Monday, September 22, 2008

More Election Year Pandering

Our anti-hero, Senator Christopher Dodd continues to stick it to millions of US tax payers. His inability to pass a piece of legislation without tacking on his own agenda is already legendary and continues to foil intelligent plans, like they did when Fannie Mae & Freddie Mac were bailed out. Main St got its ill concieved bone. Dodd wants to put limits on compensation for executives of companies which accept help. That’s fine, but Dodd also wants more plans to prevent foreclosures among loans that are purchased under this plan.

In short, renters, Senator Dodd wants to use your tax dollars against you again.

By maintaining the value of over priced home homes, anyone who doesn't own a home will still be facing an over valued market that will have even less impetus to correct. While this chart is a little old, it still illustrates just how far out of parity home prices are respect to personal income which has grown at a rate under 5% and barely kept pace with stated inflation. Even with the last 2 years of stagnation in housing prices, its growth rate vastly outpaces the growth rate of personal income.

Historically its always been less expensive to rent than own, but never in modern history has the gulf between the cost of owning and renting been this big.

It would be fine if the add ons that Senator Dodd was trying to add had something to do with securing some profit or returned revenue to the US tax payer though this bailout, but by continuing to support a bailout of the individual home owners, Senator Dodd and other legislators, like Democratic Presidential nominee Barak Obama, continue to rob Peter to pay Paul. At present, nearly 60% of US citizens own homes that are within their means and almost one third of the population rents their home, leaving a scant 8% of the population in trouble with their mortgage. Any continued bailout of the individual home owners forsakes anyone who doesn't already own a home. It also leaves the next generation with very little chance of owning a home which obviously creates a titanic problem that future Presidents and aspiring home owners will have to deal with. In short, this bailout will short circuit itself and leave the US tax payer worse off in the long run, because of the myopic, partisan, election year pandering on the part of the fat cats who don't keep their eye on the till and are quick to point the finger at everyone but themselves when things go in tank.

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