From HousingWire:
Obama administration reveals plan to jump-start housing
Speaking Thursday at the Making Home Affordable five-year anniversary summit, U.S. Treasury Secretary Jacob Lew announced several initiatives designed to spur the flailing housing market.
Lew identified three specific issues that are holding back housing in the United States and announced plans to address each of those issues.
Citing the lack of private capital in the market, the dearth of affordable rental options and the abundance of Americans who are facing foreclosure or are underwater on their mortgages, Lew announced three new plans:
The extension of the Making Home Affordable program until “at least December 31, 2016”
A plan to expand access to credit by working to revive the private-label mortgage-backed securities market
A new partnership between the Treasury and the Department of Housing and Urban Development to build new, affordable rental housing
Lew recognized the progress that the housing market has made in the wake of the crash but said that there is still more work to do.“Families and neighborhoods across the country continue to recover from the financial crisis, and we must not lose our resolve to help them, even as the economy continues to expand,” said Secretary Lew.
Good Morning New Jersey
When I lived in DC, I used to say of Marion Barry that he was a “one man Depression”. Indeed, the area around DC was growing furiously but DC saw none of it during his term and that of his flunky, Sharon Pratt.
But once DC elected a mayor perceived as more pragmatic than dogmatic, things changed very quickly and the city’s economy took off like a rocket. Talk about pent up demand. I hardly recognize parts of it now.
That observation isn’t lost on me when I assess this administration. I think many economic ills will cure themselves when Chairman O gets on an Air Force plane for the last time. Unless Elizabeth Warren gets elected. Then look for a run on gun shops and the Walmart ammo shelves.
There is no one who could be elected prezident who would make me think twice about continuing to stockpile necessities and preparing for all-out civil war.
Jack Lew is an idiot. The housing market is dead money for 50-100 years.
Fascinating. David Stockman dispels all kinds of Great Depression myths:
“Finally, universal soci@l insurance enacted in 1935 was actually a fiscal doomsday machine. When in the context of modern political democracy the state offers universal transfer payments to its citizenry without proof of need it thereby offers to bankrupt itself—eventually.”
http://www.zerohedge.com/news/2014-06-29/great-war’s-aftermath-keynesianism-monetary-central-planning-permanent-warfare-state
[3] clot
Well, aren’t we a cheery little gumdrop this morning.
Well, somebody throw anon a bone! Seems he has an acolyte in Glenn Beck
http://wallstcheatsheet.com/politics/glenn-becks-apology-to-liberals-you-were-right-about-iraq.html/?utm_source=outbrain&utm_medium=cpc&utm_campaign=feed_desktop&ref=OB
Funny thing is the left still doesn’t want to own the sentiment “it was wrong to topple Saddam.”
(Yes, Joyce, I know. It’s just easier to use labels)
More Stockman:
“Now caught up fueling a repetitive and destructive cycle of financial bubbles and busts, the Greenspan-Bernanke-Yellen Fed has taken monetary central planning into the deep waters of wanton monetization of the public debt.
Under these circumstances there is no fiscal governance – just an inexorable drift toward monetary catastrophe. In the interim, our senseless and dangerous trillion dollar Warfare State rolls on.
Keynesian statism and monetary central planning have triumphed, meaning that the American Republic has no remaining fiscal defenses, nor immunities from its extractions.
The good Ben (Franklin that is) said, “Sir you have a Republic if you can keep it”.
We apparently haven’t.”
Just dropped in to drop this gem off for those that were blowing off when Merkel pulled the plug on nuclear. For me I still see nuclear as a viable option, but 50% is ground breaking. But hey, let’s hear a big Solyndra from the haters!
You know I’m pro-solar, and I drive an electric car so that makes me more energy progressive than most.
But the reporting looks to be a bit disingenuous. 50% was reached for approximately 1 hour on a sunny summer day.
Not surprised that the story forgot to mention that Germany’s actual annual contribution of solar is well under 10%. Don’t get me wrong, this is great news and we should applaud Germany, but it’s also very misleading.
