US Homelessness Rate Rose This Year For First Time Since 2010

Here’s one statistic about the US economy that you probably won’t find in President Trump’s twitter feed.

Thanks to a surge in homelessness centered around several large west coast cities, the overall rate of homelessness in the US ticked higher this year, the first increase since 2010, according to a survey from the Department of Housing and Urban Development.

The U.S. Department of Housing and Urban Development released its annual Point in Time count Wednesday, a report that showed nearly 554,000 homeless people across the country during local tallies conducted in January. That figure is up nearly 1 percent from 2016.

 

Of that total, 193,000 people had no access to nightly shelter and instead were staying in vehicles, tents, the streets and other places considered uninhabitable. The unsheltered figure is up by more than 9 percent compared to two years ago.

 

Increases are higher in several West Coast cities, where the explosion in homelessness has prompted at least 10 city and county governments to declare states of emergency since 2015.

The homelessness crisis is only one byproduct of the burgeoning wealth inequality in the US caused by the Federal Reserve’s decision to pump trillions of dollars of “stimulus” into the markets.

Central-bank money printing has caused asset valuations to balloon while wages for everyone but the most highly skilled workers have stagnated, as the chart below illustrates.

Ironically, the primary culprit that city officials and advocates for the homeless cite as the reason behind the spike in homelessness is a strong regional economy that’s helped drive housing prices to record highs - of course, rock-bottom interest rates have made it cheaper to borrow and obtain mortgages.

All of this is helping driving up rents across every segment of the real-estate market - particularly in trendy urban areas like LA, San Francisco and Seattle.

According to the Associated Press, the most alarming consequence of the West Coast homeless explosion is a deadly hepatitis A outbreak that has afflicted Los Angeles, Santa Cruz and San Diego, the popular tourist destination in a county where more than 5,600 people now live on the streets or in their cars. The disease is spread through a liver-damaging virus that lives in feces.

Homeless populations in California, Oregon and Washington grew by 14% over the past two years, meanwhile the segment of that population considered unsheltered climbed 23% to 108,000. That is in part due a shortage of affordable housing. The unsheltered population in Seattle, the city that’s home to Amazon.com, grew by 44% over two years to nearly 5,500.

The homeless service area that includes most of Los Angeles County, the epicenter of the crisis, saw its total homeless count top 55,000 people, up by more than 13,000 from 2016. Of these, four out of every five are considered unsheltered, meaning tens of thousands of people have no place to sleep other than the streets or parks.

By comparison, while New York City’s homeless population grew to more than 76,000, only about 5 percent are considered unsheltered thanks to a system that can get people a cot under a roof immediately. In the West Coast states, the surge in homelessness has become part of the fabric of daily life.

For many business owners on the west coast – particularly in areas near downtown LA where the infamous Skid Row is home to thousands of homeless people – the burgeoning population of people living in the open air routinely intrudes on daily life and business.

The Monty, a bar in the Westlake neighborhood near downtown Los Angeles, usually doesn’t open until 8 p.m. Partner and general manager Corey Allen said that’s because a nearby shelter requires people staying there to be in the building by 7. Waiting until after that to open means the streets outside are calmer.

 

Allen said the homeless have come into his bar to bathe in the restroom wash basins, and employees have developed a strategy for stopping people from coming in to panhandle among customers.

 

Seventy-eight-year-old Theodore Neubauer sees the other side of it. Neubauer says he served in Vietnam but now lives in a tent in downtown Los Angeles. He is surrounded by thriving business and entertainment districts, and new apartments that are attracting scores of young people to the heart of the nation’s second most populous city.

 

“Well, there’s a million-dollar view,” he said.

 

Helping those like Neubauer is a top policy priority and political issue in Los Angeles.

One of the most interesting characteristics of the spike in homelessness is the concentration of homeless populations in places like LA. If one were to exclude the nation’s second largest city from the data, the national homelessness rate would’ve dropped 1.5%.

Of course, it makes sense that homeless people would gravitate towards cities on the west coast where services for the indigent are plentiful and the risk of dying from exposure is significantly reduced.

