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January 5th, 2009

Trying to Gain Republican Support for Stimulus

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The United States’ next major spending package is nearly fully formulated, expected to total somewhere in the range of $700 billion – $1 trillion. In what has been deemed the “American Recovery and Reinvestment Plan,” the latest stimulus package has been designed around infrastructure repairs, unemployment relief, state budget recovery, and most recently a large tax-cut initiative designed to garner Republican support. According to the Wall Street Journal, a $300 billion tax-cut program will be aimed at both individuals and businesses:

Republicans and business leaders hadn’t seen specifics of the proposals Sunday night, but welcomed the idea of basing a bigger proportion of the stimulus plan on tax cuts. Their response suggests the legislation could attract relatively broad support, and it highlighted the Obama team’s determination to win backing from varied interests.

Yet, will the proposed tax-cut plan, which would account for about 40% of the stimulus package, be enough to gain support from Republicans who fear more “unfettered spending?”

Our friend Rebecca Wilder at NewsNEconomics.com points to infrastructure repairs, another major spending portion of the stimulus package, as an inefficient attempt at economic progress. Ms. Wilder argues the ineffectiveness of domestic-construction initiatives in the past. “…if the rise of domestic construction production was to blame for the loss of productivity in the first half of 2000, why are the longer-term spending initiatives centered on construction projects? The focus should be on expanding our most productive sectors – manufacturing and exports – to stimulate innovation and productivity.”

One of Paul’s posts on Friday warned against “unintended consequences” that have fallen upon viable individuals and companies as a result of government assistance (i.e. housing, and most recently Ford’s latest competition). Economist Joseph Stiglitz has said the same thing as it pertains to the latest stimulus — “Bailouts, too, are aimed at correcting mistakes of the past, so they are backward-looking. We would be much better off spending our money forward-looking. If we spend $700 billion on new technology and innovation, we’d have a stronger, new, real economy. Up to now, the discussion has focused on the sectors that have been mismanaged rather than the sectors that are creating our future.

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2 Responses to “Trying to Gain Republican Support for Stimulus”

  1. John Moreno Says: January 6th, 2009 at 2:10 am

    Regardless of the market conditions, as a homeowner I need to know that if I want to refinance my mortgage I have the option to. The amount of lenders that are willing to make the loan are getting few and hard to find. The availability of lenders out there that are willing to “bank” me are scarce. A few months ago, the abundance of lenders was uncountable – but now – every lender is running scared. Now what? I have good credit – or I used to. They have changed the definition of “good credit” so now I have a problem. I am now in the group of homeowners that don’t have a shot, or maybe I am very close. Now what do I do? I know I am not alone out there. Thank you for your information. I will use it.

  2. Tim Manni Says: January 6th, 2009 at 11:08 am

    John,

    Thanks for reading and commenting. Good credit is key to get your foot in the door with lenders. The refi boom has made the once stagnant mortgage biz hopping once again. Lenders have become so swamped, they aren’t investing their time with borrowers who don’t fit their new lending criteria. You 100% correct, the percentage of lenders out there willing to lend are fewer and farther between (lenders are afraid of getting burned). Lenders are looking for borrowers with good credit, and those who don’t owe more than what their houses are worth.

    Good luck, and don’t give up. Thanks again for reading and commenting,

    Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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