- Published on Wednesday, 15 May 2013 22:32
- Written by Super User
By CHARLIE ALLO
The politicians may gain some insight to many of our problems if they took a little time to review the history of many of the aspects that they try to influence with their legislation, housing is one area that may have benefited from an historical analysis.
From 1880 to 1940 the homeownership rate fluctuated within the 40% range, it reached a peak of 47.8% at the end of the highly speculative period of the 1920’s. This speculative period was brought about primarily by the private sector, which lead to the “Great Depression.”
The second collapse of the housing market was primarily the fault of the Federal Government’s efforts to make more housing available to a wider spectrum of the population, many of whom could not afford the payments that were required.
Our representatives are making decisions based on political considerations, rather than sound economic principles.
The total lack of understanding of how the economic system functions is apparent when the government is taking a position that the way to get the economy growing is to double down on the very actions that helped to create the problem we are faced with today.
If the government was really interest in getting the economy back on track it would stop putting out legislation that tends to hold back investments by the private sector.
The middleclass needs to have an environment that it can grow in, what the government is doing is killing the middleclass and widening the gap between the poor and the rich.
This condition is being
created primarily by expanding the safety-net for individuals that are unemployed or unemployed, and the passage of legislation that is designed to bring in more tax dollars that are needed for the growing public sector requirements.
To add to this fiasco the government is playing crony capitalism by pouring huge sums of money into programs that have little or no value in developing a vibrant private sector economy that would help to reduce unemployment within the middle-class. The government’s actions appear to be more designed to ensure political considerations, rather than economic. This approach seems to be designed to enhance a political party’s control over the electorate in three prominent areas: the first would be the workers in the public sector; the second group would include all the individuals that are being supported by the various safety-nets the government has created or expanded; the third class would be those individuals that are benefitting economically as a result of their associations with the government. There are other segments of our society that could be noted, but the basic rationale would remain the same.
Creating a vibrant middle-class that would enable individuals to move vertically through the economic system, both up and down according to the individual’s abilities and predilection for a particular life style, would go a long way in stabilizing the nation’s economy. The economic variables are not currently in a favorable position to suggest that the government should encourage families to take on the long term debt that buying a home would entail, regardless of the low interest rates that are associated with the purchase. If this proposal were carried out it would only lead to more of a contraction to the nation’s already tenuous position; one would have to question the rationality of such an irresponsible move. Using the homeownership percentage that was established at the end of a highly speculative period in our history would be reckless at best; even the current 65.5% is too high for the existing economic environment. If the government continues with the policies it has been embarked on, one would expect that a more rational percentage range would be at least ten percentage points lower. The current administration has given no indication that it is willing to take the actions necessary to correct the problems in our economy. If the electorate fails to understand the nation’s plight, one can count on going into another deep recession this year, and the Federal Reserve is not going to be able to preclude it.