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Could Unspent Stimulus Money Be Used to Fend Off a New Recession?

Taking back stimulus money committed to long-term infrastructure projects like high-speed rail and spending it on short-term stimuli like food stamps is easier said than done.

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A worker finishes installing solar panels funded by federal stimulus money in October 2010, in Lakewood, Colo. (John Moore/Getty Images)

The nation's top economists are already giving odds on a double-dip recession. The Federal Reserve has only a few bullets left in its gun. And Congress seems politically paralyzed to come up with any new infrastructure or tax-cut plan that would fire up the economy.

So, it seems all the more surprising that the federal government still has $100 billion to $150 billion in stimulus money left to spend. That's about as much as the Making Work Pay tax credit that gave $800 apiece to middle-class families in 2009 and 2010. And it's twice as much as Congress gave to states to stabilize budgets and save education jobs.

So, could the money be better used to counteract the fallout from the European debt crisis and Standard & Poor's downgrade of the U.S. credit rating?

Taking back money from slow-moving infrastructure projects like high-speed rail and spending it on sooner-starting projects or on short-term stimuli like food stamps is easier said than done and might create more problems than it fixes, according to economists and current and former White House budget officials.

"It's meaningful, but it's not a game-changer," said Mark Zandi, an economist at Moody's Analytics who has followed the stimulus. "From an economic and political perspective, I'm not sure that would make a lot of sense to do. A lot of this spending has generated a lot of planning, a lot of environmental designs. They're counting on the money. If you're going to divert it, you're going to create all kinds of problems for them."

More than half of the remaining money is tied up in tax credits for things like renewable energy production and business equipment purchases, as well as increases in safety-net programs such as Medicaid and food stamps, which are distributed to states every three months.

Minus that, federal agencies had about $56 billion left in project funding at of the end of July. All but a few billion dollars of that is already committed to specific projects.

Although the vast majority of stimulus money is gone, dozens of solar, wind, high-speed rail and broadband Internet projects have yet to break ground. It wasn't until this year, for instance, that doctors could begin claiming billions of dollars in incentives to adopt electronic health records.

In addition, many highway projects

such as the rehabilitation of Interstate 295 in southern New Jerseyare reimbursed as they go. Work has begun, and construction workers are receiving paychecks, but the money technically isn't "paid out" until a certain phase is complete.

"Rescinding the remaining funds which have already been obligated would mean halting projects before they are complete, putting workers out of jobs and leaving contractors without payments owed to them," said Moira Mack, a spokeswoman for the White House Office of Management and Budget.

Centuries of federal law dating back to the Constitution tie the president's hands when it comes to spending money even in an economic emergency. Congress has full authority to set the government's budget, and federal agencies are required to use the money for a specific purpose. Many programs are further restricted with labyrinthine rules and formulas that dictate how much each state will get.

While federal and state officials do have some discretion to pick grand public works or minor repairsa new bridge versus a paved road, for exampleonce they have signed a contract or a grant agreement, it would require an act of Congress to undo and could subject the federal government to liability.

"By and large, an obligation is a commitment that, absent violation of the terms and conditions, can't be pulled back and redone unless both parties agree," said Jonathan D. Breul, executive director of the IBM Center for the Business of Government.

Such an act has precedent, though, under the Recovery Act. The White House shifted funds when recipients didn't file progress reports and after newly elected Republican governors, concerned about additional costs, turned down high-speed rail projects.

Congress cut funding for food stamps, renewable energy loans and broadband to pay for the Cash for Clunkers car rebate program in 2009 and a program to save teachers' jobs in 2010.

Linda Morrison Combs, who was OMB controller during the George W. Bush administration, said a similar situation occurred when she was chief financial officer at the Environmental Protection Agency. Some toxic-waste cleanups were facing long delays, so the agency worked with contractors and Congress to free up funds for other waste sites that had work ready to go.

Essentially, the administration could go to states and other recipients and say, "Are you going to spend your money or not?" But that option is complicated by some of the long deadlines set by Congress in the Recovery Act.

