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Economic Reality

Update: Scout at First Draft has a picture of the Frosts on their front stoop. The winger value estimate on the property isn’t even in the realm of possibility.

By now everyone is aware of what Mad Kane refers to as the Shrubbery’s No Child Left Alive plan, and the response by a middle-school kid from Baltimore.

The Blight response should have been predicted, as you have to have your innate human sense of decency removed to exist in their closed world.

They have said nothing about the New York City school board being forced to pay for the private school education of the child of a wealthy businessman, but the fact that a humble carpenter receives subsidized health insurance for his children is unendurable.

The level of economic ignorance can only be explained by the lack of any actual interaction with the real market place. They blithely attach dollar figures to real estate in apparent total ignorance of one of the harsh realities of current life: no one is buying; therefore real estate is worthless. The people who would like or need to buy can’t get a mortgage because there is no money available. The people who have money are hanging on to it to “steal” property at tax auctions.

There were reports of a newer SUV at the home of the humble carpenter. Well, you need to haul stuff around in the building trades, and with four kids, an SUV is more useful that a pick-up. Of course, the spike in the cost of gas has driven the value of even a newer SUV into the toilet, so they are cheap if you need one. There are as many SUVs available on used car lots, as there are faded “for sale” signs in front of houses. The market is at work; just ask GM and Ford.

Looking at this case in real terms, they would have found out that the cost of living in Baltimore is 19.4% above the average for US urban areas, and it is more expensive to live in a city than the country. 2007 Federal Poverty Guidelines pegs the poverty level for a family of 6 in the US is an income at or below $27,610. Families at or below that level are eligible for Medicade, which is free. The CHIPs program is for families above the poverty level, but not able to buy their own health insurance, states usually include those up to twice the poverty level, or $55,220 for the family of six. CHIPs is subsidized on a sliding scale, not free in most states.

I expect the next few years are going to be hard on the carpenter and his family, as the lack of mortgage money and downturn in housing prices means less work in the building trades. He knows his kids have health insurance until they reach 19 through the CHIP program. Of course, after the accident they will have pre-existing conditions and never be able buy private health insurance, but there is always a chances the US will come to its senses and make health care available to everyone.


1 Michael { 10.10.07 at 7:29 pm }

Don’t forget the subsidies that former Senator Man-on-Dog got when he claimed to be living (and homeschooling) his kids in Pennsylvania, but they actually seemed to have been living with him in the DC area. That was OK (probably (a) because it was one of their own benefiting, and IOKIYAR, and (b) because those godless lib’rul schoolteachers were being forced to subsidize a “proper” “Christian” homeschooling program). But Dog forbid that any actual poor person get any kind of a handout from the gub’mint–especially if it means there’s less money to pay for wars, corporate welfare, and kickbacks to corrupt Republicans.

2 Bryan { 10.10.07 at 8:35 pm }

I updated with a picture from Scout, and the value estimate on their house is absurd.

I seem to remember that Santorum was required to reimburse the school district after a local investigation. I have a friend who lives in western Pennsylvania, and he was conducting a major letter writing campaign about it after his local school taxes went up.

Money-wise, it is cheaper to catch things earlier than wait until they are emergencies. You can immunize a lot of kids for the cost of one emergency room visit. Just the savings, without regard to the morality, the country would be better off with universal health care.

3 Jim Bales { 10.10.07 at 10:39 pm }

FWIW, in our town (in Boston area, good transit access and great schools) almost every property sells at over $300/sq. ft. I don’t know the Baltimore market, and assume it is not as overheated as up here, but $500,000 for a townhouse would be unexceptional here.

Of course, as I understand it, they bought the place at $55k at a time when it was a not-so-good neighborhood, and I suspect carpenter Frost has put significant sweat equity into the home.

I raise this because the value of the property is not relevant. (To begin, the scale of medical expenses is–if I understand correctly–well over the $400-500k the residence is “worth”.)

The key point is raised by Digby, who summarizes the right-wing position as:
‘The middle class who are one car accident or one cancer diagnosis away from losing their jobs … must not be allowed to keep ANY assets. They must be, as Steyn’s pal wrote, “dying on the streets with sores on their bodies” before they qualify for aid.’

“Only then,” say the conservative harpies, “is it OK to use my taxes to care for someone else’s sick child.”

