Sunday, January 18, 2009

American Economy: Do the Math, Stupid!

To all the politicians out there who have a theory how to fix the economy, it is really very simple. Do the Math.

Our economy is dependant on a certain amount of indulgent spending.
Whether it is in a new car, new clothes or a new house, all businesses that depend on other business success go back to the middle classes spending money. I am SO SICK of people saying the American People just need to regain their consumer confidence! It is really simple, if you do the math.

"Real median household income in the United States climbed 1.3 percent between 2006 and`2007, reaching $50,233, according to a report released today by the U.S. Census Bureau. "

Ok, so if the annual income in most homes is $50,233, that means they have a total of $4186 per month before taxes.

According to the National Association of Realtors, t$FILE/MSAPRICESF.pdf the median price of a home for the year 2007 averaged $217,800. Now, if Mr. Banker sells you an ARM that has an introductory rate of 4.5, as Wachovia Mortgage did to me, the monthly payment would be (with taxes and insurances) 1332.72. That would be a little less than 30% of a monthly pre-tax income. NOW, increase the interest rate to 8.3 % (as Wachovia did to me and LOT of other ARM mortgage holders who bought into the 'index' versus 'prime rate' product) and your monthly payment goes up to $1873.08. Now, you figure 28% income tax and another 6% payroll tax (kind, I know) and the average family disposible income goes from 4186 to 3010 for the taxes and down another 251 for Social Security. It looks like this
Now, if you deduct the original 1332.72 (teaser rate offered by Wachovia Bank), you have $1427 to work with to pay for food, clothes, car, gas, insurance and utilities. Change that amount to $1873, and you only have $886 per month to pay for all of the above.
Now, when you consider the average $20,000 car payment, spread over 5 years, is $405 per month, you only have about $485 to pay for all the other stuff.
If you then factor the sudden increase of gas to $4 per gallon, credit card payments for things like furniture, and basic food and utility cost increases in response to the increased cost in transport, is there any wonder why people had to walk away from their homes, or that they couldn't buy a new car that year?
Is every politician a moron? Do the math. It is pretty simple. The last thing we need is increased taxes to pay for a multitrillion dollar "stimulus" package that does squat.
Or, in other words, bancrupcy court, here we come!

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