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In my previous article I highlighted the general economic problems President-elect Obama faces.  In short order these are the housing crisis, the financial crisis, the trade deficit, a recession, and a fiscal situation in ruins.  This article will outline some of the possible policies - as well as the pitfalls of the policy proscriptions.  Simply put, his upcoming task is daunting.


Housing's basic problem is simple.  Supply is at sky-high levels while demand is at low levels.  As a result, prices are dropping as evidenced by the drop in the Case Shiller home price index.  This has led to one third of recent homes sales leading to a loss for the seller (For a more complete explanation, see this story from my blog).  The question becomes what can be done to deal with this situation?

The answer is there is little the government can do directly.  Remember the central issue is massive oversupply of housing.  Unless the government wants to actually start buying properties outright or demolishing houses through its eminent domain powers to lower supply there isn't much to be done directly.

However, there is an important indirect policy the government can undertake - making it far easier to rework mortgages that are underwater (where the mortgage is worth more than the home price).  I would suggest three different policy ideas.  First, create some kind of tax incentive beyond the policies in the current tax code to encourage private compliance with these goals.  For example - a tax credit or some kind of bonus deduction would help to ease the losses faced by the financial sector when the financial institution directly owns the mortgage.  Second, allow bankruptcy judges to rewrite mortgages.  We're going to see a big increase in bankruptcy over the next year or so.  Housing costs will play a fairly large part in that.  Allowing judges the discretion to rework mortgage payments would ease some of the pain.  

Finally, something has to be done to allow a rewriting of mortgages that have been securitized.  Here's the basic problem. Before securitization the lender actually held the loan.  For example, when the borrower went to the bank to get a 30 year loan the bank would own the loan for 30 years.  This would make reworking the loan that much easier.  Now the problem is much more complicated because the original lender no longer owns the loan.  Instead, the lender sold the loan to an investment bank who packages the loan as part of a mortgage backed bond which in turn is sold to large institutional investors.  Some type of mechanism needs to be created to help with this situation (if it's possible).

The General Economic Slump

When the recession started is debatable.  I have argued it started in the 1Q of 2008.  I have seen others argue it started in the 4Q of 2007.  Irregardless of when it started there can be little doubt we are currently in a recession.  That means overall growth is declining.  Starting in the 4Q of 2007, the growth rate from the previous quarter was -.2%, .9%, 2.8% and -.3%.  The 2.8% growth rate in the second quarter of 2008 was a statistical aberration.  Real growth without the import price "inflator" was a decline of 1.3%.

So, the economy is clearly contracting now.   This implies government stimulus would help to alleviate the slowdown.  Former Labor Secretary Robert Reich explained the situation thusly:

Introductory economic courses explain that aggregate demand is made up of four things, expressed as C+I+G+exports. C is consumers. Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down.

I is investment. Absent consumer spending, businesses are not going to invest.

Exports won't help much because the rest of the world is sliding into deep recession, too. (And as foreigners -- as well as Americans -- put their savings in dollars for safe keeping, the value of the dollar will likely continue to rise relative to other currencies. That, in turn, makes everything we might sell to the rest of the world more expensive.)

\That leaves G, which, of course, is government. Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression. Even Fed Chair Ben Bernanke is now calling for a sizable government stimulus. He knows that monetary policy won't work if there's inadequate demand.

Anyone who is familiar with the way the BEA reports GDP growth will be familiar with the above mentioned format.  

So, we have the government spending to help minimize the effect of the slowdown.  The question now becomes how much.  Paul Krugman offered this analysis:

Right now, we're at 6.5% unemployment and a 3% output gap - but those numbers are heading higher fast. Goldman predicts 8.5% unemployment, meaning a 7% output gap. That sounds reasonable to me.

So we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it's too small. What's the multiplier? Better, we hope, than on the early-2008 package. But you'd be hard pressed to argue for an overall multiplier as high as 2.
When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.

Here's where the plan runs into a big problem.  Bush is leaving Obama a fiscal disaster.  Total US debt has increased from $5.8 trillion in 2001 to $10.6 trillion today.  From a debt to GDP ratio the increase has been from roughly 57% to roughly 72%.  These increases indicate that no one in Washington has been able to make any tough choices for the last 8 years.  As a result the federal finances are now in terrible shape.  

The central problem is interest rates on the debt.  The price of a bond and the bond's interest rate are inversely related: as prices drop the interest rate on the bond increases.  The Treasury is already issuing tons of debt to pay for the financial bail-out.  As a result traders are expecting prices to decline and interest rates on government debt to increase:

``The No. 1 reason is supply,'' said Jason Brady, a survey participant and managing director at Santa Fe, New Mexico-based Thornburg Investment Management, which oversees $4 billion in fixed income assets. ``You have Fed and Treasury actions which are supporting credit markets and causing a huge amount of issuance.''
The U.S. is boosting debt sales to fund such programs as the Treasury's $700 billion bank bailout and the Federal Reserve's purchases of commercial paper to thaw credit markets. Federal Reserve Chairman Ben S. Bernanke has made unprecedented use of the central bank's powers as lender of last resort, unlike his predecessor, Alan Greenspan, who relied on interest- rate cuts to stabilize turbulent markets. President-elect Barack Obama called on Congress Nov. 7 to pass economic-stimulus legislation.

Quarterly Borrowing

Last week the Treasury Department estimated that it will need to borrow $550 billion this quarter, more than triple an earlier forecast. New York-based Goldman Sachs Group Inc. said Oct. 29 the government's requirement this fiscal year that started Oct. 1 will almost double to $2 trillion.
The federal budget deficit may climb 58 percent to $687.5 billion for fiscal 2009 as U.S. debt swells and the slowing economy crimps tax receipts, according to a survey by the Securities Industry and
Financial Markets Association of its members released Oct. 31.

Expectations that yields on 10-year U.S. notes will rise increased to 54.08 in November after reaching a seven-month low of 48.91 in October, according to the Bloomberg survey. The measure is a diffusion index, meaning a reading above 50 indicates that participants expect bonds to weaken and yields to go up.

These are hardly alarming interest rates.  5.40% of interest on a 10-year debt is still very reasonable.  However, it's important to remember that issuing all of this debt will have consequences.  Some of which would be extremely unpleasant:

"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.

"In the United States there is already a funding crisis, and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off," Hennecke told CNBC.

So, so help solve some of the basic problems of the economy the US will have to increase spending in a big way.  For someone like myself who has been continually harping on the debt this is an extremely difficult policy call.  I don't like deficit spending in any way at any time.  It is an extremely dangerous precedent to set.  However, there are times when it is required.  And now is such a time.  Simply put without the cushion provided by a massive injection of government spending we are in serious trouble - as in a contraction the likes of which we haven't seen since the early 1980s and probably before.  

However, in doing so we are walking on extremely slippery policy ground.  We have not come close to balancing the budget in over 8 years.  As a result the debt/GDP has continually increased.  Now -- at a time when it would be great to spend without having to worry about things like a dollar collapse, a loss of our AAA rating or a spike in interest rates -- such an action will in fact increase the possibility of that happening.  Simply put there are no good choices right now.  Do nothing and risk an extremely painful recession.  Do something and place the soundness of the US government's finance sin jeopardy.  It's not a pretty set of choices.

Originally posted to bonddad on Thu Nov 13, 2008 at 05:42 AM PST.

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Comment Preferences

  •  Should bankruptcy judges reduce amounts? (21+ / 0-)

    I was wondering: what is the merit in a lender owning a load that's got a higher value than the auction sale-price of the property?  That's the most that they can ever recoup on it, so it's folly for them to insist on the full amount or else.  Or else what?  They'll collect on the lesser amount?

    If bankruptcy courts could reduce the mortgage amount to the likely auction price, then the lender wouldn't lose out (since that's all they could collect anyway) and it might allow a lot more people to stay in their homes.

    I'm sure there are flaws in that plan.  But what are they?

    Proud White Guilt Ridden Socialist Fake Anti American Ex Pat for Obama.

    by DemCurious on Thu Nov 13, 2008 at 05:50:11 AM PST

    •  What's crazy about the "stimulus" (34+ / 0-)

      Is that if the Fed didn't do anything, banks would have to renegotiate with borrowers.  Banks don't want to be in the real-estate business - especially when sale window is so long - costs too much to maintain while vacant.

      Banks could have written off their write downs and that would have been their incentive and stimulus.

      ALl the Fed needed to do was insure liquidity becasue the finacial system was under-capitalized.

      The rest is a gift from the taxpayers courtesy of our Congress.  Now our Congress is suprised and angry - fuck them - they are dumb and incompetent.

      The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

      by ctexrep on Thu Nov 13, 2008 at 06:02:06 AM PST

      [ Parent ]

      •  And the writedown amount is almost negligible (10+ / 0-)

        when you look at the massive amount of interest paid over the life of a 30 year loan.

        The costs of foreclosure alone are bad enough for a lender.. but then, in the end, they are still left with a piece of property they can only sell at current reduced market value.  It seems like a no-brainer to me to renegotiate mortgages (except for the expectation of consumers in the future regarding their own risk management).

        In addition.. if the banks had started renegotiating mortgages early on, the prices of houses would likely not have fallen as much  (given supply and demand forces) and it would have saved them a lot of grief!

        So.. hey banks! Here's a plan:

        Renegotiate loans now.
        To guarantee the mortgagee stays with you, put in a early termination fee of 10%, let's say.

        But then, maybe it's too late.

        "Those are my principles, and if you don't like them... well, I have others." - G. Marx

        by Skeptical Bastard on Thu Nov 13, 2008 at 07:20:51 AM PST

        [ Parent ]

        •  Bank is selling our house for same amount.. (34+ / 0-)

          that we could have afforded, if they had been willing to negotiate through bankruptcy.  Banks would rather sell the house to a foreclosure buyer than to lower the mortgage/interest rate for long-term customer.  Many, like us, are finding that banks are absolutely unwilling to negotiate terms of loan.

          So, I have no idea how the bank benefitted by my husband and I starting over again.  They got stuck with the house, and a loss.  

          We can't solve problems by using the same kind of thinking we used when we created them. - Albert Einstein

          by FearlessAreFree on Thu Nov 13, 2008 at 08:23:59 AM PST

          [ Parent ]

        •  You can't pick and choose the loans (12+ / 0-)

          I think this misses a few points. You can't pick and choose the people whose loans you write down, becasue that affects everyone in the neighborhood, even the guy who can afford his house. The problem is that everyone needs to take a haircut, and the last thing the struggling banks and CDO holders want to do is admit that they probably need to devalue the CDO's and loan portfolios by 30% (or more)

          Blogging about it doesnt make it all better

          by El Oso 73 on Thu Nov 13, 2008 at 08:24:40 AM PST

          [ Parent ]

          •  How does the mortgaged amount (6+ / 0-)

            affect the neighborhood?  It seems to me that prices (demand/supply/mortgage-ability) matter, because those are public.  But mortgages are only loosely related to the price of a house.

            So I'm confused how writedowns will affect the neighborhood.


            We're not on the mountaintop yet, but we can see it, now.


            by Marc in KS on Thu Nov 13, 2008 at 08:34:03 AM PST

            [ Parent ]

            •  It affects the neighborhood positively (14+ / 0-)

              to keep homeowners in their homes!

              Once homes start to become vacant, the value of all other homes in the neighborhood start to fall!

              It would seem to me that ALL homeowners have a stake in keeping people in their homes.. a financial stake!

              "Those are my principles, and if you don't like them... well, I have others." - G. Marx

              by Skeptical Bastard on Thu Nov 13, 2008 at 08:44:49 AM PST

              [ Parent ]

            •  an example (7+ / 0-)

              Say you have a street with 10 similar houses on it, they all went for $500K. Now say only 6 of those people can afford the houses they bought at this bubble price.  So 4 people are struggling. Those 4 people get their mortgages written down to say $300K (a pre-bubble price). The real estate market levels out eventually, and goes back to its historical norm of house prices increasing in line with inflation, at 4% a year. You have now placed the 6 other guys on the street underwater for the next 14 years or so

              now multiply this effect on street by street

              Blogging about it doesnt make it all better

              by El Oso 73 on Thu Nov 13, 2008 at 08:51:36 AM PST

              [ Parent ]

              •  Homes are overpriced relative to (7+ / 0-)

                what people can afford to pay.  Home prices will fall or, haha, incomes will increase until that metric is once again in line.  There is a possibility that prices will fall below that line, but the damage will have already been done.

              •  balance that against ... (9+ / 0-)

                the reality on the street, which is that those four will eventually face foreclosure.  Those four homes will sit vacant for some period of time, which will DRASTICALLY affect the surrounding property values, and will eventually sell for a more reasonable pre-bubble price.  So the lender STILL takes a haircut and the finances of the four original homeowners take a scalping from which they are likely to never fully recover.

                Yes, if the original loans are written down and the original four homeowners go brag about it to their neighbors, the neighbors are going to be PISSED.  But it seems to me there are fewer bad outcomes from option a than option b.

                I am my brother's keeper, I am my sister's keeper. - President Elect Barack Obama

                by ThirstyGator on Thu Nov 13, 2008 at 09:00:19 AM PST

                [ Parent ]

                •  not fixing the problem, spreading it around (3+ / 0-)
                  Recommended by:
                  ThirstyGator, cville townie, raoul78

                  Foreclosure is just as bad

                  So when it comes out, and it will, and you have sunk someone so underwater (even though they were responcible) their best option will be to walk away, especially if they have to move for work or for family. So now you still have the problem of home forclosures, spread over time, and possbily on a larger level.

                  what I wonder is, is this only painful to the banks in the end

                  You can recover from a bad credit report eventually

                  Blogging about it doesnt make it all better

                  by El Oso 73 on Thu Nov 13, 2008 at 09:28:22 AM PST

                  [ Parent ]

                •  Why not help the homeowners who are in (1+ / 0-)
                  Recommended by:

                  danger of foreclosure with government money insuring the mortgage to real value but place a lien against thier property for any future profits from a sale to be recouped by the country for helping them in thier hour of need. If they stay in thier house then no problem. If they are an investor who used NO Doc or any of the other loan scams to make a profit {on the Interest free money Banks had in barrels from the Fed- thier need was to make a profit on that money} you won't be bailed out to continue making that profit on the back of those who are paying thier mortgages.

                  So in effect if I pay my mortgage and home values climb I make a profit if I sell because I din't get that profit up front from the taxpayers.

              •  But getting your mortgage written down to (5+ / 0-)

                some lower value doesn't affect the value of the house.

                What people owe on a house isn't really tightly connected to the selling price of a house.

                This is what I'm not getting.  What I owe on my house does in now way affect what my neighbor's house is worth.  It's worth what it'll sell for, and that's influence by what my house will sell for, but not what I owe on it.


                We're not on the mountaintop yet, but we can see it, now.


                by Marc in KS on Thu Nov 13, 2008 at 09:21:22 AM PST

                [ Parent ]

                •  And if the govt at some point (0+ / 0-)

                  decides to pay a percentage of EVERY primary residence mortgage, it helps everybody.

                  If the govt pays down your mortgage by 20 percent, that gives you a cushion AND gives you a chance to refinance that LOWER amount if necessary.

                  For some people, it won't be much - we don't have a huge mortgage, though we do have a home equity loan as well. But even that little bit would be a help. And in places where the house values have dropped, that 20% paid against the principle might make the balance of the mortgage right about equal to the value of the house.

                  •  Excuse me (5+ / 0-)

                    Speaking as a lifelong renter, I'm stumped why you think that I, or anybody else, should pitch in now to reduce the mortgage and home equity loan of those who chose to borrow to buy when house prices were going up, up, and up.

                    •  They're not the ones with the profits (0+ / 0-)

                      The people who sold when house prices were going up up up were the ones who made off with the loot. I wish my parents had been among them, actually, but they stayed in their house. The people who bought might have been greedy, scared the prices would rise further, or just in the market at the wrong time.

                      If you wanted to go after anyone, justice would point towards the people who sold, but that money is long gone. Punishing the people who lost in this market is a silly motivation.

                      John McCain: Untested, untried, unreasonable, and unpresidential. Thank you General Clark!

                      by cville townie on Thu Nov 13, 2008 at 01:01:48 PM PST

                      [ Parent ]

                      •  Not to punish (1+ / 0-)
                        Recommended by:

                        I didn't say anything about punishing anyone. I'm prepared to leave them all alone.

                        But why should I reward anyone who played the home-buying game (or home selling game, often flippers who did both) with my tax money to now subsidize mortgages when I've always been a renter?

                        •  Very simple actually (0+ / 0-)

                          If a ton of people are foreclosed and flood the rental market, although there will be a lot of temporary rental housing from the foreclosures, you can bet your rent is going to go up.

                          Also, I don't think and I never said your tax money should pay for it. The bankruptcy laws need to be radically changed to favor consumers (as this diary proposes) and people with bad mortgages should have part of the principal written down to real, non-bubble market value. Nobody has profited with respect to the reference frame of a housing bubble not having occurred, except the flippers who already have their money, and again that money is long gone; nobody pays except investors who bought the shitty securities. Some money got transferred from fools to crooks, but that is a pretty old story and the only way around that is to devalue the currency.

                          If tax money is to be used it should be to buy stakes in the banking system when the banks fail, and the federal gov't should both have a voice in running the banks they buy into for now, and be intending to sell them back at a profit later.

                          John McCain: Untested, untried, unreasonable, and unpresidential. Thank you General Clark!

                          by cville townie on Fri Nov 14, 2008 at 01:12:10 AM PST

                          [ Parent ]

                          •  Rents will go down, no problem (0+ / 0-)

                            Don't expect any rent increases in a great deflation.

                            TUESDAY, NOVEMBER 11, 2008
                            Apartment Market Weakens
                            by CalculatedRisk on 11/11/2008 10:33:00 PM

                            From the National Multi Housing Council (NMHC): Weakening Economic Conditions Create Challenging Conditions For Apartment Sector

                            “Nine straight months of job losses have begun to cut into the demand for apartments,” said Mark Obrinsky, NMHC’s Chief Economist. "... economic worry will cause some people to 'double up' by moving in with a friend or returning to their parents’ house.”

                            The Market Tightness Index, which measures changes in occupancy rates and/or rents, dropped from 40 last quarter to 24. This was the fifth straight quarter in which the index has been below 50.

                            As Obrinsky noted, it is common in a recession for vacancies to rise, as households double up. However an added factor in this one is all the single family homes being offered as rentals. This is additional competition and might also be impacting demand.

                            emphasis added

                  •  No effing way (2+ / 0-)
                    Recommended by:
                    Brooke In Seattle, raoul78

                    You are making the case for a blanket nationwide subsidy, for mortgage borrowers, to be shouldered renters and old folks who own their house outright.

                    I don't think so.

                    All this wasted time learning and acquiring skills... And all along I should have just squinted to see Russia

                    by fizziks on Thu Nov 13, 2008 at 12:35:32 PM PST

                    [ Parent ]

                    •  Though you do realize (0+ / 0-)

                      People that have mortgages get tax deductions that you don't get. Just like there are tax benefits to those that are married and/or have children that others do not receive.

                      People who have paid off their homes still pay property taxes to pay for the schools whether or not they have any children attending them or even children at all.

                      Sometimes tax benefits or government giveaways etc. are devised not for the current generation of people but for the next generation of people to come through. And above all remember that hardly anything in life is fair.

                      It is, of course, socialism at work - despite the new found interest by the Republicans of the term - and it has been around for a long time. There are only two extremes - communism where everyone has the same or pure libertarian capitalism where it is every man for himself. In between there are varying degrees of socialism which lends itself to benefiting some life circumstances over others.

                •  by resetting the mortage we are assigning a value (0+ / 0-)

                  by resetting the mortage we are assigning a value to the home, values historically set by the cost of money and the value of the rents. Cheap money broke this long standing relationship temporarily

                  Blogging about it doesnt make it all better

                  by El Oso 73 on Thu Nov 13, 2008 at 11:14:28 AM PST

                  [ Parent ]

            •  If it is being sold at the markdown price anyway (3+ / 0-)
              Recommended by:
              Marc in KS, ZenTrainer, raoul78

              it has the same effect.  It's the same house and the same neighborhood and the same price.  Just a new owner.

              •  I think what I was going for is... (3+ / 0-)
                Recommended by:
                ThirstyGator, StrayCat, raoul78

                I think what I was going for is we all have to pay for this, the fix is bigger, and more broad reaching then most people think it is

                Blogging about it doesnt make it all better

                by El Oso 73 on Thu Nov 13, 2008 at 08:54:20 AM PST

                [ Parent ]

              •  We're not talking about selling it. (3+ / 0-)
                Recommended by:
                mmacdDE, Brooke In Seattle, raoul78

                We're talking about renegotiating the mortgage (either principle or interest) to the point that the owner can stay in the house.

                What the house will sell for is really not influenced by what deal the owner has with the mortgage holder.

                At least, as far as I can tell...


                We're not on the mountaintop yet, but we can see it, now.


                by Marc in KS on Thu Nov 13, 2008 at 09:22:31 AM PST

                [ Parent ]

                •  By resetting the mortage we are assigning a value (0+ / 0-)

                  by resetting the mortage we are assigning a value to the home, values historically set by the cost of money and the value of the rents. Cheap money broke this long standing relationship temporarily.

                  So if we go back to the mythical street we are talking about, and I go to sell my house, I will have 200K of leeway my nieghboor doesnt, and it only takes a few houses selling for less before you re-set the market price. This is assuming that wages have increased to the point to support the old $500K price anyway, which is doubtful so we are back to putting the responcible people underwater

                  And if the person shopping around is smart he will pull the luds and transfer records and know what I paid, and what my mortgage is for

                  Blogging about it doesnt make it all better

                  by El Oso 73 on Thu Nov 13, 2008 at 11:12:38 AM PST

                  [ Parent ]

        •  Say... (7+ / 0-)

          I bought a house two years ago for $200K and paid 25% down ($50K).  A neighbor bought a similar house for $200K with a 100% mortgage.  Both our houses are now worth $150K.  My neighbor who now owns property worth $50K less than its mortgage wants relief from his mortgage whereas as a frugal taxpayer I will end up losing my $50K equity and eventually, via taxes, bear some of the burden of my neighbor's profligacy. Moral hazard need to stay in whatever solutions we find. Otherwise, if we are not careful we will only promote never saving and living on credit.

          •  taken a step further.. (4+ / 0-)

            When your neighbor defaults on his loan and his property stands vacant, your property now drops another $30k in value.  Do you want that?

            It's a mess.. most definitely..

            But, I would think we could figure out a way to push penalties out to, say, 10 years on these folks and still let them keep their houses.

            In many cases, I believe a reduction in interest rates would allow many people to stay in their homes without fiddling with the principal at all!

            How many folks could stay in their homes with a new 10 yr ARM at 2% for the first ten years, do you think?

            "Those are my principles, and if you don't like them... well, I have others." - G. Marx

            by Skeptical Bastard on Thu Nov 13, 2008 at 09:00:09 AM PST

            [ Parent ]

            •  Perhaps not really so many (2+ / 0-)
              Recommended by:
              Woody, cville townie

              a large number of borrowers in really overpriced areas bought homes with option ARMS, option meaning they get to choose which amount to pay - full amortizing, partial amortizing, interest only, or partial interest.  You can find graphs of option arm recast schedules with a little googling, but suffice to say, its a large number of mortgages.  Most of these note-holders paid only partial interest payments, meaning the balance on the mortgage was rising.  Most of these arms also had low introductory rates.  

              I think the idea of lowering interest rates will help some people, and I'm not at all opposed to it.  I would bet that many more people, even if given 1% interest loans, still would not be able to afford the payments.  

            •  Not a matter of "affording payments" (1+ / 0-)
              Recommended by:

              It's a matter of people who can afford it in the long run at a proper, non-bubble market price staying in their homes. Your solution creates the possibility of these ARMs all coming due in 10 years, creating another potential crisis down the road. ARMs need to go the fuck away before they cause any more damage.

              John McCain: Untested, untried, unreasonable, and unpresidential. Thank you General Clark!

              by cville townie on Thu Nov 13, 2008 at 01:04:12 PM PST

              [ Parent ]

              •  Indeed (2+ / 0-)
                Recommended by:
                cville townie, raoul78

                Home prices rose out of whack with respect to historical pricing exactly because of these kinds of mortgage vehicles. People have been sold into homes the way many of them are sold into vehicles by the "how much of a monthly payment can you afford?" sales tactic and not on the actual valuation of the asset.

                Which is why we have over-priced homes, over-priced automobiles, over-priced college tuition, over-priced appliances and furniture and electronics, etc. It was all because of what the monthly payment was in relation to cash flow to finance debt and had very little to do with anything else.

