” these funds will provide the start-up amount for a SUN High School.
Its “CASH” Oregon program provides $75,000 for “free tax preparation service” for “low income individuals … (many of whom) are challenged by language barriers and lack basic financial literacy. In addition … CASH also assists people to get their financial houses in order by connecting them to educational resources and related community services.
6. Special Appropriations - $168 thousand
“Regional Arts and Culture Council Equity & Diversity Initiatives” provides $48 thousand to “expand its outreach to minority communities … to invest in more cultural diversity training; translate guidelines and application materials into Spanish, Russian, Chinese, Somali and Vietnamese … and increase … to one full time employee the staff … dedicated to coordinating these diversity outreach activities.”
Its “Black Parent Initiative” provides $100 thousand which “inspires and mobilizes black parent to ensure their children achieve educational excellence” through “one-on-one training … using the Effective Black Parenting model, individualized service plans, classes and support groups.”
Its “Cully-Concordia Adult ESOL Classes spends $20 thousand to “continue the English for Speakers of Other Languages Classes” tailored to the needs and desires of each student.”
Conclusion
Mayor Adams’ $525 thousand Office of Equity will be added to the $95.675 million already spent on attaining equity for the Portland population that is non white or Asian. In other words over 36% of $1.7 billion budget expense is allocated toward attaining equity for 14% of the Portland population.
Again, by no means am I suggesting that equity is not a laudable goal. I am simply pointing out that the problem does not appear to be the amount of money that is spent on achieving the goal; rather, how effectively those funds are being spent.
Generally, successful public policy to achieve financial equity involves two types of investment: Education and jobs. Government cannot create jobs in the private sector, but can make policies that are friendly toward business creation and job expansion.
The types of jobs that are likely to flourish amid our current economic climate of outsourcing and computerization are those that require physical presence (janitors, gardeners, teachers, nursing-home aides, etc.) and those that exchange information in ways that email and teleconferencing don’t accommodate (software development).
As you can see, these jobs are at the low end (janitors, etc.) and high end (software engineers) of the economic spectrum, causing some to describe both our local and national economy as a “barbell,” with jobs on either end of the spectrum, and few in the middle.
Clearly, our current policies have not achieved economic equity in the city. It requires a much more targeted approach than is being taken with our $96 million currently allocated to achieve this objective.
As to equity in home ownership, Portland home median and sales prices are down 27% from 2007, and the price to rent ratio in Portland is 22.41. As mentioned previously, a price-to-rent ratio over 21 indicates the cost of owning a home is far greater than renting. This fact places Portland as the fourth most expensive city in the US to buy versus rent.
The greatest barrier to home ownership in the city, then, is the cost of home ownership vs. renting. The $88.5 million Portland Housing Bureau, with its agenda to recognize “the historic and institutional barriers to housing, home ownership, and economic stability experienced by communities of color,” cannot further its agenda without recognition of the fact that the barrier to home ownership exists for all citizens in the community.
In our next discussion, we’ll review city policy and expenses in the area of public safety. I welcome your comments and encourage you to discuss these issues both here and with your neighbors and City Council representatives.
kittyok@earthlink.net
Friday, May 20, 2011
An open letter to PPS Superintendent Carole Smith: why we said no
Dear Superintendent. Smith,
After publicly stating that it was your goal to persuade voters to approve new construction "until all the schools have received the overhauls the district says they need," it must have been quite a shock when a your well advertised campaign resulted in a resounding "no." How could that have happened?
Who does NOT heart Portland Schools?
Does that mean that you wasted the $21,600 you paid research firm Davis, Hibbits and Midghall to tell you voters would say "yes" if you added something for ALL schools (not just the ones that needed it)? What's another $178 million, when EVERYBODY gets a little something?
Also, you made the bond issue sound positively miniscule by not including that pesky $77.5 million interest and insurance costs we'd have to pay. $625.5 million does sound like a lot more than $548 million. Voters won't notice.
