Some surprisingly simple ways to actually grow the economy

The Thinker by Rodin

In my last post, I discussed why the soaring stock market doesn’t mean a lot to most people. Roughly half of us don’t have the money to buy into the stock market, and most of us that do can only afford to do so through a retirement vehicle like a 401-K or an IRA. The principle value of a rise in stock prices is to inflate the wealth of those who bought stocks.

So the rich get richer while those who can’t afford them have to hope that their wage increases will exceed inflation. And so far, that hasn’t happened. Real wages, accounting for inflation, dropped .1% drop November through December 2019. Another sign it doesn’t mean much: the USA’s growth rate is 1.9%, at least as of the last quarter of 2019. This should suggest to most of us that markets are overvalued, and are due for a correction.

If Donald Trump is going to run on his greatest ever economy claim, then two percent growth must be outstanding. It’s not a recession but it suggests our real economy is anemic, just growing a bit while most of the rest of the world’s economy is starting to falter or is faltering. During his first campaign, Trump made it sound like 4% growth would be the absolute minimum that voters could expect. He’s failing at his own benchmark.

He’s been trying to juice up the economy with tax cuts. But as with the stock market, these tax cuts hardly affected the bulk of us and in some cases raised our taxes, such as the caps on state and local taxes that you can deduct from your federal taxes. The tax cuts definitely cut taxes on the rich and gave them a whole lot more money to do things like buy more stocks. One thing the rich aren’t doing is juicing the economy with all this new money by actually buying stuff. The trickle-down economy was never more than this: just a trickle of prosperity coming down to the rest of us from our betters.

Still, if 4% growth were a true goal, I can think of pretty easy ways to do it. So can Bernie Sanders and Elizabeth Warren. To start, we could take those tax cuts we gave to the rich and redirect them to the poor and middle class instead, who will almost certainly go out and spend it. This will cause the economy to grow, certainly by more than it has in our trickle-down economy, because the money will be used to actually buy goods and services.

Even better, we could redirect those trillions for the rich into service for the public good. Republicans clearly don’t want to address climate change, and certainly not with our tax dollars. It won’t stop climate change from happening anyhow. Trump’s trying to jumpstart the economy by stripping environmental protections clearly isn’t working either, but it is shortening our lifespans.

But it’s a sure bet that if that money were redirected to improving the environment, it would both cause the growth we want and put it to good use. We could use it to build the clean, green infrastructure we need to survive. That sounds like an excellent use of money. It will stimulate all sorts of jobs. The obvious ones will be in industries like the solar industry, but to go carbon neutral will require investment and ingenuity across our entire economy.

Moreover, if we tax carbon polluters, we can use that money to also build a green economy. I am already a beneficiary of a carbon credit. By putting solar panels on my roof in 2016, I allowed carbon polluters to claim credit for my clean and green energy. Being green paid me $1830 last year. This is real money in my pocket.

Such investments just compound. It stimulates industries like electric car manufacturing, wind energy, geothermal energy, green computing and the manufacture of more energy efficient products. By cleaning the air and water, we improve health. By removing carbon from our environment, we help address climate change.

All this growth in turn helps makes these industries profitable, so dollars start to follow them. Just as the space program brought us microelectronics and the Defense Advanced Research Projects Agency funded the beginning of the Internet, these investments make a better future possible. And if we can do it sooner than other countries, we stand to gain a disproportionate economic advantage.

But even if you don’t think government should be spending money to do these things, you could still advocate for increases in the minimum wage. This will certainly put money in people’s pockets that can use it the most. As they earn a living wage, there is less need for them to use government services like Food Stamps. That saves the government money, grows the economy and also saves lives. If we were a nation that truly was pro-life, it would be an obvious thing to do.

In short, if Trump were a progressive and had worked for our interests instead of against it, he’d likely not be facing a trial in front of the Senate, wouldn’t need the help of Russia to get reelected and would probably have his election in the bag. Even Democrats like me might have voted for him. Instead, we get an egregious use of tax dollars for counterproductive purposes and the most corrupt president ever.

Let’s hope on November 3, voters act more enlightened.

Solar absorption

The Thinker by Rodin

Two months after starting our solar project, our solar panels are online and producing clean and free energy.

