Mike Tierney of the Navigating Your Money podcast interviewed me last week and has already put the show up. Listen to me natter on about frugal living here:

Episode #19: Live Like You Have More, On Less

I haven’t actually listened to it. I find the idea of doing so fills me with dread. (I’ve heard other people say similar things, but am a little surprised to find myself so strongly affected.)

Wise Bread’s Will Chen has assured me that I sound reasonably articulate:

I especially like the part where you explained that a budget is not a limit but rather a tool for showing you what you CAN have. The part about sharing tools is also a really awesome part. You did great, but the host is also really good. He clearly has read through your material and gets your philosophy.

So there you have it. If you’re interested in what I’ve been saying, but you want to hear it in my voice rather than reading it on the screen, here’s your chance.

The tea-party right was willing to risk the hard stop in spending that would have resulted from running up against the debt limit—a game of chicken that neither the Democrats nor the sane fraction of the Republicans could take the risk of losing.

The fiscal cliff looks a little similar, but it’s much less dangerous. It’s a game that lends itself to playing through to the end, because the risk of losing isn’t nearly so bad.

Suppose we did go over the fiscal cliff. What would happen?

First, tax rates would go up for everybody. That’s bad, but it’s not terrible. Actually, taxes at those rates would produce revenue roughly equal to the amount of government people seem to want.

Second, spending would be cut, with the cuts falling on almost everything except Social Security. A lot of good stuff would be cut, but that might not be such a stiff price to pay, considering that a lot of the things that ought to be cut (such as defense spending far beyond our needs) would otherwise be very hard to cut.

The result would be a rough year or two, hard on everybody from working-class folks to defense contractors, but all those problems would be fixable. In fact, Congress would love to fix those problems! Congress could cut taxes! (Just not as much as Bush did.) Congress could boost spending! (Just not to current levels.) Really, there’s nothing congressmen like better than cutting taxes and spending money on stuff.

The other details are similar. The AMT would strike middle-class folks hard, but that could be fixed, too. In fact, having to fix it would be an opportunity to improve it—turn it back into what it was supposed to be, a minimum tax rate that applies to everyone, no matter how many tax shelters they have or how many special preferences they qualify for. The end of the “doc fix” would hurt health care providers, but that could be pretty easily fixed too. (We’ll no doubt have to make a lot of small changes to healthcare stuff, once health care reform goes into effect and we run into the inevitable glitches.)

It’s always hard to raise taxes and cut spending, so it’s hard to do what needs to be done. But that’s why the fiscal cliff is so perfect. Once we go over the edge, we won’t need to raise taxes and cut spending—we’ll need to cut taxes and raise spending, and that’s dead easy.

Dive over the fiscal cliff, then fix things. It’s not perfect, but it wouldn’t be nearly as bad as what we’ve got now.

The town of Savoy, just south of Champaign, makes a point of having lower taxes. They do so by not providing many of the amenities that Champaign and Urbana provide—no bus service, no public library, etc. Residents, since they can be free riders on Champaign and Urbana services, like the situation just fine.

A few years back, the Champaign-Urbana Mass Transit District was looking to expand its service area into Savoy. Property owners in Savoy didn’t like that idea.

There are rules allowing taxing districts to annex adjacent areas and begin providing services—and assessing the tax. The rules make it pretty tough for an area to opt out; just about the only way is to already be in the taxing district of another service provider. With that in mind, Savoy created its own mass transit district a few years ago (the Champaign Southwest Mass Transit District). The idea was that it wouldn’t provide any mass transit service and wouldn’t levy any tax.

All very sad, of course, for anyone like me who uses the bus service, along with anyone who thinks that public services are a good idea. Which meant there was a bit of schadenfreude when, as anyone with any sense had foreseen, Savoy’s transit district promptly levied a small tax (to pay the legal cost of fighting CUMTD’s attempt to annex areas within the district anyway). Taxing districts levy taxes. It’s what they do.

Now we’re getting a bit more schadenfreude: People within Savoy’s transit district (the new YMCA and an apartment complex) are asking the district to provide transit services.

It’s funny, but it’s also kind of sad. I mean, the people who built the apartment complex and the YMCA surely knew that they were building in a place where there was no transit service. I’m sure they picked those locations because the land was cheap. Didn’t they stop to think that the reason the land was cheap was because of the lack of services?

On the one hand, I’m glad to see the Savoy transit district getting pressured to provide transit services. Providing transit services are what transit districts are supposed to do. And I have no sympathy for the residents who created the district in the hopes of dodging a tax—only a moron creates a taxing district while expecting not to be taxed.

