My irregular musings on city life, politics, baseball, roller derby, and whatever happens to be getting my goat today.

Tuesday, October 04, 2005

Us and Them

A strange column appeared in the Trib last week: folksy observer Charles Madigan discussed the nation’s discovery that there are many poor people in this country. He describes “fixing the poor” as a “Federal fantasy.”
One of the mistakes we make, left, right and center, is to think that the symptom is the actual cause of social illness we decide to attack.

Housing is the solution to the homeless problem in this formula, except it's not. A job, any job, is the solution to joblessness. "Just say `no'" will get you off drugs or alcohol.

Go find someone who is homeless and talk and listen. I have. Right away, I realized, "Having a home is not the big problem here."

It might be substance abuse, a persistent mental health problem, a very bad attitude, whatever. Homelessness is a symptom, not a cause. Any house you put that person in would be a house full of trouble because you have not addressed the cause, just shifted it indoors.

Shelter is good, shelter and professional help are better. But don't be misled. Building lives is harder than building houses.

Poverty, too, is a symptom.

If it were the cause, we could just give money to people to solve it. We tried that a lot of different ways. It didn't work.

I think the solution is a hard one. We have to look at people as individuals, not as members of a race, a class, a displaced slab of society.

If you want a model, go back to the early days of Hurricane Katrina. Helicopter pilots and rescue experts saved one person at a time.

It was difficult and risky.

I believe we can do that, save one person, build one life, at a time.

But we have to be as brave as those rescue workers. We have to look beyond race and class, into the eyes of individuals who need help.

One person at a time? That is a complete fantasy. In fact, it’s a big cop out. Yes, the problems individual people face can make sure that they are the ones who end up poor. But how many people are poor is largely a function of the overall economy, so until we’re willing to address problems on that level, we’re just playing a game of musical chairs with poverty. The way the system’s set up, somebody’s going to get screwed.

Or look at it from another angle. In the same day’s Tribune, from the Tempo section:
Fashion’s polarizing economics
By Guy Trebay
New York Times News Service

NEW YORK – There are probably more scientific ways to measure the bulge at the upper end of the economy, but the season’s hot Prada coat is one way to tell how much disposable income is floating around. The coat is black wool and has jet beading at the lapel and collar. It is fitted, severe, and as chic as widow’s weeds. The person who puts one on immediately assumes the sleek and impertinent air of an urban crow. That the price of the coat is around $5,500 has apparently done little to deter sales. Since the first fall shipments, even the Prada stores have had trouble keeping the coats in stock.

Price resistance is not typically the first thing on people’s minds during Fashion Week, which ended Friday. But even industry die-hards have been forced into a new, and slightly uneasy, relationship with what people outside the business might think of as reality. “I’m a real person and I’m, like, totally sticker-shocked.” Said Lauren Ezersky, the Style channel commentator, befor the Duckie Brown menswear show. An inveterate clotheshorse, she has recently had to cut back on her wardrobe outlay.

“Prices have gotten insane,” Ezersky said, the reasons having to do partly with the continued weakness of the dollar against the euro and partly, one assumes, with the proliferation of an expanded cast of what marketers term the superaffluent. “You used to be able to buy a pear of Manolos for $500, and now every pair of shoes is 800 bucks,” she said indignantly.

For most Americans, the idea of buying a $500 pair of Manolo Blahnik shoes is so far outside the realm of the possible that it is not so much an aspiration as a delusion.
. . .
So when Simon Doonan, the creative director of Barneys New York, said last week that business was surprisingly strong, it was with the caveat, “I’m shocked that there’s no price resistance anymore.” For this season’s must-have jacket from Marc Jacobs, Doonan said, Barneys shoppers will blithely pay $4,000.
. . .
“I’m personally in a little bit of a strange economic bracket, so I don’t really look at price tags,” the lingerie entrepreneur Sarah Siegel-Magness said at the Esteban Cortazar show on Friday afternoon, as her 6-year-old daughter, Camryn, dressed in a Burberry sundress, squirmed in her lap.

Siegel-Magness is the daughter of Mo Siegel, the former Colorado hippie who made his fortune on Celestial Seasonings herbal teas. And she is married to Gary Magness, the son of the late cable television magnate Bob Magness, whose fortune was estimated by Forbes at $875 million in 2004.

“My friends look at the prices of my clothes and my bags, and they’re like, you’ve got to be kidding.” Said Siegel-Magness, who flies in from Boulder, Colo., to attend the twice-yearly New York collections for the fun of it and because, as she said, “If I only lived in my world, I would be out of touch.”


Uh huh. Don’t see the connection? Apparently some sectors of the economy (herbal tea?) are doing very well while other sectors, such as, ironically, the people who actually make clothing, or used to before their jobs were moved to Asia, are enduring a prolonged and stifling economic stagnation.

Let’s look at another fun area, Manhattan real estate:
Data from Miller Samuel shows the median price per square foot for all Manhattan apartments reached a high point in 1987, at $305 a square foot for co-ops and $413 a square foot for condos. What that means is that the median price for a 1,000-square-foot co-op was $305,000 - half the co-ops sold in Manhattan cost more than that and half cost less.

Prices bottomed out by the mid-1990's, losing about 44 percent of their value in real terms, and then they started to rise again. By 2002, prices had passed their 1987 levels, measured in inflation-adjusted dollars and by the first six months of 2005, the median co-op price was up 37 percent from 1987, while the condo price was 35 percent greater. Averaged across the entire period, the cost of a Manhattan apartment has risen at a rate of about 2 percent a year above inflation.

