Makes the 'rent strikes' and such seem even more unethical than they seemed at first.
Article also mentions a small GOP opposition to one provision of the bill (despite strong GOP support overall) while neglecting to mention the fact that the house delayed the bill for several more days than was needed. This is vox though, so...
AFAIK House Democrats were delaying the bill not because of the stimulus payments, they were opposed to the lack of teeth to Congressional oversight in the CARES Act bailouts, along with the tax code change that cost $90 billion and benefits almost entirely millionaires+.
And that justifies not mentioning the delay at all? The republicans cited in the article also have a reasonable concern (that it harms the economy to pay people more to not work than to work), and yet the GOP members were the only cited critics.
> The republicans cited in the article also have a reasonable concern (that it harms the economy to pay people more to not work than to work)
I won't disagree with those Republicans and some others the incentives were weird with the whole package. The conflict between requiring a percentage of PPP money to be spent on payroll vs the increased unemployment benefits is pretty clear. Add in some businesses essentially being forced to shutdown yet still meet the requirements for the PPP loans and you have a big mess.
However I think the better solution to the additional UI would have been a temporary UBI regardless of employment status. It removes any incentives to lay people off or force them back to work and would have eliminated a lot of the administration overhead where states were overwhelmed by UI claims.
Unfortunately I think many politicians are afraid of what happens when the workers realize what it's like not to be scraping by at the mercy of their employer.
Just because people have money now doesn't mean they're unethical for wanting some security. When the stimulus goes away the unemployment will still be there.
Owning things isn't a contribution to society. When the thing owned a limited resource like housing, owning more than you need creates artificial scarcity--this is a blight, not a contribution. As a society we're going to have to address this issue.
The worse life gets for the average American, the more the Overton Window changes and reforms that seemed unpalatable yesterday may be more reasonable today. In this way, the COVID economy is more likely than any other event in our lifetime to help spur change.
That said, what you say is correct and I have similarly low expectations that legislators are capable of reasonable policy reforms. Their incentives are far too removed from the average employee.
> Owning things isn't a contribution to society. When the thing owned a limited resource like housing, owning more than you need creates artificial scarcity--this is a blight, not a contribution.
Owning and nothing else is of course a blight. Owning and maintaining is really not. Even a homeowner who simply owns and does no maintenance is a blight, even if they live there. It would be preferable to have the property managed by a landlord who can actually maintain it.
Linking ownership and maintenance to justify rent is a fallacy for two reasons:
1. You said it yourself: a homeowner who simply owns and does no maintenance is a blight. This includes people who charge rent, and then use a portion of that rent to pay someone else to do the maintenance. In this case, the landlord is contributing nothing: they're just using the artificial scarcity of the property they own to insert themselves as parasitic middle men between the resident and the maintainer.
2. Maintenance is valued far less than ownership. Even in cases where landlords do maintain the property themselves, they are paid far more than we would pay a super or a handyman. Think about it: if you owned your own home and didn't want to handle the maintenance yourself, would you pay someone $1343/month[1] for the few hours they have to work on maintenance? Obviously not. And landlords agree: supers are paid only a small fraction of what the landlord makes in an apartment building. Let's not pretend what you're paying for when you pay rent is maintenance.
How much profit do you think it is typical to make on rent of $1343 per month? Here's my attempt at estimating for the whole industry:
$1343 rent
x 12 = 16116 [1]
x 7.11 p/s = 114,584 [2]
x 3.5% = 4010 [3]
/ 12 months = $334
Which is to say, from the renter's perspective, they're paying about 25% of their rent towards the landlord's profits, but from the landlord's perspective, they're making about 3.5% on their capital.
So I'm curious if you find this believable, whether it's an outrageous level of profit, or what? Do you see any logical problem with my calculation? Does it seem like a good explanation of why, even if you think you're being ripped off as a renter, owning property isn't an automatic way to get rich?
While your landlord may not be a big fund that is professionally managed, and might be making more or less, it seems reasonable to me to assume that the people who are the best at extracting profits work in such places and their performance represents the competitive climate for everyone.
