Keynesian Johnny

Johnny Iskason is pushing for a $15k tax rebate for new home buyers:

Isakson is pitching an idea to his colleagues in Congress: a $15,000 tax rebate check to anyone who agrees to buy a home. Congressional budget analysts project the program would cost $14 billion over the next few years. But Isakson said the rebate checks are well worth the hefty price tag. “If we can convince buyers to come back to the marketplace and buy these houses, then the houses aren’t vacant. It’s replaced by an owner-occupant, who is there making payments on a loan and helping all of the other houses around.”

Senate Republican leaders have signed on to the rebate check idea. But they have to corral support from Democrats. Senate Democratic leader Harry Reid is instead pushing a foreclosure relief proposal called The Foreclosure Prevention Act of 2008, which would offer $4 billion to cities to rehab or knock down foreclosed properties. Reid’s Democratic colleague Sen. Bob Casey said, “It’s important that we have as much money as possible in the hands of local communities, to get it into communities, where they know how to spend those dollars and help families through this crisis.”

Thoughts?

34 comments

  1. Doug Deal says:

    He has to repay his friends in the real estate industry somehow. Why not pay them back with someone else’s money (tax payers).

    Icarus will now come on and explain how this is somehow better than other welfare programs (like increasing EIC) favored by Democrats.

  2. Icarus says:

    And here’s my take.

    Isakson confounds a lot of his critics because he is, above all, a realist and a pragmatist. A lot of folks look at his ability to generate a compromise solution to a complex problem and perceive that as a sign that he’s not conservative enough. Bull.

    Isakson has consistently ranked as one of the most conservative in the Senate. Yet he is also able to work behind the scenes with members of both parties to get things done when necessary. He generally does this not in front of the cameras and branding himself as a “Maverick”, but someone who knows how to work in the background and be effective.

    Indy used an example in the other thread of Delta Airlines, and the thought process applies to this bill as well. It’s a cost/benefit analysis.

    In the Delta pension relief bill, Isakson took on a President that said he would veto any bill, and the leadership of both parties. Had Delta terminated its pension plan, the Federal Government would have immediately been on the hook for the unfunded balance, and may retirees would have seen their benefits cut.

    If you understand the South Metro Atlanta area, you would understand what an immediate economic impact that would have. Not just on the retirees, but on the small businesses that dominate the landscape down there that depend on airline families. (Understand that over 10% of Delta’s worldwide employees live in Fayette County alone. Add Henry, Coweta, and Clayton, and you might start to understand the economic impact here…)

    All those employees, retirees, and employees and owners of the businesses that are supported by them pay Federal, State, and Local taxes. If those pensions were cut, the tax revenues are cut too.

    Isakson crafted a bill that allows a longer time frame for the airlines to cover the unfunded parts of their pensions. If they fail, the taxpayers are no worse off than if the bill never existed. In the interim, the retirees get their current benefits, and the businesses that rely on them continue to do so.

    Which brings us to the $15K tax credit. Total estimated cost to the U.S. taxpayer, $14 Billion. (Compare that to the worthless $160 BN stimulus package for perspective).

    For a relatively low cost, Isakson is providing a stimulus to the one sector that is the root cause of the current economic uncertainty. This is far from a bailout, or business as usual. Lenders have already restricted their mortgage underwriting criteria. Sub-Prime and Alt-A loans no longer exist. Builders can’t get financing for spec loans, and in some cases, even pre-sold homes. The channels for over-supply have been turned off. But the uncertain buyers (and sellers, for those that want to move up, down, or out of town) don’t want to put their current houses on the market because of all the bad news.

    The resulting economic downturn in the U.S. economy will cost the Treasury much, much more than $14 BN if the slide in Real Estate continues.

    I see this as a very targeted, pragmatic solution to a very real, very large problem.

    From a cost-benefit standpoint, it’s a lot cheaper than doing nothing.

  3. Icarus says:

    Hopefully, Doug, that’s what I just did.

    I now have to go buy beer, just in case I forget to do that tomorrow.

  4. joe says:

    I can’t buy a new house unless I sell my current one. I won’t be able to sell my current one unless I discount it more than the $15,000 rebate.

    Sounds like a Washington D.C. idea to me.

  5. IndyInjun says:

    Ah, but there is perilous moral hazard in all of these bailouts in that the free market is perverted, folks who are actually responsible need no help, and the largesse allows the looters to escape the consequences of their incompetence, as in Mullin-Leo and his $10 million severance. When the pensions end up being paid by the government, folks like me who have no pension, only our self-funded retirement savings, end up paying for those who by all means should have been SOL, or more attentive to what their employers were up to.

