Half Changed World

This week, Wider Opportunities for Women issued their “Basic Economic Security Tables” for the Washington DC region.   Not unpredictably, the Washington Post coverage led with the finding that a family of four needs $108,000 to be “economically secure” in Fairfax county.  I sometimes work with folks from WOW, and I generally think they do good work, but I have to admit that I winced reading this — I worry that it feeds into the world view where people who earn  six digits feel entitled to whine about how they can’t make ends meet.

And, I make less than $108,000 a year, and I don’t feel like we’re “just getting by.”   So, I thought I’d take a look at their budget for a family of four: two workers, one preschooler, one school-age child, which is the one that is closest to our family type.

• Housing — $1546.  This is based on HUD’s fair market rent and seems reasonable to me.  I can’t think of where in Fairfax you could rent a three bedroom apartment or house for much less than $1500,.
• Utilities — $188.  Sure.  We pay a bit more, especially in the winter, but a smaller house would be cheaper.
• Food — $868.  They get this from the USDA low-cost food plan, which is one step up from the thrifty food plan.   I think we spend somewhat less than this on food, but as I’ve discussed before, we eat less meat and less prepared foods than the budget assumes.  The thrifty food plan definitely means you need to pay attention to what you’re buying — if economic security means being able to buy ice cream and meat without worrying about the cost, the low-cost plan seems reasonable.
• Transportation — $652.  They assume two cars, and a lot of this cost is depreciation.  I think you could probably get away for less, if you bought used cars and kept them until they fell apart.  It certainly feels like we spend a lot less on transportation, but because we don’t have car payments, but pay insurance 2x a year and repairs at irregular intervals, I may be undercounting the real cost of car ownership.
• Child care — $2,210.  With two school age kids, I took this out of the budget.  With no other changes, it brings the annual total bill down to$81,540.
• Personal and Household Items — $702.   This is based on a statistical report that says that renters on average (nationally) spend 27% of a family’s housing, utility and food expenses in these categories.  I think it’s too high — this is a very high cost of housing area, but I don’t think that should drive up personal and household costs correspondingly.   Even with cable and netflix and occasionally eating out or going to the movies, we spend way less than this.
• Health care — $508 (assuming employer provided health insurance).  This is based on an average of plans in the area — you can definitely spend less if you’re willing to go with a HMO like Kaiser.  (I have Kaiser, and my premium is fully employer paid, so I spend less than $1000 a year on all health care, including glasses, etc.)
• Emergency savings — $345 and retirement savings — $320.   I’m willing to buy that to be “secure” you should be saving this much.
• Taxes — $2007, and credits of $334.  I’m sure WOW did the math correctly for their hypothetical family.

So, what do you think?  Do WOW’s numbers seem reasonable to you?  Is my reaction just a version of the recurrent survey finding that the overwhelming majority of Americans think they’re “middle class?”

I was looking for an old link on the site, and I ran across my book review of Elizabeth Warren (yes, that Elizabeth Warren) and Amelia Tyagi’s personal finance book, All Your Worth.  We had a really heated discussion here, with several readers arguing that it just wasn’t possible to follow her guidelines for housing spending and live anywhere acceptable in big cities.  It’s kind of strange reading this again from other side of the housing bubble.

At the time, I wrote “The problem — at least in this area — is that in those 3 years, the same house will go up to $400,000 and you still won’t have your 20% downpayment. Warren and Tyagi’s answer is to say that you shouldn’t be chasing markets like this.”

With hindsight, yes.  clearly, yes.

I’m not sure if any of the folks who commented at the time other than Dave S are still reading here.  If so, I’d love to hear your reactions with the benefit of hindsight.  TC?  Andrea?  Moxie?  New voices are also welcome…

We’re almost 2 weeks out from the last of the snow, and it’s amazing how much is still left, even though it hit 50 degrees yesterday.

Our yard is still entirely white, with no patches of grass visible yet.  The truck that got stuck across the street before the storm is still there.  My office is on 15th street, and even though it is a snow emergency street (e.g. you’re not allowed to park on it during a storm), the entire parking lane on the other side of the street is still full of snow and ice.   Parking lots are still full of icebergs where the plows left them.  I had to climb a 2 foot pile of ice to feed the parking meter near the Building Museum on Saturday.

