Category: Markets, Business, and the Economy

I had finished working out when the nice lady on CNBC was talking about sub-prime mortgages, and noted with surprise something to the effect of “while you would expect sub-primes to mostly be in poor neighborhoods, in fact many turn out to be in some of the overheated housing markets that are currently experiencing downturns.” For example, places like Los Angeles and Las Vegas.

Now, the only thing that surprised me was her surprise. Part of the point of a bubble — any bubble — is that people buy and spend more than they can afford on fear that it will be even more expensive if they wait. It should be no shock that in the housing market, this meant many buyers would be turning to creative financing options. Aided and abetted by compliant appraisers and the market for mortgage backed securities — entities like Fannie Mae and Bear Stearns buying mortgages from the company that originally made the loan — this extra supply of buyers who otherwise could not afford to be in the market at all were helping maintain rising prices.

Now those buyers have to get out. Some are selling, which is contributing to a notable 5% increase in housing inventory, when inventory has been relatively stable for decades. Those who cannot get out are defaulting, and ending up in foreclosure. In some relatively small suburban neighborhoods, four or five banks own dozens of now-vacant houses.

Now, if you really want to know more about whether there is a housing bubble (I think there is regionally, maybe not nationally), and how it may be effecting the economy at large, your go-to man should be Dave Johnson over at Seeing the Forest. Even if I am correct about housing bubbles being regional, the fallout will be national.

Banks don’t want to own dozens of houses regionally or hundreds of houses nationally. That represents money tied up instead of working hard. And we aren’t talking about small, regional banks. We should be thankful for that, because a small bank would probably have to close if they had enough foreclosed property on the books. But the big, national banks that are involved want to get their money out. So they really have no choice but to sell for what they can get, hope to be even on the deal, and make profits elsewhere. Maybe they can raise the fees on your accounts again. They will certainly re-think loan standards. They will also be rethinking staffing levels both regionally and nationally. One major player, Bear Stearns, is at risk of takeover.

Neighbors don’t want empty houses sitting there, dragging down housing values that were too high to begin with, and attracting crime. They are going to have to live with lower housing values. This of course may put them in a pinch should they need any sort of refinancing, because they will need the house re-appraised and are unlikely to get approved for a loan high above the new, lower value of the house. And in some cases, the solution will involve a bulldozer.

All this action is going to reduce municipal tax bases. In short, there will be less money coming in for police, fire department, schools, roads, and the like. And good luck getting citizens to vote you a tax increase when their property has been decreasing in value.

And the people who have been forced out of their houses, either by sale or foreclosure? They still need an affordable place to live, close enough to their jobs that they can actually get there. Ultimately, the regional markets which are most effected are the ones where there are lots of jobs to be had, and for whatever reason (rent controls, geographical constraints) not quite enough housing for demand.

In closing, Carrie’s Nation is a very nice HR issues blog; even as we try to be more vigilant about Chinese imports, it’s hard to tell where food comes from (thanks to Big Agribusiness thwarting the rules), and in any event almost impossible to actually avoid Chinese imports for a whole week; is “Bush Bluffing”, or will Leahy really take him to court?; Zombie New Orleans slowly stumbles back to life; healthcare facts and figures versus the tricks of delightfully overheated rhetoric; in honor of Blog Against Theocracy week, some scary guys who think the First Amendment only protects their right to be whatever sort of Christian they want; and finally, not everybody gets LOLcats, “Well, they can’t spell very well. Because, see, they’re cats.”

Cross-posted at Central Sanity

If you haven’t been living in a cardboard box, you probably know that the iPhone is finally being released today. In fact, tough luck if you need to talk to somebody at the Apple Store between 2 and 6 today, as the store will be closed and employees prepping for the big roll-out. This little gadget has features that can briefly be described as everything but the kitchen sink. Some people are calling it the Jesus Phone, and others point out that there is a whole lot of hype, and really low chances of really being that good. Some commentators make this point more formally than others.

But before you get ready to camp outside the Apple Store, before you think about hiring some troll to do it for you, do yourself a favor and spend a few minutes watching the trouble Meredith Vieira has using it as, you know, a phone. I apologize in advance for the fact that you will need to watch a 30 second commercial first. Notice that this happened despite the fact that Apple sent a couple technicians along to make sure everything went right (and maintain physical security of the devices). If you have time, stick around to watch Stephen Levy demonstrate the cool features — and accidentally demonstrate that this phone will not do for many handicapped people. Sorry, “just move your hand like this” is a stretch for some people, no pun intended.