                Buying power for wage earners is less today than in 1970 yet through the magic of "innovative" credit devices we have been paying vastly inflated prices for the assets we need and use. Instead of increasing wages they increased credit and prices while pocketing the difference on the cost of production versus the sales prices and on the interest on the credit. So here we are. Millions of Americans sitting on their own bubble - largely through no fault of their own since this price/wage/credit imbalance started before many were not even born yet or were children when it started.

                There are no easy fixes. All I know is that it pisses me off that there are people raking in bags of cash while millions are being destroyed. Whatever the government does they had better do so carefully because we are much closer to "torches and pitchforks" than we are to getting out of this mess. Much, much closer.

          •  a couple of things: (3+ / 0-)
            Recommended by:
            stephdray, beans, raoul78

            First, what business is it of yours what relationship your neighbor and his/her lender have with each other.  

            Second, the value of the property isn't an issue unless it's up for sale.  The relative value of your neighbor's property isn't what makes it unaffordable.  In other words, he/she isn't going to lose his/her house because it appraises for less today than two years ago.

            And a bonus third, this is one of those cases where, for completely selfish purposes, it makes sense to be our brother's keepers.  You property value, and therefore your net worth, will be more protected in the long run if you, as Billy Joel wrote, "Rub your neck and write 'em a check" (a tax check) now than if you wait for the inevitable foreclosure/vacancy to happen.

            Of course, if your neighbor's a real son of a bitch who you've been trying to get rid of for two years anyway, this is your time.

            I am my brother's keeper, I am my sister's keeper. - President Elect Barack Obama

            by ThirstyGator on Thu Nov 13, 2008 at 09:07:22 AM PST

            [ Parent ]

          •  You will lose more than the 50K (3+ / 0-)
            Recommended by:
            alizard, Leap Year, cville townie

            When folks start defaulting in your neighborhood, you will have to deal with more than just normal market forces--your property values will plummet and you may find yourself in an upside-down mortgage that could have been avoided by helping out your jackass neighbor.

            Stephanie Dray
            of Jousting for Justice, a lefty blog with a Maryland tilt.

            by stephdray on Thu Nov 13, 2008 at 12:01:49 PM PST

            [ Parent ]

      •  The bailout was a financial PATRIOT Act (12+ / 0-)

        Congress was scared into jumping on a solution that didn't solve anything, but fulfilled some unrelated agenda (in this case, giving an assload of money to rich people).  Republicans are masters at what Homer Simpson would call a crisistunity: when a problem comes along, they're ready and waiting with a prepackaged solution that doesn't solve the problem, but advances their agenda.  The PATRIOT Act, the Iraq War, privatizing Social Security, this bailout - the bailout's not going to fix the financial markets any more than the PATRIOT Act made us safer from terrorists.

        "When three wolves and a sheep decide who to eat for lunch, that's not democracy." - John Adams

        by schroeder on Thu Nov 13, 2008 at 09:09:15 AM PST

        [ Parent ]

      •  How about a moritorium on payments (0+ / 0-)

        till the economy rebounds. Even if it shook out as the government paying the mortgages for a couble of quarters it would cost us a lot less than the $700 billion bailout.

        I'm kind of excited cause I finally got something right

        Live Free or Die --- Investigate, Impeach, Incarcerate

        by rktect on Thu Nov 13, 2008 at 01:28:46 PM PST

        [ Parent ]

    •  Scalpel instead of hatchet ... (6+ / 0-)

      The number of bankruptcies will be up to 6 million or so. Take the number of judge hours in the country and divide by 6 million people times 100 hours per bankruptcy .... it will take a long time to sort through.

      But it is a good idea though.

      "We will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term." Grantham on 2008 Crisis

      by Bronxist on Thu Nov 13, 2008 at 06:08:28 AM PST

      [ Parent ]

    •  recourse vs non-recourse loans (7+ / 0-)

      in a non-recourse loan, your statement is true.  But in recourse situations, the bank can go after the assets of the (former) homeowner, outside of the house that they were lending against, subject to some restrictions.

      you do it to yourself, you do and that's what really hurts

      by Demosthenes on Thu Nov 13, 2008 at 06:19:32 AM PST

      [ Parent ]

      •  True but... (14+ / 0-)

        In the end, if somebody is having trouble paying the mortgage, what are the odds that they have assets worth taking?  This might make sense for larger real estate speculators that had real estate as part of a larger portfolio, but for most people, if their mortgage is hosed, it's nothing but blood from a stone after that point.

        •  Two words: indentured servitude. (7+ / 0-)

          Courts can garnish future earnings.

          "McCain/Guliani Lieber You'veGotToBeJoking 2008"

          by EeDan on Thu Nov 13, 2008 at 07:25:36 AM PST

          [ Parent ]

          •  Of people who are most likely unemployed (11+ / 0-)

            Garnishing future earnings gives people no incentive to become employed.

            So... people disappear. They head out of the country, drift into the cash-only underground economy, or suicide.

            The banks still lose.

            "Be kind" - is that a religion?

            by ThatBritGuy on Thu Nov 13, 2008 at 07:33:29 AM PST

            [ Parent ]

            •  People without money have few options for (2+ / 0-)
              Recommended by:
              PsychoSavannah, raoul78

              leaving the country other than walking, and there are only two other countries you can walk to from here.  Why would you want to starve in Mexico when you can starve here?  And for certain people do "disappear" when personal burdens get too great - but at a rate of 86 thousand families per month?  That would be like trying to hide a haystack in a haystack.

              Many of those losing houses are not from the lowest economic levels, they are white collar workers unaccustomed to living 'off the grid'.  And people with wage garnishment or child support obligations still go out and find jobs when they are available.  Court judgments are attached to your social security number now, and these days it is very difficult to find a of any kind without providing a SSN.  

              "McCain/Guliani Lieber You'veGotToBeJoking 2008"

              by EeDan on Thu Nov 13, 2008 at 08:28:00 AM PST

              [ Parent ]

              •  Banks might get deficieny judgments against ... (1+ / 0-)
                Recommended by:

                these homeowners, depending on the state's anti-deficiency laws.  Even if they did get a deficiency judgment and garnished these people's wages, the bank would be unlikely to get much of anything.  The individuals are unlikely to have large enough incomes for the bank to get much out of a garnishment.  Even if they did have some income, they could file for bankruptcy.  In bankruptcy the bank would be an unsecured creditor and would get pennies on the dollar (and not very many pennies at that).  All of this ignores the transactional costs of trying to pursue the deficiency judgment and garnishment and bankruptcy proceedings.  All of these are likely to make the homeowner/mortgagee judgment proof in the bank's eyes.  

                •  I happen to live in a state with recourse laws - (3+ / 0-)

                  meaning that if you walk away from a mortgage, the bank has standing to pursue you for the difference between what you owed and what they were able to liquidate the home for.  I don't remember the code precisely, but I believe that mortgages are one class of consumer debt that is considered secured.

                  Not that we are in danger of losing our house, but I am a (normally) higher-income professional who just happens to be the victim of the current financial crisis - staff reductions due to lengthening receivable cycles.  Many people in our income bracket are in deep financial trouble because of over extension through mortgages, car loans and credit cards, and are one paycheck away from disaster.  I promise you, if you have a history of $100K+ household income, creditors will not write you off.  

                  Getting into that kind of financial trouble is the fault of the borrower, no question.  But don't jump to the conclusion that every troubled mortgage is based on $25,000 household income.

                  "McCain/Guliani Lieber You'veGotToBeJoking 2008"

                  by EeDan on Thu Nov 13, 2008 at 10:01:18 AM PST

                  [ Parent ]

              •  Once the house goes, bankrupcy becomes the remedy (5+ / 0-)

                of choice as there is nothing left to save.  The unemployed and those low wage families will not have to do Ch. 13, but will wipe out all their debts.  There go deficiency judgments and other judicial remedies.  We are, it seems, at a point that the financial and political leaders have managed to destroy the trust in the "system" and consequently destroyed any allegiance to the civil legal standards that have been so thoroughly trashed by Wall Street and our Fed.

                Patriotism may be the last refuge of scoundrels, but religion is assuredly the first.

                by StrayCat on Thu Nov 13, 2008 at 09:42:34 AM PST

                [ Parent ]

          •  Thanks to the new (8+ / 0-)

            bankruptcy legislation that went through a couple years ago.

            Speaking of, has Biden apologized for that vote, yet?


            We're not on the mountaintop yet, but we can see it, now.


            by Marc in KS on Thu Nov 13, 2008 at 08:35:10 AM PST

            [ Parent ]

        •  But these are the (2+ / 0-)
          Recommended by:
          linkage, raoul78

          ones you REALLY don't want going into default.

    •  better to reduce the interest (9+ / 0-)

      than the mortgaged amount as this may lead to market inequities if these houses go up much in value.

      Keeping the interest and payments affordable should be the goal.

      the future begins

      by zozie on Thu Nov 13, 2008 at 06:36:06 AM PST

      [ Parent ]

      •  Agreed (24+ / 0-)

        Ultimately, for the average homeowner, affordability of the monthly payment is the critical element.  So long as a homeowner can continue to pay the mortgage it usually makes sense for them to just keep paying rather than selling at a loss or walking away from it.  Even if your home is pretty significantly underwater, you can still live there, so provided you can afford it, it probably makes sense to do so.

        There are some people who got ridiculously low introductory interest rates and those people will have to take the hit.  There's just no way around it.  But for people who got loans that have floated up a couple percent through the natural market changes, it would be worth it for the government to help them refinance at their original rate and just take the hit for that 1-2%.  

        Doing this would help people keep their homes and keep the market glut from getting worse.  It would also give those homeowners greater confidence and make them feel more comfortable spending money.  So this would have multiple stimulus effects on the economy.

        •  agreed (6+ / 0-)

          wholesale "let's re-evaluate mortgages" would invite abuse.  why should your mortgage price go down just becuase the market went wonky?  eliminiating ARMs and setting fixed low interest would be the best stabilizer.

          "Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of the bowers of paradise." Thomas Paine, Common Sense

          by Cedwyn on Thu Nov 13, 2008 at 07:20:17 AM PST

          [ Parent ]

          •   why should your mortgage price go down?? (19+ / 0-)

            perhaps because the bank sold you on a ridiculous, fraudulent (in the moral, not the legal sense) instrument.  Lets say you make $35,000 / year and you go into the local bank you have been depositing at for 10 years to get a loan for a starter home.  You want $70,000 and expect to pay it back over 30 years.  You friendly  neighborhood loan officer tells you you can afford $250,000 over 15 years with this great new thing called an ARM!  You can not only get a bigger house, you can roll a new car and a big screen TV you want and a computer you think you need into it!!!  

            What do you do?  You trust that loan officer and take the money.  Then the rate jumps from 1% to 15% after 4 years and you are deeply, deeply boned.  That new car has depreciated 80%, and that "new" computer is totally obsolete, unsellable, has literally 0 value.  What did you do wrong?  You listened to the loan officer, the PROFESSIONAL, and took his advice.  You just got scammed by your bank, which then sold your loan to a company with new home offices in Kuala Lumpur, and no scruples about saying "pay me, bitch!"

            This disaster is brought to us by the "banking industry", I say let them feel the pain.  Reorganize EVERY homeloan in the US to a maximum of 9% interest, and completely refigure all payments based on that maximum rate.  Any payments over that rate represent BALANCE payouts, including all fees, penalties, etc.  If that makes banks go under, tough nuts.  That's what god created Credit Unions for.  

            The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

            by TheGryphon on Thu Nov 13, 2008 at 07:39:27 AM PST

            [ Parent ]

            •  But the other effect was that. . . (6+ / 0-)

              . . . in some areas houses which should have been "worth" $100,000 became "worth" $250,000 because so many people were being allowed to get sucked into these scams, pushing up home "values".

              There are whole subdivisions that shouldn't be there.

              The "cheap money" that's been floating around distorted prices directly, since for the same monthly mortgage payment, you'd be "affording" a higher home price. In the past there's been a tight relationship between interest rates and home prices - interest rates go up, home prices come down; interest rates go down, home prices go up. So, the "value" of all these homes got inflated by the low interest rates, but the banks were getting a smaller cut, so they tried all kinds of things to get people to borrow even more - the 0% down loans, equity lines up to (or beyond) the inflated "value" of the property, etc.


              "Have nothing in your houses that you do not know to be useful or believe to be beautiful." -William Morris

              by Robespierrette on Thu Nov 13, 2008 at 08:23:46 AM PST

              [ Parent ]

            •  And Why Should You Profit? (10+ / 0-)

              Your mortgage gets renegotiated, possibly lowered, and you reap a windfall when (if?) prices rise again.  What a deal!  Where do I sign up?  As a taxpayer bailing these mortgages (and financial institutions) out, I expect a piece of the upside so my grandchildren (at least great-grandchildren?) might have a life without the burden of paying off the debt.  There needs to be a stipulation that upon sale of a renegotiated asset, some amount is due the taxpayer, otherwise, call the repo man.

              Why the hell is it that when the slightest whiff of inflation is smelled, monetary policy takes hold immediately?  Yet housing was allowed to inflate beyond any ties to the reality of median wages for decades and not even a collective yawn is heard?  We could have put the EXACT same controls on mortgage interest as the Fed uses for monetary policy to tie home prices to median wage, no?  But instead we greedily allowed the rape of first time buyers and equity loan suckers by the banks and wall street who plundered the wealth.

              Basically, every first time home buyer for the last decade and a half is screwed for 30 years.  My parents struggled to buy a house in 1968 for $120 a month.  By 1983, $120 a month was a piss in the bucket and my family was able to use the money on education, recreation, basically some semblance of life beyond mortgage slavery.  Will my monthly nut on a 20% down $400,000 rotting piece of shit turn into a piss in the bucket in 2015?  I'm betting the pain of that monthly payment will never decrease, providing we don't lose it all between now and then.

              •  that is actually a very useful suggestion (9+ / 0-)

                some sort of stipulation that that homeowner must STAY in the home for the length of the mortgage, or owe a penalty to the government in return for the bailout.  Share the pain a little bit.  But keep in mind, the banks deserve the VAST LION'S SHARE of the agony.  Their greed and lack of scruples is the root of the problem.

                The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

                by TheGryphon on Thu Nov 13, 2008 at 08:33:40 AM PST

                [ Parent ]

                •  So maybe ... (2+ / 0-)
                  Recommended by:
                  StrayCat, raoul78

                  The mortgage reorganization docs include a stipulation that basis resets at the amount of the new loan and that a cap gains tax of say, 10, maybe 15% IN ADDITION to the cap gains rate at the time of sale, and that all cap gains will be applied regardless of any exemption.  Maybe void some portion of that tax if the principle is satisfied before a sale?  Something like that?  I'd be for it.  Keep people in their homes - now and for a long time to come.

                  I am my brother's keeper, I am my sister's keeper. - President Elect Barack Obama

                  by ThirstyGator on Thu Nov 13, 2008 at 09:21:23 AM PST

                  [ Parent ]

                  •  Whatever Prevents Gaming the System (1+ / 0-)
                    Recommended by:

                    I am irate that someone acting like a child in a candy store with debt gets ANY free ride while responsible others watch every penny they spend, screw that!  If ANYONE gets a free ride out of these bailout deals for being an asshole, then we're wasting our time and money, might as well throw the entire economy into the garbage now instead of later.  Why is Congress incapable of even the slightest competence in preventing its constituents from being robbed?

                    The depth punitive retribution must know no bounds when it comes from ANYONE gaming any piece of this shit bailout.  Taxpayer bailout money MUST be recouped before it can be cashed in and the money taken and run away with.

                    Allowing an exception when repaying a lowered principal will promote refinancing as soon as it becomes possible.  When that happens, the taxpayer subsidy somehow needs to be recouped.

                    If a house is sold to anyone for any price, e.g. your kids for $100, the taxpayer subsidy must also be recouped.

                    •  Absolutely (1+ / 0-)
                      Recommended by:

                      If the government steps in to help prevent foreclosure by guaranteeing a lower payment based on current values and a fixed interest then a lien should be put against the house to recoup any future increase in value. After all the owner is getting that value up front.

                      That would ensure that people like me who are able to pay thier mortgage don't finance these people getting as much profit from failure to be able to pay. It keeps them in thier home without rewarding them over those who helped them.

                      I can go along with that. Otherwise the smart thing for me to do is let my mortgage falter too while I tuck away money to help defray the cost of stopping those in  danger of foreclosure from being forced out.

            •  a little too simple (5+ / 0-)

              Incompetence, greed, and stupidity are just as prevalent among loan customers as lenders.  But, the truly fraudulent and unprincipled need special attention.

            •  preach ON brother (or sister)! (3+ / 0-)
              Recommended by:
              mmacdDE, StrayCat, raoul78

              The days of all of us quietly sitting by and trying to do the "right" thing while corporations just keep floating along (or getting bailed out at OUR expense) need to be over.

              People over corporations.  That's how it should be.  That's not how it is right now.

              I am my brother's keeper, I am my sister's keeper. - President Elect Barack Obama

              by ThirstyGator on Thu Nov 13, 2008 at 09:14:45 AM PST

              [ Parent ]

            •  so someone bought the house at an (1+ / 0-)
              Recommended by:

              inflated value.  but why should their price (mortgage payment) on it go down, just becauase that price deflates?  i can't go buy gold and then whinge when it's price falls next week.  

              "Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of the bowers of paradise." Thomas Paine, Common Sense

              by Cedwyn on Thu Nov 13, 2008 at 11:07:57 AM PST

              [ Parent ]

          •  The market going wonky is exactly (0+ / 0-)

            the reason the principle should be adjusted in appropriate cases.  The commercial banks and the investment banks are having their principle readjusted, but under different names.  If everybody gets a reset, then the country and well as the individuals come out with some element of survivability.

            Patriotism may be the last refuge of scoundrels, but religion is assuredly the first.

            by StrayCat on Thu Nov 13, 2008 at 09:46:38 AM PST

            [ Parent ]

        •  Also doesn't address the issue of people with (3+ / 0-)
          Recommended by:
          linkage, Cassandra Waites, raoul78

          negative amortization loans.  

          "McCain/Guliani Lieber You'veGotToBeJoking 2008"

          by EeDan on Thu Nov 13, 2008 at 07:27:36 AM PST

          [ Parent ]

    •  Nearly 1 in 5 mortgages have negative equity (10+ / 0-)

      are we re-writing all of them, or only those currently in the process of foreclosure?  If it's only those currently in foreclosure, what do you think would happen to mortgage delinquency rates when this plan is announced?  

      How do we determine what the fair-market value (auction-price) of the home is?  

      Take a look at Irvine Housing Blog and read some of the refinancing stories.  Lets say two neighbors buy homes in 2005 for $500,000.  One dutifully pays down their loan as fast as possible and is now at $400,000 balance (let's assume that's also the current value of the home).  Neighbor B did cash-out refi's at every opportunity, using the money for whatever (fancy cars and vacations, or maybe medical bills, who knows) and currently owes $800,000 on the home that's worth only $400,000.  How do you convince the first neighbor this is a good plan?  

      As someone already mentioned, what happens after we've reduced the balance to $400,00 and prices recover and the homes are once again worth $500,000 (could be a while for sure)?  

      •  The inequities ... (12+ / 0-)

        that are implicit and explicit in the overall situation are innumerable. Basically, we have a bailout process that is, surprise/surprise, focused on rewarding the 'irresponsible' in terms of business that were 'responding to the market'.  This is happening at very large scale and, well, could be on the 'small scale' as well.

        There are people who were/are highly abusive, as per the scenario that you outlined. There are also those who were, basically, abused and confused and connived into getting over their heads. I am comfortable with taking the financial hit for figuring out to help the second and pained that the reality is that most of the resources (at the national / large-scale and local level) will actually be going into the pockets of the first.

      •  And how do you convince Renter Q (21+ / 0-)

        that it's a good idea to help pay for Neighbor B to stay in his luxury McMansion?

        Not to mention Neighbors C, D, and E, who weren't lucky enough to stay in their houses long enough to take advantage of the program and are now competing with Q for limited rental units?

        Or Kid J, who just graduated from college and can't afford to live anywhere but with his parents despite having a very nice entry-level job, because C, D, E, and Q are taking up all the rental units and B is propping up real estate prices by staying put?

        During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

        by kyril on Thu Nov 13, 2008 at 06:58:57 AM PST

        [ Parent ]

        •  the alternative is (7+ / 0-)

          to have Neighbor B's Mcmansion sit empty, perhaps home to a quaint new crack house or squatted in by the new class of homeless the policy of doing nothing creates.  I think Renter Q, and Neighbors C,D, and E would rather have Neighbor B refinance his loan at a payable level than have the above happen.  It is, after all, more in their interest to have an occupied home on their block than an empty, neglected property running down their values.  Even the renter benefits somewhat in this scenario.

          Oh, and Kid J will still have no trouble finding a place to live, rental property is still very widely available due to overbuilding during the bubble.

          The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

          by TheGryphon on Thu Nov 13, 2008 at 07:44:14 AM PST

          [ Parent ]

          •  uh huh (1+ / 0-)
            Recommended by:
            In her own Voice

            to have Neighbor B's Mcmansion sit empty, perhaps home to a quaint new crack house or squatted in by the new class of homeless the policy of doing nothing creates

            Sounds like blackmail to me.

          •  Oh, there will be rental units... (1+ / 0-)
            Recommended by:
            Cassandra Waites

            because landlords base your rent-worthiness on your credit score.

            If you have been forced out of a house for just about any reason, chances are your credit score looks kind of like mine -- and you may have a bonus bankruptcy to boot!

            No one is going to rent to you.

            I'm not sure if there are enough parents/children/siblings to take us all in, but there will be vacancies as long as landlords continue to rely on the bogus and discredited FICO scores to determine who is a good tenant.

            Not only that, if you don't have a job, no one is going to rent to you anyway. Homelessness is going to rise all across the country.

            "It always seems impossible until it's done." - Nelson Mandela

            by Brooke In Seattle on Thu Nov 13, 2008 at 11:48:05 AM PST

            [ Parent ]

        •  In my neighborhood a $500,000 home (4+ / 0-)

          a year ago was a 1800 sq ft 1920s house, nice but hardly a luxury McMansion which would have been priced above a million.

          The bubble pushed prices way up, beyond rational increases.

          There is a lot of rental property around now, in part because people have that second house, left from their move upscale, that they just can't sell.

      •  A Sale/Inheritance Stipulation (3+ / 0-)
        Recommended by:
        StrayCat, raoul78, In her own Voice

        The credit fool has zero ability to obtain another equity loan and a piece of whatever equity is available upon sale or inheritance is owned by the taxpayers.

        Every mortgage has a stipulation that the property must be maintained and that must be enforced more dutifully in the case of a renegotiated property.

        Congress should have done the same thing with the lying thieving piece of shit institutions they are bailing out right now, socialism be damned.

        •  But they didn't, they gave away the store to (1+ / 0-)
          Recommended by:

          their equity stakeholders.  Now it should be the peoples' turn.  If the Wall Street and other financial thieves get skinned really good, maybe their progeny will think twice before creating another ponzi scam.

          Patriotism may be the last refuge of scoundrels, but religion is assuredly the first.

          by StrayCat on Thu Nov 13, 2008 at 09:52:44 AM PST

          [ Parent ]

      •  What the first is paying for... (4+ / 0-) to wake up and have the economy still be here tomorrow.

        When people realize that they are screwed and can't get out of a bad situation (debt), they start to do extremely desperate, stupid and destructive things.  If the second neighbor burns his house down to try to get out of paying the mortgage and get the insurance, the first neighbor's house could catch fire too.  The first neighbor may not want to contribute to the bailout of the second, but it's pretty important that both neighbors realize we're all in this economy together.  If it collapses, we'll all be hungry/homeless/etc.

        •  It's funny how everyone wants to pull together (0+ / 0-)

          NOW, but when this was happening on a smaller scale (job losses, home losses, general personal economic downturn), no one gave a damn about what was happening to some of us.

          We were told to buck up and stop whining, and to pull ourselves up by our bootstraps because we weren't going to get any help.

          This has been going on for almost three years now. The only reason people are starting to complain is because it's starting to happen to them.

          "It always seems impossible until it's done." - Nelson Mandela

          by Brooke In Seattle on Thu Nov 13, 2008 at 11:55:22 AM PST

          [ Parent ]

      •  Lenders could (1+ / 0-)
        Recommended by:

        be forced to take a no (or low) interest second mortgage.  That would have to be settled when the property is sold.  But this solution might take a long time to work out.  

      •  Rewrite them all, every mortgage loan entered (1+ / 0-)
        Recommended by:

        into after (say) January 2005.  

