June 21, 2019

CHINA: Ally or Adversary?

by Steve Dana

Watching the drama of Hong Kong unfolding, it makes you wonder how they got into that predicament.  The agreement China made with the UK was for fifty years after which China would have full control over Hong Kong.  We’re only twenty years into the agreement and China is already cheating.  Makes you wonder if China can be trusted to fulfill any agreement they sign.  The basic answer is that China will say what it needs to say to get what they want in the long term.  If it requires that they cheat on an agreement, they don’t have a problem with that.

When China was allowed into the WTO it was with the understanding that they were good citizens.  Over the past 25 years, China has revealed its true character (if you didn’t already know it, they are not).

Tienanmen Square was an indication of how China deals with a population objecting to the boot on their neck.  A heavier boot on their neck.  China of today is as brutal a dictatorship as it was during Mao’s years in control. They dress it up on the surface for Western sensibilities.  They learned to make nice with western countries only for the purposes of exploiting the West with their ridiculously cheap labor.  They learned from westerners how to go back to China to turn what they learned against their teachers.

China realized after Mao that being like North Korea wouldn’t serve them in the long term.  The billion people in China are a resource that can be put to work for the benefit of the state, so China became a place for cheap labor.

Later, they learned that by giving the people the chance to be capitalist on a small scale, their productivity skyrocketed.  Socio/Economic policy in China has evolved into a capitalistic dictatorship.  The people can have their own businesses in partnership with the government.  That opportunity gives the people at least a chance to improve their own standard of living.  They can drive a Mercedes car but have no voice in their government or say in how other aspects of their lives are managed.

American manufacturers were led to believe that China would be a great partner because they had a billion people available to work and a government that greased the skids to facilitate production.  Did any of the companies that dumped their American workforce ever look at the human rights conditions in China before they moved?  Not likely!  In the effort to produce cheap crap cheaper, American manufacturers screwed American workers while forming partnerships with the devil to satisfy corporate demand for better margins.  The American government allowed strategic industries to collapse in the US in favor of suppliers in China.  Did anyone wonder if there was a confrontation with China, would they continue to supply steel or other strategic goods to a rival?

America is at a crossroads in our relationship with China.

Our challenge is to decide whether doing business with a country that abuses the population like China does, that wages war against trading partners with their cyber tactics, that dumps surpluses of manufactured goods on the market to weaken competitors, that regularly steals intellectual property from trading partners, that manipulates their currency to create a competitive advantage, or that charges tariffs for goods coming into China to prevent competition for Chinese companies?  Do we want to be business partners with a country whose military is aggressively harassing neighbors while doing little to assist in efforts to rein in North Korea? In my view, China is a bad actor and yet we’ve intertwined our economy with theirs.  Why?

The government of China should be considered hostile.  Trade with China should be considered in that light.  Let’s see how well China will fare without US markets.

In typical government fashion, it will be determined that trade with governments that want to defeat us is okay.  China is not the only culprit in this discussion.  Our neighbor to the south, Mexico is in the same boat.

The big question is, “Should the United States of America be a trading partner with a country committed to undermining our national security?”  We cannot commit to trading with a country like China, then think about their human rights record or their treatment of their neighbors.  Most of us as citizens think about the reputation of a vendor before we hire them to work for us.  Why wouldn’t our government do the same before promoting China as a preferred trading partner?

The elected leaders in our country were seduced by China with cheap labor to produce cheap consumer goods.  At the expense of our national security.  Our country has no obligation to develop labor markets for companies without allegiance to the United States.  Companies with only an obligation to the bottom line will do business with anyone.  Aren’t we better than that?

What kind of idiots run our country?

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June 1, 2019

Student Debt: Required or Optional

by Steve Dana

Isn’t it great, Summer is finally here.  School is out and everyone is heading for the beach.  In spite of the season, I can’t help but think about all the new graduates.

How many young people you know graduated from college with huge debt? Do you believe what’s happening there?

At a time when society seems to be telling young people that they can’t make it in life without a college education, so many of those kids are leaving college with unbelievable debt and very questionable employment prospects. You have to wonder what kind of education they got if they were gullible enough to indebt themselves for life to pay for it.

My dad was a child of the depression so just going to college was still a privilege. After WWII, going to work was a high priority and getting a better education was desirable but not necessary. When my generation of baby boomers came along in the sixties, a college education was more attainable and employment opportunities seemed endless.

