VA

Back in the days when I was doing retirement planning I had to learn about Civil Service benefits. Since 1984 all new federal employees had to join the federal employee retirement system (FERS) and civil service was phased out and there are very few employee who remain in the civil service plan. One of the biggest concerns that employees had when this change was made was whether their union benefits would be changed and they were assured they would not be changed. It was well known at that time that it was difficult and in some cases impossible to fire anyone in the union. In most cases there is a suspension and then the employee is allowed to come back to work. Recently high ranking officials in the VA have been terminated but they have repealed their cases and will be allowed to return to work. A notoriously corrupt Department of Veterans Affairs (VA) manager fired in the first day of President Donald Trump’s presidency — to rousing acclaim from veterans who heralded it as a sign of lasting reform — has been returned to work by VA officials after he filed a civil-service protections appeal. Two Department of Veterans Affairs administrators in Phoenix who were suspended at the outset of a crisis over delayed patient care will return to work Monday, 19 months after they were put on paid leave and given termination notices. This is one of the reasons that it has been so difficult to reform the VA.

Rich and poor

Now with the benefit of hindsight is a good time to review just what happened in the mortgage crisis of 2008. I purchased my first home in 1959 with 4% down payment and a 28% debt to income requirement. This meant that my principal and interest payment plus property tax could not exceed 28% of my gross income. In those days as is still much of the case the cities were segregated by race. The Blacks lived mostly in one area of town and as they came in to apply for a home mortgage the banks would refuse the loan because the borrowers did not meet the required debt to income ratio and did not have enough down payment. Through the 60’s and most of the 70’s this practice continued until one enterprising group did a study and discovered that Blacks were being discriminated against when it came to home buying. This resulted in the passage of the Community Reinvestment Act of 1977 which required banks to make loans to unqualified borrows or be penalized in various ways. After years of disruption of mortgage banks by federal agencies the banks were finally allowed to lower the requirements for mortgages and this came to a head during the Clinton Administration when President Clinton told his HUD secretary Henry Cisneros to use creative financing to get more low income people into the American dream of home ownership and this opened the flood gates. This resulted in what were called NINA loans. No income and no assets! Just about any warm body would now qualify for a home loan. While these changes were occurring another practice became popular and that was the local mortgage company selling the mortgage to another company like Fanny Mae. This meant that the local bank would no longer be responsible if the home owner defaulted. This whole process by design would lead to many defaults mostly among low income borrowers who should not have received a loan in the first place. Then to compound matters many fold the major loan companies began to sell these mortgages as investments. They would put together a bundle of up to 5,000 mortgages and offer them as investments. While interest rates on bank CD’s were running 3%, home mortgage bundles were paying 6% so there was a big demand for these bundles. Rating companies jumped into the fray and rated these bundles as triple A and thus they qualified for pension fund investments. As long as the value of homes kept rising this Ponzi scheme could continue to grow but in time people realized that these mortgages were only good as long as the borrower kept up the payments. As more and more borrowers began to default the house of cards began to crumble. When all the dust settled the government had bailed out the banks and insurance companies and the poor homeowners lost their equity. As my dear mother used to say, the rich get richer and the poor get poorer.

New home solar panels

When President Obama said he wanted to look at all energy sources to combat climate change he was on the right track. Unfortunately most of his emphasis was on solar panels and electric cars. There are two uses for solar panels that currently make sense. The first is to use a small (4 sq ft) panel to power lap tops for use in third world counties where small communities are without a power source. The second is roof top solar panels on new home construction. The estimate cost is $30,000 and when added to a 30 year mortgage that comes to $150 per month which is the average cost of electric power to the average home. These panels last for 30 years and would be replaced when the roofing shingles need replacement. These panels will supply more power than is needed and the excess can be sold back to the power company and those savings can be accumulated in a sinking fund to pay for panel replacement. The cost of solar panels keeps coming down and government will provide incentives to install panels so the original cost can be cut in half. New designs in panels have improved the appearance. Power companies are influencing some states to pass laws which prohibit the sale of excess power back to the power company. One of the problems which happened in Nevada was that only wealthy people could afford to install the panels on existing homes and the price of electric power was increased on those who could not afford panels. Installing panels in new homes is more cost effective and many more people can afford this.

Natural gas expansion

Climate change is still being infected with politics instead of science and economics. The upcoming Paris meeting is a case in point. This agreement states: The Paris Agreement requires all Parties to put forward their best efforts through “nationally determined contributions” (NDCs) and to strengthen these efforts in the years ahead. For China and India the world’s two biggest producers of CO2 this means push ahead with building coal plants and offer reductions only many years in the future. Their feeling is that the Western countries went through the industrial revolution using coal and they are just catching up and have the right to do so. To sign this agreement means nothing accept it looks good politically. The US can best do its part by continuing to replace coal fired plant with natural gas. Here are two results of the US efforts in this area. The first is that carbon dioxide emission growth seems to be slowing. 2015 marked the 2nd straight year that the increase in emissions was smaller than the year before But the second positive note in the numbers is that the U.S. continues to lead the world in reducing carbon dioxide emissions. In 2015, U.S. carbon dioxide emissions fell by 145 million tons, by far the largest decline of any country in the world. The next step for the US is to move the transportation industry over to natural gas, something that should have started years ago but politics is in the way. Step two, the recent agreement of China to buy natural gas from the US will make a profound difference and should be expanded to India.

Investigation

Over a two year period there were 7 committees that investigated the Benghazi affair at a cost of 7 million and nothing came of it. The overt purpose was to find out how and why an American was killed. The covert purpose was to find something to blame on Hilary Clinton. The probe finally stopped when Clinton lost the election. We now have six agencies and a special prosecutor investigating the Trump-Russian connection. It has been going on for ten months and will likely continue as long as Trump is in office. The official purpose is to make sure that Russian cannot interfere with our elections but the unofficial reason is to get some dirt on Trump. If this goes on until he is out of office it will cost far more than 7 million.

cost of healthcare

For people like myself who worked in the insurance business it has always been obvious that the way to hold down cost was by limiting service and this is done in two ways. First is to have high deductibles as is the case in Obamacare. Second is rationing which is done with Medicare. When Obamacare first came out I pointed out that all the conversation was about the monthly cost (premiums) but when people went to use the service and discovered the deductible they would be in for some sticker shock. This has now come to pass. The middle income working people pay for most of the free Obamacare but seniors also pay through rationing since Obamacare took about 700 billion from Medicare in payments to doctors and hospitals. Even after Obamacare has insured 20 million new people there are still 28 million without insurance. In 2010 the estimated cost of Obamacare over ten years was $940 billion. In 2012 the cost was raised to $1.76 trillion. In 2014 the cost estimate was 2 trillion which is more than double the cost only 4 years earlier. As the deductibles continue to increase the total health care cost will begin to stabilized.

Race

When I was growing up our sports heroes were noted for their humility and this was best illustrated by Lou Gehrig. He would say things like, Aw shucks guys, I just tried to help the team. This was the norm until Ali came along and announced to the world, I am the greatest. This was followed up mostly by black athletes with their trash talk on the court and dancing in the end zone. I personally thought the dancer should run down the field and shake hands with the offensive linemen but that is old school. When Sam Phillips said about Elvis, If I could find a white man who had the Negro sound and Negro feel, I could make a billion dollars When Joe Biden said what many were thinking about Obama he surprised many. I mean, you got the first mainstream African-American who is articulate and bright and clean and a nice-looking guy Now we have come full circle with Trump saying the equivalent of I am the greatest. Maybe we are getting away from some of our stereotypes and on our way to a race free society.