        Patriotism may be the last refuge of scoundrels, but religion is assuredly the first.

        by StrayCat on Thu Nov 13, 2008 at 09:49:49 AM PST

        [ Parent ]

    •  A Workout is What's Needed for Homeowners (4+ / 0-)
      Recommended by:
      beans, linkage, edbb, raoul78

      What homeowners who are in danger of defaulting need is a workout plan whereby their mortgages are newly written to be 10 year mortgages amortized over 50-75 years. No payment of euity will be possible but it allows the homeowner to stay in their home and puts a floor under the housing market which allows the homeowner who doesnt have problems to not lose any additional equity.

      If people have credit card problems; as long as they can afford the additional payment; they should be able to roll their credit card balances into the new mortgage but with the legal stipulation they must not be able to have credit cards again but only debit cards. One of the reasons France is in much better shape than the US or UK is the fact 99% of all French people use debit cards and their individual balance sheets are in much better order.

      •  Another reason France is in much better shape ... (3+ / 0-)

        and a BIGGER reason ... is that in France education and health care are not opportunities for get-rich-quick corporate profits.

        I am my brother's keeper, I am my sister's keeper. - President Elect Barack Obama

        by ThirstyGator on Thu Nov 13, 2008 at 09:26:49 AM PST

        [ Parent ]

      •  Putting a floor under the housing market (1+ / 0-)
        Recommended by:

        will ensure many vacant homes and ensure that young adults will not be able to afford to buy a home for 20 years or more.

        This will all continue to be a mess until both of the following happen:

        A) The crazy option ARMs all shake out of the system
        B) Home prices fall enough to match what workers can afford to pay for them

        8/29 changed everything Your political compass Economic Left/Right: -6.13 Social Libertarian/Authoritarian: -8.10

        by wsexson on Thu Nov 13, 2008 at 01:24:01 PM PST

        [ Parent ]

    •  Irvine Housing Blog has a post on this issue (0+ / 0-)
    •  Problem is Price Bubble not "Supply" (7+ / 0-)

      We (our government) should NOT be propping up overpriced housing valuations, and bailing out banks that "enabled" housing inflation.  

      As almost anybody who has looked at buying a house in the last 10 years knows, the problem is they are "too expensive."  And that problem is everywhere.  Not just in the high forclosure areas.  Easy money, foreign money flow, immigration rates and our rapid population growth have all pushed American real estate prices higher than the abilities of average Americans to afford it.  

      Housing prices NEED to come down.  Obviously there are many people who will be getting hurt by this reality.  There are many unfortunate Americans who will lose the family home.  But a huge percentage of foreclosures are local real estate speculators who don't deserve a lot of sympathy for parlaying their "equities" into higher housing costs for all of us.

      In the long run, there is simply no easy way to stop housing prices from adjusting to the ability of average Americans to afford them.  And that is good thing.  

      Perhaps we should be concentrating on helping Americans find good affordable housing, rather than frantically attempting to prop up unsustainable (and socially damaging) high housing costs.

    •  The problem is (0+ / 0-)

      The originator - what I think you mean by the lender -  doesn't hold the loan. In many cases in foreclosure it is the loan servicer that is taking you there. They are the ones that collect the payments, pay the taxes and insurance to protect the investors investment and pass the payment along to the investors. The servicer would be the lien holder.

      The problem with modifying the loans in any way is that they are part of a block of mortgages.

      Now as the diarist notes these blocks of mortgages are packaged as a bond. What the investors on the other side of the package are buying is not the mortgages - they have no legal interest in the property whatsoever - but a future cash flow. This cash flow depends on the regular flow of payments though the amount of interest the investors are getting should be less than the interest amount on the mortgages - to cover servicer fees (that's how they make their money) and some amount of payment disruption and a few foreclosures and early payments (a foreclosure is also an early payment) based on statistical risk models.

      There are three ways in which these packages can default. The first is if more than the expected amount go into foreclosure or if they go into foreclosure and the sales of the foreclosed homes sell below the outstanding principal amount. This is where upside down mortgages have a powerful impact on the underlying securities. The second situation is more than the expected number of people pay off the mortgage early. This can happen if mortgage rates drop or prices of homes drop and people sell to buy a different home. Realize, of course, that if things were good for the mortgage payers economically this same problem we are seeing today could also have occurred. The third way is a combination of the previous two.

      Regardless of the situation what happens is that the servicer would get a lump sum principal amount but there would be no more future interest payments. Now that is a problem. They need to find an investment vehicle to put that lump sum into that would return at least the interest rate needed to pay the downstream investors. The investors don't know about the early payoffs nor do they care. They expect to be paid.

      To protect themselves the servicer and the investors have all purchased "insurance" on the future cash flows. This "insurance" is in the form of credit default swaps. Now in theory, if enough early payments occur that would generate a claim by the servicer against their "insurer". The big question is whether the "insurer" can actually pay the claim. Since the "insurers" have bet the farm that many defaults are unlikely they may not have the funds to pay the claim - or the funds are tied up in assets that take time to liquidate (and today that is nearly impossible). At any rate, if the insurer can't pay then a credit "event" occurs and what happens is the investors "insurance" policies kick in. They too are expecting to have their claims paid.

      But what people need to know is that a mortgage with a 100,000 principal will pay out around 180,000 in interest over 30 years. So it is a 280,000 cash flow not a 100,000 loan. If someone defaults 2 years into a 30 year loan like this there would be a cash flow due of about 262,000. That is a hefty claim against a 100,000 asset. Of course, the real peachy thing about this "insurance" is that anyone can buy it - not just the investors in that future cash flow. I, for example, could "bet" that the cash flow will default and if I were to "win" I would collect my "insurance" claim even though I am not a party to any of it.

      This is what is blowing up everything to enormous proportions. In order to pay the "claims" the "insurers" were dumping assets. The more they were selling the lower and lower the prices they could get for their assets. It was a case of diminishing returns until they couldn't actually sell any of them anymore.

      So adjusting a loan for interest rate - providing it is not more than say 1-2 percent - might work. Reducing the principal is probably impossible unless  it is say 5-10 percent. None of those kinds of adjustments will make too much of a difference. Unless the servicers could convince the downstream investors to accept it without triggering a credit "event". The contracts would have to be re-written and the investors would surely want a fee (penalty) for doing so - they are greedy afterall. And there will be investors that would rather take their chances on their "insurance" claim.

      Also, keep in mind that the servicers really would like to foreclose on the homes that have been paid on for longer that have equity and the principal is 30 or more percent below the existing market value. They will take that house in a heartbeat because that one they can sell for a "profit" and use that to offset some of the others that maybe upside down that went under. This is why in the Cleveland area many homes that had been paid on for twenty years were dumped into foreclosure so that they could offset the mess in Florida, California, Nevada, etc.

      This is why even the prime mortgage bundles are at risk and why for the person that played by the rules and faithfully made their payments for 20 years could suddenly find themselves out of a house after 2 missed payments while the person that lied about their income or bought a house beyond their means could stay in there - not paying - for months at a time. The servicers don't care where they get the money from as long as they can still pay the downstream investors.

      Trying to work this problem within the existing system isn't going to work. It has already collapsed to the point of being both illiquid and insolvent at the same time. Something more drastic will need to be done. I say that because the "optimists" that are beyond this system really do believe that the bottom is going to occur any day now and there will be sunny skies in their world in almost no time. That isn't going to happen.

      I have some ideas for dealing with the debt mess but since I have already been long-winded I should put that in a diary of my own.

  •  I want to end the war. (66+ / 0-)

    Not all gov. spending provides equal stimulusI think that the war spending is the gorilla in the room: not only is it ten billion a month, but it is ten B a month that has a minimal multiplier.

    Imagine that same ten billion a month going to re-build bridges. That makes jobs, good jobs, profits and you have bridges that contribute to transportation and future growth.  

    Or buying up land rights for high speed rail.  People, land is cheap now.  Now's the time to take it off people's hands.  How's that for helping liquidity?

    Moreover, the war is a drain on the energies of the government and the country....sending people overseas to babysit some other country leaves famil.ies and communities drained of their best.

  •  Thanks as always for your great analysis. nt (9+ / 0-)
  •  Don't hate me but there is no word irregardless (25+ / 0-)

    I know people hate to be corrected on blogs. And for the most part I agree we shouldn't nitpick about grammar and spelling but that one really gets me so I couldn't help myself.

    Look it up. It's improper and there's no need for it. Use regardless instead.

    That said, I do really enjoy your diaries. I believe they are very well written and understandable.

  •  I want to be hopeful, but (29+ / 0-)

    I read Roubini's Nov 11th post last night -- which is free during this crisis -- and, well, the worst is yet to come.

    # The U.S. will experience its most severe recession since WWII, much worse and longer and deeper than even the 1974-75 and 1980-82 recessions. The recession will continue until at least the end of 2009 for a cumulative GDP drop of over 4%; the unemployment rate will likely reach 9%. The US consumer is shopped out saving less and debt burdened and now faltering: this will be the worst consumer recession in decades. # The prospect of a short and shallow 6-8 months V-shaped recession is out of the window; a U-shaped 18-24 months recession is now a certainty and the probability of a worse multi-year L-shaped recession (as in Japan in the 1990s) is still small but rising. Even if the economy were to exit a recession by the end of 2009 the recovery could be so weak because of the impairment of the financial system and of the credit mechanism (i.e. a growth rate of 1-1.5% for a while well below the potential of 2.5-2.75%) that it may feel like a recession even if the economy is technically out of the recession. # Obama will inherit and economic and financial mess worse than anything the U.S. has faced in decades: the most severe recession in 50 years; the worst financial and banking crisis since the Great Depression; a ballooning fiscal deficit that may be as high as a trillion dollar in 2009 and 2010; a huge current account deficit; a financial system that is in a severe crisis and where deleveraging is still occurring at a very rapid pace, thus causing a worsening of the credit crunch; a household sector where millions of households are insolvent, into negative equity territory and on the verge of losing their homes; a serious risk of deflation as the slack in goods, labor and commodity markets becomes deeper; the risk that we will end in a deflationary liquidity trap as the Fed is fast approaching the zero-bound constraint for the Fed Funds rate; the risk of a severe debt deflation as the real value of nominal liabilities will rise given price deflation while the value of financial assets is still plunging.

    I am at an absolute loss as to how to plan for my future and that of my kids, 2 of whom are in college.

    I love my new President.

    by donailin on Thu Nov 13, 2008 at 05:55:57 AM PST

    •  Me, too. So let's mobilize. (9+ / 0-)

      I am at an absolute loss as to how to plan for my future and that of my kids, 2 of whom are in college.

      American voters just worked their asses off and changed history, from the bottom up. That same energy could go into a viable Plan.

      So whose got The Plan?

      ...there's a rose in the fisted glove and the eagle flies with the dove - Stephen Stills

      by NuttyProf on Thu Nov 13, 2008 at 06:10:43 AM PST

      [ Parent ]

    •  crazy-land plans (0+ / 0-)

      here are a list, depending on if you think you can predict how severe and how soon the big implosion happens:

      1.  Invest in a self-reliance as much as practical.  Think bunker, canned food, shotguns, etc.  Perhaps grow your own food if you think you are up to it, and/or set up your house to get powered while off the grid.  This strategy is for if you think the shit is going to hit the fan, but you have very little confidence in your ability to time it.
      1.  Buy as much stuff as possible on credit and try to disappear.  I am not an expert on either getting as much credit as possible or disappearing.  The idea behind this is that you think that the ability of creditors to go after defaulting debtors is going to collapse before you are eventually found.

      you do it to yourself, you do and that's what really hurts

      by Demosthenes on Thu Nov 13, 2008 at 06:29:47 AM PST

      [ Parent ]

      •  tinfoilness (8+ / 0-)
        1. I live in a rented condo, so that's out. Maybe we could plow under the parking lot and the front lawn.
        1. I've actually thought about this. I have (and I'm not being a dick, I just have really good credit) about $100,000 available across 3-4 credit cards and a balance of a few grand @ 0%. What's to keep me from maxing those fuckers out and disappearing to Argentina or someplace like that? Honor and integrity, I suppose, but it may come to that assuming my lines of credit aren't cut off like has happened to so many others.

        I mean, why the hell should I care about a measley 100grand when the Fed can't shovel billions at the pigmen fast enough? Fuck them.

        me talk pretty one day.

        by mudskipper on Thu Nov 13, 2008 at 06:46:20 AM PST

        [ Parent ]

        •  I belong to (3+ / 0-)
          Recommended by:
          kyril, John Shade, johngoes

          and the creditors have safeguards in place to make sure that you can't do what you just wrote.

          Your balances are reported every month depending on the  due date and if one shows any abnormal fluctuation in your balance, an alert goes off and credit is cut.

          For instance if you never use more than 10 percent of your available credit and then ring that baby up to 90 percent, an across the board internal alert is initiated and your fico drops dramatically which in turn results in decreased credit lines across the board.

          However if you use 90 percent of your credit line every month and pay it of every month than you can get away with it. Maybe.

          Your credit history doesn't lie, though.

          I love my new President.

          by donailin on Thu Nov 13, 2008 at 06:54:33 AM PST

          [ Parent ]

          •  I think that approach is overstepping its bounds (0+ / 0-)


            I had a check refused at a store not because of insufficient funds, but because it didn't fit my "usual check-writing pattern."

            Well duh.  I had written an average of 2-3 checks per month for years and decided I was using my debit cart too much.  But it seems asinine to me that a store would sign up for a system that'd turn down a method of payment with my signature, micro printing, my driver's license number on it, but gladly takes credit cards.

            "The truth will set you free. But not until it is finished with you." - David Foster Wallace

            by John Shade on Thu Nov 13, 2008 at 08:39:02 AM PST

            [ Parent ]

        •  its probably easier to disappear inside america (1+ / 0-)
          Recommended by:

          although you have to keep into account the relative stability and the ability to, as much as possible, make ends meet with unskilled labor and no documentation.

          Also, there is going to be more records of you if you leave the country than if you simply leave town one night and never return, and some anonymous person pops up in some other city.

          you do it to yourself, you do and that's what really hurts

          by Demosthenes on Thu Nov 13, 2008 at 06:56:11 AM PST

          [ Parent ]

      •  Hard to disappear while growing one's own food, (0+ / 0-)

        no?  I was with you on point one but you lost me on #2.

      •  I don't know about crazy-land ... (2+ / 0-)
        Recommended by:
        ScienceMom, PsychoSavannah

        ... but in garden-variety-middle-class-land, i just don't know what to do right now.  It's a very strange place to be because a lifetime of frugality and savings actually does give me a few options:

        I can pay down the house a little bit (but that would cut into savings);
        I can replace the Subaru which is on its "last wheels" with something new and shiny and fuel efficient.

        But does it make sense to buy right now, or does the possibility of job losses in the near term make it impossible to do anything except guard the nest egg more fiercely than ever?

        I just don't know what to do or where to turn.  On the one hand, i feel so fortunate to be fairly stable, at least for the moment.  I really do live in constant gratitude for having gotten to this place.  But on the other hand, fear that an economic tsunami will sweep me into the blackness grips me.

        I do feel as if i've gotten to this place in spite of a system that seems to penalize people like me while it rewards corruption and exploitation.  Maybe that's a selfish perspective.

        •  Why, exactly, (0+ / 0-)

          do you call that perspective "selfish"? I'd call it accurate.

        •  I share selfish sentiments (1+ / 0-)
          Recommended by:

          I've been waiting for years for this to happen.  Many years ago I happed on a site that discussed "The Coming Economic Depression", and freaked out.  Then read about peak oil and freaked out.  Then read much more about Global Warming and freaked out... was assigned to the City emergency plan (pandemic flu is big concern yet) and freaked out.  Then I said to myself, "get a grip!, you can only die once... and that sort of thing.  I mean, what's the worst that can happen?  I decided to do what I could, including TALK about it, even to, and especially to, low information people. (I live in friggin TN)  And I've been trying to make smart choices - bought a hybrid in 2004, downsized to a bungalow near work and upgraded its efficiency and greened it up, learned how to do one of those "Victory Gardens", compost and recycle, bought a scooter and a bicycle, bought a soapstone fireplace, and eventually want to get off the grid with solar panels.  I feel a bit selfish and even smug sometimes, because I have very little debt, gas prices do not bother me, fuel costs do not affect me, and I have a great garden, but it was fear and facing reality that got me to this place.  I wish I could convince more people to do something, but many people think I have been wearing a tinfoil hat (up to now).  I don't know, prepare for the worst and hope for the best... and try to help others do as well. We, as a nation, waste so much stuff. There is so much low hanging fruit... In a way I'm glad the economy is slowing down so we pause and think conservation and about the schtuff we waste our resources making and retool. Less carbons and all that. And although I have savings, I have to wonder if any size nest egg will help in some scenerios; it's the things that money buys that make a difference.  You can't digest money, and it doesn't keep the house warm.  

        •  don't worry (0+ / 0-)

          ... there's always a bright side. We will be forced to learn exactly what our country lacks: compassion, slowing down, cooperation, community and so on. If things aren't so bad, good. If things get really bad, good. Just embrace life either way.

          If things get bad, people will be in the same boat and by getting together with others we will develop collective wisdom to replace the most spectacular case of mass delusion in history, i.e., the current edition of "the American Dream" which is actually the "American Hallucination".

        •  The two biggest economic threats (0+ / 0-)

          First off is great depression, version 2.0

          The biggest threat in this scenario is wage deflation coupled with an anti-debtor climate, coupled with staggering interest payments on the debt issued for the "bailout".  tl;dr version is debt slavery for a generation.  The way out is to hopefully not hold much debt personally, and move out of the US.  Drastic, yes, but the debt situation in the US leaves it with little options.

          Second threat is Wiemar Republic-style hyperinflation.  Answer is to not have everything you own be dollar-denominated, and to own guns in case the shit hits the fan.

          you do it to yourself, you do and that's what really hurts

          by Demosthenes on Thu Nov 13, 2008 at 04:33:57 PM PST

          [ Parent ]

    •  This all sounds so... temporary and (4+ / 0-)
      Recommended by:
      JTML, beans, AnnCetera, kyril

      relatively minor, a couple of years' worth of not buying SUVs and plasma TVs and new computers for the whole family. But as gjohnsit's recommended diary points out, international trade and shipping is grinding to a halt while grain and other commodities rot at the docks - nothing's moving because the banks no longer trust each other.

      In this hemisphere our growing season is over. When people begin starving, all bets are off.

      Maybe people who live in glass houses shouldn't throw bibles.

      by Joy Busey on Thu Nov 13, 2008 at 06:58:10 AM PST

      [ Parent ]

      •  Why wouldn't we eat better? (0+ / 0-)

        If they can't sell it overseas, then we should get it cheaper here.

        "Democrats can't do any worse than them." O

        by relentless on Thu Nov 13, 2008 at 07:12:06 AM PST

        [ Parent ]

        •  Because it's already committed... (6+ / 0-)

 other markets. The ships don't move, it doesn't get where it's going, and it doesn't get processed, packaged and handed out free to us. It rots.

          Now, grain isn't that big an issue here. None of us likes the idea of trying to live on genetically engineered corn mush. But when the letters of credit guaranteeing the cost of shipping are no longer honored, internal shipping suffers as well. I live where I can literally count the freight trains crossing the continental divide in a day (Norfolk-Southern/CSX), and see what they're moving. Traffic is currently half the usual, each day there are fewer trains, fewer boxcars and tankers. Coal is (surprising to me, since by now it's half the traffic, in mile-long trains) not moving at all.

          D.C. is arguing about how much loot to give those who caused the mess, out in the real world things are becoming quite dire. When the cargo doesn't move, the trucks go idle, your grocery store starts emptying out. After Ike my region went three solid weeks without gasoline/diesel. Schools, factories and businesses had to shut down. People were hiking miles to the grocery, it emptied fast.

          That will become 'normal' and it won't be pretty. Nobody out here cares about Goldman-Sachs or AIG, whether our grandchildren's futures are buying bad debts or equity stakes. Soon, we're all going to have better things to worry about.

          Maybe people who live in glass houses shouldn't throw bibles.

          by Joy Busey on Thu Nov 13, 2008 at 07:31:49 AM PST

          [ Parent ]

          •  Interesting (0+ / 0-)

            Ship traffic is down a bit in Seattle and Tacoma though given how busy the past few years have been at the ports it is still pretty busy. Freight trains are still moving and our rail corridors seem as congested as ever.

            One interesting tidbit is I haven't seen any ships calling at the grain terminals in Seattle or Tacoma. According to the ports there are no ships scheduled either. For the past few years there has been a conga line of ships waiting for a grain terminal berth at both ports, over the last year traffic seems to have dropped to next to nothing.

      •  We can make it to the next growing season. (0+ / 0-)

        Then we better use it wisely.

      •  Winter wheat? (0+ / 0-)

        Among other things?

        I live in Texas, and they are still growing crops here in November.

        I'm not sure where you are, but the fields are not all lying fallow around here.

        "It always seems impossible until it's done." - Nelson Mandela

        by Brooke In Seattle on Thu Nov 13, 2008 at 01:39:26 PM PST

        [ Parent ]

  •  Should have incentive to buy existing homes (5+ / 0-)

    There is still a lot of $$$ going to new constuction.  Almost crazy - one way the Fed could encourage people to buy existing homes over building new ones is to add an extra incentive.

    Problem is constrution unions will go crazy with this - our team caters to unions so don't expect this although I think it would help.

    The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

    by ctexrep on Thu Nov 13, 2008 at 05:56:53 AM PST

  •  Why not tax the hell out of the wealthy? (25+ / 0-)

    Think of it as reverse-supply-side economics.  They don't need any more Bentleys, and we need a stimulus plan for the average man to get out of this hole.

    •  We need to respect (3+ / 0-)
      Recommended by:
      Sychotic1, donailin, beans

      Minority rights.

      It may be tempting and they should pay more but be reasonable - the ultra-wealthy are outnumbered something like 500 to 1 - that's not fair representation to attack these people - we live in a free country and I want it to stay that way.

      The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

      by ctexrep on Thu Nov 13, 2008 at 06:05:10 AM PST

      [ Parent ]

      •  hahahahahaha (13+ / 0-)

        they have the right to vote, speak freely, have a fair trial, etc., but the right to hold onto wealth? GMAFB.

        surf putah, your friendly neighborhood central valley samizdat

        by wu ming on Thu Nov 13, 2008 at 06:08:12 AM PST

        [ Parent ]

        •  They have more of a right to (1+ / 0-)
          Recommended by:
          Reed Richards

          hold onto it, than you do to take it.

          The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

          by ctexrep on Thu Nov 13, 2008 at 06:13:00 AM PST

          [ Parent ]

          •  nope (15+ / 0-)

            taxation's been a right of governments for thousands of years. there is no right to be wealthy. read the constitution. nothing there about sustaining the rich in their luxury, but mentions something about both taxation and the importance of providing for the general welfare.

            maybe in your imaginary country, the rich are a sacrosanct aristocracy, but not in this one.

            surf putah, your friendly neighborhood central valley samizdat

            by wu ming on Thu Nov 13, 2008 at 06:50:33 AM PST

            [ Parent ]

          •  Elections have consequences (12+ / 0-)

            They voted one of their own in who gamed the system so they could accumulate more wealth.

            Well now they lost so who is to say the system shouldn't be gamed so they are forced to give up that wealth?

            This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

            by DisNoir36 on Thu Nov 13, 2008 at 06:54:39 AM PST

            [ Parent ]

            •  A lot of the money was taken unfairly (9+ / 0-)

              by gouging and not paying fair wages, too.

              Still, we need to be fair.

              If I had gotten rich in this country, I would want to help pay my share of taxes and I would expect to pay more because I have earned more. No one becomes rich by themselves, it is the structure of a country that helps them.

              "Democrats can't do any worse than them." O

              by relentless on Thu Nov 13, 2008 at 07:19:23 AM PST

              [ Parent ]

              •  Wow. (2+ / 0-)
                Recommended by:
                sxwarren, Nailbanger

                Someone commenting with sanity - while there are evils in all parts of our society, I don't think that just because someone has been financially sucessful, they are evil and have done it off the backs of others.

                The pack mentality on this site angers me to no end.

                You are correct that people who make more should pay more within reason, the problem is the definition of reason - I get the impression that many on this site would like to strip the wealthy down to homeless status.

                The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                by ctexrep on Thu Nov 13, 2008 at 08:38:19 AM PST

                [ Parent ]

                •  Anyone who made money in this stock market with (1+ / 0-)
                  Recommended by:
                  Brooke In Seattle

                  all the financial wizardry in Credit default swaps made money on the backs of working folks. Increasing their tax burden by 3% (a minor amount) is not stripping them, but asking them to pay more for the problems which created this mess (and they gained from).

                  •  Increase it by at least 30% (1+ / 0-)
                    Recommended by:
                    Brooke In Seattle

                    They can afford it.
                    The US needs the tax revenue to get the economy back on track.
                    Don't let the Republicans fool you into thinking that "high" tax rates on the wealthy and corporations will "cost jobs" - it's a lie - in fact the opposite will occur. Jobs will be created, and consumer spending will increase.

