What is Zachary Woolfe talking about?

In his review of the LA Phil's Don Giovanni, he writes, "silence greeted Mozart’s winking quotation of his own “Nozze di Figaro” during the final scene. It was an opera in-joke in search of an opera audience."


At the performance I attended, the audience giggled at the reference.  Perhaps New Yorkers can't imagine that the city that attracted Schoenberg, Mann and Faulkner can have a subtle sense of humor.

FDR on preventing a bank run

What is a "middle-class house" in California?

Alex Lazo had a nice story in this morning's LA Times about the absence of housing supply in Southern California. One person he interviewed was frustrated because he could not find anything he wanted at $525,000. As he pointed out, he is a "middle-class" guy.

This underlines a problem with California. Even after the crash, large swaths of the state (not just Malibu) have expensive houses.

Let us think about what a middle-class household can afford. The median income for a family of four in California is about $70,000. Once upon a time (i.e., before around 2002), the "front-end" ratio for a mortgage borrower was supposed to be no more than 28 percent of gross income. The front-end ratio is the ratio of principal, interest, property taxes and insurance to gross income.  If one assumes that a borrower can get a 30-year mortgage at a 3.75% rate, pays 1.1% of property value in property taxes, and an insurance premium of 0.2% per year, AND assumes that the borrower has a 20 percent down payment, a household earning $70,000 per year can afford a $250,000 house.  So the value of a "middle-class" house is $250K.  This is a long way from $525,000.

Pushing refinancing can really help

Recent news reports suggest current borrowers are still having some difficulties getting a HARP 2.0 refinancing.  This is too bad, because HARP 2.0 can potentially help a lot in getting many people out from under their troubles.

Consider someone who is 20 percent underwater on her house.  If she moves from a six percent loan to a 3.5 percent loan (today's rate on Zillow), and if house prices go up by only one percent per year (something that I think likely will happen in most markets, for reasons I stated a week or so ago) and if the borrower keeps her payment constant, she will be right-side-up in around four years.  If she remains in the six percent mortgage, however, she won't be right-side up for about nine years.

Note the HARP 2.0 is not rewarding "bad behavior."  It is program for people who are current on their payments but who are also upside down.  Many people can look at four years and see a tunnel's end--I am not sure that is true about nine years.

Of course, refinancing will not solve the Vegas-Phoenix-Inland Empire problem, where many borrowers are 30 percent underwater and more.  But for a whole lot of the country, HARP 2 could be a game changer.

Joan Ling at UCLA tells me transit ridership's share in LA is falling...

...and two car families are rising.  Zero car families are falling too.  This after about $12 billion of spending on rail transit.  Hmmmm.

Having just finished Robert Caro's magnificent The Passage to Power, I have two questions:

(1) Absent LBJ, would we have civil rights laws even now?

(2) Absent LBJ's awful personality traits, would we have civil rights laws even now?

To Boskin and Cogan: California does not attract non-taxpayers (earlier post corrected)

I was listening to an industry type give a speech on the woes facing California, and heard him state that a "Stanford study" show that while 10 million people had migrated here since 1985, only 150,000 people more paid taxes.  This made absolutely no sense to me, so when I got home, I did a little Googling, and found an ob-ed from Michael Boskin and John Cogan that said:

From the mid-1980s to 2005, California's population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000.

The 150,000 number made no sense to me, so I went to the IRS SOI tax stats page to see what was up.  The data there go back to 1997, and in any event, I am not sure what year the authors mean by "mid-1980s."

So here are the data (download the spreadsheets and go to line 94 for 1997 and 108 for 2009)--from 1997 until 2009, the number of individual tax returns with taxable income in California fell  from 10.8 million to 10.3 million, suggesting that California was a land attracting non-taxpayers.  But the number of individual tax returns with taxable income nationally fell from 98.5 million in 1997 to 91.0 million in 2009, or by more in percentage terms than California.  The reasons for these declines are the rise of the Earned Income Tax Credit (which is good) and a reduction in incomes at the bottom of the income distribution (which is bad).

I do need to figure out where to get data from the middle 1980s, but going back to the late 90s seems more relevant at this point.  In any event, context matters.