Help Me Understand This "Booming Economy"

I would like your help. I'm not an expert on the economy. So, I can't explain what is happening to my business in this "booming" economy.

I live in Columbus, Ohio. I own nearly one thousand apartments that have been in business for over 25 years. For 23 of those years, these complexes have operated successfully and profitably. But for the last two years, they have been on a sudden decline.

Our apartments are priced for people who earn between $15,000-$25,000, the largest segment of this city. They are not the most beautiful apartment complexes in Columbus, but they are also not slums. These are lower middle class level units that are clean, well equipped, and well serviced and maintained. The type of units that make up the majority of apartments in cities in central Ohio, priced for people who are the most typically apartment dwellers in this area. Our customers are about 40% White, 40% African American, 10% Hispanic, and the remainder are a variety of others.

Over the last two years, without anything about our business changing, no pricing changes, no new competition, no local business departures, no changes in the condition of the properties, with us still doing everything exactly the same way it had been done over the last 23 years, suddenly, a large percentage of our tenants are just not paying their rent. We have no problem finding tenants, our apartments are generally full, and our tenants are employed, but getting many of them to pay rent has suddenly become a major problem.

In years past, monthly tenant turnover would be in the 2-3% range on average, either from evictions, or people just moving away. This year we are averaging closer to 25% monthly turnover, all of it due to having to evict people for non payment. And this is happening at all of our apartment complexes, all in different parts of the Columbus area. So, this problem is not unique to one area of town, or one trade district. And I'm not the only real estate landlord in this area with this problem.

How is it that I keep hearing that the economy is "booming", and that the economic figures for this country are so strong, while this is happening to this level of our society in real terms? These people who are earning at the... just above the poverty line level, are suddenly not able to make ends meet any more, much more dramatically than just a couple of years ago. Talking to them, they tell us that between gas prices and health care costs, they are making the choice to use what little they have to pay for food and clothing, and that with what they take home after taxes, they can't make their $500 monthly rent.

This city has all the appearances of a very healthy city economically. The suburbs are growing in leaps and bounds, businesses, malls, and recreation and entertainment are growing at a lightning pace here. It seems that the rich are clearly getting richer here. But for a business like mine, that depends on the financial health of the lower middle class, we are headed for disaster. Because the tenants are already living a disaster. Now don't get me wrong, I'm not asking for your insight to help me with MY problem. I am just trying to point out here, that hard working people are suddenly really struggling, and the country and the media thinks that everything is going great! And I can't understand how this isn't reflected in the economic figures that everyone talks about being so good.

If this is truly a sign that the lower middle class is suffering while this economy is "booming", how can we see that in the econimic figures, and how does this message get out? And how is it that the current administration can get away with good report cards on the performance of the U.S. economy, if the truth of what is happening to one of the largest segments of our society is hidden somehow in all those economic figures? Where can we see this well kept secret in these economic figures? I have yet to hear or see anything that explains what is really happening out there. But maybe I just don't know where to look.

That's how I see it.

:shrug:

Energy - oil, gas. They're "booming."

but I own 6 units just outside San Francisco. Upper market units - tenants make $75k and up. Of the 6 units, 2 tenants have been laid of in the past 2 months. Luckily, they have SO's with enough income and the rent is still current.

One, a 40 yr old programmer, only 6 months after being lured away by the company from a job with the City of SF was laid off 2 days before Thanksgiving. The other is a 60 year old male who was regional marketing director for a high tech company - he'd been there 15 years.

Obviously, this time of year new jobs are thin on the ground. The 60 year old is in deep doo doo, he was making $150k and who hires 60 yr olds?

Booming my arse!

Best I can tell from your post is that your rents are around $500/mo. This is about $200/mo more than someone making less than 25k can or should afford. Look at the numbers, 500/mo = $6000/yr. 6k is about 24% of their gross income assuming they make 25k. Homeowners pay (on average) 10-15% of their gross. So a) they are utilizing any of the new financing options for low-income, first-time home owners to get out of renter-hell or b) other landlords are giving them a better price for the same square footage.

Bottom line, there is reason for the red-hot housing market of recent months. Builders and lenders are finding more creative ways to get people into homes. Translation, fewer renters.

MZr7

Thanks Everyone!

I agree with most of what is posted here, and I am grateful for the help understanding this, but...

What is happening to the lower middle class here is profound and sudden. The global forces mentioned here are definately at work, but in my view are not sudden. And the $20,000 per year income people are not using financing options for first time home owners, they can't qualify. If you have ever watched Jerry Springer, those people are my tenants. They are NOT qualifying.

And Thank you Mazerat, but I know my market and my competition, and there is no landlord in this area giving away as much square footage as I am for the low price I am. With this level of our society, it is not about square footage, it's about where can they get approved, despite their past history of prior evictions or criminal records. I can assure you that unless you have been dealing with the lower middle class of all races nationalities, and religions, the common denominator here is their class has profound limits. And most notably, these same people were mostly able to make their rent payments over the last many years. But something has changed recently, and in dramatic fashion. They just can't make ends meet anymore. And they think that they can push the rent off longer than their car payment, and they know that the eviction process takes time and gives them 6 weeks before they are forced out. So, they often choose not to pay the landlord. But it eventually catches up with them.

No, guys, something has changed in this Republican economic system that is starting to surface, and it is just being exposed in my business first, because it is so truly dependant on the lower class and their ability to eek it out. These folks always had spent every dime they made each month to squeak by, and now that thin margin is no longer enough for them to make it. And this is a very large percentage of our population that resides in this category.

My quandary is not lamenting about the business, it is trying to understand why this very real sudden downward turn for the weakest level of our society is not showing up in the economic figures that the Republicans are getting positive press for. Their system is a failure, but somehow it doesn't show up in the unemployment figures, or the GDP figures, or the consumer confidence indicies, or anything else. I'm more frustrated that the economy will not be fixed before this spreads to higher levels of the middle class, and real damage is done to our country by these reverse Robin Hoods running our government.

My business can't lower it's prices anymore to maintain profits, or raise it's prices and maintain it's numbers of customers. I am just feeling it first. If any more people drop below the poverty line, more mainstream businesses than mine will begin to crumble, and the gap between the haves and have-nots will just widen.

