This Is Why We Have Huge Deficits
Gary Gerard,
dumbhoosier.com
President Barack Obama came out this week with a couple of
programs that he can implement via executive order, without
the blessing of Congress.
And on the face of it, both programs sound great. One was
allowing people who have kept up with their mortgage payment
– even though their house might be under water – to
refinance.
Sounds great. Those people, though no fault of their own,
own a house that’s worth less than they owe on it. They
can’t take advantage of current low mortgage rates because
the house won’t appraise high enough to refinance it.
But there are problems.
It will cost the government money, although I couldn’t
really find any reliable estimates of how much.
Beyond that, if you’re a homeowner whose mortgage isn’t
owned or guaranteed by Frannie May, you don’t qualify.
If your mortgage was sold to Frannie after May 31, 2009, you
don’t qualify.
You can’t do a principal reduction to get out of a
negative-equity situation.
And if your bank just doesn’t feel like participating,
you’re out of luck.
So as good as it sound, not many people will probably be
taking advantage.
And as much as I would like people to be helped out of an
upside-down mortgage, can we really afford that right now?
The other program he announced would help college students
repay their student loans.
Under the plan, students would be able to consolidate and
reduce interest rates on their student loans. A second
measure would move up the start of a program approved by
Congress that caps monthly student-loan payments for
borrowers with low incomes, from 2014 to 2012.
See, I think it’s great to help students who are buried in
student loan debt, but can we really afford that now? I
mean, you know who’s going to make up the difference here.
But it’s the same old thing that happens all the time during
election years. Do things to help people and maybe they’ll
vote for you. If Obama really wanted to do things to help,
he could reign in the crazy amount of business regulations
he’s created. He could reign in the uncertainty of the
health care law he passed.
He could stop frittering away billions on projects like
Solyndra, a manufacturer of solar panels. The Obama
administration gave $535 million in loan guarantees to that
firm, despite advice to the contrary. Obama and his vice
president, Joe Biden, made Solyndra the centerpiece of their
“green energy” initiatives.
Problem is, even while the plant was being built on the
taxpayers’ dime, lots of people knew it would fail because
China already had a far-superior and more economical way to
manufacture the same product.
The company filed bankruptcy less than two years after
taking the money from Uncle Sam. It’s all being investigated
by Congress and the Feds because the CEO and board of
directors happened to be big Obama donors.
Then there’s Fisker Automotive.
That outfit got $529 million in federal money to build
electric cars. The company decided to build a plant that
employs 500 people. Really nice, except it’s in Finland.
The company says it couldn’t find anywhere in the U.S. to
build the cars.
“There was no contract manufacturer in the U.S. that could
actually produce our vehicle,” the car company’s founder and
namesake, Henrik Fisker, told ABC News. “They don’t exist
here.”
Meanwhile, ABC reports, Fisker is more than a year behind
rolling out its $97,000 luxury vehicle bankrolled in part
with DOE money.
And just 40 of its Karma cars have been manufactured and
only two delivered to customers.
Apparently, one of those was Leo DiCaprio, so its not like
these guys are building cars for the masses.
A week or so ago Stanford University economics professor
Michael Boskin spoke to the Hoosier Institution about the
state of spending.
He noted that under President Obama, federal spending
has risen from 20.7 percent of gross domestic product to
25.3 percent. That happens to be the biggest ratio since
1945 when there was that whole WW II thing going on and GDP
was a fraction of what it is today.
Then he talked about a $1.2 billion Energy Department
loan guarantee to SunPower Corporation in Richmond, Calif.
The company has promised to create 15 permanent positions.
Now those are some pricey jobs, around $80 million apiece.
That makes Fisker Automotive’s 500 jobs for $500
million look like a bargain. The taxpayers only ponied up $1
million each for those.
One would think SunPower would be on solid ground, at least.
Nah.
At the time the company claimed its huge federal subsidy,
its market cap was $800 million and it had $820 million in
debt. It’s share price had fallen $133 in 2007 to $8, and of
course, investors had filed a class-action suit claiming the
company made false claims.
See, it’s this kind of craziness that gets us in such a huge
hole. And I am pretty confident this is just the tip of the
iceberg. We’ll probably never know how many federal dollars
wind straight down a rathole in the name of “stimulus” and
“green energy.”
Fiscal 2011 will see a $1.3 trillion deficit. That means
Obama has presided over three consecutive $1-trillion-plus
deficits.
(I know. I know. It’s all George W. Bush’s fault.)
This is not cool, people.
This is why we’re in the economic pickle we’re in. Nobody
wants to spend money. Regardless of whether you’re a
consumer or a business owner, you just don’t want to spend
money. You don’t want to expand or capitalize or hire
people. Things are too uncertain, too unsettled.
A big part of this out-of-control spending has to do with
Obama’s stimulus plan.
Boskin also talked about that.
The administration claims the $850 billion stimulus created
3 million jobs. If that’s true – for the sake of argument,
we’ll say it is – Boskin notes the cost per job is
$280,000. The private sector creates jobs at a rate of about
$60K.
Comes now Obama asking for another $400 or $500 billion in
stimulus and higher taxes on rich people.
Am I the only one who sees this as insane?
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