                    A large stimulus bill (oh...700 billion) focused on the middle/working class will make everybody far better off than bullshit Republican "theories" which have been proven wrong time and time again.

                    Of course it hurts - you're getting screwed by an elephant.

                    by sean oliver on Thu Nov 13, 2008 at 11:24:48 AM PST

                    [ Parent ]

                •  Part of it... (0+ / 0-)

         that some of your comments ("They have more of a right to hold onto it, than you do to take it") come close to Republican talking points.  That may not have been your intention, but that is how it came across to me and, I suspect, many others.  Understandably, that perception can generate an intense reaction around here.

                  I don't suspect that many here would like to "strip the wealthy down to homeless staus" as you write -- but I think it would be fair to say that the wealthy have been the sacred princes in our political system for too many years, and many of us would enjoy seeing them knocked down a notch or two. Perhaps to a point where the wealthy would have a comparable share of the income and wealth in this country as was the case in the fifties, sixties, and seventies...

                  Political Compass: -6.75, -3.08

                  by TexasTom on Thu Nov 13, 2008 at 10:24:47 AM PST

                  [ Parent ]

                •  Your impression is backwards (1+ / 0-)
                  Recommended by:
                  Brooke In Seattle

                  I get the impression that many on this site would like to strip the wealthy down to homeless status.

                  It's the other way round:

                  The wealthy (bankers, Wall St investment firms, deregulators, etc) are the ones who, in actual fact, have stripped folks down to homeless status. About 80,000 a month.

                  We don't want to make these "wealthy" people homeless, we just want to make them live where they properly belong - in prison.

                  Of course it hurts - you're getting screwed by an elephant.

                  by sean oliver on Thu Nov 13, 2008 at 11:34:08 AM PST

                  [ Parent ]

                •  I think part of the reaction you're seeing here (0+ / 0-)

                  is borne of the sense that the individuals, institutions and industries that have seen a dramatic increase in their share of the country's wealth have been able to do so primarily through Republican economic policies which have had a cumulative effect of killing the goose that lays the golden eggs.

                  Personally, I have no problem whatsoever with folks becoming extremely wealthy.  However, the wealth shift of the past three decades has been the result of applying an economic ideology that appears to deny the importance of keeping the Demand side (which is also the "real" production side) as healthy as the Supply side.  It's the arrogant stupidity and, ultimately, self-immolating nature of this that has me and a lot of other folks here frustrated.

                  It's only practical for everyone concerned (including the wealthy), at this point, for the government to resuscitate the Demand side so as to stimulate investment in production (and, thereby, job creation by the private sector).  Of necessity, this will require at least a temporary, government enforced, reversal of wealth flows to get the economic engine (that enables the wealthy to become wealthy in the first place) started again.  But this strategy is pilloried as "Socialism" or "unfairly soaking the rich."  I mean, WTF?  It wouldn't be anything but a pyrrhic victory for the wealthy otherwise.

                  BTW - I believe that economic ideologies of any kind belong only in textbooks.  They should never be applied in the real world.

                  Some folks prefer a map and finding their own route. Others need someone to tell them where to go.

                  by sxwarren on Thu Nov 13, 2008 at 02:08:46 PM PST

                  [ Parent ]

          •  If they can make a public case justifying (5+ / 0-)

            what they've done to earn it?  Sure.
            If you're the CEO of Lehman Brothers and ran the company into the ground...sorry, there's not much of an argument you can make that you "earned" your 9 figures over the past few years.

            "The truth will set you free. But not until it is finished with you." - David Foster Wallace

            by John Shade on Thu Nov 13, 2008 at 08:41:01 AM PST

            [ Parent ]

        •  I think it's snark (0+ / 0-)

          Look at his signature.

      •  Nonsense! (9+ / 0-)

        Who pays for government is always subject to negotiation.

        •  O.K. (0+ / 0-)

          Every commentor on KO's taxes are going up 40% - this will be one of Bush's executive orders before leaving office.

          Not a thing we could do either, not enough of us to stop it - now we could and would create quite a noise, but we still would have to pay.

          Not fair.

          The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

          by ctexrep on Thu Nov 13, 2008 at 06:12:08 AM PST

          [ Parent ]

          •  What? (2+ / 0-)
            Recommended by:
            kyril, mrchumchum
            •  Yes (0+ / 0-)

              My point is government should never target a small group of individuals for exploitation.  Majority rule / minority rights.

              The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

              by ctexrep on Thu Nov 13, 2008 at 06:17:52 AM PST

              [ Parent ]

              •  Government should also (15+ / 0-)

                never target a large group of individuals for exploitation, but that's been going on for decades.  

                Anyway, the voting patterns of the ultra-rich (that is, voting for Obama) would suggest that they recognize that it is their duty and/or obligation to pay a bit more during this crisis.

                •  Just becasue you (1+ / 0-)
                  Recommended by:

                  may feel exploited does not give you or anyone else the right to exploit someone else.

                  I never said that the ultra-wealthy should not pay taxes nor did I ever say that they shouldn't pay more - but I cannot stand the attitude that we should, "tax the hell out of the wealthy".

                  The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                  by ctexrep on Thu Nov 13, 2008 at 06:29:09 AM PST

                  [ Parent ]

                  •  roflmaolol omg you did not just say (13+ / 0-)

                    that we're trying to "exploit" the wealthy! I can't believe it. Seriously. That's a good one...almost as good as being told that we evil scary secularists are trying to discriminate against Christians.

                    During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

                    by kyril on Thu Nov 13, 2008 at 06:45:10 AM PST

                    [ Parent ]

                  •  Ctexrep? You wouldn't be Chris Shays would you? (14+ / 0-)

                    Seriously exploit the wealthy?

                    That shit wouldn't be so funny if I didn't live and breathe in Fairfield County Ct which is one of the wealthiest areas of the country.  

                    Who has been expoliting whom again?  Seriously.

                    This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

                    by DisNoir36 on Thu Nov 13, 2008 at 06:57:18 AM PST

                    [ Parent ]

                    •  Please listen (1+ / 0-)
                      Recommended by:
                      John Shade

                      I'm from FF county too - I have no sympathy for the fund managers who have been raping the economy of millions but my fundamental principles are that no one, should be exploited or allowed to be.

                      I'm not saying things have been fair - what I'm saying is that it should be fair.

                      I know there is a pack mentality to go after these people but we can't allow that to happen.

                      We need fairness across the board.

                      The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                      by ctexrep on Thu Nov 13, 2008 at 07:04:24 AM PST

                      [ Parent ]

                      •  You just argued that people on the bottom (5+ / 0-)

                        of the spectrum are ripping you off.  You argued that if someone makes $1 a year they should pay taxes on it.  So I'm assuming if a bucket of rice cost $1, you would rather they skip the bucket and pay taxes instead so people like you can justify your idea of fairness.  What a joke.

                        •  That's correct (0+ / 0-)

                          If you are a dependent on society becasue you choose to not make your life better, then yes, you are ripping me off.

                          Choices include:

                          Dropping out of school
                          Drug users

                          If one of those describes someone on the bottom then they are ripping you off.

                          For those who actually need assistance, I've got no problem with that.

                          The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                          by ctexrep on Thu Nov 13, 2008 at 08:20:15 AM PST

                          [ Parent ]

                          •  Wow. (7+ / 0-)

                            Thanks for the bullsh!t Republican "welfare queen" talking points.  Not.

                            It's always so easy for people who have little financial difficulties to complain about the list of people you just named.  To claim some "rational" fairness when you have no idea what people have to deal with.  When you have no idea why people drop out of school, or start using drugs, or even turn to crime.  I wonder what experience you have with any of those groups or what understanding you have why these problems persist.  

                            Your self-righteousness I'm sure feels great, but it's useless.  Whatever percentage of revenue is lost to those groups would add up to nothing.  Meanwhile the government is looted wholesale by corporate thieves and the wealthy who never pay their tax bracket.  If that revenue could be recovered, it would make a difference.

                            Despite your protestations to the contrary, I think you're on the wrong site.  The Freepers await.  I'm sure they'd celebrate you.

                          •  Quite honestly (0+ / 0-)

                            People deserve a second chance - more than willing to help to afford them that because, while I'm well aware of some of the reasons / exceuses as to why people drop out of school, do drugs etc.; I can only be sympathetic to a point.  
                            You don't know me and what I've had to do and what I overcame to get where I am - many of us a delt a shitty hand and overcome many obstacles to make sure we become productive, responsible, contributing members of society.
                            I don't know you either, but I would say that if you are blindly accepting of peoples shortcomings in life, that is all you will eventually get.
                            And please, enough of the divise comments regarding my politics - trust me if I were what yo call me, I certainly wouldn't be on this site.

                            The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                            by ctexrep on Thu Nov 13, 2008 at 09:53:24 AM PST

                            [ Parent ]

                          •  I think you'd get more love from a Neocon (4+ / 0-)

                            Mostly, people are placing the blame precisely on those who you are defending. At some point, a person can make a suspiciously large amout of money. It's kinda hard to feel sorry for someone who can't afford another yacht in these economic times.  Just because you've navigated well, doesn't mean someone else hasn't tried and yet failed.  Maybe they became ill or are disabled, or they are a VET with issues... there must be a million other unfortunate turns.

                          •  I agree with you (0+ / 0-)

                            The people you show sympathy for are the same that I do - ill or are disabled, or they are a VET with issues.

                            I never said these were people who didn't need and or deserve help.

                            Maybe we just have a fundamental disagreement when it comes to able bodied and minded people who make poor choices...over and over and over again.

                            I want my money to go the the people who need it, the problem is, too many funds get funneled to those who really don't need it.

                            Just as the other poster, I take exception with your lame attempt to paint me as a Neocon.

                            The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                            by ctexrep on Thu Nov 13, 2008 at 11:56:11 AM PST

                            [ Parent ]

                          •  I think you worry about the wrong people (2+ / 0-)
                            Recommended by:
                            Brooke In Seattle, mrchumchum

                            Why not point to the hundreds of billions going to the gang who got us in this mess instead of the person, no matter how lazy, getting free cheeze.  I'd rather pay for cheeze.

                          •  You avoided the main thrust of my comment. (3+ / 0-)

                            It is not about what people deserve.  It is about what is good for the health of the economy.  The whole economy.

                            It is in your interest and the country's interest to do what we can to bring those on the bottom into the middle class any way we can.  That's right, to spend YOUR money on helping them even if they fit into one of your groups that supposedly don't deserve it.  Americans work harder and are more productive than almost any other industrialized nation and those on the bottom earn less.  The problem is not laziness, drug addiction or whatever other group you and the Republicans wish to scapegoat.  The problem is cowboy capitalism.  Capitalism that advocates people should pull themselves up by their bootstraps, which is really just another way of saying they shouldn't be able to advance their economic interests at all.  If you have no money and no skills, unless you are a truly extraordinary, you will never get out of that hole.  Money flows to the top and stays at the top unless there are countervailing forces.  Didn't we learn this once in the Great Depression and the Post War Era for chrissakes?!  I just have to laugh when Boomers claim they worked so hard for what they earn.  Lol.  Right.  Like they aren't riding the wave of ENORMOUS government investment in education, infrastructure and other services.

                            Not even to mention that this country has other systemic problems.  Because of the vindictiveness of cowboy capitalists who advocate people getting what they "deserve" rather than offering support, we have things like the "War on Drugs".  Locking people up for non-violent crime.  I don't give a hot damn what they "deserve" it hurts us all and we all pay for it.  We would save enormous amounts of money if we paid for their treatment 10 times over.  Instead we pour endless money into jails and pay a steep price when these people get out and are unable to rejoin the workforce.

                            From what I can tell, whether you intend it or not, the end result of your philosophy is a permanent underclass.  Which is close to what we have now and is the ultimate goal of the Republican Party.


                          •  We definetly have (0+ / 0-)

                            a difference of opinion.

                            I know I'll never convince you however, remember that the:

                            ENORMOUS government investment in education, infrastructure and other services.

                            Is available to all - is it equal, no.  Do those on the upper end of the wealth spectrum benefit more from the infrastucture - yes.  

                            What you fail to recognize is that these are available to everyone if the choose to use it.

                            How do you help someone who drops out of school?

                            You can offer a GED
                            You can offer job training

                            But the fundamental fact is that if one does not take advantage of these opportunities, then other than a hand-out, how do you help the person.

                            You can argue than hand-outs are less costly than jail - you are correct.  I don't claim to have the answer to every problem becasue I don't think you can fix an individual - and that's what you are dealing with - individuals.

                            Not even children seem to motivate some people - I thought that every parents goal was to make the life of their child better than theirs.

                            Tell me what goes wrong with some people.

                            I also get the impression (and I may be wrong) that you have the opinion that people who are affluent or are sucessful have only done so becasue they have done it at the expense of those who have not achieved the same results - while there are many who fit that, by far, many have not.  Many are hard working charitable people.  Look at Bill Gates - you could say he is evil becasue he has been so sucessful - but has his risk not provided jobs for hundreds of thousands of people and he has given over a billion dollars to charity.

                            The again, he has a 25,000SF house - so he should give more - right?

                            The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

                            by ctexrep on Thu Nov 13, 2008 at 12:11:12 PM PST

                            [ Parent ]

                          •  Lol. (1+ / 0-)
                            Recommended by:
                            Cassandra Waites

                            You have me so laughably stereotyped that I don't even know how to respond to you.  In fact, your stereotype is exactly why the problems we have persist.

                            I also get the impression (and I may be wrong) that you have the opinion that people who are affluent or are sucessful have only done so becasue they have done it at the expense of those who have not achieved the same results - while there are many who fit that, by far, many have not.  Many are hard working charitable people.  Look at Bill Gates - you could say he is evil becasue he has been so sucessful - but has his risk not provided jobs for hundreds of thousands of people and he has given over a billion dollars to charity.

                            This entire paragraph doesn't describe a single belief I hold.  I don't even recognize what you're saying other than a Right wing stereotype of the Left.

                            I believe in capitalism.  I believe it works when we are not talking about basic humane services.  Those services that are failing as we speak.  Those services that were paid for by the government in the post-war era.  Those services that your worshipful free-market WILL NEVER PAY FOR.  Education.  Job Training.  Health Care.  Infrastructure.

                            Let someone else argue with you.  I'm tired and I have work to do.

                          •  You are full of shit. (2+ / 0-)
                            Recommended by:
                            Brooke In Seattle, mrchumchum

                            You must be about 14 years old, because you obviously don't have any real life experiences.

                            Nor do you know a thing about human beings.

                            Go join the GOP.
                            You belong there.

                            Of course it hurts - you're getting screwed by an elephant.

                            by sean oliver on Thu Nov 13, 2008 at 11:38:21 AM PST

                            [ Parent ]

                      •  Unless I missed something, all Obama's called for (7+ / 0-)

                        is a return to the top Marginal Rate of Clinton's time.

                        That's a far, far cry from "going after" the rich.

                        For about 40 years after WWII the top marginal rate was 70% or more (which, by the way, was not half their total income in taxes).  Country did pretty good during that run too.

                        "The truth will set you free. But not until it is finished with you." - David Foster Wallace

                        by John Shade on Thu Nov 13, 2008 at 08:43:50 AM PST

                        [ Parent ]

                      •  I'm listening (1+ / 0-)
                        Recommended by:
                        i like bbq

                        but the crap you're peddling is the same crap I hear every fucking day from these republican assholes who live around me.  

                        Sorry but I've listened to enough of that shit and I know better than to believe any of it.

                        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

                        by DisNoir36 on Thu Nov 13, 2008 at 09:27:03 AM PST

                        [ Parent ]

                  •  Boo hoo hoo (1+ / 0-)
                    Recommended by:

                    People making billions, and off the backs of ordinary schlubs like me, are so "exploited."

                    Excuse me, I have to go find my nano-violin now.

          •  you're right (4+ / 0-)

            we should eliminate that discriminatory system of "tax brackets" and wipe out the injustice of "progressive taxation".

          •  bill of attainder - no can do (9+ / 0-)

            taxing individuals for their political beliefs is against the law. taxing them based on a fraction of their income's been legal for as long as the babylonians pressed reeds into clay tablets.

            surf putah, your friendly neighborhood central valley samizdat

            by wu ming on Thu Nov 13, 2008 at 07:02:22 AM PST

            [ Parent ]

          •  Huh? (0+ / 0-)

            Of course it hurts - you're getting screwed by an elephant.

            by sean oliver on Thu Nov 13, 2008 at 11:26:03 AM PST

            [ Parent ]

      •  They haven't paid their fair share in decades. (16+ / 0-)

        It's not a matter of "respecting rights", it's a matter of not letting them rip the rest of the country off.

        Hey, President-Elect Obama - don't tell Bush too many of your plans lest he preemptively torpedoes them!

        by PatsBard on Thu Nov 13, 2008 at 06:11:25 AM PST

        [ Parent ]

      •  have you taken their security teams (3+ / 0-)
        Recommended by:
        mmacdDE, ajpuckett, kyril

        into your calculation.
        it almost sounds like you think they are a minority that has to be protected from the evil masses.
        geeee i always thought they are the only minority group in the usa who can protect themself through power and money
        but what do i know

      •  WTF? (0+ / 0-)

        First of all, wealth (property) isn't a criteria for determining minority status. That's an absurd statement.
        To enlarge upon your logic, I could say that I have minority rights based on any damn thing I want: If I play chess, and only 49% of Americans play chess, I am in a minority group - chess players - with special rights?

        Secomd, nobody is "attacking" anybody or taking away "rights".

        Wealth is a privillege that people earn - not a right. If it were a right, then I guess I could sue the US government because my "right" to accumulate wealth is thwarted by US government policy.

        Thirdly, we're talking about correcting serious flaws in our country. If this isn't done, the consequences will be devastating to everybody, rich and poor.
        Many folks here are in danger of becoming homeless, and/or cannot get health care. Far more than 1 out of 500.

        Don't you think those people have the "right" to stay alive?

        We use government action to help certain parts of our society whose right to life, liberty, and the pursuit of happiness (notice it doesn't say "wealth") are threatened by forces beyond an individual's control.
        Government gets its money from taxpayers. Wealthy taxpayers are not in any danger of becoming homeless or dying from untreated illness, or starving. They can and should be taxed at far higher rates because the money they lose will not cause them to suffer unduly.
        A reasonable amount should be about 60-70% for those making over $50 million/year. $15-20 million a year is enough to live on.


        Of course it hurts - you're getting screwed by an elephant.

        by sean oliver on Thu Nov 13, 2008 at 11:15:51 AM PST

        [ Parent ]

      •  This minority had the right to wreck our economy (0+ / 0-)

        "We let the special interests put their thumbs on the economic scales." - Barack Obama

        by Lefty Coaster on Thu Nov 13, 2008 at 12:18:46 PM PST

        [ Parent ]

      •  Huh??? (0+ / 0-)

        They are not outnumbered at all. They can hire plenty of thugs either as lawyers or firepower to get their way and they will--why not? The wealthy will do just fine--their ability to control the population is way better than in France in the late 18th century or in Russia in the early 20th.

        Still you make a good point in spirit. We ought not punish anyone but rather cooperate and find mutually beneficial solutions to our problems. But it requires an intent among the wealthy to be concerned with something other than their own class. Many of that class are concerned and need to be given a chance to help. The sharks need to be isolated and taxed heavily so that they will leave the country.

    •  that is UNAMERICAN (1+ / 0-)
      Recommended by:

      and socialist and evil

    •  Roll top rates back to 1979 levels (20+ / 0-)

      Pre-Reagan, e.g., 70%.  Those fuckers had the party, now we have the hangover.  That will make a bit of a dent in the $600B we have to spend to jump start the mess they left us.

      A retroactive Windfall Profits tax on oil would be nice as well.

      Redistribution of wealth?  You betcha!

      -9.00, -5.85
      What do you talk about when you cannot explain the last eight years of failure? -- Joe Biden

      by Wintermute on Thu Nov 13, 2008 at 06:19:05 AM PST

      [ Parent ]

      •  Bad idea (0+ / 0-)

        Supply side economics worked from the Governments prospective - it created huge increases in tax revenues.

        The problem was our politicians spent it ALL and then some.

        The economy in the late 70's was terrible - and if you did that today, it would make ourcurrent situation worse without any doubt.

        The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

        by ctexrep on Thu Nov 13, 2008 at 06:22:30 AM PST

        [ Parent ]

        •  hahah, oh wow (8+ / 1-)

          Supply side economics worked

          get out, troll

          you do it to yourself, you do and that's what really hurts

          by Demosthenes on Thu Nov 13, 2008 at 06:32:31 AM PST

          [ Parent ]

          •  Screw you (0+ / 0-)

            Don't you dare call me a troll.

            Did you just lean how to coy and paste?  Maybe you should copy and paste the entire statement and not try to play with my words.

            Supply side economics worked from the Governments prospective - it created huge increases in tax revenues.

            Look the shit up yourself.  Tax revenues increased - but spending those taxes increased more.

            I didn't say it was good for all Americans - I said it was good from a tax revenue standpoint.

            Don't try and pull that troll shit with me, I'll debate you any day any time and win becasue your just an attention whore trying to score rating points.

            The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

            by ctexrep on Thu Nov 13, 2008 at 06:41:58 AM PST

            [ Parent ]

            •  no title (1+ / 0-)
              Recommended by:

              you're just an attention whore


              you do it to yourself, you do and that's what really hurts

              by Demosthenes on Thu Nov 13, 2008 at 06:51:56 AM PST

              [ Parent ]

            •  also, read the FAQ (5+ / 0-)

              Do not troll rate people for expressing a contrary opinion, so long as it is expressed in a civilized fashion. The exceptions are for conservative talking points or debunked or false information; this isn't a site for conservatives, they have entire swaths of the internet in which they can regale each other with their reality-impaired fantasies.

              Do not troll rate someone you are actively having a fight with. If you are in a heated argument with someone, you should not be judging whether or not what they say is trollworthy. Leave it to others to decide what behavior is or isn't over the line.

              you do it to yourself, you do and that's what really hurts

              by Demosthenes on Thu Nov 13, 2008 at 06:57:36 AM PST

              [ Parent ]

            •  it did not create huge increases (4+ / 0-)

              in tax revenue.  Bonddad has pointed that out many times.  It simply did not.

            •  actually there is no evidence (4+ / 0-)

              that supply side CREATED tax revenues.  We have no way to measure that.  Revenues went up, marginally when compared with GDP from 1980-2000.  I'd like to see your data that supports that that VERY MARGINAL increase was due to supply side policy.  There was a huge increase in across the board productivity during that period, which also includes a huge economic boom and only 2 very minor busts.  Structural economic changes are a much better explanation than supply side economics for a very marginal increase in real revenues.  I argue that a sane tax policy (50-60% on the top 5% of earners) would have resulted in MUCH LARGER gains in revenue.

              Because I said so!  Prove I'm wrong!  

              That's the problem with hypotheticals, we can never know what would have happened.

              The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

              by TheGryphon on Thu Nov 13, 2008 at 07:54:28 AM PST

              [ Parent ]

            •  You really do not know what you're (0+ / 0-)

              talking about do you?

              Of course it hurts - you're getting screwed by an elephant.

              by sean oliver on Thu Nov 13, 2008 at 11:56:24 AM PST

              [ Parent ]

        •  huge increases in tax revenues? (3+ / 0-)
          Recommended by:
          JTML, ajpuckett, kyril

          man, you are some piece of work. what color is the sky in your country?

          surf putah, your friendly neighborhood central valley samizdat

          by wu ming on Thu Nov 13, 2008 at 06:57:22 AM PST

          [ Parent ]

        •  Simply untrue (8+ / 0-)

          At least according to a study by the Denver Fed. I don't have it handy, but IIRC their conclusion was that Federal tax revenues were lower than they would have been if Reagan's tax cut hadn't happened. Which is what you'd expect.

          The Laffer curve is a myth.


          "It is better to die on your feet than to live on your knees." -- Emiliano Zapata Salazar
          "Dissent is patriotic. Blind obedience is treason." --me

          by Leftie Gunner on Thu Nov 13, 2008 at 07:01:24 AM PST

          [ Parent ]

          •  ctexrep has one valid point: (7+ / 0-)

            A supply-side tax cut is more effective than a demand-side stimulus in times of high inflation (because it tends to be disinflationary).

            In times of deflation, like now, a supply-side tax cut is that last thing you want.


            "When the going gets tough, the tough get 'too big to fail'."

            by New Deal democrat on Thu Nov 13, 2008 at 07:06:50 AM PST

            [ Parent ]

            •  I don't think I get that (1+ / 0-)
              Recommended by:
              New Deal democrat

              The entire theory of supply side economics was that a decrease in marginal rates would increase productivity.

