An alternative
I was reading an article and stumbled across the phrase “a $1.5 trillion war in Iraq”. One and a half trillion dollars, in essence, pissed down the drain. And very little to show for it except a shitload of murder and mayhem.
It struck me that in terms of cold dollars alone, that spectacular blunder has pretty much caught up with Dubya’s $1.6 trillion tax-cut (implemented a few months prior to September 2001 and now a forgotten, minor footnote in a dire presidency).
But lately I’ve also been reading a bit about the US sub-prime credit crisis that’s been giving the global economy a serious kicking. It turns out everyone’s in a tizz about a 600-800 billion dollar hole in a total housing debt of 1.9 trillion.
You see where this is going, don’t you?
I may as well make it explicit… while it’s throwing trillions around, why doesn’t the US government declare a Housing-Debt Amnesty? How about this… the treasury pays 100,000 dollars off every single mortgage*. No means testing, no favouritism, just a flat payment. For most low-income homeowners (i.e. the ones currently defaulting in large numbers), 100k will cover the entire loan leaving them outright owners of their property. For everyone else, it’ll ease the burden. What a gift to the poor homeowners of America! The president who did that would end up on Mount Rushmore.
I’m sure a passing capitalist can explain why it’s a bad idea.
Incidentally, I’m well aware that the really poor people aren’t homeowners at all, and this doesn’t help them. I’m not suggesting this is a solution to poverty. I’m just suggesting it’s a better way to spend a trillion and a half dollars than blowing up another country, or tax breaks for the wealthy. Oh, and before you complain about banks getting paid public funds… I’m making a value judgement here: it’s better to give public money to banks in return for houses for poor citizens, than to give public money to Blackwater in return for killing foreigners.
I’m not a passing capitalist, but I’d wager that suddenly paying off that many long-term loans would be economically disastrous given that enormous financial institutions owning huge wodges of other people’s debt is apparently what makes the world keep on turning.
January 30th, 2008 | 1:51pm
by Rochenko
I’m not so sure Rochenko. As much as I enjoy feigning total ignorance of the subject to annoy economists, I have actually read a fair bit of theory. And here’s my thing… it all seems quite arbitrary to me. That’s the bit that economists either don’t understand, or else deny the relevance of. Economics is a retrospective explanatory tool. A model of the past. It says nothing real about the future.
It seems to me that modern capitalism, and the economic system we currently inhabit are merely a set of rules (mostly coded into law) designed to ensure an accumulation of capital in the hands of a tiny minority and a standard of living just high enough to stave off revolution in the rest.
I say, “break the rules”. Rewrite them completely. Pay off the housing debt and see what happens. See how the system adapts. If it doesn’t, then replace it with something that will.
Giving 15 million of the poorest American families their own home and freedom from debt would be the ultimate expression of “Government of, by and for The People”. If global capitalism has a problem with that, then global capitalism sounds pretty damn Un-American to me.
January 30th, 2008 | 2:14pm
by Jim Bliss
Hmm… I realise I’ve just made the transition from “a better way to spend a trillion and a half dollars” to “let’s tear down the whole edifice and erect something new” without so much as batting an eyelash.
Sorry about that. Moving targets are harder to hit, dontchaknow?
January 30th, 2008 | 2:33pm
by Jim Bliss
Sorry, I should have enclosed ‘economically disastrous’ in quote marks…
Absolutely agree on the retrospective and justificatory nature of the dismal science…it’s no more a predictive discipline than geology is. Which is why stories like this about trading algorithms that base themselves on past data are instructive.
January 30th, 2008 | 2:34pm
by Rochenko
[…] Jim’s Modest Proposal for saving the USA from itself, I came across this satisfyingly splenetic bit of crystal-gazing […]
January 31st, 2008 | 10:35am
by Smokewriting - Another Fine Edition of Me
Interestingly enough, there’s a bit in the Torah about cancelling debts every seven years. Google for “hashmatat kesafim”.
It’s more complicated than that, clearly – the amnesty seems to work both ways by way of having the courts take on debts (sound familiar?). Still, weird to think scholars thought about these problems thousands of years ago, yet we choose to ignore them, for the most part.
February 5th, 2008 | 10:49am
by Neil