5- Thought these comments from that article were interesting. I agree with the bottom comment. Everything is a cycle. Cycles change, but everything is a cycle. A boom must be followed by a depression. A depression followed by a boom. Under this economic system, this is what happens, mathematics says so. It’s a dream to have an economy that doesn’t have boom and bust cycles.
“Alternative framing:
Capitalism really was failing in the 1930’s, and indeed by 1950 it had collapsed and been outlawed and replaced throughout most of Eurasia. In the US and Western Europe, Keynesian policies plus a great increase in worker bargaining and political power, plus massive destruction of US rivals and a strong commitment by the ruling classes to never again allow a depression like the one they just survived, cleared the way for another good run, 70 years of expansion despite some good scares and transitions to ever more unrestrained regimes along the way. Like pulling out all stops to keep the system going on adrenaline, steroids, belief and hypnosis.
But now the potential for systemic life-extension has been exhausted. The Keynesian remedies, which worked at the time but which falsely assumed that the government stood outside of the economy and had unlimited power to act on it, have been used up. All the regulations, checks and balances that kept the system stable have been jetisoned to allow unshackled expansion. Credit expansion of all forms has been carried to its ultimate limits and beyond into the land of the absurd. The capitalist state is finally left with no more tools but the capacity to spin illusions to keep the game going a few more months or years, and to threaten those who would start the process of dismantling it with naked, even genocidal force. The Capitalist System is in terminal failure with no way out short of a fundamental transfer of state power from the zillionaires to the rest of us – i.e. a revolution.
Following which, of course – assuming our species survives the transition – there will be the struggle over how to restart the economy, how will it be controlled and by whom. That’s when we’ll have to resolve what elements of capitalism to keep, and how to make sure this cycle doesn’t repeat.
But we’ll cross that bridge when we come to it. If and when we do.”
“”The Great Depression thus did not represent the failure of capitalism or some inherent suicidal tendency of the free market to plunge into cyclical depression”
Why do people want to pretend cycles do not exist? The up phase of any cycle results in a down phase. A depression will follow a boom.
Just what is a free market? We had a housing boom. The FED eliminated regulation of banks, along with the government dismantling Glass Steagall. The government promoted home ownership. In 2001, 10,000 appraisers petitioned the government about appraisal fraud. In september, 2004, the FBI warned congress about massive mortgage fraud. Junk mortgage debt was listed as AAA.
What element of the housing bubble was free market?”
Comrade,
What is wrong with you? I bet you miss Fabius, let alone Anon, because you seem to enjoy watching, listening, debating the political theatre and/or benefiting from it while the racketeering takes places in the background (and sometimes right in front of our face).
You and I agreed that being against invading Iraq did not equate to supporting Saddam. So why do you insist that anyone has to “own” that incorrect implication?
Comrade Nom Deplume, a.k.a. Captain Justice says:
Funny thing is the left still doesn’t want to own the sentiment “it was wrong to topple Saddam.”
“It’s a dream to have an economy that doesn’t have boom and bust cycles.”
Idiot,
What causes the boom?
@stiglitzian:
“The true test of an economy is not how much wealth its princes can accumulate in tax havens, but how well off the typical citizen is.”
A plan to expand access to credit…
Of course, lend more money. Good-paying jobs are of no consequence and are not required.
How do you control boom and bust cycles? Regulation? Trust me, it’s a dream to have an economy with no boom or bust cycles. It would be nice to have stable predictable growth.
joyce says:
June 30, 2014 at 8:37 am
“It’s a dream to have an economy that doesn’t have boom and bust cycles.”
Idiot,
What causes the boom?
For sure!!
anon (the good one) says:
June 30, 2014 at 9:00 am
@stiglitzian:
“The true test of an economy is not how much wealth its princes can accumulate in tax havens, but how well off the typical citizen is.”
5- Makes some very good points.
“”Keynes knew damn good and well that his theories would require huge amounts of self-discipline to avoid spinning out of control.”
