Archive for October, 2009

Refinance Now? Heck Yes!

Thursday, October 29th, 2009

This is my Bloomberg column on the subject:

Commentary by John F. Wasik

If you need to refinance your home mortgages, don’t wait.

It’s not time to play chicken. Lock in the best deal now. Mortgage rates have climbed over the last two weeks, according to mortgage buyer Freddie Mac of McLean, Virginia. At a 1960s- like national average of 5 percent, the 30-year rate isn’t far from its historic low of 4.78 percent, reached in April. As the economy heats up, it’s far more likely that rates will climb.

Not only can you save every month with refinancing, over the life of the loan your total interest payments drop substantially. Increased cash flow could be the single-best excuse to refinance if your total loan expenses are reasonable.

Let’s say you have a $300,000 mortgage and you are paying $1,847 a month on a 30-year, 6.25 percent loan.

You can obtain a 5.25 percent, 30-year loan and knock down your monthly payment to $1,656, according to the Bloomberg mortgage calculator. The $2,292 annual savings would do nicely in an emergency, college or retirement fund.

If you stay in your home for 30 years, then you will save almost $69,000 in interest by refinancing. On the 6.25 percent loan, you will pay about $365,000 in interest alone — in addition to principal.

When I got a refinancing offer letter from my bank recently, I was excited. Instead of paying 6 percent on my 30- year loan, I could refinance to 5.24 percent.

Initial Offer

My monthly payment would drop from $714 per month to $572 for annual savings of more than $1,600.

I called the bank with great hope. They also offered to waive the origination, appraisal and credit-report fee.

Upon inquiring further, it became clear that not all of the loan costs were disclosed in my cheery little letter.

Total expenses would be about $3,000 and the bank would need $750 cash upfront just for an application fee.

Of course, I could add the closing costs to the loan’s principal, which my loan specialist suggested. Since I wanted to reduce my total debt, I wasn’t happy with this option.

I was peeved at paying high closing costs, since they don’t give me a bigger equity stake and have little tangible benefit. Paying $1,000 or less to refinance a mortgage is fairer.

Besides, in an age of massive automation and bank bailouts, closing costs needn’t be that high. My bank can borrow from the Federal Reserve at less than 1 percent and has received $25 billion from taxpayers. It can afford to cut borrowers some slack. I’m shopping around for a better rate and lower costs.

When It Won’t Work

With these low rates, though, only a select group of homeowners should be refinancing.

Are you facing a job transfer or plan to move within a few years? You may not be able to recoup the closing costs or realize those huge long-term interest savings. And if you don’t have much equity in the home (less than 20 percent) or below- average credit, you may pay a higher rate or not qualify at all.

What if you plan to stay for a while?

Should you consider a 15- or 20-year loan to pay it off earlier and save on total interest?

While the rates on these mortgages would be lower, the monthly payments would be higher than 30-year notes. And there would still be those nagging closing costs.

One thing that my broker didn’t pitch was a way to pay off the loan earlier without refinancing. That would save me thousands in interest costs — without having to pay a dime of onerous closing fees.

It’s simple: Prepay principal with every monthly payment.

Hidden Truth

You could effectively turn your existing 6.25 percent, 30- year note into a 20-year mortgage by applying an extra $350 a month to principal.

Over the life of the loan, you would save almost $140,000 in interest payments alone. Even paying an additional $208.50 would save $100,000 in total interest.

If you don’t care about building equity or paying off the loan, focus on lower payments and recouping the closing costs.

Since the Federal Reserve is subsidizing these low rates by buying as much as $1.25 trillion in securities from the government-seized mortgage entities Freddie Mac and Fannie Mae, they will not last.

Market forces, inflation or a new government policy will eventually force rates up. The Fed’s purchasing is slated to end in the first quarter of next year.

Clearly this is one situation in which patience probably isn’t a virtue.

(John F. Wasik, author of “The Audacity of Help: Obama’s Economic Plan and the Remaking of America,” is a Bloomberg News columnist. The opinions expressed are his own.)