However, in cities like Sacramento, where rising housing costs are forcing students at Sacramento State to give up their apartments in sleep in the 24-hour study lounge. Sacramento and Alameda County each saw increases of more than 1,000 homeless individuals over the past year.

Last year, voters in the city and Los Angeles County passed a pair of tax-boosting ballot initiatives to raise an expected $4.7 billion over the next decade for affordable housing and services for the homeless.

HUD Secretary Ben Carson praised the region for dealing with the issue and not relying solely on the federal government, but LA mayor Eric Garcetti responded that insufficient federal funding for affordable housing was one of the drivers of the crisis.

“We need to move a little bit away from the concept that only the government can solve the problem,” Carson said.

 

But Mayor Eric Garcetti said that insufficient federal funding for affordable housing and anti-homelessness programs are part of the reason for the city’s current crisis.

 

“Los Angeles’ homelessness crisis was not created in a vacuum, and it cannot be solved by L.A. alone,” Garcetti said in a statement.

Meanwhile, areas that recorded a decline in homelessness, according to the survey, include Atlanta, Philadelphia, Miami, the Denver area and Hawaii, which declared a statewide homelessness emergency in 2015.

"That's The Wrong Way To Go" - Robert Shiller Slams America's "Excessive Lust For Wealth"

Authored by Robert Shiller, originally posted op-ed at The New York Times,

The Transformation of the ‘American Dream’

“The American Dream is back.” President Trump made that claim in a speech in January.

They are ringing words, but what do they mean? Language is important, but it can be slippery. Consider that the phrase, the American Dream, has changed radically through the years.

Mr. Trump and Ben Carson, the secretary of housing and urban development, have suggested it involves owning a beautiful home and a roaring business, but it wasn’t always so.

Instead, in the 1930s, it meant freedom, mutual respect and equality of opportunity.

It had more to do with morality than material success.

This drift in meaning is significant, because the American Dream - and international variants like the Australian Dream, Le Rêve Français and others - represents core values. In the United States, these values affect major government decisions on housing, regulation and mortgage guarantees, and millions of private choices regarding whether to start a business, buy an ostentatious home or rent an apartment.

Conflating the American dream with expensive housing has had dangerous consequences: It may have even contributed to the last housing bubble, the one that led to the financial crisis of 2008-9.

These days, Mr. Trump is using the hallowed phrase in pointed ways. In his January speech, he framed the slogan as though it were an entrepreneurial aspiration.

“We are going to create an environment for small business like we haven’t seen in many many decades,” he said, adding, “So, essentially, we are getting rid of regulations to a massive extent, could be as much as 75 percent.”

Mr. Carson has explicitly said that homeownership is a central part of the Dream. In a speech at the National Housing Conference on June 9, he said, “I worry that millennials may become a lost generation for homeownership, excluded from the American Dream.”

But that wasn’t what the American Dream entailed when the writer James Truslow Adams popularized it in 1931, in his book “The Epic of America.”

Mr. Adams emphasized ideals rather than material goods, a “dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement.” And he clarified,

“It is not a dream of motor cars and high wages merely, but a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and recognized by others for what they are.”

His achievement was an innovation in language that largely replaced the older terms “American character” and “American principles” with a forward-looking phrase that implied modesty about current success in giving respect and equal opportunity to all people. The American dream was a trajectory to a promising future, a model for the United States and for the whole world.

In the 1930s and ’40s, the term appeared occasionally in advertisements for intellectual products: plays, books and church sermons, book reviews and high-minded articles. During these years, it rarely, if ever, referred to business success or homeownership.

By 1950, shortly after World War II and the triumph against fascism, it was still about freedom and equality. In a book published in 1954, Peter Marshall, former chaplain of the United States Senate, defined the American Dream with spiritually resounding words: “Religious liberty to worship God according to the dictates of one’s own conscience and equal opportunity for all men,” he said, “are the twin pillars of the American Dream.”

The term began to be used extensively in the 1960s. It may have owed its growing power to Martin Luther King’s “I Have a Dream” speech in 1963, in which he spoke of a vision that was “deeply rooted in the American Dream.” He said he dreamed of the disappearance of prejudice and a rise in community spirit, and certainly made no mention of deregulation or mortgage subsidies.