Although many programs had deadlines to spend or commit funds within the first two years, others such as energy-efficiency programs have until 2012 to spend their money. A California lawmaker recently tore into the state energy commission after an audit revealed it still had $183 million left to spend. Broadband expansion projects don't have to be completed until 2013, and California's high-speed rail funding doesn't have to be spent until 2017.

Still, if a project has multiple phases, the promise of future funding gives the federal government significant leverage to influence projects already under contract, Breul said.

So, while the Obama administration might not have a bullwhip, it does have bully pulpit, which Vice President Joe Biden was known to use during his weekly calls with mayors and governors before stepping down as "sheriff" of the Recovery Act.

For example, the administration has urged school districts that have held onto education money to spend it faster. Similarly, the Commerce Department earlier this year moved to streamline environmental reviews for broadband projects.

ProPublica intern Braden Goyette contributed to this report.

The economic problems in this country aren’t going to be solved by government spending.  Reaganomics failed.  Whether the government gives money to (orr fails to take it from) the rich to “trickle down” or the government trickles it directly, it ain’t gonna fix the actual problems.

As I see it, offshoring manufacturing has created a situation where we have overproduction, which we’re trying to sell to people who don’t have jobs and who are on austerity just to make the mortgage payment (sorry, rent—can’t forget all the foreclosures).  Hiring people to inhale asphalt fumes for a month isn’t scalable or long-enough-term to save a single life.  We want (as all the talking heads rightly tell us) small businesses working locally.

Ideally, you’d fix this without spending.
- Tax companies for employing outside US borders.
- Drive energy costs down - you can’t run a company if you go bankrupt heating the office.
- Tax speculation markets to stop Goldman-Sachs constantly bidding up food prices or S&P shorting stocks before announcing credit downgrades.

Actually, the middle item could be done through government spending, but nobody in Washington would ever go for it:  Negotiate and subsidize food, oil, and electricity to half market value for a year.

That sort of stability would strengthen the middle and lower class substantially and instantly.  They’ll buy things (and start businesses to employ more people who can buy things), which puts the big companies back in the black, at which point you can ease the subsidies.

Any other approach is Reaganomics at best, taking taxpayer money to…give it back to taxpayers (minus a cut) at worst.

Barry Schmittou

Aug. 9, 2011, 12:12 p.m.

Average citizens have never recovered from the first recession !!

Recent articles prove corporate earnings and CEO salaries are at the top of the very short list that has seen improvement !!

Meanwhile many leaders of major financial and insurance corporations have received multiple Non Prosecution Agreements for Bid Rigging, Money Laundering, and Health Care Fraud !!

In 2006 the Securities Exchange Commission wrote :

“AIG will pay in excess of $1.6 billion to resolve claims related to improper accounting, bid rigging and practices involving workers’ compensation funds.”

(end of quote)

No one was charged with a crime for this huge bid rigging of Workers Comp insurance policies !!

Two years later AIG received $182 Billion of taxpayer money to bail them out !!

AIG has received two more Non Prosecution agreements since 2006 !!

While AIG rigged bids in workers comp, MetLife, Prudential, and Unum Insurance have all received Multiple Non Prosecution Agreements regarding illegal kick backs they paid a broker to increase their sales of life, health, and disability policies AND NO ONE WAS PROSECUTED !!!!

JP Morgan Rigged Municipal Bids in 31 States and No One Was Prosecuted !!

Wachovia received a Non Prosecution agreement regarding $110 million in money laundering !!

MetLife received three Non Prosecution agreement for illegal kick backs in the sales of policies, but the DOL/DOJ will do nothing about crimes committed against very sick patients who file claims on the policies that MetLife committed frauds to sell !!

In a claims decision U.S. District Judge Richard Enslen wrote :

“MetLife and its henchmen should appreciate that such conduct may itself precipitate the suicide death of a person who has placed implicit trust in their organization to foster mental health.

MetLife also pays doctors who ignore brain lesions, Multiple Sclerosis, cardiac conditions of many patients and a foot a new mother broke in 5 places as evidenced in quotes from numerous U.S. Judges and Doctors !!