Then please direct your rancor at the broken political system and NOT at Keynes. Keynesian economic approaches would go a long way to fixing our country’s economic problems but it has been 40 years since we tried them.
By lying about the nature of Keynesian economics, as was admitted by several ZH followers over the months, ZH destroys our ability to choose the best approach.
Is is accidental?”
Contract Shows Obama Planned Border Invasion
http://news.investors.com/ibd-editorials/062514-706233-texas-border-immigration-wave-orchestrated-by-administration.htm
A federal employment ad posted in January showing that 65,000 unaccompanied minors will enter the U.S. illegally shows that the administration expected this cross-border child abuse and encouraged it.
Concrete evidence has shown up proving our earlier assertion: The breach of our border by waves of unaccompanied alien children was orchestrated by the administration based on a strategy straight out of the playbook President Obama studied as a community organizer. His goal is to get his way on immigration reform by overwhelming the U.S. Border Patrol and collapsing an already weakened system.
The evidence comes in the form a government contract solicited in January by the Department of Homeland Security. The listing asked for “Escort Services for Unaccompanied Alien Children” in expectation of the arrival of 65,000 minors on our southern border without their parents or guardians.
The operative language in the listing is the statement by DHS/Immigration and Customs Enforcement that they expect there “will be approximately 65,000” alien minors requiring assistance. This is a significant increase from the 5,000 minors who are detained by Immigration and Customs Enforcement annually. It also strongly suggests not only advance knowledge of the human catastrophe about to unfold but a lack of any effort to stop it.
Not only have the numbers vastly increased, but the points of origin have changed. No longer are we talking about just poor Mexican families seeking a better life from an “act of love,” as one possible 2016 presidential candidate put it. Hondurans, Salvadorans and Guatemalans now make up about 75% of illegals caught in South Texas.
The number of children traveling without parents has overwhelmed Border Patrol detention centers along the Texas border, prompting officials to ship them to converted warehouses and military bases as far away as California. The situation is so bad that there is fear we would have no place to put American citizen refugees if another Hurricane Katrina occurs. Some have even called this alien-children invasion Obama’s Katrina.
This is no act of love, as children are transported by cartels and other human traffickers from Central America and then through 1,800 miles of difficult Mexican roads. They are subjected to the worst abuse along the way, then dumped across the border, where they huddle on warehouse floors in conditions ideal for the spread of infectious diseases.
Such a journey is made on the expectation that these children will not be turned away. At a House Homeland Security Committee hearing this week, committee Republicans noted three causes for this influx: Obama executive actions such as the Deferred Action for Childhood Arrivals program; lax enforcement policies; and talk on both sides of the aisle of comprehensive immigration reform indistinguishable from amnesty.
Gary (14):
Please do not pour cold water on the dream of millions for taking out outrageous mortgages on homes they would not otherwise be able to afford. Good jobs, whatever, Obama has their backs. Why worry about tomorrow, that is such an abstract thought. Too much for the sheep to ponder. Live for today for tomorrow we can be victims….
I look fowrard to the next and final debt implosion.
I went to two open houses in Hillsdale yesterday, both on a spacious, tree-lined street. They were neighboring houses so I suppose they both decided to sell at the same time. The one house was listed in the mid 500s, so I looked at the pictures online. Again, pictures really do not tell a story. I can’t list the level of disgust or the number of issues with the house listed in the 500s. The smell was literally making us sick. I will just tell you that I stepped in a pile of dohsh1t while walking in one of rooms. It really was sad to see and even the agent kept apologizing.
House number two was the same construction as house one but this one was clean and a snapshot of 1965. The problem was, again, 10×10 bedrooms and a really strange layout. I can’t explain it, you need to see it. The yard was open and shared with two other houses on the backside. No good. I’m looking for layout and location, not necessarily condition. Neither had the correct layout and house one was disastrous.
House two was listed at 499K and even the agent said this one needs to go for upper 300s. And this was the clean one. That was a little startling to hear. A split on a leafy street in a “need to buy” town with a “3” handle.
