Tuesday's Grab Bag

On Tuesdays, well some Tuesdays anyway, I take a little time out to write Hedonic Adjustment posts. I use all the bits and pieces I've collected that week. Sometimes multiple posts, sometimes one big mega post. Like this one.

My California Doppelgangers

From the Times, the story of a pair of doting, yet somewhat hapless, older parents. They had things pretty well organized financially until Dad's employer (the state of California) started cutting his pay:

The Ferrells had only recently begun to relax a bit after Mr. Ferrell, 55, received a 5 percent raise in December. But the furloughs, which are slated to extend at least to mid-2010, took away the raise and then some, dropping Mr. Ferrell’s take-home pay to $4,856 a month from $5,308.

In January, the couple sat down at their computer in their cluttered living room and waded through their major bills, including the mortgage, utilities and car insurance. The Ferrells concluded they had just $1,200 a month left over to cover everything else, from groceries to diapers.

That's kind of our story at the moment too (less the exhausted savings and credit card debt). Trying to squeeze several hundred dollars out an already pretty snug household budget.

Side note: Check out some of the just plain nasty comments this story generated:

From Tim in Cambridge Massachusetts:
Is this a typical story? Here is a 55(!)-year-old man with little kids and his wife has to work... and they are in financial trouble.

Unless dad makes over a hundred thou a year on his own, why have so many kids at his age? And mom doesn't even have a professional job. How did they think they could afford their family?

Guess the college educations are out now, huh? Unless the kids can get scholarships.

Children shouldn't have to worry because their parents didn't plan better for a rainy day. This family is one major illness away from bankruptcy.
Bottom line: nothing beats family planning. Too late now.

From RB in Mt. Kisco NY
No layoff's or pay cuts for our government employee's. No need to make due there.

The average government employee makes twice as much as his private sector citizen. Plus, government employees get much better health and retirement benefits than the private sector employee.

Private sector employees are being laid off by the hundred of thousands each month. Not the government worker. They are secure.

Our elected officials who depend on the campaign contributions of the municipal workers union are beholding to them come contract negotiation time. A true conflict of interest.

Inverted Class Resentment

I hear and read a lot of what might be politely called union bashing. It mostly goes like this:

It's ridiculous that those union workers get paid $50 an hour, have guaranteed pensions, and free health care in retirement. I have to pay my own insurance, I'm stuck with a crappy 401(k) and no pension, and I don't make $50 an hour. Get rid of those unions now!

You hear this about public workers and private workers, and the thing that always surprises me is that the person complaining about it thinks that the answer is to punish the unionized worker. Hey, a defined benefit pension and retiree health care sounds like an awesome idea! Why is the answer to inequity to make everybody as worse off as the worst?

We spend to impress, but nobody's listening!

Hard, hard news from the Times. Apparently, all that money we spend on purchases that display our taste and wealth (OK, mostly wealth) are largely ignored by others:

But once you’ve spent the money, once you’ve got the personality-appropriate appliance or watch or handbag, how much good are these signals actually doing you? Not much, Dr. Miller says. The fundamental consumerist delusion, as he calls it, is that purchases affect the way we’re treated.

The grand edifice of brand-name consumerism rests on the narcissistic fantasy that everyone else cares about what we buy. (It’s no accident that narcissistic teenagers are the most brand-obsessed consumers.) But who else even notices? Can you remember what your partner or your best friend was wearing the day before yesterday? Or what kind of watch your boss has?

A Harvard diploma might help get you a date or a job interview, but what you say during the date or conversation will make the difference. An elegantly thin Skagen watch might send a signal to a stranger at a cocktail party or in an airport lounge, but even if it were noticed, anyone who talked to you for just a few minutes would get a much better gauge of your intelligence and personality.

Worried about inflation?

Paul Krugman's not:

Still, don’t such actions have to be inflationary sooner or later? No. The Bank of Japan, faced with economic difficulties not too different from those we face today, purchased debt on a huge scale between 1997 and 2003. What happened to consumer prices? They fell.

All in all, much of the current inflation discussion calls to mind what happened during the early years of the Great Depression when many influential people were warning about inflation even as prices plunged. As the British economist Ralph Hawtrey wrote, “Fantastic fears of inflation were expressed. That was to cry, Fire, Fire in Noah’s Flood.” And he went on, “It is after depression and unemployment have subsided that inflation becomes dangerous.”

...

So is there any reason to think that inflation is coming? Some economists have argued for moderate inflation as a deliberate policy, as a way to encourage lending and reduce private debt burdens. I’m sympathetic to these arguments and made a similar case for Japan in the 1990s. But the case for inflation never made headway with Japanese policy makers then, and there’s no sign it’s getting traction with U.S. policy makers now.

All of this raises the question: If inflation isn’t a real risk, why all the claims that it is?

...

But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

I do think he hits the nail on the head in the last paragraph: Massive government deficits only bother Republicans when they're spent. Deficit-funded tax cuts that enable the wealthy to spend aimlessly, that's OK!