Don't Quit Your Day Job…

Consider this my public service announcement: your opportunity to pocket $8,000 if you buy a new home as a ‘first time homebuyer’ is almost over (12/1/2009). The stimulus (which comes on behalf of taxpayers not buying their first homes) has spurred investments in entry level homes. Silicon Valley’s prices haven’t come down enough, (as viewed by the rent vs. buy ratio) so I’ll be sitting this one out.

There’s nothing worse than having something taken from you that you once had. As Alexis de Tocqueville remarks so elegantly in Democracy in America, “The heart of man is not so much caught by the undisturbed possession of anything valuable as by the desire, as yet imperfectly satisfied, of possessing it, and by the incessant dread of losing it.” Citi Cards stared down the rule makers, and unfortunately for their responsible customers, they blinked first. Maybe I’m being too melodramatic, but what I’ll illustrate in this article is merely symptomatic of the sweeping changes you may see in the credit card industry in the near future.

One of the most contentious issues of the past couple of decades has regarded policy debates on how to benefit lower-income individuals (colloquially referred to as ‘Welfare’ programs). This article will not deal with the benefits or disadvantages of Welfare programs in general, but instead will compare the various forms of implementing Welfare. Also, I will show (in the next article) a very important unintended consequence that arises from the current preferred Welfare program, the Earned Income Tax Credit.

One of the provisions for receiving government funds through TARP caps executive salaries at $500,000. Companies argue that setting caps in that way leads to a talent drain – top employees who can receive a greater salary elsewhere will go do that. These predictions are coming true; TARP companies are losing talent to boutique firms that don’t have compensation limits. Is this the best effect on companies trying to pay back public money?

Next month, the minimum wage in America is going to raise from $6.55 an hour to $7.25 an hour. The $6.55 to $7.25 jump is the last of the increases to the minimum wage under the Fair Minimum Wage Act of 2007. The minimum wage is a sexy law; politicians can stand hand in hand with the lowest income workers and say, “I’m fighting for you!”. Unfortunately, the low income workers are holding the hands that hold them down.