By the way, I was there at these houses for about 35 – 45 minutes and not one other soul showed up. This has happened for a few weekends now and I have never seen this before. Even before the bubble, it was never desolate. It’s very strange… especially in the Upper Bergen towns.
Omg… can we really survive two more years of this administration?
Clot, 5,8,
The latest Stockman book was well worth reading – he really knows how to take down corrupt people and systems, and make it clear what a veil the economic historians have set up to obscure the real history of the US economy over the last 100 years.
Also let me know if you have time for a breakfast or lunch around the Bridgewater area.
Eddie,
I wonder what kind of tricks Obama is planning for his last 30 days, when presidents sign the really nasty stuff. I guess he won’t need to pardon the whole IRS political team, with their 7 hard disk drives simultaneously failing and the whole email backup system being trashed. What are the odds of that happening? Even the Economist magazine wrote about what a scandal this is. They don’t say it, but it should be a bigger deal than Watergate. Hiring some hacks to break in and read political strategy notes is much less bad than bringing the force of the IRS’ loaded gun on your political opponents.
Shocking …. A Flabmax Special…..
grim says:
June 30, 2014 at 8:16 am
Just dropped in to drop this gem off for those that were blowing off when Merkel pulled the plug on nuclear. For me I still see nuclear as a viable option, but 50% is ground breaking. But hey, let’s hear a big Solyndra from the haters!
You know I’m pro-solar, and I drive an electric car so that makes me more energy progressive than most.
But the reporting looks to be a bit disingenuous. 50% was reached for approximately 1 hour on a sunny summer day.
Not surprised that the story forgot to mention that Germany’s actual annual contribution of solar is well under 10%. Don’t get me wrong, this is great news and we should applaud Germany, but it’s also very misleading.
[18] street
It gets better. Apparently DHS had a university study in hand when they posted the ad. The article says DHS was forewarned yet still unprepared.
Unprepared yet they sought to hire people immediately, probably based on the study. If there was no preparation, why the hiring? They hired escorts and those escorts will have needed to take the kids somewhere. Are we to believe that DHS didn’t think that far ahead? Or that the Director didn’t tell someone in the East Wing that TSGHTF?
http://www.houstonchronicle.com/news/houston-texas/houston/article/border-5559991.php?cmpid=twitter-premium&t=984be47201ab47da02
@stiglitzian:
“Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves.”
http://t.co/teXh35e7eq
[23] rags,
Missing records, political “dirty tricks”, targeting opponents with audits, and witnesses who “don’t recall.”
I’m reliving fifth grade.
It’s kind of weird but, the guy across the street from me who works for Homeland security suddenly left the job and is now homeschooling both his kids. I’m not sure what to make of it.
Thank you for the share. A really well written piece.
“We are not embracing a politics of envy if we reverse a politics of greed.”
anon (the good one) says:
June 30, 2014 at 9:49 am
@stiglitzian:
“Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves.”
http://t.co/teXh35e7eq
Ragnar [23],
I’m astounded. Seven systems “crashed” at once? The audacity to even suggest something this appalling! No backup server to be found? Pleading the fifth? This is unprecedented! They’re openly admitting major criminal activity and bragging that they got away with it.
What causes the boom? Maybe it has to do with https://njrereport.com/index.php/2014/05/16/where-the-underwater-are/#comment-643284
Michael says:
June 30, 2014 at 9:09 am
How do you control boom and bust cycles? Regulation? Trust me, it’s a dream to have an economy with no boom or bust cycles. It would be nice to have stable predictable growth.
5-4, the war continues
http://www.supremecourt.gov/opinions/13pdf/13-354_olp1.pdf
Lotsa big SCOTUS Decisions lately. I’m surprised they did not take up a nationwide right to carry case yet.