But I’m still kind of sad. If transit service to the YMCA is important (and the YMCA says the lack of it is their visitor’s number one complaint), wouldn’t it have made more sense to build the new YMCA within the CUMTD service area? Instead, they build where they know there’s no service, and then complain about it: More sprawl and more bickering.

Of course, those are just more reasons why the Champaign Southwest Mass Transit District was a bad idea. I mean, really! Who’s so stupid as to create a taxing district hoping not to be taxed?

One of my fellow Wise Bread writers, Nora Dunn, has been posting some of the financial details of her travel-heavy lifestyle, including this post on her 2011 Income. (It’s got a link to her earlier post on her 2011 spending, and promises a forthcoming post on why she chooses to earn this much money and not more.)

It’s pretty interesting for anyone who’s thinking about the sort of issues that I write about in my Wise Bread articles—how and why to spend less, and how and why to earn the money to support that frugal lifestyle (and not some other lifestyle).

I’ve got a guest post up at Asta Lander’s blog Simply Living, about the trade-offs that people make when they choose to work for wages or a salary, and how you can get most of the benefits while avoiding most of the downside.

It’s called Choosing Freedom.

There was a time when most people were self-sufficient. They acquired what they needed through some mix of hunting, gathering, fishing, farming, raising animals, and making things themselves. Not many people do that any more.

I was reminded yesterday that I wanted to mention Property Assessed Clean Energy, which came up in the course I’m taking on electric power. (What reminded me was Tobias Buckell’s post about how the real issue for photovoltaics is the capital cost of installing the capacity, which he mentioned in reference to a rather interesting article on issues with solar feed-in tariffs.)

Property Assessed Clean Energy (PACE) is a clever idea for funding homeowner investment in solar power. The way it works is this: The municipality raises money with a bond issue, then lends it to homeowners to invest in solar (or potentially wind) power generating capacity. That investment is then paid back to the municipality over 15 or 20 years via an assessment on the property tax bill. The money is easy for the homeowner to pay back, because the debt repayment is funded by savings on the power bill.

The property tax assessment stays with the house if it is sold, which is reasonable because the photovoltaic system or wind turbine stays with the house as well. This means that the capital is available quite cheaply, because the money is very likely to be paid back.

The really big win of PACE is that it greatly reduces the biggest financial risk that a homeowner takes when making an investment in solar power—the risk that he or she will end up having to move before the rather long payback period, and end up being on the hook to pay the loan back, without enjoying the benefits of the lower power bills.

The problem is, even though about half the states have laws authorizing some form of PACE, the whole scheme has been blocked by the Federal Housing Finance Agency, which instructed Fannie Mae and Freddie Mac not to underwrite mortgages on properties with a PACE assessment.

As I understand it, the issue is that the property tax assessment (like property taxes in general) are senior to the mortgage in the event of a default. But if this regulation is legitimate, the federal mortgage authorities can regulate all municipal activity. They could ban mortgages on houses where the municipality is funding public art through a property tax assessment (or on houses where the municipality isn’t funding public art). If this principle stands, municipal governments will have to do whatever the mortgage authorities demand, or else only people rich enough to pay cash would be able to buy a house in town.

There’s a group called PACENow that’s working various paths to get the prohibition reversed.

Some years back, I read a financial newsletter article that offered a technique for predicting inflation rates six months in advance. It had charts that compared its predictions to actual results, that showed that it was pretty accurate. Not perfect, but more than close enough to be useful for short-term planning.

Then I read the details. Their “technique” was this:

  1. Take the actual inflation for the previous six months.
  2. Double it.

As I say, their technique was pretty accurate. Partially it was accurate because the economy rarely turns on a dime—recent trends tend to continue. But it was more accurate than that, because half the months they were “predicting” had already happened! Even if the next six months were rather different from the previous six months, that would only produce so much change in the full year results.

I think that was the point when I decided to let my subscription to that newsletter expire.

In many places with repressive governments, nascent political parties (unable to achieve political power via the ballot box, because elections are rigged or the group is banned from participating) provide public services as an organizing tactic. They provide food for children, health care, mediation services, neighborhood watch, financial aid to victims of government actions, and so on.

This tactic has proven to be effective, so I’ve always been a little surprised that we don’t see more of it in the US. So, I was interested to see a post about the Black Panther’s free breakfast program, and the FBI’s concerns about it.

Upon reflection, I figure that the main reason we see little of this in the US is that in the US we really do have public services. There are government programs to feed hungry children, provide medical care to the sick and injured, police the streets, adjudicate conflicts, and so on. They’re flawed and limited, but they do exist. They’re good enough, that it would take a lot of money to compete—and if you have that much money, there are better ways to seek power, especially since our political system is reasonably open.

