'Are we better off today' is only half of the question
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'Are we better off today' is only half of the question

Washington : DC : USA | Sep 07, 2012 at 5:22 PM PDT
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Helping Homeowners, Housing and Urban Development, Banks and Loans, Refinancing (2012)

The other half of the question needs to include the housing market. “Are we better off because the housing market is improving?” For those who still have doubts about the Obama Administration's effectiveness in addressing the Great Recession, the housing market statistics show we are better off.

Many people lost their homes due to the deregulation of the banking industry and taking on mortgages under deceptive mortgage practices. The Republicans have been allowed to frame the argument as “Are we better off today” that capitalizes on the belief that recovery from the Great Recession could be accomplished in four years without an indepth inquiry about why recovery is slow or careful consideration of what is called “sticky” economics. This term is used to describe a variable that resists change.

In Keynesian macroeconomic theory of price and wage stickiness, one sector without performance can “spill over” and influence other sectors which leads to the rest of the economy being less responsive to change. The mortgage crisis caused a downward trend resulting in an abundance of homes on the market due to foreclosures affecting the economy in aggregate.

For many Americans, they assess their personal circumstances in answering the question “are they better off” without a thorough understanding and comparison into what was happening in 2008 and where we are today. Former president Bill Clinton made it clear in his speech at the DNC Convention that when Obama took office, the country was losing 750,000 jobs a month and an astounding four million jobs in 2008 by the time President Obama took office in early 2009.

Economists agree the housing crisis, together with its impact on all areas of the economy as defined by sticky economics, is at the heart of the slow recovery. This has a domino effect on the entire U.S. economy in terms of lower property taxes as house values decrease resulting in a detrimental impact on state and local governments as the tax revenue for public services decrease due to reduced property tax rolls. Just as the need for public services increased due to economic strains on households, the badly needed safety net services diminished as public budgets were stretched just to provide the minimum services to the destitute.

The housing bust is at the heart of the Great Recession and inextricably linked to recovery. The steps by the Obama administration to essentially “bail out” homeowners who have mortgages that now do not reflect previous value upon which home loans were obtained have been aggressive and consistent. As home equity was eroded by the Great Recession’s mortgage crisis, the Obama administration has stepped in with relief—the Democrats prescription for relief, not the Republican’s “double-down on trickle down.”

When President Obama said in his acceptance speech for the presidency at the Democratic Convention, “Take two tax cuts, roll back some regulations, and call me in the morning,” he was giving the Republican prescription for American relief. It is not the Democratic platform for relief, and the statistics bear this out as proof that the steps taken by this administration to assist the relief of homeowners has had a positive impact on the housing market overall and the economy in general.

According to Real Estate Economy Watch:

The CoreLogic Pending HPI indicates that August home prices, including distressed sales, will rise by 4.6 percent on a year-over-year basis from August 2011 and at least 0.6 percent on a month-over-month basis from July 2012. Excluding distressed sales, August house prices are also poised to rise 6.0 percent year-over-year from August 2011 and by 1.3 percent month-over-month from July 2012. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes in the most recent month.

“The housing market continues its positive trajectory with significant price gains in July and our expectation of a further increase in August,” said Mark Fleming, chief economist for CoreLogic. “While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.

“It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note,” said Anand Nallathambi, president and CEO of CoreLogic. “Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”

A very long tunnel indeed as the recovery grows, albeit slowly, with the momentum of the housing market. Housing prices go up as the demand increases, which means homes are being built and most importantly people are buying homes and given refinancing options, including low interest rates, making it affordable to buy a home or to keep a home whose equity was lost.

The housing market: Let me count the ways

The logical question by the average American is, “What have Republicans done for me lately.” It’s a valid question and one that clearly separates the Democrats from the Republicans. The 8 percent of voters who are still undecided need to ask themselves this question before they decide.

If they ask “What have the Democrats done for me lately,” here are some solutions—not campaign promises—but actual programs to solve problems together in a shared partnership between Americans and their government.

Neighborhood Stabilization Program

The American Jobs Act included The Neighborhood Stabilization Program

The Neighborhood Stabilization Program was created to help cities, counties and states deal with community problems that are the result of the mortgage foreclosure crisis in the nation. HUD provides money to local governments (cities and counties), nonprofits, and all 50 states. HUD has allocated $6.82 billion to 307 NSP1 grantees, 56 NSP2 grantees, and 270 NSP3 grantees.

