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February 17, 2009

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Mucking about with the business cycle always messes it up further.

The whole "boom/bust" cycle is a part of any capitalist society. When an economy is stable, capital is generally injected; cash reserves sitting outside the economy is invested to increase wealth. Investment always carries risk, and usually in relation to it's reward. This investment creates jobs (by creating companies or expanding existing companies) and considered an "expansion". After a while, the market determines what risks were successful and what risks were not and the capital holders start to pull thier capital out of the failed risks. This causes companies to fold and people to lose thier jobs and is considered a "contraction". Once the capital is fully extracted, the economy stabilizes and the process starts over again.

While it is possible to manipulate the cycle, the cycle cannot be broken unless we scrap the entire capitalist system - it can only be drawn out. By pouring capital into failed risks we only keep those risks alive for the duration of the capital flow; once over, the risks will continue to fail. Once the capital extraction is complete, the market will stabilize as normal, but the capital poured into the failed risks will be lost - we'll still suffer a depression/recession, but after it's over, we'll be saddled with greater debt than we would have been, which will make the expansion period less impactful as we'll have debt to service.

This stimulus package (and the bailout package before it) I see as borrowing an awful lot of money we can't pay back for a benefit that won't really help many people for very long. It would be better for the nation to temporarily expand unemployment/welfare benefits and let the cycle finish, quickly, and then start the next expansion than drag it out unnecessarily.

There is so much pork in there that we could have a pig roast for the entire nation.

It's as you said, there are little to no provisions in there to get people to spend other than buying houses and cars.

I'm also no economist, but my understanding is that there are two very broad schools of thought on this: "Keynesian" and (for lack of a better term) non-Keynesian. The Keynesiansts believe that when the private sector can't or won't spend, that government needs to step up and start spending. Non-Keyneians believe this is all a load of hog wash, and that the best way to regulate the economy is through the Feds Funds Rate.

For the past year we've done it the non-Keynesian way. Bernake lowered the Fed Funds Rate to near 0%. It hasn't worked.

Now we're trying it the Keynesian way, with Obama and Congress spending upwards of $3 trillion (which includes the $800 billion + the trillions given to the banks). Will it work? No one knows.

The third option is to do nothing. This option also has many advocates (such as Ron Paul). This option leads to things like an 89% decline in the stock market and 25% unemployment rate. Some say it's the only way to fix the economy - flush out all the bad stuff in one fell swoop. Politically, it's not feasible.

I accept that in a recession the government should spend money and lower taxes. I think most macro-economists agree on that. Or at least they do based on my limited knowledge of the subject. On the other hand this doesn't mean that they should spend the money frivolously.

I found a breakdown of where the money is going and OMG is it sad. There's some good stuff in there such as tax breaks for buying cars and infrastructure investments. I support this kind of stuff because even if it doesn't stimulate the economy it provides infrastructure that will be used for decades to come.

Then there's the pork. A whole hog farm full of pork. Like $12 billion for special ed programs.

Then there's stuff that spends money but really isn't going to stimulate anything. Like $24 billion to subsidize COBRA benefits. COBRA is serious crap and really unaffordable, don't get me wrong. But this isn't going to stimulate the economy. It just kind of maintains the status quo.

And then there's $100 billion for health care. Is health care really hurting in the recession. No, not that much. But the Obamassiah and Congress probably knew they couldn't get all those health care reforms passed in a separate bill so they crammed them into the so called 'stimulus' package.

If only this bill had a provision where Congress went on recess for the rest of 2009 so they couldn't spend any more of my money.

I don't know if it will work, but I'm concerned about the debt. Keynesian theory isn't simply government pump priming in tough times. For it to work the model assumes government will be responsible during the good times and run surpluses, enabling temporary deficit spending during the bad times. We all know the surplus was a transient occurance that quickly went away after a couple of budget years nearly a decade ago. Whether or not we should do an ES, the fact is we are in a weaker position to it now vs if this would have happened in 1999.

In defense of the political system, you have to remember nothing gets done if you don't have 60 votes in the Senate to end debate. The people's House only needs a simple majority. The Senate majority needed those 3 votes or nothing would have been passed. That's the system. Elections have consequences and if things don't improve in the next 2-4 years, the party in power will have to answer for it.

What a confusing upside down time this is.

I don't think it is best to think of this ES as something that will affect you directly, as was the case with tax rebates. Those arn't terribly effective in a recession anyway because the money just gets sucked into savings when it needs to get spent now. So, what Tom calls pork is what the stimulus is - the government buying things because no one else will. Because right now it is not in any one individuals interest to buy/build/invest in anything. Everyone is behaving rationally, yet collectively things are spiraling downwards.

