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What is the "ownership society"?

This term cropped up on in a recent NYT article which blames the financial crisis on Bush administration policies, including its advocacy of an ownership society. The article goes too far: the financial crisis is the result of bipartisan regulatory decisions going back decades and the Fed's easy money policies—and it is important to understand that financial crises will almost certainly occur even when government regulators do everything right. They are like hurricanes: we can blame the government for failing to build strong levees but not for failing to stop the hurricane from forming over the Atlantic ocean. If the hurricane is bad enough, even strong levees will do no good. (A lot of people also blame market actors but that does not make much sense. People act rationally or greedily or stupidly, as they always have, and blaming them for the financial crisis is just another way of arguing that government regulation was inadequate. Might as well blame hurricanes for destroying cities.)

But what is the "ownership society," anyway? It is a political slogan that the Bush administration apparently first used in 2003 to refer to three of its policy goals: (1) privatization of Social Security; (2) the creation of private health care accounts; and (3) subsidization of home ownership. The underlying theme is that it is better if people own than if they do not own, but what does this mean? Ownership compared to what?

The Social Security example suggests one interpretation: ownership compared to government sponsorship. In one scenario, people earn wages, a portion of their paycheck goes to the government, and then, much later, they receive money back from the government. They don't own anything, though they might have a reasonable expectation that the government will eventually pay something that bears some relationship to the payroll tax. In the ownership scenario, the sum of money that would otherwise be used for Social Security can be invested in securities. Note an odd feature, from a market or libertarian perspective: people don't have true ownership rights in their labor; they are obligated to put a portion of the return on their labor into an account. Their "ownership" of securities in that account therefore does not reflect a commitment to a free market in some pure sense. What is true is that risk and return is increased, which is a normal feature of ownership. If you invest unwisely, or wisely but unluckily, you will end up impoverished when it comes time to retire. As a result, people have strong incentives to think about retirement, and to inform themselves about financial instruments and the likely future of the economy. Whatever you might think of this outcome—some people find it appealing, others do not—the odd thing is that if you like the idea of people having control over their finances rather than being dependent on the government, then you should want to do away with Social Security altogether rather than privatize it. Let people decide how much to spend and how much to save, as well as how they save their money. The ownership society in this setting boils down to the claim that we should subsidize investment and penalize consumption. If that is really the goal, why not just advocate a consumption tax and do without the ownership metaphor?

Let's turn to home ownership. Here, the compared to what question seems to be—compared to renting an apartment or perhaps renting a government-subsidized apartment or living in public housing. If government subsidizes home mortgages, then people who would otherwise rent or live in public housing are more likely to buy their own home. Again, the effect of channeling people into ownership is to increase the risk and the payoff. If you rent an apartment, and its value appreciates, you don't obtain the return—your landlord does. If its value declines, you aren't hurt—your landlord is. Finance theory tells us that investments have higher payoffs when they are riskier, and this is true for owning a home just as it is true for owning a piece of stock in a business. It was also thought, as in the case of Social Security privatization, that people who own homes will end up being better citizens: they will invest more in their homes, which will improve the neighborhood and hence the home values of others; they will care more about the future and therefore they will inform themselves about politics and vote responsibly; they will join the rentier class and become Republicans.

The problem with this theory, as I noted yesterday, is that ownership does not have any intrinsic value. It is often wise to rent rather than own, as everyone understands from everyday life, and we might think that low-income people who chose to rent apartments rather than buy them knew what they were doing. Home ownership has some attractive features—you needn't fight with your landlord, or worry that he will terminate the lease—but it is basically an enormous financial gamble that many people, particularly low-income people, shouldn't make. Your neighborhood, for reasons outside of control, could become worse over the years; in addition, you might find that you need to move for family or employment reasons. If you are a low-income person, most of your savings will be tied up in your home, which means that you will be inadequately diversified against these future risks. These basic truths were obscured for many years because home prices tended to increase and not to collapse during recessions, but home ownership is just a kind of investment and does not enjoy immunity from the business cycle.

Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid. I cannot understand why anyone would think that such a policy would be sensible. In some cases, these people will do well and enjoy the upside of their investment, but in other cases they will do poorly, with the result that they will be worse off than ever.

jayder:
Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid. I cannot understand why anyone would think that such a policy would be sensible.

Wasn't it also an attempt to make sure that people who otherwise were not in the habit of saving would have an asset in which value accumulated? Lots of people who otherwise would not save, when they purchase a house in a good market, end up with a very substantial asset that they can pass on to their kids. Isn't that a reason why someone would think such a policy would be sensible?
12.24.2008 11:44am
LN (mail):

Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid. I cannot understand why anyone would think that such a policy would be sensible. In some cases, these people will do well and enjoy the upside of their investment, but in other cases they will do poorly, with the result that they will be worse off than ever.


What about social security privitization?
12.24.2008 11:55am
David Warner:
"Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid. I cannot understand why anyone would think that such a policy would be sensible."

For that, I'd advise either thinking harder or doing a little research, but I appreciate hearing the opposing case made unusually clearly and persuasively, instead of the usual "the ownership society means you're on your own" stuff.

The alternative to an ownership society is likely to be neither an Elysian communitarian wonderland where we all sing kumbaya and it takes a village to keep a village from getting taken or a purely rational economic utopia of risk/reward optimizers enjoying their God-given right to perfect information.

History shows that where ownership rights and practice are weak, a Pwnership Society prevails, the strong dominate the weak, and the only L33t Skillz that matter are political pull or the ability to become anonymous.
12.24.2008 11:56am
Raționalitate (www):
Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid.

And Clinton's role in it was probably bigger than Bush's -- he started the "affordable housing" push, and signed off on the 1997 housing subsidy disguised as a tax cut. And yet, for some reason, the Times lays more blame on Bush.
12.24.2008 12:03pm
A. Zarkov (mail):
The "ownership society" is a way of off loading risk onto individuals. You own your 401k (what's left of it), but you would be better off with a defined benefits retirement plan, where the plan "owns" the market risk. I sold my house (at the peak of the bubble) and I rent a house. Now my landlord "owns" the market risk, seismic risk, fire risk, repair risk etc. If this situation should change I can always go back to being an owner.

The "ownership society" is also a political tactic, to give people an apparent (but often not real) stake in the existing regime. Thatcher did that by privatizing council housing. They were better off as renters. Bush's ownership society ran along the same lines. He wanted Hispanics to own houses so they might be more inclined to vote Republican. Thus he pushed homeownership even if you couldn't afford it.

Ownership in anything is always a trade off. Sometimes renting is better, other times it isn't.
12.24.2008 12:09pm
Crunchy Frog:
The advantages of people owning their homes instead of renting is not purely economic, but also psychological. People are more likely to maintain and beautify what they own. It is theirs. Also, given that ownership connotes a sense of permanence and commitment, people tend to have more interest in the betterment of the local community - schools, parks, and the commons in general - and, because they're going to be there for the duration, they have more clout with the powers that be in ensuring their concerns will be met.
12.24.2008 12:12pm
David Warner:
Zarkov,

"You own your 401k (what's left of it), but you would be better off with a defined benefits retirement plan"

Defined by who, God on high?

Ask the UAW how their defined bennies are looking about now.
12.24.2008 12:15pm
stevefromaustin (mail) (www):
Any thoughts on whether privitizing the social security system by putting funds into the stock market would have been a good idea when it was proposed a few years ago?
12.24.2008 12:18pm
Jim Ison (mail):
It is probably elitist to point out that people who are attracted to no-downpayment-low interest mortgages are likely not to understand markets and actually have an exaggerated faith in bank and mortgage company assurances of their risk.

But elitist or not, isn't that true? Wouldn't regulations shutting the barn door behind an already absent horse not prevent the next horse from escaping? In what way, exactly, would regulations requiring some equity in the loan process remove innovation, and how can "unchecked greed" be redefined as innovation anyway? Surely there's nothing older under the sun than greed!
12.24.2008 12:24pm
Michael F. Martin (mail) (www):
Your neighborhood, for reasons outside of control, could become worse over the years; in addition,

This could be avoided with private insurance. There is a group from Yale that argued that insurance against declines in value due to offsite factors might be a nice private solution to this kind of market failure. See SSRN paper here. At least one of that group is now actively promoting a startup to write this kind of policy.

I think of this problem and the proposed solution to it as similar to the recent proposal for mandatory capital insurance by Kashyap, Rajan, and Stein.
12.24.2008 12:26pm
A. Zarkov (mail):
"Defined by who, God on high?"

Defined by a large, usually government organization, that has the power to tax and thus guarantee benefits. UAW retirees are still collecting their pensions, and you will note the auto companies got their bailout. Of course they could take a hit in the future. But over all, one is better off with the old style pension system, and it was successful for millions of people. If things get so bad the defined benefits plans crash, then you can be sure the 401ks will too. In fact, that's already happened.
12.24.2008 12:27pm
D Palmer (mail):
I think policies that encourage private ownership of assets (homes, retirement accounts) are good in general. But as Jayder points out so well, the past decade or so the pendulum seems to have swung too far.

The goal seems to have been helping people purchase homes without any regard for their ability to pay or to handle the responsibilities of ownership.

Many of the residents of public housing today are the 3rd and 4th generations of their families to live in the projects. Neither they, nor their parents nor grandparents have ever had the rsponsibility of maintaining their homes. Beyond the normal cleaning involved, they have never had to replace a water heater, or fix their own faucet. They may never have had to pay an electric or gas. When the plumbing didn't work they called the super and it was fixed for free.

On top of that, they often have the least reliable emplployment and little or no reserves. So if they lose their jobs they quickly fall behind on their mortgage and with 95-100% loans have no flexibility to sell and move to a location with better job prospects.

The bottom line is that home ownership is not for everybody and it is not the job of government to encourage people to take risks that they cannot understand or afford.
12.24.2008 12:29pm
Jim Ison (mail):
Regarding David Warner's comment on defined pensions, we probably have to consider the decades of safe and defined payments made to auto workers... what? sixty years of them? Nothing is forever, David, and while that sounds patronizing it's meant only to remind us all that the auto workers and the big three themselves have had a pretty spectacular run. Perhaps the workers at Ford will have an even longer one, and the social cost of not supporting workers in need of medical attention, for instance, in the other company plans like Toyota's, should be, must be, figured in when making comments on defined benefits.
12.24.2008 12:31pm
Jim Ison (mail):
As a Canadian I have a very different experience with public insurance plans. In the three provinces that adopted public auto insurance plans, adopted decades ago when socialist provincial regimes were in power, no succeeding conservative (read republican or right-wing) regimes have been able to replace them. These public plans are run more efficiently (surprise, surprise... the most vehement actuarial attacks cannot disprove this) than private ones, and everyone with a licence is covered, no matter what. Same deal with medicare... everyone covered, astonishingly lower operating costs. I know this fact is counter-intuitive: public employees are SUPPOSED to be lazy and incompetent compared to those social Darwinists manfully slaving away to keep their jobs. But it just doesn't work that way, folks. Have a really good look around the world for evidence.
12.24.2008 12:41pm
Laura S.:
Eric writes:

The problem with this theory, as I noted yesterday, is that ownership does not have any intrinsic value.

Well, the libertarian position would be that ownership is equated with liberty and self-determination. Does liberty have intrinsic value? We could choose to live in caretaker society. You've hit upon something that is in the realm of first-principles.

Regardless, I do not think you mean to reject 'ownership'--or has society turned full-circle that we're again left to debate the merits of communism? I think there is a narrowly fair argument that home-ownership is an under-diversified strategy. One which arguably is against notions of comparative advantage, "expert-property owners".

The question of society-security, however, hits upon questions of the underinvestment of capital. Arguably the fault of social-security is the pay-as-you-go approach. There is no pool of invested savings to yield additional bounty at retirement. Thus social-security rides on deus-ex-machina productivity growth. It even retards productivity growth by diverting true investment into present expenditure. The question is--how do you change this? There are certainly "liberty" questions to the government becoming a large investor or some Thomas Jefferson and Andrew Jackson would have us believe.
12.24.2008 12:42pm
MCM (mail):
Let people decide how much to spend and how much to save, as well as how they save their money. The ownership society in this setting boils down to the claim that we should subsidize investment and penalize consumption. If that is really the goal, why not just advocate a consumption tax and do without the ownership metaphor?


The real goal is to force people to send their money to Wall Street firms, who lobbied hard to privatize social security.
12.24.2008 12:50pm
ravenshrike:
Bush probably would have liked to abolish SocSec altogether,however he operated in a political realm. There wasn't a snowflake's chance in hell of doing away with SocSec entirely, so he attempted to privatize a portion of it to prove that over the long term that it works, which is why his proposed plan was limited to younger workers. Had the privatization gone through, the younger workers involved would have lost less than 50% of the value they had put in already, but that would have been only 4 years or so of earnings from the start of their careers. As a long term setup, privatized SocSec is a much better solution than what is currently there.
12.24.2008 12:54pm
Jim Ison (mail):
Laura, how tiresome it is to non-Americans with deep ties to relatives and friends in your great country to hear the word 'communism" so early in a discussion of public and private ownership issues. An analogy might be made to the ownership of roads. Clearly the people need to own the streets they drive and walk on; otherwise road building would be completely chaotic. Surely one does not immediately think of our civic road maintenance programs as "communism." Well, in countries other than the U.S. of A., public medical plans and insurance plans are not seen as "communism." Try to see a working combination in countries like Canada, imperfect though we are in so many of our endeavours, as a model that actually helps to avoid radical solutions like communism by offering the benefits of capitalism to all citizens.
12.24.2008 12:55pm
Portland (mail):
Trying to gloss over the Bush administration's responsibility for the financial crisis with the facile excuse that financial crises are unstoppable, "like hurricanes" is unpersuasive partisan spin.

In the finance sector, as in so many other government responsibilities, the Bush administration's conviction that government action is clumsy and ineffectual proved to be a self-fulfilling prophecy.

I know it's tradition after a huge Bush screw-up to blame the Clinton administration. Who can forget the classic post-ignored-warnings-of-9/11 lie that Clinton failed to pursue Osama Bin Laden? But it's been eight years. Common sense, as well as the actual record, clearly point to the primary responsibility of the Republican administration for the economic catastrophe midwifed by their incompetence and corrupt cronyism.
12.24.2008 1:01pm
Steve:
As a long term setup, privatized SocSec is a much better solution than what is currently there.