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Flaming Out on Old Suburbia

Tuesday, October 20th, 2009

President Obama’s “Green Deal” Needs to address how to make our metropolitan lifestyles more sustainable. Here’s a snippet of a talk I gave at my alma mater The University of Illinois-Chicago:

Cul-de-Sac Syndrome
UIC alumnus speaks about the American Dream
Erin Vogel
Issue date: 10/19/09 Section: News

Is the American Dream sick? John Wasik, above, on the Cul-de-Sac Syndrome.
Media Credit: Juliette Cardenas
Is the American Dream sick? John Wasik, above, on the Cul-de-Sac Syndrome.

John Wasik, award-winning author and UIC alumnus, visited the Richard J. Daley Library last Tuesday afternoon to discuss his latest book, “The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream.”

Wasik’s visit marked the beginning of the UIC Alumni Authors Series, a burgeoning program organized by Linda Naru, Coordinator of Communications and Marketing at the UIC Library, with the intention of educating the UIC community about the 100+ past UIC graduates that are now respected authors.

“I think that the Alumni Association has been looking for ways to recognize alumni for their work,” Naru said, “and the library wants to do more outreach programs centered on books and writing that will draw students, faculty, and alumni into the library.”

Arlene Norsym, the Vice President and Associate Chancellor of Alumni Relations, suggested that John Wasik speak at UIC after meeting the author and reading one of his books. She found the book’s subjects to be “fascinating and thought-provoking.”

The focus of Wasik’s talk was the idea of sustainability: first, the difficulty of defining this concept, and then the ways we, as Americans, must change our thinking in order to integrate this concept into our daily lives and choices. Wasik began his book with the intention of better understanding the idea of sustainability; he went so far as to relocate his family to Florida for a month in order to find a truly sustainable family that was living “off the grid” and “generating its own power.”

Wasik explained that the idea of the “Cul-de-Sac Syndrome” is about the current, rather desperate, situation of our country, the idea that “we’ve hit and blind alley and can’t go any further. We need to rethink things so we can go in another direction.”

One of Wasik’s suggestions to improve our country’s current situation has to do with rethinking our ideas of “community”; for instance, how we think about the differences between the big cities and suburbs. Wasik lives in Prairie Crossing, a conservation community in Grayslake, Illinois. According to Wasik, in Prairie Crossing, “we define sustainability as something we can walk to, as being able to buy food that is grown a block away.”

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When Renting a Home Beats Buying

Wednesday, October 14th, 2009

This is my Bloomberg News column on the subject:

Renting Beats Home-Buying Remorse After Meltdown: John F. Wasik

Oct. 14 (Bloomberg) — Unless you want to stay in a neighborhood for life, renting a home may make more sense.

With more foreclosures and huge inventories of unsold homes looming and mortgage rates held down by the government, the housing market may not stabilize for years.

It’s no longer a given that you will build home equity. The housing debacle may have depressed housing prices for a generation in all but a handful of areas.

Am I spouting American housing heresy? After all, can’t you still build wealth by simply buying a home and holding it? And with 30-year, fixed-rate mortgages dipping below 5 percent, isn’t your buy signal flashing “go”?

A rent-versus-buy decision is a complicated one. You will need to make some blunt assumptions and do some in-depth homework on the neighborhood in which you want to buy.

The first layer of your decision-making is the duration of your investment. If you are fairly certain you are going to be in a neighborhood for an extended period — say you have a young family, like the local schools and have a secure government job — check the “buy” category and calculate ownership costs.

Those facing relocation, looking to downsize or retiring should strongly consider renting.

It’s difficult to recoup all of your closing costs and down payment in a short period of time. This is the easy part.

Rent Versus Buy

Now comes some gnarly cash-flow analysis for those leaning toward buying.

Let’s say you were considering a $300,000 home, put down 20 percent, and obtained a 5 percent, 30-year fixed-rate mortgage. You are in the 33 percent federal-tax bracket and you will pay $7,000 annually in property taxes and about $1,000 for insurance and maintenance. Your total monthly payments are $1,945.

Comparing your purchase to a similar property renting for $2,000 a month, you come out ahead buying and holding for 30 years. While your actual cash outlay is much less for renting — $583,267 versus $751,236 for buying — once you figure in the tax benefits over three decades, you are better off buying.

The combination of appreciation, leverage and tax breaks makes buying the winner over 30 years. Instead of having paid rent and gained no equity, this example will show a net asset value of $526,770 for buyers. This, of course, assumes a positive annual gain in your home’s price.

This example assumes a 1 percent annual return rate, stable property taxes and federal write-offs continuing untouched.

