Metropolitan Rural

I heard the news this morning. I guess there really is a Santa Clause:

Auto Bailout Talks Collapse as Senate Deadlocks Over Wages

I guess there really area a few people left in Washington willing to stand up for what’s right. What was the big sticking point that brought down the $14 billion dollar bailout? There had already been agreement in the bill to reduce executive compensation and dividends over a period of time, but one more item requested by the most junior member of the Senate Banking Committee just couldn’t get supported:

The negotiations were based on a plan advanced by Corker, the most junior member of the Banking Committee. His proposal sought to reduce the wages and benefits of union workers by requiring the automakers’ total labor costs to be “on par” with Honda and Toyota.

…

He and other Republicans had revolted against the earlier plan because they thought it did not go far enough in forcing contracts on the UAW. GM officials have told Congress, for instance, that under the most recent contract, labor costs would be about $62 per hour in 2010 — $30 per hour in wages and slightly more than that in benefits to current workers and retirees. That’s about $14 per hour more than at Toyota’s U.S. plants.

To me, that’s just amazing. In more detail, Corker was asking that this happen sometime in 2009, but no one was willing to budge on union wages and benefits until their contracts come up in 2011. I guess having no job at all is better than taking a pay cut huh? Seriously? So, it’s okay for the executives and shareholders to agree to reduced/no compensation, but not for the working Joe? I mean, really, $30 per hour plus more than that in benefits? You can’t give up some of that to keep your job? In economics we call that “sticky prices.” That simply means price (or in this case wages) are quick to go up and slow to go down.

Also, part of this bill was to give money to Chrysler to prevent them from going under later this month (according to them). If you remember, Chrysler is actually owned 80% by Cerberus Capital Management, a private investment group. Below are a handful of quotes from the Cerberus website:

We work patiently and constructively with management teams and we have a deep respect for operational excellence. We succeed when our companies succeed, to the benefit of our portfolio companies’ employees, customers, suppliers and the communities in which they operate.

…

Cerberus Capital Management, L.P. is one of the world’s leading private investment firms. Cerberus specializes in providing both financial resources and operational expertise to help transform undervalued companies into industry leaders for long-term success and value creation.

…

At Cerberus, we have a long-term investment horizon and focus on value creation. We invest in undervalued companies and their people, and help them to realize their potential.

We partner with our portfolio companies to help them become industry leaders. We believe competition makes the global economy more productive and more efficient, which enables companies to succeed long-term in the globally competitive marketplace.

We encourage our companies to focus on the future through prudent capital investment, R&D, new product marketing, talent development, improved operations and appropriate strategic acquisitions.

These statements from a company that prides itself on turning around companies to make themselves a lot of money. Here they are now, failing with one of their investments and they want someone else to make up for it.  The reason buying “undervalued” companies and turning them around is such a lucrative business is that it is also inherently risky.  It might have been easier in a strong economy, but with a weak economy you have to be much better.  Either way, you are bound to lose a few.

Senator Corker, thank you for standing up and reminding us that we are still required to be responsible.

Times are going to be hard folks.  It’s time to make good decisions again.  It’s time to be responsible with your money for a change.  It’s time to hold our politicians accountable for the money we allot to them.  From all accounts, the great depression was a terrible thing to live through, but it also taught people the values of responsibility and  resourcefulness.  Those skills learned led to a new society when we broke from the depression.  Maybe it’s time for a new generation of us to learn those values for ourselves anew.  The road is not always easy; the path is not always straight.

The Sky is Falling! The Sky is Falling!

Thus are the cries we have all been hearing over the past 12-18 months. The housing market is in a tailspin and our financial giants are dropping like flies after being drawn to the bug zapper. The greed mongers of the last decade are now being circled by vultures and our hard earned tax money is being spent to make sure they don’t take the rest of us with them. While it is unfortunate that those of us who were financially responsible will pay even more to bail out those who were greedy or made poor, uninformed decisions, it is a necessary evil.

