Wednesday, September 16, 2009

Economic addictions....

As we near the end of the first time homebuyer $8,000 tax credit many people tied to the real estate industry fear that they are about to suffer their own Cash For Clunkers style crash after the buzz wears off.

Cash for Clunkers worked. It was a terribly inefficient way to get old cars off the road and it cost WAY too much money for too little economic impact but it drove up sales. The problem with stimulus - or stimulants for that matter - is once you have a taste for that easy money you want it again and the next time you want more of it.

The first time home buyer credit has caused a similar frenzy at the low-end of the housing market. With the FHA aggressively lending and $8,000 representing up to 10% of the purchase price of many homes in the North Country this has kept the low-end of the housing market hot (I'll note that high-end properties in the North Country seem to be dead in the water).

But now this tax credit is set to expire and what do we hear? Maybe we need EXPAND it, INCREASE the size, etc, etc. The limping housing market has been propped up by stimulus and like any good addict, instead of seeking treatment we just want more, more, more!!!

"The real estate industry, including the powerful 1.1 million-member National Association of Realtors, wants Congress to extend the credit at least through next summer. The group hopes to expand the program to $15,000 and to allow all buyers, not just those who have been out of the market for at least three years, to qualify. The price tag on that plan: $50 billion to $100 billion."

Mr. Bernanke basically called an end of the recession yesterday and I can't disagree. He has access to more data any of us so his opinion should carry some weight (much of it flawed data, but you know the old saying garbage in garbage out).

I'd just note a couple of things -

1) Mr. Bernanke does not have a great record as a forecaster. Mr. Bernanke believed the subprime issues were contained, that housings problems would not impact the rest of the economy and that the Bear Stearns situation was a one-time issue. Oopsie!

2) People continue to view stock market activity as a measure of economic activity. The stock market has become so disconnected from economic activity that it has become its own system for GENERATING economic activity rather than just measuring economic activity. Talk to anyone in the "real world" - businesses selling to consumers or other businesses - not government related entities - and you get a startling wake-up call. Business around the US appears to be getting worse not better for virtually every sector save the financial sector (and that is largely due to government stimulus - see above :).

I'm not saying that we are still in recession, but I think it's way too early to break out the champagne and party like it's 2006 again.

I don't really have an axe to grind with law enforcement. I appreciate their protection, but I feel that in many municipalities they might be migrating from serving and protecting to a role more similar to that of a tax collector. Write the tickets and earn commission........I mean, overtime.

Long Island apparent has 11 cops making over $200,000.......Pretty good work if you can get it.

"Long Island's highest paid police officer earned over $246,000 last year while working on Nassau County's drunken driving enforcement team.

Department records show that highway patrol Officer Daniel McKenna's earnings included more than $113,000 in overtime. The 14-year veteran of the force did not respond to an interview request. Nassau County's tough line against drunken drivers helped 11 police officers earn more than $200,000 last year."


1 comment:

Anonymous said...

And in 20 years they can retire, 1/2 pay, draw their pensions, and on to the next job. This is why the pension of NYS is a ticking time bomb.