From MarketWatch:
Pending home sales highest in eight months
A gauge of pending home sales jumped 6.1% in May to reach the highest level in eight months, signaling that upcoming closings of existing homes are likely to speed up, the National Association of Realtors reported Monday. The index of pending home sales hit 103.9 in May, compared with 97.9 in April. Low mortgage rates, a growing number of homes on the market and stronger job creation will all fuel more deals, NAR said. Although pending sales have risen three months in row, first-quarter closings were weak enough that NAR expects them to drag down 2014’s total sales tally below last year’s result. In May the pending-sales gauge was down 5.2% from a year earlier. By region, May’s gauge of pending home sales rose 8.8% in the Northeast, 7.6% in the West, 6.3% in the Midwest and 4.4% in the South. Pending sales typically close within two months.
SCOTUS: Public union can’t make nonmembers pay fees
http://www.northjersey.com/news/business/scotus-public-union-can-t-make-nonmembers-pay-fees-1.1043680
Are we now a right to work nation?
Michael [10];
It’s a dream to have an economy that doesn’t have boom and bust cycles.
I see the good Michael has joined us today. Welcome. If it’s such a dream, why do you so often side with those pissing away billions of dollars of other people’s money allegedy pursuing that dream?
Thought I’d never get a chance to post this link.
http://youtu.be/d0nERTFo-Sk
Just when you thought you’ve seen it all…
http://www.nj.com/essex/index.ssf/2014/06/nj_man_sues_benjamin_moore_over_racially_offensive_paint_names.html#incart_m-rpt-1
JJ
do they hv bonds?
@wxyzdetroit: Compensation plan for those killed or injured in crashes tied to faulty GM ignition switches to be announced Monday. http://t.co/tcC6iCrAYg
Grim #37 entertaining, pathetic but hardly news
other things In the news today Fox news reports
“UK is lobbying the US gov’t to lift the ban on Haggus imports” (this is our Gov’t at work, How much money will this cost? its about a 30 second decision yes or no)
“TOURIST being put on trial in north Korea” (these individuals are real dumb asses, Hey lets go to north Korea on vacation) LET THEM ROT in one of un’s cells for stupidity.
Its getting sad that alot of these things are even considered news worthy
#34,
Simply stated, this is not enough activity now to pick up slack of early year misses. In CT, we are trailing 10% behind last year while inventory is up 15%. Houses are sitting. I jave my pick as summer grinds things to a halt. The old corpse who would not negotiate with me last month is now begging me to buy his home. This tells me everything I need to know. Some many homes not sure I want to deal with tool anymore.
Fast,
I think you should just start low-balling. Desperation is here.
@CNBCnow: “I think we’ll hear from a huge number of families.” — Kenneth Feinberg to @Lebeaucarnews on $GM compensation fund
36- Thanks for that share. Video was pretty funny. I thought these two individuals had a pretty good debate for both sides of the argument in the comment section.
“Gosh, I wonder why unemployment would drop below 2% when there’s a draft and nearly every factory in the country switched to making implements of war. I guess you think it would be a great thing if government hired people to dig ditches and some more people to fill them up to stimulate aggregate demand, right? Perhaps we should break some windows too, that would certainly stimulate aggregate demand of new windows!
If you are looking ONLY at deregulation, which seems to be the “norm” these days, yes, it would definitely appear that you have found the problem, but that’s ONLY if you ignore the rest of the picture (all the other regulations that were still in place and the FDIC backing as well as the stimulus after the tech bubble burst). If we had a TRUE free market in banking, this debacle would not have happened. Bankers KNEW that they would be bailed out. It’s like going to a casino where everyone else pays for your losses, but you get to keep the wins, are you going to be frugal and try to make intelligent wagers? Or are you going to go crazy and bet on the high risk/high reward?
The crash of 2008 was caused almost entirely by the state and their absurd regulation and meddling in the banking industry, coupled with the leftover stimulus from after the tech bubble to create a perfect storm.