The danger is that if the ES doesn't manage close our output gap and things continue to get worse then we might end up like Japan in the 1990s and Japan is in an economic trap that they have never recovered from. Just yesterday Japan came out with a -12.7% annualized GDP! That is why they call it an "L shaped recovery. A crash and a flat line. We must avoid that. So far, the US response has been much better than the Japanese, who dithered and took baby steps for years.

The absolute worst thing to do would be to balance the federal budget right now (cut spending and raise taxes). That is what Hoover did and look what that did for things!

Oh and bipartisan with this bill was impossible. You had two ideas on the economy that are simply not compatible, and I think that is what elections are for! 36 Republicans voted to remove all spending from the stimulus. How do you deal with that?

www.recovery.gov has the numbers btw. I hope they add more detail in the coming days.

I also don't really see how much of the stimulus will effect me. I think some sort of stimulus is necessary but what Obama and Congress are proposing doesn't seem to really fit the bill of the economic crisis. It seems more like Obama is trying to push a lot of his pet projects through the guise of an ES.

Personally, I think they should do a tax credit for home buyers. Not just home buyers but all home buyers. This will encourage people to get out there and buy homes which will boost the housing market. This could apply to cars too. Especially American made cars. It would supplement the bailout.

Keeping military spending high helps as does rebuilding the national infrastructure as these produce real tangible jobs (my job is sustained by military spending as is so many others).

Some of the energy initiatives seem great on the surface but I could see a lot of money sinking into a few hands with failed testing. Unless something really sticks, I doubt we will see much economic stimulus from that. Investing in science is similar to the energy initiatives. It could be a lot of wasted money but if something really cool gets invented or what-not, it could payoff. These things are simply gambles rather than true and guaranteed ways to stimulate the economy.

Almost any medical spending is a money sink. It won't produce many jobs at all.

Overall, I think the ES is too heavy for it's goal and will sink. I read somewhere that we are going to be at $500 billion per year in interest spending from the National Debt. That's just ridiculous.

I think it would have been great to take a little bit more time and come with a stimulus that is less polarizing. I understand that there are several schools of thought, but it seems that you could broker some deals that a significant majority can support.

This would work to add confidence to the market, which is probably the best thing that could happen.

I think we only have to look back at history to see what happens when the government tries to solve problems by spending more money and increasing its influence. At the start of the "roaring 20's", we had a depression in 1921. However, that only lasted a year. The crash of 1929 was followed by a depression that went into World War II. The difference between the two is the amount of government involvement in "fixing" the problem.

The worst part of this whole thing is all the debt the government will be taking on, leaving our children and grandchildren to pay for it. Obviously no one can predict the future, but taxes are almost guaranteed to go up for the simple reason that they government will have an ever increasing amount of debt to pay.

BV - You are talking about the post WWI recession (not depression) that was brief. The Great Depression started in 1929, and it bottomed out around 1933-34. It was fueled by Hover's administration's insistence that they take a hands off approach and that they must balance the federal budget by cutting programs and raising taxes. (He raised taxes from 25% to 63% in 1932!)

The spending of the New Deal did stimulate the economy and it was recovering until 1937 when another one year recession hit, thanks to again, a series of tax hikes and spending cuts.

WWII did make the recovery complete, but what was WWII? It was a gigantic government funded work program.

Government cannot make a weak economy great, or a great economy better by trying to manipulate things by stimulus. It is best to stand back at that point. But it can save an economy in crisis and this is a crisis!

Professionally I should benefit from infrastructure projects, but I already have more work than I can do. It just means all the bad engineers will find work now. Personally, I make too much to benefit. I didn't get the last stimulus either. It goes back to that high cost of living - my $100k income is only middle class in LA. They don't take into account where you live. As for the overall stimulus plan, I don't think they have a clue how to fix this mess so they are throwing whatever they can at it hoping something, anything works.

Chris - you said essentially what I wanted to say and probably much better than I could.

The economy doesn't always recover on its own. World War II got us out of the Great Depression, and war spending as Chris pointed out was a huge spending bill. Reagan tax cuts helped a lot in getting us out of the recession and double digit inflation of the 80s.

Now, I wish they had taken time with this bill and made sure that everything in there actually stimulates the economy. I understand the urgency, but how can they talk about urgency when only 25% of this money is going to be spent this year?

