August 20, 2005

This Weekend’s Unanswered Questions (082005)

Filed under: Economy,General,Taxes & Government,TWUQs — Tom @ 6:59 am

Another installment in a nearly-regular series of mysteries and pseudo-mysteries (usually 3-4) this inquiring mind would like to have answers for (some links included may require free registration):

QUESTION 1: Is there anyone who still supports the long-discredited idea of “comparable worth” compensation schemes?

USA Today must think so, as it uses Supreme Court nominee John Roberts’ opposition to the idea in an attempt to discredit him (HT Michael Barone):

As an assistant White House counsel in 1984, John Roberts scoffed at the notion that men and women should earn equal pay in jobs of comparable importance, and he belittled three female Republican members of Congress who promoted that idea to the Reagan administration.

The memo from Roberts, now President Bush’s nominee to the U.S. Supreme Court, was a response to a letter that the three women — one of whom was Olympia Snowe of Maine, now a U.S. senator — had sent to the administration. The women had said that the concept of “equal pay for equal work” had not sufficiently boosted women’s wages because women were not in many of the same fields as men. The three were promoting the notion of equal pay for different jobs of comparable value, based on factors such as skills and responsibility.

In his memo to White House counsel Fred Fielding, Roberts said the women’s letter “contends that more is required because women still earn only $0.60 for every $1 earned by men, ignoring the factors that explain that apparent disparity, such as seniority, the fact that many women frequently leave the work force for extended periods of time. … I honestly find it troubling that three Republican representatives are so quick to embrace such a radical redistributive concept. Their slogan may as well be, ‘From each according to his ability, to each according to her gender.’”

Comparable-worth implementation would throw out the supply-and-demand driven employment market and replace it with what would be in effect a “Ministry of Comparable Worth” that would decide what people should be paid based on the “value” of what they do. It would be guaranteed to create shortages of available talent in some lines of work and surpluses in others. It would be a gold mine for litigants and their attorneys who dispute the Ministry’s findings.

Comparable worth is so divorced from reality that even those who claim to support it won’t touch it with a 10-foot pole when they have a chance, as Barone notes:

Almost every sensible person knows this is a terrible idea.

….. But don’t take my word on comparable worth. Look what happened when the Clinton administration took office and, for two years, the executive and legislative branches were controlled by Democrats. So far as I know, no significant effort was made to enact a comparable worth program. The Clinton administration was staffed with a lot of smart women, almost all of them feminists of one stripe or another, well educated and knowledgeable about government. Did Health and Human Services Secretary Donna Shalala, one such person, push for comparable worth? Did first lady Hillary Rodham Clinton? Did Attorney General Janet Reno? If so, I missed it.

If John Roberts favored comparable worth, it would, in my opinion, instantly disqualify him from the consideration as a Supreme Court justice. How USA Today thinks the opposition he expressed 20 years ago could possibly hurt him is a mystery without a clue.

QUESTION 2: When will Cuba’s backers acknowledge its abject failure?

From the Dallas Morning News (requires registration; HT Babulablog, the go-to place to get news of Cuban dissidents):

Cuba: an island of despair

HAVANA, Cuba–At the risk of being devoured by sharks, Juan Carlos is secretly preparing to escape Cuba by boat.

“I’ve had enough,” said the 32-year-old cook, who earns less than $15 a month. “When I get home from work, there’s no electricity, no water and no gas. I swat mosquitoes all night, then get up at 6 to go to work again. If you were in my shoes, I guarantee you’d leave, too, even if you had to climb into a bedpan and paddle to Florida.”

The socialist government that Washington has spent hundreds of millions of dollars trying to topple is on the brink again. Not because of a lack of human rights or democracy, but because of something as simple as keeping the lights on and providing basic services, according to an August report by the University of Miami’s Institute for Cuban and Cuban-American Studies.

Most of the article is at Babula if you don’t want to register at the DMN (though I suggest you do; it is reasonably open-minded for a mainstream newspaper).

It’s bad enough that the Cuban people have endured a brutal dictatorship for 40 years. It’s worse when people who should know better still sing its praises, especially the tiresome “free health care for all” mantra. Based on the pictures and content at this post at Captain’s Quarters, no-cost Cuban health care is still way overpriced.

I actually think it’s to the point where all but the loopiest lefties believe in their hearts that Cuba has been an abject failure, but just don’t have the integrity to admit they have been wrong all along after so many years. It appears that Harry Belafonte is one of the few legitimate true-believer holdouts, as this bizarre interview from 2003 indicates. Whether he’s capable of critical thinking, however, is an open question.

Perhaps Mr. Belafonte can explain why an island nation of 11.3 million needs 300 prisons, instead of the 11 prisons that existed before Fidel established his Peoples Paradise (warning: many photos and narratives at internal pages at the linked site are graphic and disturbing).

Regime change in Cuba cannot occur soon enough.

QUESTION 3: How much pressure can California homeowners take?

One in five Californians who bought homes in the past couple of years has a house payment that is more than half of gross income (HT PrestoPundit):

Guidelines from the U.S. Department of Housing and Urban Development recommend that a household pay a maximum of 30 percent of its income on housing costs, which include mortgage, taxes, insurance, utilities and related costs such as condominium fees. (Lenders actually prefer 25%-28%–Ed.)

But the institute’s report says that 40 percent of all California households with mortgages are beyond this limit, and it’s even greater for recent home buyers.

Fifty-two percent of shoppers who bought a home in the past two years spend more than 30 percent of their income on housing, the report says. In fact, 20 percent of the newest buyers spend more than half of their income on housing costs.

To be clear, that’s over half of gross income before taxes, not half of net after taxes. Assuming a homeowner pays 20% or so of their gross in Social Security, federal income, and state income taxes, there’s not much left for everyday living, and certainly not a lot of room for financial mistakes or setbacks, especially if the ability to keep paying the mortgage is based on the continuation of two incomes. And the ratio described, usually referred to as the Front-End Ratio, doesn’t even consider other debt payments (cars, credit cards, etc.).

It seems that home prices and salaries almost have to continue going up quickly for people in these high-ratio situations to be able to hang in there. High-ratio buyers in variable-rate mortgages have a third worry of interest-rate increases. Although it doesn’t necessarily spell trouble for the economy as a whole, this level of house payment has to be stressful on the individual or family involved.

It would also be interesting to know, given the Front-End Ratio guideline, how loans with 50% Front-End Ratios are getting approved, even if the applicant is otherwise debt-free, which I would think is pretty rare.