My dad always said that if we worked hard and saved our money we could go to college and be anything we wanted to be. I have two brothers and a sister so with a big family, he told us early on that he would help us go to college but he wouldn’t carry the biggest burden. Growing up, he was determined that I be prepared when college came so I worked from the time I was ten years old making money to pay for college. He made me save half of each “pay check”.

When I was a freshman at UW in the late sixties, going to college cost a lot less money and seemed to take less time. We were expected to complete our fifteen credits per quarter and graduate in four years. It seems to me that tuition at the University of Washington was about $450 per quarter in 1968. If you add in the books for another $100 per quarter, rent off campus was $80/month and then there’s food and other miscellaneous expenses, the number is still much less than a thousand per quarter.

I remember that I quit a union sawmill job that paid $2.895 per hour to go to school in the fall of 1968.

So here we are in the 21st Century and in-state tuition cost has gone up almost ten-fold to $4200 per quarter while housing costs have risen about 800% and food is ten times as much in some areas. I remember eating a lot of Chef Boyardi Spaghetti in a can. It cost a quarter a can at the Safeway on Brooklyn.

Looking back, college was a steal when I was a kid compared to the screwing kids take today.

Nostalgia is great, but if we’re trying to figure out how we drove off into the ditch, we have to peel back the onion a little.

I’m sure that before kids go to college today they sit down with their guidance counselors to talk about career paths with corresponding job prospects offering decent entry level pay and opportunities for advancement so when college is done there’s a logical next step.

If you told your counselor that you wanted to be a physical therapist, there was an educational track to get you there in four years. If you said you wanted to be an electrical engineer, a software engineer, a mechanical or aeronautical engineer, there were tracks for you too.

When I went to college in 1968, being there served two purposes; to get an education and to keep you from being drafted into the View Nam War. A lot of us knew we needed an education but we really didn’t know what we wanted to be so we didn’t declare a major at the start. That made the job of setting up a 4 year plan more difficult but it kept us out of the war.

At some point you have to look at education as a tool to get you to a better life. But the tool has to have a purpose. If you have a tool that doesn’t have a productive job to do, it’s not much of a tool. Generally speaking we go to college to prepare us to get a white collar job that can provide a comfortable living but there are some who go for the pleasure of learning without an economic component.

I appreciate the fact that a music major may provide a person with superior skills or knowledge of music, either performing or theory and the endless pleasure of playing an instrument, but there aren’t many jobs for musicians.

The fact that many businesses required all applicants to have a college education but not one related to the work they did suggested to students that a history degree might be useful in some capacity. Many liberal arts graduates became salesmen/people for the guys who got engineering or business degrees.

Currently we are cranking out thousands of college graduates per year who have undergraduate degrees in programs so obscure there is only one job they are qualified for and that is a volunteer at a homeless shelter.

I know that’s not altogether true, but this whole Wall Street protest controversy is driven by young people who paid exorbitant amounts of money for an education knowing full well there were no jobs when they were done. You don’t have to have a degree in rocket science to know better. The counter person at McDonalds or Burger King ends up being a college graduate feeling underappreciated and betrayed.

I only have so much sympathy for them.

I have been a lifelong learner. I take classes in subjects that interest me for the pleasure of knowing the material. I know going in that it’s not about a job. For others like me, we have no illusions about who is entitled and who is going to pay.

Nobody is entitled and we are going to pay. If I borrow the money so I don’t have to work while I am going to school, then that’s a bargain I have to deal with. It’s a choice I willingly make.

An education is an investment we make in ourselves. We are not entitled to a free college education. You can work for it early like I did and pay as you go or you can borrow the money and get stuck with the debt.

It’s a choice you get to make.  But whatever choice you make, it’s yours.

April 17, 2019

AFFORDABLE HOUSING…Not Gonna Happen

by Steve Dana

In pursuit of answers regarding Affordable Housing, our investigation should consider all aspects of the problem.  I will include a few I know about.

The term “Affordable Housing” isn’t well defined so it can be considered in the context of properties for sale and properties for rent. Rental properties can be privately-owned, government owned like the Snohomish County Housing Authority or NGO owned (non-government organizations typically non-profits) like Cocoon House or Housing Hope subsidized by government.  These properties are for rent to people with varying income levels.