And don’t get me started on the potholes…

I knew about KaBOOM! as the folks who come in and help people build new playgrounds, but now they're doing something a little different.  They want people to submit info about playspaces in their neighborhoods — descriptions, ratings, and photographs — which they're mashing with Google Maps, so that wherever you are, you can search for a playspace* to visit.

I'm doing this as part of a MomCentral blog tour, but I really do think it's a great idea.  As I've written before, there's a lot that goes into a successful playground, and a lot of the factors that go into it won't ever show up on a city's website.  So being able to tap into real people's experiences can make a big difference.  Some of the parenting bulletin boards capture some of this info, but they're not linked to maps.  Oh, and you can win prizes by entering new playspaces, and Julianne Hough is donating $1 per playspace to JumpStart.  They're trying to get 100,000 sites identified in 100 days.

I'm on the late side posting this because I wanted to include photos of our local playground, but I haven't gotten out with my camera yet.  It's the playground at Mason District Park, and they just redid it this fall.  They've got some great equipment now, including a climbing volcano and drums.  And there's some cute details, like dinosaur "bones" molded into the underside of the playstructure.  And there's a pond nearby where you can see turtles and fish.  The only negative — no coffee.

*"A playspace can be a field, skatepark, horseshoe pit, roller hockey
rink, disc-golf course, playground, lake, dog park, community center,
basketball court or ice rink – any public place where anyone can engage
in unstructured play either for free or for a nominal fee."

I get a variety of pitches for stories in my inbox, most of which I can delete just from the subject.  One that did catch my eye enough to open the message was headed "everyone wants to life like Friends and Seinfeld, not the Sopranos."  The trick was that it was a pitch for the merits of the urban life of Friends and Seinfeld, versus the suburban life of the Sopranos.  I clicked through, glanced at the article, and then moved on.

Then, yesterday, I read David Brooks' column in the NY Times, where he claims that most Americans prefer the suburbs.  So, which is true?

I went back to the blog post at the Infrastructurist and found that Leinberger's argument was actually far more complicated than the trick headline.  What he actually said is "Gen Xers and Millennials want a lifestyle closer to Friends and Seinfeld (that
is, walkable and urban) than to Tony Soprano (low density and
suburban)."  Brooks agrees that "Cities remain attractive to the young. Forty-five percent of Americans
between the ages of 18 and 34 would like to live in New York City."  But Leinberger implies that the preference for urban living is a permanent characteristic of this cohort, while Brooks suggests it's something they will age out of: "cities are profoundly unattractive to people with families and to the elderly."  Neither one provides evidence for their hypothesis.

Leinberger goes on to say "It’s not that nobody wants Tony Soprano. About 50 percent of
Americans actually do want that configuration. But if we’ve
built 80 percent of our housing that way, that’s the definition of
oversupply. The other 50 percent of Americans want walkable urban
arrangements and yet that’s just 20 percent of the housing stock."

I'm not sure where those numbers come from.  The Pew study that Brooks' article cites (although the Times still doesn't include links) says that "Americans are all over the map in their views about their ideal
community type: 30% say they would most like to live in a small town,
25% in a suburb, 23% in a city and 21% in a rural area."  If the small town and city figures are combined as part of a "walkable lifestyle" you get about 50 percent, but that's sort of a stretch.

There's also an issue about whether people are talking about cities as they are, or cities as they might be.  If I could live in the world of Friends where people who aren't investment bankers can afford huge Manhattan apartments, sure, I'd be interested.  In the real world, I'm unlikely to move back to NYC unless I win the lottery.  Do people with kids say that they don't want to live in cities because they think yards are essential to childhood, or because they assume the schools will be bad?

In the comments on yesterday’s post, Sue asked about the claim "that ACORN had been part of some issues with the subprime mortage crisis."   The short answer is no, not really.  But the full answer is important, so I’m giving it its own post.

Promoting homeownership for low-income families is certainly one of the things that ACORN has worked on over the years.  They’ve done this both through legislative work, primarily the passage of the Community Reinvestment Act (CRA), and through direct work with families.  Let’s look at both of these.

CRA was a response to many banks’ historic practice of redlining — of refusing to make ANY  home loans within certain areas, defined both on the basis of income and of race.  I’m not 100 percent clear on the exact requirements, but the intent was to force banks that wanted things from the government (mostly approvals of mergers and acquisitions) to meet standards with respect to the number (or share?) of loans made in low-income and underserved communities.  And from 1977, when it was passed, to the early 2000s, it caused a slow and steady increase in such loans.

