A Bailout for the Little Guy

I have always dreamed while working out if only I could immediately see the results of working out for two years before I did anything! If I could be immediately granted 30 pounds of weight loss and toned muscles and in exchange for this I would have to agree to workout regularly for the next two years. Essentially if I was fronted the results of working out for two years and if at any point during those two years I didn't make good on my workout plan I would go back to being Mr. Flab. I know this would make me much more likely to do the work. Well unfortunately for me this is not available to those of us that struggle to get into the gym on a daily basis but for your average consumer almost anyone can sign this kind of contract. Yeah, it's that little piece of plastic you have in your pocket. Unfortunately for most of us, you'll actually end up doing four years of work to eventually get what you could have gotten in only two years if you had bothered to save first, spend second. Have no fear though! Thanks to Uncle Sam we can now get fronted the cash we need without any cost (sort of).

Right now there is a nice little tax perk to anyone who goes out on a limb an purchases their first home. A program that was started in July of 2008 that is set to expire at the end of June is essentially an interest free loan of $7,500. The way this works if you are fronted the $7,500 in exchange for agreeing to pay Uncle Sam an extra $9.61 cents a week.....for the next fifteen years. It's actually structured so that you pay $500 back every year when you file your taxes. Since most of us get a tax return anyway you'll hardly miss it. Pile on top of that the fact that you'll be paying a lot of interest in the first few years of the loan and all of that is tax deductible and you really are getting a sweet deal. Bailout 2.0 which is making its way through congress right now is set to increase this to bailout to $15,000 and extend it to everyone, not just first time home buyers. By the way, the estimated cost of this ENTIRE program is only 19 Billion. I say only because it accounts for only 2.1% of the bailout package. Now I'm not a huge fan of just throwing money to anyone who can open their eyes wide enough to catch it but if Uncle Sam is determined to toss money around, it's nice to see the little guy get some. My favorite part about this legislation is probably the fact that I may actually end up being able to personally benefit from it. In my head I can actually see how something like this may work. In a downward spiraling market trying to find the bottom is like trying to catch a falling knife. Sure it's possible but very hard to do without getting hurt. Instead, what most people would prefer to do is let the knife hit the floor and then pick it up. Right now, the problem is, there is no floor! This is an incentive for people who are contemplating home purchase to get out there and start looking, making bids and getting into new homes. To me this SEEMS like it should help stabilize the market and help establish a bottom. It also doesn't give unequal treatment to people who were irresponsible and bought more than they could afford. This would give people a little bit of working cash to possibly get into a manageable fixed rate mortgage and stop some of the foreclosure mess. It also gives lenders a larger group of people they can possibly lend to since everyone comes into it with up to $15,000 even if they don't have anything! Instead of having to create fake documents so people can qualify for loans there may actually be people who can qualify all on their own! The fact that government can borrow so cheaply right now means this really won't cost that much, especially if people are required to pay it back. Also, when you take into account the breakneck pace at which the money supply is expanding (READ: inflation to come) the small amount people will be required to repay over future years will be inflated away and more than made up for by increasing wages and a recovering economy.

When you are trying to move a piece of rope from one place to another you don't try to push it. You grab it by the end and pull it where you want it to go. It looks like we may have finally gotten to the end of the rope and started to pull instead of pushing money into all these worthless insolvent financial institutions. We still have a lot of work to do and honestly we need to supply the credit to get the credit markets moving again but it's nice to see the rest of us might get a bone too! I don't know the real viability of this plan but at least we may get something out of this whole mess after all!

Breaking news story can be found here.

TRC