You can invest in real estate and reap the profits with literally any amount of money, if you live in the US or have access the financial system there[4] But I think 3.5% isn't exciting to most people.
[1] Yearly total of rent payments
[2] 7.11 is the average price to sales ratio for Residential real estate investment funds.
I'm equating sales to total rents and price to property value or amount invested.
As a cross check, $114K seems like a reasonable value for an apartment; in fact I happen to know that my former apartment's building was assessed at about $90K per apartment, and the rent was noticeably higher than $1343.
[3] 3.5% is about what a residential real estate fund, called REZ paid to investors in the past year.
(0.46+0.50+0.63+0.51)/60 = 3.5%. As a cross check, this is in the ballpark of what corporate bond funds pay, and you'd expect them to be similar when investors who want steady income can choose either (but the real estate funds don't get taxed at the corporate level).
The fundamental issue isn't whether or not people "automatically get rich", it's whether we want to incentivize behaviors that harm everyone at all.
The lowest earners are disproportionately harmed by this[1]. People who rent their homes aren't the only ones harmed. People buying a home are also harmed, because they're competing with people who are buying houses to rent out, which drives up the price. And the game is rigged: if you are buying/renting a home to live in, you're operating under the various constraints of your life: you can't wait for more favorable prices without going homeless, you can't buy in arbitrary locations because you need to be where you can work, where kids can go to school, etc.; a buyer buying to be a landlord is not operating under these constraints.
A landlord literally doesn't have to provide any value: they just own the home and get paid to do nothing. When someone pretends they can't work because of disability to leech off society we put them in jail for fraud, but a landlord doesn't even have to pretend they can't work.
I'm trying to figure out what your point is and if you disagree with me about anything. Originally I thought you were saying all the rent money you pay is free money for your landlord.
The point of my comment was, no it's not. The amount you should expect to make on owning an apartment for doing nothing is very close to zero. If 3.5% sounds like a large amount, (I'm not clear if you think so or if you think that's a wrong figure or what) that's before taxes, before inflation, and subject to property value going up or down.
I kind of take for granted that the social purpose of financial markets is to reduce economic profits towards zero to the greatest possible extent. There is no question that it's generally a bad thing for people to be paid for doing nothing. With interest rates as they are, it seems like we have the closest approach to zero profits in the entire history of the universe, at least in the developed world. How much more can you ask for?
It's pretty sad that $600-$900 a week is a massive improvement for most people.
With state benefits and $1200 its nearly $45k a year, which is quite a bit more than $15 an hour. Its no wonder people have more money given around 30 million Americans make <$10 an hour.
https://www.pewresearch.org/fact-tank/2014/11/05/making-more...
(older source, but I am sure its in the ball park)
I am curious how long until US congress starts blaming anyone who is unemployed for "being lazy", and stop providing financial assistance, or only provides the bare minimum $7.25 an hour.
And to think that all it took was printing off more than $35,000 per tax payer which will then be multiplied by 8x through fractional reserve banking.
The inflation will eventually haunt anyone with an income based off of a static dollar amount, yet those are the people who got a sliver of the avalanche of money.
For those of us who live in high cost of living areas, its easy to forget just how cheap most of the US is: the median mortgage payment in the US is $1100.month (2017 data) [0]. That's 151 minimum wage hours, or about a month of ~40 hour weeks (before taxes, which are very low at that income level). So, a household with two minimum wage earners probably would struggle to afford the median mortgage, but remember half of mortgages are less than that.
This is not me attempting to justify the current minimum wage - I think it should come up. I just think many on this site live in areas where renting a small 1 bedroom apartment is more expensive than $1100/month, or even significantly more than that, much less owning a home.
The price of real estate in an area is set pretty exactly to the level of productivity (i.e. what kinds of jobs you can hold) in that area.