If this economy is set up to serve a decreasing number of top wage earners at the expense of the bottom of the learning adder, then we are headed for big trouble. Tax breaks for the rich won't matter much if the rich see their business decline because their customers can no longer buy.

I just wish that I could find a way to point to some economic figures that explain what is truly happening to the lower wage earners, and explain my reality to those who believe that the Republicans are doing a great job, and have so many facts to back that belief up. I know they are failing. I makes me crazy that they are getting credit for a house of cards.

GDP doesn't measure anybody's salary, or employment. And Unemployment does not measure at least two critical things: (1) you can be "employed," but make a low salary that doesn't pay the rent. (2) You can only collect unemployment for so long. After that, you are dropped off the unemployment stats. So, there are many people out there who aren't employed, but the Bush administration doesn't have to count them because they stopped getting unemployment. In other words, the "unemployment" stats actually ignore the "worst" unemployment: those that have no job, and not even any aid from the govt.

I highly recommend reading Paul Krugman every week, if you don't already. He regularly explains how the GOP lies with statistics, and explains what "should" be measured to understand why the economy is so terrible for most Americans.

Well, at least for a few more months anyway.

I Kant, let's analyze part of your post:

"This city has all the appearances of a very healthy city economically. The suburbs are growing in leaps and bounds, businesses, malls, and recreation and entertainment are growing at a lightning pace here."

I would argue that the housing boom has been drawing your customers out of their apartments, into cheaply-built McHouses, financed at low interest rates. Meanwhile, many middle-class families have used the *perceived* wealth created by the housing bubble to trade up to McMansions.

"It seems that the rich are clearly getting richer here."

It may seem that way, but that wealth is an illusion. Millions of people in North America seem to think that, because the value of their home has increased by 30% or more, they've won some kind of lottery, and have buried themselves up to the armpits in credit, or remortgaged their homes to buy big trucks and hot tubs and more furniture for their bigger abodes. And that kind of business activity has meant good sales for others in the neighborhood, who also think they have won the lottery. So the housing bubble is floating an entire economy of suburban-based consumption. But this can't go on much longer, which leads me to:

"But for a business like mine, that depends on the financial health of the lower middle class, we are headed for disaster."

Soon, for a short time, there are going to be a lot of economic losers, as James Kunstler puts it. These are people who, when the bubble pops, will not be able to pay their bills and will be stuck with a home that cost them $350,000 and is now worth less than a quarter million. They will become your new tenants. Once the banks realize that they can't forclose on half the homes north of Clintonville, the remaining homeowners will become not much more than slaves, thanks to the recently updated bankruptcy laws. Your tenants will be at least happy that they were forced out early.

Oh, and Peak Oil means that once this situation is reality, it will remain in effect for....THE REST OF OUR LIVES.

So cheer up! :)



http://www.endofsuburbia.com

The poor and middle class you rent to have run out of money and credit.

Before the great depression hit, "there was a large disparity in wealth distribution. According to a study done by the Brookings Institute, in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%."

Today, the top 1% controls anywhere between 60 to 40% (depending on whose numbers you believe) of the nations wealth.

"From 1923-1929 the average output per worker increased 32% in manufacturing. During that same time average wages for manufacturing jobs increased only 8%. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits. In fact, from 1923-1929 corporate profits rose 62%."

Sound familiar? Corporate profits are way up yet the average income in the US has stayed the same for the past five years.

"Calvin Coolidge's administration (and the conservative-controlled government) favored business, and as a result the wealthy who invested in these businesses. An example of legislation to this purpose is the Revenue Act of 1926, signed by President Coolidge on February 26, 1926, which reduced federal income for the rich and inheritance taxes dramatically." (In the 1923 case Adkins v. Children's Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional.)

Again, sound familiar? What can I say? Repukes believe in the trickle down theory. Of course if the trickle down theory ever really worked, than all those economies in the 1400s based on huge wealthy royals and lords would have just been booming.

Before the great depression, "three quarters of the U.S. population would spend essentially all of their yearly incomes to purchase consumer goods such as food, clothes, radios, and cars. These were the poor and middle class: families with incomes around, or usually less than, $2,500 a year. One obvious solution to the problem of the vast majority of the population not having enough money to satisfy all their needs was to let those who wanted goods buy products on credit. The concept of buying now and paying later caught on quickly. By the end of the 1920's 60% of cars and 80% of radios were bought on installment credit. Between 1925 and 1929 the total amount of outstanding installment credit more than doubled from $1.38 billion to around $3 billion. This strategy created artificial demand for products which people could not ordinarily afford."

Oh, oh so, familiar, the average American's saving rate is as low as it was during the depression. Does anyone really have any savings today? Yet consumers carry huge debts and bankruptcy laws have tightened like a noose around a convicts neck.

Back then there was a heavy reliance on confidence to keep the market booming. "Prices had been drifting downward since September 3, 1929 but generally people where optimistic. Speculators continued to flock to the market, until Monday October 21st."

This is why the brush administration massages the economic numbers, perhaps fixes the market by buying futures, and manipulates the interest rate. They have to keep confidence up in order to keep the economy going. The current economy is based on nothing, no savings, no manufacturing, no creation of better paying jobs. We don't produce, we consume. If people lose confidence they stop consuming.

