Obama, is he over his head?

[K G]

Tell that to the folks that rode the I-35 bridge down into the Mississippi in Aug 2007.

With all due respect to those that lost their lives in that tragedy, it wasn't the WHOLE COUNTRY. Keep on task if you can, son of Cronus and Rhea....

I know they said it. They can say the sky is red and the grass is purple, too, but without some empirical evidence it doesn't mean much. It's easy to say something, but it's much harder to prove a point when the facts are against you.

Sorta like the facts you've presented, huh BP..........let me know when you've proved your point, 'cause it hasn't happened yet....

kg

[Gerry Clinchy]

I know they said it. They can say the sky is red and the grass is purple, too, but without some empirical evidence it doesn't mean much. It's easy to say something, but it's much harder to prove a point when the facts are against you.

backpasture, please read the links provided.

And also read about what government intrusion on recession wrought for Japan even more recently.

It makes a great deal of difference where the infrastructure investment is made. The links will provide information & also some of the empirical evidence you request (statistics for unemployment, etc.)

You also missed my "today" example of how a tax refund windfall will impact many small businesses through the home purchase made by a young couple honestly qualified to purchase a home. Their tax windfall will go directly back into the economy, to benefit both large and small businesses, with a portion remaining for savings. It will also improve the value of the housing stock by making modernization improvements to the home.

The example I give of the young home purchasers would be totally trash if the banks were giving this mortgage loan to a buyer that was not well qualified to purchase a home in an appropriate price range. If the banks had not been as irresponsible in giving loans as they were during the housing "boom", we would not have had the inflated home market prices or have to bail the banks out now. This most recent banking fiasco I have witnessed first-hand.

In fact, right now, banks may also be using the anticipated bail-out to make things even worse. Banks are making short-sales so difficult in some cases, that the buyers of those distressed properties are withdrawing their offers. Are the banks stalling because they know that someone else (the taxpayers) will be there to offset their losses? In the end, the properties will sell for even less than the buyers are currently offering.

Before the banks could anticipate being bailed out of their "mistakes", they were much more pragmatic in their dealings with unloading such properties to minimize their losses. Until the properties are sold the banks have to maintain insurance on them and pay the taxes. Their loss grows the longer they retain the properties.

[backpasture]

backpasture, please read the links provided.

And also read about what government intrusion on recession wrought for Japan even more recently.
.

I've read it. You should read this. It is the opinion held by the majority of reputable economists:
http://www.nytimes.com/2008/12/01/op...01krugman.html

For the record, I think the home purchase credit you refer to is a decent idea. Anything that gets housing moving again will be helpful.

[Gerry Clinchy]

I've read it. You should read this. It is the opinion held by the majority of reputable economists:
http://www.nytimes.com/2008/12/01/op...01krugman.html

I did read your link, backpasture, but I don't get much confidence from it. This op-ed glossed over the fact that the programs that didn't work both cut back spending and increased taxes simultaneously. This bears resemblance to the new POTUS's plan.

This is only one economist, and there are many economists who might disagree with this analysis. I'm not sure the use of the term "majority" would be valid or not. I'm no economist, but feel the Cato link gives a better explanation of the sequence of how the problems developed.

For the record, I think the home purchase credit you refer to is a decent idea.

The tax credit for homebuyers is ONLY a good idea, if the banks don't mess it up by giving loans to UN-qualified buyers. This is what the banks did to create the artificial housing boom.

I will add that the builders were also greedy, raising prices on new construction simply based on "what the market will bear", making larger profit margins than one might imagine.

Most Realtors® with any experience simply shook their heads in disbelief as clients went nuts to purchase over-priced homes.

[greg ye]

Just sold two houses and neither buyer had money down to amount to a hill of ...

Seems to me we aren't paying attention to recent history much less the past.

[zeus3925]

With all due respect to those that lost their lives in that tragedy, it wasn't the WHOLE COUNTRY. Keep on task if you can, son of Cronus and Rhea....
kg

Yes it is the whole country. There are over 200,000 deficient bridges in the country. The commerce of the country flows over those bridges. That affects all of us.

[Gerry Clinchy]

Just sold two houses and neither buyer had money down to amount to a hill of ...

Seems to me we aren't paying attention to recent history much less the past.

For the young buyers, down money is surely an obstacle. However, the buyer I spoke of has a good job, paid off her car ahead of time & her student loans, and has only one smaller credit card balance. The overall financial "profile" of this buyer is much better than many of the ones from the "boom" years.