              The numbers do not support that conclusion.  Productivity actually went up AFTER the Clinton tax increase in '93, and Productivity growth did not change in the aftermath of the Reagan Tax cut.  

          •  But they were higher (0+ / 0-)

            Arguments can be made which would have worked better or resulted in better revenues but the fact remains that Federal Tax revenues went way up - numbers don't lie.

            The other undeniable fact is that spending increased at a faster rate than revenue, hence deficits.

            If always believed Reagan's biggest failure was the huge expansion of Government and spending under his tenure, not his tax policies.

            The care of human life and happiness, and not their destruction, is the first and only legitimate object of good government. - Thomas Jefferson

            by ctexrep on Thu Nov 13, 2008 at 07:11:51 AM PST

            [ Parent ]

            •  You repeat the (2+ / 0-)
              Recommended by:
              JTML, Cassandra Waites

              notion that all economic growth was caused by the tax cuts.

              Which is wrong.  Much of the revenue growth was the result of economifc growth that would have happened irregardless of the tax cuts.  

            •  It was the war that increased growth (0+ / 0-)

              At first, they were selling plywood in Iraq for $70 a sheet, etc.

              "Democrats can't do any worse than them." O

              by relentless on Thu Nov 13, 2008 at 07:55:47 AM PST

              [ Parent ]

            •  Sure revenues went up because my taxes doubled (1+ / 0-)
              Recommended by:
              Brooke In Seattle

              because debt interest I had been able to deduct was yanked away before I could pay the debt off and I was stuck paying the higher taxes so the wealthiest could enjoy a tax cut. And I still had the bills I had incurred based on the tax deductions  effect on my income. The IRS 's response was tough pay the extra $3000.

              In fact, my sister who was making about $10,000 a year as a new widow saw her taxes climb to higher than a third of corporations were  paying.

              So if there was a net increase in revenue it was at the expense of lower income tax payers.

        •  The ridiculous part was when republicans (4+ / 0-)

          privatized all of government they could, making it twice as expensive.  Then they deregulated other products like electicity, oil and gas.  That made Haliburten a lot of money.

          They have used the money set aside for Social Security.  They charged the war.

          I guess they filled their pockets with all that tax money over in Iraq.

          I want that money back.  All it will take is a few disgruntled thieves to start squealing and we will have to build new prisons to hold the con men who have ripped off this country.

          90% of what taxes go for is to promote business.  The trucks are hard on our bridges and highways, but they pay the same tax as the rest of us do as far as gas tax. The Securities exchange and all those we pay, that didn't do their jobs are expensive.  

          About the only thing the middle class get is free public schools and Social Security and they fund the Social Security out of every pay check and we pay a lot of our school costs from property taxes and state taxes.

          "Democrats can't do any worse than them." O

          by relentless on Thu Nov 13, 2008 at 07:37:32 AM PST

          [ Parent ]

        •  Bullshit (0+ / 0-)

          Supply side economics worked from the Governments prospective - it created huge increases in tax revenues.

          While I don't disagree there is a tax structure that will maximize government revenue it is a far more complex than a simple Laffer Curve.

          For one thing most supply siders will never admit there is a point at which revenue will decrease if you continue to cut taxes. For another many believe cutting marginal rates for top earners will always yield more revenue than cutting rates for the bulk in the middle.

      •  Better idea. Eat the rich (4+ / 0-)
        Recommended by:
        ajpuckett, mamamedusa, kyril, John Shade

        They're nice and fit.  Maybe a bit on the plump side.  Would solve food shortage.  Then after they're gone we can take their money and houses and distribute it among the rest of us.  

        < insert joke about eating Paris Hilton here >

        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

        by DisNoir36 on Thu Nov 13, 2008 at 07:02:13 AM PST

        [ Parent ]

    •  You don't raise taxes in a recession (1+ / 0-)
      Recommended by:

      you need every bit of spending you can get out of every segment of society to pull through and raising taxes will just slow spending even more.  Once we are out of the recession, then they should be fair game though.

      •  Not necessarily... (16+ / 0-)

        If the government takes the money from those tax increases and spends it, that money goes back in circulation.  If that money comes from tax increases on the wealthy and the government spends it in a way that creates middle class jobs, the net result may well be an increase in economic activity.

        That's based on a couple of assumptions:

        1.  That we're talking modest tax increases on the wealthy, and non confiscatory tax rates.
        1.  The government spends the increased revenue, instead of using it to pay down the deficity.
        1.  The economy is soft enough that private investment is limited by a lack of end-consumer demand for commercial goods and services.

        I believe that all three of those assumptions are reasonably based on the current state of the economy and on what Obama has proposed during the campaign.

        Political Compass: -6.75, -3.08

        by TexasTom on Thu Nov 13, 2008 at 06:29:50 AM PST

        [ Parent ]

      •  Not when they're hoarding it (8+ / 0-)

        There are a ton of rich people out there just hording money, not investing it, not spending it.

        Look around, every day is another story of another massive layoff.  The rich are firing us peons and keeping the cash.  They're not spending it now under Bush tax rates.  Or if they do create a job, it's in China or India where it doesn't help us.

        •  I seem to remember over a year ago ... (4+ / 0-)

          ... reading a story about "motor-mansions" that are basically luxury versions of the Winnabego.  These things were selling like hot cakes, and the story was, "Why would anyone buy something that gets 4 miles to the gallon [i may be exaggerating that in my memory] while gas prices are increasing?"


          "Anyone who buys one of these isn't the least bit worried about gas prices."

          This was the same time luxury retailers were thriving, while the Bed Bath and Beyonds suffered.

          It really does seem as if the middle class is being pecked to death.

      •  Obama's plan is a net tax cut. (1+ / 0-)
        Recommended by:

        He has made that clear.

        In addition, the rich save a big portion of their income.  We need to take money from them and give it to people who will consume.

        Republicans predicted when Clinton raised taxes on the rich in 1993 that the economy would go into recession.  The opposite happened because money was taken out of savings and put into consumption.

        I think that the smart republicans knew that the Bush tax cuts for the rich would hurt the economy because it would increase private savings and hurt consumption.  That's why they got Greenspan to keep interest rates low and pushed the housing boom.  They needed something to inflate the economy.  Unfortunately it has backfired.

    •  Why don't we bail out Haliburton? (2+ / 0-)
      Recommended by:
      Sychotic1, kyril


      The snowdog just slayed by-tor on 11/4/2008.

      by Ex Real Republican on Thu Nov 13, 2008 at 06:25:45 AM PST

      [ Parent ]

    •  within reason (0+ / 0-)

      The problem with taxing the rich is that they would just move and remove their wealth and their expertise. We should remove the Bush tax cuts and increase luxury taxes to some degree. But the most important thing we should do is to heavily tax speculation at this point at least for awhile. This has a disadvantage in limiting a certain dynamism to the economy--but we've gone way to far down that road and need at least a decade of slowing down and focus on the commons and all that implies.

  •  Doesn't look like there's a lot of good choices.. (2+ / 0-)
    Recommended by:
    ScientistMom in NY, kyril

    Scary stuff and looks like a damn if you do and damn if you don't thing..   I hope they do pass another stimulus package and people are really needing that now..  Thanks bonddad for your diaries and really helps those of us who are just simple workers not knowing what to think anymore...

    "When the power of love overcomes the love of power, the world will know peace."-- Jimi Hendrix (1942-1970)

    by ebbinflo on Thu Nov 13, 2008 at 06:03:00 AM PST

  •  Tearing homes down might not work, (2+ / 0-)
    Recommended by:
    jamesia, kyril

    but I wonder if buying car inventory and recycling all those unsold Hummers and Escalades might.

  •  let us not forget (26+ / 0-)

    that there is also the possibility of taxing the living bejeezus out of the wealthy, and working with other countries to hunt down offshore tax evaders. that won't get us in the black by a long shot, but it ought to help.

    squeeze the piggies. lord knows they squeezed everyone else in the good times.

    surf putah, your friendly neighborhood central valley samizdat

    by wu ming on Thu Nov 13, 2008 at 06:03:30 AM PST

  •  Education, the energy grid, highways, railroads, (20+ / 0-)

    mass transit, the environment, low income housing, and green technology should be the backbone of the new WPA.

    The WPA provided jobs and income to the unemployed during the Great Depression in the United States. Between 1935 and 1943 the WPA provided almost 8 million jobs.[2] The program built many public buildings, projects and roads and operated large arts, drama, media and literacy projects. It fed children and redistributed food, clothing and housing. Almost every community in America has a park, bridge or school constructed by the agency.

    Our government is conducting a war on drugs, is it? Let them go after petroleum. Talk about a destructive high!- Kurt Vonnegut

    by crystal eyes on Thu Nov 13, 2008 at 06:03:40 AM PST

    •  Lots of education (7+ / 0-)

      teach people how to cook, how to grow food in small amounts (you can grow a lot in a large container, and you don't need a lot of space for a small garden), nutrition, after school tutoring for kids, arts education for kids (and adults), etc.

      Those things wouldn't need to be taught by certified teachers with degrees, though they should be provided with some basic guidelines and be required to pass a basic subject matter test.

      We've let things like that slide for way, way too long. About time to bring them back.

    •  My husband's dad worked on a WPA road (4+ / 0-)

      It is a wide dirt road and it opened up areas so people could put houses on the land. The road  is still being used and has never been paved.  We lived off that road for about 20 years. We have red clay mud and rocks in this area, which gave it a hard foundation. The road grader comes twice a year and grades the mud puddles out.

      It is important that we build long lasting products and not use it for frivolous things.

      "Democrats can't do any worse than them." O

      by relentless on Thu Nov 13, 2008 at 08:06:22 AM PST

      [ Parent ]

      •  Exactly. Wars and prisons don't have any (1+ / 0-)
        Recommended by:
        crystal eyes

        lasting benefit so they should be used sparingly. People with nothing to lose are more closer to the primal psychology than those who have some hope and a chance at living decently.

        Education enlightens and eases fears but Entertainment justs numbs out thinking in favor of the most basic impulses and the fears of the boogie man.

  •  Since we have become a service sector (8+ / 0-)

    society and now no one can afford services, how do we bail ourselves out?  For the past 15 years I have taken a part time retail job during the holidays to pay for Christmas.  Not likely this year.  No one is hiring.

    •  this is the crux of the issue (8+ / 0-)

      our economic policy for the last generation has been based on the ridiculous idea that we didn't need to make anything anymore.  That an economy could be healthy if it consisted only of people selling stuff (whether that stuff is underwear made in Malaysia at Wal-Mart or complex financial instruments no one really understands at Merryl-Lynch).  We need manufacturing.  We also need our farmers to be paid what food is worth.  These are the important, significant jobs.  Without food and stuff to sell, the rest of the economy doesn't exist.  We need to find a way to value that labor.

      The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

      by TheGryphon on Thu Nov 13, 2008 at 07:59:33 AM PST

      [ Parent ]

  •  I'm going to post a "democratic agenda" series (21+ / 0-)

    here and/or at Economic Populist.

    First of all, housing has to be allowed to sink to its normal level as a multiple of income.  It ain't there yet.  

    Bankrutcy cramdowns (or renegotiations during foreclosure proceedings) are one way to accomplish that sooner.  The Philadelphia housing court tried that on a mass basis a few months back, and it was quite successful.

    I'm willing to accept higher debt as a % of GDP as long as it is temporary, and targeted at the most bang for the buck.  IN this case, infrastructure:  roads, railroad tracks, bridges, canals, tech infrastructure.

    Debt needs to be liquidated, the quicker, the better.  This means, inter alia, raising taxes on corporations and the wealthy (think:  estate tax for starters) and a clampdown on Usurious interest rates.


    "When the going gets tough, the tough get 'too big to fail'."

    by New Deal democrat on Thu Nov 13, 2008 at 06:08:08 AM PST

  •  I keep asking (8+ / 0-)

    financial journalists' blogs to undertake a constitutional analysis of the question whether rewriting securitized mortgages and credit default swaps makes sense but get no takers.  What about you, bonddad?  Today's NYT has another article where financiers and hedge funds threaten to sue if the securities they own or insure are rewritten to reduce the issuing interest rate.  It seems to me that if this is, in fact, a problem of epic proportions that threatens to undermine or topple the US's and global economies, then it must follow that the security and its credit default swap relative must, of necessity, be products that should not be permitted on a public policy rationale.  No one is analyzing what it would mean to simply declare the contract terms that are harmful void and recast them as something more palatable.  I suspect you run into constitutional problems presented by the "full faith and credit clause" and "commerce clause" but I also suspect there are legal scholars who could come up with a rationale to reconcile these if the voiding of the toxic terms of these securities would help.  

  •  a move to less capital intensity would help lots (12+ / 0-)

    This can begin at home with one's choices of foodstuffs, entertainments, modes of transportation, heating, communication, etc.

    Providing same or comparable value of goods and services (or better) at the same (or less) relative price is good.

    Basically people need to train themselves to contemplate purchases as not being consumption but being consumption with an investment component, so that they take a more global view of the cost/benefits.

    What we are experiencing is not a structural change in the economy but a call to make such a change.

    This can be a time of great opportunity, but it's going to take a lot of changes to how people think, act and relate to one another and the institutions and conventions that heretofore have prevailed in our behavior as consumers, investors and citizens.

    This is where the rubber meets the road - the place where hope happens, because people are making real changes in their lives to bring hope into their lives.

    I see a lot more people riding the bus. And now that gas is 50% down from where it was in late summer, I still see a lot of people riding the bus.

    Now there's some change for you.

    We have been given this one precious chance to become one nation again, peacefully.

    by cskendrick on Thu Nov 13, 2008 at 06:15:29 AM PST

    •  Yep (5+ / 0-)

      The world has changed significantly from the days of the WPA. And while the U.S. desperately needs an infrastructure upgrade, there's another investment component we need to consider.

      It goes to what Gore calls "distributed intelligence" in The Assault On Reason.  The Obama campaign was perhaps Exhibit 1 on how grassroots organization, in which data is aggregated and disseminated to/from local/state/national organizations, is a much more efficient model than centralized, top-down structures.  This model, more than anything, is what tipped Indiana and North Carolina to Obama.

      The primary opportunity for this is renewable energy. Sure, we should build windfarms in the Texas-Dakotas corridors and solar arrays in the southwest, with thousands of miles of new transmission capacity. But even more effective would be to provide tremendous incentives for homeowners to install wind and solar at the homes and communities.  Then apply the Obama model for the energy information--aggregate it and disseminate it within a consumer-owned network.

      The result of such decentralized infrastructure investment would be thousands of new jobs (construction, IT, manufacturing) and the enduring benefit of greatly reduced monthly electricity bills for homeowners.  This would create additional discretionary income, a cleaner, more-efficient electricity grid, and the additional capacity needed to power a fleet of plug-in hybrids or PEVs.

      Seems like a good approach to me.

      •  Some thoughts on that... (5+ / 0-)

        From earlier adventures...

        Improving Environmental Quality

        Promote rational as opposed to impulsive behavior in persons and societies From that, all else follows. Impulsive aggressive individuals are highly unreceptive to the notions of self-restraint and noncompensatory values that reviving the ecosphere requires. Related to this is the need to reduce the level of aggression in society, especially with regards to territoriality and perceptions of entitlement to exclusive use, a greater awareness of public goods and inculcation of a set of norms, a moral code that supercedes contemporary notions of propriety and property.

        Perhaps you can attempt to promote 'green' without conceding to the notion of public values and private costs to uphold same, but you are handicapping the effort greatly. There is a reason why persons who 'get' green often seem to be talking a different language -- they are. And if you are interested in improving the quality of air, water and life itself in all its forms, you at least need to be conversant in the language. If not, you are not participating in the conversation that is missing you.

        An emphasis on an economics of sufficiency -- eating, drinking, using what you need rather than what you can -- Partipation in demonstrations of wealth or gestures of consumption in entertainment or travel should be mitigated; more ascetic greens would advocate truly austere protocols sucha s never flying or riding in a personal ground transport unless it is a bicycle. And if you can do so, by all means. The point is not to out-austere everyone, but to use what you need, not what you can.

        Reduce the developmental footprint; disperse infrastructure, to leave green and open spaces. Again, part of the use what you need, not what you can mantra.

        Reduce warfare, promote institutions, channels and norms of peaceful conflict resolution. War takes a huge toll on life and habitat, always, magnitudes worse that peaceful human occupancy. Any strategy towqrd ecological rehabilitation must include a component for peaceful mangement of human disputes.

        Reduce land use; expand wilderness or preserve areas. This is not just giving away to nature or an aesthetic; this is about investing in the ability of the ecosphere to give human civilization the time to undo its own damage -- this is about buying time for Humanity to life, to have not only water and food but perhaps air itself. Think about it; that next parking lot could be your last.

        mprove investment in technology and scientific expertise with an eye toward innovations to reduce ecological footprint, break down waste products, replace poisons and reduce energy and raw materials consumption. Science is not bad; science has taught us (a) what the problem is and (b) offered many tools to use to solve them. Simply put, in my opinion I do not think we can simply primitivize ourselves back to ecological well-being; the damage is too great. We need to bring out A game, and enable the A game of the future to survive...rather, for the Earth as a living home to do so.

        Reduce defense spending by aiming for sufficiency for domestic defense, not preparedness for military adventures abroad. Dovetailed with an advocacy for civil society at home and peacemaking institutions and norms abroad, a salutary cycle of greater peace, expectations of peaceful conduct and real reduction in defense expenditures should occur.

        Reduce population or mitigate growth of same. There are simply too many people; at some point a gradual decline in human population on Earth will have to be managed, and the mortgage on the environment for supporting so many extra inhabitants paid over time. This is not a call for a mega-scale suicide pact, that's just crazy talk. What we need to do is recognition, rationally, knowledgeably and peaceably, that we cannot childbirth out way out of overpopulation.

        Toward a Post Petroleum Economy

        an old diary

        We have been given this one precious chance to become one nation again, peacefully.

        by cskendrick on Thu Nov 13, 2008 at 07:17:22 AM PST

        [ Parent ]

  •  Excellent essay, Bondad. (3+ / 0-)
    Recommended by:
    Zydekos, kyril, sydneyluv

    We need big infrastructure projects, classic pump priming spending.  Keynes is back.  Green jobs.  We will pay for eventually, but it's the only way out.

    And end the Iraq war.  That alone provides money for projects, billions.

    "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

    by TomP on Thu Nov 13, 2008 at 06:17:27 AM PST

  •  So here's our situation - and I think others (5+ / 0-)

    I'm lucky enough to make a pretty good wage and my wife is about to start making some pretty good money too as she completes her fellowship in a pediatric subspecialty.

    We will move to the market where she gets a job (mine's flexible, I just need a phone and an IP line), but there's no way we can sell our home even for what we paid for it three years ago.

    We're lucky enough to be able to cover our losses (well, probably), or to carry the mortgage for a year in the new city, but we can't carry two mortgages.

    What that means is that we'll be renting in the new city, and NOT buying a new, more expensive home than we have now, as we would be if this were a normal market or a boom market.  That helps depress the market in our target city further.

    We're not the neediest case, but I'm sure there are plenty of people like us clogging up the market.  If you can fix our problem, and make it make sense to buy for us, you'll get a significant chunk of the market flowing again.

    I didn't touch on the issue of getting a mortgage because we're in that group that really won't have a problem there - high income, great credit ratings, but for others that's the big holdup.

    We elected the smart guy? How the hell did that happen?

    by nightsweat on Thu Nov 13, 2008 at 06:18:45 AM PST

    •  it might make sense to see a professional (2+ / 0-)
      Recommended by:
      New Deal democrat, kyril

      to look at the status of your loan.  If you hold a non-recourse loan and are underwater, it may make more financial sense to stop paying the loan than to sell the house and still owe money on the mortgage.

      If I remember things correctly, that was actually implicated as a flaw in lending models.  Having a non-recourse loan means you own an implied put option to, in effect, sell the house to the bank for the remaining balance on the loan, minus the cost of dealing with trashing your credit score and dealing with moving.

      you do it to yourself, you do and that's what really hurts

      by Demosthenes on Thu Nov 13, 2008 at 06:45:12 AM PST

      [ Parent ]

      •  Not paying a loan (2+ / 0-)
        Recommended by:
        nightsweat, PsychoSavannah

        if you can cover the loss and/or are under no real pressure to sell (as the commenter has indicated) is both selfish and irresponsible. It's a slap in the face to homeowners who are truly struggling and need real help.

        It's also colossally STUPID to trash your credit score simply because you are underwater on a mortgage.

        "I can't come to bed yet! Someone is WRONG on the Internet!" - XKCD

        by SingularExistence on Thu Nov 13, 2008 at 06:52:59 AM PST

        [ Parent ]

      •  I've had bad credit - it's not worth it (2+ / 0-)
        Recommended by:
        SingularExistence, synductive99

        I'd rather rent and keep the house we're not living in than reduce my credit rating again.  Over 10 years, I literally went from having to secure a credit card to have one to my current near-800 FICO.  No way I'm endangering that.

        We elected the smart guy? How the hell did that happen?

        by nightsweat on Thu Nov 13, 2008 at 07:13:17 AM PST

        [ Parent ]

        •  I would see what the government can do first (1+ / 0-)
          Recommended by:

          then consider having a real estate rent it for you.  They know how to weed out the bad pay and they keep tabs on it when it is empty.

          You never know about renters. One little pet can ruin floors etc. But most people have litter boxes and leave the houses as good as they found them.

          "Democrats can't do any worse than them." O

          by relentless on Thu Nov 13, 2008 at 08:27:24 AM PST

          [ Parent ]

          •  Why involve the government? (1+ / 0-)
            Recommended by:

            Seriously. I don't understand.

            nightsweat has stated he can handle both the current payments and the rent for the new location. It sucks that he's underwater now, and he may be for a while, but he won't be forever. Property values do increase over time - maybe never to the inflated levels they were, but if it's a decent property in a good location he will probably be able to recoup at least some of the loss if he sits tight for a few years.

            He's worked way to hard to needlessly trash his credit when there are other alternatives.

            "I can't come to bed yet! Someone is WRONG on the Internet!" - XKCD

            by SingularExistence on Thu Nov 13, 2008 at 08:59:38 AM PST

            [ Parent ]

            •  property values are still at inflated levels (0+ / 0-)

              and he never stated that he was underwater on the loan.  If he has equity in the house then it may make sense to hold onto it.

              Its a complex decision not to be made quickly.  You have to weigh several variables - how underwater you are on the mortgage, how much cash you have to make by without credit, and how long you think you might be able to drag out the foreclosure proceedings (equivalent of getting free rent for that period of time).

              you do it to yourself, you do and that's what really hurts

              by Demosthenes on Thu Nov 13, 2008 at 04:19:50 PM PST

              [ Parent ]

              •  You are completely overlooking (0+ / 0-)

                the very real costs of a trashed credit rating, which go far behind simply not being able to get a credit card. It also impacts your ability to get a job, obtain affordable health and auto insurance, get accounts with telephone, electrical, and other utility providers, etc.

                Walking away from a mortgage you can still afford is stupid.

                "I can't come to bed yet! Someone is WRONG on the Internet!" - XKCD

                by SingularExistence on Sun Nov 16, 2008 at 07:20:42 AM PST

                [ Parent ]

            •  also, with regards to involving the government (0+ / 0-)

              rational self-interest, etc.  If taking a government handout of some sort on the home loan makes the most financial sense, it makes the most financial sense.  This does result in unintended consequences - iirc, there was an incident in India where the Indian government attempted to bail out farms failing to make mortgage payments, which then resulted in many formerly mortgage paying farms to cease paying their mortgage.

              If the penalty for not making mortgage payments is less than the cost of the mortgage payments, its the best business decision to not make mortgage payments.  There are procedures built into the mortgage contract for that very reason.

              you do it to yourself, you do and that's what really hurts

              by Demosthenes on Thu Nov 13, 2008 at 04:24:24 PM PST

              [ Parent ]

  •  One thing (9+ / 0-)

    No more securitization of mortgages, or other debt for that matter. It's proven to be a very, very, very bad idea.  By passing off the risk to the suckers who bought the securities, banks and mortgage companies and investment banks (who created and sold the securitized debt) lost all motivation to apply appropriate credit standards.

    "I just had the basic view of the American public -- it can't be that bad out there." Marine Travis Williams after 11 members of his squad were killed.

    by Steven D on Thu Nov 13, 2008 at 06:18:59 AM PST

  •  What about the CDS problem? (4+ / 0-)
    Recommended by:
    ferg, zett, kyril, addisnana

    Getting laws back in place to regulate the credit default swap (CDS) market is critical.  These regulations may not be as important for getting the economy back on track, but they are critical for making sure we don't get here again any time soon.

