Saturday, November 19, 2011

A Radical Plan To Solve the US Housing Crisis

Every thinking person recognizes that the housing and unemployment crisis we are in is not easily solvable, with almost half of all homes under water, with new home construction at a standstill, and with home prices continuing to fall. Most people realize also that home construction is an important component of employment. We will not get out of the overall economic crisis we are in until the housing crisis is over.

I am a strict Constitutionalist, but I recognize that in time of war we need to do things that violate our Constitution. I also believe that people who work and save and plan should not have to support people who are suffering through their own folly or recklessness, but the housing crisis is bringing us all down; I am prepared to set aside my lifelong beliefs in the face of this catastrophe. I support a radical plan called ReMortgageAmerica, developed by an organization of the same name headed by an economist, Dr. Dennis Paulaha.

Although his plan is risky and smacks of socialism and almost unthinkable actions by the U.S. government, I believe it is the only way to avoid further catastrophe. We are seeing in the various “Occupy” movements the beginnings of violent revolution. Revolutionary thinking is needed to head it off. You can get more information about the plan at

“The Plan:

The US government offers every US citizen a 30-year mortgage at a 1% fixed rate of interest, with interest-only payments for the first two years. All financially qualified US citizens, not just those in immediate danger of default, would be able to finance a new or existing primary residence, with a $500,000 lifetime limit.

The reason for the plan:

Government programs have had a tremendous impact on big business. But the “trickle down” effect has not worked. Implementing this 1% mortgage rate for the people adds a “trickle up” boost to the economy because people will be able to spend and save more, and it is consumers who are the real job creators. The decline in net worth, wealth, and America’s standard of living will be reversed. Most important, the dignity and self-esteem of the American people that has been lost will be regained.

Why the plan will create jobs: It will let the people save and spend more.

When the US Government refinances a 4% mortgage at 1% and you pay only the interest for two years, it will cut the monthly payment on a $180,000 loan from $859 to $150 a month. That is an extra $709 a month! An extra $8,512 a year! For two years. Money you can save or spend. (Minus some additional taxes due to a smaller interest deduction.) After two years, if you have a 30 year mortgage at a 1% fixed rate, instead of 4%, your monthly payment on a $180,000 loan is $614 instead of $859. That is an extra $2,940 to save or spend every year for the length of the mortgage.

Why the plan will save homes:

It will stop home prices from falling.
It will stop people from walking away from “underwater” mortgages by making their mortgage payments less than rent, which will prevent many foreclosures and turn the housing market around. We believe this plan will increase home values, which will offset some of the financial losses experienced during the past years and help stop foreclosures.

Why the plan will eliminate the debt:

It will eliminate the federal debt in 10 – 15 years. This is a government loan program—not an increase in government spending—which means the money will be repaid. Plus, the economic expansion it generates will increase federal and state revenues while decreasing federal and state spending on unemployment and welfare. And taxpayers will have a smaller interest deduction, because they will pay less interest on their mortgages. Annual deficits will turn into surpluses of $1 trillion to $2 trillion a year, which will eliminate the $15 trillion debt in 10 to 15 years if all the extra money is put toward the debt and not spent by Washington.

The bottom line:

US citizens deserve and need this plan.
The American people who helped build this country deserve and need a plan like this—a plan that will help them directly while also stimulating economic prosperity, just like the GI Bill after World War II that gave returning veterans the opportunity to purchase a home at a low mortgage rate and virtually no down payment. In fact, the GI Bill is the model for this plan, because it was the GI Bill, not World War II, that ended the Great Depression and created the greatest era of expansion and prosperity in American history. Today, as then, the purpose of a plan focused on people and housing is not only to end a long-lasting recession, but to create prosperity that will last for decades.“


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