Before any of you Apple Cultists start on about how clearly I am not the target audience, I own a smartphone. Apple has claimed this device competes with smartphones. I have every important phone number I could need in my phone, including the Chinese restaurant that used to be on the way home. I have calendar events. I use the web browser to find information when I am out and about. I send text messages. Most importantly, I make phone calls — the one thing Ms. Vieira has demonstrated is a little difficult on this device. You know what I don’t do? I don’t browse my music collection on my phone. I don’t watch TV shows on my phone. In short, I need a phone with smart features; I don’t need a video iPod with a phone accessory.

Assuming they meet demand, assuming they can possibly meet their targets, I give it 6 months before rumors of bad batteries start to surface. And I’m willing to bet that’s expensive to replace.

In closing: it turns out the other shoe in this fake Botox scam dropped back in 2004; why does the United States want to keep information on travelers active for 7 years, and inactive 8 years beyond that?; it turns out that it’s mostly private dollars rebuilding New Orleans; the Supreme Court remembers that the First Amendment gives the people the right to recourse in the courts and doesn’t give Congress the right to say otherwise; and your brain on politics. Oh, and Maya’s Granny having her one year anniversary of blogging has reminded me that I’ve been at this 4 whole years now. Some of my favorite posts include I can vouch for him, Evil, these early ideas on tax simplification, practical advice on school programs, and the Dragon and the Tiger.

Have a great weekend, everyone!

The New York Times, here via the International Herald Tribune, declares that we have achieved a remarkable anti-Goldilocks economy. Housing has cooled, manufacturing is too cold, inflation is too high, and Fannie Mae (of all places) is forcasting a 35% chance of recession.

Hold that thought.

Poverty might not be a new thing in New Orleans, where poor residents are having to fight for a simple roof-over-head, but now the suburban poor outnumber the urban poor. And more’s the pity, because the “good jobs” are all out in the suburbs now, and services designed to help the poor are all in town. As if that isn’t bad enough, in some states health insurance costs went up 89.2% in the last 6 years compared to a full-time pay increase of only 11%. And remember, this is in a state where the minimum wage goes up every year.

No wonder Joe and Jane Average think the economy sucks: their house value isn’t going up the way it used to, their health care expenses are going up, their wages aren’t going up nearly as fast as their expenses, gas is back up now that the elections are over, and there are a lot more people living in quiet poverty in their neighborhood than they imagined.

As if that isn’t enough, the local school has their hand out again, because that’s the only way to pay for field trips and orchestra programs and library books. I consider this an unfair burden upon parents, who are already expected to help with homework and school projects and transportation and volunteer work. It is even an unfair burden on teachers and administrators, who have to manage these fundraisers and account for the money at the end instead of actually teaching kids. I furthermore think this sort of thing widens the gap between “wealthy” schools and “poor” schools; parents in the wealthy neighborhood can afford to donate hundreds of thousands of dollars in aggregate but parents in the poor neighborhood cannot.

Nevertheless, having said all this about how bad the economy is when seen from the bottom, smart guys like Jim Cramer think it’s looking great from the top. Mr. Cramer predicts a 17% rise in the Dow, based on price targets of each of the 30 Dow Components. That’s a lot lower than GDP and higher than inflation. It’s higher than both combined. Higher than the two multiplied. By the way, that Bloomberg link points out “Even as the U.S. economy added 132,000 workers in November, more than economists had forecast, wages increased by only 0.2 percent. The average weekly paycheck of $574.27 last month was a modest gain from $573.25 in October.” First, it still takes 150,000-200,000 new jobs a month to absorb new entries to the workforce (stuff that in your “but we need undocumented workers” and smoke it) and second, I don’t know how people can support a family on $574.27 a week.

Sooner or later, Anti-Goldilocks needs to expect the Bears to come home.

In closing: How to hold corporations accountable; Best Wishes to Mr. Barrowman and Mr. Gill; homemade peppermint patties; and Child’s Play.

According to the Shaolin Warrior-Monks, the Dragon is a mythical animal able to fight on land, in the air, and in the sea. By turning its long body, it is able to move smoothly and fight multiple enemies approaching from several directions. This long body, however, is a large target.

