Spending our way out of a spending-induced problem. Huh?

Barack Obama yesterday:

President Barack Obama outlined major new government stimulus and jobs proposals on Tuesday, saying the nation must continue to “spend our way out of this recession.”

Without giving a price tag, Obama proposed a package of new spending for highway, bridge and other infrastructure projects, deeper tax breaks for small businesses and tax incentives to encourage people to make their homes more energy efficient.

“We avoided the depression many feared,” Obama said in a speech at the Brookings Institution, a Washington think tank. But, he added, “Our work is far from done.”

That makes about as much sense as this:

Area partygoer Joe Sixpack outlined major new beer and whiskey purchases on Tuesday, saying that the party must continue to “drink itself sober.”

Brushing aside concerns about liver poisoning, Sixpack proposed a package of excessive new drinking of Budweiser, Coors, other cheap alcohol, and harder mixed drinks in a variety of drinking games to encourage partygoers to get totally plastered.

“We avoided the hangover many feared,” Sixpack slurred in a half-coherent rant. But, he added, “Our work is far from done.”

What got us into this mess? Out of control spending on every level—individuals, corporations, and government all spending more and more and more, assuming that future gains would somehow magically make everything work out.

So now, in order to fix things, we’re going to… spend… more?!?

Oh, and if Obama’s nonsense sounds a little familiar, it may be because we’ve heard similar talk before…

While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States – that is, prosperity.

President Herbert Hoover, May 1, 1930 (i.e. – 1 year into the 10-year Great Depression)

I can’t help but feel we’re going to “rapidly recover” in the same way today.

Hat Tip: Karl Denninger

I’d like to briefly address a few of the comments that are coming up on this post.

First is the notion that somehow since the subject of this site is real estate, discussing politics should be off-limits. In an ideal world yes, real estate and politics would be totally separated. Unfortunately, that is far from the case today.

With the capital gains tax exemption for home sales, mortgage interest deduction, home equity loan interest deduction, deductability of points paid on mortgage, $8,000 tax credit for first-time buyers, Fannie & Freddie lending, FHA lending, government manipulation of interest rates, etc… real estate and politics are inextricably intertwined. It is inevitable that politics will come up once in a while on a blog dedicated to real estate.

So far this year, a whopping 25 out of 379 total posts (not counting open threads) have been related to politics. In other words, 93% of posts here are apolitical. Considering how intertwined politics is with real estate, it doesn’t seem unreasonable that we would bring politics into the discussion 7% of the time.

Second, name-calling (e.g. – “Obama is a fascist!” or “you just want to see the economy fail”) is pointless and counterproductive. Let’s drop the nonsense implications that anyone who disagrees with your politics must want bad things to happen to the country.

You’ll notice that nowhere in my posts or comments have I accused any politician of acting out of a secret desire to intentionally destroy the economy. I’m operating on the assumption that they genuinely want what’s best for America, I just strongly disagree with their ideas of how to get out of this mess.

How about let’s start from the assumption that we all want what’s best for America? We obviously have disagreements on the best methods, but why don’t we discuss those methods instead of jumping into name-calling and tired political stereotypes?

[Addendum 2]
Thought I’d add this comment that I posted below.

Allow me to at least briefly explain why I think [Obama’s comment] is relevant [to real estate].

The comment that we must “spend our way out of this recession” to me is indicative of an overall strategy of spend, spend, spend by the administration that demonstrably includes moves such as the $8,000 tax credit, which is estimated to have cost $15.2 billion through November (compared to an original estimate of just $6.6 billion).

If the government’s plan is to “spend our way out,” who is to say we won’t see even more home buying incentives, spending more money we don’t have to entice people to spend money they don’t have on homes that are still overpriced?

The strategy of spending loads of borrowed government dollars in an attempt to get people and corporations back into their debt-fueled free-spending bubble habits is a dangerous one that is likely only to lead to further problems down the road, including a possible re-inflation of the housing bubble.

That’s why I think Obama’s statement is relevant for discussion here.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

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