To see the Judges quotes please google search these words :

Numerous Judges and Doctors Quotes Prove MetLife Destroys Lives

If you google search non prosecution agreements 2010 gibson dunn you can see the list of 32 bid rigging and fraudulent corporations who evaded prosecution in 2010, and if you look at 2004 through 2009 and SEC agreements you will see how multiple corps have received multiple non prosecution agreements for the same crimes, including MetLife, JP Morgan, Prudential, and Unum Insurance. As mentioned JP Morgan rigged municipal contracts in 31 states, and no one was prosecuted.

The Impact of Regulatory Costs on Small Firms :

The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008. Had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008. By comparison, the federal regulatory burden exceeds by 50 percent private spending on health care, which equaled $10,500 per household in 2008.

The portion of regulatory costs that falls initially on businesses was $8,086 per employee in 2008. Small businesses, defined as firms employing fewer than 20 employees, bear the largest burden of federal regulations. As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees).

Here’s the full report: http://archive.sba.gov/advo/research/rs371tot.pdf

Richard McDonough

Aug. 9, 2011, 3:16 p.m.

Reganomics was not about public spending for public benefit, sir.  It was about public spending and lower taxes to benefit the rich.  Public spending and major infrastructure projects ware what created the prosperous US that we have known.  People getting paychecks that then get spent…kind of a perpetual motion machine…seems to be a difficult concept for the owners of capitol.

Government cannot spend anything that it does not confiscate from us. Every government program results in a net loss of jobs. If we give the government, say, a hundred million dollars of our hard-earned wages to spend on a government program, it would create jobs [A]. If we withhold the hundred million dollars and instead spend and invest it ourselves, it would also create jobs [B]. If [A] > [B], we should give government at least 90% of our hard-earned wages and, still, there would never be enough workers to go around to fill all the vacancies. (The Soviet Union was run on this myth that [A]>[B])

However, if [B] > [A], as is always the case, we should only give government our hard-earned wages to take care of essential service, not try and encourage home ownership, not subsidize education (government subsidies are the greatest cause of price inflation in education*), not wage wars abroad to democratize or build nations, change regimes and annex oil fields, etc. etc.

* When the home-buy credit expired, home prices dropped. The credit just allowed sellers to ask more, because buyers were deluded in believing the government was paying $8,000 of the purchase price.

Singapore’s GDP per capita was $600, below that of Guatemala, 44 years ago. They decided to keep the size of government at about 12% of GDP.  Such a small government means the highest individual tax rate is 20% and corporations pay 18%, but manufacturers get tax holidays. Hence, manufacturers, especially those in California, are relocating to Singapore. Malaysia is now copying Singapore.

Small government and low taxes meant that today, GDP per capita in Singapore is close to $43,000, making it the 4th richest country in the world. It has a population of 5 million and it generates $240 billion in GDP for a country one-eight the size of Delaware. Government spending does not create prosperity. Singapore is the 40th largest economy in the world. Greece’s GDP is $300 billion, so large that the global economy is being shaken by its economic woes. Imagine if Greece had adopted the Singapore model. Singapore has no natural resources and has to import all raw materials and agricultural products. United Emirates and Venezuela, just above Singapore in the GDP race have huge oil revenues, without which they would fall well below Singapore. Singapore produces more GDP than Egypt, Nigeria (with its 80 million population and huge oil reserves can’t match Singapore’s GDP), Israel, Chile, Portugal and Algeria.

US Companies contribute about $250 billion in tax revenues each year, about 25% of our defense budget (including the cost of foreign wars). Instead of spending the so-called stimulus money (which have to be borrowed from the Chinese - how stupid are we?), give all manufacturers a five -year tax holiday. Tax all non-manufacturers at 15% (same rate as Canada and South Korea, two countries that each spend $20 billion a year on their defense, because the US taxpayer takes care of the rest). Allow US corporations to bring the trillion plus dollars hoarded abroad to repatriate that without any tax consequences. This is how you stimulate an economy.

