I apologize for the delay in this one. I was so busy laughing, I thought the punch line, "Just Kidding!" was eventually coming. I didn't think the President was serious on this one. All I want to know is: What is the President smoking and where can I get some? Whatever it is, it sure is good stuff because the concept of reality is eradicated by it.
Then I realized, President Obama has buyer's remorse when it comes to the stimulus. He did the Ping Pong thing by proposing to cut the federal deficit in half by 2012. Aside from the obvious, he is clearly showing the world his Obamanomics are based on flying by the seat of your pants. Let's look at the last month and you'll see what I mean.
The nimnuts in Washington vote for a bill that spends more than 787 billion dollars but never bother to read the damned thing. America proclaims its collective voice of disgust, since the stimulus does nothing to address the key cause of the current economic crisis. So, in the classic ping pong response, Obama's right hand man, Timmy G, (sounds like a rapper handle, huh?) suggests through the Big Guy, that we support homeowners who wish to refinance their mortgages (in order to exploit lower interest rates) by allowing Fannie Mae and Freddie Mac to refi houses at more than 80% Loan To Value so the homeowners who are upside down or who are in a mortgage greater than 5% can take advantage of the lower rates. Wait a second...isn't that what got us all INTO this mess in the first place?
He threw a bone to those who are already in foreclosure to get their foreclosure stalled by allowing basically a five year ARM at whatever will bring their payments down to 31% of their income. After five years, the mortgage returns to whatever rate is going at that time. Um, I hate to be a party pooper, but after spending a trillion on banks, a trillion on spending and billions on various other industries, we're gonna be facing soaring interest rates. Don't believe me? Check history. Does the phrase 'Carter Administration' mean anything to you? Mortgage rates soared to astronomical heights. The president will be sending those who are struggling at 10% to the wolves of 17%! Consequently, he just postponed the inevitable foreclosures to come. The only way to avoid this is to (drum roll please) CUT THE DEFICIT!
Why? Well, it's kinda complicated, but here goes: If the government borrows two trillion dollars in four years they drive up the competition for those borrowing dollars. Consequently, the banks can reset interest rates to meet the demand. Even with the prime rate being set at less than one percent, we're still seeing mortgage rates at 5%. That's because the supply and demand factors are at play. So if the government is spending a trillion, it pushes interest rates up, causing the 5 year ARM mortgages to be reset at 15% (or more, based on past results.) Gotta stop the spending to stop the rate climb or you just force all those who refinanced with 5 year ARMS to foreclose in 5 years.
So, now he's going to cut the deficit in half by 2012. With what? Taxing businesses and the rich? Who does he think employs people? Oh yeah...businesses and the wealthy. And what happens to states that overtax business? Well, look at California and you'll know. When the Left Coast increased corporate taxes, the businesses left in droves. They went to Nevada, or laid off workers.
It is almost as though the President is listening to economists that comment on his proposals AFTER he proposes them. So rather than consulting them first, he throws it out there and waits to see the reaction. You can almost predict what he'll do next, based on the reaction. Is this is what happens when you put an attorney in charge of an economy? Let the jury decide, then change your defense strategy? So now he wants to do the very thing that EVERY economist says is a bozo no-no during a recession...increase taxes.
Apart from looking as though he's making this shit up as he goes, I'm kind of wondering if he's still smoking some really good stuff. Maybe he should just legalize marijuana and tax it. He'll make LOTS of money and he could smoke his peace pipe with other heads of state as Native Americans used to do.
Or maybe the President should take his proposals to a number of non-political economists and ask for help. Either that, or just take Economics 101 again, and let the MARKET CORRECT ITSELF!