So what you are seeing is a repetition of the 1920s. Profits are up for corporations but wages are low. People are buying because some of them believe the confidence manipulation by the US government. But they are paying a heavy debt for borrowing what they can't afford. The poor and middle class are quickly losing ground but the haves and have mores are throwing conspicuous consumption parties. Oh the wonders of a right-wing neocon economy.

http://www.gusmorino.com/pag3/greatdepression /
http://www.inequality.org/facts.html

I've been reading books about the Great Depression trying to prepare myself for what I suspect is soon to come. Today's housing market seems similar to the stock market mania of the twenties. I think inflation is eating up I Kant's tenant's income just like it is everyone else's but unlike most Americans, they don't have a house to eat.

control more wealth especially of the paper kind than individuals do. Isn't even close. Also something is illegal now that was perfectly legal in the 20's, loan pyramiding. Which is ultimately what caused most of the great depression. Big banks borrowed from the government, then loaned money to smaller banks, which loanded money in turn to even smaller banks. And at each step money was loaned to businesses and individuals who could, and did, loan the money they borrowed to someone else. At each step the money was loaned for profit. Guess what happened when a small percentage of those loans defaulted. The whole house of cards fell apart. Also at the time the amount of cash on hand banks were required to have was unregulated. So many banks didn't keep enough cash around to cover withdrawls if they got even a little above average. People react badly when banks don't have cash on hand to cover a withdrawl. And the idiotic insistance of the US to maintain the gold standard, even after every other country gave it up, didn't help. England was well on the way out of the depression by 1937/38. The US? More people were unemployed in 1939 than in 1932. Thank you fixed currency.

That's what gets quoted most by the media. But, there is an inherent assumption in citing GDP, that the increased production is being shared. However, that's not true. Real median income is down over the last 5 years; so the poor really are getting poorer.

The perfumed, coifed, news "analysts" don't seem to be able to recognize what's happening to the poor and lower middle class.

And the GDP going UP doesn't mean the US as a whole is doing better.


"The GDP makes no distinction between productive and destructive activities....the GDP places a positive value on all transactions and adds them to the total. Illness, crime, and natural disasters (such as Katrina--woooh, here comes a big shot in the arm for the GDP!) all cause the GDP to increase, as money is spent to treat the sick, jail prisoners, and repair the damage. In this way the GDP rises even as the quality of life declines."

http://www.globalexchange.org/campaigns/econ101/gdp.html

Wow, think what the bird flu would do for the GDP. :sarcasm:

in layoffs. Others have done a good job explaining the subtleties of economic measures, but more and more I think BushCo is just plain lying their asses off.

(edit) actually, it's more accurate to say that Ohio has lost more jobs since Bush took office than any other state. Not exactly the same as layoffs.

The working person must pay for their own health insurance now and wages are being kept low in the name of "competition".

( I am new at this forum stuff, and I posted this in the wrong location. So, here it is again. My apologies)

Thanks Everyone!

I agree with most of what is posted here, and I am grateful for the help understanding this, but...

What is happening to the lower middle class here is profound and sudden. The global forces mentioned here are definately at work, but in my view are not sudden. And the $20,000 per year income people are not using financing options for first time home owners, they can't qualify. If you have ever watched Jerry Springer, those people are my tenants. They are NOT qualifying.

And Thank you Mazerat, but I know my market and my competition, and there is no landlord in this area giving away as much square footage as I am for the low price I am. With this level of our society, it is not about square footage, it's about where can they get approved, despite their past history of prior evictions or criminal records. I can assure you that unless you have been dealing with the lower middle class of all races nationalities, and religions, the common denominator here is their class has profound limits. And most notably, these same people were mostly able to make their rent payments over the last many years. But something has changed recently, and in dramatic fashion. They just can't make ends meet anymore. And they think that they can push the rent off longer than their car payment, and they know that the eviction process takes time and gives them 6 weeks before they are forced out. So, they often choose not to pay the landlord. But it eventually catches up with them.

No, guys, something has changed in this Republican economic system that is starting to surface, and it is just being exposed in my business first, because it is so truly dependant on the lower class and their ability to eek it out. These folks always had spent every dime they made each month to squeak by, and now that thin margin is no longer enough for them to make it. And this is a very large percentage of our population that resides in this category.

My quandary is not lamenting about the business, it is trying to understand why this very real sudden downward turn for the weakest level of our society is not showing up in the economic figures that the Republicans are getting positive press for. Their system is a failure, but somehow it doesn't show up in the unemployment figures, or the GDP figures, or the consumer confidence indicies, or anything else. I'm more frustrated that the economy will not be fixed before this spreads to higher levels of the middle class, and real damage is done to our country by these reverse Robin Hoods running our government.

My business can't lower it's prices anymore to maintain profits, or raise it's prices and maintain it's numbers of customers. I am just feeling it first. If any more people drop below the poverty line, more mainstream businesses than mine will begin to crumble, and the gap between the haves and have-nots will just widen.

If this economy is set up to serve a decreasing number of top wage earners at the expense of the bottom of the learning adder, then we are headed for big trouble. Tax breaks for the rich won't matter much if the rich see their business decline because their customers can no longer buy.

I just wish that I could find a way to point to some economic figures that explain what is truly happening to the lower wage earners, and explain my reality to those who believe that the Republicans are doing a great job, and have so many facts to back that belief up. I know they are failing. I makes me crazy that they are getting credit for a house of cards.

We are Ohioans who have gone back to an apartment to keep our home - rented it out - why?

Spouse is an only child
Spouse's field is IT but he's not quite a senior citizen yet.
Spouse's autistic(?) Dad, in Cleveland, did not die in his sleep as he planned; he got cancer, kidney disease treated by thrice-a-week dialysis. He'd lived alone in a very small WWII ranch for 10 years before sepsis got a hold of him. Having no one else, we packed him up, sold his home and car, got him an apartment. But he didn't take his medicine and had a lot of medical problems that forced him to give it up. He then outlived his $$ in assisted living and had to come to our home.

During the time of his illnesses and unending hospitalizations/doctor visits/dialysis sessions, spouse borrowed heavily to keep Gramps in assisted living; Gramps didn't want to live with us. When the dough ran out, he had to do just that and it didn't work out very well.

During the time of his illness, spouse lost two jobs due to absences to take care of Gramps. For a while, spouse had a couple fill-in $8 jobs that had some flexibility. So far, we've almost lost the home three times; nice 4 bdroom in nice plat but not in the best location in this racially polarized Ohio city (Dayton). My employer once provided health insurance; now I shell out over $200 a month in contributions and have had a 10 hour per week cut on top of that. So much for a healthy paycheck! If I go on spouse's plan and he gets cut again, then we're both screwed out of health care/prescription plans we need to stay healthy and sane.

