The $787 billion dollar economic stimulus package is nothing more that a big spending bill pasted together in a hurry without any real estimates of how many jobs will be saved or created. Nor does it address how those jobs will be sustained. Each line item in the package should have had an estimate of effect on jobs provided by experts in that area, a statement of how those jobs will generate growth in terms of GDP, and then the entire list prioritized. As is, it is a big picture with states and cities struggling for their piece of the pie.
And as for tax cuts. Not much there either for us low men/women on the totem pole. I'm really looking forward to my $15 to $20 more per month based on our family tax bracket. Wow, I can maybe I can take my wife to the movies.
It also looks like we are trying to fix a problem without trying to determine the root cause. How did all this happen? Was it greedy Wall Street with their outrageous bonus systems, greedy bankers who would broker mortgages with wild abandon, easy credit? Columbia professor David Beim says:
"The problem is us. The problem is not the banks, greedy though they may be, overpaid though they may be. The problem is us... We've been living very high on the hog. Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen."U.S. consumer debt rose sharply between 2000 and 2008. In 2007, it came to equal gross domestic product -- we owed as much as our entire economy was worth, roughly $13,000,000,000,000 (that's $13 Trillion). The last time that happened? 1929.
As I expected, the root cause of the economic problem is us, we have been living high off the hog. Exacerbated by corporate greed. Gordon Gekko, in the movie Wall Street (1987) said "Greed is Good". So the only real solution to the problem is to get the economic stimulus package to us. I suggest the Federal Government provide a tax free (i.e. federal, state, city) economic rescue package of $500,000 for each bonafide taxpayer with gross income less than $200,000, including those who do not pay tax because of their income level.
So what would be the result of giving $500K to each taxpayer?
For those who own a home and are facing foreclosure because they overbought or got into a bad mortgage they would have between $500K and $1M to pay off (or down) that debt. So why would they pay? Well the mortgage holder would be after them so fast they would have no choice.
But what about the folks who have no mortgage problem? Well they could keep all their money or pay off their mortgage as they chose. They would be rewarded by having more disposable money than those who overbought.
Credit card companies would be after those who had bad credit debt and force them to pay up, or else.
As for all those homes that banks own, well now would be the time for apartment dwellers and homeless folks to purchase the home to clear the debt from the banks.
As a result, banks would clear their toxic assets, either eliminating them all together or at least getting them to a manageable level. With the additional influx of cash they would now be able to start credit flowing to businesses.
With everyone now flush with money the demand for goods and services would go up. People would purchase cars and trucks with their excess cash or could now get reasonable credit. With the demand up we would not have to bail out Detroit, leaving them to sink or swim driven by the market forces (which we should do anyway).
Demand for other items would go up as well, How about that new 60 inch plasma TV, or the around-the-world trip, or you name it. With demand up so would the need for a workforce to fulfill the demand. Reasonable people, I believe, would keep on working, having experienced the worst financial disaster in their lifetime. They would see this as a once in a lifetime chance. They would realize that the money can go only so far and would need to keep working for their future financial security, health care, college tuition, unforeseen expenses, etc. Those that blow it by blowing the money well tough luck, find a nice homeless shelter.
To make sure we don't fall into the same situation as currently exists we will need stronger regulation of the financial industry, Wall Street, executive bonuses, etc.
So you get the gist, this would be a win-win situation between taxpayers earning under $200K per year, the government, the banks, and credit companies.
And as for those folks earning $200K or more, well screw them. They have been fat cats long enough and should know better how to manage finances.
1 comment:
Excellent attempt at understanding and assessing the situation. It was a noble but foolish goal to expect that all Americans have a RIGHT to own a home, regardless! It was a Democratic goal (Barney Frank, Chuck Schumer and Bill Clinton), supported by the Republicans because it looked bad to be against that AND it was a recipe for profits!?!?! Well, that opened the flood-gates of money flow since the government was backing and guaranteeing these mortgage money programs via Fannie Mae and Freddie Mac. And yes, it is our fault for borrowing what we can't repay but who ever thought EVERYONE was responsible in the first place?! Responsible people do responsible things like go to school, get and keep a job or find another one, repay money owed, and don't spend more than they make. This created huge demand for housing which of course inflated prices. It also fueled purchases and folks were refinancing to cash out and spend on goods and services. All that spending and all that cash fueled the stock market also! Which in turn created more cash to spend (except for the foolish irresponsible dreamers that would buy stocks on margin and now owe big time AND/OR those buying goods instead of paying down their debts - borrowing to play!).
Well, what we see now is that it's all dried up! The house of cards came crashing down as it always does in cycles of every nature. What's wild is I remember in business school studying long term economic cycles and reading that 2007 was expected to be a doom period for 3-5 years. (I wish I had heeded that in hindsight but I'm a optimist despite what my husband thinks).
This contraction/recession is necessary and I believe good comes out of all downturns. It is a time to reflect and reassess, to retool and reevaluate, to reprioritize and reeducate...to get people in the right jobs and clean out the excess, and a time to appreciate how good we recently had it! This is necessary to reemerge stronger, better prepared for future growth, happier and more grateful. This is why downturns and death are important. Yes death...Death of companies and individuals to make room for the eager, open-minded, better-adapted, more dynamic. We have to allow the cards to fall as they may, to rescuscitate is to prolong the inevitable which is expensive, foolish and counter to the way life works. We can, however, help folks and companies invest in reeducation and retooling, I'm all for that!
As for your proposed stimulus package...it's obviously not fair. What if you make 210,000 and the cut-off is $200,000 (that $10,000 over the threshold just cost you tons more than it was worth)? I wouldn't put large sums of "other people's money" in the hands of a disproportionate amount of people who defaulted on their loans to get us into this mess in the first place.
The government's role is to keep the markets working...to keep lending to those viable businesses and households who can repay. That's not rocket science. They just have to quit guaranteeing loans that entices banks to lend to anyone because it's the noble or profitable thing to do (not long-term it's not!). It's not even a gamble for the banks with the tax-payers backing them up!
We have little time and too many people in government to efficiently study and agree on how to fix this mess. The banks are probably best suited to assess the long term viability of current and future loans to businesses and individuals, as they know their balance sheets more intimately than anyone. It is the government who can then inturn best assess the current and long term viablility of banks and lend to them! That, and money for reeducation and retooling sounds like the best use of our tax money (and those of our children and grandchilren since we have already spent our own)!
That's my two cents!
ZELDA AUSLANDER
P.S. More than ever, this economic crisis is a world problem(which of course makes the radical Muslim fundamentalists very happy!). The emerging markets need the US consumer to grow, and US companies to employ them. They are feeling this and making plans to diversify away from the USA to the best extent possible. China and India are not even close to ready to pick up the pieces...and Europe is as paralyzed as the USA right now.
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