Is the GOP-Centered Building Industry Stuck in the Past?

As I write this column today without loyalty to any political party, the federal government has finally began creaking back to life after being held hostage for 16 days by a Congress seemingly out of touch with the country’s unique role in the global economy.  Not surprisingly, this same Congress earned an approval rating of 11 percent from a poll taken immediately after the shutdown during the early days of October.

While the same poll showed Republicans with an approval rating of 28 percent (down 10 percentage points from the previous month), Democrats also took a four-point hit, with their approval rating edging down to 43 percent.  Poll respondents also showed 62 percent of them disapproving of Republicans, while Democrats split the country more evenly at 49 percent.  Recent figures on the economic damage from the temporary closure have been estimated at $24 billion, and fourth quarter GDP growth estimates have been cut from 3.0 to 2.4 percent.

I only mention these figures because I’ve always been interested in the long-standing connection between the building industry and GOP even when their policies – especially at the national level -- didn’t necessarily coincide with the best interests of the housing market. To be sure, at the local level it certainly makes sense for builders to support politicians who share their goal of making it easier to develop new communities for growing populations, but on the national political stage it’s a far different story.

In the 2012 campaigns, just over three-quarters of the NAHB’s BuildPac funds went to the GOP – far higher than the 55 percent from the National Association of Realtors or the 57 percent from the Mortgage Bankers Association.  Looking ahead to the 2014 elections, while the GOP money lead from BuildPac has shrunk to 67 percent, it’s still far higher than the 48 percent planned by the NAR.

So just what is our industry getting for all of this money?  It’s a fair question:  Remember the $787 billion stimulus package that President Obama wanted to pass shortly after his inauguration?  It passed without a single Republican vote in the House, and just three in the Senate.   Soon thereafter, a separate law to allow judges the freedom to modify mortgages on primary residences to prevent a cascade of foreclosures was also rejected by most Republican legislators.  Meanwhile, GOP candidate Mitt Romney’s plan for the housing market was both clear and simple:  let an unfettered free market sort everything out on its own, even though 83 percent of the sub-prime loans which tanked the housing market were made by mostly unscrupulous private firms.

But this concern isn’t just about money:  it’s just as much about demographics.  While the country continues to become increasingly diverse along racial, ethnic and religious lines, the management of building companies looks much like it has in the past:  white, middle-aged (with a median age of 54 in 2011 according to a NAHB membership survey), 93 percent male and, given the historic connection with the GOP, with what I assume are traditional values handed down from previous generations.

For the overall construction and extraction industries, however, it’s a different story: while over 97 percent of these jobs were still held by men, less than 10 percent of them were Caucasian alone, while nearly 16 percent were Hispanic, 5.7 percent were African American and 2.6 percent were Asian.  It’s an even larger contrast with the general U.S. population, which as of July 2012 was 77 percent Caucasian, 17 percent Hispanic, 13 percent African American, 5.1 percent Asian and 2.3 percent two or more races.

By 2043, the Census Bureau estimates that the country will no longer be a white-majority country, fueled today by significantly higher birth rates among multi-racial couples, Asians and Hispanic immigrants.  About 11 percent of the country’s counties are currently “majority-minority” across the southwest, southeast and northeast.  As soon as next year, a majority of children nationally under age five will be of non-Caucasian descent.

So why is this important?  Because the GOP has a substantial image problem among minority voters, with just 11 percent of non-white voters declaring allegiance to the Republican party as of mid-2012.  And when the NAHB’s primary PAC is still targeting two-thirds of its funds towards Republican candidates, it’s hard to ignore this huge political disconnect between supplier and buyer.

Sure, you could always hire consultants to tell you how to market to specific minority groups, but wouldn’t it be more practical for this industry to better mirror the general population?

The perils of only planning for best-case scenarios

According to Financial Times columnist Martin Wolf, Barack Obama may be facing serious consequences to his Presidency if his stimulus plan only plans for best-case scenarios. From the column:

Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.

What is needed? The answer is: focus and ferocity. If Mr Obama does not fix this crisis, all he hopes from his presidency will be lost. If he does, he can reshape the agenda. Hoping for the best is foolish. He should expect the worst and act accordingly.

Yet hoping for the best is what one sees in the stimulus programme and – so far as I can judge from Tuesday’s sketchy announcement by Tim Geithner, Treasury secretary – also in the new plans for fixing the banking system. I commented on the former last week. I would merely add that it is extraordinary that a popular new president, confronting a once-in-80-years’ economic crisis, has let Congress shape the outcome.

Ouch!

Read the rest of the column here.

Congress fiddles as the world burns

Just when you thought we might actually be getting some real bi-partisan cooperation in Washington, D.C., apparently the Republicans are more concerned about scoring brownie points with a base still enamored of more tax cuts than coming up with a stimulus bill with the intent to avoid an economic meltdown. From an opinion piece by Nobel Prize winner Paul Krugman in the New York Times:

A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts...

Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world...

We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken...

So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh.

What matters now, however, is what he does next. It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.

Yes, Rush Limbaugh (who, like Sean Hannity, dropped out of college before finding his calling in radio) can be very funny and his show is often quite entertaining. But for politicians to take their cues from an entertainer or celebrity (whether on the right or the liberal left) is the height of brain-dead irresponsibility.

Builders change tax-break stance

The Nat'l Association of Homebuilders (NAHB) has re-opened its donation coffers after shutting it down in February when it felt builders were being ignored by Congress. Now that the tax carry-back plan seems DOA -- and never made into the House version of a home sales stimulus plan -- the group is focusing on special tax credits to buyers to stimulate the market. From a Wall Street Journal story:

The National Association of Home Builders is playing nice with Congress again.

The trade group, representing thousands of home builders, has switched its lobbying tactics and its political action committee has resumed doling out political donations, after halting them in February to protest what the group said was policy makers' failure to help the housing industry and overall economy.

The association had been pressing for a tax break that would have allowed builders to apply losses to taxes paid four years ago, instead of the current two-year carry-back. But the group has backed off that effort and is focusing now on a proposed tax credit for home buyers to stimulate demand...

The trade group's shift on the tax break comes after the Senate came under fire for including it in its housing-relief plan. Critics said lawmakers were favoring builders over strapped homeowners. The House version of the plan doesn't include a carry-back provision...

Meantime, the home builders' political action committee, BUILD-PAC, is giving out political donations again. Ed Brady, chairman of BUILD-PAC, said the group lifted the ban last month because, "we felt like people were paying attention to us again."

During the current election cycle, the group has given about $977,000, with 45% going to Democrats and 55% to Republicans, according to the Center for Responsive Politics.