Spouse now works in Columbus and stays with married daughter during the week and comes home weekends. Our home-renter has had similar problems with sudden changes in family's health and well-being, relatives in NOLA, and the cost of fuel in his business and is now behind in his rent. Our 1999 JEEP needs tires, brakes, and the windows/locks/gate don't work properly. Since I live within walking distance of work, I get the hunky jalopy; he gets to drive my car cause it gets better mileage. Hope it warms up soon so utility bills stay down like my thermostat!

We were going to pay off the kid's school loans w/home equity when we eventually sold it to downsize, but now it appears that by the time things straighten out, the Feds will be grabbing that from spouses SS check.

Through all this, we've met some wonderful, caring people who did the best they could to help along the way and I sincerely have such gratitude for that help. Sometimes, it was just an ear to listen to a whole lot of anger and frustration.

Oh, just so you know - our complex's residency rate is at about 70% here too! They're nearly giving the apartments away and it's not fun to be paying more for the same bad service/maintenance.

God Bless Us Every One and
MERRY CHRISTMAS-HANNUCHA/KWANZA/SOLSTICE/DECEMBER,whatever!

I was talking to a doctor from Portugal recently. He said that they have a mixed system which offers both public and private health care.

The public health care is totally free. I asked if they had a problem with people overusing the sytem for things like "a case of the sniffles." He said it's somewhat of a problem, but he made it sound like it wasn't that bad.

Also, the public system provides prompt emergency service, but the wait can be 4 years for elective surgeries. In contrast, the private system is very fast, of course.

He said that the public has the latest technologies, in plenty of abundance. So, for instance, they have plenty of MRI machines. The doctors are also very good and there's no stigma against people using the public. (Well, he did say that Portugal is a little behind the rest of Europe in some technolgies, but on par with the US. He said that our FDA slows us down some.)

He said that many doctors work both in the public and the private. They make more money in the private, but they get to do some things they really want to do in the public. So, doctors often seeks some sort of balance.

Looking at nationmaster, the per-capita GDP of Portugal is much less than the US.
$32,504 US
$16,373 Portugal
http://www.nationmaster.com/graph-T/eco_gdp_ppp_cap

So, if Portugal can afford it, why can't we?

Alaska is the only state in the country that has universal health care. Also, in the year 2000, Massachusetts had a referendum for universal health care, but it lost. (I wonder why it lost.) But maybe, we can get this done one state at a time.

I read a Paul Krugman article recently, which cited some statistic like that 5% of the people pay the majority of health care costs each year. The system really comes down hard on just a few people each year, when it just happens to be their turn.

Here are some statistics comparing the U.S. with the 10 wealthiest, developed countries in the world. In each column, there is a number to the right, which is the ranking. The U.S. ranks last in all the health statistics, but ranks #1 in the cost of health care. We spend 2x as much as everyone else, but get the worst results. :shrug:

I got all the data sometime in 2004... So, the data in the below table may be a little out of date.
www.nationmaster.com/graph-T/hea_hea_car_fun_tot_per_cap
www.nationmaster.com/graph-T/hea_pub_spe_as_of_tot
www.nationmaster.com/graph-T/hea_inf_mor_rat
www.nationmaster.com/graph-T/hea_pro_of_not_rea_60
www.nationmaster.com/graph-T/hea_lif_exp_hea_yea
www.nationmaster.com/graph-T/hea_lif_exp_at_bir_tot_pop

          Per Capita                           Probability 
          Spent on      % Public   Infant      of Not        Healthy   Life 
          Health Care   Spending   Mortality   Reaching 60   Years     Expectancy 
Japan           2,011 8      77% 3       3.8 1          8% 1    73.6 1       80.9 1 
Australia       2,211 6      72% 6       4.9 6          9% 2    71.6 2       80.1 2 
France          2,349 4      76% 4       4.4 3         11% 9    71.3 3       79.2 5 
Italy           2,032 7      76% 5       5.8 9          9% 2    71.0 4       79.4 4 
Spain           1,556 10     71% 7       4.9 5         10% 7    70.9 5       79.2 5 
Germany         2,748 2      79% 2       4.7 4         11% 8    70.2 6       78.4 8 
Canada          2,535 3      70% 8       5.0 7         10% 5    69.9 7       79.8 3 
Netherlands     2,246 5      68% 9       4.3 2          9% 4    69.9 7       78.7 7 
United Kingdom  1,764 9      83% 1       5.5 8         10% 6    69.6 9       78.1 9 
United States   4,631 1      45% 10      6.7 10        13% 10   67.6 10      77.1 10 

www.StopGlobalism.com       www.VOIDnow.com

I remember Rush used to say, "You see liberalllls ..." (he always draws out the word "liberals"), " ... are focussed on distribution of wealth. But what they don't understand is when the overall economic pie grows, then everyone benefits."

Actually, I've read that Rush was right over 30 years ago. From 1940 to 1970, we had a fair economy. As the economic pie grew, everyone benefitted. I read somewhere that each year, the poor grew their incomes by 3% per year, the middle class by 3%, and the rich by 3%.

So, everyone benefitted. The wealth was not equally distributed, but as the economic pie grew, everyone got a larger slice.

But for the last 30 years, wages have been stagnant after adjusting for inflation for 90% of the workforce. And many people think that recent inflation statistics are artificially low. (The conservative estimate is that they underestimate inflation by at least 1% per year. Also, it seems like necessities have gone up in price, more than luxuries.)

Actually, it seems like things are worse than the statistics describe, because I always hear how one income used to be enough to have a decent standard of living over 30 years ago.

And as "Jim__" stated above, the median income has fallen each year for the last 5 years, even though we only had a mild recession (according to the statistics) followed by fairly decent GDP numbers.

In fact, in the year 2000, our GDP was 10 trillion. Now, I believe it's nearly 12 trillion. But have people's incomes gone up 20%? Well, if you're a CEO of a major company, you get 20% income gains per year. Anything less would be an insult to these legends-in-their-own-mind.

The fact is Rush is wrong, because whether the majority benefits from a growing economy depends on the rules of the game. As Lou Dobbs says, "it's democracy that makes the free market possible, not the other way around." We need to setup the rules, so that everyone benefits, rather than just an elite few, which is what we currently have.

