From time to time the South Florida Law Blog invites people who I respect and are friends to post a blog. I introduce you to my dear friend William McCarty, an attorney who lives in the DC area.
“You can always count on Americans to do the right thing—after they’ve tried everything else.”
After three years of record low interest rates and $2.5 trillion dollars of deficit spending we still are no closer to jump starting a self sustaining recovery. Job creation is very weak, housing contracts are anemic despite historically low interest rates and prices, and the stock market is erratic and indecisive because it trades off of short term news rather than long term fundamentals. Even if we don’t have a double dip recession, a 2% or lower growth rate means that unemployment is actually increasing because we’re not creating enough jobs to keep up with our population growth.
We haven’t been able to jump start a self sustaining recovery because we cannot replace the unsustainable phantom wealth of rapid home equity appreciation, quick stock market gains and easy credit with the unsustainable phantom wealth of printed money.
So now we have to face facts:
1. Adjusted for inflation, individual income has been flat for the past ten years and real buying has actually gone down
2. In the near and long term, either taxes will go up or services will go down or both
3. Health care and college costs continue to increase twice as fast as our income
4. Collectively we’ve lost 20% of our personal wealth in the past three years
5. Thirty-five (35%) percent of home mortgages are underwater with thousands more going under every day
6. Foreclosures will continue to deflate the housing market and consequently consumer spending.
U.S. consumer spending accounts for seventy (70%) percent of our economic activity which the Washington Post reported on August 28, 2011 “Consumer fears put economy on the brink”, is in serious need of a confidence boost. In the past week the Post has also reported our government and the IMF are finally advocating a refinance program that would allow homeowners to refinance their mortgage balance to a lower rate without regard to loan to value ratios and hopefully with no PMI. (We already guarantee the mortgages!)
A family refinancing the average mortgage amount of $220,000 from 7% down to 5% would put an extra $350.00 per month ($4,200.00 per year) in the household budget every year for up to 30 years. Multiply this by one-half of the mortgages and you have 30 million families spread out over the entire country with real sustained monthly stimulus that does not add a dime to the deficit. This program would also reduce future foreclosures because reduced monthly mortgage expenses would rival or be less than paying rent.
This is our economy and it’s time for us to take charge. If you want to take control of your financial future, let your elected representative know you support the efforts to allow families to refinance to lower rates and at the same time tell them that the blame game is over, bipartisanship and accountability are in and we need to invest in ourselves, quickly.