Let’s Get a New Economy – While It’s Cheap!
My current job involves working with people who are in varying states of economic need. I’ve had this job for about a year. Progressively, the caseloads get bigger. The solutions become more difficult to obtain.
The pressure to solve the situations is huge, but it’s like trying to put band-aids on cracks in the Hoover Dam. It may look like the small, individual patching will hold the water back, but the main problem is the structure itself is compromised and weakened.
I have to admit it overwhelmes me at times. I’m grateful to have a job in this economy but I have a tough one. ( My prior employer, which I occassionally blogged about in older posts, has went out of business. ) Anyway, part of my job now is to read about hardships and then do a cold numerical analysis on whether or not their situation can be resolved under the solutions I have to offer.
So many times, it can’t. Those who I can help, who get a life preserver pitched to them….often end up back underwater. Because something else happens and they have no savings. No available credit. No reserves. Or, they just expect a second rescue and maybe this time a more generous rescue. But there’s no second rescue available.
Think about that a minute, then think about everything the government has been pitching at this barn fire of an economy. What happens if some of these troubled banks or other industries, don’t find their problems solved after billions of dollars in aid? That doesn’t mean we shouldn’t help them. It just means that we shouldn’t have unrealistic expectations about what a bailout or a government loan package will do.
I won’t detail every problem the world has here. Those of you familiar with my blog know that I touched on some major economic points a long time ago. I recall saying that the goverment needed to become part of the solution ( as it had helped create the mess ) but I also predicted the government would wait too long to get involved.
Since those posts, the mainstream media eventually reported similar thinking on topics like Greenspan’s over-aggressive rate reductions that helped create the housing bubble. On another topic, President Bush recently admitted he didn’t expect the Iraq war to last so long or cost so much.
I blogged about China’s untrustworty history months before the lethal taint of melamine was found in baby formula, dairy products, and other processed foods. The Chinese government, predictably, has promised to execute those arrested in connection to the tainted products. This empty justice will not make China’s products any safer or more reliable, and I dearly wish China’s partnership in the World Trade Organization would be revoked. Immediately. Would never happen though, because they own too much of our American debt, which brings me back to the economic subjects where tonight’s post started.
I’m no financial expert, but I haven’t been too far off the mark in the timing of certain subjects in my blog, versus when the same subjects show up in a big way in the mainstream media. I’m not any big deal, I just think on this stuff quite a bit and sometimes I see a connection that isn’t as obvious to people who don’t suffer from insomnia. Also, through my current job, I see the real-life front lines of what people are going through all over the country. I’ve watched the death sprial of the economy become wider and faster, affecting more industries, more jobs, more people. I haven’t seen anything yet that will slow it down.
I believe tho’, that we will eventually get out of this. How soon depends on one very simple thing. Namely… when will we spend money again? Yes, we have to save some money too, but let’s face it, if we don’t buy cars, or go out to a movie, or go out to eat, or do the normal purchase behaviors that keep money flowing, then employers will keep cutting back, and fewer people have money to spend, and the vicious cycle never ends. We have to reverse momentum on this. Before the unemployment rate gets worse. You can’t expect people to spend when they don’t have a job. Forclosures will only get worse as unemployment picks up. Crime, too, will escalate. So will nuisance lawsuits as people get more desperate to find money.
Here’s a few ideas of mine that I freely give to the Universe As a Whole, in the hopes that something catches on and helps.
I believe the government should work hand in hand with the Big 3 automakers, by making the interest on car loans tax-deductable. This would stimulate lending, stimulate car buying, and give the consumer an incentive to loosen the ol’ wallet. Plus, remember that state goverments get a piece of the pie from the car sales tax. Our states could use the money too, so it’s a triple-win. The loan interest deduction really woudn’t cost the Feds all that much, (compared to the cost of financial disaster) and they could put a three-year scale on it or something.
I believe the goverment should also give a tax break to individual taxpayers businesses for 2009…and make it effective in January by reducting the Federal tax withholding from paychecks. We know damn well that wages aren’t going up, so the only way to get a little more cash in people’s hands is to have Uncle Sam back off a bit. For businesses, the tax breaks should be directly in tandem with what it costs them to keep employees on the books. I believe employers have to match some of the income tax withholding but I’m not an expert on that side of accounting. You get the idea though.
For the housing crisis to end, there needs to be a realistic substitute for the ol’ toxic subprime mortgage. This idea might get me shot, but hear me out. The main problem with subprime loans were the adjustable rates, the piggyback mortgages with sky-high interest, ect. Would it be too unrealistic to let a modest-income buyer get a fixed rate mortgage at 3%, for a first home purchase? Before anybody else cries “no fair!” think of it this way. Those of us who pay more in interest, also get a bigger income tax break. It stands to reason that if we have bigger incomes, that we need the bigger tax break anyway, or more of our income would just go to the IRS. Also, we’re probably buying homes that are bigger or have more amenities than the person just starting out. I’d put a reasonable cap on the 3% forever deals for income and house price. It’s a stepping stone program, and it would help the bottom of the housing market stabilize. I’d make it especially applicable to bank-owned homes that went through a previous foreclosure to take some of the glut out of the market.
There’s my suggestions. Not being an official economist, maybe I’m full of beans, but here’s hoping something takes root out there and works.