    -- in this unlikely story that is America, there has never been anything false about hope.

    by derekd on Thu Nov 13, 2008 at 06:20:19 AM PST

  •  We should not destroy housing..make it available (7+ / 0-)

    for low income families and the is ok if the government makes houses available at a not for profit price..there used to be public housing. Alot of what I remember was the public housing that was built after WWII for returning GIs was good inexpensive housing .. we should do that now..there are way too many homeless.  

  •  First You Cook The Books (4+ / 0-)

    I am quite serious.  

    When LBJ cooked the books by throwing Social Security in the general accounts, most everybody was happy with the surplus - for awhile.

    Works wonders for corporate bookkeepers too until the inevitable failure but the government has much more flexibility to keep the fraud going for a very long time.  Social Security is the prime example.

    If only Obama knew some good bookkeepers but maybe it wouldn't work this time.

    Whatever the case, Nobel laureate and uber polemicist Paul Krugman makes the point that it is long past time for someone, somewhere, anywhere to take a crack at doing keynesian economics.  Never been tried short of war.

    Robert Reich and others are also into the rather obvious point that idling resources and manpower isn't exactly therapeutic in a severe credit crunch.

    Best,  Terry

  •  Shouldn't the first step be accountability? (5+ / 0-)

    I agree that the government is going to have to go into further debt and buoy up the landing to a new level, but really shouldn't there be an insistence on accounting and transparency to revive this thing called credibility?

    Unless credibility is restored the cheaters will keep obfuscating and cheating undermining any valid efforts to clean up the mess.

    Shouldn't the wolves be thrown out of the hen house first? Shouldn't all the assholes who pilfered and offshored their wealth to avoid fiscal responsibility have their accounts put on hold? Shouldn't the CEO's who cooked the book and flew away on golden parachutes be required to return their blood money?

    It seems to me that addressing the fundamental basis of the corruption must come first, otherwise nothing will staunch the bleeding.

    Custom will reconcile people to any atrocity; and fashion will drive them to acquire any custom. ~George Bernard Shaw

    by cosmic debris on Thu Nov 13, 2008 at 06:31:36 AM PST

    •  The one small problem with that (0+ / 0-)

      is nothing these guys did was illegal.  Not a thing.  The loosening of securities regulation was passed through Congress in support even.  So, all of it is perfectly legal.


      •  Actually they did circumvent regulations about (0+ / 0-)

        insurance by calling insurance side bets by another name. The Bush administration decided to go along with that pretense. They did that because the housing boom was the only thing making the Bush administration look good for the 2004 election. The Feds conspired by keeping interest rates artificially low so as not to stall that bubble which  may not have been illegal but could become so.  The Feds have a lot to answer for.

  •  put a spike through the heart of trickle-down (7+ / 0-)

    economics. This idea is so self-serving for the rich and so wrong.

    May no one ever use this term again.

    the future begins

    by zozie on Thu Nov 13, 2008 at 06:32:58 AM PST

  •  Judicial overload? (2+ / 0-)
    Recommended by:
    zett, kyril

    Given the number of homeowners under water, and the number likely to go underwater in the next six months as the economy continues to implode, I wonder whether the Federal judiciary has the resources to handle mortgage readjustments on a case-by-case basis.  It strikes me that they will have to resort to some kind of standard formula.  Otherwise the system will simply bog down in a traffic jam.

  •  Put some in my 401(k) (2+ / 0-)
    Recommended by:
    martini, kyril

    I would love to be able to put some of my 401(k) in government bonds.  5.4% beats the -25% return I have seen so far this year.  Right now, it is not an option, but I have pushed it to the 401(k) management team.

    Time flies like an arrow, fruit flies like a banana

    by SaltWaterCroc on Thu Nov 13, 2008 at 06:38:01 AM PST

  •  I'm on the infrastructure bandwagon (9+ / 0-)

    Country needs infrastructure repairs badly

    Creates jobs

    Pumps to local economies

    New Deal II, baby, bring it!

    •  There are some issues. (1+ / 0-)
      Recommended by:

      Getting the right long term projects or getting it done in a timely manner.

      You can start a local road project relatively quickly.  Probably within 4 months if you use what is called a design/build process.

      But it would be better, IMO, to fund improvements to the electrical grid, broadband and mass transit.  These projects take a lot longer to get started.

      Thus the dilemma.

  •  Title of diary misleading. (3+ / 0-)
    Recommended by:
    fly, environmentalist, quantumspin

    As you spend 99% of it talking about our problems and the only solution you suggest is nebulous 'spending'

    Spending on what?

    Jobs for sure, but what kind of jobs? A new health care system?

    Maybe some beefed up regulations so we aren't eating and drinking so much poison (both physically and in an economic sense given the ponzi style financing)

    What about tariffs? In a world where shipping containers are no longer moving should we not be supporting local industries?

    I think our farm system needs a total overhaul too. Without money and credit, there will be no oil, without oil, commodity corn is unedible useless waste. That farmers should get subsidies for commodity crops but not actual food people can eat is monstrous.


  •  How Much Spending and What Type? (1+ / 0-)
    Recommended by:

    That is the one element missing from the diary.

    I've heard estimates from $200 billion to 700 billion as what would be required.

  •  Buy every mortgage in America up to $350,000. (0+ / 0-)

    This would immediately get money moving in the economy. People would remain in their homes.  If HOMES are the issue, securing peoples homes seems to be the answer.  I'm guessing $700 million might just do it.

  •  Umm you gotta love the humor in our society (8+ / 0-)

    The problem is there are too many houses!  This is why people are being kicked out of their homes.  

    A great man once wrote of the central problem America faced and its one we still face today:

    We have in American today more wealth, more goods, more food, more clothing, more houses than we have ever had. We have everything in abundance here. We have the farm problem, my friends, because we have too much cotton, because we have too much wheat, and have too much corn, and too much potatoes.

    We have a home-loan problem because we have too many houses, and yet nobody can buy them and live in them.

    We have trouble, my friends, in the country, because we have too much money owing, the greatest indebtedness that has ever been given to civilization, where it has been shown that we are incapable of distributing to the actual things that are here, because the people have not money enough to supply themselves with them, and because the greed of a few men is such that they think it is necessary that they own everything, and their pleasure consists in the starvation of the masses, and in their possessing things they cannot use, and their children cannot use, but who bask in the splendor of sunlight and wealth, casting darkness and despair and impressing it on everyone else.

    I contend, my friends, that we have no difficult problem to solve in America, and that is the view of nearly everyone with whom I have discussed the matter here in Washington and elsewhere throughout the United States -- that we have no very difficult problem to solve.

    It is not the difficulty of the problem which we have; it is the fact that the rich people of this country -- and by rich people I mean the super-rich -- will not allow us to solve the problems, or rather the one little problem that is afflicting this country, because in order to cure all of our woes it is necessary to scale down the big fortunes, that we may scatter the wealth to be shared by all of the people. Huey Long

  •  What About a Temporary Payroll Tax Cut (0+ / 0-)

    This puts money in the hands of the working poor and middle class.

  •  Raise taxes on the rich to cover the interest (7+ / 0-)

    A top rate of 39.6 percent is not high enough, not even with the FICA surcharge on the super rich proposed by Obama.  I'd go to the mid 40s or even 50.  The key thing is to ensure that a proper stimulus package can be funded and to also ensure that lower to middle income people who are getting brutalized by state and local tax takes that have soared get something back fro the federal government.

    You give a rich person low taxes, it's going to end up in an imported yacht or a Swiss bank account.  We've learned this twice, now, the hard way.

  •  You could start (3+ / 0-)
    Recommended by:
    relentless, ajpuckett, kyril

    by confiscating the ill-gotten assets of every individual and corporation who's been a beneficiary of the last ten years.  That trillions of dollars of debt ended up in someone's pockets.

  •  Bonddad left out the second most importnat (9+ / 0-)

    part of Reich's solution, which is that the stimulus must be spent on building infrastructure:

    The answer to the second question is mostly "infrastructure" -- repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future. (Important qualification: To do this correctly and avoid pork, the federal government will need to have a capital budget that lists infrastructure projects in order of priority of public need.)

    Government should also spend on health care and child care. These expenditures are also double whammies: they, too, create lots of jobs, and they fulfill vital public needs.

    A conservative is a scab for the oligarchy.

    by NBBooks on Thu Nov 13, 2008 at 06:50:37 AM PST

  •  Did I really see the word (4+ / 0-)
    Recommended by:
    Bensch, martini, mamamedusa, kyril

    "irregardless" in this diary?

  •  Trickle up Obamanomics... (7+ / 0-)

    I do not understand (and I have no economic background) that if the Republicans could convince people that trickle-down economics worked, then why can we not convince them that trickle up economics works?

    After all, the more tax breaks given to the poor and middle class, the more we go out and spend, the better the stores do, the more sales taxes are collected, the more jobs can be created, the more companies and small businesses succeed, etc.

    Whereas, when the money goes to the top percentage, it mostly gets saved or put into an offshore account...

    If there is one thing that the middle and working class are good at is spending, so the more tax cuts for us, the better it will trickle up...

    Why can't we convince people on this?

    If we had given 700 billion dollars to the middle and lower classes instead of Wall street, they could have paid their mortgages, which would have helped the banks and trickled up, not to mention revitalizing our economy in general.

    Please, someone that knows something about economics talk me down on this one if I need to be talked down!

    "Let's Go Change the World!" ~ Barack Obama

    by Jdories on Thu Nov 13, 2008 at 06:55:26 AM PST

  •  Over a $100 billion a year for leaving Iraq (8+ / 0-)

    Slash another 100 bill or so from other defense related spending.

    Cut off the corporate tax giveaways, save another what, 20 to 30 billion a year?

    Institute single payer health care, inject what, 20 to 30 billion back into the Consumer and Investment side of the equation (it cost folks and businesses an awful lot of money to buy that do-nothing health "insurance").

    and so on and so forth.  We ar ein an economic shit-storm, no doubt.  But the silver linign to 8 years of craptacular governance is that there are LOTS of places to makes gains through policy.

    Dear Mr. President, There are too many states nowadays. Please eliminate three.
    P.S. I am not a crackpot.
    -Abe Simpson

    by fromer on Thu Nov 13, 2008 at 06:58:18 AM PST

  •  Treasury can't borrow all the money it needs: (3+ / 0-)
    Recommended by:
    ajpuckett, kyril, Norm in Chicago

    Per this recent Asia Times article:

    If American citizens don't save enough to buy US government bonds and foreigners are no longer willing, then the only alternative is just to print money triggering inflation on top of economic depression.  

    On the way to such an ugly scenario, while many foreigners are still willing to buy our bonds, the private sector will be sucked that much more dry by a lack of available capital.  

    Damn, the sky may really be falling.

    Republican't Leadership is a dangerous combination of cut-backs and incompetence.

    by casamurphy on Thu Nov 13, 2008 at 06:58:42 AM PST

  •  Import tariffs? (2+ / 0-)
    Recommended by:
    TheGryphon, kyril

    I know tariffs sounds like a dirty word, but I'm firmly convinced that this recession is a direct result of the loss of our manufacturing sector and millions of outsourced jobs.  Especially the wave since 2001 of high paying white collar engineering and software jobs.

    The housing market collapsed because the employment levels dropped.  An engineer with a good job bought a house, then got fired.  He found a "Wal-Mart" job at half the salary that didn't pay the bills, fell into massive debt and foreclosure.

    This is all about jobs, and if we don't get them back, there is no economy.  I really think it's time for a 20% across the board import tariff, on everything, white collar labor included.  Make the price of outsourcing 20% more expensive overnight and it'll reverse course immediately.

    Yes, the cheap plastic crap at Wal-Mart will cost a bit more.  But with millions of jobs returning to the country, the rise in wages will outpace the rise in prices.

    Everyone needs food and shelter, and those cost money.  Either we get the jobs back, or everyone's on welfare, and that costs money too.

    Either we pay more at the store and have a healthy fully employed economy, or we pay taxes for welfare.

    •  I don't think so (0+ / 0-)

      That sounds like the mistakes people made at the beginning of the Great Depression.  It took FDR's year of deficit spending to dig out of the hole his predecessor's policies had triggered.

      Not that the solution you posit sounds harebrained.  Just that I think it's deceptively dangerous.

      Been wiretapped lately?

      by m00nchild on Thu Nov 13, 2008 at 07:43:13 AM PST

      [ Parent ]

  •  Give me (a federal employee) an affordable home (2+ / 0-)
    Recommended by:
    vrexford, kyril

    close to Metro that I can afford.  

    I can't even afford to pay rent in DC ($1,500 for a frigging studio??).

    Revalue the dollar.  Pay federal employees what they'd make in the private market (if there was one left).  Help us with student loans (another unnecessary expense we incur).  

    And kick irresponsible borrowers into public housing/renting.

    "It stinks." - Jay Sherman

    by angry liberaltarian on Thu Nov 13, 2008 at 07:05:36 AM PST

  •  The party is over, my friends. (10+ / 0-)

    The solution, regardless of whatever the government tries to do, is going to be: Suffer. Have less. Use less. Travel less. Drive less. Eat less.

    Because whatever the government tries to do, when all this is over the rest of the world is no longer going to be economically enslaved to the American consumer. Which means we are only going to be allowed to consume at a level corresponding to our own production. And that's "production" that excludes the bogus, valueless "work" performed by the financial industry.

    The folks who are really going to be hurting, of course, are the wealthy. Because from here on out, they aren't going to be able to have a slave produce a running shoe for a dollar, and then resell it in America for $95. No, those shoes will have to be Made in America, by Americans, which means that either the cost of producing shoes is going to go way, way up, or the price of shoes is going to have to come way, way down.

    But the wealthy aren't going to take this sitting down. They're going to try to drive us deeper into a service economy -- one in which most of us spend most of our time serving them -- where us proles just live with worn-out, broken-down goods for longer periods of time. In response, we're going to need to push for single-payer health care, for higher-quality goods, for a general leveling out of the marketplace, and ultimately, for an economy devoted not to consumption but to satisfaction of human needs.

    Good luck with that, though. Less than half of even the dKos populace would be receptive to the sort of socioeconomic changes this would require. (Hint: If "Socialism" and "Unions" are bad things to you, the plutocrats have effectively propagandized you and thus marginalized your political power. You are their willing slave, even as you rail against their excesses.)

    I am further of the opinion that the President must be impeached and removed from office!

    by UntimelyRippd on Thu Nov 13, 2008 at 07:05:38 AM PST

    •  the willing slave ... (2+ / 0-)
      Recommended by:
      UntimelyRippd, synductive99

      that is a fabulous turn of phrase.  Shades of Huey P. Long ....

      would make quite a dissertation title too ...

      "The Willing Slave :  How Reaganite Economics created an underclass which enthusiastically participated in its own degradation"

      The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

      by TheGryphon on Thu Nov 13, 2008 at 08:08:07 AM PST

      [ Parent ]

      •  Your sig echoes fearfully down through 200 years (1+ / 0-)
        Recommended by:

        to chill the souls of those of us who occasionally hope for peace and justice.

        sigh. pacifism notwithstanding, I understand the sentiment in this:

        I am further of the opinion that the President must be impeached and removed from office!

        by UntimelyRippd on Thu Nov 13, 2008 at 09:57:12 AM PST

        [ Parent ]

        •  peace and justice (1+ / 0-)
          Recommended by:
          its an eternal question.  Yes, in the perfect world we all strive for, we can have Peace AND Justice.  Forced to choose in our demonstrably imperfect union, I'll take Justice.

          Personal preference, I understand you feel differently.  Or maybe your just less jaded, less worn down by the last 30 years...

          just remember, "Every man gotta right to decide his own destiny" - Bob Marley

          The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants - Thomas Jefferson

          by TheGryphon on Thu Nov 13, 2008 at 10:09:58 AM PST

          [ Parent ]

          •  Well, I'm not sure i DO feel differently. (1+ / 0-)
            Recommended by:

            I mean, look at the vid I embedded.

            I always used to get pissed off, listening to Americans talking about how black South Africans needed to take a peaceful approach to getting their rights -- every one of which Americans would have subscribed to the NRA's "cold dead fingers" motto.

            I am further of the opinion that the President must be impeached and removed from office!

            by UntimelyRippd on Thu Nov 13, 2008 at 10:18:32 AM PST

            [ Parent ]

    •  it all was part of (1+ / 0-)
      Recommended by:

      the Hegemony of the Dollar.

      The purest form of Capitalism is Organized crime!

      by KingGeorgetheTurd on Thu Nov 13, 2008 at 08:15:24 AM PST

      [ Parent ]

  •  No such word as "Irregardless" (9+ / 0-)

    It's either "regardless" or "irrespective". Choose one.

  •  What about Consumer Credit? (2+ / 0-)
    Recommended by:
    kyril, shann

    Here's where the plan runs into a big problem.  Bush is leaving Obama a fiscal disaster.  Total US debt has increased from $5.8 trillion in 2001 to $10.6 trillion today.  From a debt to GDP ratio the increase has been from roughly 57% to roughly 72%.  These increases indicate that no one in Washington has been able to make any tough choices for the last 8 years. As a result the federal finances are now in terrible shape.

    Emphasis mine...

    'Tough choices' is code for 'cut entitlements'.

    Unless by tough choices you mean biting the hand that corporate hand that feeds you, or reducing military spending...

    McCain/Palin '08 - Government Sucks and We'll Prove It!

    by k9disc on Thu Nov 13, 2008 at 07:06:54 AM PST

  •  Signalling Seriousness Required (2+ / 0-)
    Recommended by:
    ajpuckett, KingGeorgetheTurd

    The US Government has to signal that it is willing to increase government revenue over time to pay for new borrowing, to stop the increase in government debt and to eventually reduce the size of government debt relative to the economy (ideally through economic growth).  John McCain's manatra of no tax increases is a recipe for insolvency since it mean that a political party with close to 50 percent of the support of the American people still believes there is no connection between revenue collection and spending.

    Obama must start out by increasing tax rates a bit on capital gains, dividends and high income earners (particularly highly compensated employees of public coroporations since the current low marginal rates just encourages them to further loot public companies with the connivance of their boards made up of other highly paid executives of public corporations).

    Can somebody tell me what is the functional difference between Keynesian economics and Supply side economics in bad times (in good times Keynes believed the govenrment should pay down its debt so as to be able to stimulate the economy during bad times)?  Both are based on printing money - Keynes via unfunded government spending and Laffer through private spending paid for by unfunded govenrment spending.  OK under Keynes you get investment in infrastructure and help to most people.  Under Laffer you get money in the pockets of the rich that trickle down.

    If we are going to print money I would like see it spent on infrasturcutre and investment - not on increasing the value of Palm Beach estates.

  •  Its inevitable (1+ / 0-)
    Recommended by:

    as one ex-governor of the fed said last month, when are we going to inflate assets so we can rid ourselves of the mortgage issue. You know. print like mad.

    It serves two purposes, raises the bad assets now in jeopardy and provides the funds to start new projects. Sure long term it will hurt, but it hurts banks more than people in a large way. Eventully people have wages rise but banks are stuck with loans that become valueless over time.

    So stop kidding ourselves already, its going to happen, might as well do it now before we lose everything else.

    The purest form of Capitalism is Organized crime!

    by KingGeorgetheTurd on Thu Nov 13, 2008 at 07:12:27 AM PST

    •  NOOOOOO (0+ / 0-)

      It is impossible to inflate our way out of this mess, in fact, trying to do so may destroy our economy and cause the overthrow of the government!

      Do you think interest rates are going to stay low when dollars are printed like mad? Do you think the Chinese are going to accept 4% rates for T-bills when inflation is running at 15%? No, interest rates are going to increase to like 20%, maybe higher, to cover existing inflation plus the risk that the Fed is going to do it more.

      At that point, it is going to be completely impossible for us to service the national debt, that is, without printing even more money, driving interest rates up even higher!

      Every country that has tried this has had massive problems, many/most of them fell apart in hyperinflationary collapses. Do you want Sarah Palin elected in 2012 as a response to having to pay $20/gallon for gasoline? Don't think it can't happen!

      •  I think you misundertood (0+ / 0-)

        what I was saying. Its not an option, it inevitable. Bernake and Paulson are both treating this crisis like it was the depression all over again. They are misreading this or are intentionally pushing the "shock doctrine", but we are facing the Wiemar republic scenario, not the crash of 29.

        All I am saying is, its going to happen, might as well try to steer it before we lose control of the whole thing. Then it will be out of our hands.

        The purest form of Capitalism is Organized crime!

        by KingGeorgetheTurd on Thu Nov 13, 2008 at 09:02:14 AM PST

        [ Parent ]

    •  It will ruin peoples savings (3+ / 0-)

      to inflate.  I hope we don't have inflation.

      "Democrats can't do any worse than them." O

      by relentless on Thu Nov 13, 2008 at 08:44:59 AM PST

      [ Parent ]

  •  How about the whole $700 billion (0+ / 0-)

    Our congress appropriated $700 billion for a bank bail out, and apparently it won't be used for the advertised purpose.  So why not use it for an economic stimulus package, instead?  Doesn't Paulson have the authority to spend it any way he wants to?

    Regarding the idea that taxing the wealthy would only provide a drop in the bucket... Where do you think the money is, then?  The top 1% of earners (over $380,000/year) paid tax at the rate of around 23% (according to The Tax Foundation, source IRS.)  This paid almost 40% of the government revenue for the year.  The remaining 99% of taxpayers paid the remaining 60% of the government's revenue.

    If the tax rate on the top 1% was doubled, to 46% (surely not a confiscatory rate, and a rate lower than they've enjoyed at some times during my lifetime) then the government would collect 140% of its current revenue.  

    If you change this analysis to the top 5% (over $150,000 annual income, average tax under 21%) then the government's revenue would increase to 160% of what it would otherwise be.

    This is not chump change we're talking about here.

    •  I have read that the bottom 50% of taxpayers (0+ / 0-)

      earn 12% of the income.  Notice that is taxpayers, so that doesn't include most of those on Social Security unless they made money other than just Social Security.

      "Democrats can't do any worse than them." O

      by relentless on Thu Nov 13, 2008 at 08:47:41 AM PST

      [ Parent ]

  •  Securitized Mortgages (0+ / 0-)

    I think it is straight forward.  Pass a law that says all mortgages must be rewriten to a certain standard, say mortgage payments do not exceed 38%, etc.  By passing such a law, the people who service securitied mortgages would be required to re-write the mortgage.

    If a particular mortgage cannot be made to conform by a combination of lengthing the loan or the inclusion of a ballon payment, the mortgage is run through the FHA.  The FHA could go for as much as 15% stake in the house.  If this fails, the homeowner is out.  The government could buy the mortgage paper at 85% of face value and slowly evict he home owner to keep the economy moving.

    The exact numbers and requirements are, of course, a few of the items that should have been regulated in the first place.

    •  This also pumps money into economy (0+ / 0-)

      Banks selling mortgages at say 85% of face value when they were going to take a 50% loss through foreclosure will be a ton of money going into banks and mutual funds.  That is the loss is not as bad as first planned on.

  •  Stop Bailing out failed companies!!!!!!!! (4+ / 0-)

    They are losing money b/c their business model is a failure so why throw more money at a failure? doesnt make any sense to me

  •  The ridiculous thing is that the ONLY reason they (0+ / 0-)

    are asking for all this new money is to pay off their board employees and not their workers! This money isn't going to get to the people that need it most. The plan is doomed to fail and there will be a depression by the time Obama has finished his first term. There, your daily dose of sunshine/reality.

  •  We need to take the medicine now (1+ / 0-)
    Recommended by:

    This is basically a a multi-trillion kick of the can down the road. You are correct there are no good choice .
    The one choice that we need to make is to suffer now and start rebuilding for the next generation or hope we can hold off and let them do it.

    We were responsible. We should take the heat. Personal responsibility is not the sole domain of a long forgotten GOP platform. Lets make it part of ours.

    Let em fail. Lets default. Lets start over again. We don't have anything in the first place. The country is the proverbial homeowner, underwater and no place to go but turn in the keys. Now is a much better time than any. Delaying the inevitable only makes that much worse.

    Adding more debt is never an answer when the debt is not payable becuase of the inability of congress to run a balanced budget.

    Support Col Hackworth's because tomorrow is just a promise, not a guarantee

    by Dburn on Thu Nov 13, 2008 at 07:22:38 AM PST

  •  Spread the Wealth - to small businesses (0+ / 0-)

    (fictional example follows)
    10 Billionaires drop $150M on 10 yachts. They're fat & happy and two or so yacht manufacturers employ 150 people apiece to build the boats. So you've got 300 trickle down happy employees. I say, let's tax the billionaires $20M apiece (a drop in their bucket) to create a fund of $200M and create a small business agency from the proceeds that farms out $1/2M apiece to small businesses that bring in qualified plans to grow their business. That $20M tax would result in four hundred small business owners growing and if that growth included say, two new employees apiece, 1,600 new workers injecting cash and growing other businesses.

