Obama’s housing plan may be a bust. Post 121


Freedom Works

Feb 20, 2009 Matt Kibbe

Ten Reasons to Oppose the Obama Housing Bailout

The President, just one day after he signed the trillion dollar stimulus bill, started pushing Americans to support his new borrow and spend policy. This time it is at least $275 billion to bail out people with mortgage troubles. Among so many other reasons to tell your U.S. Representative and Senators in Washington to oppose this scheme, the Top 10 are:

1. The Bailout Encourages Bad Behavior

…Obama’s plan will shift incentives …setting a precedent for future housing bailouts that the federal government can never, ever take back. Government is protecting irresponsible home buyers from risk of foreclosure with this plan-especially with the $200 billion for Fannie Mae and Freddie Mac-that will encourage future risky behavior with the prospect of government help.

2. It Rewards the Wrong People

This plan will force the people who were responsible and worked hard to buy what they could afford to pay for those who did not. Rewarding irresponsibility by forcing people who pay their taxes and their mortgages to bail out the others is not good policy.

Scott Garrett (R-NJ) comments, “Additionally, it provides no incentives or rewards to those homeowners who have been diligently making their mortgage payments, or to those who recognized their financial constraints and chose to rent a home rather than buy one.”

3. It Will Further Nationalize our Housing Market

The plan will certainly succeed at one thing: growing government. Obama’s plan will give government even more control over our housing sector-which is hard to imagine, considering how much Fannie Mae and Freddie Mac alone did to transfer our housing market to government control. This is the wrong direction, considering government control of housing through the income tax, the Federal Reserve, the CRA, and, HUD set up the housing crisis in the first place.

4. It is a Futile Effort to Re-inflate the Housing Bubble, which Failed Miserably in Japan

Those who fail to learn from history are doomed to repeat it, and this policy is another step down the path taken by Japan, which lead to their “lost decade”- which is now going on two lost decades. If we keep going in this direction, the US, too, will lose decades of economic growth.

So far the US has passed one $1 trillion stimulus, and now President Obama is proposing billions more.

Twenty years later, and 10 stimulus packages later, Japans Nikkei stock index is down about 80%-from 38,975 in 1989 to around 7,400 today.

A similar drop in the Dow would put it at 2,800, down from 14,000.

5. The Bailout Keeps People in Homes They Cannot Afford

The plan forces banks to refinance mortgages for borrowers who cannot afford to pay even if the bank would have refused refinancing otherwise. This could create an even larger credit crunch that the federal government will undoubtedly attempt to remedy with even more spending …and higher taxes on our children.

6. The Bailout Steals Billions from Hard Working Americans

The money will primarily go to places like Nevada, and California (AZ and FL) where the bubble was the biggest-where people made the biggest gains, and are now seeing the biggest losses. The plan will result in a transfer of wealth orchestrated by government from states that did not experience the housing bubble as intensely as others. The end result: taxpayers who can afford their mortgages will pay for those who cannot.

7. Policy Like this Caused the Crisis

Over at least the last 17 years, government acted to inflate the value and amount of housing in the United States. This policy is an attempt to re-inflate the bubble that caused the housing crisis in the first place.

Without the nearly endless interventions in the market that drove prices higher and created the housing bubble, we would never have experienced this crisis. Government caused the crisis and it should get out of the way to let the market fix it.

8. We Cannot Afford it

It would put the taxpayer on the hook for over $275 billion on top of all of the money the government already spent.We are looking at a $2 trillion deficit now and a record breaking debt. If the government continues to spend like it has been, even our grand children will not be able to pay it back.

9. It Distorts the Market Economy

Bailing out borrowers and refinancing loans will further distort credit markets. It will make economic calculation and forecasting more difficult for everyone else in the economy. Without accurate information on what might happen in a market, consumers and businesses have more trouble deciding what is profitable or what to purchase.

The more government is involved in distorting a market, the bigger the mistakes will be – witness the massive and widespread over investment in housing and banking [that] government intervention pushed causing this crisis.

Similarly, the credit markets are as frozen as they are in part because of government intervention creating uncertainty.… the Treasury selectively gave bailout money to some banks, while refusing to fund others (see Goldman Sachs v. Lehman Brothers).… created uncertainty in the market that caused (bankers)… to hold more cash than they would have otherwise…

10. The Plan Creates Uncertainty in the Marketplace

How is any business person supposed to make plans in an economy like this with the government announcing new spending or making up new rules every few days? Should a home buyer purchase today or wait for another tax credit?

Who will win or lose in our market-ish economy is more and more decided by government dicta rather than competition.

There have been so many changes in plans and bailouts that we can hardly even count them. As the Nobel Prize winning economist F.A. Hayek wrote, “The more the state plans, the more difficult planning becomes for the individual.”

See entire article:

http://www.freedomworks.org/publications/ten-reasons-to-oppose-the-obama-mortgage-bailout

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Coach Mitch’s REFLECTIONS™

 

This is a tough one

I’m not sure which way to go in this one?

On one hand, government intervention in the marketplace is a very bad thing. It’s bad for freedom, it’s bad policy, it’s bad for taxes, it’s bad for the future.

On the other hand, the government has created a crisis and, we are told; only government is big enough to try to fix it; that is, if government can be trusted to fix such a problem. One thing I know for sure, a government “fix” is the worst answer to any problem.

We are in unchartered waters

The big issue that scares me is that our economy is so dependent on credit and consumerism, that any significant slowdown could put US into a depression. The governments have recognized this and for decades, the policy has been to inflate, inflate, and inflate. We see the result.

But, if we don’t inflate, then we crash. Not a good choice.

Inflation vs. Depression

This is the issue. Governments, unions, business, etc., all vote for inflation. Consumers do also. Ask anyone. Everyone is panic stricken thinking about depression, but inflation seems not nearly as scary.

In depression, economic activity subsides and unemployment rises. We are forced to be very self-reliant. We save because jobs are scarce. A better future is hoped for, but it is not seen as viable. Government is seen as the employer of last resort and as a benefactor. Breadlines and soup kitchens will abound. Class warfare will breakout, riots will occur. Government will inflict martial law. A dictator is a real possibility. The last depression was ended only when we entered WW2.

With inflation, business and everything else continues at a heightened level. Inflation forces you to spend your money today, because it will be worth less tomorrow. Danger occurs as the next big bubble inflates and then bursts, forsaking US to a continuing roller coaster of crises.

With greater government spending comes greater government control. The well connected suck even more of our sustenance, with money and power residing in fewer and fewer hands. Eventually, citizens realize that we are in a fascist economy, where those at the top make policy and we at the bottom must comply or face punishment. The current plutocracy will be more open with its manipulations and public concern will be swept away with calls for greater government activism to “fix” the problems. The money power will tighten its grip and a politburo will dictate policy to Congress. As our personal firearms have been taken away, we are powerless. The current oligarchy will be more openly authoritative and totalitarian and a dictator could emerge.

We must prepare

It can happen here and probably will – sooner than later

Coach Mitch’s “Ridiculously Simple System…”™ can help to sustain you by creating a way to gain hard assets (property). In hard times, hard assets are what everyone wants because paper money is worth less each day. You may want a safe place to retreat to. Coach Mitch’s “Ridiculously Simple System…”™ can help you find that “get away” place and only pay a few hundred dollars for it.

See Coach Mitch’s “Ridiculously Simple System…”™ for details.

Think about it,

Mitchell Goldstein - Coach Mitch
518-439-6100 until midnight EST
www.CoachMitch.com

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