Likewise, according to the Shaolin Warrior-Monks, the Tiger is an all-too-real animal known for its strength and ferocity. However, a Tiger has limited stamina, and must count on overcoming enemies quickly.

Today’s financial news is dominated by the new record high set by the Dow, and the 6 year high set by the S&P 500. Apparently Wall Street is in deep denial about what is happening half a world away. In China, American Secretary of the Treasury Henry Paulson and Chinese Vice Premier Wu Yi began a “strategic economic dialog. They were joined on the American side by 4 other members of the President’s Cabinet, the Chairman of the Fed, and our trade representative to China. On the Chinese side were ten senior ministers and their Ambassador to the United States.

If the size of the delegations alone indicate the importance of this meeting.

And to be honest, things are not going well. Mr. Paulson apparenty began the dialog by telling the Chinese their currency would have to float freely, and they needed to maintain economic growth without a trade surplus, and furthermore they’d better open their markets and crack down on piracy. The L.A. Times is under the delusion that these last two points are the important ones. Oh, and Paulson added “[T]hey have just got to move quicker.” Do everything I want and make it snappy? If this is how he thinks, I wonder how long until he is divorced.

Not too surprisingly, China [is] unwilling to budge. More specifically, Ms. Wu says “We have had the genuine feeling that some American friends are not only having limited knowledge of, but harboring much misunderstanding about, the reality in China.” In other words, respectfully, you don’t know what you’re talking about. She went on: “Wu said Beijing would ‘actively push forward trade and investment liberalization.’ But she stressed that changing China’s economy is a ‘long-term and arduous’ task.” Or, we will do it our way and we will do it in our timing.

Meanwhile, the Yuan is at record highs and Chinese banking IPOs are hot, hot, hot.

So Mr. Paulson has rushed in, hoping to get everything he wanted before anybody noticed he was attacking. Meanwhile, Ms. Wu has deftly turned and left the Tiger’s claws empty, knowing she will have time to turn and attack at will.

Why does this matter? Because China has the ability to bankrupt the United States at least 3 different ways.

First, they can continue to be our largest trade partner, draining off American money each month as the trade deficit increases and we buy more and more Chinese manufactured goods. Remember, that’s the reason the Bush Administration wants the Yuan to float freely. Currently it is pegged to the dollar, which keeps the cost of Chinese imports low in the United States. This would be the slow way to do the job. But Asian philosophy allows for the idea that a good plan well implemented might take generations to come to fruition. Look at Hong Kong: the Chinese managed to get the British to build the place and create its economy before taking it back over a century later.

The second way China could send the American economy into a terrible place is they could sell their dollar reserves. A source no less authoritative than the Wall Street Journal warns us “If the Chinese government reduces the amount of dollars it holds in reserve — or slows the pace at which it buys dollars — the revaluation could put upward pressure on U.S. interest rates.” Higher American interest rates means disaster in the housing sector and severe contraction of businesses financing new equipment. Just selling the dollars would severely devalue it, meaning deflation. Higher interest rates would probably exacerbate the effect.

The nice folks at the WSJ are kind enough to bring us way three that China could destroy our economy and send us into a great depression in the very next paragraph. They could sell the very large piece of the United States National Debt that they own. “China’s position in U.S. bonds is huge. China is the second-largest holder of Treasury securities (after Japan), with $243.5 billion of U.S. government securities as of May 2005.” Now granted, the National Debt currently stands over $8 Trillion, or $8 Million Million. Even so, over $200 Thousand Million of bonds hitting the market is going to make a big, big mess. And the thing that many people don’t realize is that “When interest rates go up, bond prices go down and when interest rates go down, bond prices go up.” So if China were to sell a bunch of bonds, interest rates would inevitably rise. Furthermore, this would be seen as a no-confidence vote on the ability of the United States Government to pay back its debts. Just like when Joe Average has lousy credit he has to pay higher rates, the same thing would apply to his Uncle Sam. This would in all likelihood drive up general interest rates, with the same effects listed in the previous paragraph.

Maybe Mr. Paulson should stop treating China like a small child and start treating them like a sovereign nation.

Before I get started, I would like to define what I mean by “Universal Healthcare.” There seems to be a lot of confusion on the issue, and frankly several implementations of the concept in various nations. “Various nations” in this case means “virtually every industrialized nation except the United States,” so it is worthwhile to learn from what all those other nations have done.