But as the term became more commonplace, its connection with notions of equality and community weakened.

In the 1970s and ’80s, home builders used it extensively in advertisements, perhaps to make conspicuous consumption seem patriotic.

Thanks in part to the deluge of advertisements, many people came to associate the American Dream with homeownership, with some unfortunate results. Increasing home sales became public policy.

In 2003, President George W. Bush signed the American Dream Downpayment Act, subsidizing home purchases during a period in which a housing bubble — the one that would lead to the 2008-9 financial crisis — was already growing at a 10 percent annual rate, according to the S.&P. Corelogic Case-Shiller U.S. National Home Price index (which I helped to create).

This year, Forbes Magazine started what it calls the “American Dream Index.” It is based on seven statistical measures of material prosperity: bankruptcies, building permits, entrepreneurship, goods-producing employment, labor participation rate, layoffs and unemployment claims. This kind of characterization is commonplace today, and very different from the original spirit of the American dream.

One thing is clear: Bringing back the fevered housing dream of a decade ago would not be in the public interest. In “House Lust: America’s Obsession With Our Homes,” published in 2008, Daniel McGinn marveled at the craving for housing in that era: “In many neighborhoods, if you’d judged the nation’s interests by its backyard-barbecue conversation — settings where subjects like war, death, and politics are risky conversational gambits — a lot of people find homes to be more compelling than any geopolitical struggle.”

This is not to say that homes have no appropriate place in our dreams or our consciousness. To the contrary, in a 2015 book “Home: How Habitat Made Us Human,” the neuroanthropologist John S. Allen wrote, “We humans are a species of homebodies.” Ever since humans began making stone tools and pottery, they have needed a place to store them, he says, and the potential for intense feelings about our homes has evolved.

But the last decade has shown that with a little encouragement, many can easily become excessively lustful about homeownership and wealth, to the detriment of our economy and society.

That’s the wrong way to go. Instead, we need to bring back the American Dream of a just society, where everyone has an opportunity to reach “the fullest stature of which they are innately capable.”

These Are The Cities Where Rent Hikes Leave The Most People Homeless

The idea that rising rents beget increases in a city’s homeless population is nothing new. But in a recent study, Zillow, the online real-estate database company, used a mix of government and proprietary data to examine how much influence an increase in the first variable has on the second.

The result was surprising.

Using a mix of government data and its own proprietary databases, the company found that the magnitude of rising rents’ impact on local homeless population varies widely between cities, even when two of those cities both have worsening homelessness problems.

For example, when the rent rises 5 percent in Atlanta, another 83 people become homeless. In New York, about 3,000 do, according to a Bloomberg analysis of the data.

“That 5 percent rent hike in Atlanta can be expected to boost the homeless population by 1.5 percent—in New York, by 3.9 percent. Cities such as Pittsburgh, Minneapolis, and Detroit may have smaller homeless populations, but theirs are also sensitive to rising rents."

The key variable here, as Skylar Olsen, a senior economist at Zillow, explains is the amount of slack, or rental vacancy rate, in a given market.

“Rent hikes are likelier to force more people into homelessness in housing markets with less slack, said Skylar Olsen, a senior economist at Zillow. Cities such as Houston and Tampa, she added, have been more successful in preventing rising rents from forcing people out of their homes. The study used the geographic definitions that HUD uses to count homeless populations, she said.

The U.S. is short more than 7 million housing units that extremely low-income households can afford, according to the National Low Income Housing Coalition, which defines such households as earning less than 30 percent of area median income. Such low-income renters may not be living in homes with the area’s median rent, but a median rent hike can boost prices for even the cheapest market-rate units.

‘There’s an overarching supply of units that’s becoming a real problem,’ Olsen said. ‘People move down the ladder, and it pushes everyone else down, and eventually the bottom rung falls off.’”

Of course, rent isn’t the only factor affecting rates of homelessness; government-assistance programs funded by Housing and Urban Development keep hundreds of thousands of borderline Americans in their own homes.

Now, the White House is proposing legislation that would strip $7.4 billion from HUD’s 2018 budget. Those cuts would eliminate 250,000 rental-assistance vouchers from the Section 8 housing program, according to Bloomberg. The cuts mean that the local housing officials who distribute the vouchers will need to reduce, or in some cases remove, their assistance.

