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October 28, 2014

The WH Has a Plan for That

Emmanuel Saez, inequality warrior extraordinaire, identifies the main factor driving what he calls "exploding wealth inequality": middle class families save too little and are saddled with too much debt:

The growing indebtedness of most Americans is the main reason behind the erosion of the wealth share of the bottom 90% of families. Many middle-class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before (Mian and Sufi 2014). For a time, rising indebtedness was compensated by the increase in the market value of the assets of middle-class families. The average wealth of bottom 90% of families jumped during the stock-market bubble of the late 1990s and the housing bubble of the early 2000s. But it then collapsed during and after the Great Recession of 2007–2009 (see Figure 3).

But fear not: the Obama administration has a solution. Never mind the fact that the housing market still hasn't recovered. Let's make it easier for the middle class to assume even more risky mortgage debt, while making it harder for businesses to borrow the money they need to pay salaries and create new jobs!

Washington has settled on a perfect credit-allocation strategy to stunt economic growth. Step One: Hand out mortgages with little or no money down. Step Two: Discourage loans to businesses.

Last week we told you about Federal Housing Finance Agency Director Mel Watt ’s plan to bring back down payments as low as 3% to Fannie Mae and Freddie Mac , the two government mortgage monsters that helped create the last financial crisis. Along with Mr. Watt’s other initiatives to expand credit, it could lead to another boom and bust housing cycle.

Now the Federal Reserve and other banking regulators have approved new rules for private mortgage-backed securities that don’t require the underlying loans to have any down payments at all.

We hear they've got a nifty plan to reduce soaring black unemployment, too: make it legal for foreign workers to compete for American jobs:

A member of the U.S. Commission on Civil Rights told President Obama Monday that the administration’s reported plan to grant work permits to millions of illegal immigrants would have a harmful effect on black American workers.

Peter Kirsanow, a Republican appointee to the panel, said in a letter to the president and to the Congressional Black Caucus that issuing millions of work permits to potentially low-wage workers “will devastate the black community.”

“Such an increase in lawful workers would have a deleterious effect on low-skilled American workers, particularly black workers,” Mr. Kirsanow said. “Illegal immigration has a disparate impact on African-American men because these men are disproportionately represented in the low-skilled labor force.”

The president is planning to issue an executive order after the Nov. 4 election that many predict will grant temporary legal status for a significant portion of the estimated 11 million illegal immigrants in the U.S.

Mr. Kirsanow should be ashamed of himself. Everyone knows that making it easier for millions of foreigners to come to the United States and work legally has absolutely NO effect on the supply of jobs. And despite all that ill informed, partisan sniping about the administration "making Ebola policy up as it goes along", it turns out that they've been all over this whole disease-preparedness thingy: (CWCID: spd)

A new audit has found major gaps in the Department of Homeland Security’s (DHS) preparations for viral pandemics like Ebola: many of the supplies purchased by the government are expired.

Officials have spent millions to stockpile medical supplies since 2006 without knowing exactly what to buy or how they would be used, DHS Inspector General John Roth said Friday. The agency also failed to track the supplies it did purchase.

“We could not determine the basis for DHS’s decisions,” Roth told a panel of the House Oversight and Government Reform Committee as he presented the 43-page report.

DHS, which is one of the agencies leading the response to Ebola, has “no assurance” that it has enough protective gear or antiviral medications or that its supplies remain effective, Roth said.

The department purchased 4,184 bottles of hand sanitizers that have expired, Roth found.

DHS spent $6.7 million for antiviral drugs, with no plan to decide what types of drugs it should purchase. It also has no way to know that the drugs were maintained at the proper temperature, which could have destroyed the drugs’ effectiveness.

The department has lost track of 2,055 doses of antiviral medication, the report said.

All this concentrated Smart Power is making us positively giddy. We should give more money and power to these people, stat. Their track record speaks for itself.

Posted by Cassandra at October 28, 2014 08:51 AM

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Who the helk cares about losing jobs when there are votes to be bought?

Posted by: Yu-Ain Gonnano at October 28, 2014 10:07 AM

Hmmm. Wealth inequality refers to net worth, right? And it's exploding because people save too little (spend too great a percentage of what they earn) and borrow too much (spend even more than they earn). Isn't the solution to spend less?

That's just my take.

Posted by: Texan99 at October 28, 2014 10:26 AM

Wealth inequality refers to net worth, right? And it's exploding because people save too little (spend too great a percentage of what they earn) and borrow too much (spend even more than they earn). Isn't the solution to spend less?

That, and refrain from borrowing money on houses that don't appreciate over time.

You have to love the logic: the housing bubble was an extended period of time where house prices grew over time. Because most of the "wealth" (net worth) of American households was tied up in the value of their homes, the housing crash dramatically lowered the net worth ("wealth") of most households.

The housing bubble was caused by fedgov making it too easy to get mortgages. So naturally, the "solution" is more of the same: make it easier for people to get mortgages even though home prices are no longer appreciating the way they did during the housing bubble and the job market/unemployment are both worse now.

What could *possibly* go wrong?

Posted by: Cass at October 28, 2014 11:02 AM

Just another out-of-touch 1% opposing a plan to make loans affordable for most Americans.

*This is an actual line of attack by Hagan in the NC Senate race in regards to student loans.

Posted by: Yu-Ain Gonnano at October 28, 2014 12:03 PM

"Who the helk cares about losing jobs when there are votes to be bought?"

Well, in case you've forgotten, we still have all those "shovel-ready" jobs to fill.

Posted by: DL Sly at October 28, 2014 01:01 PM

"Shovel-ready jobs".

At our airport, we were 3 years into an FAA-sponsored plan to replace our 55-year-old runway. The funding came from the Airport and Airways Trust Fund--funded by taxes on aviation fuels and passenger taxes.

Along came the "stimulus". The Obamunists were looking for "shovel-ready" projects, and discovered this great cache of pre-engineered projects sitting on a shelf at the FAA, awaiting their turn. The money for our project had already been allocated. Without prior notice, we received a check for about 30% of the project--and the FAA Trust Fund amount was cut back a similar amount.

The Obamunists could then claim that their stimulus was "putting people to work". Never mind that it was already funded by those that had already paid the fuel and use taxes. Never mind that no new jobs were created.

A perfect example of "Jumping in front of the parade, and claim that you are leading it!"

Posted by: frequent flyer at October 28, 2014 01:28 PM

Hey now, ease up. Homeland Security has been importuned by
mission creep. Priorities and all that, so stop getting your logos in a bunch.

Posted by: George Pal at October 28, 2014 02:45 PM

"Who the helk cares about losing jobs when there are votes to be bought?"

Why buy what you can get for free. Just say "calibration error" when caught.

Posted by: Richard Crainium at October 28, 2014 04:52 PM