Did anyone else hear Dave Ramsey's stimulus plan?

[Moxie]

I thought it sounded great! It was on his radio show Friday. Basically (and I could be getting bits and pieces wrong, I'm going from memory here) his plan is that every employer that makes a net gain in employees and anyone who buys a house should get a $20,000 tax credit. He worked through the numbers and his plan would be 95% cheaper then the current stimulus plan. Think it would work?

[Sharon H in IL]

Not if you're a Keynsian. There's a great story about economic theories and how they would treat this economic situation on NPR. I'll see if I can find it to link.

 

Rats. It was on the 2/8/09 episode of This American Life, I believe. Not available on their website yet.

 

Success! It was NPR. Here's the link.

 

http://www.npr.org/templates/story/story.php?storyId=100018973&ft=1&f=1001

Edited February 8, 2009 by Sharon H in IL

[Mommyof4ks]

Sounds interesting, and because we are buying a new house this year (assuming our house sells) I like it!

 

Is there anyway to listen to it online?

[Barb_]

I thought it sounded great! It was on his radio show Friday. Basically (and I could be getting bits and pieces wrong, I'm going from memory here) his plan is that every employer that makes a net gain in employees and anyone who buys a house should get a $20,000 tax credit. He worked through the numbers and his plan would be 95% cheaper then the current stimulus plan. Think it would work?

..

 

Senate approves $15,000 tax credit for homebuyers

[LaxMom]

Not if you're a Keynsian. ...

I would place Dave Ramsey solidly in the Chicago (Friedman) school. :D

 

I seem to recall from Econ 101 that war is good for the economy. It appears that only applies when you have an economy based on production, not on services, though, because it does not seem to be working out that well for us this time.

 

I don't really think any "school" of economic thought is a panacea, but all approaches have their merits and those merits should be weighed on their own, rather than taking an approach of pure dogma in any direction.

[Sara R]

Not if you're a Keynsian.

 

 

Interesting article. Thanks for the link. It doesn't mention the Austrian school (probably what they are calling "classic economics"), which I've read about this year.

 

Keynes flunks the common sense test. The wealth of a household is determined by production and surplus, not by spending. The same is true of a country, just on a larger scale. You don't spend your way to prosperity. I can't. The country can't either.

 

War isn't good for economies either, because you are taking the fruits of production and blowing them up. The increased productivity can be good for the economy, but it is much better to be able to enjoy the products created by that productivity (or increased leisure).

 

A great book about this topic is "Economics in One Lesson." It's available online here. The lesson about the effects of war is in the chapter entitled "The Broken Window."

[sunshine]

Just to stick my 2cents in: I was watching C-Span (yes I really do watch it) and a Rep from Texas presented his stimulus plan. It was to cut income tax for 1year to 0. That would raise over 1.7 trillion dollars and put it back in the peoples pockets where immeditately with a 30 -37% percent pay raise, credit card companies would be solvent, mortgages would be paid, pulling us out of the mortgage foreclosure crisis,technology would be purchased, the malls would be overflowing with people buying.

But alas it made too much sense. American people are too stupid to be able to handle their own money they earn. The government needs to be in charge of our money, they are much better at it than us.

[Barb_]

Just to stick my 2cents in: I was watching C-Span (yes I really do watch it) and a Rep from Texas presented his stimulus plan. It was to cut income tax for 1year to 0. That would raise over 1.7 trillion dollars and put it back in the peoples pockets where immeditately with a 30 -37% percent pay raise, credit card companies would be solvent, mortgages would be paid, pulling us out of the mortgage foreclosure crisis,technology would be purchased, the malls would be overflowing with people buying.

But alas it made too much sense. American people are too stupid to be able to handle their own money they earn. The government needs to be in charge of our money, they are much better at it than us.

 

Actually, I think the American people ARE too stupid to handle their own money. Many (most) people in forclosure are there because they took out stupid mortgages with only short-term gain in mind. The last thing we need right now is malls overflowing with people buying more stuff. That's partially what got us into this mess to begin with. Can't say the government is any better at spending our money than we are, but I don't think handing everyone a great big chunk of money for a year and then yanking it back is going to get us very far.