Property Taxes

Yet times have changed and it’s unlikely you will have the same mortgage, expenses and write-offs for three decades.

Real-estate taxes are wild cards that few brokers will discuss. Since public agencies are mostly dependent on property valuations for revenue, they are hurting in this housing recession and may be crippled for years from depressed home values. I’m seeing this in my area where the primary school district alone is facing a $3.5 million shortfall.

The most dangerous assumption is that property taxes will remain static. Ask your broker for past real-estate bills and the fiscal shape of local taxing bodies.

Another flawed assumption is appreciation. You can still lose home equity.

Check on median property values where you are buying. A few states were relatively untouched by the recent bubble, such as Texas, Utah, Wyoming, Oregon, Pennsylvania, Tennessee and North Carolina. Home-value declines were the worst in Nevada, California, Florida and Arizona, according to the U.S. Census Bureau’s most recent American Community Survey.

Invest the Difference

Still want to buy a home? Then dig even deeper in your targeted areas.

How many foreclosures are pending? Are there any vacant homes? What has been the mortgage default trend over the past two years? Is there a glut or shortage of unsold housing units? You can find local housing inventories by contacting area realtor associations.

Frank Armstrong III, a Coconut Grove, Florida-based financial planner and author of “Save Your Retirement” (FT Press, $14.99), says home ownership “is no longer a risk-free transaction. This has been the assumption for 30 years, and it’s been rebutted.”

An unstable or declining neighborhood usually translates into home-equity loss for buyers, most of whom have no idea when an area has hit bottom.

There’s no shame in not buying and exploiting the hidden upside in renting, though.

The money you would have spent on maintenance, taxes and insurance can pay off credit-card bills or be invested in an emergency fund, retirement or college savings. I know that few people will look at it this way, but renting might be a chance to recover financially.

(John F. Wasik, author of “The Audacity of Help: Obama’s Economic Plan and the Remaking of America,” is a Bloomberg News columnist. The opinions expressed are his own.)

Click on “Send Comment” in the sidebar display to send a letter to the editor.

To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net.

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Tackling Economic Issues

Tuesday, October 13th, 2009

This is a profile that ran in the Daily Herald, a suburban newspaper in Chicagoland:

Author John Wasik of Grayslake looks at writing in different ways.

“Writing a column is like a sprint, you do it in a specific period of time,” he said. “But writing a book is like a marathon with writing, editing and promotion.”

With more than a dozen published books, Wasik’s marathon has focused on a variety of consumer and economic issues, including his latest releases: “The Audacity of Help,” about President Obama’s economic plan and the remaking of America, and “The Cul-De-Sac Syndrome,” about the sustainability of neighborhoods during the real estate downturn.

While the former newspaper reporter has worked for various publishing houses, the latest two books were under Bloomberg Press. They are available through Amazon.com, Barnes & Noble as well as other book stores.

“In some ways, John follows in the footsteps of Jessica Mitford, especially with ‘Cul-De-Sac,’” said his agent Robert Shepard of Los Angeles.

Mitford, one of the famous and politically active Mitford sisters from England, hosted author dinner meetings in San Francisco many years ago that Shepard attended. Wasik had interviewed Mitford for a story and mentioned how he was looking for an agent for his books. Before she died, Mitford connected Wasik to Shepard in the late 1990s.

Still, Wasik draws much on his suburban roots for his books and has even touched on his own neighborhood in “Cul-De-Sac.” That book examines what caused the housing meltdown, how sprawl and tax breaks contributed to unaffordable homes and what could happen next.

As part of his examination, he even coined the term, “spurb,” or the sprawling urban area that’s not conveniently located near anything, like suburbs that seemingly spring out from the middle of a corn field, he said.

His life here has helped to guide his career, like a sprint around the suburbs.

Wasik was born in South Suburban Chicago Heights and grew up in Matteson. After he married, he and his wife, Kathleen, moved to Libertyville and then to Wauconda before settling into a home in Grayslake. They’re raising two daughters: Sarah, 12 and Julia, 8.

He earned a bachelor’s degree in psychology at University of Illinois-Chicago, but later decided to go into journalism. He started his reporting career at the Star Publications, a weekly chain that covers the South Suburbs. He often covered mob-related activities connected to a Chicago Heights city council, he said.