To help fund these tax cuts, cut the military budget (32% of budget if you exclude Medicare and Social Security) by $500 billion and tell our allies to take care of their own defenses. For that purpose we have military hardware to sell them. I suspect orders from abroad of more than 100 billion dollars in year one.

Let’s get real.

The limitations and requirements on spending are to blame for the slow rate of spending and recovery. If you need jobs and an expanded consumer base, designing an expensive new rail system does not solve the immediate problem. You might as well be planning a new adventure on Mars. When we have courts closing, teachers being laid off, and students faced with debt-ridden educational choices, investing in the future sounds pretty lame. If the Federal government can’t figure out how to spend the money into the system in 2011, they should hand it over to the states.

Z

Sorry, you lost me at “spending it on sooner-starting projects or on short-term stimuli like food stamps…”.  Up to then, I thought this article might offer some reasonable insight.  Food stamps as a stimuli? Give me a break!

I didn’t read your article.  I will, soon.  But what we have to do is cut the military spending.  We out gun or next rivals by 10 to 1.  We spend half of our tax revenues on the military.  See the chart: http://www.warresisters.org/pages/piechart.htm

We can cut the military, still be strong, and solve our fiscal problems.

“Food stamps as a stimuli? Give me a break!”

When the government subsidizes something, we get more of it. Subsidize poverty and you get more of it. There are rules that determine who gets welfare benefits. Assume I have a girlfriend (I’m happily married) and she earns, say, a thousand dollars a month, but after taking into account transport and other incidental expenses, it does not amount much more than, say, eight hundred dollars. Assume if she had no job or earned less than, say, five hundred dollars, then she would be eligible for all kinds of benefits including food stamps. Assume, we live together and I contribute to the rent (but nobody knows this – public record), etc. Now assume she quits her job and she applies for food stamps and a host of other benefits. In addition, she can go the emergency intake of the best hospital in town and get free medical treatment. Also, she has a teenager daughter who will now qualify for all kinds of scholarships and tuition assistance. Qualifying for welfare has never looked so good.

I’m just using an example that might be full of holes, but the point is, once the government embarks of a welfare program. At the margin, people who do not need welfare and could stand on their own two feet if they have to are now tempted to throw in the towel. A cycle of dependency sets in and that rubs off on the children and their children.

Cambridge educated Robin Koerner wrote a brilliant piece on welfare at Huffington Post:

“… all of the State apparatus of re-distributions and support have made more people poor and/or kept them poorer for longer. That more than one in six Americans are on food-stamps is a national disgrace. Another ten million are living on “unemployment insurance”; another five million on welfare. And I’ve not included the 50 million lower-income individuals on Medicaid.

“Things are particularly bad right now and many argue that it’s a good thing that these figures are high, as they represent improved lives… but if governmental redistribution was succeeding over time by its stated goals, there would be a steady decline in poverty and dependency over time—but there is not…

“…This moral demand can be reasonably answered, as it has been most succinctly by another British observer of these United States, speaking from experience of a British welfare system that has done more than perhaps any program in the country’s modern history to destroy a productive and content society. Said Daniel Hannan, British member of the European parliament, in a speech in DC in June of this year. ‘What happens as welfare expands is that private morality is nationalized. The bonds that used to tie individuals together are frayed.’

“As background, you need to know that in the UK, one in 11 households have no working adult. Most disturbingly for anyone with a social conscience, one in six children live in a home where no parent works. These children have never been exposed to the relationship between work effort and well-being. This is beyond entitlement mentality: it is the generational hard-wiring of entitlement and poverty. America is moving in the same direction, and will get there unless active decisions are taken to prevent it, because State social programs never organically shrink—never.