So yeah, it all “works out” in that it doesn’t matter if the median person is producing $10 or $15 or $2000 worth of value per hour. The median person will always be “barely making it” given what they must spend to have access to jobs in which they can produce that much value. Look at Palo Alto’s consideration of housing welfare for people earning $150k - $250k/yr.
Inequality grows as more people max out their individual productive potential, but real estate prices keep rising because the few hyper-productive peoples’ ceilings have not been hit yet.
The price of real estate is set to pretty nearly the salary of two people. The college educated live in different sections of the city from the high school educated. In nearly all instances families survive on two incomes.
My experience in looking into this in the past is that there are maybe tens of units of this sort in development at any given time, orders of magnitude less than the number of people who would qualify. With wait lists easily exceeding 10 years, for all practical purposes these units dont exist.
Wasn’t able to quickly find what the actual current number is (or if it just varies by development). But yes, obviously qualifying on even $70k would sound insane in most of the country. The point is that higher productivity = higher rent = real lifestyle gains that are nowhere near proportional to real productivity gains.
This doesn't need to happen, but this is the logical conclusion when we ensure most of the housing market is controlled by landlords rather than owned directly by the people living there. Also, when you turn housing into an investment vehicle. Also, remove any and all public housing alternatives. Also fail to build enough housing to create competition in the housing market. Also demolish housing stock serving poorer residents. Also fail to provide the transportation network to make transit from the suburbs cheap and easy. Also concentrate a bunch of upper-middle-class people in an area suffering from all of the above problems.
> I am curious how long until US congress starts blaming anyone who is unemployed for "being lazy", and stop providing financial assistance, or only provides the bare minimum $7.25 an hour.
That sentiment was certainly there from the start, several were talking about how they need to de-rate the benefits based on income.
There's a time limit on the additional federal funds for unemployment insurance, it runs out at the end of July.
>That’s because of government stimulus benefits, both the $1,200 checks that went out to most people and, even more importantly, the $600-a-week increase in unemployment insurance benefits ... But the message of this data is that, on the whole, it worked.
It sort of worked, but unfortunately the dialog has centered on the talking point that "people are making more not working than they could by working."
It's temporarily true for a lot of people suddenly out of work that weren't making a whole lot to begin with.
Now that it's ending soon things are about to get much worse for everyone.
Anecdotally, I run a website for a specific hobby that's monetized by Amazon affiliate program. I saw holiday season-like traffic and revenues in April (before Amazon cut the commission rate).
Was thr strangest thing because I had already assumed that my revenue from Amazon this year would be drastically lower. But so far, I'm up nearly 100% YoY
My father runs a Woodcraft franchise, and the past few months have been significantly better than average for him. Since people aren't spending much time and money on activities and dining out, they are investing some of that in hobbies they can do at home instead.
To add another data point, I got into hydroponics and indoor gardening since I was sitting at home all day, and I guess a lot of other people did too. Everything is sold out everywhere. Seeds, nutrients, even just potting soil is harder to come by. I tried to order some seed potatoes last week to try a hydroponic grow of them and almost every supplier is completely sold out. I found one seller that had 2/100 of their products in stock, but won't ship until mid-August.
Yeah. Another point: my wife fosters kittens for the local animal shelter and almost all of the shelters are just straight up out of adoptable animals. Everyone is getting pets now.
I’m getting into electronics and microcontrollers for exactly that reason. Can’t go out, might as well do something painstaking, expensive, and pointless!
Note this was reported on May 29, 2020 for data in the April calendar month.
It's likely that a good proportion of households got their one-time $1200 federal check in the April timeframe. I'm more interested to see how much of a cliff happened after April.
32 comments
[ 4662 ms ] story [ 144 ms ] threadArticle also mentions a small GOP opposition to one provision of the bill (despite strong GOP support overall) while neglecting to mention the fact that the house delayed the bill for several more days than was needed. This is vox though, so...
A few weeks/months after the vaccine (or some other magical eradication), your point will make sense.
I won't disagree with those Republicans and some others the incentives were weird with the whole package. The conflict between requiring a percentage of PPP money to be spent on payroll vs the increased unemployment benefits is pretty clear. Add in some businesses essentially being forced to shutdown yet still meet the requirements for the PPP loans and you have a big mess.