 

Barb

[Just Another Jen]

Just to stick my 2cents in: I was watching C-Span (yes I really do watch it) and a Rep from Texas presented his stimulus plan. It was to cut income tax for 1year to 0. That would raise over 1.7 trillion dollars and put it back in the peoples pockets where immeditately with a 30 -37% percent pay raise, credit card companies would be solvent, mortgages would be paid, pulling us out of the mortgage foreclosure crisis,technology would be purchased, the malls would be overflowing with people buying.

But alas it made too much sense. American people are too stupid to be able to handle their own money they earn. The government needs to be in charge of our money, they are much better at it than us.

 

 

They'll never cut the income tax- once people figure out how much they are paying there would be a revolution before they'd pay it again!

__________________

[Catherine]

If allowing the market to figure out the most efficient way to deal with a problem always worked, then why did the whole row of dominoes (banks) fail, based on basically bad investments by those banks?

 

Giving people more money in their pockets, from taxes or some other source might provide a short term economic boost (that is if they don't hide it somewhere, which is what *I* would be tempted to do) but it doesn't solve the underlying problems.

 

And, wasn't a bill approving a $15,000 tax credit for a house purchase just passed anyway?

[Trivium Academy]

Actually, I think the American people ARE too stupid to handle their own money. Many (most) people in forclosure are there because they took out stupid mortgages with only short-term gain in mind.

 

People who haven't been taught a skill or body of information are considered ignorant but they CAN learn. They are not stupid, those stupid mortgages were being 'pushed' by mortgage companies and loan officers. People to some degree we're to trust.

 

My brother and his wife were involved in an ARM and was foreclosed on two years ago. This 'crisis' has been a long time coming. People are not being taught, just taken advantage of!

[LaxMom]

People who haven't been taught a skill or body of information are considered ignorant but they CAN learn. They are not stupid, those stupid mortgages were being 'pushed' by mortgage companies and loan officers. People to some degree we're to trust.

 

My brother and his wife were involved in an ARM and was foreclosed on two years ago. This 'crisis' has been a long time coming. People are not being taught, just taken advantage of!

No, I think people choose to be ignorant in order to not have to make good decisions. If your annual income is $47,000 there is simply no possible way you can look at a $550,000 mortgage and think you can afford it. It should be clear that whoever is telling you different is a) lying or b) crazy and you should run like hell. It took me about one minute to google and discover that the monthly payment on that is $4,200, or over $50,000 a year.

 

The problem here - and I believe it was Dave Ramsey who I heard state it so concisely - is that we want to have the same standard of living (or better ) that our parents and grandparents worked their entire lives to achieve, right out of the gate. Lenders have been happy to help us with that sense of entitlement and we have been happy to find and listen to the "yes men" in order to deceive ourselves into thinking we can, in fact, have everything we want.

 

Do I think predatory lending practices have led to this financial fallout? Absolutely. But predatory lending practices only worked because they catered to our sense of entitlement and outright greed. It's very easy to trust someone who is telling you everything you want to hear.

 

We, personally, have a ridiculous amount of credit card debt. We own that stupid and are on the path to owning our finances. Mea culpa. But we are not victims. We are idiots who chose the more fun, instant gratification path and are now paying the piper.

 

Plans that send us big lumps of money are counting on the fact that we are too stupid to handle our own money, and that we will all be out at the nearest Walmart, buying more stuff, most of which we don't need. If we weren't, and everyone used that money to pay off debt (for crap we already bought, but on credit) or put it in savings, it wouldn't stimulate the economy at all.

[Tarheel Heather]

People who haven't been taught a skill or body of information are considered ignorant but they CAN learn. They are not stupid, those stupid mortgages were being 'pushed' by mortgage companies and loan officers. People to some degree we're to trust.

 

My brother and his wife were involved in an ARM and was foreclosed on two years ago. This 'crisis' has been a long time coming. People are not being taught, just taken advantage of!