“Ultimately, the failure of government programs to reduce poverty and their apparent tendency to increase dependency stem from the fact that the provider of help—the government—has no way of responding to the personal situation of the recipient. It cannot differentiate according to the circumstances, character or even intent of the individual whom it helps…

“… More subtly, but infinitely more destructive in the long run, is that the recipient of help is completely unconnected to the individuals taxpayers who are providing the help. Recipients cannot see the impact of the giving on those who gave. This is literally a de-humanization of a huge set of human transactions, as it eliminates the natural human responses of reciprocity and responsibility toward those who help us. Since the welfare state delivers help in a way that seems to come from no person, the perceived cost is zero. Why then, would any recipient feel grateful toward, or any moral obligation to, those who provided the help? Responsibility wouldn’t need to be legislated if we had not instituted a system that demolishes it.”

bruce ritchie

Aug. 9, 2011, 7:23 p.m.

As I see it, anything that isn’t reasonably priced, and seriously sustainable in a permanently slowed down economy won’t sell.  Anything based on the old high energy economy is suspect.  Helping people turn their lawn into a food garden might work, wereas lots of high tech solar might not sell so well.  Better to sell a solar shower, or low flow shower head, than to sell a jacuzzi.  Any thought of restarting the economy with another unsustainable bubble just like the other bubble is a no go. Time to get used to living within the limits of the earth, and slow down the pace a bit.  It’s about time, too!

Perhaps if we used this money to put the welfare recipients to work, as WELL as the unemployed, we can lower our welfare rolls and get people off their butts and back to work.  We give TOO much to our citizens and we allow them to stay on welfare because it is made to look more attractive than actually working!  What’s the incentive to getting back to work if you get all this money for free….you may not live as high on the hog as you’d like, but you can survive on it.  People need to know that they cannot depend on welfare to support them….they NEED to get motivated and find jobs, and this stimulus money could help with that if utilized properly.

We are too busy stimulating the Afghan economy. Refer:

“The ‘War On Terror’ Is A $6 Trillion Racket, Exceeding The Total Cost Of World War II by David DeGraw (Centre for Research on Globalization)

Hundreds Of Billions Of Dollars In Fraud And Waste

“When you breakdown the spending on the War on Terror, you see hundreds of billions of dollars in shocking fraud and waste across the board. When it comes to fraud, a Defense Department report revealed:

“The military paid a total of $285 billion to more than 100 contractors between 2007 and ’09, even though those same companies were defrauding taxpayers in the same period… What’s perhaps most shocking is that billions of dollars went to contractors who had been either suspended or debarred for misusing taxpayer funds. The Pentagon also spent $270 billion on 91 contractors involved in civil fraud cases… Another $682 million went to 30 contractors convicted of criminal fraud.

“When it comes to shocking examples of waste, it costs the military in Afghanistan $400 for a gallon gas, and the Marines alone use 800,000 gallons a day. Another report reveals that the military spends $20.2 billion a year on air conditioning. That’s $20.2 billion a year on AC. There are more absurdities in military spending than you can imagine. The list goes on and on.”

The folk in Washington live on a different planet and obviously have no morals.

Bayareapatriot

Aug. 10, 2011, 10:50 a.m.

This site is a joke. The people who started it are just using it as a tax shield, the Sandlers. You want to know why things are bad, look at them and companies like World Savings that laid off most of their employees and destroyed another company. Then took the money and ran, leaving employees without a job. They are some of the biggest hypocrites on the planet.

Richard, I don’t disagree with the result, but “trickle-down economics” was (and still is) an actual theory:  Put extra money in the hands of specific people, and it’ll eventually circulate through direct employment and purchases to uplift the economy.  And it always fails, whether it’s tax breaks to the rich, bailouts for the Too Big to Fail, or handouts (having been on welfare, I don’t see that as a bad word, by the way) to the unemployed.

The problem with this stimulus is that we’re sucking money OUT of the economy through taxation in order to inject less of it back in.  That’s not enough to “close the loop,” and it’s not sustainable.

I also agree with public works, but the benefit won’t be seen in plugging potholes.  I don’t want to get on a soapbox, but what drove the pre-1980 economy was innovation pouring out of the space program without (because our government doesn’t lay claim to “intellectual property”) getting entangled in copyrights and patents.