However I think the better solution to the additional UI would have been a temporary UBI regardless of employment status. It removes any incentives to lay people off or force them back to work and would have eliminated a lot of the administration overhead where states were overwhelmed by UI claims.
Unfortunately I think many politicians are afraid of what happens when the workers realize what it's like not to be scraping by at the mercy of their employer.
Owning things isn't a contribution to society. When the thing owned a limited resource like housing, owning more than you need creates artificial scarcity--this is a blight, not a contribution. As a society we're going to have to address this issue.
This cans been getting kicked down the road since before my ancestors naturalized. I'm not holding my breath that'll be addressed in my life time.
That said, what you say is correct and I have similarly low expectations that legislators are capable of reasonable policy reforms. Their incentives are far too removed from the average employee.
Owning and nothing else is of course a blight. Owning and maintaining is really not. Even a homeowner who simply owns and does no maintenance is a blight, even if they live there. It would be preferable to have the property managed by a landlord who can actually maintain it.
1. You said it yourself: a homeowner who simply owns and does no maintenance is a blight. This includes people who charge rent, and then use a portion of that rent to pay someone else to do the maintenance. In this case, the landlord is contributing nothing: they're just using the artificial scarcity of the property they own to insert themselves as parasitic middle men between the resident and the maintainer.
2. Maintenance is valued far less than ownership. Even in cases where landlords do maintain the property themselves, they are paid far more than we would pay a super or a handyman. Think about it: if you owned your own home and didn't want to handle the maintenance yourself, would you pay someone $1343/month[1] for the few hours they have to work on maintenance? Obviously not. And landlords agree: supers are paid only a small fraction of what the landlord makes in an apartment building. Let's not pretend what you're paying for when you pay rent is maintenance.
[1] https://www.abodo.com/blog/2019-annual-rent-report/
$1343 rent
x 12 = 16116 [1]
x 7.11 p/s = 114,584 [2]
x 3.5% = 4010 [3]
/ 12 months = $334
Which is to say, from the renter's perspective, they're paying about 25% of their rent towards the landlord's profits, but from the landlord's perspective, they're making about 3.5% on their capital.
So I'm curious if you find this believable, whether it's an outrageous level of profit, or what? Do you see any logical problem with my calculation? Does it seem like a good explanation of why, even if you think you're being ripped off as a renter, owning property isn't an automatic way to get rich?
While your landlord may not be a big fund that is professionally managed, and might be making more or less, it seems reasonable to me to assume that the people who are the best at extracting profits work in such places and their performance represents the competitive climate for everyone.
You can invest in real estate and reap the profits with literally any amount of money, if you live in the US or have access the financial system there[4] But I think 3.5% isn't exciting to most people.
[1] Yearly total of rent payments
[2] 7.11 is the average price to sales ratio for Residential real estate investment funds. I'm equating sales to total rents and price to property value or amount invested. As a cross check, $114K seems like a reasonable value for an apartment; in fact I happen to know that my former apartment's building was assessed at about $90K per apartment, and the rent was noticeably higher than $1343.
https://www.reitnotes.com/reports/REII-Price-to-Sale-P/S-Rat...
[3] 3.5% is about what a residential real estate fund, called REZ paid to investors in the past year. (0.46+0.50+0.63+0.51)/60 = 3.5%. As a cross check, this is in the ballpark of what corporate bond funds pay, and you'd expect them to be similar when investors who want steady income can choose either (but the real estate funds don't get taxed at the corporate level).
https://www.ishares.com/us/products/239545/ishares-residenti...
[4]I'm not a customer and this is not an endorsement, but see:
https://robinhood.com/us/en/support/articles/fractional-shar...