    Now those billionaires will have to sacrifice and buy a $130M yacht instead of the $150M yacht, and maybe those two yacht builders may have to lay off a person or two, but they'll have plenty of work form the growth of spreading the wealth - the right way.

    The repubs grabbed that spread the wealth meme and interpreted it to mean a handout (like welfare.) I hope that any increase in taxes on the wealthy is applied to become a small business growth engine.

    "People the world over have always been more impressed by the power of our example than by the example of our power." Bill Clinton

    by johngoes on Thu Nov 13, 2008 at 07:26:53 AM PST

  •  Mitigate the deficit by increasing revenues... (0+ / 0-)

    Why is no one talking about significant tax hikes to mitigate the expansion of the deficit under the needed spending programs, especially at the upper-income levels? Take back the ill-gotten gains of the super-rich of the past eight years to fund some of this needed government spending. Maybe not enough to balance the budget, but at least to minimize the amount of new debt. I'd support going well beyond restoring the Clinton-era top marginal tax rates. Let's go to 45%, or 50%, or possibly more on incomes above, say, $250,000. Remember, we had a 90% top rate after WWII. It's time to pay for all that spending we aren't willing to cut. I make less than $30,000 a year, and taxes sure as hell aren't what I'm worried about being able to pay for. Even if my taxes went up, if they were paying for things like effective economic stimulus, renewable energy investment, universal health coverage and increased scientific research budgets, I'd gladly pay more. Joe Biden was right, paying taxes is our patriotic duty, now more than ever.

    •  Okay, people here are talking about tax hikes (1+ / 0-)
      Recommended by:

      But why are none of the "serious people" in the establishment media talking about it? That is the elephant in the room, IMHO, that the government needs to spend money and it will need to raise revenues to do it. People seem to have forgotten that there is a vast historical precedent for much more progressive taxation than we have now, and the economy worked MUCH better for the middle class back then. Spreading the wealth is good for everybody except the greed-heads.

    •  Eisenhower's top rate was 91% .. (3+ / 0-)

      91% for the top bracket - 24 brackets in all.

      We need these back, phased in as quickly as possible without shocking the system.

      2008, the Year the Republican Party dissolved into a little pond of goo

      by shpilk on Thu Nov 13, 2008 at 09:28:26 AM PST

      [ Parent ]

    •  Estate tax (0+ / 0-)

      Even better re-institute the estate tax. For the most part this penalizes accumulated and hoarded wealth without impacting productive activity.

      Similarly pushing the top marginal rates up likely won't have much of an impact on the economy.

      Oh and remove the cap on the payroll tax to put Social Security on a solid footing.

      The rich will howl, but frankly they can go "Cheney" themselves.

  •  help people protect their IRA-401K investments (4+ / 0-)

    The Feds should suspend the requirement that IRA and 401K investors-savers must withdraw a percentage of their money each year and pay taxes on the amount.

    I know my personal account has lost so much money during the last months that to have to withdraw more would do me great financial harm. I would have to sell stock to withdraw the money when the stock has lost much of it's value. Add the tax payment requirement would add to my losses.

    If the Feds want to help large numbers of people, this would be a good move to make.

    •  And then everyone pulls out (0+ / 0-)

      and stock prices plummet more.

      Really we should never have allowed our retirements to be feed into the stock market in the first place.

      Hail to the Chief-Elect!

      by sadpanda on Thu Nov 13, 2008 at 09:55:06 AM PST

      [ Parent ]

      •  Actually (1+ / 0-)
        Recommended by:

        This would encourage people to leave their money in their accounts and therefore in the market.

        Though if you are smart you have your account structured to move from equities, to bonds, to cash on the required schedule so you don't take too much of a haircut if equities or bonds get hit by a bear market.

  •  actually, a CMU prof has had a sound plan re hous (1+ / 0-)
    Recommended by:

    housing. Allan Meltzer criticized Paulson's approach Paulson Shifts Economic Rescue Plan to Focus on Boosting Creditand argued that what should be done instead is that, starting immediately and for a period of a year or two, the IRS should create significant tax incentives to buy homes. Meltzer said the fundamental problem is not defaulted mortgages but in oversupply of houses, and that Paulson never had a plan.

  •  Cut back on defense spending (4+ / 0-)

    The US comprises ~ 4.5% of the world's population and we generate approximately 29% of global economic production

    and we spend close to 50% of the world's total military expenditures. Wikipedia:

    The 2005 U.S. military budget is almost as much as the rest of the world's defense spending combined and is over eight times larger than the official military budget of China. (Note that this comparison is done in nominal value US dollars and thus is adjusted for purchasing power parity.) The United States and its close allies are responsible for about two-thirds of the world's military spending (of which, in turn, the U.S. is responsible for the majority). In 2007, US military spending was above 1/4 of combined industrial and agricultural production in the USA.

    Military discretionary spending accounts for more than half of the U.S. federal discretionary spending, which is all of the U.S. federal government budget that is not appropriated for mandatory spending.

    Re-define our geo-political objectives and we can reduce military spending and thereby improve our national fiscal position.

    •  I'm with you. Compare to other G spending; (0+ / 0-)

      I understand generally that the multiplier for public capital project spending (my familiar example is public transit projects) is more than the multiplier for defense spending.  Public projects also create direct and indirect job growth, and both temporary (i.e., construction) and permanent employment (the operators and maintenance folks for the trains).  What are the actual multipliers for these two?

      As an example, a 2006 project I am familiar with  cost about $700 miliion, and creates 13,000 direct and 13,000 indierect jobs in the local market (Dallas).  What is the actual employment creation for defense dollars spent, compared to public capital projects?

      Anyone? (IANAEconomist, as many here are not).

      Torture is Wrong!

      by tom 47 on Thu Nov 13, 2008 at 08:28:28 AM PST

      [ Parent ]

    •  And redirect the spending into domestic infrastru (0+ / 0-)


      Start with high-speed rail on the east coast, across to Chicago and then down HWY 61 to California.

      Massive investment in nuclear electricity generation would be a good way to go too.

      Serious incentives for consumers to green their homes and cars would also help.

      Only the most naive gamblers bet against physics, and only the most irresponsible bet with their grandchildren's resources -- WILLIAM H. CALVIN

      by Randomizer on Thu Nov 13, 2008 at 08:53:06 AM PST

      [ Parent ]

  •  Solution: Sunrise very progressive tax increases (4+ / 0-)
    Recommended by:
    Bensch, ajpuckett, mrchumchum, creamer

    Bonddad frames the problem nicely.  Here's a out of the dilemma he poses.

    If tax increases are passed now or very soon and phased in over, say, Obama's first term, or longer, that could alleviate the concerns about increasing the deficit in the short term, i.e. years 1 and 2.

    If the tax increases are highly progressive, i.e., larger for higher incomes, then those who benefit most from the success of the recovery will help to pay most for it.

    And, BTW, what would be the downside of increasing the inheritance tax on large estates, say above $5 mil., immediately?  This would go some way to assuring lenders (purchasers of T bills) that our government can be trusted to pay its debts.

    What appeals to me about this strategy, is that it's the reverse of what Bush has done with his stupid tax cuts that sunset. Hah.

    We don't need to "Drill, baby, drill," we need "Change, baby, change."

    by Neighbor2 on Thu Nov 13, 2008 at 07:49:49 AM PST

  •  Redistribute wealth. (3+ / 0-)
    Recommended by:
    ajpuckett, AnnCetera, creamer

    The argument upthread made me realize just how much the Dems have been cowed from our principles by right wing lies.

    I am a redistributionist.  

    I am a Democratic SOCIALIST.  

    I believe in spreading the wealth.  

    I believe capitalism is structurally unfair to the poor and wealth always flows to the top.  The wealthy are inherently advantaged to make more wealth.  The ONLY forces to counter it are unions and the government.  Obama has it right - we should lower taxes on the lower brackets and RAISE IT on the higher.  Bill Gates and Warren Buffet have it right, too.  The estate tax is good.  Personally, I think it should be doubled, quadrupled, I don't care.  The notion that people have some inherent right to their money when the nation that gave them the opportunity to make it verges on collapse is utter nonsense.  It is cowboy capitalism and we are suffering greatly from it.

    •  And it encourages and rewards hoarding (1+ / 0-)
      Recommended by:

      Yes, its nice to be able to pass on money to your children.  Yes, if you are financially secure you want your children to be too.  But at some point its gets excessive.

      Really the economy is better served by you giving that money to your kids to use before you die.  Hoarding money your whole life and knowing that even if you don't spend it all your kids may is the wrong attitude.

      Of course this somewhat ignores the fact many people invest large portions of the estate.  However given that it benefits the economy to have more people spending, we create a peverse incentive with low estate tax for people to hold on to money even when they can't take it with them because it will keep their family weatlhy for generations to come.

      And I won't start my rant about it not being double taxation.  Triple the estate tax for large estates and see that money being put to better use not instead of people trying to build the longest dynasty they can.

      Hail to the Chief-Elect!

      by sadpanda on Thu Nov 13, 2008 at 10:31:29 AM PST

      [ Parent ]

  •  What form would a $600 billion stimulus take? (0+ / 0-)

    That's amounts to $2,000 per capita. Seems like a drop in the bucket on most family balance sheets. Median household income is $48,000 so a family of four gets about a 16% one-off bonus. It might pay off the credit cards temporarily.

    Or would it be some kind of New Dealish public-employment program?

    Housing prices are still in a bubble, per the Schiller index. Housing should be more affordable, & the government shouldn't attempt to prop it up.

    With all the talk about the US Treasury buying equity stakes in banks, propping up Detroit and the housing industry, it recalls the idealized corporatist state of Mussolini, once lauded in a big spread on the pages of Fortune in the 1930s. Maybe the time for a kinder, gentler national socialism has finally come, 70 years later?

    •  We're going to need a WPA type (0+ / 0-)

      program anyway, because of the high unemployment.

      Insulating homes and businesses should be a high priority, to reduce demands for energy. Putting people to work to do this at government expense is a win-win for consumers, the economy, and even the government.

      Give the money directly to the poor and working classes; cut it off at $100K/year or so, it will go farther.

      See my post above about the rest.

      2008, the Year the Republican Party dissolved into a little pond of goo

      by shpilk on Thu Nov 13, 2008 at 09:26:25 AM PST

      [ Parent ]

      •  There must be jobs of all kinds. (0+ / 0-)

        Many of the unemployed are not healthy 30-year-old men who can do physical labor.

        Some of us are women and men over 50, who have been cut loose by companies as we got too expensive in salaries and benefits.

        We are not old enough to retire, and we are not physically disabled enough to qualify for federal aid money. We have to work.

        If all we have are jobs that resemble the old WPA/CCC jobs (building roads and bridges, landscaping projects, installations of new technology), unemployment is still going to be rather high.

        What are we supposed to do?

        "It always seems impossible until it's done." - Nelson Mandela

        by Brooke In Seattle on Thu Nov 13, 2008 at 04:26:56 PM PST

        [ Parent ]

  •  In 1933, (0+ / 0-)

    a Keynesian approach was optimal.  In 2008, I think we are far too leveraged.  I offer these thoughts:

    1. initially lower taxes to put money into consumers and businesses' hands without running the Treasury printing presses;
    1. cut government spending radically, as Gov. Patterson and Mayor Bloomberg are doing in NYS and NYC, respectively; then
    1. once a recovery has come along, raise taxes slowly to avoid government debt from crowding out the private borrowing needed for a sustained recovery.

    I think Pres. Obama needs to look at Thatcher as a role model (warts and all), rather than Roosevelt.    

  •  No. Housing demand is actually high. (5+ / 0-)

    The problem is not demand for housing, the need and desire for housing, rent and purchase, is high.

    The problem is that many people hold houses whose market value is less than they paid for them due to speculative bubble.

    Addictionally many of these homes are held by people who could never afford them, absent a recession much less in a recession.

    This created a liquidity crisis (no loans for homes and businesses) when mortgage fraud/bubble problem then triggered a liquidity crisis as a number of these bad mortgages were multiplied in value but complex financial schemes.

    The uncertainty created by the financial collapse then creates a recession because people don't know what is going to happen and stop purchasing cars, homes, etc. until they know.  So we get GM/Ford seeing 30% drop in business, laying off 30% of workforce etc.

    Key is getting back to the bottom of the crisis and refinancing all those mortgages at 30% reduction in value with homeowner, bank, mortgage bond owners all sharing the loss.

    We still haven't really done that. The "bailout" was as complex and indirect as the mortgage backed bonds that caused the problem.

    Once the mortgages have a real value, the bonds have a real value and economy starts moving forward with everyone's home and savings worth 30% less.

    In meantime, banks and major industry like GM/Ford get government help to stay in business since bankruptcy adds to the problem.

    People get help with mortgage, unemployment.

    Economy gets help with industry/job creation via infrastructure rebuild and focus on new alternative energy industry which US economy needs.

    •  I second this argument (2+ / 0-)

      We had a "false" market for a long time, and now are suffering the consequences.  The market will correct itself, and IS correcting itself, but only at a huge cost to everyone involved and the economy as a whole.

      It's an interesting proposition to refinance everything at current market value.

      Save the parrots: Drink shade-grown coffee!

      by oscarsmom on Thu Nov 13, 2008 at 09:10:28 AM PST

      [ Parent ]

  •  Thus, fiscal bankruptcy follows moral bankruptcy (3+ / 0-)

    As pointed out in the book, "The Cheating Culture," cheating has increased in recent years as more and more Americans convinced themselves that deceit is not only acceptable, but necessary to achieve success.  We now see where that kind of thinking leads.  It is heartening to hear that Obama is committed to transparency and integrity in the new administration.  But, success requires a similar commitment from all Americans.

  •  Think of it This Way (0+ / 0-)

    The debt/GDP ratio is going to go up one way or another, and that increase can come from an increase in the numerator or a decrease in the denominator. Which would you rather have? I know you've already staked your claim, but sometimes it's helpful to hear another angle.

  •  The United States of America: too big to fail? (1+ / 0-)
    Recommended by:
    In her own Voice

    "The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.

    Maybe not.  Maybe we've been gawking at the homes, cars and livestock floating down the swollen river of debt, not noticing that the bank we're standing on is itself undermined by the flood, and about to sweep us away as well.

    "Well, yeah, the Constitution is worth it if you can succeed." -Nancy Pelosi, 6/29/07.

    by nailbender on Thu Nov 13, 2008 at 08:13:20 AM PST

  •  an oldie but a goodie (0+ / 0-)

    Politicians will never allow another Great Depression.  As such they will do what governments always do:

    Inflate the currency!

    That will stabilize or increase asset prices.  Borrowers will gleefully repay lenders (with cheaper dollars).

    Yes interest rates will go up but if you have fixed rate debt, you don't care about that.

    I continue to bet:

    1.  Gold at $2000/oz
    1.  Oil at $200/bbl
    1.  10-year notes at 10% and rising
    1.  DJIA at 5000 and falling  

    Why when I think of Bush does the bumper sticker "Chaos Panic and Destruction -- My Work Here Is Done" come to mind?

    by jimsaco on Thu Nov 13, 2008 at 08:14:21 AM PST

    •  Re (0+ / 0-)

      Yes interest rates will go up but if you have fixed rate debt, you don't care about that.

      You care if you're the US government running a massive current accounts deficit. We can not finance our government debt at high interest rates. Of course, you could always print the money to finance government debts as well, which of course just makes interest rates rise even further into a hyperinflationary spiral.

      Of course, if we're going to go that route, why even bother with having President Obama when we can just contract the situation out to this guy:

    •  You'll need a wheelbarrow to buy a loaf of bread (0+ / 0-)

      2008, the Year the Republican Party dissolved into a little pond of goo

      by shpilk on Thu Nov 13, 2008 at 09:21:35 AM PST

      [ Parent ]

    •  The inflation plan makes both parties happy (1+ / 0-)
      Recommended by:

      The plan is to screw renters and savers to better the numerical 'value' of homes and 401k's. IMO it won't work as the deflationary spiral will correct asset values to the point where homes are worth 3x income. At 12k I expected a correction to 7k, I now think we will go much lower to somewhere around 4-5k or 1995-1996 levels before the tech bubble started. The unwinding will not be pretty.

  •  Progressive taxation works. (2+ / 0-)
    Recommended by:
    ajpuckett, edbb

    It not only protects middle and low income people, it protects high income by providing the vehicle for their wealth. The middle class.
     We need to rebuild our economy, then we need to pay down our debt. The middle calss tax cut is needed right now to stimulate spending and put fairness back into the system, but I suspect in the future some of cut will be erased to help the country regain fiscal disciplene.

  •  There's only two questions left... (0+ / 0-)
    1. What is the real debt limit for the federal government?
    1. How much money can we print once that debt limit has been reached?
  •  There is one man who has been nearly flawless... (0+ / 0-)

    I know some of the crazy partisans here won't acknowledge it, but Ron Paul's Advisor PETER SCHIFF(Youtube him) has been the ONLY man with an HONEST realistic approach and grasp of the situation...IF WE DON'T PUT ASIDE PARTISANSHIP SOON AND REAAAAAALLLY COME CLEAN WITH THE PROBLEMS WE ARE IN FOR A VERRRRRYYYYY LONG AND HARD TIMES.

    Its time to stand up and act like frickin adults and not run and hide and beat around the bush like children

    Opening the Credit lines is not the answer it is the PROBLEM...PEOPLE DON"T HAVE MONEY to pay back the credit....ITS TIME TO STOP SPENDING LIKE CRACKHEADS AND SAVE.

    "Those who cast the votes decide nothing. Those who count the votes decide everything." -Josef Stalin

    by ChemicalsInTheSky on Thu Nov 13, 2008 at 08:27:24 AM PST

  •  I keep hearing "experts" (7+ / 0-)

    saying that housing is the root of the problem. I disagree.

    Housing is just a symptom of what's really wrong.

    The fact is that average working people have been losing real wealth since the 80's. Therefore, many have tried to maintain their standard of living by relying on real estate prices always rising and borrowing beyond their means.

    The real estate collapse has served to reveal this festering problem that has been ignored for far too long.

    When so many people have less real income and when our economy produces less as more and more people can only find employment in service industries, the effects "trickle down" throughout the economy.

  •  Immediate Surtax on Carbon Based Fuels (0+ / 0-)

    The Federal government should immediately set a tax on carbon based fuels for the following reasons:

    1. to raise revenue
    1. to dampen the ability of foreign monopolists to raise prices in the future
    1. to signal to alternative energy providers that their investments will not be sacrificed as they were in the early 1980s when oil prices slumped
    1. to rub automakers noses in the fact that icnreased efficiency and increased CAFE standards are what the market will continue to demand.

    Oil prices have fallen below $60 - time for the American people to take money off the table of the oil producers - both domestic and foreign.

  •  Bottom Up Stimulus as Opposed to Top-Down (0+ / 0-)

    They need to do a second stimulus but model it with a bottom-up approach.  Every taxpayer, regardless of income, should get a stimulus check in the thousands of dollars.  The government would recoup a portion of this back in taxes.  This would enable people to pay off the debt which is tearing down this economy (student loans, medical bills, credit cards), as well as helping those people thinking of buying a house come up with a downpayment.  The $600.00 tax rebate last time didn't do anything because it wasn't big enough.  They need to do it again and do it big.

  •  I deeply disagree with housing (1+ / 0-)
    Recommended by:

    Supply is at sky-high levels while demand is at low levels.

    Isn't that the definition of anything (and everything) that's wrong with our industrial economy. We are out of equilibrium because there is more 'supply' at high prices than demand.

    Where I disagree is the diagnosis of what to do, the focus on one side of the equation. What we should do is make housing affordable, ie, lower its price. Lower prices is good, not bad. The problem isn't the supply side (we have too little housing in this country). The problem is the demand side: we don't have an economy that produces jobs that pay people wages to afford housing, we don't have an economy that puts construction workers to work rebuilding abandoned parts of our cities, we don't have an economy that helps poorer people buy homes (the home mortgage interest deduction is incredibly regressive, for example), we don't have an economy that helps young people get houses (how are you supposed to make a down payment when you've got $20,000 in school debt?), we don't have a regulatory framework that requires real estate agents and mortgage brokers to be fiduciaries of their clients, etc.

    This has led to one third of recent homes sales leading to a loss for the seller (For a more complete explanation, see this story from my blog).

    No, rampant speculation and short-term sales have led to home sales ending up in a loss. The idea that someone can buy a house and sell it three years later for a guaranteed profit is absurd. The National Association of Realtors marketing primary residences and second homes as if they're merely financial products like stocks and bonds led to short-term losses. Loose monetary policy of the Greenspan Fed led to short-term losses. Low-downpayment loans, NINJA loans, lack of transparency, fraud, etc.

    Responsible buyers, ie, people who bought a house they could afford and lived there for several years, have made money. The only losses have been either 1) people buying houses they can't afford (which inevitably causes a problem at some point), or 2) people speculating on real estate, in which case, we shouldn't care whether people make money or lose money. Investments go up and down; that's part of the risk/return calculation.

    The question becomes what can be done to deal with this situation?

    The answer is there is little the government can do directly.  Remember the central issue is massive oversupply of housing.  Unless the government wants to actually start buying properties outright or demolishing houses through its eminent domain powers to lower supply there isn't much to be done directly.

    This is quite misguided because it's based on the flawed premise above, namely, that the massive oversupply of housing assumes a fair price. In reality, there are 'too many' houses at the high price they're offered. Because the problem is pricing, not supply, there is a lot the government can do.

    1. Government can directly transfer wealth to current homeowners (ie, shift the supply curve).
    1. Government can directly transfer wealth to potential buyers (ie, shift the demand curve).
    1. Government can indirectly transfer wealth to homeowners by changing bankruptcy and foreclosure laws.
    1. Government can indirectly transfer wealth to homeowners (and the community in general) by building parks, bike paths, mass transit, schools, hospitals, fire houses, and other infrastructure that raises property values and standards of living.
    1. Government can indirectly transfer wealth to both homeowners and potential first time buyers by supporting economic policies that create jobs and raise wages. After all, that's the core problem. There are plenty of people who want housing in this country (in fact, lack of housing is a major problem in our country). The problem is that many people can't afford housing at the current prices housing is offered, which are still higher than the fundamentals of things like wages, employment, rental options, and inflation support.

    These policies aren't even that expensive, relatively speaking. If the government offered $100,000 toward a downpayment to any first time home buyer who closes a house by the end of the year on a five year vesting cycle (ie, if someone sold the house next year, the government would get the first $80,000 of the sale), and 10 million people took the government up on that offer, it would only cost about a trillion dollars, far less than the financial bailouts done by the Fed and Treasury so far. A program like this would 'stabilize' prices and virtually eliminate the immediate problems in credit and securitization because nobody would be defaulting on anything anymore. And, it would do it in a way that would encourage community investment and transfer wealth downward, to the people whose marginal propensity to consume is greatest, instead of upward, to the people whose marginal propensity to consume is smallest (or less politically correct, people who hoard money).

    You've written a lot about economics on here, so I'm curious why you take such an approach that sounds downright defeatist? We have lots of options. We don't have to use tax credits and so forth that benefit wealthiest people the most. We can have direct government involvement to actually strengthen communities while helping the people who most need help and whose investment will return the most over the long term.

  •  Essentially the author is arguing for price (0+ / 0-)

    controls, which have never worked well in any economy.

  •  If we could spend our way out of this... (0+ / 0-)

    the government would have "saved us" a looong time ago.
    But this is the broken window fallacy (see wikipedia entry).

  •  I propose lottery tickets at 5 bucks a crack (4+ / 0-)
    Recommended by:
    shpilk, mediaprisoner, fhcec, Lopez99

    winner gets to slap the cuffs on Bush!

    Sell tickets worldwide.

    Think it might raise a few bucks?

    •  $10 for Cheney .. (2+ / 0-)
      Recommended by:
      fhcec, WedtoReason

      $20 for Rove .. ;p

      2008, the Year the Republican Party dissolved into a little pond of goo

      by shpilk on Thu Nov 13, 2008 at 09:20:25 AM PST

      [ Parent ]

      •  See how well it works?, could total fix economy (1+ / 0-)
        Recommended by:

        except for big pharma , stock would tank with drop in demand for tranqs.
        The upsides just keep coming to this plan.

        Confidence in the USA would soar, dancing in streets, put the fear of the public right there in Congress's face, which would be pleasant.

        A boom the likes of which have never been seen on this planet ensues, the "take out the trash" movement which removes the worst of the abusers and puts the next generation of public servants on the straight and narrow and then takes on global warming, and littering, thus saving the planet!  Ta Da, the end. We all live happily ever after.

