[EconProf]

If we just had High-Speed Rail everything would be all right. And higher pay for government employees so they would spend more. And more environmental protection to attract people and businesses back to California.

[EconProf]

Let’s keep in mind in this thread the difference between stocks and flows. Your net worth is a stock concept–assets minus liabilities at a certain point in time. Your personal balance sheet. It is one measure of well-being. Another is measured by two flows over a period of time, such as a year or a month. Income minus expenses = saving (which can also be negative–dissaving). A year’s worth of saving is added to your net worth (or subtracted in the event of dissaving).
During the housing bubble years, many people’s net worth was ballooning because of the increase in their house value. If they extracted this gain via HELOCs, their spending went up accordingly, giving them the illusion they were doing well and could afford to ratchet up their spending. New consumption habits were hard to curb when the values stopped going up, making the return to spending no more than one’s income extra difficult. All this is well known to long-time Piggs.
What’s made this housing decline have such a negative impact on the economy is the subsequent decline in housing values, decimating the homeowner’s net worth. They correctly feel poorer and must cut back more than normal on their expenses to build back their balance sheet. That largely explain the economy’s lingering weakness–housing values must stop falling for a real recovery to take hold.

[EconProf]

Agreed BG, and in the same vein of women doing free weights, some of the guys could really benefit from doing yoga. Nothing is more silly than a hulking muscle-bound guy with no flexibility and hunched-over shoulders. Yoga can fix that. Take a class and incorporate some of the stretching into every weight-lifting workout.
And while I’m bloviating, let me put in a word for pullups. They have a wonderful stretching out effect on your shoulders and back, and obviously strengthen biceps and help posture. (Yes, I have a fetish about posture.) If age or weight prevent one from doing even one pullup (which describes most people over 30), there are machines in the gyms to give you an assist on pullups.
I don’t get the appeal of deadlifts. Stopped them long ago when I hurt my back. Squats, done right, are far better for the legs and butt–men and women. Instead of deadlifts, pull the weeds in your yard for half an hour.

[EconProf]

This is a one-sided discussion in that it is ignoring the benefits of weight training for females. Women make up the majority of the attendees at the LA Fitness I go to, and an increasing share of the free weights users–perhaps 25%. And frankly, with toned arms, hard abs, and strong legs, they look great. Posture is greatly enhanced by the right kind of weight training, another advantage to both men and women.
Surely some female Piggs can weigh in here. Weight training, even if only using light weights and many repetitions, should continue into old age for both men and women.

[EconProf]

Walter: I’ve done weights and serious stretching (left over from a Yoga class once) for decades, and @ 6’3″, 190, commend you on your regimen. Weight training, often abandoned by us oldsters, is especially good for maintaining bone density. Doing the right kind of exercises will also aid posture, which, if maintained, will trim 10 lbs. off your appearance. And if you chose LA Fitness for your gym, the eye candy will further inspire you.

[EconProf]

DM: Please share with us what interest rates you are paying on your three investment properties, and a bit about the properties. I suspect more and more people with liquidity will do this as they give up on ever getting more than 1% interest on their savings, don’t trust the stock market, and find that rental properties finally pencil out.

[EconProf]

This is exactly the kind of loan banks ought to be making. Here is a high income couple with great credit, ready to put over 25% down on a SFH to rent out. The banks are apparently so traumatized by the regulators and bank examiners that they won’t likely go for it even though the interest rate on an investment property may be 2 percentage points over the going rate for an owner-occupier. The prejudice against investor-owners is keeping the market from recovering.

[EconProf]

Upon more examination, this proposal is not as major as it first appeared. The big changes would apply to future hires, not current lucky employees. So it will do nothing immediately to stop the bleeding and likely implosion of the system, especially since there will be little new hiring given our new austerity. Someone likened it to putting a surcharge on Titanic passengers in order to hire more iceberg spotters.
What’s needed is to cut existing benefits, which may be legally impossible since unions can rightly argue they are a contract. And, in fairness, employees have built their personal finances around the expectation of a certain pension.

[EconProf]

Long ago a French economist named Bastiat warned us to guard against “what is seen compared to what is not seen” in public policy making. I think it applies especially to government pensions.
Rather than ask what is “fair” or unfair–very ambiguous and easily contested word–let us agree that what is really needed is honest and transparent accounting. If office-holders were held to the same accounting standards as the private sector, most of our pension woes would never have appeared.
A pension is simply part of overall compensation when one is hired. They are promised a package of goods that include pay, working conditions, various costly items like health care, paid vacations, etc., and a promise to make future cash payments upon retirement in the form of a pension. All except the last are easily accounted for and totaled up to tell all parties the cost of hiring this employee.
Honest accounting would require the employer, whether city council, school district, or state, to set aside the appropriate amount out of the current budget to pay this future obligation. The amount would depend upon many tricky assumptions about the future: investment returns, lifespans at promised age of retirement, formula defining how pension benefit relates to earnings, etc. Just because these are hard to quantify does not mean we should dodge them.
Politicians have gamed the system by ignoring the long-run costs, and making their short-term budgeting look good and get a boost at the next election. What is not seen is the long-run obligations taxpayers are building up which must eventually be faced. Unions have been more far-thinking than the politicians and the public, and have won these grandiose promises in part because they are more savvy about what is seen vs. what is not seen. The accounting rules that apply to the private sector need to apply equally to the public sector, and the money set aside accordingly.

