Today, I was writing a post of how Ronald Reagan reacted to the Savings and Loan Crisis, which comparable to our Subprime Lending Crisis, with a tax cut. While I was composing that, President Bush was making this proposal:
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/18/AR2008011801865.html?sub=AR Bush said such a growth package must also include tax incentives for business investment and quick tax relief for individuals. To be effective, he said an economic stimulus package would need to roughly represent 1 percent of the gross domestic product _ the value of all U.S. goods and services and the best measure of the country's economic standing. Let me translate that. That is an average of $483 of a rebate for every man, woman and child. Supposedly, that would be $1933 for a family of four. I highly doubt it will happen. It is a high number meant to get Congress to bargain upward. Here is what I think this will translate to in terms of the average person. It will be a month's rent for the lower middle class. It is a month's mortgage payment for the upper middle class. Whatever that is for you, it will be a month's worth. It means individuals beyond the upper middle class earning $80,000 will get no rebates. It means couples earning more than $110,000 will get no rebates. Here is what I think this means in terms of the Federal government. We are at 19% of the Gross Domestic Product. My target figure for a proper budget is 15% and going to 18% is in the correct direction, if it meant a spending cut. If there is $1.3 trillion dollars at stake and we may have to use our credit to bail out of that. Otherwise, some banks will fail. The banks backing them, like CitiCorp, are backed by the Federal government. If it will cost us even 2%, it will be $260 billion dollars. If it boosts housing starts, we will get that back in revenues from income taxes on those working in the industry. Regardless of how you cut it, the US will have an increase in the national debt and have to print more money, unless there is a spending cut. We have to cut the size of government. If there is not a spending cut, that means we print more money and make each dollar worth less. Now, let's get back to what Subprime Lending is. Many of us watching TV ads have seen the commercials that say they will tell you what your FICO credit score is. Mine was 754 before I paid off my credit cards. The median score is 678. That means half of us are below 678. The mean is 723 and that is what the average is. Prime borrowers are defined as those above 620. If you have missed payments, had a suit judgment against you, a repossession, or a bankruptcy, you are likely not in this group. Those with a credit rating below 620 have to seek Subprime loans. They have higher interests and fees for late payment. It is almost like dealing with a loan shark. As I said before, we have $1.3 trillion dollars in loans to such people who have purchased homes. The payoff for lenders is that up to 10% is put down as equity. If they pay off the high interest loans, the lenders win. If the worth of the home is maintained so it can be sold and the borrower forfeits, they keep the equity. What if market prices go down because unemployed workers start selling to keep their equity? Then a foreclosure can be a real loss. That is what happened in the Mid West with the plant closures in the auto industry. That is why the Subprime Lending industry has had to declare losses. For those who support the mission in the middle east, that will put even more pressure to cut the troops and cost lives. The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries. -- Winston Churchill ____________________________________________________________________________________ Be a better friend, newshound, and know-it-all with Yahoo! Mobile. Try it now. http://mobile.yahoo.com/;_ylt=Ahu06i62sR8HDtDypao8Wcj9tAcJ [Non-text portions of this message have been removed]