He later joined Consumer Digest magazine and produced several award-winning investigative projects involving treatment of the elderly and financial fraud. That work led him to writing a column for Bloomberg News and writing books, starting in 1987.

Since then, he has won numerous awards and appeared on NBC, NPR and PBS. He’s also a regular speaker around the area. He appears regularly for promotional spots, including at 7 p.m. Wednesday, Oct. 14, at Common Ground in Deerfield, and at 7:30 p.m. Tuesday, Oct. 20, at the Schaumburg Library.

Colleagues believe Wasik has the unique ability to dissect complicated financial problems and explain them in a way that makes sense to everyone.

“I really enjoy having him as a guest on my radio shows because I know we’ll have fun exploring the topic of the day and I’ll wind up thinking a little differently about the issue because of a point he has raised,” said Ilyce Glink of Chicago, a syndicated real estate and finance columnist and commentator.

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Daily Kos Hails Audacity of Help

Sunday, October 11th, 2009

This is review from DailyKos, the leading progressive blog:

Book Review: The Audacity of Help Hotlist
by DarkSyde
Digg this! Share this on Twitter - Book Review: The Audacity of Help

Sun Oct 11, 2009 at 08:00:16 AM PDT

The Audacity of Help: Obama’s Economic Plan and the Remaking of America
By John Wasik, Bloomberg 2009
Paperback, 202 Pages, $16.95 New

John Wasik is quickly becoming one of my favorite authors. His prior book, The Cul-de-Sac Syndrome took what at first glance was a wonky and potentially dry topic and turned it into an engaging series of anecdotes and narratives neatly integrated into an informed, comprehensive story. Audacity follows right along in that vein, performing a minor literary miracle in the process by transforming the language of bailout and stimulus legislation from text so mind numbingly dull it would knock out any reader forced to slog through it faster than a 10mg Valium and Tequila chaser, to a series of exceptionally well organized and interesting vignettes that will entertain the reader while leaving behind a detailed grasp of the subject matter superior to many of the politicians who vote on it.

The book briskly reviews voodoo trickle-down economics and deregulation, and the general scope of the wreckage conservative economic policies and corporate lobbyists made of the thriving nation handed over to them in January 2001, before introducing the steps since taken by the President and Congress to clean up along with who wins and who loses. The chapters are neatly organized by topic and intent like “Rebuilding Infrastructure,” or Job Creators and the Green Collar Bonus”. Wasik then smartly summarizes the various bills and spending plans in each category like this:

CLEAN-ENERGY FINANCE INITIATIVE

What Was Promised: Obama promised to launch a clean-energy finance initiative to leverage 100 billion dollars in private sector …

What Congress Passed: Congress created a raft of incentives for clean-energy producers, including the following: …

The concise summaries are in turn followed by expert analysis entitled “Who Benefits the Most”. And that’s where the high quality writing and detailed research really shines through. Wasik minces no words, spares no political sacred cows, and takes no partisan sides. If the GOP, blue-dogs, lobbyists, pork and earmarks, or reversals or political stumbles waters down the legislation or fails to get it passed, Wasik tells you in no uncertain terms and frames it in what it means, or might portend, for you.

The topics are well footnoted and indexed, making the book extremely useful as a reference to shoot down those endlessly circulated emails winguts like to send out brimming with half truths and outright whoppers about some alleged legislative outrage du jour. The book mercifully stops along the way as necessary to develop useful definitions and explanations that are too often assumed by other authors, or lost to the programming limitations of commercial radio and cable news. For example, if you want to understand the challenges and benefits of a smart power grid and how the Obama administration is planning to create them, it’s probably useful to know the basics of a traditional dumb grid before tackling what the key features of smart one would be. I doubt very much if most politicians — especially the antiscience goons — comprehend it as well as you will after reading this book, making Audacity of Help a fine addition to any home library or office, not to mention a great stocking stuffer in the holidays ahead for the political junkie in your life.

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The $1.5 Trillion “Fix-Up” Gap

Thursday, October 8th, 2009

This is a piece I did for Huffington Post on the $1.5 trillion need to to fix U.S. infrastructure:

Let’s face it. America is one giant fix-up project. Bridges are crumbling. Public transportation systems are rusting. Water mains are leaking. Getting everything repaired and modernized is perhaps the largest and most expensive“honey do” list imaginable.

