Obama, probably the most middle-of-the-road candidate on mortgage reforms, offers help directly to the people. His method is more costly, but could be effective.
The Democratic race continues to be fierce, while the Republican nomination is already decided. One of the hot issues being thrown around the election this year has been the mortgage crisis. Candidates have proposed a variety of economic stimulus packages and mortgage reforms, but just who has the best mortgage plan? Looking at the issues, it’s simply too hard to tell.
Barack Obama
Barack’s approach is straight down the middle of the road. While Hilary wants to open the barn door and McCain wants to shut it and ride out the storm, Barrack wants a little bit of both worlds. He offers an immediate $250 tax cut for workers and an additional $250 if the economy continues to decline. By providing $75 billion in aid upfront and the promise of $45 billion more if the economy worsens, he hedges his bets. Additionally, Obama plans to set up a $10 billion reserve for families facing foreclosure and a $10 billion fund for local governments hit the hardest by the housing crisis.
Economic Stimulus Plan Pros
Obama’s plan gets cash to the people who need it most and promise more cash in everyone’s pockets. While this does not specifically speak to the plight of the homeowner in distress, it could have a positive effect on the housing market as a whole. While $250 does not seem like much, unexpected cash inflows tend to make people feel better. Sometimes this is all the economy needs to turn itself around. At a cost of $35 billion dollars, this strategy is quite expensive and quite risky, but it puts money where it counts most, in the hands of the people.
Setting aside another $10 billion in reserves for foreclosed families additionally gets money where it is needed most. While many people will balk at the $10 billion price tag, it’s actually a very small sum in terms of governmental spending. Remember, the US currently runs a deficit of over $4 trillion.
Economic Stimulus Plan Cons
Barack’s plan gets the most money in the hands of the people, but it is simply too rich. At a price tag of $75 billion upfront and a follow on investment of $45 million, the government could be looking at spending $130 billion dollars on the housing crisis. That is a lot of money for most taxpayers to stomach. While they can take some solace in the fact that they could possibly get another $500 in free money, it will still mean higher taxes.
Another issue is risk. Barak’s plan will only stimulate the economy and the mortgage market if people feel more confident and start spending their refunds and tax breaks. Without a swing in consumer sentiment this plan will be a very expensive mistake. Struggling homeowners will definitely benefit from this plan, but the broader housing market is still a toss up.