Installation day (June 16) was a big deal for us. It certainly was for our cat Cinnamon who was freaked out by all the noise and strange people inside our house and quickly ran under our bed for the duration. Direct Energy Solar sent four trucks with two guys to do the roof work and two to do the electrical work. The roof work required attaching rails to our roof to hold the panels. Before the panels were attached inverters were placed next to the rails. The inverters convert the direct current (DC) from the solar panels into alternating current (AC) used everywhere. Meanwhile two electricians crawled through our attic, laying cable. This required putting a hole in the roof to carry wires from the solar panels into the house. A hole was also needed on the side of our house so the cables could attach to the outdoor electrical junction box but also into the basement to our circuit breaker box. Only then did the crew on the roof haul up our twenty panels and put them in place, connecting them to the inverter box just underneath each panel.

Installing rails and inverters
Installing rails and inverters

It all went quite speedily, taking about six hours, one of which was spent waiting for the city electrical inspector to show up. However, having solar panels on the roof didn’t mean we could actually use them. Any attempt to do so would have caused a major problem, as we were not yet wired to put electricity back into the grid. So for a week the solar panels adorned our roof while we continued to draw power from the grid.

Wednesday found a man from the power company unexpectedly at our door. He came by to replace our meter. We needed one that would report power we contribute to the grid, i.e. one that would go backward. Happily this was simple to do: the old meter was unplugged and the new one plugged in. It took about five seconds, but it did shut off everything in the house. Still, I was reluctant to lift the switch that would start the flow of this green energy. I figured another inspection was needed first. Thursday night I finally heard from our project manager who said it was safe to turn the system on, which I did first thing Friday morning.

All done!
All done!

We’re not quite done. A building inspector still has to sign off on the project. In addition we are promised some tools. The Enphase inverters report on electricity produced but we need an account with them established so we can see real-time usage and get reports. We’ll have our own webpage and we can monitor our system in real-time anywhere in the world where there is Internet from the convenience of an app on our smartphones.

This time of year we are putting surplus energy back into the electrical grid. What we give back in electricity will count as credits during the darker months when days are shorter. If the engineers who planned our solar system are correct everything should even out. So unless we start adding power-hungry appliances we may never have to pay an electric bill again.

Of course nothing is free. Back in April when I first wrote about this venture, I detailed the costs. Our system cost $21,432.25. Subtracting healthy federal and state tax credits, our net cost is $14,002.58. With Solar Renewable Energy Certificate (SREC) income payable over ten years worth $9,262.50 the true net cost is $4742.08. In effect we are paying only 22% of the system’s cost.

How long would it take you to use $4742.08 in electricity from your power company? Electricity is expensive around here, averaging about 22c/kwh. This is actually good for justifying this investment. For us this is about 21,500 kwh which based on our projected usage suggests the system will pay for itself in four years. After that aside from minor maintenance that may be required, electricity should be free.

Once your system is up and running, it apparently fails to entertain. They tend to be very reliable and as they are solid state, so it’s rare for problems to occur. But I do plan to post updates from time to time, perhaps a year from now after we have some experience and metrics to look at.

Getting solar panels for your house is (usually) a no-brainer

The Thinker by Rodin

I recently wrote about my father’s death in February and my thoughts on what to do with his inheritance. On the latter, I opined I might just give it away. It didn’t seem like something I needed to worry about, as we saw a copy of his will. It left everything to my stepmother, provided she did not die within thirty days of his death. In that event we were to get five percent of the estate. My stepmother’s will was similar so providing she didn’t change it, it looked like it would be some time before we would receive any portion of the inheritance, if any at all.

So I filed away what to do with the money as an academic exercise. A couple of weeks after my father passed away I got a call from my sister. “We have a problem,” she said. Dad had made me and each of my siblings (there are eight of us) beneficiaries to the money in his Merrill-Lynch accounts. This consisted of a money market account and two Roth IRAs. And this trumped anything in his will.

