by Rich Schiffer, Weichert Realtors
We are all familiar with the Charles Dickens story of Ebenezer Scrooge. One night he was startled from a dream by the rattling of chains by the Ghost of Jacob Marley, and before morning, he had realized the error of his ways, and sent a young boy off to buy a feast for Bob Cratchet's family.
The Cratchet family was overjoyed, and praised Mr. Scrooge's generosity. The part of the story that Dickens' publisher seems to have left out is what happened next: soon enough, Bob was back to work, scrambling to put food on the table, heat their home, and pay for Tiny Tim's healthcare. (I suppose the publisher thought that ending with Tiny Tim saying, "God Bless us, everyone!" would sell more books...)
Scrooge learned a lesson, but was it the right one?
There's a parallel developing in the "economic stimulus" packages being discussed by the Bush Administration, the Congress, and even the Presidential candidates.
It seems that President Bush woke up one night, with Fed Chairman Bernanke standing at the foot of his bed, shaking the chains of the economy, and warning him of three spirits that would visit him before morning: The Ghosts of Recessions Past, Present and Future.
Before you could say "Bah! Humbug," President Bush's knee jerked into action, and he urged congress to push forward an economic stimulus package, so the Cratchets could have their "Christmas Goose."
The type of stimulus being talked about most widely would amount to a one-time tax rebate of about $600. While this may represent a nice shot in the arm for some families, it is only a "band aid" measure, and does not address the core causes behind the recent economic downturn. $600 will not bring a single outsourced job back from Bangalore. $600 will not prevent any foreclosures. $600 will not provide a college eduction for anyone. It is a quick-fix, stop-gap measure that ignores the real cause of the economic downturn. While it will put a lot of money back into the economy, (and potentially make the election results more favorable for some politicians) this sort of band aid lacks staying power.
At the core of the downturn has been the weakness in the national housing market. When people buy houses, they also buy all sorts of things, like household cleaners, appliances, televisions, furniture, garage door openers, security systems, shower curtains, lawn-care services, and even pets. When spending on housing slows down, retailers and service providers feel the crunch.
I suggest that for any stimulus package to have lasting impact, it must have a direct tie to the housing market. Rather than a $600 rebate to everyone, something like a $2000 credit toward the purchase of your first home would have a much greater impact, and a longer lasting "trickle-down" effect on the economy.
I am not talking about making it easier for people to get a mortgage. That is in part what led to the high foreclosure rate we are seeing today. I am talking about making one of the barriers to purchasing -- high closing costs and transfer taxes -- easier to break through for credit-worthy but cash-limited families.
Sadly, I don't expect politicians to jump at this idea. Short-term patches that have broad voter appeal seem to be more palatable than long-term cures with deep-reaching benefits. If they want to do a quick patch, fine. I will take $600 any day of the week, but I hope they also see the value of a longer term solution, and include a longer term approach as well. I am certain that as a society we need to shift our way of thinking, and begin to seek long-term solutions.
Let your voice be heard. Tell your representatives in Washington that you want long-term stabilization of our economy, not a quick patch.
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