Housing in Virginia 2010

It is now May of 2010 and there is no sign that housing is recovering here in Virginia. I live out in the exurbs, so in close to the city core things are probably a bit different. Out here, most of the homes that sat empty last summer still sit empty today. Most of them don’t have any signs on them at all and grass is now waist deep. I am no expert, but I imagine that a home sitting empty for a summer or two warps, cracks and falls into disrepair. Mold sets in. Bugs get in. Who wouldn’t want that? The few homes that do sell are at fire sale prices, 150K or more under where they were in 05-06.

Will these homes eventually need to be demolished? Will this neighborhood and those like it turn into exurban ghettos? After all, we are only another oil shock or inflation shock away from it being totally unthinkable to do the 1-3 hour commutes (each way) that we do here.

All things considered, housing isn’t picking up steam here. There are years of pain ahead.

Subsidies for the World’s Most Expensive Healthcare

Writing a market analysis for Citigroup’s weekly Portfolio Strategist newsletter, Steven Wieting outlines a dire future for America’s government debt. Note that this is far from a partisan magazine, it is a real-world analysis of possible scenarios for investors. An extensive excerpt follows:

§ Markets may still be overestimating the short-term vulnerability of the U.S. economy amid a strengthening and self-sustaining cyclical recovery. At the same time, the risks to U.S. economic performance in the long term have actually never seemed more dire.

§ Far from hoarding labor (unlike others), the U.S. has just endured the deepest two year decline in employment of the post war period. Signs abound that production, employment and investment declines have been unnecessarily severe, an overshoot. Friday’s data surprised with three consecutive months of private employment gains, with some confirmation in the separate survey of households.

§ But few had ever contemplated entering a well-advertised period of demographic weakening and higher dependency levels with a U.S. budget deficit so large as a starting condition.

§ The structural budget deficit looks potentially unmanageable even five years from now, when employment is assumed to be “full” and the financial supports of the recent crisis are paid back as fully as they ever will be.

§ Higher taxes have always seemed necessary to cover elder-care entitlements in the period ahead. But as a start, taxes are being raised instead to cover expanding entitlements further and can’t be used again for initial deficit reduction or offsets to future large increases in spending programs in place.

§ With the presumed passage of expanded subsidized healthcare coverage for nearly all in need, U.S. consumers, taxpayers and employers will have to buy more of the same healthcare goods and services sourced at the highest observable cost per unit in the world.

Unusual Digression in Short and Long View

On visits to clients across different parts of the world in recent weeks, we have continued to sense at least a worrying complacency with the long-term outlook for the U.S., against residual fears that the economy is incapable of cyclical recovery. In essence, many investors seem to overestimate cyclical vulnerability, while underestimating structural economic risks for the U.S. over the long run, in our view.

Far from hoarding labor (unlike others), the U.S. has just endured the deepest two year decline in employment of the post war period. Signs abound that production, employment and investment declines have been unnecessarily severe, an overshoot.

[…]

At the same time, the risks to U.S. economic performance in the long-term have actually never seemed more dire.

A demographic bulge in the dependency ratio has always loomed beginning in the early- to mid 2010s. That “bulge” worsens gradually for the following 25 years.

Few had ever contemplated entering this period with a U.S. budget deficit so large as a starting condition. This structural budget deficit looks potentially unmanageable even five years from now, when employment is assumed to be “full” and the financial supports of the recent crisis are paid back as fully as they ever will be.

Higher taxes have always seemed necessary to cover elder-care entitlements in the period ahead. But as a start, taxes are now being raised instead to cover expanding entitlements further and can’t be used again for initial deficit reduction or offsets to future large increases in spending programs already in place.

Following the recent political debate, many Americans might have come away with the notion that health insurance companies “charge too much” for healthcare. Perhaps the insurers need to hire their own cheaper doctors and build their own cheaper hospitals to compete with the existing supply of them. Assuming otherwise, they will still need to pay the same amounts for hospital stays, procedures and medicines as before, at the highest observable cost per unit in the world. But now, with the presumed passage of expanded subsidized coverage for nearly all in need, U.S. consumers, taxpayers and employers will have to buy more of those same goods and services, sourced from the same supply base.

Aside from small experimental steps to develop competitive exchanges for individual insurance coverage, never before have we seen a U.S. policy solution seem so detached from the underlying problem it purports to address. Americans want more healthcare, and will need more as the population ages. But the existing system fails in almost every way to match economic benefits with costs, obscuring them instead.

And while the latest reform effort purports deficit reduction over ten years, it does so on roughly six years of expenditures and 10 years of tax increases. More importantly, medical entitlements have never been “overpriced” into budget outlooks allowing for positive cost surprises (see Figure 11). The healthcare overhaul achieves the bulk of its purported spending cuts through limiting Medicare payments to doctors, hospitals and nursing homes, cuts that Congress has failed to pass through repeatedly since 2003, instead opting for more spending. Private insurers, meanwhile, would see some ostensible limits to their pricing, but generally would need to expand coverage, and purchases of healthcare services and goods.

