You can't get blood from a turnip or new taxes from people who are unemployed and/or looking at losing their home. I will vote for governor Brown's upcoming (in February?) extension of an $8 billion emergency tax to avoid cuts to schools but it is not a slam dunk. People reading about Bell city salaries and government employees with pensions they can only dream about may be less than willing to vote for an extension. If schools want more money they need to show some willingness to rein in some of the higher salaries. For example, Cupertino Union SD's $277K and Fremont Union HSD's $272K for their superintendents might not look all that great to people staring foreclosure in the face. Only one superintendent in Santa Clara county got a housing allowance so salaries are pretty much it. By comparison, LA Unified's super makes $300K, the CA governor makes $212K. Districts might consider a rollback on salaries above $100K or something as a gesture if they are asking for millions from taxpayers.
Unemployment is officially over 9% but add in all those who aren't counted because they gave up looking or are working only part time and you are at 17%. Add in the under-employed (engineers working at Macy's) and we are looking at depression levels of jobless.
According to the December economic letter from the Dallas federal reserve ( http://dallasfed.org/research/eclett/2010/el1014.html ) 20% of mortgages are "underwater" and another 5% are borderline. Since the same letter projects another 23% decline in the housing prices then we are looking at even more foreclosures when they have already been increasing rapidly for 3 years. Counting houses that are close to default there is really about a 2 year supply of housing compared to official 10 month supply and the "normal" of about 4-6 month supply. The Case-Schilling housing price index needs to get back to levels last seen in 1995 to be "normal". In the SF Bay area it is down to 2003 levels so has another few years of decline, just like the country as a whole. More than you want to know about the housing market is Gary Schilling's (ominous) view:
http://www.businessinsider.com/gary-shilling-house-prices?slop=1#slideshow-start
The lousy economy is depressing new household formation - meaning that new grads can't get jobs so they stay with mom and dad. They aren't about to get married and start a family. This in turn depresses the new home-building part of the economy which in turn depresses sales of new items still made in the US such as furniture and appliances. This further depresses the economy, in a vicious cycle.
These unemployed new grads aren't just poetry majors from East Podunk State. A friend of mine's son just got a BS in Chem. Engineering from UC-Santa Barbara and can't get a job anywhere in the USA so he is going for a master's hoping that might help. A neighbor from India with a Ph.D. in Chem. Eng said every last Chem E. job went to India or China so he got out of the field entirely. There are too many stories like that.
Government employees, elected or not, need to show a little sympathy for the average taxpayer struggling to stay afloat. Police and teachers cannot expect salaries and benefits to keep on increasing when it isn't for very many paying their salaries.
More people are working than aren't and if 25% are underwater or close on their mortgages, then 75% are not so I suspect all the new tax measures will pass. This time.
Sunday, January 23, 2011
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