I recognize that house prices are much discussed here. I'm setting up a different thread because I'm interested in the question: does supply create an irresponsible or unsustainable demand? (I'm not sure if this is a poll adrian can answer, but we'll see .) Myself, I'm torn between #5 and #6; I hate spending money. (And I have seen at least one person in each of the scenarios I've tried to distill.) On the other hand supply-side economics was predicated on letting producers produce, without having to worry, like Ford, on whether workers could afford to buy what they produced. Now, it seems, working or not, there's always someone ready to advance you cash (at usurious interest) for whatever purchase you don't really need, or had never even thought of before. Sure, there's a sucker born every minute; problem is the suckers, or at least their lenders, somehow end up listed on the stock market. The wild west of mortgages Susan Wachter, who teaches realestate finance at the Wharton School of the University of Pennsylvania, has been asking the question longer than most. Early last year, as U.S. housing prices kept soaring, she repeatedly pointed out that the push wasn't coming from homeowner demand but from the relentless expansion of the subprime industry by investors who just couldn't say no. Ms. Wachter blames the current housing crisis on substandard analysis of the subprime sector. Supposedly savvy Wall Street advisors bought into the myth that housing prices don't go down. While it's true that national housing prices have never dropped more than one or two percentage points over the past 15 years, "Wall Street failed to understand that poorly underwritten mortgages would make the market more volatile," she says. While some economists blame Wall Street, homeowners themselves must shoulder some responsibility for the housing crisis. Are Americans too greedy? To be sure, the housing crisis is due to the fact that borrowers "are not really good at delayed gratification," says Marian Friestad, associate professor of marketing at the University of Oregon. "We are immature consumers; we have things and we want more things." But another factor, she says, is consumer illiteracy. "We have the means to purchase what we want in the moment, without necessarily having to feel the impact of that purchase. You move it into the less real, and every time you do that it's hard for people to keep track of what they spent," she says.

parvus wrote: (I'm not sure if this is a poll adrian can answer, but we'll see .) Yes can do

We admit to cheering when TV News items focus on people spending, since we figure it tends to place us, (as stockholders and non-spenders), in a relatively better position, (their accumulated junk notwithstanding). Shopping Schadenfreude.

To be sure, the housing crisis is due to the fact that borrowers "are not really good at delayed gratification," says Marian Friestad, associate professor of marketing at the University of Oregon. I disagree with this. "Gratification" means consumption. Everyone lives somewhere, whether they be renters or buyers. The problem is not overconsumption of shelter per se. Indeed, many people were actually moving out of rental accommodation to buy purchase equivalent or even inferior housing. Rather people have been paying substantially more per month (or taking on adjustable loans that will end up this way) to finance the purchase of the same shelter rather than rent it. Why? Expectations of capital gains. In other words, a speculative bubble, just like dot-com. If people were really overconsuming shelter rents would have risen to the same extent as prices. In the same vein the purchase of a capital good such as housing should not be an item in the same poll as consumables. Consumables should not be bought with borrowed money, period. Capital goods should be bought with borrowed money when the fundamentals make sense and the carrying costs are affordable.

I think low-cost financing can influence purchases. I bought my BMW on lease because it was 3.9% (1995). I try to avoid debt now that we are retired but I will still take advantage of cheap money if it makes sense financially. Ben Stein did an OpEd piece on sub-prime lending. He claims the total subprime market amounts to 1% of mortgage lending in the US, and that any losses are likely to be quite a bit under .5% so his conclusion is "Get a grip people and buy some of these bargain stocks."

There was no "because I'm married" option, so I chose #1 It's kind of sad to see so many people who only have needs and so few wants. Or am I misinterpreting this? Maybe these people are so far gone into consumerism that they regard good food, vacations, booze, new clothes and other consumables as needs rather than wants. kcowan wrote: Ben Stein did an OpEd piece on sub-prime lending. He claims the total subprime market amounts to 1% of mortgage lending in the US, and that any losses are likely to be quite a bit under .5% so his conclusion is "Get a grip people and buy some of these bargain stocks." See here

er, ah...a typical poll designed for most 90%ers and wannabees... Unlike most 90%ers and wannabees, us 10%ers purchase the 'finer' things in life...things with added-value. Missing out on the 'finer' things in life is just plain missing-out-on-life. Mega-Money = Mega-Lifestyle. In our household the time started 14 years ago to get-rid of stuff. OTOH, a lot of 90%ers accumulate fresh-junk...they seem to need to impress the Joneses who have more fresh-junk. We all know why so many 90%ers are 90%ers...Yes/No? My choice...#1. Maintaining the Money-Jar constantly at the FULL mark is a darn good thing. The aim is to have so much MONEY that it is impossible to spend it all. CASH-FLOW is a darn good thing. BTW, what Canada needs is more 'believers'. BTW2, trust me, believe me.