    The $180,000 grants to Katrina victims was even worse. There you have gifts to folks living in flood zones and pricey waterfront real estate which are the after-tax annual earnings of 4 1/2 average households. If a poor family in Early county has their home destroyed in a fire or rogue tornado, they get nothing. The rest of us get to pay more interest on the debt to the Chinese for funding the ‘relief’

    This morning the Fed violated its charter by bailing out Bear-Stearns and has pledged to cut interest rates to zero. It will cost in the $trillions to bail-out the derivative-levels of this fiasco, blowing money supply and US debt even higher above the already insane levels already doubled under Isaks, Bush, and Chambliss. Savers will get no interest on their inflated-away sacrifices which were supposed to fund their own retirements. Some reward for responsibility, eh?

    In the aftermath of all of this, will anyone be stupid enough to save and live responsibly? The message is clear – eat, drink and be merry for either Hillary or Johnny will bail you out on the backs of the working stiffs.

    Hillary has plans for someone to pay. Johnny thinks that the Federal government can create money out of thin air and the rest of us won’t pin the resulting inflation tax on him.

    A pox on the both of them.

  6. Harry says:

    No-one other than a fraud artist is going to be persuaded by $15k to buy a house. The Reid plan is equally wasteful — it sounds like another type of recipe for corruption. All the corrupt legal middlemen in the sewer bond racket, set-asiders, etc. will jump into that game.

  7. Icarus says:

    O.K., Doug first.

    It’s easy to throw the accusation around that he’s only supporting the RE industry because they are his contributors. Isakson spent his adult life in that business, and knows it pretty well. He also knows the people in that industry well, and they know him. It’s an industry that there are few secrets, and a person’s integrity is well known in that community. I’ve yet to meet anyone in the real estate field that did business with Johnny that doesn’t hold his integrity in the highest regard.

    When this issue was first becoming public (i.e., political front burner) several months ago, I attended a luncheon where Sen Isakson was the guest speaker. His postion at the time was that government interference usually made a natural correction of a market worse. So what’s changed?

    The very core of the markets that we depend on are very shaken. Indy’s prognostications, which he appears to be actually pulling for, are not totally far fetched. They are, hopefully, still avoidable.

    It was the consumer who kept the country out of recession following 9/11. Unfortunately, a lot of them, like the country, borrowed too much in the process. There are a lot of people who will still lose their homes, regardless of any tax incentives. Their credit will be damaged, as will their purchasing power, for a long time to come.

    This bill bails out no-one. The chips are still going to fall hard in a lot of places. Bear Stearns shareholders will probably end up with nothing. This doesn’t attempt to bail out them.

    This is aimed at the consumers who have done the right thing, still have decent credit, and want or need to buy a new home. If these people, who can qualify for mortgages under today’s underwriting standards, can be brought back into the market, the predictions of another 20% drop in average housing values may be avoided. The other, more healthy sections of the economy may not be dragged down with the housing sector, and the economy may experience more of a “soft landing” than a total crash.

    Joe, the housing market works that way. It is a bunch of dominos. And if you’ve priced your home more than $15K above the current market, then either don’t sell, or get realistic about where the market is.

    While the South Metro Atlanta area has some specific issues, in-town (non-high rise) and Northern Suburban ATL are still one of the best markets in the country. (Suburban McMansions are still a bit over-done).

    Indy,

    You lost me at Leo Mullin. He was a complete douchebag, but he left Delta well before the pension bailout. Gerald Grinstein and Isakson are both heros for what they were able to do for Delta, it’s employees, and other stakeholders in the wake of what that man left behind.

    As for the rest of it, your getting way to much schauenfreude out of the problems of both the economy and the republican party. I can’t wait until you get to see what socialism actually looks like.

  8. IndyInjun says:

    Aha, Icarus, you are partially right. AFTER the airlines got emergency financial aid from the USA, which was the first bailout, Mullin started the pension bailout pleas before he left. The pension bailout was the second bailout for Delta.

    No sane person can have satisfaction from the clear and present danger of a GREATER Depression, given that then 70% of the people could feed themselves, and now we face a societal meltdown that will be truly horrific, one that neither of us may survive, nor may numerous other PPunditeers.

    I have the capability of examine my own culpability and will not exempt the ‘leaders’ who, had they been the conservatives they claimed to be, would not have caused or fed it.

    Yeah, the process started in 1998, under the Dem/GOP divided government- that is when M3 started its pronounced assent, but it turned nearly vertical under Bush, Isakson, and Chambliss, all of them charlatans for whom I voted.

    With the trillions being offered forth since August, money supplygrowth is now vertical, meaning it will certainly collapse, if the debt implosion doesn’t outrun it.

    In about 5 years we will start rebuilding America and will get back to the real values that made her great, accountability being one of them.