You even went to the trouble to underestimate the real interest cost by promising to do the very thing guaranteed it high. You would finance the long term bond by renegotiating interest rates every few years, when every economist under the sun is warning that interest rates are going up. I guess you thought that, if voters didn't notice that you didn't include the interest or insurance they'd pay, they certainly wouldn't notice that the terms of the deal were bad.
The plastic surgeons in Portland probably loved your co-chair's quote, "Anyone needs a face-lift after 65 years," but apparently some of the other voters didn't. Talking about elective plastic surgery when 9.6% of the city's workers are looking for a job may have been a bit of a misstep, but maybe you thought that if they don't work, they may not vote.
But, it turned out, even the Portland voters with jobs notice that the value of their homes was down 29% from its peak, while their property taxes were rising up at least 3% a year. Of course, you tried to soothe homeowners by saying that, the average voter would only be paying $300 more. You didn't expect them to know the difference between median and average. You couldn't have known that they'd figure out that half of them would be paying more than $300. You relied on the voters, who paid out money for salmon and elephants to pony up for the kids.
All you needed to do is show the poor little kids with ceiling tiles raining down on their heads, pointing to signs that read "asbestos," and entering through warped, unpainted doors. Surely the voters would heart schools.
On the other hand, maybe it was the older voters that killed it. They may not have liked that "everybody needs a face-lift after 65 years" comment as much as the plastic surgeons. And they may have listened to local professor Dr. Eric Fuits, with two young children in Portland schools, that recommended a "no" vote. Based on census data and Journal of Urban Economics, he estimates that "approximately 4,500 people age 50 and older may be driven out of Portland if voters approve the higher property taxes." That may have upset them more than you thought.
After publicly stating that it was your goal to persuade voters to approve new construction "until all the schools have received the overhauls the district says they need," it must have been quite a shock when a your well advertised campaign resulted in a resounding "no." How could that have happened?
Who does NOT heart Portland Schools?
Does that mean that you wasted the $21,600 you paid research firm Davis, Hibbits and Midghall to tell you voters would say "yes" if you added something for ALL schools (not just the ones that needed it)? What's another $178 million, when EVERYBODY gets a little something?
Also, you made the bond issue sound positively miniscule by not including that pesky $77.5 million interest and insurance costs we'd have to pay. $625.5 million does sound like a lot more than $548 million. Voters won't notice.
You even went to the trouble to underestimate the real interest cost by promising to do the very thing guaranteed it high. You would finance the long term bond by renegotiating interest rates every few years, when every economist under the sun is warning that interest rates are going up. I guess you thought that, if voters didn't notice that you didn't include the interest or insurance they'd pay, they certainly wouldn't notice that the terms of the deal were bad.
The plastic surgeons in Portland probably loved your co-chair's quote, "Anyone needs a face-lift after 65 years," but apparently some of the other voters didn't. Talking about elective plastic surgery when 9.6% of the city's workers are looking for a job may have been a bit of a misstep, but maybe you thought that if they don't work, they may not vote.
But, it turned out, even the Portland voters with jobs notice that the value of their homes was down 29% from its peak, while their property taxes were rising up at least 3% a year. Of course, you tried to soothe homeowners by saying that, the average voter would only be paying $300 more. You didn't expect them to know the difference between median and average. You couldn't have known that they'd figure out that half of them would be paying more than $300. You relied on the voters, who paid out money for salmon and elephants to pony up for the kids.
All you needed to do is show the poor little kids with ceiling tiles raining down on their heads, pointing to signs that read "asbestos," and entering through warped, unpainted doors. Surely the voters would heart schools.
On the other hand, maybe it was the older voters that killed it. They may not have liked that "everybody needs a face-lift after 65 years" comment as much as the plastic surgeons. And they may have listened to local professor Dr. Eric Fuits, with two young children in Portland schools, that recommended a "no" vote. Based on census data and Journal of Urban Economics, he estimates that "approximately 4,500 people age 50 and older may be driven out of Portland if voters approve the higher property taxes." That may have upset them more than you thought.
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