 

Mortgages may have been 'pushed' upon some consumers. Those consumers also have the responsibilty to accept responsibilty for their own actions.

[cathmom]

No

Plans that send us big lumps of money are counting on the fact that we are too stupid to handle our own money, and that we will all be out at the nearest Walmart, buying more stuff, most of which we don't need. If we weren't, and everyone used that money to pay off debt (for crap we already bought, but on credit) or put it in savings, it wouldn't stimulate the economy at all.

 

 

But wouldn't it help the banks, which could help everything else?

[LaxMom]

But wouldn't it help the banks, which could help everything else?

Maybe. I doubt it would push any long-term economic changes, though. Thus far, the stimulus checks that we've received periodically haven't done much, whether they've been saved or spent.

 

I think there are simply too many factors in any given economy for a simple answer to suffice.

[sunshine]

Actually, I think the American people ARE too stupid to handle their own money. Many (most) people in forclosure are there because they took out stupid mortgages with only short-term gain in mind. The last thing we need right now is malls overflowing with people buying more stuff. That's partially what got us into this mess to begin with. Can't say the government is any better at spending our money than we are, but I don't think handing everyone a great big chunk of money for a year and then yanking it back is going to get us very far.

 

Barb

 

I would rather waste my own money than someone in government deciding how to spend my hard earned money. And most people took out stupid mortgages because the mortgage lending is too confusing for the average person. If you dont' explain that a payment is only for 3 to 5 years and then will triple you won't know it.

And spending the economy into prosperity is not my idea. I believe that is what Congress thinks. Of course there is not too many economist in Congress. It is easy to waste someone else's money.

The American people are not too stupid to handle their own money. If they are smart enough to earn it they are smart enough to keep it. I find that sort of thinking elitist and socialist. I believe the American Revolution was a lesson in Americans tired of the Government taking their money for their fat cat special interest. You will only tax the people so much. Especially a free country.

[sunshine]

They'll never cut the income tax- once people figure out how much they are paying there would be a revolution before they'd pay it again!

__________________

 

I wish I knew French, of course I am too stupid to know French, but if I did I would say: Viva LeRevolution!!

[Barb_]

People who haven't been taught a skill or body of information are considered ignorant but they CAN learn. They are not stupid, those stupid mortgages were being 'pushed' by mortgage companies and loan officers. People to some degree we're to trust.

 

My brother and his wife were involved in an ARM and was foreclosed on two years ago. This 'crisis' has been a long time coming. People are not being taught, just taken advantage of!

 

Nope, I believe a lot of it was driven by greed. I was mortgage shopping in 2006 and I saw those subprime and cash-out offers. My thoughts were, "Why would ANYONE mortgage more than their home is worth to buy a car or boat or pay off credit cards so they can run them up again? Does the morgatge industry believe we're that stupid? " Apparently we were. Too many people wanted more, more, more for essentially nothing. They were not willing to see the risks. No one pushed a subprime or cash-out morgatge on me when I was looking...I saw the advertising, but declined to take the risk. That's the problem inherent in a free market--the economy depends on an educated and self-disciplined society to function well. We have proven we are largely neither. On the whole, we have no one to blame but ourselves.

 

Barb

[Barb_]

Sorry, you said it so much better than me. I should have simply shut up. We dug this hole ourselves and not it's time to pay up.

 

Barb

 

No, I think people choose to be ignorant in order to not have to make good decisions. If your annual income is $47,000 there is simply no possible way you can look at a $550,000 mortgage and think you can afford it. It should be clear that whoever is telling you different is a) lying or b) crazy and you should run like hell. It took me about one minute to google and discover that the monthly payment on that is $4,200, or over $50,000 a year.

 

The problem here - and I believe it was Dave Ramsey who I heard state it so concisely - is that we want to have the same standard of living (or better ) that our parents and grandparents worked their entire lives to achieve, right out of the gate. Lenders have been happy to help us with that sense of entitlement and we have been happy to find and listen to the "yes men" in order to deceive ourselves into thinking we can, in fact, have everything we want.