    As an aside, from my purely independent world view, why is it so bad to dole out $20,000 per year in welfare to a retarded drop-out with kids, when the GOP seems to value $150,000 government contract jobs to people doing nothing? Why is the latter make-work job that produces nothing any better than the $20,000 for doing nothing? It is confusing. It is why I am Indy.

  9. IndyInjun says:

    To the degree that I show ‘schauenfreude’ it is because the GOP is reaping what it has sown, showing that my value of accountability is renewing already.

    That the opposition is ‘worse’ is the last refuge of the GOP partisan’s. It is ALL that is left.

  10. Burdell says:

    My parents just bought a home. Will they get $15K, or will this only benefit people who can afford to wait on Congress to act?

  11. Carpe Forem says:

    There was on old lady that swallowed a fly, I don’t know why she swallowed the fly, I guess she’ll die. She swallowed a spider to catch the fly…

    Icarus,

    I guess you big government master planners will never get it. GOVERNMENT CAN NOT SOLVE ECONOMIC PROBLEMS, THEIR POLICIES ARE THE PROBLEM!

    Sorry, didn’t mean to yell. As a biologist, trained in observation, I see nature correct itself after an adverse occurrence all the time without anyone’s involvement. The free market works very similarly. A hands-off free market will correct itself.

    As we all know, the fly would not have been fatal, but we all also know what happens if we get to the horse.

  12. Doug Deal says:

    Icarus,

    I never said he was inconsistant, I said we should have elected Cain. A borrow and spend conservative might actually be worse than a tax and spend liberal. At least the Dems admit it will cost money and try to fund their programs with tax revenue, instead of pulling out a Visa. But why pay for something now when your grand children can pay twice as much for later.

  13. bowersville says:

    Self serving and selfish question.

    I have a home with a little less that 90 acres. I didn’t put it on the market due to declining prices and I’m in a holding mode with this property. How does Isackson’s proposal help/hurt me?

    Sidebar:Failing home prices? Below par interest rate loans with the promise that homes will appreciate in value with no consideration that value would fluctuate(collapse) has borne this out.

    You can’t buy a nickel pencil for five dollars and expect a profit.

    I’m holding, but not hurting.

    Indy usually talks at me or beyond me, but this time he’s making sense.

  14. Icarus says:

    Indy – getting someone to say I’m partially right is better than average for me.

    Burdell – Haven’t read the bill, I have no idea what the effective date is to be.

    Doug – What planet are you living on? Isakson is the 6th most conservative Senator in the Senate. You really think you’re going to find someone with a better record to replace him? Really?

    Carpe – you should stick to the study of drosophila ingestion and leave off the econ if you can’t move beyond 101, where all examples have very controlled assumptions that never appear in the real world. What utopian Ronulans never want to deal with is that there is already a government program for everything. Doing nothing in the Delta scenario meant that the Government immidiately took over the burden of Delta pensioners. Doing nothing in response to the current real estate crisis could mean the implosion of Fannie Mae, Freddie Mac, the FDIC, and in general, the modern western economy. Which is what you guys seem to want, since you want an 1800’s gold standard.

    Bowersville, can’t remember what part of North Georgia you’re from, but the bill helps you much more in a macro sense than a micro sense. N GA’s forclosure numbers are not nearly as bad as the average because you are populated with a disproportionate number of retirees, many of whom have little or no mortgages. While sales have slowed down up there, the prices are not falling because you don’t have massive property liquidations going on by banks. That said, I’m told that Habersham county has an almost 5 year supply of developed subdivision lots, so 90 acres is an asset that probably is best in a “hold” class right now. However, if the Isakson bill helps to stimulate the weakest area of the U.S. economy right now, the resulting stability should help you recoup your investment sooner than if we have to have a total banking collapse to make the Ronulan/GoldStandarder/Truthers happy.

    As for everyone else, tonight is futher proof that God wants Athens to remain a football town. We win one game in an SEC tourney, and the GA dome gets hit with a tornado just before we’re supposed to play Kentucky. Coincidence? I think not.

  15. bry777 says:

    Let’s see, we have a major housing problem because they sold houses to people who couldn’t afford them. Now Johnny wants to help people buy houses by giving them $15K. Didn’t he read the book? Has he been drinking koolaid?

  16. bowersville says:

    Ic, I’m actually not worried about the investment. It’s more than ten years old, waiting until an appropriate profit..

    But it remains, dumb asses that never should have bought homes did, with the expectation of increases in property value and refinancing. What idiots, I hope this bill is not encouraging those dopes to purchase or giving them an avenue to do so.

  17. Icarus says:

    “I hope this bill is not encouraging those dopes to purchase or giving them an avenue to do so.”

    In the current mortgage market, if you don’t have 10-20% real money to put down, stellar credit, a decent debt to income ratio, and verifyable income, you can’t buy anything. Even if you have that, some Jumbo mortgages are still a bit difficult.