As I discovered in researching my new book Audacity of Help: Obama’s Economic Plan and the Remaking of America (www.audacityofhelp.net), there’s a $ gap between what was committed in the American Recovery and Reinvestment Act and what needs to be done.

While it’s undeniable that the stimulus funds are slowly trickling into communities and creating jobs - although not enough to offset the employment lost in the past year - the actual amount of money needed is far short of what’s needed. The infrastructure repair bill is estimated to be more than $1.6 trillion, according to the American Society of Civil Engineers, which published a report card on infrastructure conditions a few weeks after Obama took office. So the stimulus plan comes up about $1.5 trillion short.

What about all of those annoying barricades you see everywhere for road construction? Crumbling or inadequate roads cost American motorists some $67 billion a year or $710 per motorist - that’s just to fix the highways and bridges. We collectively lose the equivalent of 4.2 billion hours just sitting in traffic, costing the economy about $78 billion a year in terms of lost working hours (not to mention lost family time).

Are you a conscious commuter and take public transportation? Federal spending on public transportation systems lags the amount needed by about $6 billion annually. That makes the highway repair number loom even larger since nearly half of Americans don’t have access to public transportation.

You don’t need to go far to notice that America’s skeleton has some major osteoporosis. New York’s water tunnels are leaking millions of gallons of precious water. Los Angeles can never seem to get enough of this elixir of life. Chicago’s ancient “el” elevated-rail system is rusting away. Just miles from the White House, suburban Maryland’s 5,500-mile system of water pipes sprang a few leaks - more than 4,000 over the past two years (252 leaks were reported just a few days before the inauguration). Nearly every municipality has something that needs to be fixed or updated.

The Obama Administration’s stimulus plan set aside about $100 billion for infrastructure improvements. Of the $48 billion for all transportation projects, $27 billion of that has been allocated to the US Department of Transportation for mostly road/highway improvements.
Here’s a more detailed breakdown:

*$30 Billion for electrical system improvements. This money would be divided between modernizing and creating a “smart” grid, advanced battery technology and energy-department grants.

*$29 Billion for Public Works. This covers everything from street repairs to bridge reconstruction.

*$18 Billion. More funding for public works that will cover toxic waste clean-up, municipal water systems and flood prevention.

*$8.4 Billion for Public Transit. Sorely needed by cities, this will help repair and upgrade public transportation systems.

*$8 Billion for High-Speed Rail. This was a long-sought downpayment on creating intra-state systems to reduce the reliance on air travel.

One glaring subject that Obama avoided in the campaign and early days of his presidency is how to pay for infrastructure over time and how it will dovetail with an overall strategy to address climate change. While conservative Democrats and Republications generally object to increasing the federal deficit, they also oppose taxes. Unless huge cuts are made to other large budget items - unlikely during a recession - the Treasury will need to sell more notes to pay for the new spending, most likely to the Chinese, Japanese and Europeans.

At a certain point, investors in our debt may decide that the paltry after-inflation returns outweigh the political benefits. No one knows when that day will come, but it will happen and may shut down the debt-financing juggernaut that’s keeping the world’s largest economy afloat.

There may be no way of getting around the fact that gasoline taxes (or carbon-based levies on fuel, vehicles or buildings) need to be added or raised. The 18.4-cent levy on gasoline on 24.3-cent surtax on diesel fuel has been unchanged since 1993. That brought in about $39 billion in 2007. The CBO projects an economically justifiable investment of $132 billion in highways alone. Filling this funding gap will have to involve some sacrifice and extra dollars from those using the roadways. A $44 billion kitty could be created annually by boosting the fuel tax by 25 cents a gallon. The money has to come from somewhere. Plunging the nation ever further into debt and saddling future generations with it just isn’t sustainable.

A national infrastructure bank or trust fund, as proposed in the 2011 budget, could become a permanent institution overseen by trustees who are independent of Congress. This entity, if managed prudently and free of political earmarking, might be able to avoid the pork-barrel process of awarding federal dollars to the well-heeled few. Until then, the first wave of federal dollars may be a short-term boost, but won’t address the long-term aging of the nation’s backbone.

