Schadenfreude Smörgåsbord (Open Thread)
1 hour ago
Friday, January 30, 2009
U.S. Economy: GDP Shrinks at Fastest Pace Since 1982
The U.S. economy shrank 5.1% in the fourth quarter. To make things worse companies such as from Starbucks and Pep Boys- Manny, Moe & Jack have announced job cuts. Obama used these events to push his stimulus package forward claiming that "this is a continuing disaster for America’s working families.” Consumer spending dropped from 3.5% after having already dropped 3.8% earlier. Many believe that Obama's stimulus plan could help the economy. “Without the stimulus plan, the economy would be flat to declining in the second half of the year,” said Meyer, vice chairman of Macroeconomic Advisers LLC in Washington.
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An interesting idea that we worked on in my Model Congress committee last weekend:
There are lots of foreclosed homes sitting vacant and quickly becoming dilapidated. There are lots of people in need of low income housing. There are lots of people in need of jobs.
Instead of merely buying "toxic assets" from the major banks, the Fed should actually obtain ownership of foreclosed properties around the United States. This won't distort the housing market, because these homes are currently worthless as they are. Plus, this would relieve the banks from billions in toxic assets.
The Fed would then transfer ownership of these properties to HUD or state agencies, who will then do several things with them:
First, with stimulus package money, these homes should be improved/renovated/restored to selling conditions. Sort of a micro-infrastructure project on a major scale providing many jobs to lower-income workers.
Second, low-income families should be allowed to move into these homes and rent them at subsidized rates from HUD or the state agencies. Just as Freddie Mac announced yesterday that it will allow residents to stay in their foreclosed properties, because it keeps them in better condition.
Third, when the housing market slowly climbs back up to stable levels, these homes would all be gradually sold to banks, allowing HUD to recuperate some of its spent money and working to stabilize the housing market with solid, high-quality homes. By this time, those renting the homes would ideally have saved enough money (from the really low rents) to have gotten themselves in a position to get a secure job and find a home for themselves to either rent or buy, without government assistance.
One plan, three problems.
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