Toil Index and Tax Credits for Home Ownership

Robert Schiller from Yale gave props to Richard Green of USC for his recommendation that there be a targeted tax credit to encourage homeownership.  Green and Andrew Reschovsky of Wisconsin have studied the data closely are clear that the real benefit of existing tax policy allowing a standard deduction for interest on mortgages is for more wealthy homeowners who itemize their taxes.  They have concluded that this primarily encourages them to build bigger houses, rather than distributing the benefits as real incentives to home ownership.  The multi-billion dollar tax loss of interest deductions is the largest US investment in citizen wealth, and despite the fact that this investment has created homes as the single largest source of citizen wealth for many working families, the recent recession has now wiped out wealth for such families and destroyed confidence without offering an alternative for low-and-moderate income families to create wealth.  I’m not sure that these professors are right, but at least it is a way to go until we can right-size solutions to our current predicament and the emerging future.

Robert Frank of Cornell helped defined challenge to the middle class by creating what he called a “toil index” to puzzle out a problem he had recognized from Elizabeth Warren and her daughter’s book about the “two income trap.”  That problem was essentially that middle income families were being pushed into buying houses past their means in order to secure good schooling for their children.  He notes that, “The increase in the toil index has been spectacular.  From a postwar low of 41 hours a month in 1970, it rose to more than 100 hours in 2005.”

If a family is lucky, and it takes a lot of luck these days, to have two breadwinners working fulltime 100 hours of work would still be almost one-third of their income going to put a roof over their heads.  That doesn’t work under any calculation either for a family or for the entire economy which despite the failures of HAMP, Treasury, and the Obama Administration to address, is still very important to the US economy and the recovery from neighborhood to neighborhood around the country.


Near Poor: Trouble at the Dividing Line of Poverty

New Orleans                       Nothing like stumbling over the obvious, but then the whole point of being relatively poor or “near poor,” as the Times called it today, is being invisible, no matter what they or anyone else may want to call it.  In looking at the new numbers that try to define the terror and tragedy of poverty now being issued by the Census Bureau by examining how much money people really have to spent, as opposed to believing that anyone can “eat” something as gross as “gross income,” the razor edge between being dead ass broke and just barely scraping by is clearer.

It also has a number now thanks to a “freedom of information” request by the Times to the Census folks for the numbers of people that are only at 50% above the poverty line.  The numbers are huge:  51,000,000 people are “near poor” and bleeding at this sharp edge where any bad break can push them below the poverty line.  There are hundreds of reasons families are in this bind, including the housing crises, stagnant wages, undervalued work, medical bills, and whatever, but the point is they are there and it’s no picnic with no relief in sight.   According to the U.S. Census Bureau, the characteristics of the “near poor” include the fact that 50% include a married couple, 49% own their homes, 42% have health insurance, and 28% work fulltime.  On the “citizen wealth” index where I have argued that “maximum feasible participation” could spell the difference, 20% are barely above the poverty line solely because of benefits that they have successfully accessed.

Conservatives bickered over whether or not this means that 100 million people (counting the near poor and the rest of the poor) in the USA are “starving.”  This is hardly the point, because this is really an emerging definition of precariousness that would be the statistical point where any tremor or imbalance can push a family into deeper poverty and even hunger.

As an organizer of low-and-moderate income families, I was probably only asked to define that term a thousand times over the decades, but, like it or not, it now appears that we are getting closer and closer to a real definition, even though there seems to be no will or reason that any are arguing to do something about it.