Mick Wright.net

In July, Congress passed a tax credit for home buyers purchasing their first homes between April 2008 and July 2009. Taxpayers could claim the $7,500 credit, but would have pay it back over the next 15 years.

This month, Congress decided to extend the offer through the end of 2009, increase the credit to $8,000 and strike the provision requiring it to be paid back for homes purchased in 2009.

Another proposal, passed unanimously in the Senate but removed by the joint conference, would have upped the credit even further, to $15,000, and would have allowed any home buyer to claim it (not just first time home buyers). This amendment did not make the final cut, but the proposal’s sponsor said he will continue to push for the increase tax credit in a separate, stand-alone bill.

Each of these proposals are intended to spur home sales and quickly pump money into the housing market. Instead, by continually upping the ante, Congress actually discourages home sales. The signal that this activity sends to potential home buyers: hold out for a better offer.

And that’s not even addressing the question of whether such credits actually help the economy in the long run, or what might be the net effect of a temporary, artificial boost in demand.

All we really seem to know is that we’ve got to pass something, anything, no matter what it is, and now matter how bloated and foul, as quickly as humanly possible.

We’ll pay for it later.

UPDATE: “U.S. Home sales drop as many wait to see how tax credits will help market… Buyers ‘did not want to jump into the market until they were certain’ what the government would do to resuscitate the housing market, said Lawrence Yun, chief economist for the Realtors’ trade group.” Commercial Appeal, Feb 26.

Our President says the federal government will “save or create” 4 million jobs by borrowing roughly $800 billion and spending it on random programs and projects.

If blowing money on widgets can save jobs, why can’t blogging?

Therefore, I declare that this blog post will save or create 4 million jobs. If you had a job when you started reading this blog post, and you still have a job when you finish reading it, consider your job saved.

No thanks necessary.

Every work day, you go out for lunch and eat at the Corner Cafe. You have budgeted $5 each day to spend on your lunch. Meals at the Corner Cafe cost $6, so you borrow $1 from the restaurant, which has set you up with a line of credit. At the end of the week, you’ve spent the $25 you budgeted, plus your tab of $5. If you skip lunch one day next week, you can pay off this week’s debt.

When Monday rolls around, instead of skipping lunch and settling your debt, you hatch a clever idea. You take an important colleague to lunch with you; if you are able to impress this colleague, you could advance your career and earn more money. And if your financial situation improves, your lunch budget will increase enough to pay the $6 each day, plus your $5 debt from last week.

For a week straight, you treat this colleague to lunch at the Corner Cafe, for a total daily cost of $12. You pay by spending $5 from your lunch budget and adding $7 to your tab. At the end of the week, you’ve spent $25 and added $35 to your debt. At your current salary, you’ll have to skip lunch for seven days to pay back the restaurant for this week’s tab.

Well, to make a long story short, your colleague enjoys the free lunches but doesn’t come through for you. On Monday, you feel the burden of that big debt at the Corner Cafe, but your stomach is rumbling and you need lunch in order to stay focused and do your job. You’ve got to eat, and you’ve got to make more money.

You decide to invite two of your colleague’s closest friends to lunch with you. Perhaps they will be able to influence this colleague or tell you how to get your point across. After lunch, the Corner Cafe brings you the bill, but the manager is starting to question your ability to pay off the tab, so they’re going to start charging you interest. At the end of the week, you charge $65 to your tab, plus 10% interest, for a total of $71.50, if you pay by Monday.

Before long, you realize that your colleague’s friends don’t seem to have any more influence than you do, and you still have to pay off that debt. Around lunch time, you go to the manager at the Corner Cafe and confess that you don’t have the money, and what’s worse, you’ve actually been borrowing half of your lunch budget from your retirement account. The manager tells you not to worry, he’ll put you on a generous payment plan.

He also suggests that you start getting politically active and support candidates who will pay for your lunch, guarantee you a “living wage,” and take care of your retirement account. What could possibly go wrong?