Of course, we would have had to borrow trillions of dollars in new debt to set up Bush's private accounts, so I assume you included the interest on that debt in calculating that private accounts have a better return.

I believe Bush's proposal would have received even less support than it did had people realized that his retirement security plan amounted to borrowing money from overseas so that people could play the stock market with it.
12.24.2008 1:25pm
Laura S.:
Jim,

Your sensitivities do you disservice. Eric remarked that ownership lacked any intrinsic value. I commented by way of introduction that surely he did not mean that comment absolutely.

I do not think a debate about health-care is appropriate at this time. There is very little 'ownership' at stake in such a subject. So please do not pivot the debate into a referendum on American particularities.
12.24.2008 1:26pm
Andy Freeman (mail):
> Defined by a large, usually government organization, that has the power to tax and thus guarantee benefits.

Very few defined benefit plans in the US have the power to tax.

One problem with relying on taxes is that taxpayers get to vote too. SS is not a contract that future generations are obliged to honor. It's a hope that they will and they may well decide that they're not going to give 30% of their income to old people.

It's unclear whether public employee pensions will be honored either when they start to consume a significant fraction of govt revenues. If SS gets cut by GenX, Y, and Z, it's unclear why they'll honor public pensions.
12.24.2008 1:35pm
R Gould-Saltman (mail):
Laura S.:

Your Red-baiting of Jim Ison does a similar disservice. He seemed neither to be "rejecting ownership" in the Bakunin/Proudhon sense (which would, tecnically, make him a Left Anarchist...) nor advocating anything which can meaningfully be characterized as "communism", (even with a small "c") as opposed to, say, "socialism".

Are we going to be debating, long and hard in the next few months, whether certain forms of investment and ownership should be encouraged by government policy, discouraged by government policy or (like certain forms of loan securitization) damn near banned by government policy, and what sort of "incentives" or investments should be made by governments? To quote a recent candidate for office, you betcha.

The debate's not likely improved much by name-calling, though.
12.24.2008 1:57pm
Putting Two and Two...:

But what is the "ownership society," anyway?


Conservative websites these days seem to be full of retrospectively probing articles like this.

They remind me of a cousin of mine who would, from time to time, ask rather loudly, "Who farted?".
12.24.2008 2:01pm
J D Jennings (mail):
"...an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid..."

You neglect the fact that the no-down-payment, teaser-rate purchase money mortgage is essentially a call option -- at least in California. The lender's recovery is limited to the property. The borrower has no personal liability. If the value of the property goes up, the buyer wins; if not, he can walk away. If the monthly mortgage payment, upkeep, taxes and insurance are not too much greater than the rental rate buyer would be paying anyway, the purchase is a great investment.
12.24.2008 2:08pm
PersonFromPorlock:

A lot of people also blame market actors but that does not make much sense. People act rationally or greedily or stupidly, as they always have....

In that case, can you blame anyone for anything? I suppose that next year we could name hurricanes for famous financiers....
12.24.2008 2:35pm
SeaDrive:
I suppose there is no hope in getting people to understand: social security is not like a savings account or investment portfolio. The underlying principle is taxes collected this year are expended in payments this year.

The only reason that the social security system has accumulated huge funds is to be able to afford to pay off the baby boomer generation when the tax burden would be (and may turn out to be) unsupportable.

Social Security should not be on the table in a discussion of an 'ownership society."
12.24.2008 2:42pm
David Warner:
"Any thoughts on whether privitizing the social security system by putting funds into the stock market would have been a good idea when it was proposed a few years ago?"

Looking pretty good about now, actually. Buy low, sell high. Or have your government confiscate your capital for forty years, skim the float, then "promise" to pay you back in what will no doubt be highly deflated dollars.

Judging by this thread, we're being condemned to repeat history by those with nothing resembling an understanding of it. Well, my ancestors immigrated here, perhaps I'll need to emigrate too. India?
12.24.2008 3:03pm
Janson K. Hendridge (mail):
"Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid." Home ownership creates jobs, many paying Middle Class wages, so that is always a good policy outcome.

There are a number of reasons why I must strongly disagree with the conclusions reached in this article, insofar as home ownership is concerned.

First, putting people in homes has been a policy of the United States since the end of World War II.What Clinton and Bush did was to work for deregulation of the financial markets that allowed, amongst other things, the securitization and globilization of mortgage debt to unprecedented levels.

The Clinton and Bush 43 administrations do both deserve blame for allowing real estate prices to inflate from relatively stable for 100 years, to increasing by 30% from 1995-2002. That means whatever loans people were getting, the underlying asset valuation was too high to begin with.

Second, it is wrong to place "low income people" and minorities at the center of blame for this mess. As reported in the Wall Street Journal, 61% of those with subprime loans were qualified to receive prime loans. The fact that so many people with these mortgages were otherwise qualified speaks more to lender greed than it does a misguided policy.

To underscore this point, there is another wave of Alt-A and other alphabet soup loans that are about to default that were unavailable to low income borrowers.These loans represent a market segment that is worth over $3 trillion dollars.Add to that an impending commercial loan bubble about to burst and one cannot simply point to low income people and minorities and say that some do-good policy was the reason for the mess.

Lastly, the article is remiss in that it does not include in it's analysis any mention of stagnant wages and the effects of an economy that is shedding, rather than adding jobs. These are essential points that must be factored in any serious analysis of home ownership policy. It is job loss that is behind most of the defaults, as well as people trying to survive with rising prices for food, gas, healthcare, utilities, while their wages stay the same, or worse, decline if they were let go and was forced to take a job that paid less as is so often the case.

Finally, as to whether it is a good policy to enable low income people to own their own home, and retirement responsibilities, I would say to not focus on the people, but focus on the "low income" part. If people are willing to work, which most of those foreclosed were, then they were already productive citizens.

A perpetual insecure and volatile job market undermines most home owners, it's just hits those with the weakest positions first. There are more than a few attorney's who now find themselves on the same runway to financial disaster as those "low income" people everyone so loves to point their fingers towards.
12.24.2008 3:05pm
R Gould-Saltman (mail):
J.D. Jennings:

Except, (at least in California until the middle of this year) you'd have been hard-pressed to find too many original purchase-money mortgages around, a year after they're written; as soon as a couple of payments were in the door, there would follow a bombardment of offers of refis and/or HELOCS, all of which, of course, are recourse paper. Any explanation of the unique "non-recourse" nature of purchase-money deeds of trust was nowhere to be found in those refinance offers.

. . . and once he's got refi paper, the lender can not only pursue any deficiency above the foreclosure sale price, but alternatively can issue a forgiveness to the borrower, and send the borrower a lovely 1099 so she owes income tax on the amount of the forgiveness...
12.24.2008 3:17pm
Portland (mail):
From the NYT article:


Mr. Falcon's report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off "contagious illiquidity in the market" — in other words, a financial meltdown. He also raised red flags about the companies' soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined "G.S.E.'s — We Told You So."

But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.

At the time, Fannie and Freddie were allies in the president's quest to drive up homeownership rates; Franklin D. Raines, then Fannie's chief executive, has fond memories of visiting Mr. Bush in the Oval Office and flying aboard Air Force One to a housing event. "They loved us," he said.

So when Mr. Falcon refused to deep-six his report, Mr. Raines took his complaints to top Treasury officials and the White House. "I'm going to do what I need to do to defend my company and my position," Mr. Raines told Mr. Falcon.

Days later, as Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.

His warnings were buried in the next day's news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon's report had flagged.


Deny reality, suppress the truth, fire those that tell the truth, and replace them with foxes to guard henhouses -- and finish it off with a great big whopper in the form of "We told you so."

Classic Bush &co. Classic.
12.24.2008 3:41pm
Frater Plotter:
Well, the libertarian position would be that ownership is equated with liberty and self-determination.
Sure, self-ownership is. Not home ownership. It's up to the individual whether they would prefer to own a house, rent a house, live in a communally-owned house with like-minded people, crash on consenting friends' couches, or buy a tent and rent a campsite.

For some people, renting makes sense and owning a house does not. Having the government monkey with the incentive structure does nobody any good (except the bureaucrats) in the long run.
12.24.2008 3:44pm
jukeboxgrad (mail):
posner:

It is a political slogan that the Bush administration apparently first used in 2003


It's easy to do a site search of whitehouse.gov. The search returns 398 results. Some of the results are from 2002 (see here, here, here, here, and here).

That first release is from 2/28/02:

I want America to be an ownership society


On 10/15/02, Bush hosted a "Conference on Minority Homeownership:"

I appreciate your attendance to this very important conference. You see, we want everybody in America to own their own home. That's what we want. This is -- an ownership society is a compassionate society.

…we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That's a homeownership gap. It's a -- it's a gap that we've got to work together to close for the good of our country, for the sake of a more hopeful future. We've got to work to knock down the barriers that have created a homeownership gap.

I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families. (Applause.)

…Last June, I issued a challenge to everyone involved in the housing industry to help increase the number of minority families to be home owners. And what I'm talking about, I'm talking about your bankers and your brokers and developers, as well as members of faith-based community and community programs. And the response to the home owners challenge has been very strong and very gratifying. Twenty-two public and private partners have signed up to help meet our national goal. Partners in the mortgage finance industry are encouraging homeownership by purchasing more loans made by banks to African Americans, Hispanics and other minorities.

Representatives of the real estate and homebuilding industries, through their nationwide networks or affiliates, are committed to broadening homeownership. They made the commitment to help meet the national goal we set.

Freddie Mae -- Fannie Mae and Freddie Mac -- I see the heads who are here; I want to thank you all for coming -- (laughter) -- have committed to provide more money for lenders. They've committed to help meet the shortage of capital available for minority home buyers.

Fannie Mae recently announced a $50 million program to develop 600 homes for the Cherokee Nation in Oklahoma. Franklin, I appreciate that commitment. They also announced $12.7 million investment in a condominium project in Harlem. It's the beginnings of a series of initiatives to help meet the goal of 5.5 million families. Franklin told me at the meeting where we kicked this office, he said, I promise you we will help, and he has, like many others in this room have done.

Freddie Mac recently began 25 initiatives around the country to dismantle barriers and create greater opportunities for homeownership. One of the programs is designed to help deserving families who have bad credit histories to qualify for homeownership loans. Freddie Mac is also working with the Department of Defense to promote construction and financing for housing for men and women in the military.

…So I want to thank you all for coming. I want to thank you for your determination to help close the minority homeownership gap. It's an incredibly important initiative for this country.

…this is an initiative -- as Mel will tell you, it's an initiative that we take very seriously. We're going to stay on it until we're -- until we achieve the goal. And as we all achieve the goal, we can look back and say, America is a better place for our hard work, our efforts and our desires for our fellow Americans to realize the greatness of our country.


The phrase is also used in Bush's official bio. Working "to create an ownership society" is supposedly something he has done "since becoming President of the United States in 2001."
12.24.2008 4:40pm
notedscholar (mail) (www):
Good post.

I agree that crises will happen regardless. Indeed, economists such as Dean Baker and Noam Chomsky have been pointing out for years that crises are intrinsic to capitalist markets of the contemporary variety. Has a lot to do with the externalities.

NS
http://sciencedefeated.wordpress.com/
12.24.2008 5:48pm
p. rich (mail) (www):
And Social Security as currently operating is not a Ponzi scheme because...?


As for Freddie and Fannie: Diseased products of the FDR and Johnson administrations. CRA: Carter. CRA enforcement: Clinton. What can you expect?

Chickens. Roost.
12.24.2008 6:00pm
Allan Walstad (mail):
The term "ownership society", as used by Bush, is mostly empty political rhetoric. Bush is one of those many political conservatives who talk limited government but expand government when they get the power.

For libertarians, the ideal is individual liberty--meaning, we interact non-coercively. Property ownership gets into it as the principle by which land and other resources and goods are controlled. Somebody has to say "This is how this house, this car, this wad of cash is going to be used." Among the possible ways of solving that problem, freely transferable private property rights are more consistent with individual liberty than various forms of collectivism.
12.24.2008 6:14pm
juris_imprudent (mail):
But over all, one is better off with the old style pension system, and it was successful for millions of people.

Never would have worked well for me, or just about everyone I know. You move from company to company, or to an entirely different industry, you lose that defined benefits every time you move. So, do you remain in suboptimal employment just so you can hope to collect a defined benefits pension?

A few years ago the Economist noted that the vibrancy of the U.S. labor market was a key distinguisher with the European (British in particular) markets, where workers are extremely averse to change (of industry, location, etc.). And of course, unemployment benefits in the U.S. are considerably less generous than across the pond.
12.24.2008 6:30pm
Randy R. (mail):
Crunchy Frog is exactly right. The better neighborhoods of most cities are the ones where the homes are owner occupied. Rental units usually are poorly maintained and pull down the neighborhood. When you have a stake in the community, you start doing what you can to make sure it improves.

Time and time again, it's often gay people who enter into bad neighborhoods and spruce them up. Realtors have a motto: When the gays move in, it's time to buy. They like the mix of older houses with great spaces, and the convenience of living downtown. Often, though, that starts a spurt of gentrification, which pushes out the poorer people who are just tenants, and that causes resentment.

But the neighborhoods DO improve, usually quite a bit. I guess that's part of the Gay Agenda, and makes us all immoral and all that. But owning a house does make you fight for the improvement of the place. When I moved into my capital hill house in Washington, all the straights were moving out. I got deal, rehabed the place, and now it's worth a lot more than I paid.

And everyone loves my garden.
12.24.2008 7:25pm
Randy R. (mail):
One of the curious things about this housing crisis is how many poor people bought brand new houses way out in past the traditional suburbs. Why didn't they buy closer in? Why didn't they buy an hold house in the city and rehab it?

I just don't get it. Living way out there, you need a car to do anything at all, and you are isolated from those who can help you in time of need. And now we have abandoned houses in the suburbs! up to ten years ago, abandoned houses were limited to the inner cities. That's quite a switch. Perhaps high gas costs helped push them over the edge. When you have to drive five miles just for a quart of milk, high gas prices, high heating and cooling costs, and the fact that these houses are for the most part cheaply built and won't last another ten years without major anyway, probably combined to put them over the edge.
12.24.2008 7:29pm
tsotha:
Notedscholar, Chomsky isn't an economist.

