Housing stimulus

[ziggy29]

Quote:

Originally Posted by Martha I am not a student of history. How were the Depression era jobs and other programs paid for? Borrowing like now?

Many times they were. But in 1930 we didn't nearly have the crushing public debt per capita that we have today. In that sense, it's like the difference between running a marathon when you're rested and refreshed and running one when you are already half dead from exhaustion.

[OAG]

Martha: I would suggest a book named "Forsaken" from the Public Library. It is history and not fiction and very well footnoted. It really opened my eyes to just how bad it got for some that worked in the Michigan Auto Assembly Factories especially the Ford ones. The book really provides an eyeopening experience for some citizens of the US and the extremes people went to during that time. After reading it IMO we are still very fortunate overall.

[OAG]

Martha: Here is a very good history of what happened to some Americans and the extremes they went to for jobs: Amazon.com: The Forsaken: An American Tragedy in Stalin's Russia: Tim Tzouliadis: Books

[samclem]

In my opinion, everyone who is legally qualified for a nickel of this idiotic government largess should take as much as possible.

There are many people who read this board who have lived responsibly all their lives, bought reasonable houses, paid off their mortgages as soon as they could, and want nothing from the government except to be left alone. Instead, the government has embarked on a crusade to shower money on the irresponsible, and to send these responsible people, and their children, a bill for the rest of their lives. Such a responsible person should do any restructuring of their lives that is feasible to grab all the cash they can. The law is not wise--it just sets parameters for income, etc and does not/cannot make distinctions between the lazy, those whose misfortunes are not their fault, etc. Wise peoplecan make these distinctions when deciding who should get assistance, and they probably do at charitable organizations. Which is one reason help should come through these charities.
For the responsible folks out there--the government has opened bar and it's free drinks for everyone. You'll get the bill every year for the rest of your life, so you might as well have a drink tonight. From government cheese to $4500/year of free mortgage money, you paid for it, take all you are legaly qualified to take or you are even more of a sucker than your senator thinks you are.

[Leonidas]

Quote:

Originally Posted by Martha I am not a student of history. How were the Depression era jobs and other programs paid for? Borrowing like now?

Depends on what stage of the Great Depression we're talking about. The government's policies were at best uneven, and at worst erratic and contradictory.

FDR was not, at first, keen on Keynesian theory. (I remember reading a quote from FDR after he first met Keynes that was somewhat derogatory, something like he thought Keynes was an over technical egghead who threw too many numbers around.) In fact, at first, he was heavily invested in having a balanced budget, something that was a Democratic Party platform plank in that era. Eventually, when the Depression within the Depression came along, FDR completely reversed himself on balancing the budget and created a deficit budget.

Well, actually that's not completely accurate. FDR, at one point while espousing a balanced budget, was in reality keeping two sets of books. There was the official budget, and then there was the emergency budget. The first was balanced and the second was used to fund all of the different agencies and programs, like the RA, WPA, CCC, etc., that were experimental.

But your question indicates to me, that you think, as I once did, that the government spent its way out of the Great Depression.

Most people think of the New Deal in terms of the WPA and CCC and millions of Americans working on government jobs. That all of that somehow stimulated the economy and created more jobs in private industry. Then WWII came along and deficit wartime budgets sent everything into overdrive. The reality is that government programs employed some people, but there were still millions of people out of work. At the height of the WPA the nation's unemployment rate was still 15-20%.

What doesn't get as much attention in the average high school or college history text are the details of government policy.

Much of what the government did during the Great Depression actually delayed recovery. And it wasn't how much the government was spending, or not spending, it was the policies and regulations created. Punitive taxation, thousands of regulatory practices that ranged from common sense to insane (they prosecuted and jailed some Kosher butchers in New York for letting customers choose which chicken they wanted to buy), to prosecuting wealthy taxpayers for maximizing deductions within the law.

Gold policy? FDR once set the price for gold based on what he thought was "a lucky number".

His own head of the Treasury once pleaded with him to stop screwing around with the markets before he destroyed the bond market. Roosevelt told Henry Morgenthau that he was hoping for some breathing room and that might mean the bond markets would falter for a few months. Mogenthau told him the reality was that a few months "breathing room" for FDR actually meant years of delay for the economic recovery. FDR later came back and said he was "just kidding", but Morgenthau wrote in his memoirs that he thought FDR had been serious and that it was his arguments that had persuaded the change.