  •  Anyone still think we can afford a 600 bn annual (3+ / 0-)

    military budget?

    Just wondering ;)

  •  don't be fooled: deflation not inflation, folks (2+ / 0-)
    Recommended by:
    Mas Gaviota, raoul78

    worldwide supply gluts, worldwide recession, worldwide rate cuts, a strengthening us dollar (the currency of last resort), and Americans who won't/can't spend a time. the air comes out of the bubble as hard assets lose value. government can't spend their way out of this big of a the new admin and fellow dems may even be able to grow the fed deficit, ie spend, and still manage a respectable economic landing because everyone wants US bonds. money always flows to the safest place and economy with most flexibility and productivity growth. and importantly china will want a strong dollar to aid exports and protect/enhance their own USD holdings. and, at the end of the day, all you have to do is look at commodities and their respective markets to see that for now, inflation is dead on arrival.

  •  Star Trek (1+ / 0-)
    Recommended by:
    In her own Voice

    Some answers, but more questions.

    How do we deal with the excess capacity in virtually every industry around the world, and how do we address the need for deflationary pricing?

    And how do we revalue work - ALL work - so that everyone in America is clothed, housed, educated, and has enough to eat?

    Personally, while I think investment in infrastructure is a good start, it does not go far enough. The one thing - the only thing -  that can save us all is a new frontier, namely outer space itself, the final frontier.

    The future does not lie with financial instruments, credit swaps, or stealing market share from each other, it can only stem from new industries, new modes of work, and the unknowable opportunities of new lands.

    Ad Astra!

    •  Are we going on Enterprises made from the (0+ / 0-)

      lowest bidder? Might turn out to be like that flight of the Excelsior after Scotty sabotaged it. :)

      I have this nagging suspicion that increases in space research is going to be somewhat limited in the next few years, as much I'd like to see that happen.

      2008, the Year the Republican Party dissolved into a little pond of goo

      by shpilk on Thu Nov 13, 2008 at 09:19:10 AM PST

      [ Parent ]

  •  The banks are behaving extremely (0+ / 0-)

    irrationally.  On the real estate side we are seeing good offers being made on homes approaching foreclosure, yet they're getting either no response from the bank, or even a counteroffer at a higher price--these in situations where the bank will certainly realize at most about 2/3 of the original offer if it goes to foreclosure.  The sellers lose, the buyers lose, AND the banks lose, and their investors lose.  It's crazy-making!

    Save the parrots: Drink shade-grown coffee!

    by oscarsmom on Thu Nov 13, 2008 at 09:07:54 AM PST

  •  The stimulus should be put directly into the (2+ / 0-)
    Recommended by:
    mediaprisoner, penguinsong

    hands of the poor and middle classes, and the tax rates should be brought back to what they were in the 1950s.

    Bring back Eisenhower's 24 tax brackets.
    Bring back Eisenhower's 91% top tax bracket.
    Tax capital gains based upon the tax brackets set for income levels.

    Lead the way, and the rest of the world will follow out of necessity, much as they followed David Stockman's joke of supply side VooDoo economics which Reagan and Thatcher rammed down the world's throat.

    We are weak, but we still hold the largest dynamic of consumers on the planet. Without US consumers, China and Japan will collapse, and the EU would suffer greatly. They will follow out example [most the EU is much closer to realistic taxation policies than the US, anyway].

    This whole sequence of events is a direct result of putting too much money in the hands of the rich,  speculators who have created bubble after bubble. If we do not fix this basic problem, we'll be reliving it in another 30 years with yet another sequence of 'bubbles'.

    The dramatic increase in the numbers of the upper 1% or 2% of who holds the wealth in this country is part of the problem, as is the gross disparity between the rich and poor throughout the world's economy. It's time to make this stop.  

    It's time to take that money back.

    Rather than having price controls, it's time to have income controls. By having a 90%+ tax rate, without loopholes, this will serve to effectively ensure no more plutocracy. No more oligarchs. No more dynasties. No more of these multi-billionaires. No more handing down riches generation to generation without taxing the living HELL out of them.

    The hell with conflating the idea of 'life liberty and the pursuit of happiness' with raping the rest of the population to enrich one's self. ENOUGH!

    Remove the cap on SSI, and maximize the outlays available. Make all earnings, including dividends, interest and capital gains taxable for a national health program to ensure all citizens get health care.

    The solution is clear and easy: tax the rich, and take the money to fix what they have broken.

    Capitalism can survive, and democracy can survive.
    Just make those who have raped the wealth from our country and our fellow citizens [and the world] belly up to the bar pay their fair share already.

    2008, the Year the Republican Party dissolved into a little pond of goo

    by shpilk on Thu Nov 13, 2008 at 09:14:32 AM PST

    •  I Personally Think 91% Is Too High (0+ / 0-)

      How about 70%

      •  What's wrong with 91% marginal rate? (3+ / 0-)

        If the 91% is on all personal income above and beyond something like $5million or something...

        That's why you allow for the stratification in marginal rates, it makes it easier for industrious, fiscally savvy people to reach "wealthy" simply makes it harder to become "fabulously, obscenely, ridiculously wealthy"

        It is amazing how much can be accomplished when you don't care who gets the credit - Harry Truman
        PoliticalCompass Scale: -2.13, -2.97

        by floundericiousMI on Thu Nov 13, 2008 at 10:10:17 AM PST

        [ Parent ]

        •  I Feel 91% Will Create Too Many Incentives (1+ / 0-)
          Recommended by:

          for the superrich to find more loopholes, hide money offshore, use fancy tax tricks, compensation schemes to avoid paying the taxes.

          I think 70% will raise more money and is a fair amount.

          •  your're right (1+ / 0-)
            Recommended by:
            In her own Voice

            The result will be that the super rich will leave the country. In some cases this will be a good thing, in others not good. I think the tax should not be on income but on spending--we ought to encourage investment and certain kind of spending. Thus rebuilding your luxury home using green technology would be a write off and rebuilding it with more bells and whistles that do nothing should be taxed heavily. Luxury items and speculation should be taxed heavily (speculation is not necessarily bad; just something that, at this time, we ought to discourage).

      •  Why? It was 91% for over 10 years, until 1962. (0+ / 0-)

        It's not like they are taxed 91% on the lower brackets, it's a progressive tax rate. They get to keep a larger percentage of the money earned at the lower brackets.

        It means that for each million they make over let's say 5 million, they roughly get to keep $100,000 free and clear. Still provides the incentive to earn more money.

        2008, the Year the Republican Party dissolved into a little pond of goo

        by shpilk on Thu Nov 13, 2008 at 10:17:55 AM PST

        [ Parent ]

  •  The ideas presented here for helping underwater (1+ / 0-)
    Recommended by:

    homeownwers create more problems than solutions.

    Allowing Courts to rewrite mortgages is a complete disaster.  This will make mortgages more expensive as the lender now faces one more risk besides the risk of default.  The  lender will face the risk of the court rewriting the mortgage.  This will tighten the mortgage market.

    And the idea that the government should pay off the mortgage securities that go under is completely nuts.  How about paying off my current stock market losses while the government is at it.

  •  Housing Oversupply With Homelessness (0+ / 0-)

    There's a housing oversupply, but there's lots of homeless people - several million. The Federal government (or the states, with money loaned by the Feds) could buy out the principal of these failed homeowners from the banks, then enter the homes into the public housing stock, and let anyone newly homeless into the same pool of applicants for public housing.

    These new homeless people have no greater claim on our sympathy or bailout necessity than the existing millions of homeless people. Except that many of the newly homeless do have incomes, even if not enough to afford the extravagant homes and mortgages they got in the past 10 years, while most existing homeless people don't, and also are much more often mentally ill, needing more government intervention into their health and other affairs.

    So until these people who bought homes they couldn't afford start insisting on more bailouts for the millions of existing homeless people who are exactly like them, I don't want to hear their whining. I certainly don't want to spend any of my money - that I protected by managing properly despite the many temptations to get in over my head - bailing them out first. These new homeless didn't care about the old homeless, or the next homeless we can't serve because we've used up the money in bailouts.

    There is absolutely no justification for the public to bail out these new homeless just because there are so many more of them, before we bail out the old homeless, which was a much more manageable problem. Especially if the problem is "there are too many homes", while anyone goes homeless.

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Thu Nov 13, 2008 at 09:25:19 AM PST

    •  Some are homeless due to job loss (0+ / 0-)

      and you would have to rewrite the Section 8 qualifications.

      If you HAVE a job and sufficient income, you may not qualify for housing assistance.

      And they go by your previous year's tax returns. If you are newly unemployed, they still use your old data to calculate your worthiness for a place to live.

      It's a racket that needs revamping as much as any assistance program, like the ones that cut people off food stamps if they make $1.00 too much.

      "It always seems impossible until it's done." - Nelson Mandela

      by Brooke In Seattle on Thu Nov 13, 2008 at 04:41:45 PM PST

      [ Parent ]

  •  SHORT SALE ANYONE? (1+ / 0-)
    Recommended by:

    I would recommend short selling your home if the bank won't help you out. Let them eat it. This new foreclosure plan down right sucks and a short sell will enable you to buy again in 24 months at the latest. Some sooner depending on the situation.

    The only way the housing market will stabilize is for values to stabilize. Short sales have a way of bringing values to where they should be, not where they are now. Its funny how the bank isn't willing to do redo the loan, but they will accept a short sale at a much lower price. I say let them eat it. The sooner the better too.

  •  We are throwing money (1+ / 0-)
    Recommended by:

    at the fire (and paper burns right?) instead of paying a firefighter to put it out.

    the government needs to use sovereign credit to maintain full employment and boost wages to catch up with inflated asset prices. Bailing out failing institutions is the exact opposite of what we need to do with our limited time we can still borrow money.

    The purest form of Capitalism is Organized crime!

    by KingGeorgetheTurd on Thu Nov 13, 2008 at 10:00:56 AM PST

  •  6.5 unemployment my ass! (4+ / 0-)

    When are these people going to start using honest numbers? U3 unemployment is useless for getting a true picture of what the employment situation is.

    U6, on the other hand, is a lot closer to the true. and I thought I heard Keith Obermann using that figure recently.

  •  What's Missing Bondad?? (5+ / 0-)

    Yes.  Yes.  This diary is about right, and I agree with all of it except that I also believe that the deficit spending advised can be made less risky or more risky based on where the money is spent.

    If deficit money is used to re-inflate "money chasing money" investment, then the ice will be thin and I believe it will crack, break and we will drown.

    But what's missing here is the renewed opportunity America has to start investing again in BUILDING THINGS.

    We built cars, planes, and highways in one generation, the internet in another generation.  And in this generation if we do use deficit spending to build Alternative Fuels, then I believ the ice will be thick and we can skate across it safely until the return begins and we pay down debt.

    Where teh money comes from is never half as important as what you spend it on.

    Tht fact that a nations financial woes are linked to the solution that will save our environment is GOOD NEWS!

    Lets get to work!

    how can it be permissable/ to compromise my principle. -- robert palmer

    by Edgar08 on Thu Nov 13, 2008 at 10:17:50 AM PST

    •  You hit the nail on the head (2+ / 0-)
      Recommended by:
      fhcec, sullivanst

      We need to spend on high speed rail, mass transit and health care.  This  spending will make our country stronger.  Government spending that strengthens the country will not kill the dollar.

      Government bailouts and all these government goodies to drive up the price of housing only make the country and the dollar weaker.

  •  80-90% of all COGS is ENERGY & THAT is the root . (0+ / 0-)

    ... the root cause of the collapse ... because, as the price of energy rose, profits fell, and as projects fell, the rest of the economy followed .... but this was also coupled with loss of confidence in the stock market, dating back to Enron/Worldcom, and SOX, which failed re-instill the confidence ... investment in housing, has some mitigating affect, but it is only a small piece of the owerall mix and cannot, alone, do anything, and if it is relied upon severely and without regulatory standards, it collapses, as we have seen.

    ~we study the old to understand the new~from one thing know ten thousand~to see things truly one must see what is in the light and what lies hidden in shadow~

    by ArthurPoet on Thu Nov 13, 2008 at 10:18:21 AM PST

  •  But the "fundamentals" of the economcy are still (0+ / 0-)

    strong, right?

    "If we believe that all humans are human, than how are we going to prove it? It can only be proven through our actions." Lt. Gen. Romeo Dallaire

    by djs on Thu Nov 13, 2008 at 10:20:17 AM PST

  •  Bonddad, thanks for another great diary. nt (1+ / 0-)
    Recommended by:

    "There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy" Hamlet, 1:5

    by synductive99 on Thu Nov 13, 2008 at 10:20:32 AM PST

  •  "The Taxpayers will probably MAKE money" (3+ / 0-)
    Recommended by:
    mrblifil, 3goldens, sullivanst

    ...and we will be greated as liberators in Bagdad.

    Sound familiar?

  •  Invest in Arts Education and Arts Funding (1+ / 0-)
    Recommended by:
    Brooke In Seattle

    Turn those depressed industrial sectors into non-profit, government funded arts facilities. Set aside properties that won't sell which are near the facilities as artist and administrator housing. Watch the home values in such areas turn around. Put some conservatives on the boards if they're so worried about nudity, filthy language, and teh gayz, but require that these facilities hire and generate product for their communities.

    A lot of our best and brightest would turn out to assist in such a campaign. Arts infrastructure is as vital to our cultural health as roads and bridges are to our economic health. And assuring our cultural health makes good economic sense.

    •  What an excellent idea! (1+ / 0-)
      Recommended by:

      During the Great Depression, some of what turned out to be our finest photographers were sent to chronicle the events and people of the time.

      We got Dorothea Lange, Walker Evans, and Gordon Parks, and all of their compelling images that have moved people to this very day.

      There were writers and artists, craftspeople including muralists in paint and tile, and sculptors in metal and wood.

      They contributed their work to communities, were paid and able to further contribute by having salaries to spend, and they introduced their skills to others, relieving some of the tedium of that time.

      Nowadays, people would probably think it was too frivolous and insist on punishing people instead of making life better with creative things.

      "It always seems impossible until it's done." - Nelson Mandela

      by Brooke In Seattle on Thu Nov 13, 2008 at 05:03:12 PM PST

      [ Parent ]

  •  Why should people be paid huge salaries (4+ / 0-)

    for simply shuffling paper?

    Why are bond traders and hedge fund managers -- and insurance company executives -- paid so much more handsomely than teachers, firefighters, police, and simple jobs that are the backbone of society?

    Why do we so value people who are basically gamblers scamming us with worthless assets?

    We will never turn this country around until people realize that these men and women do nothing to deserve these crazily inflated salaries and start paying regular workers more fairly.

    And we need JOBS. Real jobs. Ones that make something or do something tangible. Without them, we are all lost.

    "It always seems impossible until it's done." - Nelson Mandela

    by Brooke In Seattle on Thu Nov 13, 2008 at 10:46:09 AM PST

  •  Government's gotta hold its nose and spend (4+ / 0-)

    The alternative is even worse.

    If the government doesn't stimulate the economy now, they're going to see their revenues plummet and benefits claims skyrocket when the slowdown really gets going.

    There's simply no way around the fact that the national debt is going to increase over the next year. The question is, do we use that increase to drive productivity with a stimulus, or to try to soak up the blood on the floor when everything goes into free-fall?

    Stimulus is the only answer. And I like Obama's ideas about where to direct spending: our transport infrastructure needs urgent improvement, the consumer internet backbone would reward investment in the long term, and of course turning the nation's power profile green will take enormous amounts of government money, but also create exportable skills and technologies.

    I would never die for my beliefs because I might be wrong. - Bertrand Russell
    -5.38, -6.41

    by sullivanst on Thu Nov 13, 2008 at 10:53:43 AM PST

    •  no question about that (1+ / 0-)
      Recommended by:

      its really two options, bad and worse.

      The only trouble is, wage income must rise or asset prices must fall to restore financial equilibrium. Government interventions to prop up inflated asset prices without a rise in wages will only end in hyperinflation.

      We need to stop throwing money at the institutions and spend money at the structure that allows those businesses to succeed, the customers(workers).

      The purest form of Capitalism is Organized crime!

      by KingGeorgetheTurd on Thu Nov 13, 2008 at 11:08:44 AM PST

      [ Parent ]

      •  Exactly! You should be in charge! (0+ / 0-)

        You've got a better grip on what the economy needs than anyone in the current administration.

        Supply-side simply does not work. We tried it twice now. Both times we got left with a festering heap of shit where the economy was supposed to be, although Bush's pile is bigger and smellier than Reagan's. And it's not even fertile horse manure, it's just plain toxic.

        I would never die for my beliefs because I might be wrong. - Bertrand Russell
        -5.38, -6.41

        by sullivanst on Thu Nov 13, 2008 at 11:23:08 AM PST

        [ Parent ]

    •  Easy answers are usually wrong ... (1+ / 0-)
      Recommended by:

      ...but not this one. Very well and succinctly put.

      Get people and small businesses working, they'll buy more stuff and pay more taxes. More purchasing power lower on the ladder means more profits (if the execs don't siphon it off into more golden parachutes, which needs to be addressed legislatively). More profits means more jobs, and the wheels on the bus go round and round...

      I tremble for my country when I reflect that God is just, and that His justice cannot sleep forever.--Thomas Jefferson

      by jazzyndn on Thu Nov 13, 2008 at 12:22:20 PM PST

      [ Parent ]

    •  Yes, and don't think it requires nose holding (1+ / 0-)
      Recommended by:

      it's investment, a really good investment if done right.

  •  Pre-New Deal, Debt to GDP ratio was 125%... (1+ / 0-)
    Recommended by:
    David PA

    ...and then we had a 30 year boom which carried us to the top of civilized world.

    We need to spend and spend massively. I know you're scared of deficit spending bonddad, but you know the principle is sound, and we as a nation have a record of success when this strategy is administered by an intelligent, pragmatic progressive, who is focused on jobs and fundamental economic infrastructure.

    Our credit rating is in jeopardy because of the erosion of our economic infrastructure, the detriment of investment would exist only in the very near term. Bankruptcy and downgrade are not in our future if our economic engine is rebuilt NOW.

    We finally have a president who was first in his class. We finally have a president who understands that permanently strengthening the middle-class is the key to long-term prosperity. But we cannot wait! We need to get behind him and push, hard, for a new New Deal.

  •  Another direct housing solution: increase demand (2+ / 0-)
    Recommended by:
    banger, David PA

    How? Immigration, of course. Start out with an expedited amnesty which costs some money. The people are already here, but having citizenship will motivate many to buy houses. Move on by giving out a large increase in green cards, conditional on people having a job lined up at prevailing wages, or having their own company which they want to relocate to the US, and settling in places where the housing bubble happened. It would be just as direct, and more productive, as knocking down houses.

    Opinions are like assholes. I spend way too much time looking at them on the internet.

    by homunq on Thu Nov 13, 2008 at 11:35:26 AM PST

  •  This is not a piecemeal economic disaster... (2+ / 0-)
    Recommended by:
    banger, shigeru

    it is not simply a matter of supply and demand in the housing sector. This is a macro-economic implosion brought on, principally by the wage gap.

    Since 1973 the gap between wages and productivity has grown. From a macro-economic perspective the only way to sustain this arrangement is to inject debt. When people(consumers) are not making enough money, they have to go into debt to continue to by the products and services that the economy creates with the increased productivity. Of course, this arrangement has the added extra benefit of increasing profits to corporations four fold. Debt, however, has the undesirable effect of causing bubble economics. Your explanation of the "housing crisis" makes no mention of the 800 lb. gorilla in the room. The bubble. Looking at the prices of 2 and 3 bedroom houses in my town a couple of years ago, I would go further and call it a mania. There were 1000 sq. ft houses with two bedrooms and one bath in neighborhoods where there had recently been gang related shootings selling for 700K!  

    There is no way to "fix" the housing crisis without first deflating the bubble. The best way to address the problem is to deal with the individual homeowners and use "bailout" funds to re-write all mortgages at the new, much lower, more realistic prices.

    The subsequent credit crisis and banking collapses are all part of the same whole. The economy is extremely sick and we have basically hit the debt wall. Friedman economics, Reganomics, trickle-down economics, supply-side economics has been shown to be a total disaster. The only way to fix this is to give the "bailout" money back to the people(consumers), not to the banks.

    I'll end this too long comment by reminding everyone that over 70% of GDP is consumer spending. Unfortunately, we've allowed the Republicans and the corporate Democrats to so badly destroy our real economy, that it is going to take some real work to get real jobs back that will pay workers(consumers) real wages.  

    "Politics is the art of controlling your environment." - HST

    by angrycalifornian on Thu Nov 13, 2008 at 11:52:04 AM PST

  •  IMHO the economic, investment and (0+ / 0-)

    pension trends over the past twenty-five years have been designed to separate as much wealth from the 1st world middle class and redistribute it to the wealthy classes. Period.

    "The fact which the politician faces is merely that there is less honor among thieves than was supposed, and not the fact that they are thieves." Thoreau

    by shigeru on Thu Nov 13, 2008 at 12:41:26 PM PST

  •  insufficient medicine (2+ / 0-)
    Recommended by:
    Paper Cup, banger

    I love ya Bondman, but, you don't seem to really believe in your remedies--and neither do I.  If the government goes an extra trillion or so in debt, interest rates will definitely rise, putting mortgages out of reach for housing anywhere near today's prices.  Also, there's no reason to believe people won't hoard whatever stimumlus we give them--or simply pay down their debt to banks that hoard the money.

    Maybe we can tie bailouts to production.  In the auto industry, the government could pre-purchase military vehicles and buy vehicles for local governments.  Banks should be forced to open up their books and seat a fed on its board.  Also, attention must be paid to the aforementioned local governments, they're bleeding and will add to the employment woes without some quick relief.

    Bushco was the bad substitute teacher of a rambunctious class.  No control resulted in chaos.  Paulsonco is the vulture looting the dying carcass that was our economy.  That the stock market is as high as it is shows how foolishly optimistic investors are that we will rebound because we are "different."  We ain't, and we won't until there is a lot more pain--and I think you know it.

    •  yes, and we have two roads to choose from (0+ / 0-)

      I think Bonddad and others believe that we have to sort of balance on a razor's edge of neo-liberal capitalism. I don't think that is feasible should the economy go the way people like Roubini suggest. We have to choose either a kind of neo-Libertarian model, i.e., judicious use of law and state entities emphasizing restructuring or writing off losses and debt (see Karl Denninger). But this road is full of very tricky choices and will take a firm hand and great intelligence to work out--the risks are huge.

      Or we can just go on to a neo-socialist path with nationalization of finance and greater oversight of markets--this may, in fact, be the direction we are going in. The problem is that those entities that have the most political pull will dominate the economy and profit the most. The call for bailing out GM is a symptom of that.

  •  Indus. west debt increasing, US debt increase not (0+ / 0-)

    as bad as it would be otherwise.  Thew dollar will stay relatively on par with Western industrial nation's currency as a result, though probably falling wrt China.

    To the question: stimulus or reduce debt, the answer is clearly stimulus. That is, stimulus of the type the makes permanent things: infrastructure (electric grid, rail, bridges, etc.), accelerates alternative energy research and implementation.

    And, on more essential thing: force US car makers to churn out greener cars.  People would actually want to buy them.

  •  It's a massive gamble (0+ / 0-)

    If we assume more debt then we are placing a bet. We are gambling that the economy will turn around and grow. If it doesn't, we have saddled the government with more debt. Consider that a severe recession will contract government receipts. Servicing the debt will become a very large part of the budget and add in entitlements and you don't have much, if anything, left to do something creative about the economy. If the economy doesn't grow then international investors will shirk at buying more US bonds.

    My opinion is that this has everything to do with income distribution. The rich have loaned back wealth to the middle class through mortgages and credit cards, and they spent the money to enhance their lifesyles. That comes to a halt at some time. Bondad has been drilling this into us for the last many years. The real solution is to reduce debt and correspondingly, wealth. Good luck with figuring out how to do that, although if the bailout doesn't work we will have to solve that problem in the long run.

  •  Disagree with housing over supply (0+ / 0-)

    All these foreclosures had someone, usually families living in them. Even the houses purchased by "flippers weren't vacant long. The problem is that the price of housing increased beyond the ability of most workers to afford it. Thats why there were so many of these so called "creative" loans. What is needed is an increase in median household income or a way for the economy to absorb the cost of housing returning to affordable levels. All the job losses and downsizing are making this problem worses and worse. Incomes need to increase or housing needs to decrease. The financial industry also contributed to these problems by creating financial vaporware and pyramid schemes out of mortgages.  

    Patriotism consists not in waving the flag, but in striving that our country shall be righteous as well as strong. ~James Bryce

    by california keefer on Thu Nov 13, 2008 at 04:43:28 PM PST

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