By Liz Enochs
September 8, 2011
President Obama Thursday outlined a plan to stimulate the U.S. economy and revitalize the job market through a combination of spending and tax cuts.
The proposal, which various news reports calculated could cost anywhere from $300 billion to $447 billion, would slash payroll taxes for small businesses, fund infrastructure improvements at 35,000 public schools, and extend unemployment benefits.
The president touched on housing briefly in his address to Congress, saying his administration will work with federal housing agencies to help more homeowners refinance their mortgages. That step “can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices,” he said.
Several economists called the refinancing proposal short on specifics, while housing advocacy groups said the president needed to go much further to help the housing market.
“I think that one’s still a work in progress,” said Mark Vitner, a senior economist at Wells Fargo (WFC: 23.93 -1.93%). “That’s not the bold stroke that I want. It’s not just refinance; we want people to be able to sell their homes.”
Anthony Sanders, a professor of real estate finance at George Mason University’s Mercatus Center, called the president’s proposal a repeat of the ideas in his first stimulus speech — “infrastructure, tax credits, teacher bailouts and tax the rich.”
He noted that the refinance plan included no details and raised concerns about the proposal to create a national infrastructure bank. “Having an opaque infrastructure slush fund is supposed to make me feel good?” he commented on his blog. “How about just have the (Department of Transportation) choose the projects and make it public on their Internet site?”
On the other side of the fence, housing advocates praised the president’s proposal but pushed for more aggressive action to help distressed residential real estate markets.
The president’s refinancing proposal “could help some of the millions of underwater homeowners, but more is needed — particularly principal reductions,” said Dory Rand, president of the Woodstock Institute, a Chicago-based research and advocacy group for low-income communities, in an email.
“Rehabbing homes and businesses in communities hard hit by foreclosures is important, and I was happy to hear the president acknowledge this,” she said. “The most important thing, though, is to stop more foreclosures from happening through a mandatory principal reduction program and strict enforcement of procedures to end the ongoing robo-signing scandal.”
The Greenlining Institute, a Berkeley, Calif.-based research group, echoed those concerns. “We’re glad (President Obama) addressed tax fairness, but we're less convinced that the tax cuts will actually create jobs,” said Executive Director Orson Aguilar in a statement.
“In any case, these actions by themselves won’t be enough,” he added. “To get the economy moving forward, we simply must address the millions of people in danger of losing their homes to foreclosure. This massive shadow inventory is a dead weight on the housing market and the whole economy, and we can’t ignore it.”
Vitner suggested a plan, perhaps backed by the Treasury, that would allow people to sell their homes even if they are underwater on the mortgage and take the negative equity with them.
A lot of people can’t take a job they would like to take, because they can’t sell their house, they can't afford to sell their house,” said Vitner. “The mobility of labor is one of the biggest comparative advantages the United States has.”
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