But this is becoming less true. With constant pressure on public services, holes are opening up that can be—and are being—filled by private organizations. So far, those organizations are mostly charitable non-profits, but there’s no reason that a political party couldn’t join in.

I think we’ll see it pretty soon, especially at the local level. People who have felt disenfranchised will be very willing to support political parties that directly provide what the government won’t and ask nothing in return except that you consider voting for their candidates.

I think of myself as a writer, not a “content creator,” so I find Drew Breunig’s warnings of doom to anyone whose business is built around “content” to be hopeful. Those same warnings ought to terrify the owners and managers of those businesses.

My writing for Wise Bread has given me a particular perspective on this. The Wise Bread admins have done a pretty good job of seeking out and paying for high-quality writing. They have fallen prey to the idea that winning in this niche is all about SEO and monetizing, but that’s not so bad.

The SEO thing tends tends to work in favor of a writer who wants his work to be read. A Google search for budget categories finds my article Refactor Your Budget Categories, despite a lot of other articles on budgeting. (I was going to say that I wouldn’t do so well if I just posted the article on my own blog, but when I tested that theory, I found a Google search for rich country finds my article How to Have a Rich Country just fine. Maybe I could do as well on my own site.) In any case, there’s nothing wrong with SEO, as long as it’s in service of good content—good writing.

The monetizing thing is more of a slippery slope. If you let your browser do so, it’ll run scripts from at least 15 other domains every time you load a page on Wise Bread. I haven’t looked at what they’re all for, but most of them either serve ads or provide some sort of analytics or tracking of who’s viewing what. As a reader, I don’t care about any of that stuff, so I generally don’t let my browser run those scripts. As a writer, I tolerate it as a way to make more money, but I don’t think it makes my posts look better. (Wise Bread does at least avoid the very worst of the interstitials and floating boxes that cover the page and so on.)

So, as I say, I hope Drew Breunig is right. I’d very much like to see the revenue potential of a content farm article fall to zero. Or, at least, low enough that there’s no point in paying some semi-literate buffoon a nickle to cobble together a few paragraphs that look like prose and are stuffed with keywords. Not that I begrudge the semi-literate buffoons their nickles; I’d just like to see the incentives in the system shift so as to make it pointless to hire writers who can’t write.

It would take a lot of those nickles to add up to a reasonable wage, but there are a lot of those nickels. A world in which we swapped 10,000 worthless articles for one worthwhile article—and paid one writer $500 instead of a thousand buffoons 50¢ each would be a better world.

What makes a country rich? Hint: It has nothing to do with natural resources. Places like Singapore, Hong Kong, and Japan prove that. (See also: How to Get Rich by Being Evil)

We’ve known how to have rich countries for a while now; Adam Smith laid most of the ground work in 1776 with The Wealth of Nations, and we’ve improved on it modestly since then. You need three things:

  1. Private property
  2. Free markets
  3. Rule of law

None of those things have to be perfect for a country to get rich. Look at what China and India have done over the past twenty years. Allow a little private property, reduce government regulation a little, and you unleash a lot of entrepreneurial activity. Pretty soon, you have a bigger economy, higher incomes, and a richer population.

What’s interesting to me is how important that third point turned out to be.




As the Soviet Union began to collapse, a lot of people were offering advice on how to free the economies of the formerly communist countries. Most of the advice had to do with getting state property into the hands of ordinary people in ways that would allow the greater productivity that private property and free markets allow.

There was a lot less focus on how to imbed the rule of law into the system. It was almost as if people figured that the shift from a police state to the rule of law would be easier than getting there from a state of anarchy. (A dumb idea, once you think about it.)

So, thanks to the unhappy experiments in Russia (and other places) we now know what happens if you have (some) private property and (moderately) free markets without the rule of law. You don’t get a rich country; you just get a lot of rich people.

This insight has been guiding me politically for a while now. Obviously, it would be great to be a rich person in a rich country, but few of us have that option. Pretty much by definition, most of us are going to be somewhere in the broad middle. But if you’re going to be in the broad middle, it’s a lot better to do so in a rich country.

Happily, we know how to have a rich country.




Note: This was originally written for Wise Bread, but they decided it wasn’t for them, so I’m posting it here. I’ve kept it just as I’d written it, including the “see also” link back to Wise Bread. And, since it was written for a monetized market, I’ve gone ahead and put some ads in this post, even though I don’t general monetize my blog. Somehow, the post seemed lonely without them.