The middle class is an artificial creation of government policy. Like New Orleans without protection from levies, the middle class will naturally be underwater without protections. And like New Orleans, if and when the middle class goes underwater, there will be all the accompanying mahem.

Thom Hartmann has a good article on outsourcing here:
http://www.albionmonitor.com/0408a/outsourcing7.html
"If a company wants to hire people to answer the phone in India for two dollars an hour, fine. Let them do it -- and pay a $10/hour tariff on top of the $2/hour wage. Most will simply return to the United States for their labor, and those that don't will enhance government coffers with funds that can be used for national healthcare and education of our workforce."

www.StopGlobalism.com       www.VOIDnow.com

this "booming" economy. First, resources are limited. Second, all financial and economic policies, trends and decisions are ultimately driven by fear or greed. Third, spending (i.e. purchasing goods and services) creates jobs. Purchasing goods and services results in increased demand. Making tax incentives available to the wealthy may increase capital but it does not necessarily increase demend. Fourth, executives have an inherent conflict of interest with the companies they manage. Everything that is happening can be explained and understood in that context.

Over the past several decades we have seen, among other things:
1. Increased participation in the stock market which has fueled pressure on corporations to show ever increasing profits (whether directly or through increased sales).
2. Increased marketing and advertising sophistication which has fueled increased consumer demand for discretionary consumption - and with that consumption increased levels of consumer debt.
3. Increased barriers to entry that act to prevent many aspiring business folks from entering the marketplace and providing meaningful competition - these barriers would include sophisticated technology and volume price discounts available to big box retailers.
4. Changes in the tax code that shift burdens from the wealthier to the poorer segments of society - and to small businesses.
5. Refusal to maintain a minimum wage that will provide the ability to survive on a single full-time job.
6. Increased emphasis on higher education even at the expense of undertaking significant long-term debt to produce a more skilled workforce - even when there are few prospects of attrition or job creation.
7. A general unwillingness to enforce sanctions and reduce the number of undocumented workers.
8. Virtually unlimited lobbying by corporations, political action committees and other special interest groups.
9. Large multi-national corporations that largely avoid paying taxes in the US and yet exert tremendous political influence.
10. Increasing numbers of workers who are required to work multiple jobs just to survive and have little time to become informed participants in our society - and now lets throw in a few preachers who are going to make everything but money and budgets a moral issue.

The folks that you rent to have been on the financial edge for some time. By and large they do not have much of a safety net and our society does not provide them with one. Many of them are one paycheck or one serious illness or injury away from financial disaster - or eviction. I suspect most of what you are seeing is cumulative. It did not happen overnight. A college loan, an entry level job that did not require any higher education, some overspending, a divorce, a paycut, a layoff, higher taxes, a car accident. Even those who live on the edge are resourceful and motivated enough to figure out how to absorb some of these expenses. But many are in a position where they cannot accumulate and save in anticipation of the next financial disaster - they are just continually falling further and further behind. Unfortunately, the first businesses to feel the effects are those who provide goods and services to these folks. The effects on your business and employees, in turn, will be passed on to those who service you. It is a downward spiral - and I fear for the future of this country.

Some of the stats I would look at would be (1) the increase in consumer debt, (2) median earnings, (3) labor force participation, (4) increase in poverty and specifically the working poor, and (5) increase in corporate profits.

First of all, you have my utmost respect. My dad owned about eight rentals when I was younger and managing them was an unbelievable task. I can't imagine owning a thousand. And despite what the above poster said, $500 is a reasonable rent, even for Ohio. I can't imagine you'd be able to offer them for any less, what with maintenance, taxes and miscellaneous expenses to cover. And there's nothing wrong with making a profit -- even most liberals would agree with that.

I'm no economist, but it seems to me that in the simplest terms, the gap is growing between rich and poor, and more resources are flowing to the top; very little is staying in the middle and almost none is flowing southward to the poor. Ergo, you increasingly have a society that is either very rich, or very poor -- much like the third world. (And the larger this gap grows, the more unstable we will likely become. But that's a whole other post.)likWhat no one talks about much is the burden this places on middle-class folk like you and me; we have to move either up or down; and cater to those who have, because that's where the money is. Hence, the growth in luxury stores/luxury websites/et. al. Very few small businesspeople, the ones who cater to the average folk -- i.e., garden stores, family-owned bakeries, mom-and-pop restaurants -- seem to be able to make it these days. I see them going dark all the time, where I live.

Sorry I can't offer you more concrete reasons for why this is happening: they are many, I suspect. The social contract is gone, for one thing: there's no longer the sense that the company "owes" its workers anything.

I'm curious: are/were your tenants Bush supporters? And what is the general mood down there: most people still pro-Bush, or is the tide turning?

"Very few small businesspeople, the ones who cater to the average folk --...seem to be able to make it these days. I see them going dark all the time, where I live. "

That's the kind of business I think about getting into sometimes.

Where are you?

Albeit one that is decidedly middle-class and struggling in the Bush economy. The more affluent suburbs may tell a different tale.
Sadly, it seems harder and harder for an independent store to make it. I myself patronize them whenever possible -- I PREFER to shop there, because of the superior service and the easy-in, easy-out process; plus, I don't find their prices that much higher than the superstores.
I DO know a few mom-and-pops that are making it: one is a family-owned garden store, a few more are restaurants. Some of these folks own their properties free and clear, which makes a difference. A friend of ours owns a hobby shop that his mom and dad started originally. He does such a good job that people come from far and wide to shop. He also treats his employees well, pays a good buck, and has no turnover.
Another friend of mine runs a restaurant. She has a great location. serves good, basic food at a good price and provides a great atmosphere: she's a people person and her eatery is rapidly becoming the place to go. She works her tail off, though.
I'm not saying it can't be done, but you should know the risks, and work, involved.

I work in the maintenance department of a property management firm in Chico CA. Our properties are owned by owners who have between 1 and 400 units that we rent and maintain. The local economy is service based due to the dominance of Cal. State University, Chico. Tenants are not paying rent. These are the cheapest rents in California with the exceptions of a few very scary places.