 

Do I think predatory lending practices have led to this financial fallout? Absolutely. But predatory lending practices only worked because they catered to our sense of entitlement and outright greed. It's very easy to trust someone who is telling you everything you want to hear.

 

We, personally, have a ridiculous amount of credit card debt. We own that stupid and are on the path to owning our finances. Mea culpa. But we are not victims. We are idiots who chose the more fun, instant gratification path and are now paying the piper.

 

Plans that send us big lumps of money are counting on the fact that we are too stupid to handle our own money, and that we will all be out at the nearest Walmart, buying more stuff, most of which we don't need. If we weren't, and everyone used that money to pay off debt (for crap we already bought, but on credit) or put it in savings, it wouldn't stimulate the economy at all.

[Barb_]

The American people are not too stupid to handle their own money.

 

And I find that sort of thinking naive, childlike and sweet. I can't tell you how tired I am of the words "socialist" and "elitist" being thrown about. It doesn't even take any effort anymore.

 

Barb

Edited February 8, 2009 by Barb F. PA in AZ

[Pam "SFSOM" in TN]

That's the problem inherent in a free market--the economy depends on an educated and self-disciplined society to function well. We have proven we are largely neither. On the whole, we have no one to blame but ourselves.

 

Barb

 

Education is much too elitist, Barb, and self-discipline goes contrary to the notion of handing out "stimulus" checks and free "credits" to spend at Wal-mart on really useful plastic crap from China.

 

We can't do either education or self-discipline. It's just not the American way anymore.

 

(Start disclaimer: This post does not apply to any of y'all who are educated or who spend your stimulus and credits on things that you know are necessary for your family, or who don't get a stimulus, or who don't get credits but rather earn every single penny that passes into your hands. Everyone makes their own decisions in life, and so for heaven's sake, if my comments don't apply to you, don't be all offended. They weren't MEANT for you, if they don't apply to you. End of disclaimer.)

Edited February 8, 2009 by Pam "SFSOM" in TN

[Mommyof4ks]

Nope, I believe a lot of it was driven by greed. I was mortgage shopping in 2006 and I saw those subprime and cash-out offers. My thoughts were, "Why would ANYONE mortgage more than their home is worth to buy a car or boat or pay off credit cards so they can run them up again? Does the morgatge industry believe we're that stupid? " Apparently we were. Too many people wanted more, more, more for essentially nothing. They were not willing to see the risks. No one pushed a subprime or cash-out morgatge on me when I was looking...I saw the advertising, but declined to take the risk. That's the problem inherent in a free market--the economy depends on an educated and self-disciplined society to function well. We have proven we are largely neither. On the whole, we have no one to blame but ourselves.

 

Barb

 

Well said! We have to do the research and make wise decisions. This goes for money, education, quality food, and anything else that we want choices for.

[lynn]

I believe there is a buying a house credit in place and it's $15,000. We were considering buying a new house this year so unless there are income limits we just might do it.

[LisaNY]

If allowing the market to figure out the most efficient way to deal with a problem always worked, then why did the whole row of dominoes (banks) fail, based on basically bad investments by those banks?

 

Giving people more money in their pockets, from taxes or some other source might provide a short term economic boost (that is if they don't hide it somewhere, which is what *I* would be tempted to do) but it doesn't solve the underlying problems.

 

Allow the market to correct itself. You make bad investments, you fail. Other banks will rise up in your place. Allow the ridiculously unrealistic housing market to correct itself. Home prices will come down to a more reasonable level, and banks will (if they haven't already) figure out that potential home-buyers need to have a wider debt-income ratio before they hand out loans.

 

The market has served to correct itself where gas was concerned. The prices got way too high, and the consumer reduced consumption - which led to lower prices. We didn't need the gov't to figure that out for us.

[LaxMom]

I can't tell you how tired I am of the words "socialist" and "elitist" being thrown about. It doesn't even take any effort anymore.