To try to pin this whole thing on Bush is silly. The CRA was passed under Carter, Fannie Mae and Freddie Mac have been around since FDR. There are quite a few long term trends that converged to create the real estate bubble, and much of it was driven, not by the government at all, but by the same set of beliefs you see in every bubble - the price of real estate will always go up. This time around it's different.

It was Clinton that really got the ball rolling by using the justice department to force a relaxation in loan standards under the mostly-phony guise of anti-redlining efforts. Yes, Bush deserves a measure of blame, but he was just the last guy to holding the bomb when it went off.
12.24.2008 7:39pm
Jim Rhoads (mail):
You hit it, tsotha.

I find it difficult to understand how, when one administration continues a policy that its predecessor has begun and promoted when that policy has some bad (but unintended) consequences, only the latter administration can be wholly to blame.

Fighting terrorism, curbing Iraq's aggressiveness and lately home ownership for the lower income strata of society are several examples of this phenomenon.

What do you bet that these policies are only slightly modified under BHO, and become no longer "evil"?
12.24.2008 8:16pm
Elliot123 (mail):
"Second, it is wrong to place "low income people" and minorities at the center of blame for this mess. As reported in the Wall Street Journal, 61% of those with subprime loans were qualified to receive prime loans. The fact that so many people with these mortgages were otherwise qualified speaks more to lender greed than it does a misguided policy."

The blame rests with the folks who forced a lowering of credit standards to accomodate the low income and minorities people. Once standards were forced lower for the poor and minorities, they stayed low for everyone. The impetus for all this was the claim by civil rights people that banks wouldn't lend to poor and minorities.

When the banks were forced to lower standards, they didn't want to hang onto the mortgages because they knew they were bad. So, the same folks who forced the lowered standards forced Fannie Mae to buy them to get the banks off the hook.

But everyone who failed to pay their debt is also at fault. Poor or minority status is not an excuse.
12.24.2008 8:16pm
Elliot123 (mail):
"Why didn't they buy closer in? Why didn't they buy an hold house in the city and rehab it?"

1. The cost per square foot was lower.

2. They could qualify for a loan to buy a house, but not the extra to rehab it.

3. Jobs for these folks were disappearing in the city and moving further out.

4. They wanted their kids growing up with other kids, not a bunch of yuppies, dinks, and gays.
12.24.2008 8:35pm
Randy R. (mail):
"Yes, Bush deserves a measure of blame, but he was just the last guy to holding the bomb when it went off.:"

Holding on to a bomb for eight long years and not do anything about it is pretty damning, dont' you think?


Elliot: "4. They wanted their kids growing up with other kids, not a bunch of yuppies, dinks, and gays."

Touche. Myself, I can't stand the yuppies, baby boomers, or suburban straights. I guess the feeling is mutual!
12.24.2008 9:18pm
LM (mail):
David Warner:

"Any thoughts on whether privitizing the social security system by putting funds into the stock market would have been a good idea when it was proposed a few years ago?"

Looking pretty good about now, actually. Buy low, sell high.

Didn't the Democrats want social security invested in the stock market at the outset, but Republicans nixed it as socialism?
12.24.2008 9:31pm
LM (mail):
Elliot123 (mail):

The blame rests with the folks who forced a lowering of credit standards to accomodate the low income and minorities people. [...]

But everyone who failed to pay their debt is also at fault. Poor or minority status is not an excuse.

And that's it? Nobody else comes to mind who shares any of the blame?
12.24.2008 9:37pm
JoshK:
1. I think many of the lower grade mortgages were for new homes in the "exurbs" b/c the builders could give a "gift" to the purchaser which was used to then buy the property. That was a recent (10 years or so) I believe change to either regulation or industry practice that allowed this. It used to be that your down payment really had to have been yours. But, this was seen as a great way to help lower-income people afford housing, so it was accepted.

2. Why does everyone think that lower (or medium) income people who bought these no down payment teaser rate loans were dumb and that they would somehow benefit from a wise regulator guiding them? This was a great trade; you get almost infinite leverage for appreciation and no downside (no recourse).

3. I think people overlook that securitization was a good thing, just priced to cheap.

If only someone would really pursue an ownership society agenda....
12.24.2008 9:45pm
Eli Rabett (www):
Very off topic, and you can wash this out, but Newsday reports that Bush has revoked the pardon of Robert Toussie. Can this be done??
12.24.2008 10:54pm
tsotha:
Holding on to a bomb for eight long years and not do anything about it is pretty damning, dont' you think?

For a process that started in the 1930s? No, not really.
12.25.2008 12:14am
jukeboxgrad (mail):
rhoads:

I find it difficult to understand how, when one administration continues a policy that its predecessor has begun and promoted when that policy has some bad (but unintended) consequences, only the latter administration can be wholly to blame.


Then you might find it "difficult to understand" something even more extreme than that: an instance where "the latter administration can be wholly to blame" for "a policy that its predecessor has begun and promoted when that policy has some bad (but unintended) consequences," even when "the latter administration" doesn't even exist yet. This remarkable phenomenon has a name: the "Obama Recession."
12.25.2008 12:32am
Ricardo (mail):
A somewhat polemical way of putting this is that the "ownership society" is just Republican social engineering. The typical conservative and libertarian argument has always been that property rights are a critical pillar of a free society. That is, it is important for individuals to be able to exercise their property rights should they choose to do so. The ownership society meme is a non-sequitur that says that since the existence of property rights is a social good, it follows that the exercise of property rights is also a social good.

To the extent that people choose not to invest in the stock market or choose to rent instead of purchase property, it is a social ill that needs to be addressed by government social engineers.
12.25.2008 12:32am
Elliot123 (mail):
"And that's it? Nobody else comes to mind who shares any of the blame?"

There are many whose actions were necessary for this situation, and none whose actions are both necessary and sufficient.

In that case, I look for the earliest players who set up the strusture which allowed all the subsequent players to join the game.
12.25.2008 1:07am
Elliot123 (mail):
"A somewhat polemical way of putting this is that the "ownership society" is just Republican social engineering."

The greatest example of social engineering is the 64,000 pages of the IRS code which attempt to influece behavior in all kinds of ways. Ownership society is just a subset of it.

Consider if the individual income code simply said , "Pay 16% of everything you earn above $35,000." No deductions or credits for mortgages, electric cars, windmills, vehicles over 5,500 pounds, or earning too little...
12.25.2008 1:17am
PlugInMonster:

Consider if the individual income code simply said , "Pay 16% of everything you earn above $35,000." No deductions or credits for mortgages, electric cars, windmills, vehicles over 5,500 pounds, or earning too little...


You know as well as I do, that there are political reasons for every line of the tax code. That is the logic behind it. The only way to change it is through Constitutional means, you will never "reform" the IRS. You have to go at it from the side.
12.25.2008 3:33am
lonetown (mail):
An "ownership society" is actually a good idea. I'm surprised to hear Clinton was even close to the idea.

The problem is less the idea than the the implementation.

Its like kids having babies without training. Sometimes it works out OK, most of the time, not that great.

Give me an ownership society any day over the hell that represents the alternative.

I think this is the first year boomers can start to collect SS. In another 5 you'll see the real extent of the problem.
12.25.2008 5:41am
Dana H.:
"You own your 401k (what's left of it), but you would be better off with a defined benefits retirement plan."

Keep your filthy hands off my 401k (and keep your guaranteed benefit plan to yourself). Please don't tell me that I don't know what's good for me. I'm happy to assume the risk in return for the asset and the investment decisions belonging to me alone.
12.25.2008 10:17am
David Warner:
LM,

"Didn't the Democrats want social security invested in the stock market at the outset, but Republicans nixed it as socialism?"

Whoa, the DLC counts as Democrat again? Who knew? I need a scorecard to keep up with the playas.

No, after decades of hard work on the part of those who wanted the working classes to enjoy the return on their investments that was once the exclusive privilege of the rich, the D's, in their infinite wisdom, flushed it all down the toilet by conducting a profoundly shameful, but nonetheless stunningly successful, propaganda campaign to convince the Average Jose that the equity markets were like a big casino, except more fixed.

All for the purpose of, what? Poking Bush in the eye? Thwarting Rove's plans for R hegemony?

Seriously, though, Clinton once upon a time floated the trial balloon of diversifying the "trust fund" by investing some of it in equities, a great idea, and my recollection is that it was shot down by a firing squad consisting of several million horrified Progs, temporarily suspending their disbelief in the Second Amendment for that express purpose.

I wouldn't be surprised if R's favored an approach that offered more individual choice, being the party of choice and all at that time, and for my money, up to the present.

I have hopes that Obama will lay this sordid past somewhat to rest.
12.25.2008 10:22am
seadrive:

And Social Security as currently operating is not a Ponzi scheme because...?


The school tax in your community as currently operating is not a Ponzi scheme because...?
12.25.2008 10:22am
David Warner:
"You own your 401k (what's left of it), but you would be better off with a defined benefits retirement plan."

No doubt you would, with the rest of us picking up the tab for your no-deductible health care, boats, SUV's, and golf and fishing in your mid-fifties. Yep, Progs, CEO's suck even more. Bust their union too.
12.25.2008 10:24am
gran habano:
Sure, the underpinnings of this real estate bubble go way down and back in time. Bush didn't build this furnace, but he was the one who cycled the bellows onto this inferno of illegitimate, ahistorical financing, until it overheated and blew out.

That Times article correctly pointed out Bush's lack of recognition of an upcropping disconnect between real estate sales prices and rental prices. This was a relevant indicator of the bubble, and they ignored it.

Instead, they looked to keep the train rolling, and the bubble filling.

Bush owns this one. I got no problem if Frank and Dodd go to jail, but Bush leads the Executive, and he ignored a disastrous situation unfolding on his watch, which is inexcusable.
12.25.2008 10:58am
J D Jennings (mail):
Seadrive sez:

"The only reason that the social security system has accumulated huge funds is to be able to afford to pay off the baby boomer generation when the tax burden would be (and may turn out to be) unsupportable."

Shades of Al Gore's "lock box"! Seadrive, the social security payroll taxes do exceed the amounts paid out, but the system has not accumulated "huge funds" or any funds, for that matter. The funds realized from the payroll taxes are used to purchase treasury obligations. The money received by the Treasury goes to pay general fund expenses. When Social Security needs to sell those Treasury obligations to pay the Boomers, where do you suppose Treasury will get the money? Answer: Taxes. The same taxes you think we were avoiding by running a surplus.
12.25.2008 12:27pm
David Warner:
J D,

"Answer: Taxes"

Ah, yes, but taxes on thee (future generations) and not thee. Risk too. Let them eat risk.

The legacy of the Boomers: breaking the American tradition of sacrifice for the good of one's children, all so they could die before they got old and/or responsible.
12.25.2008 1:02pm
juris_imprudent (mail):
The legacy of the Boomers: breaking the American tradition of sacrifice for the good of one's children

Hmmm, could we be looking at a reformulation of the cliche'

Don't do it for the children, do it to the children.
12.25.2008 1:51pm
Elliot123 (mail):
"Sure, the underpinnings of this real estate bubble go way down and back in time. Bush didn't build this furnace, but he was the one who cycled the bellows onto this inferno of illegitimate, ahistorical financing, until it overheated and blew out."

What does that mean?
12.25.2008 2:12pm
LM (mail):
David Warner:

"Didn't the Democrats want social security invested in the stock market at the outset, but Republicans nixed it as socialism?"

Whoa, the DLC counts as Democrat again? Who knew? I need a scorecard to keep up with the playas.

I think we're talking about different outsets. I had 1935 in mind.
12.25.2008 3:58pm
David Warner:
LM,

Oops. I missed the outset part.

If FDR wanted to govmint to invest in equities, that would be a nice source of cognitive dissonance for your conservative friends, I can tell you that. I wouldn't recommend bringing it up around certain tribes of progressive either, if you value their friendship. Like Christ wanting to get in on with Mary Magdalene territory.

Got any links?
12.25.2008 4:14pm
juris_imprudent (mail):
eliott123 asks What does that mean?

I assume that to be a rhetorical question and you realize that what it means is the person who posted it suffers from Presidential Partisan Derangement Syndrome.
12.25.2008 5:12pm
A. Zarkov (mail):
Dana H.:

"Keep your filthy hands off my 401k (and keep your guaranteed benefit plan to yourself). Please don't tell me that I don't know what's good for me. I'm happy to assume the risk in return for the asset and the investment decisions belonging to me alone."

Dana might be an investment genius, but most people do very poorly at managing their 401k, and sometimes virtually no one survives an extreme downturn in the market. Then we get a massive number of people who don't have enough money to live on in their old age, and they come running to the government to bail them out. A retirement system must be designed for the average person, not the special case of a brilliant investor.

A wise investor avoids high management fees, but most people don't, and the mutual funds, brokers and other money managers make a fortune off the 401k system. It's a giveaway disguised as "the ownership society."

All that being said, I certainly don't advocate anything like the confiscation of people's retirement accounts. Argentina is doing that very thing right now. I'm afraid the US government might try something like that in future too. I simply think that the old defined benefits system that many people enjoyed in the past is better than offloading market risk on to individuals. About the only way to get that now is to work for a government.
12.25.2008 5:27pm
seadrive:

When Social Security needs to sell those Treasury obligations to pay the Boomers, where do you suppose Treasury will get the money?


J.D. Jennings: Taxes are not the only possible source, but your basic point is correct. The fundamental problem is that it's not possible to buy, e.g. an hour of nursing care now, and use it in the future. It's only possible to buy the promise of future care, and after all, all financial instruments are promises of one sort or another. Even if you put the dollar away for a rainy day, the dollar could be devalued before you collect.
12.25.2008 5:37pm
A. Zarkov (mail):
David Warner:

"No doubt you would, with the rest of us picking up the tab for your no-deductible health care, boats, SUV's, and golf and fishing in your mid-fifties. Yep, Progs, CEO's suck even more. Bust their union too."


That might describe something like the UAW retirement, but I'm thinking about something more like the University of California Retirement system. You must be 60 years old, and have been in the system for 30 years to retire with 75% of your salary. None of the funds come from taxpayers. The employees pay part of their salary into the system. Then the system made a lot of money through investment.
12.25.2008 6:06pm
Elliot123 (mail):
"None of the funds come from taxpayers. The employees pay part of their salary into the system. Then the system made a lot of money through investment."