In these tough financial times, it will be those of us who were responsible during the binge that will come out ahead. The next few years are shaping up to be pretty rough for a lot of people. Now is the time people can make a real difference in their community. Think more frugally about where you spend your money. Is it worth it to drive across town to a Wal-Mart when there is a local store down the street with most of what you need? Sure, you might spend a bit more, but how much time and effort did it cost you to get to and from there? For us, since we bought our new car in December, we’ve averaged about $0.80 per mile we’ve driven in total costs. That means a 8 mile round trip to my nearest Wal-Mart would run me $6.40 in car expenses (not totally as part of that 80 cents is car payments and insurance that I’ll have to spend, but you get the idea). Oh, and so you know, I’m also not bashing Wal-Mart here as both my parents work happily for them it’s just not as close as my other shopping options in this instance.

For now, sit back, take a deep breath and realize, This too shall pass.  This country has been through hard times before and we will make it through again.  Tighten your belt and watch your pennies.  Oh, and don’t forget to smile.  After all, this isn’t the end of the world.

It wasn’t that long ago that the Presidential candidates were debating the ideas of having a gas tax holiday.  Somehow, that has kind of fallen by the wayside.  It’s funny though, I saw gas last night on my way home from work at $3.599 per gallon.  That’s nearly 40 cents cheaper than just a couple months ago.  It’s funny to me how talk has shifted from a tax holiday to help the consumers this summer to off shore drilling to help consumers who knows when.  Economics seem to take care of themselves if the politicians argue about it long enough.

 Since we got our new car back in December, I’ve been tracking how much we’ve been paying for gas and what kind of mileage we’ve gotten.   For the record, we’ve gotten 26.0 miles per gallon total so far, it’s been way up this summer from this winter, even with doing the same kind of driving.  Below is a graph of our actual prices paid and the average price we’ve paid in total since purchasing the car.

(click image for the full view)

Our highest price was $3.959 back on 7/15 (just 3 weeks ago).  We haven’t paid less than $3.00 since 3/10.  I’ve actually been tempted lately to take a couple of weeks to fill my car up with gas every evening.  I’m thinking it would be a good experiment to see just how much  money I spent on gas today driving places.  Did I get my money’s worth going where I went for that cost?  It would be interesting to see.

… ask what you can do for your country.

A truly great sentiment from the beloved President John F. Kennedy during his inaugural address.  Yet, where is that belief now?

• “Why doesn’t the government do something about gas prices…”  (so I can drive my SUV 35 miles each way to work.
• “Why doesn’t the government do something about the food prices…” (so I can continue to eat too much, go out to eat, and throw away food that is still good)
• “Why doesn’t the government do something about the high energy prices…”  (so I don’t have to consider the impact of my energy consumption on the environment)
• “Why doesn’t the government do something about the mortgage and credit crisis…”  (so I don’t have to feel bad about making a bad financial decision for myself/my corporation)
• “Why doesn’t the government do something about the high price of health care…”  (so I can get as much care as I want without considering the cost)

It seems so much is going on today asking the government to fix our problems from the top down.  What’s wrong with real people making real changes to their own lifestyles that lead to real changes in our country.  Let’s try things from the bottom up.  Sure, each of us as individuals make a minuscule impact on each of these things.  However, there are over 300 million Americans today. 

If each American saved just 1/2 gallon of gas each week this year, that would add up to 7.8 BILLION gallons that would not be used over the course of a year (at the DOE estimate of 388.6 gallons per day consumed in the US, that is 20 days of gas savings for the year).  For an SUV that gets 18 MPG, that amounts to driving just 9 miles less each week, just over 1 mile less per day.

Let’s not forget, we have a government OF the people, BY the people and for the people.  Let’s stop emphasizing the for and think about that it’s not an Us against Them when it comes to government.  We ARE the government.  Each of these problems above can be solve quite simply by changing the behavior of ourselves and expecting the same of our neighbors.  We are 300 million strong and can have a huge impact when we start to do things that might not be pleasant for us, but that we know if for the greater good of all. 

Let’s stop thinking about “what our country do for us” and get back to thinking about “what we can do for our country.”

I was talking with some co-workers on Friday who were discussing the high cost of gas.  I did some math on our new car and discovered this.

We’ve had the car 20 weeks now.  During that time, we have bought just over 160 gallons of gas.  Average gallons per week is just over 8. 

My co-workers, on the other hand, were buying somewhere in the neighborhood of 20+ gallons per week because of longer commutes, multiple cars and both spouses working. 

