Economic Stimulus Plan
 

I've heard a variety of things about this, whether it will work or not, is debatable apparently. I'm still trying to figure out the "facts"
I saw this on cnn.com and thought it was interesting

Alethia...you know that is the first great lie

"The Check is in the Mail"

and...

even if we do...they will still find another way to take it out of our pockets...higher taxes or get us at the pumps

lol, true true, I was just looking for more information and/ or perspective about this....

This actually makes me mad, which is not to say that I'll be sending the money back.

If they have the money to return as an economic stimulus and they don't really need it for other government functions, maybe they shouldn't have taken it in the first place.

No y'all... they likely will send the money out to folks because they know most of us are idiots who will say "Ooh $1,200?!?!?!" And then go spend $3,000. That's what they're counting on.

They only need to mask the decline of our economic state until the elections are over.

And -

Are you kidding? What do you think tax refunds are? It's money that the IRS has withheld from you for profit. Then, you get it back at the end of the year with no interest. That's quite a deal for the IRS! A no interest loan to the government compliments of the tax payers.

I have not read through all the specifics yet, but this is very much like what happened in 2002 (it was 2002 I think) except it is directed a bit differently.

The check we all got in 2002 was a refund of $300 as I recall for individuals and $600 to couples. It went to anyone who had paid taxes (I am not sure what the rule was for people who had paid taxes, but less than the amount of the refund.)

This time, the checks are larger- but if you earned more than $87,000 as an individual (in 2006 I assume- I doubt 2007 data will be ready in time for the checks to go out), then the amount gradually gets reduced based on your actual income.

Plus, the refund will this time go to people who may not have paid any federal income tax, but who filed a tax return and had Social Security and Medicare withheld from their paychecks.

This is not necessarily "fair" to those who pay tons of income tax and earn lots of money, but it is more viable politically for obvious reasons and it does target a wider range of people who would be likely to spend the money immediately (not because lower and lower middle class people are less responsible with their money, but because they unfortunately don't have the luxury of saving a lot of what they earn.)

At the end of the day, this will have little actual financial impact- but it could have an important psychological impact- and that can matter a great deal in a consumer-driven economy which is heavily reliant on people using credit.

Because credit is a buy now and pay later scheme, actually having the money to buy something with cash becomes less important to spending on a given day relative to the spender's perceptions about having future money to pay the bill for today's purchases. So there are positive implications in this "stimulus plan" which will make something of a different I think.


But in the larger picture I am surprised there are not more people on TV talking about the fact that a housing market and subprime crash- which is what is driving the broader economic deterioration- is actually a very good thing for the vast majority of Americans.

Houses are fairly permanent assets. The supply of homes has not declined in the US at all- in fact it has skyrocketed since existing homes are still there, or have been replaced with a new home, plus there has been much new building in the last 15 years.

And so the sharp increase in housing prices is the result of increased demand.

But it is not demand based on higher incomes. A significant number of areas have seen home prices rise overall 50% or much more in the past 10 years. How many of you have gotten a pay increase of 50% or much more in the past 10 years?

The increased demand came from a restructuring of credit. With ARMS, interest-only loans, more lax lending practices etc.- all that happened is people were allowed to get more credit based on their income than was possible before.

So, let's say you have a $250,000 home 15 years ago. That home might be $500,000 now because the number of people who can get the credit to buy that home has doubled or tripled and that many more people are competing to buy your home. And there are not more people competing because they earn more money- but rather because they can borrow more now than they could before, regardless of whether they can ultimately pay for it.

And so of course when it turns out even a small percentage of buyers cannot afford the long term costs of the credit they took on, we get into this death spiral.

The first to suffer were those who had no business taking out their mortgages in the first place. But as the impact of those foreclosures spreads, housing prices fall and suddenly a great many people find themselves upside down in their houses (owing more than the home is worth) and unable to refinance or sell their home for a quick profit and move on- as many have planned to do.

And this brings us to now when there has been a substantial decrease in home values, and with no end in sight. More importantly, it scares a lot of these home owners because suddenly they have fewer choices. Even if they can afford the mortgage, they can no longer flip the home for profit if that was their goal. This is where the psychological effect kicks in and really kills consumer spending (which is THE driver of a service-based economy like ours as industrial jobs continue to go abroad.)

Lower and middle class Americans are getting really messed over in this process. Not only are many forced to leave their homes now, but rents have gone up sharply as large numbers of people go back to apartments. Rent at my apartment complex just went up $60 a month!

But wealthy investors are still sitting pretty. I have been house hunting here in Austin lately and a good 50% of the homes I have looked at are either empty or being rented out until sold by the owners.

