Housing Starts . . .
Is there any better guide to sound policy than going with the opposite of Hugh Hewitt‘s instincts:
Housing construction drives a huge portion of the economy, and is an extraordinary multiplier of economic activity. This isn’t debatable. But the stimulus package unveiled in the House of Representatives last week does nothing for the housing sector. Some had expected up to a $20,000 tax credit for the purchase of a home in the first two or three quarters of 2009, a huge kick in the pants to the buyers who are waiting for the bottom of the housing market to appear.
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The entire idea of an effective stimulus is suspect, but why is emphasizing housing – as opposed to “infrastructure” like the power grid – so bad?
Wait a minute, I thought the right’s thinking was that the current mess was caused by overjealous attempts to get people into homes? Now they’re mad the stimulus package won’t do that again? He’s right that ‘Housing construction drives a huge portion of the economy, and is an extraordinary multiplier of economic activity’, lord know all of that hid the fact that our economy the past eight years was based on a fantasy. Once new houses stopped being built because the flipping stopped we suddenly realized the only thing we made in the past eight years were houses and schemes to get people into houses.
I remember hearing him say two years back that the housing market was booming, crediting it with Bush’s economic policies. He also was convinced that Mitt Romney would be the 44th president of the United States and argued with Christopher Hitchens when Hitch asserted that Ahmadinijad was a puppet of the Mullahs and not in himself much to worry about.
Hewitt has a pretty spotty track record.
it’s not just the neo cons. all the pundits are struggling to get an angle on the stimulus and the economy in general. virtually all of them came of age politically and professionally in 1980-2000 when on the surface there weren’t really any problems. they are good at beltway type personality stuff and the whole sort of american idol routine with the media of who said what or did a gaffe at an inopurtune time. John McCain is to me the real personification of this type of character. 99% personality and image driven
As usual rawshark is spot on, although on the other hand it can seem that Hewitt isn’t really doing anything worse than what everyone else seems to be doing which is just desperately throwing out ideas.
I mean, isn’t there a sense out there that there’s a huge component of what’s going on that’s either something genuinely new or at least something we don’t recognize?
From what I can see the conventional perspective out there that seems shared by almost everyone is indeed, predictably, kind of the classical one: That there’s somewhat two separate problems facing us, which may be related somehow but which call for two separate responses really. One, to first prevent the failure of big banks and institutions which could lead to some kind of cascading panic and damage to the fundamental economic structure and etc. And the second simply being to stimulate demand because we are in a recession.
So, obviously, at least as to the second problem Hewitt’s idea seems totally conventional and indeed better than a lot of the other ones given the truth of the matter of how housing is a multiplier and can be stimulated quickly and etc. And that would still seem to be true regardless of rawshark’s trenchant point.
But I can’t help feeling that maybe all this conventional perspective on what’s going on isn’t missing something. I mean … I understand how problems with mortgages can cause big problems for the U.S. economy. But doesn’t it seem that what we’re seeing with damn near *every* big bank and institution is way way way out of proportion to the idea that it was just these sub-prime mortgages being the primary problem? To gaze over the immense field of huge, mega, diverse mulit-national banks and institutions now already dead or on fire one would think that 70% of all Americans were defaulting on their mortgages or something. And yet these subprime things are said to constitute what?, something like only 10% of all mortgages, with only a portion of those then being in trouble, right?
So what’s really caused all this? I can understand one or two or three big institutions that foolishly concentrated on buying these subprime things going tits up. But why virtually every big bank and financial institution? One thought that has struck me is that maybe it’s *their* fundamental structure/business plan that’s at the root of the problem, and maybe *that’s* why people are having so little faith in them. Instead of just “toxic” mortgage buying is there perhaps a problem with these huge institutions that they can’t help dabbling in toxic debt *generally*?
I also understand from the Great Depression how a financial panic/crash on Wall Street can then be the cause/trigger of a recession rather than being the effect/result of same. But given that we supposedly understand the cause of the present financial panic on Wall Street with these subprime mortgages, how come all the saving/bailouts of these banks and institutions doesn’t seem to be having any effect on stanching the pessimism behind the recession? After already having pumped in hundred of billions, the government has made clear that it will pump *trillions* if necessary to save these banks and institutions, and yet the banks’ situation have just gotten worse. And as to actually *being* in a recession, doesn’t it seem that so many if not the vast majority of these layoffs and etc. by big companies isn’t in response to a present lack of demand for their product, but are instead merely anticipatory?
I don’t know, maybe the recession and the mindset moving us into it is just simply irrational, or a reflection of follow-the-leader thinking, or being defensive or etc. Okay, but then you have to ask the question of whether *any* governmental stimulus is really going to change that or if it isn’t something psychological that just has to work it’s way out. Indeed, it might even be that putting the government further into debt is just *worsening* the problem by now making people pessimistic about the fundamental stability of the government as well as the private sector.
And what about these bailouts? When a company “fails” its assets don’t just disappear in a bankruptcy; essentially the companies are simply chopped, or kept by a smaller company that presents a viable restructuring proposal. So by just bailing out these companies aren’t we just keeping “toxic institutions” in business that by definition nobody believes in and indeed people feel are part of some bigger structural problem? And why exactly should we be striving mightily to *reverse* precisely that phenomenon that has bothered so many of us for the last thirty or so years of seeing our nice, diverse little economic institutions being gobbled up into a few huge conglomerates?
I don’t know, but I do know that I’ve never really been able to fix anything without understanding its cause. And it just seems to me that we are going about spending untold trillions now—which itself may be part of the problem and is almost certainly going to cause huge trouble—and yet doing so absolutely reflexively, as if it’s because we don’t know how to do anything else, without any understanding what is really going on.