[EconProf]

First, I did not know Paramount was Steven Greenhut, a noted researcher and author on CA politics and economics who is often interviewed and quoted by various media. Welcome to the Piggs.
Second, Bearish Girl, I’m not sure your links help you make your case. I’ve looked at each, and they are standard-issue application forms–a little long and involved, but nothing surprising considering that once one gets hired by a gov’t agency, it tends to be for a longer time than hires in the private sector. The latter are more subject to layoffs and firings, and the application process is less bureaucratic. Relatively fewer people actually quit government jobs, so it stands to reason that the application process is longer and more involved.
Another of your links described a job opening in Temecula for a Theatre Manager, and showed the pay and benefits. Starting salary of $66,000 and topping out at $84,000. I wonder what the manager of the local Regal theatre makes. And I bet they don’t get 5 weeks of vacation after ten years and retirement @55 with 2.7%, plus the other fringe benefits shown. Hmm…I was in Teahouse of the August Moon during college…I wonder if…..

[EconProf]

Pri-dk, you are highlighting one of the painful truths that distinguish public sector pensions from the rest of us. Not only do public sector pensions vastly exceed those of private sector workers (if the latter get them at all), but they last for many more years.
If you goggle Life Expectancy Tables, you will discover that a retiree at age 50 will live an average of 28.5 more years; a 67-year old, 15 more years. So the CA public safety worker retiring at 50 will not only get far bigger monthly checks, he will get them for about twice as many years. This is what so angers the private sector taxpayers supporting the government workers.
Of course, many government workers don’t get their retirement benefits till they are 55, or even later. But the system in general is far more generous to them.
And isn’t it kind of silly to have Highway Patrolmen and prison guards retire at the robust age of 50? Many, perhaps most, go on to other jobs for a decade or two, pulling down two incomes, sometimes even double-dipping by earning another government pension.
This generosity did not exist a couple of decades ago, before public sector unions became politically powerful and muscled their way to such affluence. You can’t blame them–they are doing what they can for their members–that’s what unions do. We can blame the weak-kneed politicians for caving and for thinking short term instead of long-term. And we can blame ourselves, the voters, for allowing it to happen. We are paying the price now and will continue to do so until some kind of roll-back is implemented.

[EconProf]

Bearishgirl, all the papers have stories about this today, as it is a big deal.
I get my state and local political news from Chris Reed, KOGO, AM 600, from 6-8 pm weekdays, except Wednesdays (shameless plug). He’s a libertarian lite, and has done much to expose local and state corruption and waste.

[EconProf]

Gov. Brown has pretty much done the bidding of state employee unions and has thoroughly earned his reputation of being their lackey…until now. Looking at the details of his proposals, I’m impressed. Retirement at 67 instead of 55? Wow. Employees pay half into the system? Pension depends on last three years of pay, and no spiking with overtime or other gimmicks? Guys, this is a Nixon goes to China moment. Apparently Brown looked at the math and realized that the current system would blow up in his face and scuttle his chance for a second term.

[EconProf]

The rationale for dropping public sector employee unions, whether in CA, San Diego, or Wisconsin, is that good faith, fair bargaining in the public interest cannot result when a union negotiates with elected officials. This was behind FDR’s opposition, as well as Gov. Walker in Wisconsin, and is now being recognized in San Diego.
In private sector negotiations, managements and unions duke it out fairly, since management has the long term interests of the company in mind. In the public sector, “management” is short term oriented, and only wants labor peace and to look good at the next election, so they make extravagent promises that will come due years later. Witness our city council a decade ago binding us to outsized pension benefits that we are just now being saddled with. Our San Diego School Board did the same 1-2 years ago, with the now-upcoming 7% pay hikes that will hit the fan in the next 12 months, likely forcing insolvency and shortening the already brief school year by 7 days. In 1999, CA bumped all existing state pensions, past and future, by 50% because the tech boom briefly boosted the stock market. State pensions are now squeezing out every other category in the state budget. In each of these cases, the savvy union leaders educated their membership to be patient, keep their lifetime compensation in mind, and stay united. Taxpayers got screwed because they were complacent. The media did not do its job, accountants and actuaries did not become whistleblowers (with some exceptions, like Diane Shipione in San Diego), and the liberal media looked the other way.
Add to all this the tendency in a democracy for special interest groups to have an outsized influence over policy when they individually have a lot at stake while the average voter/taxpayer only suffers a little and far in the future, and you often have unions “capturing” the management side of negotiations. The San Diego School Board is essentially owned by the union, and is a prime example of this, Our students are about to pay the price.

[EconProf]

The bigger question is whether you want to become a landlord. There is a huge learning curve involved to do it right, and beginners too often quickly say…I can just rent it out. Are you handy with tenant-caused maintenance problems? Ready to get up to speed on all tenant-landlord laws? Can you list the red flags that should warn you away from certain applicants? Have you fully accounted for vacancy and fixup periods between tenants? Know how to interpret credit reports? Above all, have you considered ALL the costs involved over time, including the value of your own time?
Historically, owning a rental property is only worthwhile in those rare periods of rapid appreciation. From an operating standpoint you are up against the big rental or condo complexes that have economies of scale in purchasing, contracting, advertising, showing and on-site management. And prospective tenants are understandably suspicious of amateur landlords, which may lower your achievable rent.

[Author]

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