In their Forum, the editors of the Orlando Sentinel (OS) in Florida asked, “Should government help homeowners caught in the subprime tangle?” And I thought, now shouldn’t that dude in the cartoon be frowning or did the OS fail the brain-paper connection when it chose its OP ART that day?

So I figured, maybe they had a lot of happy-homeowner letters for me to read about but I was wrong. The peaceful-looking pOP ART dude defied the responses printed.

What OS published was an overwhelming response against homeowners. I counted.

Then, I realized, if I were a homeowner in crisis – with a bank note owed months ago, Christmas gifts bought on credit, and barely able to buy just the necessities I needed to survive and stay alive – would I have had the time to write a letter to the editor of the Orlando Sentinel? To be sure, I’m a homeowner myself, though, thankfully not one caught in the subprime housing crisis devastating hundred’s of thousands of Americans today, so I thought I’d write a few lines for them: for those unable, unwilling, or without the time to communicate some basic truths about the symptoms and effects of the now-2008 housing crisis.

If it is true that the foundation of U.S. government is the American taxpayer and it is this taxpayer, each one, who supports the interconnecting system we call government, and it is also true that government had any hand in causing the current housing crisis, then shouldn’t we expect ourselves, as taxpayers, to foot at least some portion of the bill to fix the problem?

Ah, if it were only that simple. But it isn’t and its effects did reach proportions in 2007 that could be called the start of an economic pandemic. For example, did you hear about the bank run in Britain? How about the devaluation of the U.S. dollar against – of all currencies – that of Haiti. Or, could you have missed that Abu Dhabi bailed out American-based CitiFinancial Group. How about the German corrections or the worldwide stock market declines? Does any of this sound familiar to you? Do you think it should’ve sounded familiar to those in power?

I address Federal Chairman Ben Bernanke to say that unless you are playing Make-Believe with the President of the United States, a game best left to pre-schoolers, you would’ve recognize that the bottom line is this: The federal government has a supervisory role over the institution we all know as the Federal Reserve. This is the same entity that allowed interest rates to remain excessively low during the years I fondly call Alan Greenspan’s “irrational exuberance.”

In 2005, Greenspan retired, and shortly thereafter began the descent of home values, and shortly thereafter began the reign of Bernanke, our so-called “depression expert,” Ben Bernanke.

When the market began to point distinctly to a housing failure in about June 2004, did the Feds raise “an ounce of interest?” Did they take heed to the economic application of the saying, “an ounce of prevention . . . ?”

Did Bernanke, via the Feds, consider it was part of the function of government to keep the economy stable? Or did Bernanke have no choice but to say to the world that the American economy is stable when many, too many, indicators show it isn’t?

Unless one happens to believe that the Federal Reserve is not any part of the U.S., and its government, it would remain to be true that if government caused the problem, . . . well, you know the rest.

In the end, the Feds not-so-invisible hand of the market has been economically traumatizing millions worldwide, at least until recently, when the one who could have done something sooner suddenly seemed to realize that lowering rates could actually help to alleviate the problem. Way to go, Bennie!

But it hasn’t been enough. Taxpayers need to recognize a huge balance due by the one I have named Incompetent, the one who should have been busy applying reason to the economy instead of writing about theories of depression.

No.

You’re right, people are going to pay down bills. It doesn’t stimulate the economy, exactly, but they SHOULD be paying of their debt. It’s in their self-interest not to carry extra debt that accumulates interest. So putting shifting more money and accumulating larger government deficits were never an ideal solution.

The problem I have with this particular form of intervention is that I find it short-sighted to think that economics is simply about monetary transactions. An economy is a system which addresses a societal relationship of needs between segments of the population, so rather than worry about how much money is in the economy at any time, I’d rather we addressed some of the needs that people are going to have as the market adjusts. I’d like to see us help unemployed workers retool by helping them take classes to build new job-skills. I’d like to take a page from the New Deal and the Tennessee Valley Authority and see some government investment in clean energy sources and transmission infrastructure, thereby diversifying our energy sourcing, creating sourcing competition and encouraging existing energy providers to bring down their prices to be more price competitive. I’d like to reprioritize some of our government spending into domestic programs like the Federal Student Loans program–which I mention specifically because we’re likely to see a lot more applicants if we really are entering a recession because middle-class families that weren’t anticipating a need to take out loans for college tuition are going to have to apply if their financial investments devalue as the market collapses. Those are only three suggestions I could make.

A little government intervention, strategically and thoughtfully applied, can help people get through a recession and lead us into having a stronger economy in the long run. Unfortuantely, the administration’s solution is handing everyone a check for $800 and begging, pleading with people to take that money and spend it on consumables, and that is neither thoughtful nor strategic.

http://www.nytimes.com/2008/01/21/us/politics/21clinton.html?ei=5065&en=07b1c660076fe5b9&ex=1201582800&partner=MYWAY&pagewanted=print

in which Hillary states that the government must take a far larger role in managing the economy to protect us from the excesses of the free market.