However, we can’t build an ambitious space program after a generation weaned on thinking the space shuttle was high-tech, a Congress that mistakenly thinks a government budget works like a household budget, and a President who thinks the space program should be in private hands (and, thus, all innovations encumbered without exorbitant licenses) or other countries.

Albert, don’t forget the other beneficiaries of the Afghan war.  The Taliban, for all the suffering they cause, worked hard to wipe out the opium trade.  Take a look at when we started removing their power base versus when we started seeing heroin flood our streets.  According to recent reports, that about 50 billion dollars going to Afghanistan annually and another 20 to smugglers and our local dirtbags.

And that ignores the missing trillions at the Pentagon that Rumsfeld promised us he’d find, back in early September 2001, before the war wiped that incident from memory.

Bayareapatriot, they might be (I hear the Sandler name pop up a wee bit too often for comfort, myself), but they’re also one of the few outlets doing any investigation.  Most news outlets happily copy and paste the AP feed or press releases.  Hypocrites aren’t necessarily wrong, after all, and I don’t think anybody is naive enough to take reporting at face value anymore.

Obummer needs that money for his campaign and to buy off reporters and news agency’s. That money is to right before the election to pump money to the places he wants to win in. Yes, Your tax dollars at work…

Contract law schmontract law. Obama has demonstrated he has no regard for contract law. Look at what he did to the GM bondholders. That directly violated long standing contract law.

{^_^}

Most people don’t know that in Dec 2010 the guidance was changed on how to count jobs created or saved under the Recovery Act, resulting in a meaningless and intentionally inflated number. 

They now count “jobs funded” which means that states can use the money to fund jobs that were never in danger of being cut and that gets counted.  Originally they could only count jobs which wouldn’t have existed without the Stimulus funding.  Darrell Issa issued a memo calling out the ECB on this issue, which forced them to change the wording on the Recovery.gov website from “jobs created” to “jobs funded”.  However, in every speech and every press release they still intentionally mislead the public by continuing to refer to “jobs created or saved.” 

http://www.propublica.org/article/white-house-changes-stimulus-jobs-count-111

The truth is this money went to fund many government and union jobs that would have existed anyway.  It was simply Obama taking $288 billion from taxpayers and funneling it to his voter base.  That is why there has been no improvement in the economy.

It’s unfortunate that most people have no clue how corrupt the Obama Administration is, or how much they spin the numbers.  Based on the latest stock market activity, it seems that they are finally running out of tricks to mislead the people.

Catherine J Rose

Aug. 11, 2011, 8:11 a.m.

Since the taxpayers helped bail out AIG and the banks I think it’s time now for the Banks and Investors to bailout the taxpayers confronted with the potential of Foreclosure.  This can be done by creating new mortgages ate lower interest rates that can be repaid over 20, 25, or 30 years.  The only criteria for eligibilty should be that the homeowner has missed a minimum of one mortgage payment in the last year.  If another criteria were needed, perhap that could be evidence of loss of income.  There also needs to be tight regulations on matters pertaining to any additional or hidden fees that could present a financial difficulty for the homeowner.
Homelessness is a major problem in this country and being proactive is much better than being reactive.  An ounce of prevention is worth a pound of cure.  If as a government we are able to provide for the basic needs of our people, such as shelter, the people will be better able to attend to their other needs such as nutrition and healthcare.
Let’s get the show on the road!

The system is designed to promote poverty.

People with disabilities receive as little as $675 p/m and after two years of receiving an award letter of benefits receive healthcare benefits. If they return to work they lose their healthcare and cannot purchase private healthcare due to preexisting condition. People become trapped in a system that promotes poverty with no way out and few find their way out.

Catherine, “Since the taxpayers helped bail out AIG and the banks…”

Two wrongs don’t make a right. They should never have been bailed out. It should never be the taxpayer’s responsibility to make good on the bad investments of others.

“…I think it’s time now for the Banks and Investors to bailout the taxpayers confronted with the potential of Foreclosure.”

Here you are facing a huge problem, as I will explain below.