I am myself in the income category of the renters we service. My 30k per year wage minus child support leaves me with enough income to pay rent($650) with one paycheck per month plus $100. The other $750 goes for everything else including $250 per month in debt service for a useless college education. I have no health care and no savings at all.

I only make it from month to month because I am very, very frugal. I eat lots of rice, beans and tortillas. When I buy a chicken I buy the whole bird, cook it, strip the meat, and boil the rest for broth. My weekly luxury is a trip to the farmers market for fruits and veggies which are probably cheaper here than anywhere in the U.S. I don't drink, smoke, or have cable TV. My daily commute is four miles total.

Most renters cannot be expected to duplicate my lifestyle. They extend themselves and try and make it up by working second jobs or dealing drugs. They wear our or get busted and I do evictions every Wednesday. Our company is running out of people we can rent to without getting people previously evicted elsewhere. Many people just don't qualify to rent anywhere despite being continuosly employed. Worse, property owners are starting to have trouble meeting their mortgages.

The whole thing is on the brink of collapse. There are simply not enough proffesional jobs for college kids to go into where they can hope to buy a house in California. The people who actually do the work that make the whole thing spin are broke. They work overtime and they're broke. They work two jobs and they're broke. They quit paying for everything but food, heat and rent and they are still broke.

We're broke folks and nobody, Dem or GOP is talking real solutions.

That's right.

I remember listening closely to Vice-Presidential candidate John Edwards, who always gave those stirring "two Americas" speeches.

Chris Mathews asked Edwards on Hard Ball, "why can't we keep the call-center jobs in America." Edwards replied something like, "well, Chris we've got to work on our education."

On C-Span, during a townhall meeting, somebody asked Edwards, "I'm a 56-year-old manufacturing worker and my job has left the country. What will you do for me?" Edwards again muttered something about education.

And I believe Senator Edwards voted for the Free Trade Agreements too.

What good is an education when all the jobs leave the country for wherever the labor is the cheapest? Or when companies import labor on work visas to take the jobs?

Most members of both parties are not doing a good job, IMHO.

www.StopGlobalism.com       www.VOIDnow.com

are tech jobs that there's a shortage of people in. Aren't that many bio-chemical or electrical engineers around for the private sector. As for jobs leaving, that has bugger to do with free trade agreements. Ultimately that such agreements are even needed just shows how pigheaded people in governments everywhere are. Long ago establshed trade tariffs and quotas only hurt the country imposing them.

There is no tech worker shortage. Go to http://www.phds.org/jobs/it-worker-shortage-1998/ or www.zazona.com if you want to learn the truth. IT workers were doing too well. They had to bring in workers to flood the market. There are plenty of talented workers in the US. Think about it, who build the IT industry in the first place? And now we are not educated enough? No, corp inc. wants to flood the market until the tech sector is making $10 an hour.

flood the market while putting american IT workers out of jobs and highering young college grads - same song different year

and I notice as time has gone on most of the posters have gotten angrier and angrier , and their are more people people posting about their personal experiences. I have been noticing that everytime the numbers,come our they send out Elaine cho, the labor secretary or Snow the commerce or treasury secretary. They come out with phony figures and numbers. The jobs they talk about are minumum wage jobs, so people can't pay all of their bills. Bush has his people in every area of government and his people have a monopoly on the businesses in this country and he is changing every law so that people have no where to go. He wants destroy the middle class and he and his cronies are setting it up so that the wages are unlivable, but nothing else in this country is adjusted to compete with the cost of living. I believe he is trying to rebuild Iraq while destroying this country in the meantime. People are living in their cars, on the streets and living with people they thought they would never have to live with.

The turnover rate is 10 times what it used to be:

...In years past, monthly tenant turnover would be in the 2-3% range on average, either from evictions, or people just moving away. This year we are averaging closer to 25% monthly turnover, all of it due to having to evict people for non payment...

Thank you for this very interesting post. I keep wondering how long it will take before it becomes impossible to ignore the downward spiral. These same people, being evicted from your housing, must be spending less in stores.

Thank you NYC,

I''m from NYC, and moved here to Columbus Ohio, where my wife and I began to build our apartment business 5 years ago. We purchased complexes that have been in business here for on average over 15 years, some over 20 years. Without changing anything, in terms of pricing, and running these complexes exactly the same way they have always operated in the past, we are dying. For the first four years our evictions and skip outs averaged between 2-3% per month. Suddenly this summer that number jumped to 25% per month. And the cold months of this winter, when business has historically been more stable, we have had no improvement. We are unable to make mortgage payments and are forced to sell. We have tried everything that the apartment association has recommended to boost our rate of pay but to no avail. We are fairly well occupied, averaging about 90%. And we have no problem finding tenants to replace those that are evicted, but getting them to pay has become a nightmare. No matter how we approach collections, the results have been horrible.

Since we are renting to people primarily in areas with lower middle class working people, I believe that our business is a bell weather for bad things happening in our economy. The ever widening divide between the haves and the have-nots is just appearing in this business first. There is clearly a very bad trend developing in our economy that will be devastating for more businesses eventually, and most importantly for those people who are willing to work but unable to get better paying jobs. Clearly the minimum wage is no longer enough for these people to survive. Or for my business to either.

"Getting back to the thing that causes me to have nightmares, inflation, Kurt Richebacher writes "U.S. inflation rates of consumer and producer prices are now at the top in the world, even despite the Fed’s gross understatement. As of September 2005, the PPI was up 6.7% year over year. A year earlier, in August 2004, the 12-month rise was 3.3%. As to the CPI, it showed a rise of 4.7% year over year in September, as against 2.5% a year earlier. Import prices are up 9.9%.

"Annualizing the price increases over the last three months, the numbers become outright frightening. For the PPI, in September, it was 14.8%, for the CPI, 9.4% and for import prices, 20.5%."

A 14.8, 9.4 and 20.5% inflation rate, no wonder he says we are doomed. Yet did the median household income rise that much in the last three months?

We are headed for a big dip in the economy and the government is more interested in spinning it, than fixing it. Oh well, even the great depression didn't last more than ten years.