Thus proving my last post true.

There’s really no need to make it more complicated than that. Government exists to secure our rights. When it goes beyond that, it deteriorates into something less than good government.

Aside from which, any stupid enough to think he can manage a free market economy has proven himself unqualified to try.

It is the role of the government to get out of the way of economic progress. If they want to call it a “stimulus,” it would be no different than the thousands of other misnamed bills they pass.

“And secondly, if you do, why not in other cases, such as banning smoking in public places or setting usury interest rates?”

They should stay out of that, too.

If the situation were more dire, I don’t think I’d have a real problem with the infusion of cash. But this isn’t the 1930s and we’ve not given the market time to respond to other monetary policies (such as interest rate reductions by the Fed) so I think this is premature. Much of the slow down in the economy can be tied to real estate and the exuberance of all the related investments in it. Not unlike the exuberance of the stock market of the 1990s. It seems to me we should be allowing things to correct themselves.

anon – I think the cash refunds will be used to pay down bills. That’s why I think it will have little effect. I just don’t see folks spending the money.

So I don’t think the government should be intervening here, any more than I think they should be doing anything with our money to help subprime borrowers or lenders. And no, they should not be involved in the smoking ban. And unless the usury laws apply to all, they shouldn’t exist.

I understand people don’t enjoy paying taxes because you’d rather YOU were the one spending that money instead of our theoretical US Navy SEAL. To you I saw, “waaaaah.” But taxes aren’t a black hole where money disappears, never to re-enter the economy again.

**

To answer your question Viv, I think the role of government in this situation is to help people survive by facilitating their growth with a retooled economy post-market correction. Every bad piece of economic news is a new opportunity for growth, and I’m optomistic that if we finally ween ourselves off the unsustainable status quo that the faux free marketers in the Republican party are addicted to and allow the market to correct itself, we will end up with a naturally stronger economy in the long run. Unfortunately, the GOP hasn’t been especially eager to allow the housing market to correct itself after a period of ill-advised lending practices artificially inflated the price of housing, and now that personal debt and low levels of personal savings are catching up with us and starting to influence other areas of our economy, their solution is generally to play the Enabler and hope that we will continue to spend, spend, spend instead of reinvesting in ourselves or paying down some of our outstanding bills.

I do not have it handy, but a WSJ editorial Friday made the point very well. Any “stimulus” would simply be some kind of a transfer from people who invest to those who spend. A better way would be to fix the tax code so that it does not penalize success, and that allows our companies to compete on an equal footing with foreign companies.

Eliminating corporate income taxes would go a long way to all of those goals.

The lst question is very hard to answer at this point, at least for me and what I know. Before I could answer the overall question, I’d have to ask the question(s): What happens if the government doesn’t act? Will the stock market collapse if the government doesn’t intervene? Will revenues drop and entitlements can’t be paid? …and questions like these. And if a reasonable number of people agree that the overall good for the citizens would be for the government to intervene, then I would concur, given that the intervention didn’t enrich those not derserving.

Rhetorical question: Does the second question have to have any relation to the first since the consequences of the negatives are so different (not sure of the soundness of this question)? But you’ve asked the hard question.

The first scenario could have massive consequences on a large part of the population in a fairly quick timeframe. The second question/scenario has a less deliterious effect, at any one time, on parts of the population and would take longer to have its effect. BUT, to argue against myself, what is the difference if the negative effects happen quickly or slowly when a country tries to decide what is best for itself. Democracy is complicated isn’t it.

Thanks for positing this “if. then” thougt provoker, Vivian.

Second, just how much of a benefit can be gained through a stimulus package which appears to be aimed at $100 billion to $170 billion of an economy worth hundreds of trillions of dollars, and how permanent a bump would it be? Moreover, the government is already squeezed by a cash crunch. How do we decrease the deficit with a stimulus package, and if we’re not going to decrease our deficit and we’re issuing tax incentives to stimulate the economy aren’t we going to end up having to borrow even more money from our buddies in China and elsewhere?

I slept through most of my Econ classes in college, and I do try to read up on such things, but a close friend yesterday told me of her suspicion that I’m seriously ADD, and she’s probably not too far off base. I lack the discipline to truly school myself on this issue so will gladly hear someone else’s point of view.

I think the government should first get the accounting problem fixed at the Pentagon and make them accountable and responsible for the vast sums of money they get (and then don’t know where it went)…This leaking at the Pentagon has got to stop asap….we should also assess which bases in other countries we can close and close them….saving additional monies….

Then the government should intervene to assist folks who aren’t making it…

Our other major problem, the environment and energy, should receive government funding to help ge solar and wind power going…this would also result in increased jobs.

Other than that let the market straighten itself out.

buzz…buzz…