I do believe that some kind of stimulus is needed and that it has to be large. I am not sure if this bill is it. I also believe that the financial system's health is of utmost importance, so I hope our new Fed chairman will get his act together and gives us more than just a vague sketch.

In terms of spending - there is another side of the deficit - revenues. Unemployed people don't pay taxes, and if we indeed get into a deflationary cycle (or if we are already there), we'll have higher and higher unemployment every year and hence lower revenues. So if successful, the stimulus could increase employment and result in higher tax revenues and hence lower deficit down the line.

I personally don't benefit from this bill at least in term of tax breaks - I am considered too rich. Some articles on the web seem to suggest that the bill may increase tech spending and that my employer may be among those who benefit. That will be great. I am also not an economist, so I know about as much as most posters here.

the craziest thing is one of the proposed amendments to the bill, which didn't survive congress, would have allowed people to deduct interest on car payments....

What the heck? First, have these people not seen the fact that most new car deals are 0% interest? Second, what are we encouraging with allowing the deductibility of car payments? For people to finance a depreciating asset on a 36, 60, even 72 month basis. What sound financial advice.

I think this may be an opportune time for our economy to shift to something other than a consumer spending driven economy. We can't outspend China/India since they have 6x the population. I say we let them assume that role we can do something else. I'm just not sure what that is...

I'm not going to weigh on this awful pork-filled bill that will bankrupt our nation for sure (told you I wouldn't weigh in on it. ;-) ).

But I will say this:

For the first time in my adult life (I'm over 40) I am financially AFRAID!! :-((

I make good money. Between my wife and I we make over $100k and we barely cover our living expenses. You'll have to take my word for it that we don't live in a 5,000 sq/ft McMansion in some gated private community, drive his&hers Lexus's, have a time share, own a yaht, take vacations in Cancun, are members of a country club, eat lobster on anything like a regular basis, etc etc etc.

Yet at the end of the month nothing is left. Worse still, I have had to dip into savings more and more just to pay living expense. That can't last forever.

Before you say "Cut your expenses - cancel/stop something!" there is so little we have too cancel/stop!! Can't stop using electricity or heating oil, can't stop driving to work or taking the train to work, can't stop eating, and shouldn't cut any of our benefits (health insurance, life insurance, disability insurance, 401k contribs etc). The few things we probably could cut are mere pennies by comparison, saving at best a couple of hundred a year. While I agree that every penny counts, they aren't things that are going to make even a ripple in our financial lives.

I'm afraid.

ps- If you want to suggest me and/or my wife get second jobs, besides the question of when we'd be working them, the amount of tax we'd have to pay on the second/third incomes would more than detract for any cash flow we get. May even push us into AMT range too.

I actually deleted and re-wrote this comment three times. I'm highly offended by your response to this. You seem to have decreed this bill to be useless because it isn't giving you enough perks.

This bill is not aimed at people who have plenty of money. It's aimed at the 3 million+ people who have lost their jobs and their healthcare coverage. It's aimed at the healthcare industry itself, which is the one growth industry, to make sure it stays a growth (or at least neutral) industry.

Your answer to "why is the government doing something they don't know will work" is really a simple one. The one thing most economists do agree on is that the worst thing of all would be to do nothing.

This stimulus may be a shot in the dark, but can you imagine the potential civil unrest if all those people that lost their jobs, their healthcare, their homes, and their ability to buy food saw that their government was doing *nothing* to help them, but had instead bailed out bankers with multi-million dollar bonuses? Marie Antoinette would love to have a word with you...

The stimulus won't work for various reasons:

1. It's too small if the purpose is to actually "stimulate demand". People are furiously deleveraging - the savings rate was up to 3% from 0% in the 4th quarter, in the teeth of an economic crash - so the parts of the stimulus that get money quickly into people's pockets will effectively convert private debt into public debt. But there's still a ton of private debt that needs to be deleveraged before people will feel willing to "spend" again.

2. The infrastructure parts, whether needed or not, will take too long to have much of an economic effect. If we're going to do this sort of thing, we should have taken some thought as to what we were going to do with hundreds of billions of infrastructure spending. There was enough money in the bill to do Things That Need to Be Done, like modernizing the power grid or building a national broadband network (actually both). Instead, we'll get a zillion little bits of pork that won't do much of anything. But Obama insisted that the bill had to be signed by Presidents' Day.

Sadly, after blowing our wad on this and cleaning up the banks, there won't be much left.

My main concern is our highly paid representatives in Congress didn't take the time to even read the bill before they voted it in. We should remove all of them that voted yes in 2010 for such irresponsibility.