What perentage of an employee's pay goes into the fund?
12.25.2008 6:43pm
LM (mail):
DW,

The issue that sparked the loudest protest was one that still burns today: the trust fund. Deductions from pay envelopes began in 1937, but benefits weren't scheduled to start until 1942, and there was a great deal of mistrust about where the money was going. Government actuaries sheepishly explained that Social Security was building a reserve eventually expected to reach $47 billion. This was an awesome sum -- eight times the total then in circulation. Alfred Landon, the Republican who ran against Roosevelt in 1936, called it ''a cruel hoax'' on the American people. His platform, sounding uncannily that like that of Republicans today, stated, ''The so-called reserve fund . . . is no reserve at all, because the fund will contain nothing but the government's promise to pay.'' Arthur Altmeyer, head of the Social Security board, came under heavy fire at a Congressional hearing. Looking for a way to safeguard the reserve, he made an intriguing suggestion: why not let the government invest in sound private securities, and thus insulate the surplus from Congress's eager hands? As Altmeyer recounted in his memoir, Arthur Vandenberg, a Republican senator from Michigan, threw up his hands and snickered, ''That would be socialism!''
12.25.2008 6:51pm
LM (mail):
DW,

At the outset there were also supposed to be voluntary contributory annuities, but those were shot down by the insurance industry.
12.25.2008 7:30pm
Aleks:
Re: It's a hope that they will and they may well decide that they're not going to give 30% of their income to old people.

Those old people are their own parents and grandparents-- who they would have to take into their own homes and support directly, often costing a lot more than FICA taxes, which by the way are only c. 15%. People will continue to support Social Security indefinitely for that very reason.

Re: there would follow a bombardment of offers of refis and/or HELOCS, all of which, of course, are recourse paper.

Technically they are recourse, yes. But as a wholly practical matter 2nd lien mortgages are NOT secured at all, certainly not in this environment where the house is no longer worth enough to even cover the first lien. We have a boatload of bad HELOCs and the like on our books where I work. The chances of recouping anything from them range from slim to dismal. From time to time we bundle up a bunch and sell them to the debt collection agencies for mere pennies on the dollar. Classic "blood from a stone" situation.

Re: Why didn't they buy closer in? Why didn't they buy an hold house in the city and rehab it?

Too many Black people, immigrants and low income white people live closer in-- and in the city itself. The modern parent must be certain that the kiddies do not rub elbows with rif-raf (of any race) at school. Everyone knows that associating with children of a lower social class will doom a child's chances of getting into any truly good (equals: no rif-raf) college. So they build and buy way out in Snob Gardens.

Re: The funds realized from the payroll taxes are used to purchase treasury obligations.

Which are absolutely worthless, which is why investors are flocking to them now that every other financial asset is in the crapper too.
12.25.2008 8:47pm
A. Zarkov (mail):
Elliot:

"What perentage of an employee's pay goes into the fund?"

In the early 1970s it was 7.1%, and no FICA. Starting in 1976 new employees were required to coordinate with Social Security. In 1989 the deduction went to zero because the portfolio returns were sufficient to cover obligations. I'm not sure if there is any deduction today. If there is, it came in recently. Thus people employed before 1976 had a great deal. No FICA and no deductions period 1989-2007 (?).
12.25.2008 8:59pm
Dick King:



And Social Security as currently operating is not a Ponzi scheme because...?




The school tax in your community as currently operating is not a Ponzi scheme because...?


Because the school tax is collected for a purpose [running the schools next year] and that, by and large, is when and where it's spent. When a thirtysomething "invests" in social security, he is given a statement to the effect that he has an "account" with the Social Security Administration that has a certain amount of funds in it and that he will receive a return on when he reaches 66 or whatever ... but the money is used to make payments to current "account holders". Quintessential Ponzi.

-dk
12.25.2008 9:09pm
tsotha:
The school tax in your community as currently operating is not a Ponzi scheme because...?

As DK pointed out that's not a very compelling argument. The basic problem with SSI is the government is incurring a debt when it deducts money from your paycheck, but there's no provision to service that debt beyond the hope Congress will be willing and able to keep the system funded to an adequate level. Payment of a school tax doesn't imply repayment at some later date.

I don't know why people think defined payment plans are any safer than 401k plans. When the Soviet Union collapsed millions of pensioners were left high and dry as the government ran out of money. I don't know if the government actually had some kind of sham accounting like ours does, but those people, too old to work, had been led to believe they would receive a pension large enough to live on. Surely the events of this year are enough to shake the certainty people have about availability of taxpayer funds for their own retirement?
12.25.2008 9:48pm
AST (mail):
Why do we always let the media get us into these p_ssing contests about who's fault this or that fiasco was? The truth is that it's always our own fault for allowing this idiocy to become successful politics in the first place. We float or sink together, so maybe it was meant to be. Prosperity begets a sentimental concern for the "underprivileged." The best remedy is probably a good therapeutic depression, to remind us all that we're responsible for our own survival.

Merry Christmas, all!
12.25.2008 11:01pm
ravenshrike:
LM,

Given that the 74th Congress was a very solid and filibuster-proof Dem majority it would seem that had that been a real concern the Dems could easily have passed it.
12.26.2008 12:22am
LM (mail):
Who said it was a "concern?" I said it was Democrats who brought it up, and Republicans who shot it down, as it happens with red-baiting. Filibuster-proof doesn't mean demagoguery-proof.
12.26.2008 1:12am
A. Zarkov (mail):
tsotha:

"I don't know why people think defined payment plans are any safer than 401k plans."


You are confusing market risk with default risk. Holders of 401k plans must bear market risk as well as default risk, unless they elect something as safe a Treasury Bonds. The problem with the latter is government paper can have a really low and sometimes even negative real rate of return.

If one is unlucky enough to have to retire during a protracted bear market, then you might not have enough money to live on. This does happen. The market was essentially flat or declining from 1933-1954, and 1968-1982. Today we might very well be facing just such a bear market, and current holders of 401k plans could be SOL unless they are astute enough to maneuver around the downturns.

On the other hand, people with defined benefit plans get a steady income regardless of what the market is doing. That's a big difference and a tremendous benefit. But they do face default risk unless they are in a secure government plan. But even then they can rely on ERISA to cover at least part of their benefits.

All that being said, almost everyone could suffer in a true financial Armageddon. Hyper inflation could make all pension plans worthless, unless they are fully indexed. A super economic contraction could force all plans including the Pension Benefit Guarantee Corporation into insolvency. We could be facing that now. But the fact remains, defined benefit plans are mush less risky overall.
12.26.2008 5:23am
A. Zarkov (mail):
Social Security as a Ponzi Scheme.

The SS retirement system fits the classic definition of a Ponzi Scheme. Nathan Keyfitz, professor of mathematical demography at Harvard and consultant to SS used exactly that term in an article appearing in the Public Interest Magazine in the late 1970s. He correctly predicted that SS would run out of money in the early 1980s and it did. It was rescued by a big hike in FICA. The Trust Fund holds special-issue, non-tradable Treasury Bonds. In effect it has lent money to the Treasury and Treasury spent it. Thus Treasury has to hike taxes or use printed money to pay back the loan to the Trust Fund. It's true that the Trust Fund has a legal claim on Treasury, so the claim on tax revenue is much strong than an entitlement or a moral promise. But we all know that SS is the third-rail of American politics, so legal-claim versus entitlement is a distinction with little difference.
12.26.2008 5:35am
Yankev (mail):
Another reason for home ownership -- fewer apartment units suitable for middle income families. I have not seen any statistics, but it seems that after the second world war, fewer and fewer rental units were built. Many of those built after the 1960s were aimed at senior citizens or at young single adults. Many older apartment units were converted into condos in the 1970s and early 1980s. In many post-war neighborhoods, no rental housing is available, unless you can find a single family house whose owners have despaired (at least temporarily) of selling. If you want to be in a given neighborhood whether for the public schools, proximity to your job or to public transporation or an Orthodox synagogue, rental housing may not be an option.
12.26.2008 8:57am
jukeboxgrad (mail):
jennings:

When Social Security needs to sell those Treasury obligations to pay the Boomers, where do you suppose Treasury will get the money?


One answer is that Treasury will get it the same place it now gets money: China.

You're basically saying that investing in Treasuries (what the SS system does) is the equivalent of investing in a Ponzi scheme. At the same time, the money to run our wars and keep our economy afloat is coming largely from Chinese bankers who are willing to invest in Treasuries. So I think we have to pray that they don't start thinking like you. When they do, the SS system is not the only thing that's going to collapse.

The SS system has to do something with its temporary surplus. Hold it in cash? Gold coins? CDOs? Government bonds seem to be a reasonable choice. Especially since it was Republicans who claimed it would be "socialism" to invest it in private securities. Which is pretty ironic, since our current GOP administration adopted a policy of nationalizing banks.

zarkov:

The Trust Fund holds special-issue, non-tradable Treasury Bonds. In effect it has lent money to the Treasury and Treasury spent it.


The fact that the government has overspent, and is in debt, is not the fault of the SS system (or of anyone else who has loaned money to the Treasury, including those Chinese bankers). It is the fault of administrations that have adopted the policy of borrow-and-spend (and they sell that as "tax cuts" even though it's not; it's simply a way of shifting the tax burden from ourselves to our kids; this strategy is politically astute since kids don't vote). And those administrations have mostly been Republican:

since 1776, we have racked up a cumulative deficit — the national debt — of nearly $10 trillion . . . and fully three-quarters of that was racked up under just 3 of our 43 presidents: Reagan, Bush, and Bush.


It was Cheney who said "deficits don't matter." Which is true in a way, since they don't matter much to people who are already old. In this context it's interesting to notice that support for Obama was very highly correlated with age (inversely, of course). It's possible that young people are figuring out that they've been getting screwed, and how, and by whom.

The GOP stopped being the party of fiscal responsibility a long time ago.

warner:

The legacy of the Boomers: breaking the American tradition of sacrifice for the good of one's children


Correct.
12.26.2008 9:13am
Fury:
jukeboxgrad:

"The fact that the government has overspent, and is in debt, is not the fault of the SS system (or of anyone else who has loaned money to the Treasury, including those Chinese bankers). It is the fault of administrations that have adopted the policy of borrow-and-spend (and they sell that as "tax cuts" even though it's not; it's simply a way of shifting the tax burden from ourselves to our kids; this strategy is politically astute since kids don't vote). And those administrations have mostly been Republican:"

An accurate, but incomplete statement. Congress is an active player in this process and there has been bipartisan culpability in the policy of borrow and spend. Regardless of what either party says or either branch says, the results speak for themselves.
12.26.2008 10:01am
A. Zarkov (mail):
jukeboxgrad:

"The fact that the government has overspent, and is in debt, is not the fault of the SS system (or of anyone else who has loaned money to the Treasury,..."

There is nothing new about Treasury spending the money it gets when it sells bonds to the SS Trust Fund, or anyone else for that matter. It has always done that; it's supposed to do that. The problem lies in the Trust Fund having switched to special issue non-tradable bonds. The Trust Fund should be buying tradable securites in the open market, the same way other pensions funds do, like The University of California Retirement System. The reason for this set up is to lower the price of Treasury Bonds. Remember supply and demand? If the Trust Fund buys elsewhere then Treasury would get lower bids for its paper in open market auctions.

As to the root cause of all this, you're right, it all stems from excessive federal spending, and the failure to raise taxes. Both both parties know support for social and other programs would falter if the public actually had to pay for them today. But this behavior is hardly limited to Republicans. LBJ did the same thing. Only he relied more on printed money which caused the great stagflation the US suffered in the 1970s. Obama will do the same thing. It's better to have merchants raise their prices, then to raise taxes. This way the merchants take the heat. People didn't blame LBJ for those raising prices.
12.26.2008 10:06am
David Warner:
Zark,

"That might describe something like the UAW retirement, but I'm thinking about something more like the University of California Retirement system. You must be 60 years old, and have been in the system for 30 years to retire with 75% of your salary. None of the funds come from taxpayers. The employees pay part of their salary into the system. Then the system made a lot of money through investment."

And the Marx lay down with the Friedman. Isaiah would approve.
12.26.2008 10:58am
tsotha:
On the other hand, people with defined benefit plans get a steady income regardless of what the market is doing.

That, I think, is largely an illusory distinction. I believe what we'll see over the next year or so is California's defined benefit plans "redefined" as cities and counties go bankrupt. The California Public Employee Retirement System is an excellent case study for the risks of such plans: The money was invested in the market, and during the good years the plan made so much money contributions were no longer needed. On the contrary, the plan seemed to be funded well enough that benefits were increased without increased contribution.

But CALPERS lost something like 30% of its asset value this year, and in order to keep the system funded the entities involved (cities, counties, and the state. UC?) will be required to provide extra money. This while they've seen their own revenue drop 30%. I do not believe most cities will be able to meet all their state and federal mandates, while at the same time providing extra money to CALPERS.

From what I can see there are a whole lot of cities in California which relied on an "auto mall" to pay the bills. Unless the car companies recover rather quickly, which seems unlikely at this point, financial Armageddon for public retirees is already here.
12.26.2008 11:55am
Elliot123 (mail):
"The legacy of the Boomers: breaking the American tradition of sacrifice for the good of one's children"

The trend appears to have been adopted by their children, too.
12.26.2008 12:53pm
A. Zarkov (mail):
tsotha:

"That, I think, is largely an illusory distinction. I believe what we'll see over the next year or so is California's defined benefit plans "redefined" as cities and counties go bankrupt."

I never said that government funded pension plans such as UCRS and CALPERS were perfectly safe, just safer than the average self-directed 401(k) plan. It only takes a protracted market downturn to ruin your 401(k) retirement plans, but it takes a real financial Armageddon to take down you UCRS retirement. A market like 1968-1982 didn't drive UCRS or CALPERS into bankruptcy did it? If UCRS can't meet current obligations from the return on its portfolio, then it can always return to the kind of salary deductions in place before 1989. UCRS and CALPERS retirees have a legal right to their defined benefits and the systems would have to go into bankruptcy to abrogate those obligations. That's a big step with many consequences.