Universal Healthcare is a system under which basic health needs are paid for by a single government payer. Basic health needs includes treatment for urgent, emergent, preventative, reconstructive, routine, and chronic care. Any system which mandates basic coverage be purchased by employers is not Universal Healthcare. Any system which involves for-profit insurance companies selling policies for basic health coverage is not Universal Healthcare. Health insurance companies can still sell supplemental policies, and employers have the option of providing them as a benefit to employees and their families.

How Universal Healthcare will Improve the Economy:

1. It will make the Big 3 American automobile manufacturers — and other manufacturers — more competitive. Depending whose figures you like to use, healthcare costs add between $1000 and $1500 to the price of every new American car. Toyota has also found health insurance costs to be unreasonable, and is trying to do something about it that is beneficial to employees. But when all is said and done, the fact that the heads of the Big 3 are not demanding Universal Healthcare is an issue about which shareholders should scream holy hell. Although the figures for the automotive industry are the most readily available, it must be noted that other manufacturers have similar issues. Reducing the cost of manufacturing products in the United States will make our manufacturing companies more competitve at home and in the world markets.

2. Universal Healthcare gives employers greater control over the cost of providing benefits. As the CEO of GM has pointed out, healthcare costs are rising 14-18% annually, a number which exceeds inflation and GDP growth combined and doubled. It is difficult to control costs when certain expenses grow that rapidly. Some companies have tried to work around this company by slashing coverage, or by making employees pay a greater share of their coverage. This is nothing more than a band-aid on a gaping wound. Such practices put off the day when costs actually have to be controlled, and insurance companies told “no.” And of course, this “solution” creates resentful employees.

3. Universal Healthcare evens the playing field for employers competing for labor. Many job seekers have to do some internal calculus to the effect of “Company A pays more but has Insurance X, but Company B pays less and has Blue Cross. Which is a better deal?” Many job seekers can’t take a chance on a small company that can’t afford to provide “good” benefits due to health concerns. This brings us to….

4. Universal Healthcare will stimulate the growth of small business and create jobs. There is no way to know how many businesses have never been started because the potential entrepreneurs couldn’t get insurance for their families. Universal healthcare will encourage people to be in business for themselves, and make it easier for them to hire people to help make their dream a reality.

5. Universal Healthcare will improve worker productivity. How? By giving workers the means to treat small problems before they become big problems, and by providing better access to preventative care. When workers spend a day out of the office, sure they aren’t doing anything, but how does that compare to the slow pace that worker might take if they came in sick for a week? And they’ll do even less if they have to spend a week in the hospital. Strangely enough, that means….

6. Universal Healthcare will allow more efficient spending of healthcare dollars. If Jane Average can have her infection treated in the doctor’s office, that’s a lot cheaper than treating her raging infection with complications in the emergency room. If Joe Average can get his high blood pressure under control before he has a heart attack, it will save both time and money in the long run. And that is to completely discount the effect of reducing crowding in the emergency room!

7. Universal Healthcare will insure a better educated and healthier workforce for the coming generation. One of the great tragedies of employer-provided health insurance is that children don’t have employers. Sure, many employers that provide health insurance will provide it for employee’s kids, but usually for an extra fee. As a result, there are millions of American children with no healthcare insurance, and parents who pray they don’t get sick. These kids are less likely to get preventative care, less likely to have chronic conditions treated, and more likely to miss school. Someday, these kids will grow up. Even if there is not enough support among politicians to get Universal Health, the very very least we can do as a society is provide a MediKids program that would cover all minor children (and in an ideal world, college students).

8. Universal Healthcare will help prevent chronic illness from becoming disabling illness. It is sad but true that certain illnesses, if not treated promptly and properly, will result in permanent disability. Diabetes is a prime example. Untreated and uncontrolled, it can result in blindness, limbs which must be amputated, kidney disease, strokes, and a host of other terrible problems. And since chronic conditions by definition can go on for years and years, many people find themselves in a position where an insurance company will decline to cover their single biggest health problem as a “pre-existing condition.” This is of course a business decision, not a moral or ethical decision. It is also disgusting.

9. Universal Healthcare will prevent medical debt from forcing people into bankruptcy. You may recall a couple of years ago when Congress was trying to force through a bankruptcy reform bill, then-new research found that medical debt can often lead to bankruptcy. People who cannot afford to pay their bills are not generally out making lots of consumer purchases. Consumer spending is of course the largest single part of the GDP.