If you believe that public private partnerships might be a way to create affordable housing, they are working in some areas.  We approve property tax relief for some projects if there is an aspect of affordability incorporated into the credit agreement.  It’s not clear what qualifies for affordability in this scenario.

Section 8 has been a way to incent private landlords to rent to low income tenants, but the pool of money and the applicable regulations haven’t kept pace with demand.  There are anecdotal accounts of huge fraud within the Section 8 program that might warrant investigation.  It was reported recently that there is an eight year wait for Section 8 housing with the current inventory of properties.

Private sector property owners cannot be expected to cut rents out of the goodness of their hearts so if the government wants access to the property, they need to kick in enough to cover the differential between appropriate rent for low income tenants and market rent for the landlord.  There might be other incentives for landlords that would also make participating worthwhile.

If affordable housing is only for rental properties our focus could be on them, but home ownership is still the American dream.  How can we keep buying a home within the range of young families?

Let’s take a look at why buying a home is so expensive.

There are a few components to housing cost consistent with all segments; land cost itself, driven by local and state/federal regulations, building regulation driven by local permits and fees and construction cost of the building.

From the standpoint of housing cost at a structure level, the cost in our market is comparable to other places in the country.  Framing materials, plywood, roofing, drywall, carpet and fixtures are generally the same price across multiple markets.  A home built in Boise, Idaho should have approximately the same component cost as a home built in Snohomish, Washington.

So, for the most part, factors effecting housing cost for consumers is driven by something other than the structure.  It appears that government regulations are the driving force.

Right out of the gate, the government controls the zoning of the land that might meet affordability requirements better if more was set aside for multi-family development rather than single family detached housing.  Encouraging condominium construction might address a deficiency for housing where ownership is a priority.  Condo construction comes with its own set of obstacles also created by the government we cannot begin to address here.

When the state passed the Growth Management Act, it created a tool to limit the amount of land available to developers which we knew would artificially drive up the cost of developable land.  Areas outside Urban Growth Areas would be down-zoned to rural density in the One Dwelling Unit per Five acres range while land within UGA’s would immediately escalate in value because of the finite supply.  Supply and demand is still a market force that reflects shortages or surpluses in product or in this case, land.

When the government creates shortages through regulation, the cost goes up faster than in an unregulated market. Urban Growth Boundaries arbitrarily pick winners and losers.  The politics of urban growth designations add a layer of cost that compounds as the process evolves.

The process of dividing land required by local and state laws make $40,000 lots into $140,000 lots.

The other factor in the cost of housing is the skyrocketing increases in direct government regulatory cost through permitting, hook-up fees, mitigation fees and associated regulations from state regulatory agencies.  The Growth Management Act empowered cities and counties to collect mitigation fees supposedly to offset the cost of future development rather than to address existing deficiencies.  Without inventorying the deficiencies at the time, cities and counties went about collecting fees and spending money to build schools, roads and parks.  The burden of growth is supposedly borne by the new development.  Do we need to collect park impact fees if we have enough parks already?  How many parks do you need?  Can you use mitigation fees for anything other than purchase of the land?

School districts must develop a capital improvement plan to predict where and when new facilities should be built.  They analyze where schools are today and compare that with where students are coming from to know where deficiencies exist to be mitigated by new facilities.  In our district, there haven’t been school impact fees for a while since we built or remodeled schools through a huge bond issue.  That should establish a legitimate baseline for future growth to be paid for with mitigation fees.

Hook-up fees have become commonplace in the last twenty-five years as utilities discovered that they could sell the privilege of connecting rather than granting it for free as a property owner in the service area.  Hook up fees supposedly allow collection of funds that can be used to expand the physical delivery system in advance of growth.  I don’t think it’s happening that way in practice.  New pipes in the ground are now paid for by developers.  Under certain circumstances, they can recover a portion of the capital cost of the installation through late comer fees.

On top of that add Storm Water Collection and conditioning fees authorized/mandated by the state.

The science of sanitary sewer service is driven by federal and state laws which translate into higher sewer rates.  In recent years, clean water standards have driven up the cost of increasingly smaller incremental improvements in quality of the effluent released into the river.

The Shoreline Management act limits how property owners can use their land if it is within 200 feet of a significant waterway in the state.

Critical Area regulations also play a huge part in limiting the supply of land and how much of that land can be used for a designated purpose.