Gus wrote: There was no "because I'm married" option, so I chose #1 It's kind of sad to see so many people who only have needs and so few wants. Or am I misinterpreting this? I think you are misinterpreting. There wasn't an option for "I'm happy living within my means and see no reason to buy shit just for the sake of spending money." I therefore chose - #5. Money doesn't burn a hole in my pocket, and we don't really have any "peers" as such that I have to keep up with. (I guess we used to when we lived in the city, but not any more.) Shopping is not recreation for me. Mainly I hate it. (Having said that, it's a good thing there's no Home Outfitter within an hour and a half of me - if there was, I'd go broke. ) I do have fairly cheap financing, though. My PCFinancial Mastercard reduced my rate to 5.97%, probably because I've paid it off faithfully every month since I got it. Scotia VISA kindly allows me to make balance transfers at 3.9%, so I carry a small balance on that card from time to time. (I don't even have to wait for them to send out a special offer - I just phone them and ask for it.) But the existence of this cheap financing in no way encourages me to spend more money than I otherwise would.

My ex-girlfriend was a recreational shopper. I quickly learned to regret having to set foot in a shopping mall. Without her to pick up the other half of the rent, I find myself much further ahead than I could have ever imagined.

I spent a significant part of my life having to squeeze every penny, I have more flexibility now but old habits die hard, still spending an extra 5 minutes in the store looking for the can of soup that's 5 cents cheaper. So answer one doesn't quite fit, but we've moved past the bare necessities stage implied in answer 5. Still value conscious, but have learned that the cheapest item is not always the best value, and that "luxury"" purchases (travel, for example, would always be a luxury using the definition spelled out in 5) can provide good value for the money.

westinvest wrote: So answer one doesn't quite fit, but we've moved past the bare necessities stage implied in answer 5. Still value conscious, but have learned that the cheapest item is not always the best value, and that "luxury"" purchases (travel, for example, would always be a luxury using the definition spelled out in 5) can provide good value for the money. I actually voted for #5, even though I'm in the second-highest tax bracket; I get invited to lunch, in the course of my job, but still find, for example, that I won't order an entree over $20. And my biases are showing. My idea of travel is to go to Montreal for a weekend, I have little interest in the U.S. (except cycling in Vermont) and less in Europe, unless I can spend a week in a single city or region: Berlin, Normandy, Masurian Lakes, Barcelona, for example. That said, I have friends who finance their vacations by credit card. I guess when you put a poll together, you go with what's in your head, about the people you know. Mind you, weekly necessities for me include buying books, beer and beef (no Buddhist monk me). But I'm still a believer in "use it up, wear it out, make it do or do without."

parvus wrote: weekly necessities for me include buying books So do you, like Levin, believe that you should read all the books you already have before you buy new ones? I've tried that over the years, but have always fallen off the wagon. Books and education are my only luxuries. But my wife makes up for it. So an "I'm married" option would have been appropriate for me as well. Georges

georges wrote: So do you, like Levin, believe that you should read all the books you already have before you buy new ones? I've tried that over the years, but have always fallen off the wagon. Oh, I'm surrounded by books staring at me fitfully, maybe even angrily, demanding to be read. "I'll get to you," they intimate (in the same tone I use to address the cats ) before I retire, or maybe by taking an early retirement. Still, I'm never stuck in an elevator without two books in my bag — just in case.

