By York Van Nixon III
Since the day Lehman Brothers was allowed to implode in 2008, DC Mortgage Examiner has offered more than twenty articles stressing that TARP and subsequently The American Recovery and Reinvestment Act of 2009 (stimulus plan) failed to adequately address a more pernicious problem that three years later has moved closer to the forefront to explain our floundering economy.
While it was certainly necessary to maintain confidence in our financial system by pumping in tax payer dollars, marginalizing the significance of declining values of most Americans’ greatest investment – their homes – ranks as the greatest blunder and oversight of the Obama Administration.
When Mr. Obama got the keys to the country from George W. Bush on January 20, 2009, support for a second trounce of TARP was already in motion. For that Mr. Obama can be forgiven. But when he pumped $800 billion into the top of the economy instead of Main Street, it did little more than slowdown a recalcitrant downward spiral. His decision to continue the economics of his predecessor may have a lot to do with the lack of an economic theory that is the reverse of “Reaganomics.” Perhaps such an approach could be called “flood-up” as opposed to “trickle-down” theory.
Despite those who say his stimulus plan is a failure, the report released by CBO (Congressional Budget Office) suggests without it, our economy would be in a nuclear winter. And if one were to ask the 1.2 to 2 million Americans who are working because of the stimulus, one would probably hear a resounding “yes it did work.” The same endorsement would not be forthcoming from the more than twelve million people still without a paycheck.
“… CBO estimates that, compared with what would have occurred otherwise, ARRA will raise real GDP in 2012 by between 0.3 percent and 0.8 percent and will increase the number of people employed in 2012 by between 0.4 million and 1.1 million."
Supply-side economics, also known as “trickle-down” economics, in its simplest form holds that when applying Keynesian economics (government spending) it is accomplished by doing what most Republicans clamor for: cutting taxes and reducing regulation. While those at the top of the economic food-chain will certainly laud its merits, eight years of top-down fiscal policy has wrought thirty-year lows in revenues and a national debt that was around 5.5 trillion dollars in 2001 and that more than doubled to eleven trillion dollars by the day Mr. Obama entered the West Wing .
The price tag for The American Jobs Act is estimated before scoring by the CBO to be about $447 billion. Contained in the section titled Putting Workers Back on the Job While Rebuilding and Modernizing America,which is supposed to cost $140 billion, is $15 billion for the rehabilitation/repurposing of vacant property.
Focusing money directly on housing problems is not a new idea. It first emerged in the Neighborhood Stabilization Act of 2008 (H.R.5818), sponsored Rep. Maxine Waters (D-CA). Since then, funding was included and increased in the 2009 Recovery Act.
As the name implies, programs are developed for specific neighborhoods across the country to stabilize their respected real estate markets. There are many areas of Washington, DC like Anacostia that continue to benefit from the NSP.
Despite their success, little support has been garnered to nationalize this program on a large scale. In all likelihood, Republicans would label it socialism, although they seem to have no problem with corporate welfare.
President Obama sent his jobs bill to Congress this morning. Speaker Boehner said he will have more of a response after the CBO has crunched the numbers.
As amendments are being offered in coming days, increasing funding to housing should be considered. Small business has always created more jobs than government. The Obama Administration should not lose sight of entrepreneurs whose homes are underwater and unable to get loans from banks.
There is an untested correlation between residential real estate prices and employment. Perhaps the obvious does not need a study done by a Harvard MBA.
Comments