With gas currently being around $3.50 a gallon, I’m spending $28 per week and $1,456 per year on gas.  The suburban commuting co-worker(s) is spending $70 per week and $3,640 per year (and one of their cars is a Prius, the other I believe is a Corrola, imagine the 2 SUV family!).  That means I save $2,184 each year on gas.  Not to mention that I don’t have 2 car payments, 2 sets of oil changes, 2 insurance payments or 2 sets of new tires to buy either.  Sure, I spend $60 a month on a bus pass, but that pales in comparison to the extra costs they are paying.  

What else I don’t get is that this co-worker lives southwest of Fenton.  She works downtown here and her husband is a teacher at some school in south county.  A home in south city or county would save them quite a bit in gas alone I’m sure.   

After all, I can buy a LOT Of Ted Drewes with my extra $42 a week!

Do you get sinking feeling every time you pull into the gas station to fill up?  If so, I’ve developed a fool proof solution to help you save some money.

STOP DRIVING SO MUCH!!!

Oh sure, you might not like my solution, but it’s guaranteed to work, 100% of the time.  I would offer a money back guarantee, but I’m not charging you for my advice.

I read the other day that Presidential candidate John McCain was going to propose a holiday on the gas tax for the summer driving season to give US consumers a relief.  Great, just what we need, another excuse to use more gas because it’s not so expensive.

You see, economics works from 2 angles called Supply and Demand.  If the suppliers of gasoline can continue to reap large profits by raising prices, they should be not only allowed, but expected to raise prices.  Honestly, if you ran a business and knew you would make more profit by simply raising prices you would too. 

If, on the other hand, the Demand becomes too inelastic (meaning demand falls enough when the prices is raised that the Supplier makes less revenue and thus less profit) they will stop raising prices and lower them in order to make more money.  Yet, as much as I hear people complain about gas prices, few people are changing their behavior around it.  I don’t hear those people talking about moving closer to work, cutting back on the kids activities, taking fewer driving vacations or even going out to eat less.  Instead, they’d rather complain and ask the government to fix it so they can continue on their merry way.

High gas prices excite me personally.  I just wonder how much farther we’ll go before people finally get the idea and conserve gas.  How much higher before alternative fuel cars like fuel cells, hybrids or even electric start to make financial sense for the masses?

I came across some free material recently on the FDIC website for teaching basic personal finance and banking to adults.  With all the pay day loan places in my neighborhood I thought it might be a good way to help teach people some alternatives.  I was wondering if any of my many readers (okay, it’s many to me even if I can count everyone on my fingers and toes) has any experience setting up a not-for-profit entity? 

Drop me a line on my contact form if you think you might be able to point me in the right direction.  Even better, if you might want to help (cause I know I can’t do all this by myself)!

Yesterday morning while half asleep and not ready to roll out of bed, I heard this story on NPR about a teenage girl in Maine who is taking on the challenge of Global Warming.  It’s not what you think though.  Her website, Ponder the Maunder, grew out of an honors class assignment in high school.  She did some pretty extensive  research to pull together some well thought out and well presented facts from scientific studies that are contrary to the global warming craze.

Most notably, she published an extensive review of Al Gore’s “An Inconvenient Truth” and pointed out where he was right and where he was sensationalizing.  Evidently, the article was so well received, that the family’s Internet provider sent them a warning letter about excessive bandwidth usage!

It is really cool to see someone who is willing to take the time to do research and see both sides of science.  So often the media presents only the most sensational version and glosses over all the other research that is done.  This includes the fact that she was not afraid to take on the Nobel Prize winning Al Gore.

My wife and I had a discussion about this last night as well.  It’s a shame that so much of science is allowed to be published without realistically reviewing the contrary opinion (or null hypothesis).  From my first basic science classes in school I was taught that you can never prove something to be true unless you can prove all other possibilities are false.  Yet, so much of what we read in the paper and hear in the media presents one researchers viewpoint showing that one thing and another are highly correlated.  The media picks up on this and assumes one causes the other. 

This is another HUGE mistake in statistics and science.  Proving a cause and effect relationship is nearly impossible outside of a highly controlled laboratory.  The phrase, “Correlation does not mean Causation” comes to mind.  Yet, our society is so inundated with news and media constantly giving us tidbits of information that we tend to take things at face value and never do the real research ourselves.