From tomorrow's NYT: April 6, 2007 Op-Ed Contributor How Supply-Side Economics Trickled Down By BRUCE BARTLETT Great Falls, Va. AS one who was present at the creation of “supply-side economics” back in the 1970s, I think it is long past time that the phrase be put to rest. It did its job, creating a new consensus among economists on how to look at the national economy. But today it has become a frequently misleading and meaningless buzzword that gets in the way of good economic policy. Today, supply-side economics has become associated with an obsession for cutting taxes under any and all circumstances. No longer do its advocates in Congress and elsewhere confine themselves to cutting marginal tax rates — the tax on each additional dollar earned — as the original supply-siders did. Rather, they support even the most gimmicky, economically dubious tax cuts with the same intensity. The original supply-siders suggested that some tax cuts, under very special circumstances, might actually raise federal revenues. For example, cutting the capital gains tax rate might induce an unlocking effect that would cause more gains to be realized, thus causing more taxes to be paid on such gains even at a lower rate. But today it is common to hear tax cutters claim, implausibly, that all tax cuts raise revenue. Last year, President Bush said, “You cut taxes and the tax revenues increase.” Senator John McCain told National Review magazine last month that “tax cuts, starting with Kennedy, as we all know, increase revenues.” Last week, Steve Forbes endorsed Rudolph Giuliani for the White House, saying, “He’s seen the results of supply-side economics firsthand — higher revenues from lower taxes.” This is a simplification of what supply-side economics was all about, and it threatens to undermine the enormous gains that have been made in economic theory and policy over the last 30 years. Perhaps the best way of preventing that from happening is to kill the phrase “supply-side economics” and give it a decent burial. It’s important to remember that at the time supply-side economics came into being, Keynesian economics dominated macroeconomic thinking and economic policy in Washington. Among the beliefs held by the Keynesians of that era were these: budget deficits stimulate economic growth; the means by which the government raises revenue is essentially irrelevant economically; government spending and tax cuts affect the economy in exactly the same way through their impact on aggregate spending; personal savings is bad for economic growth; monetary policy is impotent; and inflation is caused by low unemployment, among other things. These beliefs led to many bad economic policies. In particular, they lay at the root of stagflation, that awful combination of high inflation and slow growth that bedeviled policy makers in the 1970s. Based on insights derived from the Nobel-winning economists Robert Mundell, Milton Friedman, James Buchanan and Friedrich Hayek, the supply-siders developed a new program based on tight money to stop inflation and cuts in marginal tax rates to stimulate growth. As the staff economist for Representative Jack Kemp, a Republican of New York, I helped devise the tax plan he co-sponsored with Senator William Roth, a Delaware Republican. Kemp-Roth was intended to bring down the top statutory federal income tax rate to 50 percent from 70 percent and the bottom rate to 10 percent from 14 percent. We modeled this proposal on the Kennedy-Johnson tax cut of 1964, which lowered the top rate to 70 percent from 91 percent and the bottom rate to 14 percent from 20 percent. We believed that our tax plan would stimulate the economy to such a degree that the federal government would not lose $1 of revenue for every $1 of tax cut. Studies of the 1964 tax cut showed that about a third of it was recouped, and we expected similar results. Thus, contrary to common belief, neither Jack Kemp nor William Roth nor Ronald Reagan ever said that there would be no revenue loss associated with an across-the-board cut in tax rates. We just thought it wouldn’t lose as much revenue as predicted by the standard revenue forecasting models, which were based on Keynesian principles. Furthermore, our belief that we might get back a third of the revenue loss was always a long-run proposition. Even the most rabid supply-sider knew we would lose $1 of revenue for $1 of tax cut in the short term, because it took time for incentives to work and for people to change their behavior. When President Reagan proposed a version of Kemp-Roth in 1981, every revenue estimate produced by the Treasury showed large revenue losses from its enactment, based on standard models. The independent Congressional Budget Office produced figures that were almost identical. Moreover, we were adamant that only permanent cuts in marginal tax rates would stimulate the economy. We thought that temporary tax cuts, tax rebates, tax credits and such were economically worthless, and we strongly opposed them. Today, hardly any economist believes what the Keynesians believed in the 1970s and most accept the basic ideas of supply-side economics — that incentives matter, that high tax rates are bad for growth, and that inflation is fundamentally a monetary phenomenon. Consequently, there is no longer any meaningful difference between supply-side economics and mainstream economics. There is no question in my mind that we never could have overcome the stagflation of the 1970s as quickly or with as little pain as we did without the supply-side idea. But supply-side economics has done its job, just as Keynesian economics did in the 1930s. Those who campaign as its champions are fighting a fight long won — and it is time for supply-side rhetoric to go, with its essential truths embodied in mainstream economics and its perversions discarded for good. Bruce Bartlett, an official under Presidents Ronald Reagan and George H. W. Bush, is the author of “Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.”