The money must be used to buy, fix up, and resell foreclosed and abandoned homes. As long as the funds are used for this redevelopment, the grantees that receive HUD funds decide how to use the funds and what specific redevelopment activities to undertake.

Rural Housing Service

The Department of Agriculture’s Rural Housing Service representative appeared before The House of Representatives Financial Services Committee and gave a report in October of 2011. In their testimony it was ensured that efforts to improve capital access in rural housing areas have been reevaluated to enhance their program. They re-engineered Section 502 Single Family Housing Guaranteed Program with fees to offset losses, which allow rural borrowers’ access to credit and reducing costs to the taxpayer. Also lending flexibility addresses fluctuations in the market and emphasized loan refinance and loan modifications in order to keep people in their homes.

HARP: Home Affordable Refinance Program

The Home Affordable Refinance Program is a critical part of the Obama Administration’s all encompassing strategy to help homeowners avoid foreclose, stabilize the country’s housing market and thereby improving the nation’s economy.

Options under the program include: 1) Lower monthly mortgage payments; 2) a way out in the program if homeownership is no longer affordable by avoiding foreclosure; 3) unemployed homeowners options; 4) homeowners who owe more than their homes are worth due to the recession.

Keeping people in their homes and lowering payments means homeowners have more money to spend injecting money into local economies, which addresses the macroeconomic theory of “sticky” economics as a counter balance to resistance to change.

Greg Sargent in the Washington Post’s “Plum Line” observes, “With roughly 150,000 new jobs per month and GDP growth of 1.7 percent, there’s no question that we’re better off today than when Obama took office. It’s true that current conditions are on the bad side of mediocre. But that’s just a sign of how terrible things were four years ago. Voters aren’t sure that the recovery has been fast enough, and that’s why they are hesitating before granting Obama a second term. But it’s not enough for Romney to tell voters that their disappointment alone should lead them to fire the president. Romney has to show them that he could have made things better — and that he will make things better. Without that, the 'are you better off' question may not be enough.”

This begs the question of where is Romney’s housing economic plan that will make all Americans better off, not just the wealthy, Wall Street and health insurance companies? One that does not include Paul Ryan’s scorched earth method of “voucherizing” Medicare and Social Security or eliminating the Department of Education. The only solutions from team Romney are eliminating government programs while keeping the tax cuts for the rich and making sure corporations preserve the tax loopholes that have ensured soaring profits for them while the rest of the country suffers.

The Republican response is to slash and burn government programs in order to keep the middle class in their place, rather, to squash any upward mobility that either propels individuals into the middle class or maintains those who are fortunate to occupy middle class. On the other hand, the Democratic response is growth moving forward for all Americans. It is a balanced approach by improving programs like Medicare and Social Security to ensure their solvency, not getting rid of them. The development of government assistance programs for homeowners shows this administration has a vision now and for the future to secure the nation’s economic growth, wealth and stability. The safety net in all its manifestations needs to be there for everyone because as the Democrats made clear at the convention, “we are in this together.”

If you like to write about U.S. politics and Campaign 2012, enter "The American Pundit" competition. Allvoices is awarding four $250 prizes each month between now and November. These monthly winners earn eligibility for the $5,000 grand prize, to be awarded after the November election.

Resources

http://www.washingtonpost.com/blogs/plum-line/post/why-are-you-better-off-is-the-wrong-question-for-2012/2012/09/03/a262cad8-f5d8-11e1-a93b-7185e3f88849_blog.html

http://thegreatrecession.info/blog/economists-just-dont-get-the-great-recession/

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/08/economists-to-romney-campaign-thats-not-what-our-research-says/?tid=pm_business_pop

http://www.realestateeconomywatch.com/2012/09/july-prices-soared-more-than-in-six-years/

http://en.wikipedia.org/wiki/Sticky_(economics)

https://hudnsphelp.info/index.cfm?do=viewAbout

http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx

http://financialservices.house.gov/uploadedfiles/112-69.pdf

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Dava Castillo is based in Clearlake, California, United States of America, and is an Anchor for Allvoices.
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