Friday, March 9, 2012

'Look on my works, ye Mighty'

The photos adjoining these words pretty much sum up the state of Ireland these days.

They are of a house that I pass most mornings, as I bring my daughter to school on a rural back road. I don’t know who built the house, but during the past decade it was very common to see sites like this dotting the countryside. As the economy heated up and housing prices escalated, the easy profits were too tempting for farmers. They sold sites like this to people looking for an economical way to have a grand house. Sometimes they sold the sites; sometimes they built houses themselves to sell with the sites. Sometimes the houses were meant for their own adult children. Sometimes they were for people working in a nearby town or city but who didn’t want to pay city prices for a house or maybe just liked the idea of living in the country. Sometimes the buyer was a speculator from Dublin, planning to hold on to the house while the prices appreciated further.

The trouble with a housing boom is that it inevitably turns to bust. And if you try to jump on the bandwagon too late or hold out too long for too much money, you can find yourself with a new, unfinished house on your hands. I don’t know the specific story about this house, but I was amused one day when I happened to notice that, apparently having given up finding a buyer anytime soon, the owner had put it to another use. The unfinished structure was filled, floor to ceiling, with bales of hay. Demonstrating the exceedingly practical nature of Irish farmers, this one was using the newly built house as a barn. If this isn’t a metaphor for the Celtic Tiger, I don’t know what is.

For most people here, the reigning metaphor is the “ghost estates,” that is, the empty housing developments on the outskirts of cities and town that have been abandoned because there is no one to live in them. The ghost estate metaphor took an even darker turn recently a couple of weeks ago when a toddler wandered onto such an estate outside the midlands town of Athlone and was found drowned in a pool of water.

Some would say that these ghost estates—and my Celtic hay barn—are lingering monuments to greed. In a way, they evoke the ruined ancient statue described in Percy Bysshe Shelley’s poem “Ozymandias.” A traveller finds the remnants lying in the desert sand along with a pedestal that reads, “My name is Ozymandias, king of kings: Look on my works, ye Mighty, and despair!” To my mind Ozymandias is a better metaphor for some political careers than for the housing boom.

While some of us watched in wonder at the madness of the building frenzy, it wasn’t a completely illogical reaction to the lax Irish banking oversight of the time and the low interest rates dictated by the European Central Bank and which suited the cooler economies of Germany and France better than the then-booming Irish economy. This and subsequent events in Greece show how hard it is to get a common currency like the euro right—when so many different countries and types of economies are involved. And, of course, the politicians’ solution is to put Ireland and the other member countries under even more control by the euro architects and the ECB.

One wonders if we are watching the rise of yet another Ozymandias.

Wednesday, March 7, 2012

The Cost of Being Distracted

Leave it to James Taranto to get to the heart of the matter.

Taranto is the editor of The Wall Street Journal’s and writes the daily “Best of the Web Today” column. He has a very analytical style that makes sense of issues of the day that have been spun to death on TV and radio. And he has a hilarious sense of humor.

The latest epiphany he provided for me came on Monday, as he discussed the Sandra Fluke kerfuffle (one of his favorite words). He cited her quote, in testimony before Congress, that “[w]ithout insurance coverage, contraception, as you know, can cost a woman over $3,000 during law school.” Generally, the press let that assertion pass without scrutiny, preferring to focus instead on the rude words of someone with a radio show and whether that person had apologized and whether the apology was sincere enough and how many advertisers he would end up losing.

That’s where Taranto got to the heart of the matter. He pointed out that a journalist (John McCormack of the neo-conservative Weekly Standard) had actually checked out Fluke’s assertion and discovered that a course of birth control pills could be had for as low as 9 dollars per month from a Target near the Georgetown campus in Washington, D.C. That works out to $324 during a three-year stint at law school.

And that is exactly the crux of the matter. This is a prime example of something Taranto has pointed out very coherently in a number of columns. When government gets involved in something, the cost of that thing shoots up. Over the years, the more government has tried to help students pay for higher education (first by subsidizing private loans, then by making low-cost loans directly and by providing more and more outright grants), the more a university education has become wildly expensive. It’s a simple case of, when more money chases a product, that product will become more expensive. A similar thing happened with housing. The more the government pushed low-cost loans on the mortgage industry through Fannie Mae and Freddie Mac, the more housing prices shot up, ultimately creating a bubble.

I don’t know whether or not Sandra Fluke’s estimate of the cost of birth control was based on her own personal experience or if she simply quoted the highest possible price she could come up with, but if those products don’t cost that much now, they are certainly liable to by the time the government has finished mandating third parties to pay the bill. The more layers between the person receiving a good or service and the person providing the money, the more prices tend to go up. Many of us know that from such experiences as being quoted two prices from a mechanic, one for cash payment and a higher one if insurance is paying for the work.

The irony is that, before the fight over Obamacare started, surveys showed that most people were happy with the quality of their medical care except for the fact that it cost too much. And true to form, the government’s solution was to overhaul the whole system in such a way as to virtually guarantee that medical care will get even more expensive. And the proponents even had the chutzpah to claim, with straight faces, that it would reduce the national deficit. At the time the Congressional Budget Office validated that claim, working with assumptions that it had been given. It later had to concede that new entitlements that are part of the plan will likely add 4 to 6 trillion dollars to the deficit over 20 years.

Somehow the president, other politicians, the candidates for president and most of the press have all managed to talk about everything but this looming disaster. Instead they are talking about birth control.