LOL .... HERD CATS! That really cracked me up.

I don't have much input on the subject as I am the furthest thing from a financial analyst. It seems a little excessive, maybe even unneeded, to me.

Taking US tax dollars and spending them in the US is not a bad strategy.

The reason that "rich" people like you don't get a break is that you are most likely not going to spend it. You are frugal and would save it. That doesn't help the economy. Giving someone with a $20,000 income an extra $800 guarantees it will get spend, because they NEED that money.

"Trickle-Down" does not work, because someone with $1 million in the bank is not going to spend a $800 tax break.

Kaitlyn --

I think you need to re-read what I said.

If you do, you'll find that I said I don't know if it will work or not and it seems like no one knows. Yet we are spending a ton of money. And I noted that I never spend money personally thinking it may or may not work, so why should the government? Do you really have a problem with that?

Also, I said that it's not spurring me to take any action that may help the economy.

And you commented: "The one thing most economists do agree on is that the worst thing of all would be to do nothing." Really? Do most economists agree on anything these days? Not from what I can see.

Mark B. --

What I was saying is that I have cash and I'm willing to spend it -- a lot of it -- if motivated correctly. The current plan does not motivate me. No, I probably wouldn't spend an $800 tax break, but I would buy a $300k house if they'd kept in the $15k tax credit provision that was originally proposed.

It's interesting that you used the phrase "take our medicine" when you were discussing what would happen if we did nothing. This is purely anecdotal, but there is saying among doctor's that 90% of their patients will be absolutely fine if they do nothing. How many times do we go to the doctor and they simply "prescribe" things to ease our symptoms, but do nothing to address the root issue, because the root issue will heal itself.

Trickle Down economics does work. If you increase the standard of living for the top - the overall standard of living will increase as well.

However, if you subsidize the lowest level there is very little incentive to obtain wealth and push the standard of living to a higher point.

Trickle Down may not be the best economic theory, but its vastly superior to bottom up economics where moral hazard runs rampant.

MASTERPO,

How may car payments do you have? What percentage of your income is you mortgage? Please don't tell me that at a 100k income you can afford to buy anything but necessities. Ridiculous.

Why the animosity to those with nice things? (lexus, vacation time, McMansions, etc) Class warfare at its finest. Those people are also the ones that support the Local University, Church, Charity, and provide scholarships for the needy.

You should send Obama a letter telling him to take my Luxury Car or Second Home to give to you. Now that is the American way.

FMF --

I agree 100% with your thought about the housing credit. That would have been HUGE for motivating people to buy houses. It was probably the best piece of the whole package and they took it out.

FMF: You state you would almost certainly buy a $300k house if the 15k credit were left in. The consensus among those involved in writing and analyzing the bill was the exact opposite, that most people receiving the credit would probably have bought a house anyway.

To look at it from a scaled down perspective. Let's say the bill would have included a $1500 credit on the purchase of a new car. Do you think many people would run out and buy a 30k car because of the credit? I would say no. The evidence is car prices have been slashed at least that much and sales remain down significantly.

You may think the credit would cause you to buy a new house this year, but my guess is you would still make the determination to purchase a house based on all the criteria you have mentioned in your home-buying posts. It would be out of character for you to do otherwise. I think most other people would do the same and that's why the authors of the bill concluded it wasn't a good stimulus.

RWH --

Nope, it would almost have certainly resulted in us buying a home. If you're familiar with our situation (I've been blogging about it), you should know why:

1. We've been looking for two years now.

2. We know the area we want to buy in and have a list of 10-12 "potential" homes we like. These are homes that meet most of our criteria at the current time.

3. Key issue why we wouldn't "buy anyway": price. (Isn't it always?) The sellers in our area are yet to take big price drops downward and sellers aren't willing tom pay those prices. As a result, many homes have been sitting on the market for months (even a couple of years!) with no price drops.

4. If there was a $15k incentive that effectively took that amount off the selling price, I'm SURE we could find a home/seller that we could reach agreement with. Especially since we would both know that we had to make the deal in 2009 or it went away.

But your position is unprovable. If you buy a house this year without the available credit it's because you were looking for one anyway and you found one that met your requirements.

If you don't buy a house this year there is no evidence to prove you would have bought the house if there were a credit to take advantage of.

We just bought a house for 285k last October. If there was a 15k credit available at the time there is no evidence to prove they would have moved off their original asking price of 297.

That's the type of calculation the authors of the bill were including and I think they were correct.

