The GOP is doing whatever it can be as partisan as ever. President Barack Obama has made overtures to the republicans in congress, including appointing them to his cabinet. Senator Gregg, a republican from New Hampshire, said yesterday:
"We need a robust [stimulus package]. I think the one that's pending is in the range we need. I do believe it's a good idea to do it at two levels, which this bill basically does, which is immediate stimulus and long-term initiatives which actually improve our competitiveness and our productivity."
That was yesterday. Today he withdrew his nomination, because it is clear the republicans will stop at nothing to fuck over President Obama. This is partisan politics at its worst.
2009-02-12
Honest Abe's Birthday
Coincidentally, two historical figures were born on the same day. Charles Darwin, who we already discussed, and Abraham Lincoln. Elected to office in what would probably be the worst circumstances ever, he did an admirable job managing the conflict and allowing the Union to come out on top.
2009-02-11
Darwin-Mania
Today (February 12th) is the 200th anniversary of the birth of Charles Darwin. Wired has a nice little story, and the history of evolutionary thought is the featured article on Wikipedia.
While there are still 1 or 2 crackpots and several million idiots who would lead you to believe that his thoughts on natural selection and evolution are still controversial today, they are not. Modern biology has much to thank to this man, who gave us the blueprints for understanding how present day life came to be and is the foundation of modern biology.
Happy birthday Chuck.
$15,000 housing tax credit dead
The $15,000 house buyer tax credit is going to be wiped out of the reconciled bill between the house and the senate. It will be replaced with a $7,500 credit, which is still better than the $7,500 15 year interest free loan that is currently available.
My biggest beef? This is not a true stimulus, because it will likely be retroactive, applying to those who purchased houses as far back as January 1. If the goal is just to stimulate housing sales, it would be better to make it for the future only. However, this credit may be used to spend on a house, at stores like Home Depot, which would then make it more of a stimulus. But who knows what the buyers will do with it?
Baseball players behaving badly
And you thought A-Rod was the worst player of the year. May I present a case for Roberto Alomar?
Israel's election: the early results
99% of the results are in for Israel's election and the Kadima party has 28 seats vs 27 for Likud.
For those of you scratching your heads, you should know that in Israel people do not vote for candidates, they vote for a list of candidates. The most votes a list has, the more people from that list will take a seat in the Knesset (their parliament). Nobody will usually have a majority of the seats, so that party must form an alliance with other parties, in order to form a government. The leader of the party with the most seats will generally be the PM.
The leader of the Kadima is the weak Livni, while the leader of Likud is the madman Netanyahu, who is mostly like a smart version of George W. Bush, which is doubly scary.
Either way, the peace process is likely screwed, at least unless the Israelis realize that their future is dependent upon cooperation with both the US and their neighbors.
Livni is very weak, and was unable to muster any support in the fall. However, she does favor the peace process. Netanyahu on the other hand, is a loose cannon who will likely lead Israel further down the wrong path into a war on all fronts, which will benefit the terrorists more than anyone else.
Time will tell what happens. One of the two mentioned above will be the PM. The US reaction to either one should be:
1. Congratulations.
2. Here's what we need you to do. Now.
Time to open the immigration floodgate?
Friedman thinks so. I tend to agree. We can't lock talent out of our country by keeping companies out of the visa market, or making the world's other citizens feel unwelcome here.
2009-02-10
The beginning of diplomacy?
Over in Tehran, we may be seeing the first overtures of democracy. It goes to show that even the worst of leaders and the worst of countries will respond to an olive branch - and that's a good thing. In the 21st century, you cannot win over a population through bloodshed and war.
The human cost of climate change in Australia
Over in Australia, climate change fueled wild fires are raging, and have thus far taken the lives of 200 people.
2009-02-09
Krugman Confused on Housing Credit
In today's op-ed, Paul Krugman delves into the compromises of the stimulus package. While there are many examples of bloat, pork, and garbage in the stimulus bill, he takes aim at one thing he shouldn't: the $15,000 housing tax credit. From reading his piece, I am almost certain that he understands the credit less than your average blogger.
He makes a good point that funds cut from state governments is a problem. State governments are badly in need of cash and they are generally more effective than the fed at getting money into peoples hands. Those are all valid criticisms.
This is not:
A little background on my perspective. I am not a homeowner; I have rented a 1 bedroom apartment for the last 5 years since I graduated from college. I live in Metro DC and have not been in a position to buy a house until now, mostly because of the bubble prices that were quite atrocious here. So yes, I have something to gain from this bill, but that doesn't affect my opinion of it.
Those who bought houses from 2003-2006 are likely very deeply underwater now. We are currently at the 2002 level of prices. Now, a lot of this blame rests with the "ownership" society created by Bush & Co, who believed that giving people loans they wouldn't be able to pay in 5 years would at least allow them to temporarily become members of that society.
But we need to focus on the present situation: There are tens of millions of families who are upside down on their houses. The only way for them to have the chance at downgrading to another house or maybe even relocating to another, more affordable market, is for them to sell their current properties. Some people just vacate their houses, destroying their credit rating and any chance of future ownership. Some were not as foolish and actually bought houses they could afford; but they still cannot sell at today's prices.