“This can be done by creating new mortgages at lower interest rates that can be repaid over 20, 25, or 30 years.”

You are calling for investors to create these mortgages. Let’s assume these 30-year mortgages are priced at a fixed rate of 3.5% p.a. Assume you are one of the investors contemplating offering people who in the past have demonstrated that they are not a “risk-free” investment by any means. To fund these mortgages you would have to risk your own capital and/or borrow the money by offering investors/banks a 30-year loan at a fixed rate that is below 3.5%. How are you going to find investors willing to invest in a 30-year bond at a lower rate than 3.5%, knowing that the money will go to financing highly unpredictable mortgages? You could try and finance the 30-year mortgages with, say, 5-year or 10-year bonds, but you run the risk of a rise in interest rate, so that by the time you need to roll over the loan, you might have to offer investors a rate that exceeds 3.5%. That would put you and your fellow investors in a hole. Of course, we know that at the rate the Fed is printing dollars, we might well face a period of hyperinflation. This is another risk against which a fixed rate of 3.5% for a 30- year will offers you no protection.

“The only criteria for eligibility should be that the homeowner has missed a minimum of one mortgage payment in the last year.  If another criteria were needed, perhaps that could be evidence of loss of income.  There also needs to be tight regulations on matters pertaining to any additional or hidden fees that could present a financial difficulty for the homeowner.”

At the one end of the risk spectrum you have people with good jobs and a very good record of meeting their obligations. You could offer these folks mortgages at “lower” rates as the risk of default is remote. On the other end you have those who have “missed the odd payment” and whose earnings have not been stable and/or increasing over time. These people represent a higher risk of default. Offering them mortgages at a “lower” rate just won’t inspire any investor to risk his or her precious capital.

The government thought they could lend a helping hand with mortgages to these types of people and they created Fannie Mae. To date, taxpayers have suffered in the region of $350 billion in default losses, but it could be double that once the whole mess has been wound down.

Catharine this has all been tried before, with disastrous results for the taxpayer. The government tried to create a mechanism whereby people could be offered shelter and failed spectacularly. There is no such government intervention in the housing market in Canada and homeownership in Canada is higher than in the US. Read the article by Robin Koerner, I cited above.

Americans are very generous people, almost too a fault. (Again the Koerner article is very instructive on this point.) What we need is for the government to allow us to keep most if not all of our hard-earned wages and we will have plenty of spare cash to reach out to our neighbors, in person, through charities, churches and the like – see my post above about what happens when we give the government our hard-earned wages. You have a good compassionate heart, but the government has no resources other than what it takes from you and me. It also has a very poor record when it comes to the manner in which it spends the loot.

One group here appears to believe that they should keep all their income earned and not pay taxes.  I may be going out on a limb here, but I assume that you won’t need or are receiving Social Security. 

Another group here is still complaining about the Bank Bail-out that occurred in a previous administration.  Complaining about what was done it fine, but how does that help the current situation?

Then the group who still believe that lowering taxes will somehow decrease the national unemployment - which is the original question.  Well, we have had no tax increase and we have a stagnant economy and high unemployment.  If there were decent paying jobs (not like the jobs in TX which are minimum wage jobs) for the unemployed, then the gains would be:  increase in revenue to the gov’t for wars, social security payments, etc, decrease in demand/outlays at the state and federal level for unemployment, food subsidies, etc.

So people are free to write whatever they want, link to a specific website that supports their opinion, post all the numbers they want, etc.  These ignore some of the basic facts that the recession started in 2007, Wall Street Mortgage Meltdown 2008, and each state that used part of the stimulus took 5% off the top.

Again, out on a limb, we have all watched Wall Street for the past week and I don’t know if there was a correlation between the lower than expected unemployment numbers and the index rise at the end of today, but if so, then isn’t that a signal that decreasing the unemployed has a direct correlation with Wall Street gains.

This article is part of an ongoing investigation:
Eye on the Stimulus

Eye on the Stimulus

Officials have struggled to spend the nearly $800 billion stimulus package quickly and effectively.

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