Friday, October 23, 2009

People are too Expensive

A few months ago, I went to a corporate function at Blue Hill at Stone Barns, an organic restaurant 30 miles north of midtown Manhattan, in Pocantico Hills, part of Westchester County. Glad someone else was paying, because it was damned expensive and I left hungry. They grow most of the food there, on 80 acres that is owned by some non-profit organization.

Some of the other people at the event commented how nice the rolling hills and farmland looked. My response was that yeah, it looked nice enough I guess, but since the place was just 30 miles from Manhattan, and since many people want to live near Manhattan, I'd certainly have no objection if instead of a non profit farm, the place was occupied by a subdivision of 80 or 100 houses. After all, housing is very expensive in Westchester, and if you increase the supply of something, it'll make that product more affordable. Yeah, 80 to 100 houses wouldn't make that much of an impact, but every little bit helps.

I sort of expected some reaction about open space, traffic, and the usual arguments against more development. However, I was a little surprised by the almost universal reaction that I got. The problem that everyone said they'd have with development of the land would be that the property taxes collected wouldn't cover the additional school costs the children in those houses would require.

In Pleasantville (Pocantico Hills is part of Pleasantville), the median home and condo value in 2007 was $638K, so the median home would be somewhat higher. Not sure what the median house would be today, but you could probably sell the houses there for $750K each. These houses would likely generate $20K in annual property taxes each. In the school district, they spend Over $28K per student.

This leads me to a deeper question. Here we have a situation where people who can afford $800,000 homes and who are going to presumably have good jobs are too expensive to support. These are people that make the top 5% of income in the country. The local school district has become so expensive, that there are only a tiny portion of families that carry their weight. The shortfall has to be made up from people without children, businesses and other commercial property, and state and federal aid. Poorer people who could only afford say $400,000 houses (if such animals existed) wouldn't come close to carrying their costs. With the exception of multi millionaires in country estates, or with single (and childless) people living in condominiums, no one is really affordable anymore. The educational expenses in this community have become so bloated and expensive that it's encouraging basically everyone to take a no-growth stance. How does a society even hope to function if families become too expensive?

Oh, and another thing. You have a non profit organic farm that pays no property taxes 30 miles from the most desirable city in the country. Yet the restaurant is over $100 per head and serves tiny portions. So how exactly is the whole local, organic farming thing really supposed to work from a practical perspective? How are we going to feed all the people who make less than $300,000 per year?

Tuesday, August 18, 2009

A Matter of Preëxistence

Representative Travis Childers (D-Mississippi) said today that he wouldn't support the current healthcare reform bill. The AP article also said:

"Childers said companies should stop denying coverage to people with pre-existing conditions. He said he wants to see details before deciding whether he'd support a mandate for all Americans to have some type of health insurance."

I hope to God this guy doesn't think all insurance shouldn't be subject to preëxisting conditions.

"I want fire insurance on my house please. Yeah, it burned down last week, but who are you to deny me coverage for a preëxisting condition?"

"I need insurance for my Toyota. Yeah, it was in a major wreck last week, but you can't deny me coverage just because of a preëxisting condition."

So here is this congressman, basically telling health insurance companies they have to accept someone, even if they know that person is going to cause the company to lose money. Now, if the insurance company could charge different rates for different people based on their health, they'd just charge the guys with preëxising conditions a lot. But since they can't usually charge much more for a guy with pre&emul;xisting solutions, they need to jack up the prices everyone else pays.

If insurance companies can't use their judgment to screen out those with preëxisting conditions, or at least charge those people market rates, it's not insurance. Really, it's just a privately-administered redistributive scheme.

Sunday, August 16, 2009

Republican Pressure

Today, Associated Press (AP) published an Article with the title White House Appears Ready to Drop 'Public Option'. Here is the first paragraph of the article:

"Bowing to Republican pressure, President Barack Obama's administration signaled on Sunday it is ready to abandon the idea of giving Americans the option of government-run insurance as part of a new health care system."

So it's Republican pressure, not pressure from some Democrats? The Democrats have a 60-40 majority in the Senate; they have an overwhelming majority in the House of Representatives. Republicans are powerless in Washington right now. Yet the first four words of the AP article, "Bowing to Republican pressure" makes it sounds like Republicans can stop the legislation. They can't.

So anyway, apparently they are going to do this instead:

Health and Human Services Secretary Kathleen Sebelius said that government alternative to private health insurance is "not the essential element" of the administration's health care overhaul. The White House would be open to co-ops, she said, a sign that Democrats want a compromise so they can declare a victory.

Under a proposal by Sen. Kent Conrad, D-N.D., consumer-owned nonprofit cooperatives would sell insurance in competition with private industry, not unlike the way electric and agriculture co-ops operate, especially in rural states such as his own.

With $3 billion to $4 billion in initial support from the government, the co-ops would operate under a national structure with state affiliates, but independent of the government. They would be required to maintain the type of financial reserves that private companies are required to keep in case of unexpectedly high claims.

"I think there will be a competitor to private insurers," Sebelius said. "That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing."

So I guess these private coöperatives are never going to need a bailout, right? Seriously, if these coöperatives do run into problems (and you can almost bet on that happening), what's going to happen? Who is going to rescue them?

Sunday, June 21, 2009

Federal taxes vs. Federal Outlays by State

Often times, when reading various articles about tax policy, I see references that such-and-such a state pays more in federal taxes than it receives back. Today, I read that California gets only $0.80 back for every $1.00 it sends to Washington. People in Connecticut often point out that Connecticut gets somewhere between $0.60 and $0.70 for every dollar spent.

Often times, people say that Republican-leaning states in the South take much more than they provide, while more liberal states in effect subsidize the Republican states.

For Connecticut and New York, this has almost certainly inverted due to the AIG bailout alone. AIG received $170 billion in bailouts: this would almost all be going to New York and Connecticut. AIG is headquartered in New York, and its financial products group that caused most of the problems was in Connecticut. $170 billion is $7,394 for every man, woman and child in the two states, which should easily make up the difference between what's paid in and what's paid out.