Author Bio
John F. Wasik, author of The Audacity of Help: Obama’s Economic Plan and the Remaking of America, is the author of twelve books, including The Cul-de-Sac Syndrome and The Merchant of Power. He speaks widely and writes a weekly Bloomberg News column that reaches readers of five continents and which earned him the 2009 Peter Lisagor award for journalism. He lives in Chicago.

For more information please visit www.audacityofhelp.net

Read more at: http://www.huffingtonpost.com/john-f-wasik/closing-the-15-trillion-f_b_314026.html

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Hot Green Deal Jobs

Wednesday, October 7th, 2009

The Green Deal: Obamanomics can do more for small business
October 6th, 2009

By John F. Wasik

There’s something glamorous about a couple of bright souls in an American basement or garage. They tinker around a bit, apply their imagination and creativity to a project, and voila, they’re the next Stephen Jobs or Bill Gates, reinventing the way the world works. Are those days over? Can America still foster the culture of innovation that helped it launch the second industrial revolution, land on the moon and seed the information age? Is President Obama’s “Green Deal” going to foster this kind of growth?

Durable small companies that do everything from manufacturing forklift parts to specialty contracting have been creating the bulk of new jobs in recent years. It’s these “high-impact’’ firms that have been generating employment at a surprisingly robust pace over the past decade. As defined by the U.S. Small Business Administration, these companies generally have less than 20 employees, are 25 years old or less and represent about 3 percent of all firms.

Obamanomics3As I discovered in researching my book The Audacity of Help: Obama’s Economic Plan and the Remaking of America, it’s the small shops, factories and firms that are producing new jobs, accounting for 33.5 percent of employment growth for firms of their size from 1994 through 2006. In contrast, during the same period, firms with 500 employees or more accounted for nearly all of the job loss in the U.S. economy. Yet the stimulus plan and budget do little for small businesses; they didn’t get the kind of cheap-credit bailout that the largest mismanaged financial institutions received.

Obama’s stimulus program will benefit specialized contractors in the building trades, alternative power and energy efficiency. While the initial plan will not be a substitute for a comprehensive climate change policy, national green building standards or a renewable energy portfolio mandate (required use of clean energy by a certain date), it will likely seed thousands of businesses and create jobs. Here’s a breakdown of the nearly $42 billion that will be made available:

* $11 billion for smart-grid research and development
* $6.3 billion for energy efficiency and conservation grants
* $6 billion for loan guarantees for electricity generation and renewable projects such as wind and solar (bringing them online and feeding clean power into the grid)
* $5 billion for weatherization assistance (for low-income residents)
* $4.5 billion for making federal buildings more energy efficient
* $3.4 billion for fossil energy research and development (carbon storage and “clean” coal)
* $2.5 billion for energy efficiency and renewable energy research
* $2 billion in grant funding for advanced batteries systems (making them lighter and store more power over time)
* $1 billion for other energy efficiency programs (alternative fuel trucks and buses, smart appliances)

There’s little doubt that the stimulus package will be the largest portion of seed money ever devoted to remaking the economy in a more sustainable mold. Provided the general economy doesn’t collapse, there will be reasons to be optimistic about the green sector. Renewable energy/efficiency industry grew three times faster than the general economy in 2007.

Mostly creating jobs that can’t be outsourced, this employment boom buoys states that have already embraced alternative energy such as California, Oregon, Colorado and Washington. Ironically, the biggest consumer of solar panels is Germany, which has a long-term tax incentive program in place for residents and businesses to buy and install them. Green-collar jobs in the U.S. will never grow substantially without a comprehensive policy that funds a smart grid with net metering, a national renewable energy standard (Al Gore would like to see all electricity generated from renewable sources in 20 years), job training and national building mandates that directs owners to do energy-efficient retrofits.

While the number of new business start-ups (around 600,000 annually) will not be directly effected by the Obama plan, it may spur new growth in companies specializing in creating a green building industry. Even traditional jobs (see below) will flourish if Obamanomics funds a multi-year construction or rehabilitation or maintenance boom.

There’s one other small-business linchpin that the Obama plan leaves out: Cheap and available credit. Small businesses are still being pinched by the credit crunch. They should be able to garner interest-free loans and get the same kind of deals the big banks got during the bailout. It’s also essential that Congress pass a universal, affordable health care plan. Such a national program would immediately make small businesses more productive and profitable.