Morgenthau was not Keynesian by any stretch of the imagination, but he was a supporter of FDR and a close friend of he and his wife. However, he did testify before Congress near the end of the GD that all of the spending had accomplished nothing other than putting the government deeply into debt. He basically said that unemployment had not improved and all of the government programs had failed to live up to their potential.

And my concerns for what is happening today mirror Morgenthau's sentiments in the 1930's. The government is spending money like a drunk sailor on leave, increasingly to score political points rather than solve the problems, and the policies are contradictory, confusing, and increasingly nonsensical.

Policy created today has the potential to come back and haunt us for decades. I can't find the quote now, but when FDR was talking with his advisers about creating Social Security, his main concern was the possibility that it would get out of control and create a huge deficit for future generations. The quote was prescient, something along the lines of: "It would be just as disastrous to create a deficit for the government of 1933 as it would be for the government of 1983". The hole we are digging today has the potential to make the SS hole like like a pothole next to the Grand Canyon.

[Walt34]

Quote:

Originally Posted by samclem In my opinion, everyone who is legally qualified for a nickel of this idiotic government largess should take as much as possible.

Logically, reasonably, rationally, I think you're absolutely correct.

But somehow, neither I nor DW could do it, as doing so would go directly against our core values. We actually discussed it, in a facetious manner.

The whole stupid, greedy mess is infuriating to both of us and apparently to many others as well.

[FIREd]

Quote:

Originally Posted by Walt34 Logically, reasonably, rationally, I think you're absolutely correct. But somehow, neither I nor DW could do it, as doing so would go directly against our core values. We actually discussed it, in a facetious manner. The whole stupid, greedy mess is infuriating to both of us and apparently to many others as well.

I am the same way. I can't bring myself to sponge off the government. In 2002, when I lost my job, I couldn't even bring myself to claim unemployment benefits. What a sucker!

But that was the point of my earlier post. Those of us who have been responsible and have always taken care of ourselves should continue to behave responsibly and reject government's handouts. It's not because the money is there for the taking that we should grab it "because everyone else is doing it". It's sad to hear responsible people strive to collect government cheese when they can still afford camembert on their own.

[Midpack]

Quote:

Originally Posted by Walt34 Logically, reasonably, rationally, I think you're absolutely correct. But somehow, neither I nor DW could do it, as doing so would go directly against our core values. We actually discussed it, in a facetious manner. The whole stupid, greedy mess is infuriating to both of us and apparently to many others as well.

Us to. And to suggest we should all now grab all we can only hastens our collective demise. This is a very sad state of affairs, I still have to look myself in the mirror every day...

[Brat]

I agree that the public is ... angry .. that we are in this situation. I venture that many who signed up for crazy mortgages didn't understand what they were getting... few hire an attorney when buying or re-financing a house (that would be a good poll question). One interesting study would be the income and education level of folks with foreclosed mortgages in the last 2 years. The folks in the know were the lenders. Yes, some borrowers knew what they were getting and thought they were smart but their culpability is less than the lenders who were in a position to know.

IMHO direct venom at the lenders.

[ERD50]

Quote:

Originally Posted by REWahoo I think I heard the $1,000 per year loan principal reduction is a payment made directly to the lender by the US govt. Edit: I found this... "The program would not only give [loan] servicers $1,000 for each modification, but would give them another $1,000 a year for three years if the borrower stays current." Obama seeks to aid up to 9 million borrowers - Feb. 18, 2009

Another quote from that article burns me up. Think about what this says:

Quote:

"In the end, all of us are paying a price for this home mortgage crisis," Obama said. "And all of us will pay an even steeper price if we allow this crisis to deepen -- a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit."

That is the governmental sponsorship of the death of personal responsibility. ( please read that again, out loud, and let it sink in)

Sine we are "all paying the price" for the results of what some people did, that means it is OK to ask all the people to cover the expenses for those who caused the problem? Not OK with me, let me tell you.

So let's illustrate with an analogy. Let's say I go around vandalizing the neighborhood. Well, that lowers the value of the homes here, and we "all pay the price". So, we should all chip in and fix the damage, because we will all benefit? I suppose so. But no mention of going after the person responsible for the damage?

I suppose they were a victim. They didn't understand that they were lowering home prices with their vandalism. You know, that is such a complex thing to grasp. Almost as complex as the idea that an adjustable rate mortgage is, ummm, adjustable - not fixed.

You know, I think there are a lot more Citizens, especially voting Citizens, that did the right thing than there are people who are "trapped" by a risky mortgage. I think this whole thing is going to backfire on the administration big time (it is already starting). People are getting fed up, they are getting vocal about it, and every time the Administration offers a new plan, the market tanks further. What does that say about confidence in these plans?

