Saturday, May 1, 2010

Solutions for our times...

When my Latino friend and housekeeper came to me years ago and told me that Bank of America had approved her and her husband for a loan on a $400,000 house (in a neighborhood where houses should never have cost $400,000) with $25,000 down, and told her their mortgage payments would be about $2000/mo, but that their tax savings would make up for the difference from their $900/ rent, I told her to run as fast and as far as she could. Doing the math and trying to figure out what was up, I first sent her back to B of A to ask, “What will my mortgage payments be in 6 months?” The answer that came back, “We don’t know because we don’t know what the rates will be in six months.” Wow, I thought, what’s the game? Why would Band of America want to take advantage of unsuspecting first time home buyers and get them into loans they can’t pay? I told my friend that we could expect lots of foreclosures down the line and that then she should look to buy a house for a lot less.

The rest, of course, is history. What still surprises me is how B of A came out of it so clean. Being the middle man, they managed to keep all the bad loans off their books; but how is it that none of the financial analysts has pointed a finger at them? Maybe because the majority of their victims were Latino? Just a theory.

The fact that I saw the mortgage debacle coming, and the powers that be did not still perplexes me. But given that I did, I no longer feel that I should keep my mouth shut when I see other things that seem obvious to me and don’t seem to occur to the folks in position make a difference. So here’s what I see now. Tell me what you think.

  • The Problem: Too few jobs. The Solution: Retire the baby boomers.

I heard a story recently on the news about how colleges are struggling because students are taking too long to graduate. Students staying 5 or 6 years in college make less room for incoming freshman since schools have only so many classrooms and so many teachers. The same applies to the job market.

There are many more baby boomers than there are people in the next generation. Furthermore, many boomers have not saved for retirement and, like it or not, are holding on to their jobs much longer than they might have planned. If they retired, the 10% job loss would disappear over night.

So why not craft a stimulus plan to encourage retirement? I am not an economist, but one thought that occurred to me would be to offer those who retire and scale down the opportunity to forego capital gains tax on the sale of their home so that they have some capital to live on. I am sure economists could come up with many more incentives.


  • The Problem: Illegal immigration. One Solution: Remove a primary incentive to illegal immigration by establishing that only those born in this country to parents who are legally here will be American citizens. This might require passing a constitutional amendment or it might be sufficient to change Title 8, Section 1401 of the US Code, which specifies the definition of a natural born citizen, and already contains an exception for children born to foreign diplomats while in the US.

Illegal immigration is a complex problem and one for which reasonable people have a difficult time agreeing on reasonable solutions.

This suggestion in no way takes a position on immigration itself as an issue. In fact, I contend that we have already have plenty of decent laws defining the United States’ immigration policy. My assumption is that we have a difficult time enforcing our borders and need to address the problem that many people come here illegally and establish homes and lives over long periods of time, making it difficult for us to just toss them out, even if we know who they are. Furthermore, since they cannot acquire social security numbers to pay taxes, or (in some states) get drivers licenses or legally be employed, they live under the radar and often compound the social burden of their greater community. Once they are here, they have no alternative but to use resources such as schools and hospitals without paying taxes, drive without a license, and get into car accidents as uninsured drivers.

The fact that many of these illegal aliens, having given birth in the US, are the parents of American children compounds the problem. Having taken away most of the decent jobs, what incentives are left for people to risk their lives and risk jail to enter this country? A big one is the possibility that their children will have a better future—as American citizens.

I consider myself a hard-core liberal. But having lived in California for 28 years, I know that another amnesty without a real effort to stem future illegal immigration would be foolish. If we really want to address the issue of illegal immigration, we need to stop people from establishing lives here before those lives become too difficult to unwind. And we need to be willing to take some tough steps and make some tough choices. But those steps need to be directed at the people whose behavior we are trying to change, not at random folks who look to someone like they do not fit in.