With the nation’s health care system on the operating table this year, Washington’s policy surgeons have focused so intently on their outsized patient that they seem not to have noticed that Social Security is attached at the hip. That’s unfortunate, because a clearer recognition of the interconnectedness of the two policy challenges could make it […]
Treasury Secretary Timothy Geithner’s toxic asset plan is a brilliant, highly complex and very expensive answer to the wrong question: How we can raise the value of bank portfolios without improving the quality of the underlying loans? It is truly remarkable that an administration that preaches progressive economics intends to deploy $1 trillion – […]
Even economists who are sold on the need for a big boost in government spending have said that because such spending may be slow in coming, a tax cut is needed to help lift the economy in the near term. Unfortunately, the proposed Obama tax cuts will start with a whimper.
The Joint Committee on Taxation analysis of the House-passed bill estimates that just $13 billion of the $145-billion Making Work Pay tax credit would be disbursed before the end of September.
The Obama administration is apparently ready to propose a massive plan to quickly address financial-sector weakness, along with less-aggressive efforts that might only moderately reduce foreclosures. If so, that would be like grooming a dog’s tail before you give the whole dog a flea bath.
The two mortgage fixes being embraced by Democrats would draw out the necessary mortgage restructuring and might only moderately reduce the coming wave of foreclosures.
There are much more forceful policy options that can end the foreclosure crisis now, while doing more to boost household cash flow and confidence.
Foreclosures are only a symptom of the real housing problem facing the economy – the deadweight of excessive mortgage debt.
Without the burden of mortgage debt that exceeds present home values, perhaps twelve million households would have more disposable income and more confidence, limiting declines in consumption and employment.
Up until now, policymakers in Washington have approached the mortgage debt crisis with two goals – helping those on the verge of foreclosure and easing credit for refinancing (as well as home buying).
The FDIC proposal is a constructive and important plan to encourage reworked mortgages while attempting to limit taxpayer exposure, but it does appear to have a few drawbacks.