 

Barb

Indeed. I just pretend the meaning has changed to mean "mindful". (And yes, I have real trouble with the assertion that it is wrong to provide the tools for everyone in our society to pursue their destiny... but that's a rant for another day.:001_smile:)

[LaxMom]

Allow the market to correct itself. You make bad investments, you fail. Other banks will rise up in your place. Allow the ridiculously unrealistic housing market to correct itself. Home prices will come down to a more reasonable level, and banks will (if they haven't already) figure out that potential home-buyers need to have a wider debt-income ratio before they hand out loans.

I agree. In a very celebrated free market, we should step back and let bad business choices result in business failure. I doubt that would ever happen, though.

 

The market has served to correct itself where gas was concerned. The prices got way too high, and the consumer reduced consumption - which led to lower prices. We didn't need the gov't to figure that out for us.

And, yet, Exxon-Mobile once again broke their own record for corporate profits. :001_huh:

[Krista in LA]

Actually, I think the American people ARE too stupid to handle their own money. Many (most) people in forclosure are there because they took out stupid mortgages with only short-term gain in mind.

 

Ah, but we have to remember that the only reason the banks were approving those mortgages were because the government, while Carter and then Clinton were in charge, forced the banks to make more sub-prime loans. Perhaps if the government had stayed out of business to start with, some of these problems wouldn't exist or at least wouldn't be as bad.

[ELaurie]

I wish I knew French, of course I am too stupid to know French, but if I did I would say: Viva LeRevolution!!

 

How about "No taxation without representation?" :tongue_smilie:

[Brilliant]

... And most people took out stupid mortgages because the mortgage lending is too confusing for the average person. If you dont' explain that a payment is only for 3 to 5 years and then will triple you won't know it.

....

The American people are not too stupid to handle their own money. If they are smart enough to earn it they are smart enough to keep it. I find that sort of thinking elitist and socialist. I believe the American Revolution was a lesson in Americans tired of the Government taking their money for their fat cat special interest. You will only tax the people so much. Especially a free country.

 

I'm not sure if you think the average American is too stupid to handle money or not. In the first part of your quote above, you said it's the mortgage industry's fault for making it too confusing. But then you say if a person is smart enough to earn it, they are smart enough to keep it. But not smart enough to read their mortgage papers? The subprime borrowers KNEW their loan payment would double or triple. They thought they could refinance or sell the house if needed. They gambled and lost, and the rest of us are now paying for them to renegotiate their mortgages.

 

I can't find a link to this now, but I read recently that many loans which have been renegotiated (lowered principle balance and/or interest rate) are delinquent again the first month after their loan is modified! So by giving these people new loans, we are just postponing the inevitable. They bought houses they can't afford under any terms. Nobody tricked them into it.

 

I know a homeschool family who just did what's called an intentional foreclosure. They contracted for and bought a new home (for half what they'd paid for their old home) before they went delinquent. Then they walked away from the old home. When I mildly asked why they were moving, she informed me that "There's no way we can afford that house, and our loan officer should have known it." Why didn't she and her husband know it? They are both college degreed.

 

I think this whole crisis is a moral failure for our country.

[LaxMom]

...

I know a homeschool family who just did what's called an intentional foreclosure. They contracted for and bought a new home (for half what they'd paid for their old home) before they went delinquent. Then they walked away from the old home. When I mildly asked why they were moving, she informed me that "There's no way we can afford that house, and our loan officer should have known it." Why didn't she and her husband know it? They are both college degreed.

 

I think this whole crisis is a moral failure for our country.

 

Wait. How did they get a new mortgage, when they clearly couldn't afford it?? I mean, I'm trying to figure out (particularly in this crisis) who on earth would write and approve a mortgage for people who were already over-extended... or is this "intentional foreclosure" something the mortgage industry is now recognizing as a way to do business and using it as a contingency, the same way selling your existing house or paying off other debt used to be? :001_huh:

 

I agree that this financial crisis is part of a moral failure. We, as a culture, seem to no longer take responsibility for our own actions. There is always someone else to blame, we are always victims. (And, of course, those who choose to educate themselves and make good decisions are "elitist", which helps the rest maintain their downtrodden status in their own minds.)