The lowest earners are disproportionately harmed by this[1]. People who rent their homes aren't the only ones harmed. People buying a home are also harmed, because they're competing with people who are buying houses to rent out, which drives up the price. And the game is rigged: if you are buying/renting a home to live in, you're operating under the various constraints of your life: you can't wait for more favorable prices without going homeless, you can't buy in arbitrary locations because you need to be where you can work, where kids can go to school, etc.; a buyer buying to be a landlord is not operating under these constraints.
A landlord literally doesn't have to provide any value: they just own the home and get paid to do nothing. When someone pretends they can't work because of disability to leech off society we put them in jail for fraud, but a landlord doesn't even have to pretend they can't work.
[1] https://www.federalreserve.gov/econres/notes/feds-notes/asse...
The point of my comment was, no it's not. The amount you should expect to make on owning an apartment for doing nothing is very close to zero. If 3.5% sounds like a large amount, (I'm not clear if you think so or if you think that's a wrong figure or what) that's before taxes, before inflation, and subject to property value going up or down.
I kind of take for granted that the social purpose of financial markets is to reduce economic profits towards zero to the greatest possible extent. There is no question that it's generally a bad thing for people to be paid for doing nothing. With interest rates as they are, it seems like we have the closest approach to zero profits in the entire history of the universe, at least in the developed world. How much more can you ask for?
Given around 40% of Americans rent their homes, 3.5% profit is clearly enough to incentivize rent-seeking.
https://en.wikipedia.org/wiki/Rent-seeking
With state benefits and $1200 its nearly $45k a year, which is quite a bit more than $15 an hour. Its no wonder people have more money given around 30 million Americans make <$10 an hour. https://www.pewresearch.org/fact-tank/2014/11/05/making-more... (older source, but I am sure its in the ball park)
I am curious how long until US congress starts blaming anyone who is unemployed for "being lazy", and stop providing financial assistance, or only provides the bare minimum $7.25 an hour.
The inflation will eventually haunt anyone with an income based off of a static dollar amount, yet those are the people who got a sliver of the avalanche of money.
This is not me attempting to justify the current minimum wage - I think it should come up. I just think many on this site live in areas where renting a small 1 bedroom apartment is more expensive than $1100/month, or even significantly more than that, much less owning a home.
[0] https://www.census.gov/programs-surveys/ahs/data/interactive...
So yeah, it all “works out” in that it doesn’t matter if the median person is producing $10 or $15 or $2000 worth of value per hour. The median person will always be “barely making it” given what they must spend to have access to jobs in which they can produce that much value. Look at Palo Alto’s consideration of housing welfare for people earning $150k - $250k/yr.
Inequality grows as more people max out their individual productive potential, but real estate prices keep rising because the few hyper-productive peoples’ ceilings have not been hit yet.
This sounds like an exaggeration, this 2020 article puts "low income" housing at a household income of less than ~$70k: https://www.paloaltoonline.com/news/2020/01/17/palo-alto-boo...
My experience in looking into this in the past is that there are maybe tens of units of this sort in development at any given time, orders of magnitude less than the number of people who would qualify. With wait lists easily exceeding 10 years, for all practical purposes these units dont exist.
Wasn’t able to quickly find what the actual current number is (or if it just varies by development). But yes, obviously qualifying on even $70k would sound insane in most of the country. The point is that higher productivity = higher rent = real lifestyle gains that are nowhere near proportional to real productivity gains.
https://sanfrancisco.cbslocal.com/2018/06/26/hud-117000-low-...
That sentiment was certainly there from the start, several were talking about how they need to de-rate the benefits based on income.
There's a time limit on the additional federal funds for unemployment insurance, it runs out at the end of July.
It sort of worked, but unfortunately the dialog has centered on the talking point that "people are making more not working than they could by working."
It's temporarily true for a lot of people suddenly out of work that weren't making a whole lot to begin with.
Now that it's ending soon things are about to get much worse for everyone.
Was thr strangest thing because I had already assumed that my revenue from Amazon this year would be drastically lower. But so far, I'm up nearly 100% YoY
It's likely that a good proportion of households got their one-time $1200 federal check in the April timeframe. I'm more interested to see how much of a cliff happened after April.