Time for plan B, maybe one with the words "personal responsibility" tied to it? Maybe that would instill some confidence and (dare I say it), "hope" in the MAJORITY?

-ERD50

[OAG]

I remember reading someplace that BEFORE this Bail Out Mania started something like 43% of the voters did not pay Federal Income Taxes and AFTER this Mania something like 58% will not be paying Federal Income Taxes. If this is true (and I have no reason to doubt it), and you were one of these people, I think the propensity when voting is to vote for someone (regardless of party) that would keep the "status quo". So the "hope" may be coming to the minority quicker than we think.

[samclem]

Midpak, FireDreamer, Walt34,
Until very recently I felt as you do, and I still understand and respect the reasoning behind your point of view. But I now think this is, ironically, counterproductive and will lead to more damage. Here's the other side:

- This is not charity. It is entirely different. I would never go to a church, a food bank, or a soup kitchen for a handout. The resources there are for the needy, and they have been (largely) provided by the kindness of people who want to help others. For me to take these resources would be despicable. I donate to charities and support their work.
- The government seized the money for these ill advised expenditures. You have no choice in whether you pay your taxes or not. It is automatic, and it is mandatory. On the other hand, the government has established this pot of resources to be handed out to people based on certain criteria. If an individual meets these criteria, they should apply for the resources. It is what the government wants you to do (like paying your taxes). In fact, the heads of the agencies responsible for handing this money out will be "graded" on how much they can get rid of. Help them get a good grade! We didn't get to say "no" or offer opinions when this plan was being hatched, the people who rushed it through admit they didn't even read it, and it was never posted on the Internet (as President Obama promised to do with all pending legislation). Now here we are--who are we to argue with the wisdom of this wonderful process? Comply now, just as we will do every year when we pay our taxes.
- Taking the resources will not increase the debt owed by future generations one cent. The programs each have a budget, and it will be spent whether you take the money or not.
- It helps assure the resources are put to good use. The underlying reason our economy is on the rocks is because people (of large and small means) mismanaged the resources at their disposal. If you are at the point of FIRE or on the way there, it is safe to say that you know more about the way money works and how to put it to good use than the average bear. You'll make good use of the government resources, husband them well, maybe even invest them so the government can tax it later. You are helping the economy, not continuing the same personal deficit spending that got us into this ditch. Taking the resources is your civic duty.
- Do any of us fail to take tax deductions that would benefit us? Do we send the government a few thousand dollars extra every year? Failing to take this money, which the government wants you to have, is exactly the same. Is it fair to deprive the people who depend on you? If you believe in the power of individuals and private giving, please take the "government" money and give it to a well-run charity--it will be much better spent. If you believe in bigger, fatter government, don't take the money--that way politicians can use it to buy the vote of someone who will become dependent on government handouts--and they'll clamor for more handouts. Your taking of the money helps break the downward cycle.
- It may lead to a quicker end to the madness. You should take the check, and then write the local newspaper and let them know that you have plenty of money of your own but are really enjoying the stuff the government has dropped in your lap courtesy of your neighbors. "Hey, everyone, keep the gifts coming! I'm playing by the rules and you are giving me tons of free stuff! It is great! Please work a few more hours so you can pay more taxes--I need a big screen TV!" This is the surest way to get people mad enough to vote people into office who will stop the downhill spiral to greater collectivism.

Help the country by helping yourself. I am entirely serious.

[ERD50]

Quote:

Originally Posted by OAG I remember reading someplace that BEFORE this Bail Out Mania started something like 43% of the voters did not pay Federal Income Taxes and AFTER this Mania something like 58% will not be paying Federal Income Taxes.

Latest stats from IRS go from 1986 to 2005:

http://www.irs.gov/pub/irs-soi/05in05tr.xls

Quote:

Table 5: Number of Returns, Shares of AGI and Total Income Tax, AGI Floor on Percentiles in Current and Constant Dollars, and Average Tax Rates Classified by: Selected Descending Cumulative Percentiles of Returns Based on Income Size Using the Definition of AGI for Each Year Tax Years: 1986 - 2005

Scroll down to ROW 154 for the breakdown by top filers. A few "highlights":


1986 Top 10% filers paid 55% of the income tax
2005 Top 10% filers paid 70% of the income tax

1986 Top 25% filers paid 76% of the income tax
2005 Top 25% filers paid 86% of the income tax

1986 Top 50% filers paid 93.5% of the income tax
2005 Top 50% filers paid 96.9% of the income tax

Fairly constant trend throughout the time period. Another way to view this is from the opposite perspective (just a re-hash of the above):

1986 BOTTOM 50% filers paid 6.46% of the income tax
2005 BOTTOM 50% filers paid 3.07% of the income tax

IOW, the bottom 50% of filers are paying less than half as much of their share of income tax as they were in 1986.

