At the risk of being hated, we have brought much of our problems on ourselves. Too much spending and not enough saving would be the theme for many, if not most, Americans. We could use a few lessons from the WWII generation and “waste not, want not”. I am not casting dispersions upon others but place myself firmly in the middle of this group of people who have spent first and worried about how to pay for it later. Now is the time to get it together. If the government wants to help us, I have a (responsible) plan. If not, we got ourselves into this mess. It is up to us to get ourselves out.
First, the way that government could help. Rather than spend hundreds of billions of dollars on special-interest spending, maybe relief targeted directly at homeowners could alleviate some of the problems we are facing. Interest rates are very low by historical standards, but so many people are upside-down or have too little equity in their homes to take advantage of this.
I would suggest that the government provide a way for homeowners to refinance at the lower rates for either a 30- or 40-year loan. By lowering the rate and extending the loan period, many homeowners could avoid foreclosure. To sweeten the deal for mortgage lenders, the government may offer a subsidy to qualifying borrowers that would pay fees to the lender ($2,000 per refi perhaps??). Even if a million homes were refinanced under the plan, the government would be on the hook for about $2 billion, which is way less than what we are facing right now. Maybe half of the people facing foreclosure, or more, could afford to stay in their homes. This would have the derivative effect of stabilizing home prices. Other industries (construction, home retail, etc.) would benefit as well. The plan may pay for itself. That is up to the real economists to determine.
Second, the way we can help ourselves. Nobody wants to hear it, but we need to show some personal responsibility. That means saving more and spending less. It means making decisions about what we really need versus what we want. Buying a car that is less expensive or gets better mileage, putting off the vacation this year – everyone has their own list, but we need to get realistic about what we can afford.
The bottom line is that I didn’t ask for the government to bail me out. If they are going to do it anyway, please let it be with a well-thought plan. Either way, the real bailout comes at home by making the right decisions.
