Good morning all: How are you? It's another cold but beautiful morning here in Seattle. Snow has already fallen and people are skiing! Get excited. I was thinking about Stimuli this morning and if they work.
First of all, a definition: Here is the definition of stimulus. Stimuli is the plural version because there are so many at work right now. Stimulus is defined as "an agent, action, or condition that elicits or accelerates a physiological or psychological activity or response".
Why am I writing this? With the never seen before economic downturn and the government's answer to try and stimulate our economy, I wanted you to weigh in. This is by no means meant as a political rant. In fact, I abhor most things political. But I'm also a free market guy who has to wonder.
Let's start with our own personal favorite, the $8000 first-time homebuyer tax credit which was just extended. I was talking with a realtor yesterday and he asked me how many deals I had done because of it. I told him two so far with a third that will probably close next month. What are you seeing? Have you closed a lot of deals because of the homebuyer stimulus? If so, I'd like to hear about it. For me, it really hasn't helped that much.
I have to wonder what would have happened if there weren't so many stimuli in place right now. How will this work in the future? Are we in fact mortgaging it? Is the first-time homebuyer tax credit, health care bill, government bailout of our financial institutions, etc. etc. working? Some of you may argue we need more time to see the results. But if you look at the definition of stimulus above, it makes me wonder. Have we elicited a physiological or psychological response? Again, I'm not so sure!
As you can see, this is a little deeper post than normal. Sorry about that. But the numbers don't lie. Greater and greater deficits and people in our business having challenging years with no quick turnaround. Again, I invite your thoughts. Stimuli. Do they work? Have a great weekend!
Paul McFadden
Paul, the only stimuli I'm counting on to work is a good cup of coffee each morning. And the dedication of each real estate agent and mortgage professional in America :) Kate
Paul: I definitely believe the "stimulus" is a short-term fix. Its rather like when a person is cash-strapped and borrows on their credit card; they may feel good, but the bill will soon hit.
I honestly believe there are 3 things we could do to get the country up and running--no, sprinting--again. That doesn't mean Congress would ever really consider them, but they are practical and WOULD work:
1. Announce and begin the process of building at least 50 new nuclear power plants, at least one in each state. Clean power.
2. Announce and begin the process of finding and drilling for all the oil we as a nation need. Declare it a national emergency if we must. This would immediately drop the price of oil and, in the long-run, render the Middle East irrelevant.
3. Begin an honest, fair evaluation of the Fair Tax. This would repeal the 16th Amenment, turn the United States into a tax haven, bring the estimated $10 trillion plus in dollars sheltered off-shore home and, most important to the economy, by eliminating both corporate taxes and capital gains taxes, would return the United States, with its stable government, work ethic and natural resources, back into the manufacturing capital of the world. International corporations would be fighting each other for a place in line to relocate here, and we would be begging non-citizens to come here to fill all the new jobs.
Just my thoughts......
I agree with the plan Steve just gave.....we need energy which is not dependent on other countries, we need lower taxes to allow the people to spend and businesses to grow, and we need the expectation of personal responsibility....which is sorely lacking today.
Paul - Steve does offer some good long-term suggestions, but unfortunately, politicians are incapable of strategic thinking. And if that is the case, we need to boot them ALL out and start over, with of course, term limits for all.
Paul,
Stimulus programs probably are more effective psychologically than anything else. People at least see that something is being done to fix things. Besides, it's often hard to accurately measure the results.
Esko: Thanks for your thoughts. I appreciate them. I would argue that most of our citizenry is so shell-shocked right now, they're not buying into any psychological stuff. In other words, the jury is still out! Thanks again!
John: I like your thinking. In the olden days, our politicians often worked other jobs as their job was part-time at best. Imagine how much money we could save if we didn't have to pay for all their pet projects, staff salaries, and benefits!
Karen: I agree with you. So why isn't this happening? We're going through what for most of us is the most profound economic challenge we've ever encountered. Yet we don't seem to be clamoring for the change Steve talks about. Why is this?
Steve: These are great thoughts. Thank you very much! I agree with you. Something radical needs to be done. Imagine if we devoted our so-called money to what you propose as opposed to throwing $787+ billion at the bailout and up to $1.2 trillion to fix our health care mess. I wonder how things would change. Again, thanks. We'll see how innovative our leaders are. I don't think we're going to have good times for a while again and something different needs to be done. The question is how do we get our politicians out of the back pockets of the special interests? This is where I am unfortunately pretty cynical. Take care.
Kate: I appreciate you bringing some levity to an otherwise deep conversation. Have an awesome day!