So what happened to the median income in Manhattan during the same period?
Census data reveals that median household income growth in Manhattan was strong from 1979 to 1989, increasing 35.8 percent above inflation. But in the 1990's, median income - the point at which half the households earned more and half earned less - barely rose, going up just 8.5 percent in real terms from 1989 to 1999, or 0.85 percent a year. Since then, a similar rate of growth has been documented by the Census Bureau in its annual American Community Survey, which shows a 4.1 percent inflation-adjusted increase in the median income for Manhattan from 2000 through 2004, or 0.82 percent a year. The median household income last year in Manhattan was $50,731, according to the Census Bureau.

In other words, since the last peak in the real estate market, Manhattan apartment prices have grown about one and a half times faster than median household income.
Manhattan has the greatest income disparity of any county in the country, and the census data shows that while the household income for the bottom 20 percent rose just 7.9 percent from 1989 to 1999, in real terms, the income of the top 20 percent went up 61.5 percent.

Reasoning that it is mainly earners at the top end who can afford to buy an apartment in Manhattan, a group of economists argues that, despite the galloping price increases of recent years, real estate on the island has actually become more affordable.

The group, Business360, an economic consulting firm, compared the increase in apartment prices per square foot with increases in personal income for Manhattan. While real estate prices rose and fell and rose again, average personal income in Manhattan, reported by the federal government's Bureau of Economic Analysis, rose at a fairly steady pace, increasing 87 percent in real terms since 1981. The figure is very different from the median because it is an average of all earners, and with Manhattan's great income disparity, it is heavily skewed toward the top.

Average income has grown faster than average prices, which since 1981 are up 50 percent for co-ops and 37 percent for condos. Because of that, the study concludes, housing is more affordable for the average Manhattanite than it was in the early 1980's or at the peak of the last real estate boom.

To show the relationship between rising incomes and prices and falling interest rates, Business360 calculated the number of days it would take for the average household to earn enough money to pay a year's mortgage payments for a 1,000-square-foot condo, at the average mortgage rate and square foot price for each year of the study. In 1987, it took 273 workdays to cover the mortgage, while today, the study concluded, it takes 152 days. The average household income for Manhattan, projected by Woods & Poole Economics, is $185,993.

"People look at the prices - they're stratospheric - and they think that that's a bubble," said John Marchant, one of the economists who wrote the Business360 study. "But if they looked at what people are earning in New York, they'd think that's outrageous too."

Ingrid Gould Ellen, the co-director of the Furman Center for Real Estate and Urban Policy at New York University School of Law, said: "It really depends on who your target is when you talk about affordability. For the median earner in Manhattan, those apartments are going to be less affordable, but somebody's buying them."

The truth is, the economy’s growing great. You’re just not benefiting from it. And what happens to the rich affects everyone else. Not only does their increased wealth not “trickle down” to everyone else, it makes life worse for everyone else. The fact is, a fraction of their money could meet whatever needs they have for the rest of their lives. Between the misshapen economy and 5 years of tax cuts, they now literally don’t know what to do with the piles of cash. $1 million for a one bedroom co-op apartment. Sounds reasonable! $2,460 for a really ugly lopsided Marc Jacobs sweater? Sure, whatever.

This kind of behavior drives up prices for the rest of us, making us relatively poorer. This doesn’t show up in government accounting because things like rising real estate and health care prices are arbitrarily counted as economic growth rather than inflation when GDP is calculated. (It’s sort of like the problem that occurs when your house is totaled by a flood. Both the cost of demolishing it and rebuilding it are counted as an economic positive rather than a cost – even though you are spending a lot of money just to get back to where you were – but I digress.)

If you separate their economy from our economy, you will find that they are doing great while we are experiencing stagnation and inflation. Part of the reason is simply that they (owners) are increasing profits by forcing down the wages of everyone else (workers – us). They are breaking unions, dismantling pension systems, cutting back on health benefits, all to increase the share of revenue that goes to owners rather than workers.

We’re not a unified group – some of us are poor, others are clinging desperately to “middle class” status – but we are all getting screwed. If you’re not one of them, it’s getting much harder to support a family on the scraps they leave us.

What’s the solution? Raise their taxes. For now, I don’t even care what you do with it. In spite of Mr. Madigan’s protestations, we have not tried giving money to people “a lot of different ways.” This country has never guaranteed a basic living to its people. Instead we have offered a pittance of social benefits to those so desperate they are willing to humiliate themselves to get them, then take them away at the first sign that the recipients may be working towards self-sufficiency.

But let’s say we had tried it and it didn’t work. Taxing the crap out of the rich would help, even if we just flushed the money down the toilet. Why? Because if we strip away their surplus income, there won’t be anyone left to pay a million dollars for a crappy condo. Then maybe the market will collapse, and I can afford to own a home, too.

If this approach were tried, the media would carp about recession, but you would actually be better off. Just like now, they say there’s growth, but it doesn’t help you any. The media people say that stuff because they’re rich. We’re not, and I harbor no illusions that I’m ever going to join the $800 million herbal tea set. We’re not all in this together. The rich are the class enemy, and no matter how much you admire their threads, what’s good for them is probably not good for you.

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