Currently we are developing local code language to address a mandate from the state to regulate archaeological aspects of privately-owned property that could substantially increase the cost of housing if there is a suggestion that artifacts are on the property.  Not proof that there are artifacts, but suggestion.

The bottom line for those clamoring for the government to do something, the government is doing something, they are driving up the cost of housing.  If the private sector is to be the solution to the problem, the government needs to cut the permit fees, mitigation fees and other fees while offering credits and incentives to the developer if the end use is committed to subsidized housing for low income or senior tenants.

Affordable Housing will not happen with government playing such a significant part in regulating housing in general.

The housing market is a hugely complex dynamic creation that cannot be explained in a couple hundred words.  The takeaway should be that every level of government regulation compounds and adds to the cost of housing for consumers.  Relief will only come from peeling away those regulatory requirements away.

March 26, 2019

Barrel of Bad Apples

by Steve Dana

So if Robert Mueller found no evidence of an improper relationship between Donald Trump’s campaign and agents of any foreign country that rose to a level worthy of indictments for anyone, was there evidence of an improper relationship at any level?  Trump was a businessman with an international reputation so it’s not unreasonable for him to have previous relationships with foreign governments.  Having said that, were any of those relationships such that his patriotism was ever called into question?

This two-year nightmare we just completed should provide some closure for the critics of Donald Trump but it probably won’t.  The question of him possibly conspiring with Russia or any other government should have been determined definitively.  Mueller said there was none.  His job was to find out if Trump conspired with Russia in any way.  He found nothing.  How many ways can you say there was no there there?

The apparent need to exhaustively investigate Trump only calls into questions the motives of the ones calling for the investigation.  If they have knowledge of or evidence of criminal activity by Trump, wouldn’t you think they would have shared it with Mueller?

What the incessant demand for Trump’s hide does for me is to reset the bar for investigation of every candidate.  We need to codify the scope of this investigation so we will never elect a candidate who’s ever accomplished a thing in his/her life.

Imagine what would have happened if anyone in the press demanded to know as much about Barrack Obama as they want to know about Trump.  Fact is, Obama’s list of accomplishments prior to being elected president was non-existent so he wouldn’t have had to worry about much. We still don’t know a lot about him because the press didn’t bother to investigate him for fear of what they might find.

During the Obama years, there was no shortage of topics to investigate if the press was inclined, but they weren’t.  I know I had questions about Fast & Furious that warranted investigation, but we heard nothing by the Department of Justice or the press.  Lois Lerner took the Fifth rather than answer questions about the IRS treatment of conservative organizations. That could have been a good story if the press had bothered to investigate even a little.  Where were the high standards of journalism during those years?  Where was the DOJ investigation of crimes then?

Since we all suffered through two years investigating Trump, I’m okay if we spend a couple more finishing the job. We spent time and money looking into Donald Trump when there wasn’t any evidence that he had committed a crime.  Federal prosecutors told us time and again that before you begin an investigation you need evidence of a crime.  You can’t just start investigating because you don’t like someone; and yet, they did.

In the case of Hillary Clinton, we had lots of evidence of crimes; many of which would send you to prison for many years.  And yet, the DOJ chose not to investigate.  Why?  What we learned with Paul Manefort is it’s never too late unless the statue of limitations has expired.  The clock is ticking.

As we all suffered through the Trump investigation, some because we wanted to find evidence of a crime and others because we needed to certify that there wasn’t a crime, it became clear that we all need closure.  Now it’s time for the other shoe to fall.  Those of us who wanted justice served by investigating Clinton need closure too.

The fact that in the face of a mountain of evidence there was no investigation of Clinton suggested that there were other rotten apples in the barrel.  The things we’ve learned in the course of investigating Trump exposed the corruption in the Obama government more than in the Clinton candidacy.  To what degree her campaign conspired with the Obama administration we don’t know yet.  But because of the efforts to sink Trump we’ve found an unbelievable conspiracy involving members of the Obama administration at the highest levels.  It could be that Hillary Clinton going to jail won’t be the big news when everything is said and done.  The scope of criminal activity seems so vast its mind boggling to contemplate.

What we’ve learned from the Trump investigation is that we start with evidence of a crime and follow the evidence wherever it takes us.  If it had taken down Trump, a lot of folks would have been cheering.  If pursuing the evidence ends up exposing people in high places of crimes, so be it.  I only hope the press is as enthusiastic in pursuit of justice as they were in pursuit of injustice.