4 hipparchia { 10.10.07 at 11:32 pm }

michelle malkin

suv? blame bush. the $100,000 limit has been reduced back down to $25,000 [if memory serves] but the idea was to make it affordable for small individual- and family-owned businesses [including farmers! and woodworkers!] to be able to afford to buy the heavier vehicles and equipment needed for real work.

that house nearby that recently sold for $485,000 or whatever the cited figure was… it’s very possible, especially in old sections of old cities for run-down, not-yet-regentrified neighborhoods to exist side-by-side with wealthy neighborhoods sporting huge and expensive homes. that photo looks like it could have been from such a neighborhood.

i’m vociferously against school choice, school vouchers, the privatization of the public school system, but it would warm the cockles of my cold black heart if it should turn out that the frost family lives in one of those neighborhoods with a failing school and qualified for vouchers to private school under nclb.

and that bit about health insurance? sure, you can go to ehealthinsurance.com, type in a zip code for baltimore, and find plans quoted at $400-$800/month for a family of 6. but wait, carpenters are always shooting themselves with nail guns, slicing off fingers with skil saws, or falling off roofs and breaking their necks. i’m betting the insurance companies want a fortune for insuring them.

so here’s a family who’s bought their own home, a decent but not extravagant one, own their own business [owning their own warehouse, no less], and is getting their kids a good education, in short, they’re the complete embodiment of the self-sufficient rugged individualism so prized by americans, especially the right-wingers.

in return for living up to this ideal, what do they get when they need a helping hand? the wingnuts want them to sell the house and business and truck and place the entire family into penury [from which they’ll likely never escape] before — grudgingly — consenting to help out. all rational economic arguments aside, the sheer meanness of that attitude is stunning.

5 Bryan { 10.10.07 at 11:58 pm }

As I said, real estate and stocks only have value if you can find someone who wants to buy them, and no one’s buying right now. in any case the only means test for CHIP is income, and their income meets the test.

Actually, under the Maryland plan they may have qualified for supplemental insurance even if they had basic health insurance through work.

What was happening in Florida before CHIPs was “medical divorces.” When a child was seriously ill, the couple would divorce so that the mother and children would be eligible for Medicade.

6 Steve Bates { 10.11.07 at 9:03 pm }

“medical divorces.”

Ah, yes, Mr. Bush, always family-friendly…

“Medical divorce” was suggested at one point to my father when Mom was institutionalized with Alzheimer’s, by some adviser who saw things only in financial terms. Dad was kind enough not to wring the adviser’s neck.

7 Bryan { 10.11.07 at 11:13 pm }

It is unconscionable that people are forced to such extremes because of the failures of our health care system.

One of the arguments about assisted suicide is that some would do it to spare their family the medical expenses.

The Texas law that allows hospitals to end life support is based on costs.

Hospitals that dump indigent people on Skid Row to avoid the costs.

There are so many area of our life that are directly impacted by the cost of providing health care, that the need for universal health care is obvious for moral and financial reasons.

These people just don’t care, Steve, they just don’t care.

8 Bryan { 10.11.07 at 11:28 pm }

Hipparchia, for some reason you got flagged as spam, sorry about that.

First, as a carpenter he has to have disability insurance to get his business license in most jurisdictions, as well as, property and liability insurance. The rates are not cheap, and they are not optional.

They have made some good buying decisions and are making it in a tough racket – small business.

As for getting quotes based on zip codes, the rate for the zip code for the main post office boxes is probably great, since no one lives there. You need the zip code for their address, not just Baltimore, and then you need to know what’s covered in the policy. I can get a policy down here for next to nothing, and that’s exactly what’s covered – next to nothing.

I get the feeling that the kids got into the private school based on testing. That’s why they can get scholarship money. A lot of private schools do it to raise their ratings score and cover for the “gentleman Cs” of the moneyed class. The little girl is now covered by “special needs” funding.

They shouldn’t need CHIP, everyone should just be covered.