    This bill is to encourage the people that can and should be able to buy homes to do so. Sub-prime and Alt-A (No doc loans to those with good creidt) are gone, and won’t be back anytime soon.

  18. bowersville says:

    Good, that’s the way it ought to be. No assets, no loan.

    But sub-prime loans brought that down to naught. Plus the liar loans, I earn X, I own X, I’m worth X with no verification.

    And X is just that, nothing.

  19. AubieTurtle says:

    If it passes, I’d be very interesting in knowing the nitty-gritty details. How difficult would it be for people to set up an LLC or similar entity to buy their home and sell it back to them, with a nice $15,000 bonus? How many times could one do this swindle with the same home? If the government program doesn’t take things like that into account, the opportunists will.

  20. Thadius says:

    I remember that Huey P Long (from LA) was criticized for calling for “a chicken in every pot”.
    The socialist idea of the government stepping in to pamper people who will not take care of their own family has been a great issue for republicans to run agaisnt for the past 75 years. Now it seems like we really are seeing a change.
    THE REPUBLICAN PARTY IS NO LONGER CONSERVATIVE. PERIOD.
    I won’t pretend like I have a brilliant response to this situation, but I will not support these flaming liberals just because the have an R next to their name.
    The fundraising picture in the presidential race would indicate that others feel the same way.

  21. Thadius says:

    BTW, I hate this for Barry Fleming but I think being alligned with the establishment right now is a really horrible position. I think he is really more conservative than he votes, but his unwillingness to stand up to leadership makes him vulnerable to someone like Broun who at least has some intestinal fortitude. He is the type who would fall right in line if / when he gets to Washington.

  22. Holly says:

    Honestly? We are far more likely to know or care how a person votes or behaves – be it Barry Fleming, Nancy Schaefer, or Paul Broun – than the average voter. It’s amazing to me how little most people actually care to know. So, in short, unless a big red flag is waved from one side or other during the campaign, I doubt most people are going to have a clue (or if they know anything, it will be because a group they belong to takes issue or supports one or two votes or actions or comments, etc.). Call me cynical, but it’s been my experience thus far.

  23. IndyInjun says:

    Holly,

    What is about to clobber the ‘average voter’ due to his inattention is about to get his undivided attention.

    It is that big and it has been inflated (quite literally) by idiocy such as Isakson proposes on top of his previous votes for Medicare D and such.

  24. Jace Walden says:

    I feel vindicated.

    Seriously, I used to catch all sorts of hell from the Cult of Isakson members on here for consistently calling Isakson and Saxby Chambliss two of the biggest, big-government Republicans in the U.S. Senate.

    I wonder what all of those idiots who have been promoting Isakson as the “conservative alternative” to Sonny Perdue are thinking now! I’m sure they’ll come up with some long-winded, but completely inane explanation (read: excuse) for nanny-state Isakson’s latest big-government expansionist idea.

  25. Carpe Forem says:

    Icarus,

    What utopian Ronulans never want to deal with is that there is already a government program for everything.

    -Not “utopian”, but Liberty Loving.
    -Reducing government size and scope is our goal of dealing with it, since as I stated, It is the largest part of the economic problems.
    -I understand it takes a leap of faith to allow the Free Market to fix economic problems, but just like John Adams came to agree that Hamilton was wrong, I have hope, due to your intelligence, that you too someday come around as well.

  26. Bull Moose says:

    Okay, Icarus, I agree with your first point. However, I don’t think some of these folks on here have the capacity to understand you.

    The housing industry is at the backbone of the economy.

    97% of the home loans are performing as they should with buyers making their payments on time, etc…

    However, both buyers and sellers have been scared by the media. Both aren’t moving. What Isakson proposes is a stimulus to get the buyer and seller back into the market. In that way, the housing starts to move and then in turn, the wheels of other businesses in turn rotate and the big wheel of the general economy begins to move again…

    Isakson is putting forward a very smart and pragmatic stimulus idea. I would much prefer his plan to the $160 BILLION stimulus plan that was introduced.

  27. IndyInjun says:

    $4 trillion might end up being the sum total of Isakson and the boys’ bailouts.

    By the reckoning here the Fed has bailed out the bankers to the tune of $500 billion with their alphabet-soup of bail-out funds, the GSE’s have gushed another $100 billion, the Federal Home Loan Banks another $100 billion, the ‘stimulous’ another $180 billlion, and then there are $hundreds of billions being stolen from savers in negative real interest rates.

    I figure we are well over a $trillion already and this is just the opening phase.

    Isakson’s many bailouts threaten the financial viability of the USA. He is perfectly capable of turning a $14 billion new welfare scheme into another $trillion or so.

    His record is pretty clear on that one.

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