John F. Wasik, author of Audacity of Help: Obama’s Economic Plan and the Remaking of America (Bloomberg Press), is a personal finance columnist for Bloomberg News and the author of several books. Wasik has won more than 15 awards for consumer journalism including the 2008 Lisagor and several from the National Press Club. He has appeared on such national media as NBC, NPR, and PBS. He lives in Chicago. For more information, visit www.johnwasik.com.

Copyright © 2009 John F.Wasik

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Talking to Monster About Green Jobs

Monday, October 5th, 2009

This is a Q&A I did with Monster.com, the leading jobs portal:

Stimulus Check 2009: How Will It Reshape America?

How has the Stimulus impacted American industry? And what lies ahead for future funding? Author John Wasik provides insight.

Economic Stimulus



Launched with great expectation and much political debate in early 2009, the American Recovery and Reinvestment Act sought to lift up the beleaguered American economy. Five months later, that expectation was tempered by realism and a plea for patience.

As the country looks ahead to better days in 2010, the Economic Stimulus will continue to play a role in the nation’s economic recovery. What might that role – and its impact – entail? And what might a “son” of Stimulus plan include?

For answers, Monster turned to John Wasik, author of The Audacity of Help: Obama’s Economic Plan and the Remaking of America.

Monster: What size businesses have most benefited from Stimulus funding?

Wasik: At this point, mostly large road and building contractors have benefited, although energy-related firms are receiving grants as well. Large to mid-sized companies seem to be doing the best.

Monster: Will this allocation evolve in the coming months?

Wasik: Yes. Some of the largest funding in medical and energy research takes months to wind its way through the process. There’s a lot of vetting to do and certainly a ton of bureaucracy.

Monster: How would you rate the government’s efforts to distribute Stimulus funding?

Wasik: Fairly good, although the government needs to disclose more on exactly who is getting the money and why.

Monster: Will the education and training programs included in the Stimulus significantly reshape the profile of the US workforce?

Wasik: No, not at this point. The new education bill that Congress is considering will have more of an impact. Sending more money (President Obama has approved $12 billion) to community colleges is key. Congress also needs to do a major overhaul of college aid. There should be more grants and less loans. The House just approved a measure to make the loan program direct, which will save billions. That’s a good first step. Tax incentives for college financing need to be consolidated and broadened if college is to become affordable for the middle class.

There aren’t enough retraining programs for President Obama’s “Green Deal” to make a difference now. They need more funding.

Monster: Will the Stimulus enable US industries to be more competitive globally?

Wasik: Yes. The Stimulus plan effectively makes the US government the largest venture capital entity in the country, especially the Department of Energy. Billions have been committed to alternative energy, new battery technology, electric cars, high-speed rail and a digital electric grid. But the Stimulus is just seed money. A sustained effort and trust fund for research and infrastructure is needed if we’re to compete long-term with the Chinese, Japanese and Europeans, who are planning decades into the future.

I would bet that any profession tied into energy research and development will do the best. There will be a pressing need for nano-technology engineers, systems analysts and integrators, auditors and intellectual property lawyers.

Monster: What areas of the economy might a “son of Stimulus” plan focus on?

Wasik: Manufacturing is still essential. The US still has considerable prowess in making things, but our expertise is in high-end products like machines that make silicon wafers. Biotechnology and nano-technology are two areas where the US has a tremendous advantage. We need to build more partnerships between research universities and Department of Energy Labs and the private sector. We could also lead the world in building technologies, building affordable, green buildings and communities.

Monster: Besides the Stimulus, how else could the government help employers successfully manage the current downturn?

Wasik: Provide more re-training programs, temporary support for lost benefits (COBRA extensions) and affordable universal health care.

Monster: How long do you project it will be before we see a steady improvement in the unemployment numbers?

Wasik: Unemployment will probably turn around early next year. There are a few wild cards, though. Interest rates need to remain relatively low, employers need to regain confidence to hire again and we definitely need a healthcare program that will cover everyone — particularly small businesses, students and those between early retirement and Medicare. Financial reform is absolutely essential to avoid another blow-up on Wall Street. Global regulation of derivatives is needed. The housing market is still a mess as well. Congress needs to find a more effective way of shutting down foreclosures.

John F. Wasik is author of The Audacity of Help: Obama’s Economic Plan and the Remaking of America and twelve other books, including The Cul-de-Sac Syndrome and The Merchant of Power. He speaks widely and writes a weekly Bloomberg News column that reaches readers of five continents and which earned him the 2009 Peter Lisagor award for journalism. He lives in Chicago.