If some of you caught the big news story about Michigan last fall, you will note huge foreclosure rates in some areas- and a report on a foreclosure auction where several investors bought up 10+ homes each to hold and resell later.

The growing gap between rich and poor in this country is often thought of in terms of jobs- but the real ugly side of this gap is situations like what I have outlined above where a handful of people have turned the key component of the American Dream into a personal get rich quick scheme.

The fallout of the housing market is far from over, and it is important that it see its end so that the speculators take a bath and prices get back to where real people can afford to buy real homes.

Sure the government has to do their "stimulus package" in an election year- but at the end of the day I see this recession as a good thing since it should bring housing prices back within reach for the average American.

Right now there is too much investment money out there in the hands of a very few. In the last 5 years, thanks largely to Sarbanes Oxley implementation costs for public companies and a slowdown in the IPO and tech growth market, a lot of investors have taken public companies private to consolidate them and take them public again later for profit.

This has drastically reduced the availability of stocks for investors- and I think that has been an important driver in real estate speculation. If the availability of one investment tool drops- then the players have to find something else to dabble in.

YES! This has been what has pissed off my bf and me so much. I can't stand watching those "Flip this House" shows anymore because it's those people that are ruining my chances of buying a house...and I'm not even close to being poor!

Here in Seattle, home prices are still going UP! Granted, it's a much smaller increase than in recent years, but we're apparently the only housing market in the U.S. where it's still considered OK to buy. BF and I are waiting for prices to drop, and we're going to have to wait a while in order for it to be possible for us to buy a house in the area we're looking. It's not right that a couple making well into six figures can't afford a single family home 20-30 minutes outside Seattle. Even the 2-bedroom shacks here go for $500k.

Also, when they did in 2002, when you did your taxes for that year, you had to reduce that amount from what was withheld. So, if you normally would have gotten a $200 refund, you ended up owing $100 at the end of the year since you had already received $300. It was like a tax refund in advance. So, if you usually owe on your taxes (or expect to this year), I'd recommend saving that money to pay it back by April 15th, 2009.

There's no need to get your tin-foil hat on - there are enough problems with this plan without any conspiracy theory.

The amount being pushed out the door is inconsequential compared to the overall market decline - there's your starting point.


This is only true if you schedule your own taxation in this fashion - you have literally dozens of other options, from quarterly payments to non-payment, that would allow you to not give an interest-free loan to the government.

In short, you have no one to blame but yourself if this is true.

I generally owe at the end of each year. But, how many people really know this is how it works? I'm talking about the general public that unconsciously turns money over to the government and has no idea what happens to it after that.

Thank you to EE-BO and everyone who responded about this, I'm still pretty confused, no matter how many times my dad tries to explain it to me, I understand the basics about the ARMS and credit crunch but it's so comprehensive, it's overwhelming I guess, also because I have so many other things that I'm worried about....
Idk if any of you are interested in this, but my dad works for Bloomberg and wrote a series of articles about most of this stuff, just thought i'd pass it along. Plus, i'm pretty proud of him, even if I barely understand what it is all about. :o:p
Merril Lynch plans to write off ACA Bond insurance

updated 2

update 3

Hedge fund

subprime securities market began as "Group of 5" over chinese

I'm pretty sure the government isn't lying around with a bunch of cash reserves that they could send back to all of us. The "refund" really just inflates the deficit, so for those of us that are out there that are younger, this "refund" is in some ways just a long term loan. We'll all have to eventually pay down that debt, some of us more than others... but I just wanted to point out that it isn't as if the government is adding up the money they DIDN'T spend from year to year since every year we're still spending more than we have (even before this economic stimulus plan).

I personally think that more money should have been given back, but to people in lower brackets. If you're a single making 60K or a couple making 120K, I don't think you're in a position to need the "economic stimulus" as much as someone making half that.

Right, I get that.

My point is when "they" can throw money back to us, it ought to be harder for them to make the case that we shouldn't keep more of our money to spend generally and keep the economy robust all the time.

If they don't really need the money now, why should I accept that they need it ever? Make cuts in programs to reduce the deficit if paying for the programs as you go isn't really necessary.

And I think most people understand that they can set up their withholding to come pretty close to matching what they owe. I think a lot of us would rather give them the free no interest loan rather than run the risk of owing. It's our own fault.

This tax us but then decide to give some money back as a stimulus thing is beyond our control.

*If* I end up getting a check in the mail, I'll be surprised if it covers more than a tank of gas.

I've read on some website (cnn maybe?) that the checks could take as long as May to reach the taxpayers.

How exactly is that a stimulus if it is still several months away?