[TravelingChris]

I knew someone who was walking away from their home. He bought a house while single, got married , they decided they needed a bigger house because a baby was coming and they can't afford two houses. Even though he could rent the house and simply eat 100 a month, he chose to let it get foreclosed. We rented our home for two and a half years getting less than the mortgage payment.

 

The houses are still way overpriced. I live in a nice area with larger, 35-40 year old houses. This neighborhood used to be made up of higher ranking military officers and government workers and lawyers and other professionals. We are renting here since we can't afford the prices. Next door to us is another couple that is renting also because they can't afford to buy - a lawyer and a speech therapist. There aren't enough people making 200,000 or 300,000 a year to buy all the very expensive houses here in the DC area.

[TXMomof4]

But alas it made too much sense. American people are too stupid to be able to handle their own money they earn. The government needs to be in charge of our money, they are much better at it than us.

 

I am going to pretend that you are kidding here and laugh out loud at the idea that the government is better at handling money than most Americans are. :glare:

[Catherine]

to purchase a house. While I don't know the particulars of their financial situation, I have to wonder why a bank under any circumstances would provide a large mortgage to people who appear to be such a poor risk. It begs the question of whether banks have leaned anything from the current mess. IMO borrowing large sums of money is for people who have a reasonable life expectancy, and some reasonable likelihood of paying it back. So I think there is blame enough for all sides.

[HRAAB]

to purchase a house. While I don't know the particulars of their financial situation, I have to wonder why a bank under any circumstances would provide a large mortgage to people who appear to be such a poor risk. It begs the question of whether banks have leaned anything from the current mess. IMO borrowing large sums of money is for people who have a reasonable life expectancy, and some reasonable likelihood of paying it back. So I think there is blame enough for all sides.

 

Is it common to take into consideration the health of the potential buyer? Even if their finances are sound, and they are perfectly capable of repaying the mortgage? What do they require - a physical? Somehow this doesn't set right with me.

 

Janet

[Brilliant]

Wait. How did they get a new mortgage, when they clearly couldn't afford it?? I mean, I'm trying to figure out (particularly in this crisis) who on earth would write and approve a mortgage for people who were already over-extended... or is this "intentional foreclosure" something the mortgage industry is now recognizing as a way to do business and using it as a contingency, the same way selling your existing house or paying off other debt used to be? :001_huh:

 

 

From the mortgage company's standpoint, I don't know how it could work. Perhaps the borrower claims they will rent out the old house? All I know is that I read an article about these intentional foreclosures - in some cases the homeowner buys the house next door or across the street and then lets the first one go! And then a month later I was having this conversation with someone in my hs group. So it IS happening.

[Niffercoo]

 

I know a homeschool family who just did what's called an intentional foreclosure. They contracted for and bought a new home (for half what they'd paid for their old home) before they went delinquent. Then they walked away from the old home. When I mildly asked why they were moving, she informed me that "There's no way we can afford that house, and our loan officer should have known it." Why didn't she and her husband know it? They are both college degreed.

 

I think this whole crisis is a moral failure for our country.

 

I agree.

 

As for the buying a house you can't afford, we were actually encouraged to do this by the music minister at our former church - my husband was the music assistant there for 6 years, and the church was an hour away. It was in an incredibly rich part of town where we couldn't begin to afford a house. The music minister was encouraging us to get an "interest only" mortgage, so we could buy a house near church. When I said we couldn't afford to make the payments when the interest only part was done, he blew me off and said that we didn't need to worry about it, we could just keep refinancing!! This is a member of the clergy! Then he gave my husband a hard time for not being the "leader" of the family (because my husband leaves the finances to me since I love budgets, number crunching, etc.).

 

It's so rampant, this mindset of just getting whatever you want no matter what it costs. It's sad.

[LisaNY]

And I find that sort of thinking naive, childlike and sweet. I can't tell you how tired I am of the words "socialist" and "elitist" being thrown about. It doesn't even take any effort anymore.

 

Barb

 

LOL! Well, we'd all better get used to that terminology, because even THESE GUYS are acknowledging it.