The inflation threat is a bigger danger than default to UCRS and CALPERS. The feds can always print money to bail out the states and I suspect it will do just that if needed. The Federal Reserve has just doubled the base money supply in the space of a few weeks. It's also brought junk into its portfolio increasing the assets in its account by a factor of 80. All this shows that the gloves are off in fighting liquidation.
12.26.2008 1:18pm
Elliot123 (mail):
Maybe Obama's card check idea is the solution to all of this?
12.26.2008 1:58pm
tsotha:
The inflation threat is a bigger danger than default to UCRS and CALPERS. The feds can always print money to bail out the states and I suspect it will do just that if needed. The Federal Reserve has just doubled the base money supply in the space of a few weeks.

Yes, based on the M1 base money charts I expect we're in for some very high inflation when banks start lending again. But aren't benefits inflation indexed? I don't understand why inflation would be a bigger threat unless a decision is made to index at a lower rate.

I'm still not convinced these kinds of plans are safer. If you had your money in a 401k plan throughout your working years a bear market is reducing gains you made in a bull market. Assuming you have a 30 year career you would have built up assets sufficient to cover the bear market. You might be unhappy at having less money than you expected, but I'm not sure you'd have less than the defined benefit plan.

And prolonged bear markets coincide with times of both decreased tax revenue and a decreased number of contributors. Those kinds of situations result in political compromises in which "everybody takes a haircut". In previous recessions did payments keep up with inflation, or did they reduce pensions though inflation? My father has an Air Force retirement. They index for annual inflation every 15 months, so every year his pension is worth a bit less than the last year (it's worked out to about a 2% annual decrease).

For me health care is the big elephant in this discussion. A defined benefit plan that includes health care is the only way I can see retiring before I'm eligible for medicare, since there's really no upper bound on medical costs. I'm not sure retirement plans are the place to attack that problem, though. Retiree health care is a major reason the auto companies are in trouble now.
12.26.2008 2:51pm
gran habano:

Sure, the underpinnings of this real estate bubble go way down and back in time. Bush didn't build this furnace, but he was the one who cycled the bellows onto this inferno of illegitimate, ahistorical financing, until it overheated and blew out.


Elliott123,

What does this mean? Well, as a following poster suggested, I take yours to be a rhetorical question (although as I'm a 2-time Bush voter, he's incorrect that my observations have any partisan derangement associated).

In any event, my comments are straightforward. Do you have a specific question?
12.26.2008 3:00pm
Elliot123 (mail):

"Bush didn't build this furnace, but he was the one who cycled the bellows onto this inferno of illegitimate, ahistorical financing, until it overheated and blew out."

What exactly does "cycling the bellows onto this inferno " mean?
12.26.2008 4:30pm
David Warner:
tsotha,

"there's really no upper bound on medical costs"

There's always an upper bound. I think we may have already passed it.
12.26.2008 5:07pm
jukeboxgrad (mail):
fury:

there has been bipartisan culpability in the policy of borrow and spend


Both parties have contributed to the "borrow and spend" problem, but one party has contributed more. Ironically, it's the party that makes an especially great pretense of being fiscally responsible. Fool me once etc.

A president (like GWB) who has a hard time spelling "veto" is in a poor position to blame his profligacy on the other party. Especially since his party held congress for most of his term. When Bush took office, the national debt was $5.7 trillion. Now it's $10.6 trillion. Heckuva job. It's amazing what can be accomplished with tax 'cuts.'

zarkov:

this behavior is hardly limited to Republicans


It would be nice if we had a two-party system.
12.26.2008 6:09pm
jukeboxgrad (mail):
elliott:

The trend appears to have been adopted by their children, too.


Mostly not. Voters under 30 picked Obama, 66%/32% (only two other demographic factors were substantially stronger predictors: being black or being Jewish).

The GOP needs to pray for the longevity of its aging base.
12.26.2008 6:23pm
gran habano:
Elliot123,

Combustion reactions require fuel and oxygen. One can increase the magnitude of a combustion reaction by increasing the inflow of those 2 inputs.

In an older style forging process, or blast furnace, a "bellows" was used to mechanically pump air into the combustion process. Of course, there will always be an upper limit, beyond which an excess of fuel and oxygen will overload the combustion process within the forge/furnace, destroying it.

The imagery I was using was of Bush pumping on a bellows, pouring oxygen into an overloaded furnace, watching the temperature gauges spike into the red zone, and frantically continuing on this doomed course.

He didn't build the furnace, but he definitely operated it out of spec., overloaded it, and blew out the refractory.
12.26.2008 7:00pm
Elliot123 (mail):
"He didn't build the furnace, but he definitely operated it out of spec., overloaded it, and blew out the refractory."

Can you tell us exactly what he did?
12.26.2008 7:16pm
Elliot123 (mail):
"Mostly not. Voters under 30 picked Obama, 66%/32% (only two other demographic factors were substantially stronger predictors: being black or being Jewish)."

What does that have t do with sacrificing for one's children?
12.26.2008 7:18pm
A. Zarkov (mail):
tsotha:

"I'm still not convinced these kinds of plans are safer. If you had your money in a 401k plan throughout your working years a bear market is reducing gains you made in a bull market."

A bear market can do more than reduce gains. It can wipe out a big piece of your portfolio. Then in retirement, you have two forces eating away at your capital. The bear market and your withdrawals.

Let's do an example. Suppose you retire with a $1 million 401(k) and you decide to take out a constant $70k each year, and the market declines by 5% per year. When do you run out of money? Answer: in 11 years. Suppose the market declines by only 2% per year. In this case you run out of money in 12.5 years. Suppose you take out only $50k per year and the market declines by 2%. Then you run out of money in 16.5 years. This example is a little unrealistic in that bear markets don't decline at a steady rate. They have really bad years and a lot of poor years. This situation is even worse because a single bad year will shorten the lifetime of the portfolio even if the average is decline is only 2%. Thus we see that even a $1 million 401(k), does not give protection for a bear market.

In contrast someone retiring on a salary of $100k at age 60 with 25 years of experience will get a fixed $75k per year income regardless of what the market does. I would much rather have the UCRS annuity than a 401(k).

You can do your own calculations. Solve the difference equation y(k+1)= y(k)- r y(k) - c. Where r= rate of market decline and c= constant withdrawal. This will give you an idea of just how fragile a 401(k) is bad times. We are in bad times. Someone with a $2 million 401(k) in 2007 could easily have only a $1 million in 2008. That $2 million would have lasted 18.5 years (r= .02, c= 50k), so you see how much affect a really bad year can have.
12.26.2008 7:54pm
jukeboxgrad (mail):
elliot:

What does that have t do with sacrificing for one's children?


Maybe you should start at the beginning and tell us what you meant here. And if you have a point, and if you can manage to find a non-oblique way of telling us what it is, hopefully you'll then show some proof to support it.
12.26.2008 8:09pm
Elliot123 (mail):
Warner: "The legacy of the Boomers: breaking the American tradition of sacrifice for the good of one's children, all so they could die before they got old and/or responsible."

Elliot: "The trend appears to have been adopted by their children, too."

Jukebox: "Mostly not. Voters under 30 picked Obama, 66%/32% (only two other demographic factors were substantially stronger predictors: being black or being Jewish).

Elliot: "What does that have t do with sacrificing for one's children?"

Jukebox: "Maybe you should start at the beginning and tell us what you meant here. And if you have a point, and if you can manage to find a non-oblique way of telling us what it is, hopefully you'll then show some proof to support it.
12.26.2008 8:55pm
jukeboxgrad (mail):
We already know all the words that already appear in the thread. What we don't know is what you meant when you said "the trend appears to have been adopted by their children." But you're doing a good job of letting us know that you don't want to let us know.
12.26.2008 11:15pm
darrenm:

Any thoughts on whether privitizing the social security system by putting funds into the stock market would have been a good idea when it was proposed a few years ago?


The performance of the stock market in the very short term is rather irrelevant with regard to this proposal. No one was proposing 60-year old soon-to-be retiress put their money in the stock market. The main thrust was for younger workers, who have decades to go before retirement, to place a portion of what they would otherwise be paying into FICA into a private account. I'm not sure how much control they would actually have had over it. You might have seen some kind of formula where the closer you were to retirement, the less weighted toward stocks and more weighted toward bonds and money markets you'd be. There are mutual funds that are set up to do this now. You get to 55 and most of that money would be in bonds and money markets anyway. Instead of losing 40% in this lates crash, you might have lost 10% at most. In short, we won't know for another couple of decades if this would have been a good idea a few years ago. The DOW hit 14,000. It will be interesting to see how long it takes to get there again, preferably without relying on inflation.
12.27.2008 1:48am
jukeboxgrad (mail):
I'm not sure how much control they would actually have had over it.


Bush never offered a complete, specific proposal, but statements by him and his people indicated that it would be up to the individual to decide on the stock/bond weighting:

…under the President's proposal for personal accounts … [t]he available investment options would be small in number, and very simple. There would be basic corporate bond funds, government bond funds, and broadly diversified stock funds. Participants wouldn't be selecting individual stocks or sectors of the market. The President's accounts are designed so that all eligible workers can have safe, simple opportunities to receive the benefits of long-term investing, without requiring any special knowledge of financial markets. … The President's proposal would make available a "life cycle" fund that would automatically reduce the share of one's investment in the stock market as one nears retirement.


These various choices would be "available," not imposed or mandated. So people who entered 2008 with excess faith in stocks (given their own retirement situation) would have been just as screwed as they currently are. Because Bush's "personal accounts" would be essentially self-directed (even though you're not picking individual stocks).
12.27.2008 7:31am
Fury:
jukeboxgrad:

Both parties have contributed to the "borrow and spend" problem, but one party has contributed more. Ironically, it's the party that makes an especially great pretense of being fiscally responsible. Fool me once etc

There's no doubt that Republican elected officials have lost their way fiscally and until that changes, there will continue to be less and less of them in elected office. Frankly, I'm not hopeful that either party as currently constituted has the ability to make the tough decisions required to assist in as efficient an economic recovery as possible. This is in part due to each party trying to play "Gotcha!" in regards to the sub-prime mortgage mess, automakers bailout, etc. But that is the way of politics, so on it goes...
12.27.2008 7:33am
gran habano:
Elliot123,

You ask: "What did Bush do?"

I suspect that you already know what Bush did, and didn't do. If not, you're not faithfully participating in this discussion, either that or you're being obtuse, which is equally unfaithful.

But let's test.

Are you or are you not aware that Bush pushed hard for home ownership by those unqualified for historical mortgage terms?

And are you or are you not aware that Bush pushed for legislation that provided ahistorical financing for those unqualified borrowers?

And are you or are you not aware that these loose money policies can (did?) contribute to the real estate bubble that's recently burst? (more money chasing limited resources... what is the likely result?)

Are you aware that the burst bubble leaves holders of this ahistorical financing upside down on their mortgages? (which were at risk even before the burst)

Are you aware that sale values spiked well above rental values over a year ago, a sure indicator of a soon to burst bubble?

Are you aware that like candidate McCain (the fundamentals are strong), Bush refused to take corrective action, but rather kept his hand pumping the bellows of this overheated furnace, until it blew out?

Bush lauded Raines' work. He welcomed it, and made no effort to temper. He pushed for "compassionate capitalism", to get the private banks to jump hard into these illegitimate loans, and investment instruments generated by same. Those transactions and companies required a much harder look than they got.

It's both what he did... and what he didn't do.

And now? Homeowner rates are at about historical levels, or soon will be. Ownership is at equilibrium, but economically speaking, how's that working for you, all around?
12.27.2008 10:35am
gran habano:
And remember, E123, the Executive bears unique responsibility here. Sure, the congresscritters created and fostered this situation over time. Sure, they built this furnace, but the Executive administers and operates it, and is the first responder when the system goes awry.

Much like the Iraq war, which the congresscritters voted for overwhelmingly, it is the Executive that must lead on critical decisions, and will be blamed upon failures, as the Congress heads for the tall grass. Not fair, perhaps, but life ain't fair.

Bush failed here... bigtime.
12.27.2008 10:54am
Elliot123 (mail):
"Are you or are you not aware that Bush pushed hard for home ownership by those unqualified for historical mortgage terms?"

What did he do?

"And are you or are you not aware that Bush pushed for legislation that provided ahistorical financing for those unqualified borrowers?"

What legislation?
12.27.2008 12:17pm
Elliot123 (mail):
"Bush lauded Raines' work. He welcomed it, and made no effort to temper."

Bush sent legislation to Congress to curtail Fannie Mae. It passed out of committee on a strict party line vote. It was blocked on the floor of the Senate by democrats.

McCain did the same. Hagel was the chief sponsor, joined by Sunnunu, Dole, and McCain.
12.27.2008 12:21pm
Dan Weber (www):
A. Zarkov said:
The "ownership society" is a way of off loading risk onto individuals. You own your 401k (what's left of it), but you would be better off with a defined benefits retirement plan, where the plan "owns" the market risk.
Is it better for your employer to pay you in gold or in silver?

The naive answer would be "gold, because it's worth more," but of course what would happen is that you would be given the exact same value in gold. Part of assumption of "it's better to get paid in gold" is that the employer will pay you an equal weight.

"$70,000 a year in guaranteed benefits" sure does beat "$70,000 a year in non-guaranteed benefits," but that's not the choice. There is no free lunch, and the payouts from the defined benefit plan will be smaller.

Of course there are people who don't want that risk, and they have the total freedom to buy an immediate annuity. One million dollars on the open market would buy a 60-year-old man in New York $78,000 a year for the rest of his life. And it gets to be his choice, too. (And immediate annuities are backed by insurance companies who are very well placed to transfer risk, since someplace else they are making bets for decreased death rates.)
12.27.2008 12:24pm
gran habano:
E123,

Based upon the above test, and your follow-on obtuse questions, you do appear to be unfaithful to the discussion. I'll leave you be.
12.27.2008 12:32pm
Andy Freeman (mail):
> When you have to drive five miles just for a quart of milk

What are you babbling about? Suburbs have grocery stores and they're not 5 miles away.

Moreover, the urban stores within reasonable walking distance are significantly more expensive than the gas to get to real grocery stores.
12.27.2008 1:21pm
Dan Weber (www):
Back to the "ownership society," there are lots of people in this country who have no ownership of anything. Helping these people to have ownership gives them a stake. This is sometimes called the stakeholder society. Lots of people who previous had no stake in society now will.