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Obama Stimulus Makes Green Remodeling Pay Big Time

Thursday, October 1st, 2009

This is my 10/1/09 Bloomberg column:

Homeowners Get Easy Money From Green Renovations

Commentary by John F. Wasik

Oct. 1 (Bloomberg) — Can you profit from being an eco- investor?

There are really only two ways of doing it now. You can buy a risky sector fund or stock and hold on to it for dear life over the next few years. Or you can invest in your home.

Of the two, I prefer a home investment because the incentives have never been better and there’s no market risk. All the green funds got creamed last year.

Yet it’s unlikely your broker will tell you about the multiple tax breaks available through state and federal governments. Nor will he mention that eco-improvements will lower your cost of living.

If you do this right, not only will you be cutting your energy costs and greenhouse gases, but you can realize immediate savings in energy costs. Solar panels, for example, will save you money every year and have a steady rate of return that’s almost guaranteed, depending on the state incentives.

As part of the U.S. stimulus plan, also known as the American Recovery and Reinvestment Act, there are a raft of generous tax breaks for everything from replacing doors to installing geothermal heating systems.

Whether you are contemplating a complete makeover or just replacing a furnace, you have until the end of next year to put in service a number of improvements to qualify for the federal tax credits.

What You Can Do

Fixing up your home has never made so much economic sense. Uncle Sam is subsidizing lots of green remodeling this year.

The Treasury will give you a tax credit of 30 percent of the cost (a maximum of $1,500) for energy-efficient windows, doors, insulation, conventional heating/cooling systems, water heaters and biomass stoves.

As with any tax break, only certain types of improvements qualify, although this is the most generous range of incentives in recent memory. See www.energystar.gov/taxcredits for specifics. Even if you rent or own a condo, apartment or co-op, you can save on energy costs by buying Energy Star appliances.

Even better credits are available on geothermal heat pumps, solar panels/heaters, small wind energy systems and fuel cells. There’s no limit on the 30 percent write-off for these items through 2016.

So if you purchase a $20,000 solar-electric system, you can get federal credit for $6,000 that will knock the price down to $14,000. And that’s before state tax breaks apply, so this is not your final price.

Although state programs vary, there are additional incentives for installation and actual purchase of the clean power you generate.

Figuring a Payback

When doing the numbers on your home-improvement project, you will need to see what your state is offering you to go green and make a few assumptions.

Let’s say you want to install a 5,000-kilowatt solar electric system on a full-sun, south-facing roof in New Jersey, which has a generous alternative energy program. The retail price is $38,000, but after a state rebate of $8,750 and $8,775 federal credit, your net price is $20,475.

Since the state will compensate you for the solar power you generate, you will receive renewable energy credits once you produce at least 1,000 kilowatt hours of electricity.

According to a payback analysis at www.thesolarcenter.com, you will receive $2,750 in annual state energy credits while paring about $1,000 in electricity costs for a saving of $3,845.

Know Your Energy

If power rates drop, then the payback will be less generous. One reasonable prediction, though, is that climate- change legislation will penalize fossil-fuel power producers and force their rates higher, so it also pays to know if your electricity is generated by nuclear, coal, gas or hydroelectric.

Another consideration is the cost of solar equipment, which has been dropping, so that may also shorten your payback time.

No matter which course you choose, I’m generally optimistic about the future of investing in what I call eco-tech, a category that includes clean power, energy efficiency, green buildings, biofuels and nanotechnology.

As the nation’s largest venture-capital entity, the Obama administration has provided more than $37 billion in seed money for numerous projects in alternative energy, clean fuels and electric vehicles through the stimulus plan. That means the cost of these products will come down as they are mass-produced.

Few would dispute that eco-tech will gain even more traction as the United Nations Climate Conference convenes in December and carbon-trading exchanges are established.

No matter which eco-technologies win out, one concept won’t change: If you have a chance to reduce your living costs, why not do it now?

Global climate-change solutions will require time, capital and mass political acceptance. Paybacks on your home improvements will materialize at a much less glacial pace.

(John F. Wasik, author of “The Audacity of Help: Obama’s Economic Plan and the Remaking of America,” is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net.

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