Banks objected to the CRA, because they believed that they couldn’t possibly make money by issuing home loans in low-income areas.  But CRA forced them to look at their criteria and do their best to distinguish between moderate-income people who were bad credit risks and ones who were actually pretty good.  This is where the second part of ACORN’s work came in.   They did a lot of financial education for their members, and negotiated with deals with banks where they’d provide reduced points, or other lower fees, for people who completed these courses.  The banks benefited because it helped them make loans that met their CRA requirements, and because the people who were willing to complete the courses were in fact better risks than similar people who didn’t.  ACORN benefited because these courses were a way to recruit members.  And the low-income people benefited, because they were able to buy homes.

So, what happened in the 2000s?  For one thing, people were convinced that home prices were only going to go up.  So it didn’t really matter if people were bad credit risks, because if they defaulted, the banks thought they’d get houses that were worth more than they had loaned.  For another thing, banks had come up with all these fancy ways to resell the mortgages they made, so they believed that they had made the risk go away.  Suddenly, there was a ton of money to be made making loans to poor people.  And lots of institutions rushed in — including things that weren’t "banks" and so weren’t subject to CRA.

My sense is that ACORN had pretty mixed feelings about this.  On the plus side, lots of people were able to buy houses.  But on the negative side, they could see that a lot of people were being given crappy high cost loans.  But as a little nonprofit — and one that made people jump through hoops before helping them get loans — they had a lot of trouble competing with the sleazy mortgage brokers who were promising people easy loans and low monthly payments.

So, in the sense that banks experience under CRA taught them that it was possible to make loans to low-income people without losing money, I suppose you could argue that it "contributed" to the subprime mess.  But that’s like saying if agriculture had never been invented, we wouldn’t have to worry about the spread of obesity.

But don’t take my word for it.  Here’s Ellen Seidman’s explanation of why CRA isn’t the cause of the subprime mess.  She ran the Office of Thrift Supervision under the Clinton Administration, among other things.

So today was Car Free Day in the DC area.  Most of the time I drive to the metro, but I decided to give it a try.   I was a little concerned that it would mostly prove that public transit couldn’t handle a 10% increase in usage…

In the morning, I missed the express bus to the Pentagon, but caught the local that comes 10 minutes later.  Got to the Pentagon, and discovered that there was a disabled car between Foggy Bottom and Rosslyn.  So I took the Yellow line up into DC, then changed over to the Blue/Orange line.  If  I had gone my usual route, I would have been stuck on the Orange line until the bottleneck cleared.

In the evening, I was busily working when I realized that I should have left 20 minutes earlier if I wanted to catch the express bus from the Pentagon.  Ran out, saw the bus that goes from near my office to Columbia Pike, so hopped on it, and promptly got stuck in traffic.  Got home a good 40 minutes later than usual, although I did get to read all of both the Economist and Cookie magazine.  (Yes, I subscribe to both.  Take that micro-demographers!  But what I’d really like to know is why I’ve started receiving Field & Stream…)

There’s a good discussion about H1B visas
going on in the comments of my last post, with some interesting
perspective provided by Jen, who actually hires programmers.  But I
wanted to pick up on a different aspect of the discussion.

GoriGirl commented that I was
missing the point by focusing on inequality within the US — she
suggested that by employing workers from poorer countries, it would
reduce worldwide inequality.  I’m not convinced that’s
necessarily true about the H1B visa program as currently implemented,
but I’m willing to concede the claim that I’m more concerned about the
displaced American workers than I am about the upwardly mobile workers
from other countries.  And I’m not sure how there’s a moral basis for
that.  I certainly can’t come up with one based on either utilitarianism or Rawls’ "Veil of Ignorance." 

We’ve recently been having some mice in the kitchen, so I bought some
traps.  The kind that bash their little mousie brains out.  And within
the first 24 hours, we caught two mice.  And I feel badly about it, and
sorry for the little pathetic things.  On the other hand, I don’t feel
the least bit guilty or sorry about squashing mosquitoes.  And, while I
could try to find an ethical basis for the distinction (the mosquitoes
I kill are generally in the act of biting me, while the mice are just
taking food), the truth is that I think I feel badly about killing the
mice because they’re cute and furry. Aesthetics, not ethics.