In two places in the developing and developed world, laypeople mentioned to us that healthcare in the U.S. would now properly come for “free” for those unable to pay for it. If only that was true. Instead, future tax payers will have to come to grips with the costs of a system that for now is neither disciplined by competitive market forces nor rationed like other public welfare programs.

But if not in healthcare, rationing will take place in other places. Public education outlays for the future taxpayers have reportedly been a target of near-term budget constraints. While never free from waste, these are human resource investments that contribute to the future economic output. There are investments in the individuals who will carry the larger future tax burdens of the dependency bulge of coming decades.

We have been concerned for some time that a greater, unsustainable share of future entitlement outlays will end up deficit financed, with costs simply put off further into the future. At least that may be attempted. But among other concerns, lenders to the U.S. may feel less than certain about that stream of future income and output if incentives are so skewed against those who will need to provide it.

The Barbarian Conversion

Richard Fletcher [The Barbarian Conversion] notes that ancient Christendom was not monolithic:

In terms of custom and practice there were many churches in sixth- and seventh-century Europe, not One Church. Christendom was many-mansioned.

Fletcher talks about the motif of exile in the monastic expansion. Christians, following the writing of Augustine, saw themselves as exiles and pilgrims and then the monastics took this exile literally. They often left their homeland and people to found monastic missions amongst others. Fletcher says:

Pilgrimage, in the sense of ascetic renunciation of homeland and kinsfolk, is of special importance in our understanding of the phenomenon of conversion in the early Middle Ages. Pilgrimage merged insensibly into mission. The monasteries that were founded by the exiled holy men had something of the character of mission stations. It was not that they were established primarily among pagans; indeed, they could not have been, dependent as they were on wealthy patrons, necessarily Christian…for their endowments…But their monastic communities were situated on the margins of Christendom, and had what might be called “diffusive potential” among nearby laity who were Christian only in the most nominal of senses.

It seems to me that we could apply this same method to the diffusion of the faith in our day. Establishing tightly-focused communities at the margins of our society, for example in rural areas and urban areas that aren’t glamorous. Communities devoted to Biblical saturation, mission and learning which could aim to gradually convert the surrounding area.

Election Day 10

It was a cool morning today as I voted down at the local fire station. Turnout was massively lower than last year. Last year people were coming out of the woodwork to vote for O or against him (in our district anyway). There were long lines and boisterous attitudes. Today there were two other voters.

The Democrats didn’t even bother to field a volunteer today handing out sample ballots! That surprised me, it was a first. The GOP was there with one guy, and he looked lonely. So all the enthusiasm is out of the season now that George Bush, the sacrificial victim has been driven out and we are back to the norm, which is dysfunction, debt and war with no one to blame. It isn’t yet the fault of the Chosen One, but it will be by 12. He’s looking more like LBJ and Carter by the minute.

I expect Deeds to lose in a blowout. Let’s hope this is a glimmer of good news for the unborn.

Mind your own business

Thomas Fleming deconstructs the central myth of many conservative Republicans:
To explain the decline of American Christianity, conservatives continue to cling to the myth of a nation settled by pious believers seeking to found “a shining City on a Hill.” But this republican Eden, on which God has uniquely bestowed his blessings, was corrupted by the Tempter. The American people are still, for the most part, good and faithful Christians, but they are under assault from immoral Hollywood movies, wicked journalists, and pointy-headed intellectuals, etc. Setting aside the obvious problem of equating New England (particularly the worst aspects of it) with all of America, we should ask ourselves this: Could men and women of strong faith really be corrupted by Hollywood movies that no Christian has any business going to see? Can you imagine Saints Peter and Paul attending the premier of Kill Bill or Saint Monica watching Lost with little Augustine? If America were, in fact, a basically Christian or moral nation, Hollywood would be out of business, and so would most colleges and universities.
Conservative Christians are right to complain that they are being persecuted by the government, and I do not have a solution to this grave problem except to suggest that they are wasting their time in trying to change the laws. Instead, they might consider the example of early Christians living under the pagan Roman Empire. Most Christians paid their taxes to Caesar, served in Caesar’s army, and were good neighbors  and loyal citizens of Caesar’s empire. They did not engage in futile protests about infanticide, nor did they abuse and insult their pagan neighbors. They minded their own business, went to church, and prayed for the empire’s conversion. If today’s American Christians had the faith of a mustard seed, they would spurn the false prophets who have enslaved them to a party or political ideology and go about their Master’s business.

