16 January 2008

What do Economic Stimulus Packages and Drug Users have in Common?

A stimulus package will do absolutely NOTHING FOR LONG-TERM ECONOMIC STABILITY. I liken it to a drug user on a high. The user takes more drugs to maintain the high. Eventually the user runs out of drugs and crashes. This country has run out of “drugs” and is set to crash. It is inevitable and all the morons in Washington, D.C. are doing is delaying the inevitable and making the crash worse in the end.

I am listening to Senator Chuck Schumer on C-SPAN. He is talking about an economic stimulus package. His naivety is plainly obvious. Senator Kennedy promptly outlines a litany of government spending. He does not get it. Representative Phil English is clueless. Everything they do is merely putting a band aid on a gushing wound. They trot out supposed experts on the economy like Lawrence Summers, Lawrence Mishel and William Beach that do not address the real issue. They want more tax cuts and more spending. They want a rebate. Now that we need a “stimulus” they want spending on infrastructure as a stimulus. They want the tax cuts to be permanent. Nothing is said about reigning in spending habits and debt. They dance around the real issue of their complete and total incompetence. They have no realization that the government should not be micromanaging the economy. They cannot even manage the government properly.

The last thing the nation needs now is more intervention from lawyers who, in general, have never run a business. The last thing this nation can afford is a policy based purely on political gain. Short-term rebates and small injections of money will not solve this problem. ALL of these problems come back to stupid people. Greedy bastards giving out loads have caused this. Ill-informed and ill-prepared homeowners have caused this.

The housing market was artificially created through low interest rates and poor loans. The truth is that the people getting sub-prime loans should have never been given them in the first place. Truth hurts. Greedy banks have oversold what these people can afford. These people are generally poor savers and cannot weather even a small emergency. Any small emergency and an increase in mortgage payment results in them not being able to afford their homes anymore and consequently they default on their loans. This should hardly come as a surprise to anyone.

When my wife and I went to buy a house the bank told us we could afford a much more expensive house based on our income and some other factors. But we knew better and looked at less expensive houses. Our mortgage payment on our 30-year fixed loan was reasonable. Due to poor information where our property taxes were concerned our payment increased by $500 a month last year. No interest rate change – just a screw up by the bank. We were able to weather that increase because we were reasonable when we went down the road of the single biggest liability one typically takes on in their life (notice how I do not say investment – home ownership is a LIABILITY – you have maintenance, taxes, interest on loan, etc. etc. – it is generally NOT an investment). Many people defaulting now simply cannot weather an increase because they were over leveraged to begin with.

America is spending and spending and spending. On the federal, state, local, and personal levels America is in massive debt. The dollar is falling because of ill-thought out policies from the Federal Reserve, the massive debt at all levels nation wide, and NO PLAN for sound long-term fiscal or energy policy. One bright spot in all this is that it looks like exports are up because the dollar is down. Home prices are falling because the demand is down and the market is flooded. Supply and demand folks. The falling home values have far reaching consequences where local property taxes are concerned. Many of the localities count on increasing property values to keep their coiffeurs flush with more cash.

A comment on a left-leaning blog recently equated the typical republican plan for the economy as: 1) cutting taxes, 2) massive borrowing, and 3) massive spending. Funny, but the democratic plan is typically: 1) increasing taxes, 2) massive borrowing, and 3) massive spending. The only realistic and responsible plan that will work and provide long-term economic security is: 1) increasing taxes, 2) stop borrowing, and 3) massive spending cuts. Sure there will be an initial hurt, but it is a long time in coming anyway. We need a reckoning for the unsustainable path we have led before we can right the ship.

NONE of the presidential candidates are looking at the realistic and responsible plan. And that should concern everyone. Meanwhile the word of the day is stimulus without realizing how short sighted of an economic policy that really is.
Photo by KCThinker, Old Lead/Zinc Mine Ruins, Cherokee County, Kansas, 2007

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