My wife and I are not "rich" by Congress' standards, and I still don't see anything in this bill that helps us out. And, as has already been said, the only part we were interested in was sunk...that $15k home-buying incentive. We currently rent and have a decent amount of money stockpiled for a downpayment next summer, but if the incentive was included we'd be house-hunting right now even though the market here hasn't dropped a bit (unemployment is only at 5+% here, despite Circuit City and a number of large businesses laying folks off).

We check house prices every now and again to get a feel for the market, but people aren't dropping their prices at all, no matter how long their home has been up for sale. And there are some seriously outdated houses that sellers are crazy to think are worth as much as the newer place down the street.

I think people are missing the point of this stimulus package. It is really not intended to help any one person, it is intended to bring our economy back, which helps everyone a great deal.

The most directly impacted will be those folks that have been laid off, now they will get extensions of the health insurance and unemployment benefits.

RWH --

Your position (that it would have made no difference) is unprovable as well. Since it's not an option, we'll never know, will we? The one difference in my specific case though is that I know myself better than you know me -- so I'd say I'd have a better insight into what I'd really do.

And since when is something being "provable" the criteria for an item to be in the ES? Seems to me there's a whole lot that's in now that is certainly unprovable.

Mark B. --

I understand the point. My contention is that if the ES had incentives to get those with cash (like me) to help out the economy by buying, then the $800B they spent could be multiplied many times by all of us doing just that (buying stuff, spending money, etc.) But with no incentive, there's no reason for me to take any action other than what I would take normally.

FMF --

I agree. The compromise with the Republicans forced them to strip some things to lower to total price tag below $800b. That is what killed the housing credit.

That $15,000 credit had everyone buzzing when it looked like it might make it into the bill, it is a shame that it got dropped. They say the total cost would have been around $19b. That seems like a small price compared to the other items in the bill. It would have went right after the heart of this recession, the housing crisis. You would have seen an immediate impact.

Anyway, I am a huge believer in using tax incentives to reward certain behaviors (i.e. spending, buying energy efficent appliances, etc.). They did leave some items in the bill, like a $1500 credit for buying energy efficient items for your home, such as windows, doors, and appliances.

Mark B. --

I know about the energy credits. Now I have to decide if I want to buy new windows for my CURRENT home before I sell it/move (if we ever do move). Ugh! ;-)

Dave,

The idea that we are not operating from a non-kenesian mentality is pure hogwash. Lower interests rates -is- a form of government "spending." Plus, we've spent how many trillions the past 6 months? That's just ... silly. :?

FMF-
I think your situation is different than most in that you have been looking for so long and seem to not want to move that bad. You have been talking about buying a house for so long its becoming almost comical to read your articles on why you did not buy the house you wanted... again

Why not just wait 2-3 more years when house prices are down even lower? I am sure the houses you want will have dropped more than 15k by then as will your house have dropped more in value

(I tend to agree with what Marc B said)

I'll throw my hat in the ring with Mark B and rwh. Fact is, if the gov't was offering 5% of the purchase price of anything I'd probably laugh, say "That's nice of you to offer." and then continue to make whatever decision I was going to make anyways. You wouldn't use a 5% off coupon on a full-retail price item, nope you'd wait until clearance sales.

Similarly, we're all in the same boat. I can't spend money if my job looks to be in limbo. Therefore, the gov't is spending money and while I may not agree with where it's going, I understand why it's going there. Plus, I'm sick of people treating the Dems like spendthrifts when the Reps had no problem spending how many 100s of Billions on wars that we didn't need/want? Just a financial stimulus for the war machine, this one is for the social machine, big whoop.

The "stimulus" is ill-conceived.

FMF: I never said the 15k credit would make no difference. I said the authors of the bill determined it wouldn't be enough of a stimulus.

And regarding proof:

http://www.realtor.org/wps/wcm/connect/a0a78e804d0074afa729ef8d0a12d865/REL08Q4T.pdf?MOD=AJPERES&CACHEID=a0a78e804d0074afa729ef8d0a12d865

The top column shows a drop in median sales price in Metro areas nationally as 12.4% and over 25k from 12/31/07 to 12/31/08. Since 2006 the drop is 18% and almost 42k.

Scroll down and look at Grand Rapids, MI. A 35.9% decline (43k) in 2008.

This is real data and it's what the authors were considering when they concluded a 15k credit wouldn't provide much stimulus when the price of homes had already dropped far more than that and they remain unsold.

So yes, I don't know you as well as you know you. But the authors of the bill know the data better than you apparently do.