10. Universal Healthcare will facilitate early detection and prevention of epidemics and pandemics. The United States Government is concerned enough about the risk of a flu pandemic that they have set up a website called PandemicFlu.gov. They’ve even had the CDC figure out the economic impact of a flu pandemic. Oh, and don’t forget the possibility of an outbreak of some of the old, traditional diseases like measles. Like other illnesses, the sooner we as a population realize there is a problem the quicker it can be contained. In this case, time may be money, but more importantly it is lives.

In closing, if Bradford Plumer is not on your regular read list, he should be; WikiHow; and where exactly can we get a copy of this so-called radical homosexual agenda? Is that the sort of thing you can get at a bookstore, or do you have to order it from some radical website?

Follow Up.

Today’s employment news is that new jobless claims are higher than expected, and employment costs are up, mostly because benefits cost more than they used to. So maybe you heard yesterday that the American economy added 128,000 jobs in October. The fact that these stats came out before the ink was even dry on some of those paychecks should alert you to the fact that these are preliminary numbers, subject to revision. Don’t let that worry you, however. Worry about the fact that this number is far lower than the 150,000 to 200,000 that the American economy needs each and every month to keep up with people who are just joining the workforce.

Or maybe, don’t worry about that too much?

An item in The Economist suggests that the American economy is slowing, and it might be because the workforce is contracting. Something called the “labour force participation rate” is falling (they’re British). And why is that? They blame retiring/near-retirement baby boomers, women who are dropping out of the workforce, and teenagers who are not working.

Let’s take a close look at those boomers. Sure, some of them will be able to retire, but I think it more likely that the majority of them will scale back their work. Joe Average doesn’t have enough savings for a prolonged retirement in an environment where the politicians have been shouting at him for years that he can’t count on Social Security and it’s all his fault for being one of the millions of babies born after World War 2. However, as much as Joe wants to work, the fact of the matter is that for many people like Joe, health concerns are beginning to affect the ability to get up and go do a job every day. This is particularly true for people in physically demanding occupations.

As for women dropping out of the workforce, there are two separate things going on. First, I think there is a large group of women who lost their jobs early in the Bush Administration, and having failed to find a new job in a timely fashion gave up. But instead of calling them “discouraged workers” we are falling back on the fact that they have kids at home. Having no money for childcare, these women have become de-facto stay-at-home-moms (SAHMs). But the second thing that happened — both to these women and those with different circumstances — is far more interesting. This post from *itch, PhD sums it up nicely:

My observations suggest that at least some, if not a majority of stay home moms and dads are not only working as parents and housekeepers; they also serve as unpaid support and teaching staff for local public schools, unpaid case managers and caregivers for sick and elderly relatives, and unpaid volunteers/part-time help for a wide variety of social services and programs including libraries, hospitals, art, music, and sports programs, and political organizations…. But the point remains: a lot of stay-home parents are doing a lot of unpaid work to keep society running.

The women who are not counted in the official workforce are doing vital work that they couldn’t afford to pay someone else to do. And that doesn’t even account for those who — like me — do not receive a paycheck but through various Department of Labor loopholes are officially “employed.”

And that brings us to the last group mentioned by The Economist, teenagers and young adults. They tell us:

This decline is a bit of a mystery, since job growth in the kinds of industries that tend to employ young people—restaurants and shops—has been well above the national average. It may have happened because teenagers are staying at school or college longer, and are working less on the side. More education may mean higher future productivity, but in the medium term it cuts the number of available workers.

Oh it would be easy to say it’s the fault of No Child Left Behind, and say that fewer teens in the workforce is the result of higher academic requirements. It isn’t that simple. Those “kinds of industries that tend to employ young people” have much greater choice in employees than they used to. Even the ultra-conservative Heritage Foundation admits that 53% of minimum wagers are under 23, so that must mean 47% are 23 or older. The reader is left to wonder what the percentages would look like if we discussed workers younger than 19. Some sources imply that adults are up to 80% of the work population that earns under $7.25 per hour. It is reasonable to say that probably about half the jobs that have traditionally been held by young people are now held by their elders. And frankly that’s a sad statement about the economy. It is also worth mentioning that more college kids have loans than part time jobs, and that changes to vocational education are having an unknown effect on the issues.

