I’m angry as I sit here poking at the keys. From where I sit, the world has gone mad.
You see, I work all day in an office full of 20-somethings. They are a diverse bunch. They’re smart and they work hard.
But the one thing they all have in common is they are stuck on a ladder with no where to go. Buried in debt from student loans and various other sources, they are trapped in time unable grab the next rung.
Among them the most common refrain is: “I can’t”
They would like to further their education…but they can’t.
They would like to buy a house…..but they can’t.
They would like to buy a car….but they can’t.
They would like to have children….but they can’t.
There’s more to the list…but you get the picture.
Of course, when you look at their list of wants you realize that what they want is no different than what everyone else has wanted at one time or another.
The difference is in their world it’s a lot harder to attain—if not impossible in some cases.
The reason for this is pretty simple: The cost of their dreams can’t be met with their incomes and adding more debt for them is not much of an option. Everything single thing on their list and then some simply costs too much. As a result, they go without.
So there is steam is coming out of my ears today as I contemplate a what vanishing middle class means for the future.
Then, I came across this great story in Barron’s about the federal housing credits that made me even more angry. Because I know the government will only make things worse.
You can decide for yourself why this one is wrong….
From Barron’s by Randall W. Forsyth entitled: Homebuyers’ Handout-Worse Than Cash For Clunkers
THE FEDS SEEM INTENT UPON REFLATING the housing bubble. Not the Federal Reserve, as you may have read elsewhere, but the federal government.
Following the cash-for-clunkers idiocy, the federal government may extend its subsidy for homebuyers. The $8,000 tax credit for first-time homebuyers is due to expire Nov. 30, but our solons in the Senate are looking to push back that deadline and possibly expand the credit to $15,000 to most homebuyers, not just newbies.
As with the clunker cash, Uncle Sam is giving money to folks to do what they would have done anyway. Cash for clunkers temporarily juiced auto sales in August, but they fell back to their previous, depressed pace in September. And some 85% of the subsidy was pocketed by the dealers, not car buyers, according to one estimate (“Clunker Cash: No Boost for Consumers,” Sept. 29.).
As an inefficient use of taxpayer money, clunker cash pales besides the homebuyer handout. With housing affordability currently the best it’s been in most of our lifetimes, with marked-down home prices and mortgage money in the 5% range, you wouldn’t think homebuyers would need a subsidy.
But there it is, and it’s a lot more expensive than you think.
According to estimates by Ted Gayer at the Brookings Institution, each additional home sale generated by the $8,000 first-time homebuyers’ tax credit actually costs the government $43,000.
How’s that possible? Gayer figures that of the 1.9 million homebuyers that will get the $8,000 tax credit, 85% would have bought a house anyway. The price tag of $15 billion — about twice what Congress had intended — he reckons will result in approximately 350,000 additional home sales, at a price tag of $43,000 for each additional sale.
That’s nothing compared to the tab for a possible one-year, $15,000 tax credit for all home buyers (except those with high incomes.) Gayer figured that would cost the Treasury $73.9 billion, which he estimated would increase house sales by a total of 253,000. Each of those extra home sales would cost the Treasury $292,000 ($73.9 billion divided by 253,000.)
The National Association of Home Builders, not exactly a disinterested bunch, figures the subsidy would boost house sales considerably more, by 700,000 homes. That implies each of those additional sales would cost American taxpayers only $133,000 — still “a very expensive and poorly targeted subsidy,” writes Gayer.
Now think about this for a minute since affordable housing is one of the hallmarks of the middle class. This program is nothing more than an attempt to prop up prices at a level that is clearly unsustainable.
I mean who exactly is the government helping here? Shouldn’t home prices be allowed to fall to more affordable levels?
And is it okay to bury future generations with debt to help bailout realtors, bankers and homebuilders? This is their bright idea you know.
It is madness I tell you. And if I was 20-something I would be ready to take the streets.
Someday I imagine they will. After all, when you mortgage the future eventually the bill comes due.
Related Articles:
Baby Boomers . . . or Baby Doomers?
The Student Loan Bubble Bursts
Sorry Charlie, But Housing has Further to Fall
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