I'm not sure that the "$80,000 gift" thing at the above link is a good idea, but recent events make me think something like it should be tried. In the past year the government mailed out "rebate checks" to everyone in the hopes that they would be spent. (Lots of people saved them or paid down debt.) Why not, when times are good, do the same thing, except with the implicit and explicit expectation that the money should be saved?

So have the government just set up a $1000 IRA for every person in the country. I'm sure that Vanguard or Fidelity would love to get another ten million IRAs under their belt so we'll find someone willing to accept the money in return for no-fee IRAs (although the IRAs might be very limited, say only offering a few index funds and only usable with telephone/computer interfaces).

There might be other things that are better for fostering ownership -- giving the poor access to no-cost savings and checking accounts, for example, might be resources better spent. But the idea of giving more people more of a financial stake is worth pursuing.
12.27.2008 1:30pm
Andy Freeman (mail):
> [examples showing that $1M doesn't necessarily last very long.]

> In contrast someone retiring on a salary of $100k at age 60 with 25 years of experience will get a fixed $75k per year income regardless of what the market does. I would much rather have the UCRS annuity than a 401(k).

Not so fast. Who pays for said pension and how much?

The amount of money required to provide $75k/year does not depend on the name of the financial instrument used to provide it. It depends solely on the amount of savings, its timing, and how that savings is used before payout.

Also, folks who want a "pension" (relatively safe and low bankruptcy risk) can buy T-bills with their 401(k) money. On average, they'll be worse off than folks who make other choices, but that's the price that someone has to pay for the situations where they're better off.
12.27.2008 1:33pm
A. Zarkov (mail):
Andy Freeman:

"Not so fast. Who pays for said pension and how much?"


Here I'm talking about the UCRS pension system. The benefits come from the returns on the UCRS portfolio and salary deductions. Unlike SS, it's not a strict pay-as-go system; in other words it's not a Ponzi Scheme. As a large investor, UCRS enjoys many advantages over the small retail investor. With a large capital base it can ride out market volatility. It can avoid the huge transaction costs that clobber the small investor. But fundamentally as I said before, it's better able to deal with market risk than the 401(k) holder.

UCRS retirees can elect either a lump sum buy out, or the fixed annuity. To make this decision one has to compare holding the present value of the annuity in an IRA against future payment stream. It's pretty much a no-brainier. Take the annuity. Take the annuity. It was not so obvious in the go-go days of the the late 1990s, but it is now.

The "ownership society" is a fraud on the American worker who is much better off with the old defined benefits system. I shudder to think of what's going to happen to all those retirees who are going to outlive their pensions.

My comments apply to the average small investor who is not very good at it. Of course we are now staring down the gun-barrel of hyper inflation which will destroy everything. This is a whole other thread.
12.27.2008 2:13pm
David Warner:
Zark,

"The "ownership society" is a fraud on the American worker who is much better off with the old defined benefits system. I shudder to think of what's going to happen to all those retirees who are going to outlive their pensions.

My comments apply to the average small investor who is not very good at it. Of course we are now staring down the gun-barrel of hyper inflation which will destroy everything. This is a whole other thread."

And you see no connection between the hyper-inflation and those phoney-baloney defined-benefit plans? There is no Risk Fairy. Too big to fail just means turning small-time risk into catastrophic risk. It's like a gambler who keeps doubling his bet thinking he can never lose.

Defined benefit plus the implicit backing of the taxing authority turns adversarial bargaining into a sham, where the true adversaries consist of the tag-team of the union and short-term focused management/politicians on one hand and the poor sap future generation taxpayers on the other.
12.27.2008 2:33pm
A. Zarkov (mail):
David Warner:

"And you see no connection between the hyper-inflation and those phoney-baloney defined-benefit plans?"


Which defined benefit plans are you talking about? Do you think the UCRS is phoney-baloney?

"Too big to fail just means turning small-time risk into catastrophic risk. It's like a gambler who keeps doubling his bet thinking he can never lose."


Are you asserting that the UCRS has a greater probability of running out of money than a small investor? Gambler's fallacy is not the appropriate model. Look at the gambler's ruin model. The larger the capital base the smaller the ruin probability. Of course the game must have positive expectation, which is normally the case, because the US GDP increases except for recessions. Another point. You don't "double down" because you will almost surely go to ruin with that strategy. The right way to do it is with the Kelly Criterion, which tells you what fraction of your capital to bet on each trial.

Hyper inflation is another matter. This is a government policy problem. This is the way the unmanageable US public and private debt is going to get repudiated without going into a declared default. A word to the wise. Get your financial assets out of dollars.
12.27.2008 2:57pm
Elliot123 (mail):
"Are you asserting that the UCRS has a greater probability of running out of money than a small investor?"

It all depends on the monthly payout obligation. A plan with a single beneficiary has a given monthly drawdown. A plan with a million beneficiaries has a given monthly drawdown. Account balance itself tells us nothing.

Running out of money all depends on the relationship between account balance and drawdown, not the size of either as an independent variable.
12.27.2008 5:06pm
Andy Freeman (mail):
> As a large investor, UCRS enjoys many advantages over the small retail investor. With a large capital base it can ride out market volatility. It can avoid the huge transaction costs that clobber the small investor.

Zero load mutual funds exist and the large ones have minute transaction costs.

UCRS is allowed to make some investments (VC and hedge funds) that aren't available to small retail investors but mentioning that wouldn't support the story so .....

> But fundamentally as I said before, it's better able to deal with market risk than the 401(k) holder.

The claim has been made, but without supporting evidence. Instead, we have facts that the payout supported by $1M depends on market performance. However, as I pointed out, that's true regardless of the name of the financial system doing the payout.

If UCRS is able to maintain a given payout in a down market, it could maintain a larger payout in an up market. If it won't actually make that payout in an up market, isn't it fair to ask where that money would have gone?

The only way to make a pension fund work is effectively write insurance. Curiously enough, this is where the skimming occurs.

However, as I pointed out, anyone who wants risk free can get it, even in a 401(k).
12.27.2008 6:14pm
David Warner:
Zark,

What I'm saying is that unfunded defined benefit backed by taxing authority in effect repeals limited liability and would inevitably lead us into bankruptcy/Chinese receivership. We may already be well on the way...

As for CALPERS, it strikes me as among the healthiest of the wide variety of plans. UAW/Cal municipalities, not so much.
12.27.2008 7:29pm
jukeboxgrad (mail):
elliot:

Are you or are you not aware that Bush pushed hard for home ownership by those unqualified for historical mortgage terms?


What did he do?


Here's one answer: on 10/15/02, he hosted a Conference on Minority Homeownership, where he delivered a speech promoting the "ownership society," and "pushed hard for home ownership by those unqualified for historical mortgage terms."

You already know this, because that speech was already cited in this thread. But it's just like you to pretend that the question you're asking hasn't already been answered.

gran:

Based upon the above test, and your follow-on obtuse questions, you [elliot] do appear to be unfaithful to the discussion


elliot is highly reliable. He regularly proves what you have noticed about him.
12.27.2008 7:42pm
Bruce Hayden (mail) (www):
What I don't get about public employee retirement plans, such as the ones that Zarkov is apparently talking about is what happens when benefits exceed inflows, AND the governments whose employees are to benefit from them cannot afford to pay the difference. The assumption always seems to be that the governments involved will somehow have to find a way to pay the difference. But I am not sure how this would work. At some point, I would think that the taxpayers having to fund the difference would revolt, and simply refuse to make it up.

This seems to be somewhat of a potential problem for any number of government employee retirement programs right now, where benefits got hiked due to the long bull market and flush tax receipts, but then some of them started speculating in more questionable investments in order to keep their returns up - and some of those (including packaged subprime loans) have already gone south.

I do expect that some public employee pension plans are going to suffer for similar reasons that the UAW pension plan might, absent the U.S. taxpayers bailing out the Big 3 automakers. Retiring after 30 years of work, and then living for another 40 on a large portion of their indexed indexed last (read highest) salary make no actuarial sense. Those retiring under such a system would seem to inevitably put in (or their employer puts in for them) far less than they ultimately get out, after taking inflation and compounding into account.
12.27.2008 8:15pm
Bruce Hayden (mail) (www):
Jukebox seems to be arguing that Bush 43 is uniquely responsible for the subprime mess because back in 2002 he was still in favor of expanding home ownership, and that somehow the executive (meaning GW Bush, and apparently not WJ Clinton) has some unique responsibility here in comparison with Congress. As far as I can figure out, his explanation for all this is that Mr. Bush is apparently insanely evil, or some such thing. This is the apparent explanation why Congress has little culpability, despite its Democratic leadership actively and successfully opposing attempts by Mr. Bush (and Sen. McCain) to regulate Fannie Mae and Fredie Mac starting three or four years ago. And, the fact that Congress, not the President, initiates and passes the laws in this country that encouraged these excesses. Apparently, that is of little importance though, when compared to Mr. Bush's apparent inherent either ineptness or evilness, as apparently evidenced by the fact that all of our telephone conversations since 9/11 have been intercepted by the NSA and thousands of POWs have been tortured (almost) to death at Gitmo and Abu Ghraib, etc. (including, apparently, the three who were waterboarded).
12.27.2008 8:30pm
Elliot123 (mail):
"Here's one answer: on 10/15/02, he hosted a Conference on Minority Homeownership, where he delivered a speech promoting the "ownership society," and "pushed hard for home ownership by those unqualified for historical mortgage terms."

What was the result of that speech? He also gave speeches about privatising social security. Does that man SS is private now?
12.27.2008 10:21pm
jukeboxgrad (mail):
hayden:

Jukebox seems to be arguing that Bush 43 is uniquely responsible for the subprime mess because back in 2002 he was still in favor of expanding home ownership


It's hard to find a sentence in your comment that doesn't rely on some kind of straw-man argument. I didn't say anything like "uniquely responsible." And it's disingenuous (or maybe just ignorant) for you to imply that after 2002, Bush was no longer "in favor of expanding home ownership." I showed the 2002 examples because Posner incorrectly suggested that Bush didn't start using his "ownership society" slogan until 2003. And examples can be found in every year since 2002. Including this year:

I believe the ownership society is necessary for a hopeful America. We want people owning their homes.


Also this year:

We believe in an ownership society for Americans from all walks of life.


Also this year:

throughout this administration we've been promoting the ownership society


And I don't think we had a "National Homeownership Month" in 2008, but we don't have to go back to 2002 to find one. Bush issued this proclamation in 2006:

National Homeownership Month … A Proclamation by the President of the United States of America

Owning a home is an important part of the American dream. During National Homeownership Month, we raise awareness of homeownership and encourage more Americans to consider the benefits of owning their own home.

Nearly 70 percent of Americans enjoy the satisfaction of owning their own home, and my Administration continues to promote an ownership society where the promise of America reaches all our citizens. The American Dream Downpayment Act of 2003 is helping thousands of low to moderate income and minority families with downpayment and closing costs, which represent the greatest barrier to homeownership. Since 2002, when I announced our goal to help 5.5 million minorities become homeowners by the end of this decade, the rate of minority homeownership has climbed above 50 percent, and more than 2.5 million minority families have become new homeowners. My Administration will continue to provide counseling and assistance for new homebuyers and expand homeownership opportunities for all Americans.

During National Homeownership Month and throughout the year, we applaud the men and women who work to achieve the dream of homeownership, and we are grateful for those who provide counseling, lending, real estate, construction, and other services to these individuals. The hard work, financial discipline, and personal responsibility of our country's homeowners help transform neighborhoods throughout our Nation and reflect the best qualities of America.

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution of the United States of America, do hereby proclaim June 2006 as National Homeownership Month. I call upon the people of the United States to join me in building a more hopeful society and recognizing the importance of expanding the ownership of homes across our great Nation.


So it's not just that "in 2002 he was still in favor of expanding home ownership." He was promoting that idea in 2006, and making reference to the "ownership society" in 2008.

Bush's official biography currently says this:

Since becoming President of the United States in 2001, President Bush has worked with the Congress to create an ownership society


If we take those words at face value, they mean he is still doing so (working "to create an ownership society").

This is the apparent explanation why Congress has little culpability, despite its Democratic leadership actively and successfully opposing attempts


Prior to 1/07, Congress was held by the GOP.

the three who were waterboarded


When you find a non-anonymous source to tell us that three is the correct number, let us know. We'll be even more impressed if the source has credibility and can be corroborated.
12.27.2008 10:27pm
jukeboxgrad (mail):
elliot:

What was the result of that speech?


You're talking about the speech Bush made on 10/15/02, when he said this:

by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families.


I just cited the statement he made on 5/24/06, when he said this:

Since 2002, when I announced our goal to help 5.5 million minorities become homeowners by the end of this decade, the rate of minority homeownership has climbed above 50 percent, and more than 2.5 million minority families have become new homeowners.


In 2006, Bush seemed to think that there was some causal relationship between "our goal," which he announced in 2002, and the fact that "more than 2.5 million minority families have become new homeowners." You might be inclined to now claim that there's no such connection, but then you should explain why Bush was seemingly taking credit for such a connection.

What was the result of that speech?


What's the result of you continuing your long track record of obtuseness, obfuscation, and evasion?
12.27.2008 10:41pm
allison (mail):
No one will ever read this, but,

people advocating home ownership as a way to improve neighborhoods, increase property value, increase savings rates, etc. have mistaken correlation for causation.

the set of preconditions needing to be met in order to own a home when mortgages are difficult to come by already makes those homeowners more likely to be people who already saved, maintained their property, sought to purchase in a good neighborhood, were likely to vote, to stay married, etc. etc. etc.

magically giving mortgages to people who do not or cannot save, don't maintain their property, live in a bad neighborhood, etc. does not turn them into good homeowners.
12.27.2008 11:23pm
David Warner:
Allison,

I did read it. I also worked for Habitat for Humanity for five years. We didn't "magically give" people mortgages - they had to work for them, and work to keep them paid up. But that was the thing, we were there with them on both ends helping them do so, and often the "them" became the "us", helping new homeowners.

We did it because we believed that homeownership was important. As far as I could tell, we were right.
12.28.2008 12:52am
David Warner:
Just so I'm on JBG's unimpeachable record, I was for the Ownership Society when I was supporting Clinton. I continued to be for it as I support Bush. I will continue to be for it eleventy-one percent as I support Obama.