Last night I was reading a collection of short stories by Orson Scott
Card, and a few of them are set in Mormon communities, and so he
explains in a background essay a bit about the system of "wards" that
are an organizing structure of Mormon communal life.   It made me think
about whether it’s an inherent part of human nature to value your
fellow citizens over citizens of another country.  I think it’s natural
to value your family members, and your neighbors, but I’m not sure
about anything much larger than that.  I do think that it’s part of American ideology to say that people have a claim on us because of fellow citizenship, rather than ethnic origin, or race, or religious.

We’ve been in this house for a bit more than a year now, so now we’re able to do same month year-to-year comparisons of our energy use.  We’ve been steadily working on making the house more energy efficient, so I’ve been curious to see what the impacts are.  We’ve replaced the windows, one of the toilets, clothes washer, dryer, boiler, fridge, dishwasher, and stove.  Basically, the only things left to do are the hot water heater and the air conditioner…

So, the envelope please…

• Electricity — Dominion Virginia Power has a handy-dandy button on its site that generates various comparisons for you once you’ve logged in.  It shows how much you paid in a given month compared to the previous month and the same month the year before, and divides the change out among different temperatures, different number of days in the billing cycle, change in prices, and "customer-controlled use."  So, we paid $71.20 in May 2008, down from $95.02 a year previously.  And the rates went up in that period, so they claim that customer-controlled use saved us $27.28.  So, a decent percentage savings, but not that impressive in absolute dollar amounts.  Even with the forthcoming 18% rate hike, it’s going to take us a long time before the improvements pay for themselves.  (Obviously, the energy savings were not the primary reasons we made these changes, so we’re not upset by this.)

• Gas — Washington Gas doesn’t offer this kind of comparison, so I have to sort of eyeball things.  We used 13.2 therms last month, versus 63 therms a year ago.  That’s because it took us a while last year to figure out how much energy our old boiler was using keeping water hot even when it wasn’t sending any into the baseboard heaters.  Once we figured out that we needed to shut the boiler off in the summer, it dropped down to 32 therms. (The remainder is for the clothes dryer and water heater, both of which are gas-powered.  Our new stove is also gas powered, but you’d have to work really hard to spend more than a few dollars that way…)  The more impressive comparison is February to March, when our use dropped from 258 therms to 151 when we installed the new boiler.  That improvement clearly is cost-effective, since our February bill was close to $400.*

• Water — We get billed quarterly for water, and haven’t paid more than $100 per quarter.  While the washer and dishwasher use less water than the old ones, I don’t expect it to make a noticeable difference on our bills.  We put in a low-flow showerhead but I’m guessing that it impacts the gas bill more than the water bill.

Dominion is making a big deal out of their new conservation plan, but I’m pretty skeptical.  Based on my results, my guess is that just showing people how much their energy use costs won’t significantly affect usage unless they also adopt variable rate pricing, where electricity costs a lot more during peak usage times. (Dominion does not appear to be doing that, since their demo says you’d be entering the rates from your bill.)  I think this is mostly an attempt to convince politicians to give them approval for the transmission lines and coal-burning plant they want to build.

* When I see stories like this one about people with $400 monthly electric bills, I have to assume that they have electric heat, and very poor insulation.  I’m not sure I could run up a $400 electric bill in this house even if I ran the air conditioning with the windows open.

Cross-posted to my home blog.  Also, note the new "Environment" category — I’ll go back when I get a chance and add the tag to some of my older posts. 

The Metro Orange line has been a mess all week — several serious delays, and terrible overcrowding even when the trains are running.  When I got to the station yesterday morning, the platform was so crowded that they had to stop the escalator to make sure no one was pushed onto the tracks.  And the air conditioning in my car seems to be dead, so I’m soaked in sweat by the time I get home.  It’s only taking a little longer than usual, but it’s really taking the stuffing out of me.

The scary thing is that it’s only going to get worse if the price of gas makes more people switch to the train.  They can buy some more cars to run more 8-car trains, but that only adds a limited amount of capacity.  I can work from home sometimes, but usually not more than once a week.  Maybe I should talk to my boss about working 7-3.30 or something.