Richmond: If you have been renting for at least 3 years you meet the bill's definition of a first time buyer. You would qualify for a $7500 credit.

RWH --

We'll never know the actual impact, will we? As you know, almost as many times as not, "experts" think one thing and something else plays out in reality. And as for those GR numbers, you know that real estate is a very LOCAL decision. The area we've been looking at is south of the city limits and has seen a few percentage point drop only in home prices.

BTW, I'm NOT saying I would buy any home simply to save $15k. It obviously have to meet my other criteria. But given that I've been shopping so long and have a hit list, I'm confident I could find something acceptable. Again, we'll never know.

Otis --

That reasoning doesn't work here. A small percentage of a large number is still a large number. So while saving $0.15 on a $1 candy bar may not be a big deal, saving $15k on a $300k home is certainly meaningful, even for someone with a high net worth.

Another example: when my portfolio is down 5%, I don't say "oh well, it's only down 5% -- that's no big deal." No, I say, "5%???!!!! That's $XX!!!! Ouch!!!!!" Why? Because a small percentage of a big number is a big number.

I think the 800 billion is too scant an amount to have any real impact of the trajectory of the economy, which is clearly heading south rather quickly.

I think the several TRILLION we will hand over to the idiots running the big -- but insolvent -- money center banks is an ever greater waste of taxpayer funds.

I say less bailouts, and more stimulus for the real middle class (under 250k a year). I don't care how you do it -- tax cuts, tax credits, Ben Bernanke himself showing up at our doors with bags of cash, whatever!

Bottom line, I'd rather go broke as a country bailing out my neighbors than paying for $60,000 commodes so John Thain can take a luxurious piss.

What do I think about the stimulus package? Hmm, the same thing about the bailout plan on mortgages.

At the rate he's bailing we won't make it through one term in office!

-Mike

The "Scam"ulus bill is one big robbery of American tax payer money for social projects and other institutions that will have no real effect on turning around the economy. They fumbled the housing "bailout" as expected and now we are trillions and trillions more in debt.

The only real way to 'stimulate' would have been to suspend the income tax for 6 months to a year so that Americans would have long term expectations of income. Studies have shown that Americans spend money based on long term expectations of income, not short term like a measly $400 tax credit.

And of course the other part of the story is the ridiculous, monumental spending that the Big Government train keeps riding on. If we're spending trillions and trillions they don't want to cut our taxes, they want to raise them. We need to cut federal spending on a monumental level to get our country back on track, including cutting all of the bullshit military funding that we spend overseas for nation building, which is only crippling our country.

Please see http://DownsizeDC.org for more information.

I am with FMF on the 15k housing credit. I am on the home ownership fence and the 15k would have made me jump. What they offered instead, meh. Given the recession I will probably keep the cash in my pocket.

Cherryblossom:

Check the details of the law. If you qualify as a first time home buyer you can still get a credit of $7500. What I have read indicates you qualify even if you have previously owned a home, but have rented for the last 3 years. I'm not sure if there are income limitations but my guess is there is a pretty good chance you could qualify.

I'd have to agree with FMF on the housing credit as well.
I already own a home and would love to move to a bigger place. My wife and I decided that if the 15K credit made it into the bill, we would put our place up for sale and have a new house built. That is now not happening, we are staying put for a couple of years. I can say with certainty that if the credit had been included, we would be building a new house in 2009 and I'm sure I'm not the only one.
Now before people jump all over me and say that the ES isn't about me, I know that. I'm not complaining here. Just pointing out that I would have created some cash flow through the "system" with the sale of my $300,000 house and new construction costs of $450,000. I'll happily stay in my current home and continue to save up for our next place.

F20: I'm not jumping all over you, but you are not presenting any data to support your position. You, FMF and a few others are "sure" you would buy (or in your case build) a new house this year if the credit were available. But show the data that supports the prediction that enough people around the country would also do so, given that prices have fallen dramatically and continue to fall.

The data you will find is that despite the large drop in prices, there is very little evidence that people are starting to buy or build again. The conclusion by the authors of the bill was another 15k wouldn't do much to change this and the money would be better spent elsewhere.

Disagree on policy all you want, but provide some facts to support your view.

RWH --

You must admit that there's a difference between the decision of a group and the decision of an individual, correct?

And if $15k isn't enough to get people to buy a home, how is $1,500 enough to get them to buy energy efficient windows or eliminating sales tax (through a credit) enough to get them to buy a car (both measures that were in the ES)?

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