Despite some quips to the contrary, I believe that Obama is more on board than any of them with the general principles, and more importantly with the on-the-ground details, thanks to his Mom's microlending background.

And, no, I don't automatically support Presidents. I'd have had a hard time stomaching Kerry, Nixon, or what Gore has become. I happen to like the last three a great deal.
12.28.2008 1:00am
gran habano:
David Warner,

As you seem still to be pleased with the "Ownership Society", you must also be pleased that children yet unborn, upon being born, will immediately take ownership of the trillions of dollars of debt that your policy fetish has inevitably inflicted on them.
12.28.2008 8:51am
gran habano:
And to reiterate, some preliminary data out there seems to indicate that homeownership levels are now or will soon be at historical "norms".

So apparently, the policy fetish is nothing more than that... a fetish... and judged by its own metric, has had no impact.

The increased national debt load is having and will continue to have an impact, to say no more.
12.28.2008 9:01am
David Warner:
Gran,

Lies, damn lies, and no links. You can stick my "fetish" up your ass.
12.28.2008 10:02am
jukeboxgrad (mail):
warner:

Just so I'm on JBG's unimpeachable record, I was for the Ownership Society…


Just so I'm clear about where I stand regarding "Ownership:" I'm also pro-"Ownership," except that I think people should generally avoid owning stuff they can't afford. Because that's not really 'ownership.' It's debt.

And this is true both for individuals and groups. So, for example, countries should avoid owning wars they can't afford.

Instead of trying to expand the number of people who own things, I think a better idea is to expand the number of people who can afford to own things. Ultimately this means enhancing health and education, because they are essential elements of prosperity.

So instead of hearing about the Ownership Society, I think I'd rather hear about the Healthy and Educated Society. Because that will ultimately lead to affording to own things, and actually owning things. Which is better than relying on shortcuts that tend to collapse.
12.28.2008 10:18am
Elliot123 (mail):
"by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families."

Is home ownership by minoritites a problem? Which monorities?
12.28.2008 11:43am
gran habano:
Warner,

You're correct, this "Ownership Society" nonsense IS your fetish, and we could only wish that you'd shoved your fetish up your own ass.

The reality, sadly, is that your fetish also includes shoving trillions of dollars of debt up everybody ELSE'S ass... including children yet unborn.

I hope your moral preening today is satisfying, so at least one person will be getting something out of this foolishness.
12.28.2008 1:03pm
Andy Freeman (mail):
The relevance of Bush's support, or lack thereof, for an "ownership society" is unclear.

Is someone arguing that whether or not Bush supported it has some relevance to whether it was a good idea? In particular, aren't the Bush opponents often telling us that pretty much anything that he supported was a bad idea? Are they arguing that this is an exception or that he didn't support it?
12.28.2008 7:23pm
David Warner:
JBG is deranged by Bush hatred, evidently from knowing one too many people like Gran Habano.

Although in this case, Habano is correct. It would be impossible to stick my "fetish" up his ass, as his head is already taking up all the room there.

From the mortgage interest deduction, to the Homestead Act, to the freaking Plymouth Plantation charter, the Ownership Society is as old as America itself. I'd preach the full sermon here, but there are unlikely to be many readers left.
12.28.2008 11:00pm
jukeboxgrad (mail):
elliot:

Is home ownership by minoritites a problem?


Ask NR. On 12/11/08 they promoted this explanation regarding "the origins of the financial meltdown:"

The crisis has its roots in the U.S. government's efforts to increase homeownership, especially among minority and other underserved or low-income groups


Although in 2004, Bush's Treasury Secretary was expressing a different perspective on the pages of NR:

Another excellent indicator of our economic growth is the housing market. Homeownership is at 68.6 percent, an all-time high, with substantial gains among minority homeowners.


And of course in 2006 Bush himself bragged that "more than 2.5 million minority families have become new homeowners."

andy:

The relevance of Bush's support, or lack thereof, for an "ownership society" is unclear.


Unclear only to you. It's very easy to find conservatives making assertions like the one I cited above ("the crisis has its roots in the U.S. government's efforts to increase homeownership, especially among minority and other underserved or low-income groups"). See also here and here, where similar arguments are made. What is pointedly absent from those analyses is any acknowledgment of Bush's vigorous leadership of "efforts to increase homeownership, especially among minority and other underserved or low-income groups."

warner:

I'd preach the full sermon here


Maybe a better idea would be to answer the question I asked you here, which you seem to be ducking, for some reason.
12.29.2008 12:27am
jukeboxgrad (mail):
Above I implied that Bush declared a National Homeownership Month in 2006, but not in 2008. I was wrong. Bush issued the following proclamation on 5/29/08:

National Homeownership Month, 2008

A Proclamation by the President of the United States of America

For many Americans, owning a home represents freedom, independence, and the American dream. During National Homeownership Month, we highlight the benefits of owning a home … My Administration is committed to helping Americans achieve their dreams of homeownership. …

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim June 2008 as National Homeownership Month. I call upon the people of the United States to join me in recognizing the importance of homeownership…


That proclamation was made not long after Sen Chris Bond (R) said this:

Homeownership appears to be a bigger priority in the administration than affordability and foreclosure… I think the emphasis on homeownership helped to drive the foreclosure crisis we're now in. . . . All these wonderful ideas . . . didn't do them any good when we put them in housing they couldn't afford.
12.29.2008 12:37am
gran habano:
Warner,

FYI. I voted for Bush... twice. However, that doesn't put me in the group with you Bushbots, who whine that no Bush criticism is legitimate... and therefore must arise from "hatred".

You see, thinking people must be objective... and objectivity leads us to recognize that government promotion of mortgages to the unqualified represents a clear departure from the historical policies and programs you fulminated over in that post.

That departure represents your fetish.

Your fetish created bad debt.

We now own that bad debt, created through you acting out your fetish. Your mistakes come with compounding interests.

We also suffer economically as a result of the financial turmoil caused by the bad debt created by your acting out of your fetish.

Happy Ownership Society... or Merry Subprime Derivatives... or whatever greeting you cult fetishists prefer.
12.29.2008 10:46am
Elliot123 (mail):
"Ask NR. On 12/11/08 they promoted this explanation regarding "the origins of the financial meltdown:"


The crisis has its roots in the U.S. government's efforts to increase homeownership, especially among minority and other underserved or low-income groups


There is nothing at all wrong with minority home ownership. Is there? If so, which minorities? Japanese Americans?

Who objects to a minority with a good job, good credit, and down payment owing a house? But, that doea brings up an interesting question. What is the default rate for each minority? Should we consider it in giving future mortgages?
12.29.2008 11:00am
jukeboxgrad (mail):
that doea brings up an interesting question


You've just asked six questions, but I don't think any of them are "interesting." Here's "an interesting question:" why would you expect to be taken seriously when you routinely use asinine questions to evade and obfuscate?

Speaking of evasion, maybe you'll eventually let us know why you're still ducking the question I asked you here. Is it because you like to ask questions, but you don't like to answer them?
12.29.2008 11:36am
David Warner:
Gran,

Odd how one can be dehumanized via the second person, but I guess that's an internet phenomenon. I still don't get the whining accusations, is that some sort of dominance move? Nothing like a libertarian blog for the old circular firing squad.

But you definitely have me pegged - I'm a raging Bushbot, the man can of course do no wrong. Too bad on Jan 20th I'll have to trade in my old messiah for a new one in my ceaseless worship of authority - didn't you find Bush almost cuddly in his lovableness?

JBG's criticism is indeed colored by his Bush hatred, but even in my high regard for JBG, I don't consider him the entirety of the human race, so your claim that I consider any criticism of Bush illegitimate might be a little light on logical or evidential support.

"government promotion of mortgages to the unqualified represents a clear departure from the historical policies and programs you fulminated over in that post."

I agree. To the extent Bush did so, he was wrong. Tarring the whole Ownership Society (I consider it the opposite of Communism, in a nutshell) with that departure is like blaming your comical misreading of my position on the alphabet.
12.29.2008 11:43am
jukeboxgrad (mail):
warner:

JBG's criticism is indeed colored by his Bush hatred … your claim … might be a little light on logical or evidential support


Your claim ("JBG's criticism is indeed colored by his Bush hatred") "might be a little light on logical or evidential support."

Tarring the whole Ownership Society … your comical misreading of my position


Claiming that someone in this thread is guilty of "tarring the whole Ownership Society" seems to be a "comical misreading" of what's actually been said in this thread.
12.29.2008 12:13pm
Elliot123 (mail):
So, is it OK for minorities to own houses?
12.29.2008 12:35pm
gran habano:
Oh for crisakes, Warner, now you're whining about being called out for whining. To paraphrase a master: "When you're in a hole... stop whining."

At the top of this discussion, you took snarkish exception with the blogger's characterization of this mortgage fiasco as it relates to this "Ownership Society" fetish with which you and Bush are apparently afflicted.

My series of posts are in general alignment with the blogger's... and you took exception with those, yet suddenly you're claiming that you "agree" with me... that giving mortgages to the unqualified is a bad idea?!?

What do you think this whole discussion has been about, you fool?

This is the problem with policy fetish. You'll always be rooted in fantasy constructs and semantics, and inevitably your tortuous circulations will be exposed... and ridiculed.

Hey, if it's your fetish to get people to own stuff... then you go ahead and give them your stuff... and quit indebting future generations with your fetish.

Is this so hard to understand?

So far, your "Ownership Society" seems to have enriched big investment houses/banks and their employees, solely. They definitely appreciate your fetish.
12.29.2008 6:05pm
jukeboxgrad (mail):
elliot:

So, is it OK for minorities to own houses?


So, is it OK to discredit yourself by asking inane questions? I say yes. So keep up the good work.
12.29.2008 6:16pm
Elliot123 (mail):
Well, that's a relief. So, I guess it was OK for Bush to say, "by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families."

So, now maybe we can find out exactly what Bush actually did to cycle "the bellows onto this inferno of illegitimate, ahistorical financing, until it overheated and blew out."
12.29.2008 6:47pm
jukeboxgrad (mail):
now maybe we can find out


A vacuous question that's already been answered is still a vacuous question that's already been answered even when you rephrase it as something other than a question.

When you get tired of re-asking that question, maybe you'll decide to finally stop ducking this one.
12.29.2008 8:38pm
Elliot123 (mail):
Cycling those bellows is hard work. Doesn't enyone know exactly what Bush did?

Juke says he gave a speech saying it was OK for minorities to own houses.

Habano says, "Combustion reactions require fuel and oxygen."

Obama says, "First comes spring and summer, but then we have fall and winter. And then we get spring and summer again."
12.29.2008 9:09pm
jukeboxgrad (mail):
he gave a speech saying it was OK for minorities to own houses


He didn't just say "it was OK." In 2002, he said that closing "the minority homeownership gap [is] an incredibly important initiative for this country … an initiative that we take very seriously." And in 2006, he took credit for making progress in closing that gap. He bragged that "more than 2.5 million minority families have become new homeowners."

But maybe what you're trying to tell us is that Bush took credit for this even though he had nothing to do with making it happen. And he even though he said this is something "we take very seriously," he didn't really do anything about it. Is that your point?

By the way, Obama didn't say what you said he said. But we already know that you have a hard time separating fiction from reality.
12.29.2008 9:57pm
Elliot123 (mail):
"closing "the minority homeownership gap [is] an incredibly important initiative for this country … an initiative that we take very seriously."

Is that a problem? Didn't we establish it was OK for minorities to own houses? Mi casa su casa?
12.29.2008 10:43pm
jukeboxgrad (mail):
Is that a problem?


Already asked and answered.

Since you're capable of nothing other than mindless repetition, why not just do it by reference? You'll save a few innocent electrons.
12.29.2008 10:56pm
David Warner:
For those reading along at home, the Ownership Society is about a lot more than housing, and even there, its about a lot more than rent vs. buy. Section 8, for instance, is an Ownership Society alternative to public housing. While I'm no fan of policies that enable people to treat the gummint like twenty-something boomerangers do their parents, given the current Nanny-State consensus, Section 8 appears to be the least bad alternative. Perhaps EP could benefit from taking the subject up with dear old dad sometime to gain a fuller perspective.

Beyond that, I believe that Gran, too, has earned the silent treatment. At least he won't be subjected anymore to my whining!
12.30.2008 1:38am
gran habano:
Well, you haven't said anything to this point, so why start now?

Were that we could have silenced you fetishists a few years ago... before you managed to ram a few trillion dollars more debt down on us.
12.30.2008 7:46am
Technorino (mail) (www):
Bush had policies? Whoa!

/sarcasm
12.30.2008 9:13am
Elliot123 (mail):
"Already asked and answered.

Since you're capable of nothing other than mindless repetition, why not just do it by reference? You'll save a few innocent electrons."


Doesn't anyone know what actions Bush took to cycle those bellows?

Juke is sticking with his idea that Bush caused the problem because he gave a speech.

And Obama just says, "As long as the roots are not severed, all is well. And all will be well in the garden."
12.30.2008 9:36am
jukeboxgrad (mail):
I see you're sticking with the idea that we'll all be impressed if you continue to pretend that various people (like Obama and me) have said things we haven't said.
12.30.2008 11:01am
Elliot123 (mail):
Well, what did Bush do?

You answered that he gave a speech saying it's OK for minorities to build, clean, roof, and even own houses. Yes, own them!

Habano says he cycled the bellows.

Obama just tells us, "Yes! There will be growth in the spring!"
12.30.2008 3:41pm
jukeboxgrad (mail):
he gave a speech saying it's OK


He didn't just give a speech, and his speech didn't just say "it's OK." But keep making up your own facts. There might be some fans of fiction here.

Obama just tells us, "Yes! There will be growth in the spring!"


Do you have a friend named Obama who said that? Because the one most of us know didn't say that.
12.30.2008 3:52pm
Elliot123 (mail):
"He didn't just give a speech, and his speech didn't just say "it's OK."

OK. That's progress. What else did he do?

"Do you have a friend named Obama who said that? Because the one most of us know didn't say that."

The One is a friend to all. Remember, he said, "Yes, I've been here all my life."
12.30.2008 5:13pm
jukeboxgrad (mail):
What else did he do?