9 hipparchia { 10.12.07 at 1:55 am }

i’m sure it was the multiplicity of links; i was expecting it 🙂

everyone should just be covered is exactly right. this idea of forcing people to impoverish themselves, or forcing already impoverished people to humiliate themselves and beg, before giving them any help is beyond repugnant. the fact this t’s also economically, as well as ethicallly, the better choice to cover everyone— but i’m beginning to repeat myself.

at least you can get a policy…. but my point was less about what the lower priced policies cover or where you can find them, and more about refuting what that one person said about going online and easily finding an affordable policy in just a few minutes.

even in bad zip codes, you can get a good quote from an online search. the prices go up from there once the underwriting kicks in: pre-existing medical conditions? dangerous job? dangerous hobby? and your age is…? not to mention the fact that they can also charge you a higher health insurance premium based on your credit rating.

i wanted to start my own landscaping business some years ago. not quite as great a chance of lopping off body parts in landscaping as in carpentry, but you still have to get thousands and thousands of dollars of various insurances before you can get the various licenses, and it was going to cost me enough up front that i eventually decided that i couldn’t do it.

anybody, no matter what the business [except possibly mafia don or drug kingpin], who is making it as a small business owner deserves nothing short of accolades.

and of course i’ll like the story better if the kids have earned their scholarships based entirely on scholastic ability [there’s another “american dream” btw]. i hope that’s the real reason, rather then the one i posited.

10 Badtux { 10.12.07 at 4:20 pm }

Brian, a 650 square foot 1960’s vintage apartment with no garage and no air conditioning converted to condo sells for $365,000 around here. A 1970’s vintage mobile home in a standard trailer park sells for $250,000 around here. While property values in Baltimore are nowhere near Santa Clara, it wouldn’t surpise me if their home is now “worth” $400K even though, from the photo, it appears to be pretty much a dump.

11 Bryan { 10.12.07 at 5:53 pm }

Badtux, I would probably pay $300-400K for it based on when it was built because it would have been built with true dimensional wood [2X4s that are actually 2 inches by 4 inches] and hardwood that you can’t get anymore. They build boats in Baltimore so I assume that the people who built it were decent woodworkers.

The problem is that no one is buying property right now. There is no mortgage money. There are examples of builders auctioning off houses that went for $600K with a starting price of $300K. The housing market has collapsed, and if no one wants or is able to buy what you’re selling, the value is zero.

The Frosts apparently don’t think much of the school system, and not everyone is willing to live in a row house. The neighborhood can’t be too bad or the wingers wouldn’t have stopped by, but if no one is buying there’s no point in talking about value.

12 Badtux { 10.14.07 at 9:53 pm }

Bryan, I know where those $600K houses that auctioned for $300K are located. They are located 90 minutes away from the majority of employers in the San Francisco Bay area, and only eight of the houses sold in the first place. This was a case of a builder who way overpriced his inventory for the local conditions (the upswing in fuel prices hasn’t helped either, since it’s a 150 mile round trip from there to work, i.e. roughly $20 per day just for fuel), not a symptom of a lack of mortgage money. Brand new townhouses next door to me in the center of the “Golden Triangle” of the Silicon Valley (i.e. within 15 minutes of most major employers) are still selling for $750K and up, and brand new condos next door to me (basically apartments, except you buy rather than rent them, they were originally permitted as apartment buildings then re-permitted as condos with no change in the floor plans when the condo market went wild) are still selling for $450K and up. While the “liar loans” are now gone, apparently there do still exist people with the money to buy the right house in the right neighborhood — and that neighborhood is likely to be closer to where the Frosts live nowdays because folks have figured out that commuting to work for 3 hours a day sucks.

That said, you are correct that the current pricing is unsustainable without cheap money, especially as the flood of foreclosures hit the market. On the other hand, who’s picking up those foreclosures? Around here, it’s Chinese interests. Yeppers, just say hello to our new Chinese overlords oops landlords as they do their part to make sure that housing prices stay high (and thus their mortgage-backed securities in their portfolios remain valuable) via taking houses off the market until the prices go back up.

13 Bryan { 10.14.07 at 10:23 pm }

Send some of those Chinese down here, because the local market really sucks. There’s a duplex 3 bedroom/2½ bath at the end of the street that has had a For Sale in front of it for weeks, and no one is even nibbling. If they can’t sell it, the owners are going to have to rent it, because they are being transferred.

The places were built in 2004 and selling for upwards of $400K at one point, but he can’t get any interest at $175K. His best shot is the military for a rental, because locals can’t afford the rent he needs to get to cover the mortgage and condo fees.