The one thing it all adds up to is that the unemployment rate is artificially low because of people who can be — and probably should be — in the work force, but are not.

In closing: on CNBC, great documentaries run as often as they can get away with it; do slave laborers in the Marianas Islands count as part of the American workforce?; on being an Iraqi woman; next country over cash for the vacation of a lifetime, as long as you don’t mind the people who would rather you were dead; treat kids like animals and then act all surprised when they live up to your expectations, be sure to read the second page, about how the school library has exactly zero books; if the Feds knew where 10,733 gang members, kidnappers, child molesters, sex offenders, carjackers, and burglars were, why did they wait until two weeks before a national election to arrest them?; and finally, smile, and start up a random conversation, because you never know where it will lead.

Last week I was amused by the fact that it took pointing out that Congressmen got $31,000 in raises since the last hike in the minimum wage before the House of Representatives was willing to put together a bill. Of course this wage hike for millions of workers was attached to a huge cut in estate taxes for people with multi-million dollar net worth that is widely regarded as a “poison pill” Just for reference, the $31,000 in Congressional raises works out to 6,019 hours of work at minimum wage, or at 40 hours per week, just under 3 years of work at minimum wage. Yeah, that’s right. Just the annual raise would take 3 years for a minimum wager to earn. If the rise in minimum wage actually goes through, the raise will only be 4,276 hours of minimum wage work, about 2 years of work assuming a little overtime.

By way of reference, this raise would directly benefit over 7 million workers, 70% of whom are adults — not teenagers. The majority of the workers in question are women, and a third of them are the sole wage-earners for their families. Furthermore, 22 states have enacted higher minimum wages than the federal standard. According to the Bureau of Labor Statistics there are 144 million people employed right now in the United States. So by my math, just under one out of every 20 employed Americans would get a raise under this bill.

I confess, I used to be one of those people who was against raising the minimum wage. I was a young worker, and thought that raising the minimum wage would make older (more desperate) workers more attractive to the sorts of employers who pay minimum wage. I now see that wages today are artificially depressed by several factors. Sure, in an ideal world wages would be raised not by government fiat, but by workers saying “no, I can’t afford to pay my bills for that, so you will have to pay me more,” and employers responding “well, that’s what everybody else says too, so I guess I will have to pay you what you are worth.” For those that say a raise in the minimum wage would result in inflation, I reply that low-income people spend most if not all of what they earn; if they have more money to spend, they will spend it, and that is good for the economy.

On one hand, 13% of men aged 30-55 have dropped out of the workforce, due to a combination of not being able to find jobs as good as the ones they lost, wives who do work, home equity loans, and sometimes-trumped-up disabilities. The money quote:

Many of the nonworking American men could find work if they had to, but at lower pay and fewer benefits than they once earned, and they have decided that they prefer the alternative. It is a significant cultural shift in the country from three decades ago, when men almost invariably went back into the work force after losing a job and were more often able to find a new one that met their needs.

Translation: if the economy were really as good as it was in the 70s, these men would have moved on to other jobs that, if not better, at least “met their needs.” Unspoken: or gone into business for themselves. Let’s say for the sake of argument that most of these men should be in the workplace, and that this is an artificial contraint of labor supply. As a footnote, could the low minimum wage and the ability of these men to “just say no to low wages” be part of the reason the majority of minimum wagers are adult women?

Now, it would be easy, nay a cheap shot, to say that welfare reform artifically grew the labor supply by “forcing lazy welfare recipients to get jobs.” Well, that represents maybe 4 million workers, sure. And they are barely getting by, “working long hours despite low wages, shrinking health-insurance coverage and serious trade-offs between work and decent care for their children.” These people would certainly benefit from higher wages, but more so from universal health care and fundamental changes to their childcare arrangements. Oh, and that says nothing of dealing with the fundamental additional expenses of being poor in the first place. Unfortunately, none of those things are on the Congressional agenda, but a minimum wage hike is.

You cannot reasonably talk about why low-wage earners earn so little without talking about the elephant in the kitchen: illegal immigration. Do not get me wrong, I am not against immigration; like almost all Americans, most of my forbears came to this country sometime after 1607. But there are 2 major problems with hiring illegal immigrants. First — as I have said many times before — there is no way to know which of them are just people trying to get by and which of them are involved in drug-running, human smuggling, human slavery, forced prostitution, organized crime, and/or terrorism.