The problem was: do we take the money and run? Or do we honor what appeared to be the intent of his will and give our share to our stepmother? Regardless we each would get an eighth of the amount, and it was a considerable sum. We’d all have to voluntarily agree to give our share to our stepmother. After much discussion we figured that this was likely not an oversight; our father probably intended us to get this money, possibly to respect our late mother’s wishes for his estate. There was still something like half a million dollars in other assets that our stepmother could draw on. It was strange though that Dad did not communicate these details with us before he died.

So now we are assembling forms to try to claim our share of these accounts. As you might expect it’s a hassle. All inheritances are tax-free. Dear old dad had at some point paid a bunch of taxes to put much of his money into Roth IRAs, which made his withdrawals tax-free. If we moved our share of these funds into our own inherited Roth IRAs, we could let these funds accumulate tax-free. It’s almost like having a tax shelter but not having to go to the Cayman Islands!

Thus my hypothetical thoughts on basically giving the money away now turned more concrete. First of all, the amount of money was more than I expected. My dad turned out to be a good investor, which meant that he found a financial adviser he trusted and he turned it into a pile of cash. (Much of the startup money came from his parents.) Second, it made me think of what I might actually want to spend the money on. It turned out that only two things mattered and there would still be money left over to give a lot away.

First, I wanted us to be debt free again. We would get there in a year or two but with a windfall it seemed like a sensible way to spend Dad’s money. There is about $18K on the new mortgage. We actually were debt free for a few months after we sold our last house and waited for the new one to be constructed. It was surreal. I wanted that feeling again.

Second, I wanted to reduce our carbon footprint even more. Basically, I wanted solar panels. Our house is new and super tight, so it’s energy footprint is already minimal. We already pay extra to get our electricity through renewable wind power. But if we went solar we would probably pay nothing for electricity, once we paid for the cost of getting a solar system installed. Besides, about a third of the houses in our subdivision have them already so we are feeling the social pressure to go green.

So I started dialing around. It was strange that our condo association cares about your doorknockers but not solar panels. No permission was needed. If you have the money, solar tax credits make going solar a no-brainer. Uncle Sam will give you a 30% tax credit and the state of Massachusetts (where we live) will give a $1000 tax credit. Moreover there are the SRECs (Solar Renewable Energy Certificates). Basically the power company will give us money for our solar system because they must show that they are getting an increasing amount of their power from renewable energy. The credits expire after ten years, but the first year we will earn $1635 from our SRECs, which will taper down to $545 by the tenth year. (SRECs are not available in all states. See if you qualify.)

The estimates were all pretty close pricewise. We ended up signing with Direct Energy Solar mainly because they seemed the best capitalized. It turns out that we don’t need to cover the entire southern facing side of our house with solar panels. Based on our usage we need them just over our garage, twenty altogether. It’s actually counterproductive to generate more solar energy than you use because you end up with a credit you never can fully spend.

Not every house is ideal for solar panels. Lower latitudes certainly help. You need a roof that faces south and if there are trees in your way it probably won’t make financial sense. You don’t necessarily have to buy a system to go green, like we are doing. There are companies that will let you lease solar panels they put on your roof. You still pay for electricity, but usually at about five cents a kilowatt-hour less than what you would otherwise pay. If you run the numbers it makes a lot of sense to own your own panels. You can in theory take them with you to your next house if you want. We figure that our system will pay for itself in about five years. And we’ll get a cool app that will show us in real time how much electricity we are generating. Direct Energy Solar will even guarantee that we will generate the energy we need and will pay us in the unlikely situation that we don’t.

Going solar is really a no-brainer and probably worth taking out a home equity loan to finance it if necessary. You will get tax credits if you buy your system, earn income from SRECs that you will sell (if your state allows it), reduce carbon pollution and minimize your carbon footprint. Since these systems tend to cost $20-$30K to install, the only question is why builders don’t offer solar panels as an option for every house where it is appropriate.

The only downside I can find to solar is that you can’t get it quickly. A whole lot of coordination has to happen between various parties. We expect to have ours installed and turned on in 90-120 days. There is likely much that could be done to hurry up this process but the power companies don’t make it a priority and worry about whether all this “net metering” will stress out their power grid. They would like to charge solar customers for costs to maintain the grid. There is a bill to this effect in front of the Massachusetts legislature at the moment.

I’ll let you know how it goes in future posts.