Some of those cuts will be cushioned by regular turnover, since some voucher recipients move out of the program every year, for one reason or another. But the level of proposed cuts means many local housing authorities will have to reduce how much assistance they supply to voucher holders—or, in some cases, take it away entirely. According to data from the National Low-Income Housing Coalition, the US economy is already short 7 million affordable homes. A policy change like this one would likely cause that number to rise.
 

The Striking Reason Why The US Just Spent A Record $429 Billion In One Month

On Thursday morning the CBO released a surprisingly upbeat assessment of Donald Trump"s proposed budget, calculating that it would cut the cumulative US deficit by 30% over the next decade, preventing the US debt from spiraling out of control (even further).

That however. may be an overly optimistic assessment, especially following the release of the latest monthly budget data, which showed that not only did the US deficit surge to $90 billion, far above the $38 billion consensus estimate, and a "NM" compared to the $6.3 billion budget surplus in June of last year, but the US also saw the biggest one month outlay on record, at $429 billion, 33% higher than the $323 billion in outlays one years ago.

What prompted this massive surge in outlays?

The biggest reason for the outlier print is that according to Stone McCarthy, outlays increased by roughly $60 billion in "other" items relative to baseline because the Treasury revised up its estimates of the subsidy cost of student loans, and to a lesser extent housing, it guarantees.

Here is the CBO explanation:

Outlays for the Department of Education rose by $31 billion (or 51 percent), because the department revised upward, by roughly $39 billion, the estimated net subsidy costs of loans and loan guarantees issued in prior years—a change much larger than last year’s $7 billion upward revision. If the effects of those revisions were excluded, outlays for the department for the first nine months of fiscal year 2017 would have fallen by $2 billion (or 3 percent).

Outlays for the Department of Housing and Urban Development rose by $29 billion, primarily because the department made upward revisions in June 2017, but downward revisions in April 2016, to the estimated net subsidy costs of loans and loan guarantees issued in prior years.

The cost of those loans is treated in the budget on a present value basis, not a cash basis and the Treasury periodically revises these costs. (It should be noted that the associated increase in outlays doesn"t impact Treasury borrowing or debt under the debt limit.) If not for these special factors, Treasury would have reported another small surplus for June... however it did not.

On the revenue side, things were just as bad with the US Treasury collecting only $338.7BN, just 9% higher than the $330BN in June of 2016.

What makes the surge in the deficit especially surprising is that June is often a surplus month, as the Treasury receives large corporate and non-withheld individual tax payments in that month.

One theory explaining the shortfall in revenues reflects taxpayers delaying the recognition of income in 2016, anticipating tax cuts this year. That revenue should eventually be recovered. About a third of the revision was on the outlay size, with a large chunk due to changes in the estimated subsidy costs described above. Based on the CBO revisions, it appears that the deficit for the fiscal year, which has three months left, will be in the $650 billion to $700 billion range, if not even higher, mostly due to the surge in "subsidy costs of housing and student loans" guaranteed by the Treasury.

Combining these two means that YTD, the deficit jumped to $523.1BN vs $399.2BN last year.
While many analysts had a deficit base case for fiscal 2017 at roughly
$575BN (the year ends on Sept 30), the CBO recently revised its
projection for the fiscal 2017 up by $134 billion to $693 billion. Most of the CBO revision reflects weaker than expected revenues, which means it will be even more surprised when it finds out what is going on with outlays.

To summarize: what the unexpected surge in government spending means is that quietly and mostly behind the scenes, the student debt bubble has begun to burst, and the Treasury is "provisioning" for it in real time, with all US taxpayers once again on the hook.

Finally, since the $1.4 trillion and rising student debt bubble is expected to end up with discharges of 35% if not higher, it means that over the next several years, the budget deficit will be incrementally boosted by approximately $500 billion as America"s taxpayers are once again taken to the cleaners, this time to bail out millions of liberal arts majors who for one reason or another just can"t pay back their student loans.

h/t @SMRA

6 Steps Toward A More Sane Economic Policy

As the Trump administration takes shape, it may be helpful to remind ourselves of some of the steps that can be taken in the direction of economic policy that better allows private citizens to be free and flourish. Given his expressed views, there"s no reason to believe he plans to radically re-orient the federal government in the direction of freedom and free markets. However, any one of these steps below — even partially implemented — would be a step in the right direction. 