Now here's the thing I've been unable to get my head around with these stats. They reflect filers with positive AGI. How many people who pay no taxes don't even file? I dunno. Here's the number of returns though. Seems this is further complicated (surprised?) because now, you can get a credit for filing, right? How does that play into this? Seems we need some negative numbers in there for credits, right?

1986 - 102,087,623
2005 - 132,611,637


And this is all OK because the "rich are getting richer", right? A little, but not so much AFAICT.

The AGI of the top 50% of filers increased by 3.11x in current dollars from 1986 to 2005.
The AGI of ALL filers increased by 2.97x in current dollars from 1986 to 2005.


-ERD50

[ERD50]

Picture>1000 words:

The Tax Foundation - Tax Foundation Once Again Refutes Warren Buffett?s Tax Misconceptions


-ERD50

[FUEGO]

I am setting a personal goal to extract $30,000 from the government this year and next. I will do whatever is legally allowable to achieve this goal. I figure with enough effort, hard work, and diligence I'll be able to get my fair share. If you don't get yours, well, thanks!

[OAG]

I looked at that data at the site too. I wonder how many (have income) but do not have to EVEN file and how they get that number (I doubt it is in there). Wonder how many are "under the table" workers. Guess they get that from the Census but that data is outdated quickly. Nice thing now is, if you pay, you are going to pay more.

[Midpack]

Quote:

Originally Posted by samclem Midpak, FireDreamer, Walt34, - Taking the resources will not increase the debt owed by future generations one cent. The programs each have a budget, and it will be spent whether you take the money or not. Help the country by helping yourself. I am entirely serious.

If this were true, I would not be upset about our circumstances. Where is all this bailout money ultimately coming from then? Unless I'm mistaken, current and/or future generations will have to bear this debt sooner or later. Please explain...

[lets-retire]

Quote:

Originally Posted by Midpack If this were true, I would not be upset about our circumstances. Where is all this bailout money ultimately coming from then? Unless I'm mistaken, current and/or future generations will have to bear this debt sooner or later. Please explain...

I think what sam is saying is it doesn't matter if you take the money or not, someone will. All of the money alloted by the law will be spent, whether it goes to you or to someone else.

[lets-retire]

Quote:

Originally Posted by Brat I agree that the public is ... angry .. that we are in this situation. I venture that many who signed up for crazy mortgages didn't understand what they were getting... few hire an attorney when buying or re-financing a house (that would be a good poll question). One interesting study would be the income and education level of folks with foreclosed mortgages in the last 2 years. The folks in the know were the lenders. Yes, some borrowers knew what they were getting and thought they were smart but their culpability is less than the lenders who were in a position to know. IMHO direct venom at the lenders.

I disagree. Mortgages and the housing market have for the most part always been buyer beware. It is not the responsibility of the sales person (originator or realtor) to provide the customer with the best option for them. The sales person's job is to provide the best option for the company and serve the needs of the customer second (at least from a customer's perspective that is how sales people should be viewed). If a sales person looks out for the best interest of the consumer then take it as a gift. Many of the people who took loans that were not suited for them, probably wouldn't have taken those loans, if they followed the first rule of contracts. That is don't sign anything you haven't read. I can't count how many people I've heard say the originator lied to me. If they would have read the paperwork they signed then the originator would not have been able to lie to them. The only other way for the sales people involved to lie to the consumer was to tell them that the value of the property would continue to go up. Using the view I stated earlier about sales people would lead a person to automatically discount the belief that the value would continue to rise and any other statements connected to that position.

IMHO the venom should be directed at the people not smart enough to look after themselves and protect their own financial interests.

[samclem]

Quote:

Originally Posted by Midpack If this were true, I would not be upset about our circumstances. Where is all this bailout money ultimately coming from then? Unless I'm mistaken, current and/or future generations will have to bear this debt sooner or later. Please explain...

Right, what lets-retire said. Every nickel in that huge spending bill will be given away whether you take the money or not. An individual who doesn't take the money isn't "saving" the taxpayer anything, and he isn't assuring that it goes to a "worthy" recipient. He is just being a chump and helping to keep the government vote-buying scheme in operation.