The second problem is that the sort of employer who doesn’t mind if his employees aren’t legal doesn’t mind ignoring other laws while he’s at it. Laws like workplace safety regulations, overtime laws, and even that minimum wage law we were discussing. So not only are we talking about millions of people artificially increasing the labor supply, they might not even be getting minimum wage. Furthermore, they may be working way more than 40 hours a week, and they may be working in an unsafe environment that a legal worker simply wouldn’t tolerate. When one out of every 7 Mexican workers is working in the United States — and most send money home — we cannot be too surprised that Americans are having a hard time finding jobs (I will leave the possible impact on the trade deficit to the reader’s imagination). Although the official numbers estimate 11 or 12 million illegal immigrant workers, some experts think the number is closer to 20 million. Or back to the BLS statistics, or almost 14% of the American workforce. Elephant in the kitchen? It’s a whole herd of elephants.

The Feds are finally starting to come down on employers who break the law by employing illegal workers. But frankly, if they were serious, they would not be going after small time operators with a few dozen employees. Nope, if they want to get the job done, go after some big companies.

Hey, if they need to protect their big-business benefactors, just send a little note to the CEOs of the S&P 500 companies letting them know they have 30 days to get their acts together before the raid.

In closing: 100 years of progress; about freaking time they did something to prevent unwanted pregnancy, the leading cause of abortion; it turns out that people will eat as much as they can fit in the container, regardless of container size; and it’s vaccination time! Quick question, which is cheaper: $360 for a vaccine that prevents cervical cancer — you know, should your daughter be sexually assaulted or have an unfaithful husband or just use the wrong hot tub — or thousands of dollars to treat that cancer?

So today we learned that consumer confidence is not that bad, but these readings were taken before record gas prices, rising oil prices, yet more war breaking out in the Middle East, and a slowing housing market. I’d like to examine the housing market in more detail today.

Although Mr. Bernanke tells us that “The downturn in the housing market so far appears to be orderly,” it is worth noting that he admits the housing market is having a downturn. The Washington Post outlines the numbers for us: sales slowest since January; weakest price increases in 11 years; condo sales “tumbled”; a decline in sales of 8.9 compared to June of last year; 6.8 months supply of homes on the market, when most realtors sign 90 day agreements. It isn’t a disaster, but it isn’t good either.

This morning, as I was listening to the duelling pundits on CNBC, somebody offered the semi-helpful advice that you shouldn’t “worry” about a declining real estate market unless you are in an “overheated” area of the country — and he wasn’t talking about the weather.

That got me thinking about this item from over the weekend about how high housing prices are squeezing the middle class who can’t afford luxury homes, yet make too much for subsidized housing. But look at some of the cities mentioned. They are the obvious suspects: New York, Los Angeles, San Francisco, Chicago, Boston, San Diego. Places where the local economy is OK and conditions in the city are improving. But unfortunately places where enough people want to live that home prices are rising faster than the wages that would pay for such a home. Although that particular article does not mention the Seattle area, today’s local news informs me that even in suburban areas a county over basic 2 bedroom homes (with no view and a small lot) are half a million dollars.

All these housing markets are in “Blue” states.

Remember this story about people getting out of overheated housing markets? Most of those overheated markets are in liberal areas. The Atlanta Journal Constitution tells us the housing market in the South is holding up well, but then they mention that “Atlanta’s price increases have been far less dramatic” than in other areas of the country. The South was pretty Republican last election. The Real Estate Journal helpfully tells us that Some Housing Markets Are Grossly Overheated

It’s one thing to look at a and it’s another thing to look at a map. And now, compare that map of hot housing markets to this map of 2004 electoral votes.

When you look at those maps together, it becomes even more clear that with the exception of Florida, most of the overheated housing markets — where everybody wants to live and work regardless of cost — are in areas that vote with a progressive agenda. It is reasonable to suspect that voting on local and state issues is more or less in line with voting on Federal issues.

Why is that?

Could it be that progressive policies result in desirable living conditions? Do progressive policies result in relatively stronger local economies?

Alternatively, could it be that states with very conservative policies end up having less desirable living/economic conditions?

Just asking.

