Thursday, July 30, 2009

Back by popular demand

I'm a little worried about this Main Street stimulus business. It seems like we are back to the old tricks of giving loans to people who can't afford it.

Now, it's the Democratic thing to do. "A chicken in every pot," and that sort of thing.

But I wonder if Obama has thought this one through.

For example, the $8,000 bonus for buying a house. Sounds good on the surface, though we don't really have any money to back it up with and it'll just be added to the debt. (The debt we can only afford to pay the interest on at the moment. Apply the new credit card rules to that pile of bills and you've got a real mess on your hands.)

The idea is to get the market going and hand out money to people who otherwise couldn't afford to buy right now. Say, doesn't that sound familiar? We just learned a hard lesson that getting into a home and being able to afford to stay are two different matters. Is this $8K bonus simply setting up poor people to foreclose again? Think about it.

The second program is that if you have an old car and are willing to trade it in for a brand new car, Obama will shell out $4,500 of national debt money to help you buy it.

Who owns the gas-guzzlers? Not the rich people. So, you are dangling this free money in front of poor people and stipulating that they buy a brand new car to get the deal. Again, are we setting people up here?

Now, I think the cash for clunkers program is wrong on a couple of points. The fact that you can spend the bonus on a foreign car rubs me the wrong way. And I'm not convinced that the government can control this program to the point that smoke puffers stay off the streets. Every junk yard in the country is on their approved salvage list so I see little real control.

But my real problem is that people who can't afford a new car are being tempted by the government to sign the loan papers. That can't be good.

So, we haven't really learned anything about credit/debt and saving despite a collapse of the financial system that shocked the world. We're right back playing the same beyond our means.

No comments:

Post a Comment