One, there would be a lot more social unrest because people nowadays have more of an attitude that the government should do something when the situation really bites (and I agree.).

Two, in the '30's many more American families lived on farms, so they could at least feed themselves even if they didn't have jobs.

For those two reasons, and others, another depressions would make the '30's look tame.

Yes, the great depression only lasted 10 years. However, it took a World War and one of the largest military build ups that the world had seen up to that point to recover. We also still had alot of engineers, scientists, gold, silver, oil, exports and charismatic leaders. All of which are being lost or consumed. No, I do not think this one will last only 10 years. I point to Russia as a prime example. The last great accomplishments that country turned out right before it crashed - a police state, a failed war in afghanistan, a quick breakup of the states and the rapid gutting of the military infrastructure. All of which occurred in a period when precious resources were still relatively abundant. Yes, my friends the world will look alot different in the next decade.

I found this post on DailyKos.com

Minimum Wage won't get you a 1-bedroom apartment ANYWHERE!
by gjohnsit

Wed Dec 14, 2005 at 02:04:11 PM PDT

Bonddad has let us all know that workers wages aren't going up.
But now a simple concept - that if you work full time that you can afford a place of your own - is history.


This year, for the first time in the 16 years the coalition has published "Out of Reach," it determined that there is no place in the country where a full-time worker earning minimum wage can afford to rent even a one-bedroom apartment at fair market rent.
gjohnsit's diary :: ::

Using data from the Department of Housing and Urban Development, the U.S. Census Bureau, the Bureau of Labor Statistics, the Department of Labor and the Social Security Administration, the report's authors determined the fair market rent - the cost of rent and utilities on a modest rental unit - in every county and metropolitan region nationwide.
A minimum wage worker in Sacramento would have to work 115 hours a week to cover rent for a two-bedroom apartment and other bills, the report said.
The report shows that this year's national housing wage - the hourly wage a full-time worker needs to earn in order to cover the rent with no more than 30 percent of his or her income - is $15.78 an hour.
That's up from $15.37 an hour in 2004 and is more than three times the federal minimum wage of $5.15 an hour.

It's one thing to say that about a minimum wage worker in, say, San Francisco not being able to afford their own place. That won't shock anyone.
But someone working full time at a 7/11, or as a waiter in BumF*ck Arkansas, not being able to afford their own apartment is a sad statement on America today.

Chris Bender, communications director for Housing California, a leading statewide housing advocacy group, said the vast majority of housing being built in the Sacramento region is for purchase, not for rent. While classified sections fill with "for sale" ads, Bender said, some 38 percent of the region's residents need to rent.
Many of them can't find any place they can afford.
The market is penalizing hairdressers and grocery clerks and garbage collectors who don't make enough to buy, Bender said.
"There's a lot of housing out there," he said, "but it's not the right type of housing."
The high cost of land and the decline in available federal subsidies have further exacerbated the lack of affordable housing in Sacramento, said Rachel Iskow, executive director of the Sacramento Mutual Housing Association.
Iskow's organization develops and manages housing for low-income renters. As prices go up, she said, increasing numbers of people are losing their apartments. They end up doubling up with family members or sleeping in shelters or cars or on the streets.
"In poor areas, it's just getting rougher for people," she said.

Let's lay the blame exactly where it should pointed - the Federal Reserve.
The Fed, you ask? Why not minimum wage laws? Because the reason why rent prices are so high is because of the Real Estate Bubble. Real estate prices are out of control because the Federal Reserve is helping inject huge amounts of cheap loans into the system. People are making money from speculating on real estate. But apartment buildings are harder to turn over, so developers want to build single-family homes rather than affordable housing. Hence, a glut of housing developments, with many getting bought and sold without anyone ever living in them, and a lack of rental housing.
Greenspan will go down as the worst Central Banker in history.

Said the elephant as he danced amongst the chickens.

Quote: Greenspan will go down as the worst Central Banker in history.

If you’re a member of the Elephant Society (the Top Ten percent) you will have a much different opinion of Chairman Greenspan than those in the Flat Chicken Club (the trampled Lower Ninety percent). The Barons of Finance will forever read their children bedtime stories of the Fabled Fixer of Finance, the Great Expander of the Wealth Gap, Maestro Greenspan.

http://www.wpherald.com/storyview.php?StoryID=20051214-113005-9763r
"The central bank seems more worried than before that resources feeding the U.S. economic expansion are getting scarce and that this could lead to higher inflation in the future," he said.

The Fed may have been taken aback by recent evidence that wage pressures and labor costs are rising, particularly for skilled and educated workers.

"If labor is becoming scarce, it will drive up wage inflation and that is enemy number one with Fed officials," Mr. Baumohl said.

It seems as though interest rates, gasoline, heating fuel, housing, CEO’s bonuses and inflation can all go up but if a worker asks for a raise to match they become “enemy number one” with the Fed.

...capital. The domestic economy has replaced industrial production with manipulation of financial assets. The exodus of jobs, capital and industry is presaged in the declines of the Spanish, Dutch, and English empires. See Kevin Phillips Wealth and Democracy. War after the dynamic period accelerates the decline.

1929-1933. gnp posted some very impressive numbers as soon as fdr got into full swing.

I just got back from Sprawl Mart, thanks to a poorly timed refill in an essential prescription. The parking lot was 3/4 empty. You have to understand that this store is located in a poor area in the inner city. The people inside were buying. There just weren't any more of them than I'd see there on a random weeknight during the rest of the year.

Last year was the first year I didn't see their parking lot overflowing onto surrounding streets. This year I got a parking space right in front of the joint!

No matter how they pad the sales figures with plasma TVs and platinum for the overclass, this is big. People are NOT spending like they have in years past, especially the bread and butter customers that retail business depends on in most of the country.

Look out below!

Since the original post I have had the opportunity to tour several buildings whose owners are desperate and asking for help. Essentially their buildings have become occupied by squatters. In one building we had two paying tenants, two vacant units and on squatter. That's a miserable 40% paid occupancy.

In another building only 4 of 12 units were paying rents. Even worse, 30% paid occupancy.