I’ve long been a sceptic of the global warming thing.  Of course, that’s not to say I believe we don’t need to conserve (I even had a recent post about how we are Going Green around our house).  Just like sensationalizing the ideas of global warming does a disservice to the intellect of the public, choosing to ignore environmental care is just as bad.  If only we could find some more moderation in the media and accept that people will make better decisions when faced with real information rather than bombarding them with sensational and contrary views and forcing them to decide.

I was “teaching” again a couple nights ago.  I put that in quotes because it was actually a final exam so I mainly sat around and watched.  My work will come later when I start grading.

The class rooms get pretty warm with the doors shut, so they are typically open.  With not much to do, I  listened to the lecture from the class across the hall.  It was an economics class, one of my favorite topics.  I heard some very good explanations of GDP and the difference between Fiscal and Monetary policy.  I was quite impressed listening to the instructor, he seemed to know his stuff and did a good job of explaining things.

Then, just as I was leaving, I heard the discussion start on Highway 40.  I hung around my empty class room for a few extra minutes to hear what would be said.  I was sorely disappointed.  He had clearly fallen victim to media and PR on this one.  He talked about how the project would boost the local economy now by providing jobs for the construction workers and later by making it easier for people to get places to shop and spend money.  Of course, he also mentioned that he was using the highway for his commute, so it might be more benefit to him at the expense of others.

The problem with that line of thinking is that it ignores the social impact and incentives.  The wider highway makes commuting easier and adds incentives for people to live further away from work.  That will start to benefit home builder again of course, but will also continue to drive up demand, and thus prices, for gasoline. 

While I don’t have anything against building highways when they can really help, I also worry that we often focus too much on making things easier on people to drive and neglect to offer government incentives to NOT drive.  I guess there is too much lobbying money flowing to our politicians from the oil/gas and automotive industry to do anything else. 

We continue to try and teach people in this society to Reduce/Re-Use/Recycle.  Yet the government builds more and more roads to make it easy to drive further to use more fossil fuels, wear out cars faster and build new homes.  If we really wanted to follow the 3 R’s, we would offer incentives to:

• Reduce - fuel, vehicle and road consumption
• Re-Use - current housing stock
• Recycle - our tax dollars into programs the encourage more positive behavior

After my post yesterday, I started doing some investigation.  I have started work on a custom Google Map titled “St. Louis Tax Whores”  The plan is to show links and details of business tax incentives that have been given in the city.  Once I get a handful of entries done I will post the link to the map on here permanently for reference and make periodic posts as more are added.

Anyway, while doing this research, I wandered over to the city website and decided to look at press releases.  What better place to find out about these tax incentives than the very politicians who like to brag about them and how good they are for the city.

What I ran across very quickly was a recent press release from city Comptroller Darlene Green on the tax initiative on the recent ballot.  This press release was on 1/23/08, just a couple weeks before the voting.  The link is above, but I also have the full text below:

My office did not initiate this ballot measure, but on Feb. 5, city voters will decide on a half-cent sales tax increase. As comptroller of the city, I support any additional revenue for the city. However, in this case, city leaders should be requesting a lower increase balanced by increased funding from developments. My position on this has been consistent throughout the process.The city needs the tax revenue without question. Police and firefighters deserve to be paid more money. I support the pay increases and the need to meet pension obligations and fight crime. However, I think the city needs to make an immediate change in its development incentive policies before it can ask the public to pay for city expenditures that should be paid for by a growing tax base.As new developments crop up all over the city, new jobs are added to the city, and more and more people buy homes and condos in the city, the tax base should be growing at a rate to sustain the growth. It is up to city leaders to change old development incentive policies designed to begin the turnaround that we are now experiencing. The new policies should acknowledge the need to cover the costs of growth.

In doing so, we create funding to keep up with rising costs and show good faith to the public who should not be asked to shoulder these costs. The regressive nature of the sales tax threatens the retailers who have already moved in and taken a chance on the city as well as those retailers who contemplate the move here.

Changing outdated development incentive policies now will show average citizens that their hard-earned money matters as much as the wealthy developer.

I was SO glad to see this press release. It sort of restored my hope for politics. There are a few good and smart people out there after all.  Thanks Darlene.