Bruce Bartlett, an official under Presidents Ronald Reagan and George H. W. Bush, is the author of “Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.” Funny how the neocon intelligensia are falling over each other to disown Bush these days. They seemed to be pretty proud of him two years ago, and his policies haven't changed since then. Just his popularity. Just a few days ago Paul Krugman made the case in the NYT that not only has Bush not betrayed the Reagan legacy, he is the Reagan legacy. The big difference is that Reagan didn't have a Congress that would give him everything he wanted, and Bush did. And after all it was Reagan who put Bush I on the path to the Oval Office, and appointed the Supreme Court judges who installed Bush II.

patriot1 wrote: Funny how the neocon intelligensia are falling over each other to disown Bush these days. They seemed to be pretty proud of him two years ago, and his policies haven't changed since then. Just his popularity.. From Bruce Bartlett's book: Traditional conservatives had grave doubts about George W. Bush since day one. First, he was his father’s son. George H. W. Bush ran as Reagan’s heir, but did not govern like him. Indeed, the elder Bush signaled that there would be a sharp break with Reagan-style conservatism in his inaugural address, when he spoke of being “kinder” and “gentler.” Conservatives immediately asked themselves, “Kinder and gentler than whom?” To them, the answer was obvious: Ronald Reagan. In effect, Bush was accusing his predecessor and the philosophy he stood for as being the opposite of kind and gentle–nasty and brutish, perhaps. As columnist George Will later put it, Bush was determined “to distinguish himself from Reagan by disparaging Reagan.” <snip> Right from the beginning, George W. Bush made it clear that he was not a conservative in the Reagan mold. In a speech in Indianapolis on July 22, 1999, he called the idea that our problems would be better solved if government would just get out of the way a “destructive mind-set.” Government is “wasteful and grasping,” Bush said, but “we must correct it, not disdain it.” Commenting on this speech, Cato Institute president Ed Crane said it could have come straight out of the Progressive Policy Institute, a think tank allied with the Democratic Party. Even in front of explicitly conservative audiences, Bush continued his theme that government was not the enemy, but just wasn’t being used for the proper ends. In a speech to the Manhattan Institute on October 5, 1999, Bush put it this way: “Too often, my party has confused the need for limited government with disdain for government itself.” He went on to complain that the government was too weak to do what was needed. It was “grasping” and “impotent,” he said. Georges

I know what my monthly and annual savings targets are, and I enjoy spending the money I have left over once those savings targets have been met.

In a speech to the Manhattan Institute on October 5, 1999, Bush put it this way: “Too often, my party has confused the need for limited government with disdain for government itself.” He went on to complain that the government was too weak to do what was needed. It was “grasping” and “impotent,” he said. This has to be the most hilarious quote I've read in some time. No president in living memory has shown such disdain for government as Bush, and been so "grasping" and "impotent" in times of real crisis (like you know when). The whole point is that Bush talked about "compassionate conservatism", but actually practiced the exact opposite. The neocons have to resort to attacking Bush's words, not his deeds.

patriot1 wrote: The whole point is that Bush talked about "compassionate conservatism", but actually practiced the exact opposite. The neocons have to resort to attacking Bush's words, not his deeds. Perhaps. (It's your post, after all.) But surely a subsidiary, but very important, point is that Bush never acted as a conservative while in office. Increased spending alone should be enough to make that point obvious. And for anyone reading the editorial pages of the WSJ these last eight years, it was obvious that there was conservative unease with Bush from the beginning, quickly growing into opposition. Georges

I voted for #5, but I suspect the "necessities" are highly individual. I was brought up that for durable goods buying "quality" was always the best policy, and quality costs; I still feel this, but I don't equate namebrand with quality. Every significant purchase is researched, and while price is is usually not the deciding factor, it is certainly not ignored. For example, the necessity was the vacation; the supply side economics meant I go someplace warm, at competitive rates. If the costs dramtically increase then the vacation will be to my sister's house, we'll still take the vacation.

Quality can have many aspects. Whenever I have a salesperson trying to tell me how the quality is worth the extra money, I tell him/her I only buy the quality that I need and is cost effective.

Dennis wrote: Quality can have many aspects. Whenever I have a salesperson trying to tell me how the quality is worth the extra money, I tell him/her I only buy the quality that I need and is cost effective. Good point. I usually ask him/her to prove it. I am all for a worthwhile expense.