One: Eliminate all federal cabinet level agencies related to regulating economic life.

Of the current cabinet level bureaus, the following should be eliminated immediately, including all departments within these bureaus, such as OSHA (within the Department of Labor) and the EPA (customarily accorded cabinet rank):

1. Agriculture


2. Commerce


3. Labor


4. Energy


5. Education


6. Housing and Urban Development


7. Transportation

The above seven agencies spent $667 billion in 2010, representing 23% of all federal spending.

Two: Eliminate the central bank — the Fed — and scrap legal tender laws.

Of course, a free market must include freedom of its participants to use whatever medium of exchange — money — that it chooses. Money is part and parcel of the market economy. It arises naturally to break the limits of a barter economy, also known as direct exchange. Commodity money becomes indirect exchange, whereby market participants trade for the most widely accepted commodity rather than trade directly to satisfy their ultimate goals. There is no need for the state to dictate what may be used for indirect exchange. Market participants themselves are in the best position to determine which commodity makes the best money.

Furthermore, central bank produced and controlled money has allowed government to act like a common counterfeiter, producing money out of thin air to fund its own spending programs and/or reward its supporters, all at the expense of society as a whole. It is much easier to fund wars and welfare out of printed money than taxes, or borrowing from real savings. The steady erosion of money"s purchasing power hits retirees the hardest, diminishing their ability to plan for a retirement of comfort and dignity. Furthermore, the Austrian theory of the business cycle places fiat money expansion as the root cause of the boom/bust cycle that misallocates and eventually destroys capital.

Three: Eliminate government licensing of occupations and products.

The best regulator of quality in products and services remains the marketplace. Government agencies protect the status quo, erecting unnecessary barriers to cheaper, affordable alternative services. There is no objective standard for determining service quality. This is a judgment of market participants themselves. In a free market unscrupulous and incompetent practitioners are weeded out by competition and ordinary commercial and tort law.

Four: Eliminate standing in court of third parties.

Environmental groups and other anti-business, anti-development groups file suits to stop projects over which they are not parties. These third parties do not own affected property, and cannot show that they are suffering real harm — as opposed to hypothetical or psychological harm such as the loss of scenic views. In the case of "scenic views," for example, such groups are always at liberty to solicit funds from their members to buy and set aside what they consider special, scenic areas. Like licensing of occupations under the banner of consumer protection, there is no objective standard of what is and is not a scenic view or special area. Only consumers themselves, acting in in the marketplace, can decide such things. Environmental groups cannot assume to have a superior, or more insightful position outside the market, because there is no standard for determining such things as beauty. These are subjective evaluations which change constantly. If you think this is not the case, just study the rural cemetery movement of the nineteenth century in which the world"s best landscape architects were hired to design cemeteries where families would spend many hours each weekend among their ancestors.

Five: Restrict recipients of monetary damages for violations of commercial law, torts, and other harms.

Only the parties to a dispute who have standing in court as suffering real damages should be compensated financially for violations of the common law, and these compensations should go entirely to the parties involved, not third party whistleblowers and/or their attorneys. Current friend-of-the-court rules allow meddling by third parties who can delay business projects almost indefinitely or drive up costs until the projects are abandoned. Those who suffer are the project developers, of course, plus all the unseen employees who never became employees and all the projects" happy customers who never became happy customers.

Six: End all subsidies.

If a business cannot produce a profit acceptable to its investors, then the investors should close it down and invest their scarce capital in a business whose product is more highly desired. Businesses that produce losses are prima facie evidence that capital is being consumed rather than accumulated. Private investors will close down such businesses or lose all their capital. Government subsidies plunder existing capital in order to prop up those businesses that are consuming it. But subsidies do not stop capital deccumulation.Typically high profile businesses, those with large union workforces, or those politically connected are the recipients of capital provided by common, working people. In other words, subsidies are theft.