In closing: Barry Manilow may be harmful to your budget; a food columnist at the L. A. Times describes KFC’s “Famous Bowls” (because they contain pretty much everything KFC is “famous” for, get it) as “It’s like throwing up in reverse”; “This Isn’t World War III”; normal everyday people might end up on international terror watchlists simply because it’s been a slow month as a result of air marshal incident quotas; survey shows Americans beleive a lot of things that are untrue about Iraq (see sources such as this item on reconstruction and this item on Americans ordered to kill all military aged men and boys — way to win hearts and minds, create desperately poor widows in a society where women can’t work, and commit war crimes all at once — and this item on how the WMD being found are all from the 1980s); The New York Times reports that most states aren’t meeting NCLB requirements; and finally 95 Theses for the technological age.

The Dow fell today — strictly speaking, it continued a slide from last week’s multi-year highs — along with the other indices and Treasuries on news that the Consumer Price Index rose more than expected, an annual rate of 5.1%. Even taking out food and energy, the core rate is 3%. These figures are both up substantially over last year. Of course, ShortWoman readers may remember this paragraph:

Finally, while you may be aware that Gas and Oil prices are at or near all-time highs you may not be aware that other commodities are also at high prices. Commodities being the building blocks of pretty much anything you can buy, this makes inflation almost a sure thing. Gold is also at multi-decade highs. Remember, investors usually buy gold when they are worried that all heck is going to break loose in the economy.

Seriously, how can anyone have not expected some inflation? The stuff companies use to make other stuff is at record high prices. The fuel used to power the machines that make stuff is at high prices. The fuel used to get the stuff to the store where you can buy it is at high prices. Are we surprised that there is inflation, or are we surprised that the Department of Labor can no longer hide inflation by rigging the numbers?

We might be forced to admit that the Emperor is nude. To think how recently financial news shows were talking about the Dow hitting a new record.

Fair warning, the CPI numbers pretty much mean the FOMC will have little choice but to raise interest rates at their June meeting. For pity sake, if you haven’t refinanced anything with a floating interest rate, will you please fix that?

In closing: Peruvian Princess Warrior! As “organic” food becomes more popular and more readily available, are standards for organics being maintained? Yet another article about the NSA phone record database. My favorite tidbits: yes the FISA court was told this would happen, but they didn’t actually approve it; Verizon swears they aren’t involved; and this choice quote from a Republican Senator, “For as long that I know of, the government has always had an opportunity to look at business records without a court order,” he said. “Business records are not personal property.” Alright, then the Senator won’t mind if we begin by looking at his business records? Apparently it’s ok to live in sin if you have only one kid. But have more than one, and this town thinks it can evict you. And a final bit of absurdity, “New federal guidelines ask all females capable of conceiving a baby to treat themselves — and to be treated by the health care system — as pre-pregnant, regardless of whether they plan to get pregnant anytime soon.” Boy, next thing you know it will be illegal to sell booze to any woman of childbearing age.

On one hand, we have workers fired for leaving early to attend an immigrants’ rights rally. Now make no mistake: most of us would lose our jobs if we walked in one fine morning and told the boss we were leaving 2 hours early unless there was a really outstanding reason. Particularly if a quarter of the employees likewise wanted to leave 2 hours early. In some ways it is just as simple as “they left the job and were fired.” But would they have been fired if instead of attending a political event, they were going to a Holy Week service at church? If they were at a big ball game? If they went to the wedding/funeral/hospital bed of a co-worker? All the same, there is the net effect of chilling dissent. There is some question about the immigration status of some of the individuals involved, but that brings us to another issue. Illegal workers have limited legal recourse against ill treatment by an employer. This situation is a bit stickier than most, but it is a no-brainer that the ability of working people to participate in political protests is limited by their ability to get time off. Doubly so if they will have a hard time obtaining a new job due to issues of immigration status, limited skills, or just plain old fashioned discrimination.

Way off on the other hand, we have CEO paychecks. Did you know that the CEO of Capitol One made almost a Quarter of a Billion with a B Dollars in 2005? What’s in your wallet indeed. And he was awarded this princely sum for shareholder returns of less than 3%. Harry Silverman of Cendant (you remember Cendant?) earned well over a hundred million dollars while shareholders lost over a fifth of their investment! It must be nice to get paid so handsomely to lose other people’s money. Be sure to click through to the main story to flesh out those numbers with more general statistics on CEO paychecks.

In the words of the Gershwins, “Nice work, if you can get it.” Oh, and if you happen to need 17 painters in the Seattle area, I bet I know where you can find some.