Thomas Fleming deconstructs the central myth of many conservative Republicans:

To explain the decline of American Christianity, conservatives continue to cling to the myth of a nation settled by pious believers seeking to found “a shining City on a Hill.” But this republican Eden, on which God has uniquely bestowed his blessings, was corrupted by the Tempter. The American people are still, for the most part, good and faithful Christians, but they are under assault from immoral Hollywood movies, wicked journalists, and pointy-headed intellectuals, etc. Setting aside the obvious problem of equating New England (particularly the worst aspects of it) with all of America, we should ask ourselves this: Could men and women of strong faith really be corrupted by Hollywood movies that no Christian has any business going to see? Can you imagine Saints Peter and Paul attending the premier of Kill Bill or Saint Monica watching Lost with little Augustine? If America were, in fact, a basically Christian or moral nation, Hollywood would be out of business, and so would most colleges and universities.

Conservative Christians are right to complain that they are being persecuted by the government, and I do not have a solution to this grave problem except to suggest that they are wasting their time in trying to change the laws. Instead, they might consider the example of early Christians living under the pagan Roman Empire. Most Christians paid their taxes to Caesar, served in Caesar’s army, and were good neighbors  and loyal citizens of Caesar’s empire. They did not engage in futile protests about infanticide, nor did they abuse and insult their pagan neighbors. They minded their own business, went to church, and prayed for the empire’s conversion. If today’s American Christians had the faith of a mustard seed, they would spurn the false prophets who have enslaved them to a party or political ideology and go about their Master’s business.

Observations while walking


I’ve been walking every day for about three months now. This has given me a wealth of insight into how my neck of the woods functions which I was not aware of when I was more housebound. Here are some of my observations:

* This is a “duh” observation, but being outside and seeing the world in ways that exceed walking to and from a big-box store, a restaurant, or your workplace, gives you a completely different feeling about reality. I’m sure that if I hiked or camped or hunted, this would go up another few orders of magnitude, but since I am an avid indoorsman, that won’t be happening. This is probably as much nature as I’m going to willingly experience. With that said, my subdivision is basically a big forest with lakes and creeks in the middle of it, and I see deer, turtles, vultures and other things as I walk, so this isn’t a heavily suburbanized area.

* Kids don’t play outside much, if at all in 2009. While I don’t want to overplay the “back when I was a kid” angle on things, I think that kids did play out way more back then, and that this number has been progressively declining since the advent of game systems. When I was a kid, I think that my brothers had played outside way more than I did a decade earlier when they lived in the city and did lots of stuff. I grew up in the burbs and was hardly playing outside all the time, BUT, I do remember playing variations of “go fish” with the neighborhood kids, riding bikes, exploring around my subdivision, and so on. When I walk, I almost never see kids of any age on the streets, running around, or anywhere. I don’t walk past our pool, and I know kids go there more than anything, but still, there doesn’t seem to be any version of neighborhood football, baseball or anything going on.

Additionally, lots of folks have big playground-type equipment in their own back yards. These include swings, slides, and that stuff. I have never once seen a single kid on these units. Of course, I’m only walking once a day, often at night, so maybe my timing is just off. But I find it hard to believe that kids are playing on these things all the time and I’m always missing it. I think that kids just can’t be bothered with this stuff and that parents buy it for nothing. The parents think it will be great and it ends up being a gathering place for wasps nests.

On a couple occasions I have seen some teens walking from one place to another, but that’s about it. I guess most little kids play inside, watch TV, play video games, or maybe play in their driveway. I don’t see the old neighborhood pack of kids around.

* I rarely see adults outside either. In most cases when I do see adults, they are working on their yard, working on a car, or messing around in the garage. I have seen some poker games going on in garages, some birthday party crowds, and an occasional porch-sitter, but overwhelmingly people are inside.

It is sometimes eerie how desolate it seems out there. I am walking by homes with people in them, but you almost wouldn’t know it. The streets are deserted, all I hear are bugs and birds, and it’s lonely in the middle of a bunch of houses. A contributing factor is that all the homes are built far back from the street and there are no sidewalks, so there is no sense of community, rather it is isolated homes that have trees between them. It is the quintessentially American idea of “leave me alone” that wants as much land as possible and as much distance from neighbors as possible. And since I know a bit about my neighbors, I can’t say that I disagree in reality with this approach, though it feels wrong.

The New Dark Age

Writing in the February 2002 issue of Chronicles, Thomas Fleming says that we are already being ruled by the barbarians:

So the question is not whether American civilization will collapse but when – and what are we prepared to do about it. Until we are willing to give up the fiction that we are living in a decadent period of the Roman Empire – say, the reigns of Nero and Caligula – we can never appreciate our situation. The barbarians rule our world just as surely as they ruled Rome during the sixth century.

Up until a few years ago, I thought that Bubba might have a little fight left in him; but Bubba watches the WWF and the Playboy Channel, and his wife is on Prozac.