You crazy Keyneseans think that you can somehow STOP mal-investments, but in attempting to do so, you make them that much worse. YES, banks occasionally fail, just as the overwhelming majority of businesses fail, this is ESSENTIAL to capitalism. It’s how men LEARN and how capital is reinvested in worthwhile endeavors. When you try to stop these events, you funnel billions (or in this case, TRILLIONS) where it shouldn’t have gone, then when it all blows up, you throw your hands up and blame everyone but the people who deserve the blame…government. It shows a fundamental lack of knowledge about how the business cycle works on your part that you support stimulus. It’s never worked, it WILL never work, because you’re simply throwing good money after bad. I believe the definition of insanity is doing the same thing over and over again and expecting a different outcome. Let’s see, what happened when the tech bubble burst? Oh yeah, Keyneseans decided that we needed stimulus to create a housing bubble. Then when that happened, you blamed the free market? Really? *sigh*
It shocks me that with all the information floating around us, freely, 24/7, there are still people who don’t understand BASIC economic theory. Yet you’ve demonstrated just that.
I guess I was expecting too much, that people might ACTUALLY give some rational thought to issues, but if you did that, you couldn’t be a Keynesean. So you hop back on that unicorn with your buddy Krugman and fly off to the land of make-believe where stimuli actually work. I’ll be here waiting to tell you “I told you so” when this round of stimulus fails too.”
“You speak of rational thought, but can only discuss by putting false arguments in the mouths of others: “I guess you think it would be a great thing if government hired people to dig ditches and some more people to fill them up to stimulate aggregate demand, right?”
No, not right–notice how YOU had to come up with a stupid application of the policy, not me? I am, however, okay with the way a temporary, government-driven surge in demand permanently ended a long depression and was the single greatest factor in converting the US from an agricultural to an industrial economy.
You make no actual attempt to explain how excessive regulation (i.e. the least regulation since the 30s, and least enforced) was responsible for 2008, except for lying about the cause of the housing bubble, a creation of speculation facilitated by monetarist policy-making by the most right-wing (Rand acolyte-led) leader of the Fed in history, (so, not Keynesian, making your statement factually wrong), while a number of prominent leftish economists warned against the bubble and the right-wing ones and Phil Gramm angrily asserted everything was fine and this was a dishonest attempt to incite a panic.
So many simple factual errors! Why do you talk? Yes, no effective stimulus, except for the thirties, the forties, 1959, 1961, the immediate stop to a 9% rate of economic contraction caused by a modest stimulus in the first two quarters of 2009? Copious mounds of evidence from Europe in the 30s and Japan in the 90s showing effective stimulus followed by a dip when stimulus is prematurely withdrawn? (I grant you, you have to spend five minutes looking at numbers and not screaming about how businessmen are the only people who can allocate capital, to see that last one). But, yes, you’re correct, it’s shocking that there are so many people floating around who don’t understand BASIC economic theory, such as the absolute necessity of demand for goods to be sold. Good day!”
Thanks for the share. It was pretty funny. Both economists have valid points. I just think that there is a time and place for each economic policy. Adapting to only one, and holding it as the truth (extremism), is where the game gets deadly. Economics has become a lot more complicated from when these capital based economies were forming in the 1800s. You have to analyze the current situation and adopt the right economic policy to fix the problem. Obviously, this will just create another problem that needs to be fixed, hence, why you can’t just stick to one kind of economic policy in 2014. You need to know them all, and adjust policies on the fly. Sticking to one and only one kind of economic policy is suicide.
I thought this comment from that video was pretty interesting. I would like to hear some of your thoughts on this. What is value?
“Value of a resource exists only in the mind that values. This is precisely why a central economic planner cannot perform economic calculation for my welfare. They have an economy of billions of individuals to manage. Can they make ever-so-subtle value-judgments on each of their behalves? They cannot. The moment you understand that economy is about human action (employment of means to achieve personal ends), all possibility of central economic planning flows into gutter.”
Anon E. Moose says:
June 30, 2014 at 11:00 am
Michael [10];
It’s a dream to have an economy that doesn’t have boom and bust cycles.
I see the good Michael has joined us today. Welcome. If it’s such a dream, why do you so often side with those pissing away billions of dollars of other people’s money allegedy pursuing that dream?