Additionally, this buyer is buying below her means. A bank would likely qualify her for a larger mortgage, but she is smart enough to not go for that bait. Her new mortgage payment is not much higher than the rent she has been paying. During the boom people were stretching themselves too far.

The down money problem was pronounced even before ... that's how that cool 100% financing came about

Here in PA the closing costs are high due to a 2% transfer tax (usually shared equally between buyer & seller). That's an extra $2000 for the buyer on a $200K house here.

[T. Mac]

No one is going to debate whether or not WWII was worth fighting. But, the question is how it was more stimulative to the economy than infrastructure projects. Your main argument is that the infrastructure improvements are not evenly dispersed across the country, and that that not everybody gets a piece of it. But, that also holds true for defense spending. Some areas certainly benefit more than others from defense spending.

Explain to me how defense spending puts more money in more pockets, and distributes that money more evenly and 'fairly' across the country than infrastructure spending.

BP, There are several major differences in the New Deal programs of the 30's and the stimulus packages of today. At the time of the New Deal, unemployment was running over 20%. Some say it reached a high of 24%. The New Deal's two major works projects, WPA and CCC, were designed to get prople working to restore their self worth while providing them room and board. Be advised that the average income for WPA or CCC workers was about $45 per month, or about $700/month in todays dollars. The programs were design to put the maximum number of people to work for the money.

The stimulas plans of today include many infrastructure projects. However the federal rules for letting these contracts specify that the winning bider MUST pay prevailing wages to all its employees working on the project. Prevailing wages are nearly double what non-union worker earn doing comperable work and is still way above the minnimum wage not to mention the $700 (in comperable dollars) that the CCC or WPA workers earned in the 30's.

Despite the wide numbers of people invloved in these projects, the unemployment rate had only decreased tom around 17-19% when WWII broke out. The reason the war and war effort cured the depression was that many million men and women were removed from the work force by enlisting or being drafted into the military. During the war years, there was rationing of many items from gasoline and tires to fats and oils. The public were encouraged to save buying war bonds and also contributing by recycling cooking oils, fats, tallow as well as metal and other items. Coupled with the savings at home and all the soldiers whose military earnings were not being spent or being sent home to families, the inventory of domestic products plummetted.

The basis for todays recession/depression is the collapse of the housing industry which during its hayday of the late 90's and early 00's, promoted many millions of citizens to essentially live beyound their means. As housing prices escalated many people purchased or refinanced their homes based on the new inflated values. This was further escalated by the subprime mess where you had many people buying houses they simply could not afford. When the bubble burst and home values dropped to near half their highs (in some places), a huge number of home owners saw their investment value drop below their debt supporting their home. They now owe more for their home than it is worth. Remember that the rule of thumb is that the average persons changes homes every 7 years, so you can see that a huge number of Americans are affected by the housing collapse. This now affects those who had planned to use their home equity for future purchases; cars, boats, remodels; or activities; vacations, education, healthcare.

Then there is the further depression caused by the depreciation of the values of most stockmarket portfolios to upto 50% off their highs. This affects many of the retired and near retirement age citizens and many retirement funds. This is further complicated by the collapse of saving interest rates, MMF, CDs, treasuries, etc, such that retirees must now tap nest egg equities to support themselves, which decreases future income potential.

It is hard to understand how a stimulus program can correct any of this. Especially with the government attempting to get the citizenry to buy more when it was the buying that got us into this problem in the first place. While you might be able to elieviate the problems of a segment of total population, a very large subset will have their position worsened by this cure.

T. Mac

[backpasture]

A well-reasoned, informed argument is pretty refreshing. My hat is off to you.

I have a couple quibbles with your numbers. The Bureau of Labor Statistics pegs unemployment at 24.9% at the start of the New Deal (1933), and at 9.9% in 1941. That is a pretty substantial drop, and in of itself speaks to the accomplishments of the New Deal. There is no reason to believe that rate would not continue to decline had we not entered the war.

As you note, it dropped to virually nothing during the war, mainly because the labor force was employed as soldiers.

As for the new stimulus paying much higher wages than the WPA paid... isn't that a good thing?

And, of course the circumstances are different this time around. What is happening now is unprecendented. There is little evidence that doing nothing is going to work, the question is what 'something' is the appropriate way forward. I think the New Deal offers some pretty compelling lessons, and I think the arguments that it was the war, and not the New Deal, that helped us regain our footing are fairly weak.

[K G]

Yes it is the whole country. There are over 200,000 deficient bridges in the country. The commerce of the country flows over those bridges. That affects all of us.

Where did that 200k number come from?

kg