New Definition: Successful Stimulus Program

Calendar March 2, 2010 | Posted by Michael S. Langston

With high levels of bipartisan anger, not only affecting elections, but affecting polls on the flagship legislation… er, I mean, the monstrous health care bill which no understands as well (here via WaPo):

…A CNN poll last week found that only 25 percent of Americans want Congress to pass a health-care bill similar to the one it has been working on for the past year, while 73 percent say Congress should either start from scratch or not pass health-care legislation at all (other polls show support for the bill in the low 40s). …

The White House is once again, on a media blitz to prove the administrations’ efficacy and job one is selling the idea the simulus worked.  While they have seemed keen enough to not discuss actual housing or job numbers, but instead spend time on nebulous items such as “saved jobs“, they are nonetheless telling us with great frequency what the stimulus did for us.

Vice President Joe Biden (here via ABC News):

Vice President Joe Biden said today that it is “taking a while” for the nation’s economy to “get out of this ditch” but credited the Obama Administration’s stimulus legislation, enacted one year ago, for laying a foundation for long-term economic growth. …

As well as President Obama himself (here via USA Today):

President Obama credits the one-year-old economic stimulus legislation with staving off a second depression …

The President even sent high level officials all over the country to prove the stimulus worked.  In one case, they used construction for residential housing to spotlight the great work the stimulus package has done for Cincinnati (here via Cincinnati.com).

With unemployment numbers continuing to rise (UE Rate for January 2010 10.6%)

& defaults on existing mortgages doing the same (here via Reuters):

…More than 8 percent of homeowners were behind 30 days or more on their mortgage loans, up 4.4 percent from December 2009 and 21 percent from last January…

& just like the last media blitz the White House went on to prove the stimulus was working (here via DA), they have spent approximately 34% of the money they claimed to need originally (here via ProPublica).  Combining the money spent and tax cuts approved listed on Recovery.gov they find:

…the government has now moved at least $272 billion into the economy, or 34 percent of the total amount approved by Congress last February….

So there you have it.  Successful stimulus program is now defined as a jobless, homeless, shaky recovery, for which the majority of the money requested has yet to have been spent.

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Housing Recovery?

Calendar March 1, 2010 | Posted by Michael S. Langston

According to many reports from recent “economist” we are on are way.  Starting with the “Sage” Warren Buffet (here via Calculated Risk) arguing that supply has dropped below demand, which effectively will balance out the system:

…Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us…

The NY Times  (here):

After a plunge lasting three years, houses have finally become cheap enough to lure buyers. That, in turn, is stabilizing prices, generating hope that the real estate market is beginning to recover….

& Our trusted Federal Reserve Chairman Ben Bernake (here via CNBC):

Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday he expects the downtroddenU.S. housing sector to improve by the end of the year, a senator who participated in the closed-door meeting said….

At first, this might seem like some sort of an agreement, however there is one stark difference.  Mr. Buffet spoke in February 2010, the NY Times piece is from July 2009, & Mr. Bernake spoke in February 2008.

The timing of the statements is instructive, as each was based upon changes in supply and demand.  The problem all had in their given time frames appears to be the same – you simply can’t count on economic activity trending when the growth was due to temporary incentives from the federal government.

As with Cash-for-Clunkers (here), Cash-for-Appliances (here), and recent tax breaks and money for lending, Cash-for-Homes will fail as well.  A temporary relief program will only provide temporary relief and is already showing signs of weakness.  From WaPo (here):

…Even as the housing market shows signs of improvement, including in new data released Tuesday, economists warn that it could take up to a decade for many homeowners to regain equity in their homes, while some people in the hardest-hit regions of the country may not see a recovery during their lifetime. …

CNBC (here):

The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market….

& Time (here):

For a while there, it seemed the housing market had made the turn to recovery. Housing sales were up in nearly every month in 2009. But today it looks like real estate is headed back down again…

Delaying the inevitable will just make the pain worse.

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