An example would be someone who bought a house in 2003 for $275,000. At the peak, it may well have hit $500,000. Now it is closer to $200,000. They have it listed for $250,000, which is what they owe. But the buyers (especially those who don't own a house yet) aren't willing to pay $250,000, because all they see are the prices going down down down. Why immediately have negative equity in a house? The $15,000 at least provides a bridge, it gives these first time buyers a little bit more so that they can get the house they want at a price the other side can swallow.
It also gives people who buy foreclosed properties the capital to improve them. I've toured many of these properties and some are a complete wreck. $15,000 would at least make them livable. This would take some of these "toxic assets" off the books of the bank, both improving our nation's financial picture and also giving people the opportunity to own.
Krugman fails to understand that. He is obsessed with a "house flipping" theory, in which you would only buy the house so that you could sell it for a quick profit, using the $15,000 as your start-up capital. This is unlikely for two reasons.
1. The tax credit would only be for a primary residence, so no second "flip" home.
2. Buyers would have to own the property for at least 2 years, or risk repaying the credit.
These two provisions alone should prevent most flip activity.
Lastly, this is an amendment that helps to address the core issue of the meltdown: the housing bust. It is also bipartisan, and passed a voice vote. Other than Krugman, I can find almost no opposition.
And not to belabor the Nobel Laureate anymore but this is the second time I've seen him confused and woefully wrong on his facts. The first was when he discussed Germany's failure to pass a bailout about a week after they already had.
He makes a good point that funds cut from state governments is a problem. State governments are badly in need of cash and they are generally more effective than the fed at getting money into peoples hands. Those are all valid criticisms.
This is not:
On the other hand, the centrists were apparently just fine with one of the worst provisions in the Senate bill, a tax credit for home buyers. Dean Baker of the Center for Economic Policy Research calls this the “flip your house to your brother” provision: it will cost a lot of money while doing nothing to help the economy.
A little background on my perspective. I am not a homeowner; I have rented a 1 bedroom apartment for the last 5 years since I graduated from college. I live in Metro DC and have not been in a position to buy a house until now, mostly because of the bubble prices that were quite atrocious here. So yes, I have something to gain from this bill, but that doesn't affect my opinion of it.
Those who bought houses from 2003-2006 are likely very deeply underwater now. We are currently at the 2002 level of prices. Now, a lot of this blame rests with the "ownership" society created by Bush & Co, who believed that giving people loans they wouldn't be able to pay in 5 years would at least allow them to temporarily become members of that society.
But we need to focus on the present situation: There are tens of millions of families who are upside down on their houses. The only way for them to have the chance at downgrading to another house or maybe even relocating to another, more affordable market, is for them to sell their current properties. Some people just vacate their houses, destroying their credit rating and any chance of future ownership. Some were not as foolish and actually bought houses they could afford; but they still cannot sell at today's prices.
An example would be someone who bought a house in 2003 for $275,000. At the peak, it may well have hit $500,000. Now it is closer to $200,000. They have it listed for $250,000, which is what they owe. But the buyers (especially those who don't own a house yet) aren't willing to pay $250,000, because all they see are the prices going down down down. Why immediately have negative equity in a house? The $15,000 at least provides a bridge, it gives these first time buyers a little bit more so that they can get the house they want at a price the other side can swallow.
It also gives people who buy foreclosed properties the capital to improve them. I've toured many of these properties and some are a complete wreck. $15,000 would at least make them livable. This would take some of these "toxic assets" off the books of the bank, both improving our nation's financial picture and also giving people the opportunity to own.
Krugman fails to understand that. He is obsessed with a "house flipping" theory, in which you would only buy the house so that you could sell it for a quick profit, using the $15,000 as your start-up capital. This is unlikely for two reasons.
1. The tax credit would only be for a primary residence, so no second "flip" home.
2. Buyers would have to own the property for at least 2 years, or risk repaying the credit.
These two provisions alone should prevent most flip activity.
Lastly, this is an amendment that helps to address the core issue of the meltdown: the housing bust. It is also bipartisan, and passed a voice vote. Other than Krugman, I can find almost no opposition.
And not to belabor the Nobel Laureate anymore but this is the second time I've seen him confused and woefully wrong on his facts. The first was when he discussed Germany's failure to pass a bailout about a week after they already had.
No help for the needy
The NYT points out that despite rising unemployment, states have continued to cut welfare programs. When the economy is strong, there is a good case to scaling back benefits. But in the face of an economic meltdown, I think its necessary to help families out. If that means giving them cash handouts, so be it.
2009-02-08
Three GOP Senators to Support Stimulus
Thus far, three republican senators have said they will back the new stimulus package.
They are:
Olympia Snow (ME)
Susan Collins (ME)
Arlen Specter (PA)
That leaves 38 republicans who are not backing it yet. If you live in a state with republican senators (I do not; though both were only 3 years ago!) you should contact them and urge them to support this needed legislation. At this point, their talk about not adding to the debt is not helpful. We are beyond the point at which the market can correct the situation.
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