Thought I’d never get a chance to post this link.
http://youtu.be/d0nERTFo-Sk
Grim – please contact me via e-mail re. your need for a [bio]chemist. I happen to work in F&F industry, but need more specifics to decide who to approach.
http://www.mrctv.org/videos/sen-menendez-speaker-boehner-abusing-his-power-not-bringing-immigration-bill-vote
“…Second, Mr. Reece’s perspective comes with some judgment; his story makes the unemployed seem a bit lazy or ungrateful. But you could just as well say that this situation arises from the employer’s failure to up his bid so that it competes better with unemployment benefits. My point here is not to assign fault but to illustrate that a lot of different actors contribute to market outcomes….”
Opinion
A Recovery Stymied by Redistribution
Public policy intended to make layoffs less painful actually made layoffs cheaper and more common.
By Casey B. Mulligan
June 29, 2014 5:00 p.m. ET
This is adapted from remarks by University of Chicago economics professor Casey B. Mulligan on receiving the Hayek Prize on June 25 from the Manhattan Institute for his book “The Redistribution Recession”:
Why has the labor market contracted so much and why does it remain depressed? Major subsidies and regulations intended to help the poor and unemployed were changed in more than a dozen ways—and although these policies were advertised as employment-expanding, the fact is that they reduced incentives for people to work and for businesses to hire.
You probably heard about the emergency-assistance program for the long-term unemployed that ended only a few months ago after running for almost six years. But there is also the food-stamp program. It got a new name and replaced the stamps with debit cards. Participants are no longer required to seek work and are not asked to demonstrate that they have no wealth. Essentially, any unmarried person can get food stamps while out of work and can stay on the program indefinitely.
There were new mortgage-assistance programs. People who owed more on their mortgage than their house was worth could have their mortgage payments set at a so-called affordable level—in government-speak, that means that you pay full price for your house only if you have a job and earn money.
There were new rules for consumer bankruptcy, with special emphasis on the amount that consumers were earning after their debts were cleared.
All of these programs have in common that they, like taxes, reduce incentives to work and earn. The cornerstone of “The Redistribution Recession” is to quantify the sum total of these incentives and their changes over time. That’s what I call the marginal tax rate, by which I mean the extra taxes paid, and subsidies forgone, as the result of working. Waves of new programs increased the typical marginal tax rate from 40% to 48% in two years.
There is a real demand for this kind of redistribution. Helping people who are unemployed or with low incomes is intrinsically valuable. We like doing it, and we like knowing that a system of help is there if we need it.
This demand fluctuates over time. Democrats had quite a streak of winning federal elections: taking the House and Senate in 2007 and then winning the White House twice in a row.
Even if somehow Democrats hadn’t won these elections, we would still have had redistribution in a crisis. For most of our lifetimes, middle-class people did not imagine themselves participating in, say, the food-stamp program, and understandably were not particularly supportive of expanding it. But 2008 was different, and for the first time lots of people were thinking about what might happen if their family suddenly became poor or unemployed.
Helping people is valuable but not free. The more you help low-income people, the more low-income people you’ll have. The more you help unemployed people, the more unemployed people you’ll have.
That’s a cost. For example, you have people out of work who would be productive if it weren’t for the help. So there’s a trade-off: more help, less economic efficiency.
I met a recruiter—a man whose job it is to find employees for businesses and put unemployed people into new jobs—and he described the trade-off pretty well. Stacey Reece was his name, and he said that in 2009 his clients again had jobs to fill. But he ran into a hurdle he hadn’t seen before. People would apply for jobs not with the intention of accepting it, but to demonstrate to the unemployment office that they were looking for work.
As Mr. Reece described it, the applicants would use technicalities to avoid accepting a position. The applicants would take Mr. Reece through the arithmetic of forgone benefits, taxes, commuting costs and conclude that accepting a job would net them less than $2 per hour, so they’d rather stay home.
People remain unemployed longer, as Mr. Reece saw with his own eyes.