The truth is that our economy is so scewed that we are building housing stock for the well off while we refuse to rent existing housing stock to the working poor. The people who occupy these units have absolutely no fear of discovery or eviction. They know they can move on to another building any day.

I'm kind of scared here.

I am one of those at on the bottom rungs, not due to anything I could influence. Hubby worked for WorldCom and was laid off in 2002. We were fortunate that we could sell off the house in the SF Bay Area and move out to the (much cheaper for California) country.

Hubby is now on disability (dialysis 3x/wk) and we are living on his humble $13K/yr. If I work it will influence his qualification for MediCal. The only reason we can survive on such a small sum is because the payment on our equity loan is $167/mo (we own the mfg. house/land outright). If we had to rent we would be starving in the cold. We owe so much on credit cards that we will have to declare bankruptcy. With any luck, the disability "rating" and the relatively low value of our home will allow us to continue living in it.

Contrary to popular opinion, there has been a significant amount of inflation in the last year. I see it in food, gasoline and health care prices. Incomes are very stagnant, and no one is offering health benefits with low jobs. The usual trick is to employ the workers without enough hours to qualify for benefits, or to cut the worker's hours back to that point. So your tenants are choosing to eat, pay for medical costs, get to work and stay warm rather than pay rent.

I see all the spec houses being built here and keep wondering when the bubble will burst. The low-interest loan hype has just about played out and I am starting to see the dreaded word "reduced" on home listings. And yet most of the business people think everything will be hunky-dory, that the housing boom will continue, that there will be lots of tourists here next summer, etc. I somehow doubt it. (We live in a rural tourist area, the largest non-tourism "industry" is agriculture: wine grapes, pears and walnuts.)

My uninformed hunch is that the brown stuff will hit the rapidly rotating object sometime next summer. Let me count the ways:
1. higher gasoline costs: will cut down on tourism by those on the economic margins, raising prices of anything that runs on/uses petroleum products...
2. the continued shredding of the social safety net by the bozos in Wash. DC and statehouses
3. end of housing boom, perhaps not a "bust" but a decline, none the less
4. with end of boom, no more construction jobs, which have been the only employment sector showing an increase
5. continued hemmoraging in employment sector (even fewer new jobs, which is at this moment a negative number)


Sorry about the rambling nature of this post, but I thought you would appreciate the view from the " at bottom, looking up" position.

Good luck with your business, I am afraid you will need it. You sound like an ethical landlord, something unusual these days. :hi:

I believe that we have tried to be as ethical as possible as landlords, but as the plight of our tenants has worsened, or business model has made it impossible for us to go on. We have been backed into a corner where we have had to make as many cuts in services and upkeep just to try to stay afloat. But that only works for so long. So, I understand how landlords get the reputation they have, and how they really have little choice in making some of the decisions they do. But like some of those whose housing bubble is bursting, our business model is bursting too. We are forced to sell while we can at least get enough value for our complexes, to pay what we owe to the banks, and get out without too much damage to us personally.

But there are going to be vendors that we have used to buy supplies from, and tradesmen that have done work at our complexes to which money is owed, and will never be paid. That was never our intention, but is reality that we cannot change. Maybe the people that we sell to will have more cash on hand to overcome some of what we could not, but I don't really see how. And unfortunately, I believe that this is just a sign of what is coming for a lot of other businesses in similar neighborhoods across this country. This economy has bad things happening within the lower half of the income levels in America, and they seem to be going unnoticed by the main stream media who are reporting good economic figures for the country overall.


Clearly the very rich are getting richer, but the poor are also getting poorer, and are about to fall off an economic cliff. Having picked a business that depends on the lower half surviving to maintain its success, is bringing me down too.

The numbers are being fixed. I am convinced.

the OFFICIAL unemployment rates, and the OFFICIAL poverty rates, are all meaningless.

Or, you can take the OFFICIAL figures multiply by 2 to get a more realistic figure. Maybe you could multiply them by a higher number.

Whatever, it's to the benefit of the powerful to understate these stats. It's been done for ages, whether a Democrat or Republican is in the WH.

and with oil fairly steady at well over $60/bbl (currently about $68/bbl) when it was $25-$30 before shrub took office, there's obviously been huge inflation in the energy sector.

once upon a time, sustained high energy prices rapidly rippled through the manufacturing economy because you can't produce without consuming energy and passing it along to customers.

but today, our service economy isn't affected in quite the same way. people simply pay more, and eventually LABOR will put pressure for greater wages, but offshoring has offset this threat.


MOREOVER, gdp measures domestic CONSUMPTION, not production. price of goods sold in the u.s., regardless of where produced. so even spending more for the same amount of oil causes gdp to rise!

now in debt service they can't meet their minimum monthly payments anymore. Also, underemployment getting larger every day. And unemployment stats are very underreported re previous poster points

has a lot of information on poverty levels, income levels and the like. Some of it goes down to the school board level. There you may be able to find information on the changes in the economic situation of your tenants.

http://www.census.gov

We're in the middle of the 2nd Great Depression. I'm not kidding & I'm not trying to be hyperbolic. Jobs are few & far between, just like in the 1st Great Depression. The republinazi media isn't talking about just how bad this economy is. But people like you, and those who are unemployed or underemployed know the real truth about the economy. The economic path we're on is unsustainable.

at a new movie theater that opened in our small rural town. I grew up in the sixties and worked in the 70s. I have never heard about so many people applying for such poor paying jobs in such a rural area. Even in the 70s, you could get a low paying job like this or like pumping gas, waiting tables and cleaning hotels. Not anymore, even those boring, repetitive jobs that pay minimum wage are hard to come by. I guess the repukes are proud of our new economy.

I was renting videos and two women came in to apply for jobs, said they'd just graduated from the university in town. The store manager said there was a 70 person waiting list for jobs, but he'd be glad to take their applications.

I spoke up and said, "Yeah, the same thing happened the last time a Bush was president, too!"

Everybody looked a little puzzled. They don't look puzzled any more.

It's not unusual for new grads to take low level jobs while they figure out what they want to do next. It is unusual for there to be no low level jobs available, anywhere, unless the Repugs are controlling things.