There are some big clues in this thread. Reading is fundamental. It's never too late to learn how to do it.

he said, "Yes, I've been here all my life."


Your preoccupation with fiction is adorable. I hope you keep telling us about your favorite stories.
12.30.2008 8:11pm
Elliot123 (mail):
"There are some big clues in this thread. Reading is fundamental. It's never too late to learn how to do it."

Well, since you can't tell us what Bush did to cycle the bellows, and it's not giving a speech that says it's OK for minorities to own houses, we can only conclude someone else must have been producing all the hot air.

Fiction? If Obama hasn't been here all his life, where has he been? Is that what he was hinting at when he said he's the one the world has been waiting for?
12.30.2008 9:45pm
jukeboxgrad (mail):
since you can't tell us what Bush did


It's not that I "can't tell us what Bush did." It's that you're looking for an Academy Award in Obtuseness, which involves pretending to not comprehend what's already been said. But I think you need to decide if what you're really going for is the Fabrication category. Because you also put a lot of effort into pretending that people have said things they didn't actually say.

he said he's the one the world has been waiting for


Someday soon I hope you introduce us to your private Obama who has said all these things. Because the one the rest of us know did not say he's "the one the world has been waiting for."
12.30.2008 10:12pm
jukeboxgrad (mail):
"I wonder why this exchange seems so very very very very very
very very very very very familiar."

When the members of the Academy meet to decide which award(s) he should get, they're going to have a tough time making a choice. He's up against some stiff competition, mostly from himself. Aside from this thread, and what you mentioned, I'm talking about his remarkable work in threads here, here, here and here. And I'm sure that's just scratching the surface. Can he keep outdoing himself? One can only hope. I can't wait to find out.
12.31.2008 8:52am
Elliot123 (mail):
"It's not that I "can't tell us what Bush did."

Correct. You told us he gave a speech that said it was OK for minorities to own houses. Did he do anything other than just give a speech?

"Because the one the rest of us know did not say he's "the one the world has been waiting for."

"We are the ones we've been waiting for. We are the change that we seek."
Barack Obama, Feb 5, 2008
12.31.2008 9:56am
jukeboxgrad (mail):
elliot:

We are the ones we've been waiting for


You're charmingly reliable. You're doing exactly what you did previously: showing proof that Obama said something other than what you (or one of your pals) claimed he said. I guess this is your way of letting us know that your reading comprehension is exceptionally poor. Either that, or you don't mind repeatedly misquoting people. I wonder which it is. Maybe both.

Did he do anything other than just give a speech?


Do you do anything other than mindless repetition of the same inane questions that have already been asked and answered?
12.31.2008 10:37am
Elliot123 (mail):
OK. If your final answer is Bush gave a speech, then it will have to stand.

Now, other than just giving a speech, does anybody else know what Bush did to cycle the bellows?

Since The One appears to be following Bush's economic policies, is he now heaving away at those bellows? Does he think it's OK for minotities to own houses?
12.31.2008 11:00am
LM (mail):

Can he keep outdoing himself? One can only hope. I can't wait to find out.

That's what new years are for.
12.31.2008 2:54pm
jukeboxgrad (mail):
elliot:

Bush gave a speech


That's just part of what he did. And it's very entertaining to watch you pretend to not know that.

does anybody else know what Bush did


Lots of people know "what Bush did." But it takes a special person like you to pretend otherwise.

The One appears to be following Bush's economic policies


Yes, precisely. Did you know about his secret plan to lose track of several hundred tons of cash (pdf)?

Does he think it's OK for minotities to own houses?


It's normally poor form to call attention to typos (so I ignored "minoritites" and "monorities"). But it looks like you might be on the verge of coming up with something funny, so I want to encourage you to continue.
12.31.2008 8:28pm
Elliot123 (mail):
"That's just part of what he did. And it's very entertaining to watch you pretend to not know that."

OK. What's the other part? Besides the speech you mentioned.
12.31.2008 8:53pm
jukeboxgrad (mail):
What's the other part?


See if you can find someone who has actually bothered to read this thread (since you apparently haven't). Maybe they can explain it to you.
12.31.2008 9:46pm
Elliot123 (mail):
"See if you can find someone who has actually bothered to read this thread (since you apparently haven't). Maybe they can explain it to you."

It seems reasonable to ask you since you are making the claim. You have told us several times about the speech part, but have said nothing about the other part. Is your final answer the speech?
12.31.2008 10:26pm
LM (mail):

But it looks like you might be on the verge of coming up with something funny, so I want to encourage you to continue.

Elliot, you have to admit, that's pretty funny.
12.31.2008 10:30pm
jukeboxgrad (mail):
elliot:

It seems reasonable to ask you


It seems reasonable to ask you to read the thread. But we already know how you feel about that request.

Is your final answer the speech?


I don't think you really want me to spoil the fun by saying anything "final."
12.31.2008 10:47pm
jukeboxgrad (mail):
lm:

that's pretty funny


When I saw that he had typed "minotities," I first read it as 'monotities.' Maybe because earlier he had typed "monorities."

But there are some interesting possibilities either way. "Minotities" could be a crude reference to Minotaur anatomy. I realize that this creature is male, but after all males do have breasts.

And 'monotities' seems to imply some kind of aggregation of two into one. Surely somewhere in fashion history there must be such a thing as a monocup bra design?

But now it seems he doesn't want to type that word anymore. That strikes me as a bit selfish, on his part.
12.31.2008 10:47pm
LM (mail):
... not at all in the spirit of the season.
12.31.2008 11:43pm
Elliot123 (mail):
"I don't think you really want me to spoil the fun by saying anything 'final.'"

OK. Let us know when you have your final answer. You have until ths thread falls off the active list. Then you're off the hook.

So far, you have told us several times about a speech, but said it was just part of what Bush did to cycle the bellows. What's the other part?
12.31.2008 11:56pm
jukeboxgrad (mail):
elliot:

let us know when you have your final answer


Everything you're looking for is right here in this thread. I suggest you start at the top and read more carefully. Or maybe just read.

What's the other part?


Start at the beginning. Let us know if you need help figuring out where that is.

Then you're off the hook.


I haven't seen anything around here that looks like a hook. Does this "hook" you're imagining come from the same place as the minotities you mentioned? You're giving us a fascinating glimpse of your make-believe world. I especially want to hear more about your fantasy friend Obama who lives in your imagination. I mean the one who said all those interesting things that the president-elect never said. Do they have anything in common, aside from the name?
1.1.2009 2:11am
Elliot123 (mail):
Since the thread is about to fall off the active list, the judges accept as Juke's final answer his claim that Bush cycled the bellows by giving a speech. Since he has not offered anything other then the speech, the judges have no choice but to accept the spepech as his final answer.

Chief Judge Barack Obama observes, "This is not the answer the world has been waiting for. There will be growth in the spring!"
1.1.2009 1:08pm
jukeboxgrad (mail):
elliot:

his claim that Bush cycled the bellows by giving a speech


Please show where I said "Bush cycled the bellows by giving a speech." Quote my exact text, please.

he has not offered anything other then the speech


I guess you should try reading the thread one more time. This time don't skip any words.

"This is not the answer the world has been waiting for. There will be growth in the spring!"


Quote marks are customarily used to denote an actual quote. Did you know? You might want to keep that simple rule in mind, for next time. Then again, I suppose it might be an actual quote from your little friend named Obama who exists only in your imagination, and shares nothing with the president-elect, other than a name. When are you going to tell us more about your little imaginary friend?
1.1.2009 4:34pm
Elliot123 (mail):
I'm sorry, but your time has expired. The judges already have accepted "the speech" as your final answer to how Bush kept cycling the bellows.

You were offered multiple opportunities to elaborate on your answer. It's too late to change now, and judges decisions are final.

As chief Judge Barack Obama says, "You are the one the world has been waiting for."
1.1.2009 6:06pm
jukeboxgrad (mail):
The judges


Please tell us more about this special little world of yours, where you hear voices from "the judges," and there's a "hook," and there's your special private Obama friend who says things no one else has heard. I bet talking about it more will he helpful. And I think you're really just getting started, so I hope you won't stop now.
1.1.2009 7:14pm
Elliot123 (mail):
Since your answer that Bush cycled the bellows by giving a speech has been accepted as final, please direct all further correspondence to:

Bobama@officeofthepresidentelect.com
1.1.2009 8:04pm
LM (mail):
BTW, Elliot, I assume only your taxing attention to this thread is delaying your reply to this.
1.1.2009 8:27pm
Elliot123 (mail):
I forgot about that thread. I have posted an answer.
1.1.2009 9:53pm
jukeboxgrad (mail):
lm:

delaying your reply to this


It's true that you asked him a fair and substantive question, and it's true that he's ducking it. However, important work is being done here. He is telling us about the voices he hears. We should try not to distract him from his catharsis.
1.1.2009 11:03pm
jukeboxgrad (mail):
your answer that Bush cycled the bellows by giving a speech


I asked you to show us where I said "that Bush cycled the bellows by giving a speech." Is this something you heard from those voices, or can you show us the text?

And that other "answer" you posted. Did you check with those "judges" first, to see if they approve?
1.1.2009 11:06pm
Elliot123 (mail):
I'm sorry. As we explained earlier, you had ample opportunity to expand upon your answer or add to it, and you chose not to take the opportunity. The judges have accepted as final your answer that Bush cycled the bellows by giving a speech.

As Chief Judge Barack Obama says, " As long as the roots are not severed, all is well."

We trust your roots are not severed, and we welcome you back anytime.

Please diret any further corerspondence to:

BobAma@TheOneTheWorldHasBeenWaitingFor.com
1.2.2009 9:37am
jukeboxgrad (mail):
Bush cycled the bellows by giving a speech … he gave a speech saying it was OK for minorities to own houses


I realize you've been having a fascinating dialogue with those "judges" who live in your head, but have you had a chance to check in with Sen Bond (R)? Because he lives on Earth, and he said this:

Homeownership appears to be a bigger priority in the administration than affordability and foreclosure… I think the emphasis on homeownership helped to drive the foreclosure crisis we're now in. . . . All these wonderful ideas . . . didn't do them any good when we put them in housing they couldn't afford.


Recall that Bush made a statement taking credit for increasing homeownership. Bond criticized Bush for increasing homeownership. So they both agree that homeownership increased. And they both agree that Bush has responsibility for making that happen. Where they disagree is that Bush thinks he deserves credit for this, and Bond thinks that Bush deserves blame.

But this is quite perplexing. After all, if all Bush did was "gave a speech saying it was OK for minorities to own houses," how could this possibly be sufficient basis for Bush to take credit for increasing homeownership? And how could this be sufficient basis for Bond to blame Bush for increasing homeownership? According to you, Bush deserves neither the credit nor the blame. After all, he did nothing but say that "it was OK for minorities to own houses."

Therefore, we can only reach one possible conclusion. Bush is a blowhard who is inclined to take credit for something he didn't do, and Bond has a severe case of BDS.

Maybe the "judges" can give you some help figuring this all out.
1.2.2009 10:19am
Elliot123 (mail):
The judges do not accept changes to a final answer. Those rules apply to everybody. Your final answer is that Bush cycled the bellows by giving a speech.

Chief Judge Barack Obama notes, "Bond is not Bush, but there will be growth in the spring."

Please direct any further corerspondence to:

BobAma@KeepingBushtaxcuts.com
1.2.2009 10:40am
jukeboxgrad (mail):
Bush cycled the bellows by giving a speech


Did the "judges" tell you that? Because that statement appears nowhere in this thread outside of comments written by you. Then again, maybe you're having a hard time telling the difference between your own comments and comments written by others. This wouldn't be surprising, since you're also hearing voices that no one else hears.

KeepingBushtaxcuts


Right. That's why Axelrod just said that the Bush tax cuts are "something that we plainly can't afford moving forward … it's going to go … It has to go."

I know it's hard to pay attention to the actual voices of actual people, given all the noise that's being made by those special voices only you can hear.
1.2.2009 11:47am
Elliot123 (mail):
The judges have accepted your answer, and late protests cannot be taken into consideration. Your final answer is that Bush cycled the bellows by giving a speech. You offered nothing more.

Chief Judge Barack Obama has personally reviewed your case, and said, "In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again."

Please send further correspondence to:

BobAma@StuckinaDChotel.com
1.2.2009 12:17pm
jukeboxgrad (mail):
The judges


Do "the judges" ever express their pronouncements directly, or are you their Sole Channel? And if you have an exclusive deal, is it just for this planet, or does it cover the whole solar system?
1.2.2009 12:59pm
Elliot123 (mail):
"Do 'the judges' ever express their pronouncements directly, or are you their Sole Channel?"

Chief Judge Barack Obama speaks to us all when he says, "There will be growth in the spring!"
1.2.2009 1:06pm
jukeboxgrad (mail):
Chief Judge Barack Obama speaks


Do these characters exist in the form of little figurines that speak to you, or are the voices just fully inside your skull?
1.2.2009 2:43pm
LM (mail):

Do these characters exist in the form of little figurines that speak to you, or are the voices just fully inside your skull?

Funny you should ask that, because I've been envisioning Elliot getting the messages from a "Team America" type Obama puppet inside his head. In other words, both.
1.2.2009 4:10pm
cbyler (mail):
an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid. I cannot understand why anyone would think that such a policy would be sensible.

Because the entirely predictable end result was a massive transfer of wealth from the borrowers to the lenders, and that was a pretty sweet deal if you were one of the lenders?

Granted, they also overheated the real estate asset bubble and blew themselves to hell. But they damn sure ripped off a lot of poor people before they went, and some of them got away with it by painting the blowup as a financial crisis nobody could have predicted.

There are times and situations when assuming good faith ceases to make sense. The Bush Administration is a good example.
1.12.2009 2:00pm
klimmklimm (mail) (www):
Perfect work!
Gluttony kills more men than the sword.
Good health is above wealth

[url=http://buy-xenical-online-klim.blogspot.com/][/url]
9.20.2009 8:19am
petrarka (mail) (www):
Perfect work!
9.24.2009 9:34am
petrarka (mail) (www):
Perfect work!
9.24.2009 9:34am
petrarka (mail) (www):
Perfect work!
9.24.2009 9:34am
petrarka (mail) (www):
Perfect work!
9.24.2009 9:34am

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