Friedrich Hayek’s “Use of Knowledge in Society” explains how economic information is not and cannot be fully known by a single person. That information exists “solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” Mr. Reece is one of those separate individuals. Most Second, Mr. Reece’s perspective comes with some judgment; his story makes the unemployed seem a bit lazy or ungrateful. But you could just as well say that this situation arises from the employer’s failure to up his bid so that it competes better with unemployment benefits. My point here is not to assign fault but to illustrate that a lot of different actors contribute to market outcomes.policy makers were not and are not aware of what Mr. Reece was seeing. Most of those who voted Democrats into the Senate, the House and the presidency were not aware.
But as Hayek would tell you, it’s not simply a matter of putting Mr. Reece in charge. It’s impossible for me or anyone else to tell you all of the things that Mr. Reece doesn’t see, but let me name three. First, Mr. Reece doesn’t mention many other new and expanded programs with the same economic character, such as food stamps, mortgage assistance or health-insurance subsidies.
Third, Mr. Reece is in charge of hiring, not firing. If we had more time to look at what businessmen had to say about the government’s fiscal stimulus, I would show you statements from those making decisions about layoffs. They explain how the new and expanded programs for the unemployed and poor were subsidizing layoffs—they were making layoffs cheaper.
Unlike state unemployment-insurance benefits that are sometimes a kind of liability for the employer writing the pink slip, the federal unemployment-insurance expansions were paid by taxpayers generally, which means that an employer could lay off as many people as he wanted without adding to his federal tax burden.
Maybe more vivid was the kind of ObamaCare experiment in the American Recovery and Reinvestment Act of 2009 that told unemployed people that “if you like the health plan you had on your old job, you can keep it,” and the federal government will pay. Before the Recovery Act, many employers used to voluntarily help employees with their insurance after a separation; these were expensive benefit programs for their employees. The employers had to consider that laying somebody off was going to end the value created by the employee but wasn’t going to end the health expenses the employee creates. But employers readily explain how the Recovery Act completely changed that calculus. Lay somebody off during the crisis and, for the first time, among other things, the employer wouldn’t have to pay for former-employee health insurance.
So public policy intended to make layoffs less painful actually made layoffs cheaper and more common.
It’s not just politicians or journalists who do not see the full economic picture. It’s the top economists in the world, from the International Monetary Fund to university professors, who promised that there was no trade-off and that, at this supposedly special time in history, redistribution would create jobs and grow the economy. The stimulus advocates rarely note the kind of thing that Mr. Reece talked about, and they never, ever, mention that redistribution is a subsidy to layoffs.
joyce (12)-
Boom and bust cycles are parts of any normal, functioning economy. The problems start when central planners try to use financial engineering to eliminate the bust cycles.
This is a little detail that our resident trilobite hasn’t figured out.
michael (17)-
Marxism has also been distorted- in practice- by our friends in the former Soviet bloc.
Any economic theory- in the hands of ANY politician- becomes a weapon of mass destruction.
Too bad that capitalism only thrives in the presence of limited gubmint.
ragnar (22)-
1. Are you bringing the whiskey?
2. Are there any firing ranges in Bridgewater that serve breakfast?
“Also let me know if you have time for a breakfast or lunch around the Bridgewater area.”
street (28)-
Easy explanation: he’s Jack Bauer.
“It’s kind of weird but, the guy across the street from me who works for Homeland security suddenly left the job and is now homeschooling both his kids. I’m not sure what to make of it.”
Whoa…does J@ck Bauer send you into moderation?
More boots on the ground
http://www.cnn.com/2014/06/30/world/meast/iraq-crisis/index.html?c=homepage-t
I gather their lawyer isn’t too happy.
http://www.nj.com/politics/index.ssf/2014/06/jury_awards_ocean_county_couple_just_300_for_sand_dune_easement.html
46
Agreed. The booms and subsequent busts are orders of magnitude larger than necessary giving the constant economic intervention.
The next bust will be the one that sends us back to the Stone Age, joyce.
Smoke ’em if you got ’em.
Clot,
I do have an experimental bottle of grim ‘ s white lightning. I suppose you could turn the Bridgewater or Time to eat diner into a shooting range with the right gear.
Buying black votes in Mississippi. Tea Party vs. GOP establishment.
http://gotnews.com