Improving the General Economy Will Improve the Real Estate Markets
It doesn’t take an economics guru, like Milton Friedman, to understand, that the general economy must improve before the real estate markets are able to improve. It naturally occurs, that when general economic conditions are sinking deeper into negative territory (as evidenced by many factors including a national unemployment rate of 9.8% and rising), that there is going to be little buying activity taking place in all sectors of the real estate market, especially in the residential market. Let’s face it, there aren’t too many folks with either the capital, the cash flow (in the form of a reasonably secure employment situation), or the confidence in the future of the economy that are either able or willing to risk buying a home in the uncertainty of the present economy.
As for the very important “confidence” component, per the September 2009 Consumer Confidence Survey of current conditions, “Those claiming business conditions are ‘bad’ increased to 46.3 percent from 44.6 percent, while those claiming conditions are ‘good’ increased to 8.7 percent from 8.5 percent. Consumers’ appraisal of the job market was also less favorable. Those claiming jobs are ‘hard to get’ increased to 47.0 percent from 44.3 percent, while those claiming jobs are ‘plentiful’ decreased to 3.4 percent from 4.3 percent.” Seems like there’s not a whole lot of confidence being created by the so-called “economic stimulus” implemented by the present administration. (Go to http://www.conference-board.org/economics/consumerConfidence.cfm for the complete press release on the Sept 2009 Consumer Confidence Survey.)
As for how to get people back to work and create more wealth for consumers to spend on everything from furniture, to cars, to homes, we only have to look at the virtually identical actions of two recent presidential administrations; the Kennedy administration in 1961, and the Reagan administration in 1981; they both substantially reduced income tax rates on individuals. And, in both cases, the result was almost immediate, as well as creating a substantial and sustained economic growth.
The success of these income tax reductions resulted from putting more cash in the hands of every working citizen, especially those in the higher tax brackets (90% for top earners when Kennedy’s took office, and 70% when Reagan took office). In turn, more and more citizens purchased more and more products which required businesses (particularly small businesses) to hire more and more workers to produce and ship those products being bought by the citizens with the extra cash they had in their pockets. It was also during these times when there were great increases in the construction of homes and commercial buildings, and relatively low rates of national unemployment.
You should also know, that as a result of the Reagan tax cuts, the federal government nearly doubled the amount of tax revenue it collected in less than 8 years.
Although this tried and true method of stimulating a stagnating economy has a proven favorable historic track record, unfortunately, it appears that the economic concept of the present presidential administration is more akin to that of failed socialist economic models whose philosophy is to confiscate as much of the productivity of the American citizen as possible through taxation, regulation and massive government expenditures to takeover major sectors of the national economy, the money for which is being borrowed and printed by an obviously out-of-control federal government.
The consequence of that strategy, is the removal of economic power from the private citizen and private business, and the transfer of that economic power to the federal government, and a burden of debt upon the US taxpayer for generations into the future that requires substantially higher taxes to repay.
As a result, there is virtually no reasonable probability of any meaningful improvement in employment, or general economic growth; (and as we’ve seen) this strategy has caused and will continue to sustain an already high, nearly double-digit unemployment rate. These events can only leave the real estate markets floundering in a continual state of negative events, including perpetual foreclosures and the continued erosion of value.
Sadly, when viewing the trend of events that are resulting from the combination of the undesirable economic strategy of the present presidential administration, along with its confiscation of private industry, its massive wasteful spending, accumulation of trillions in debt, and its interference with private investment contracts, there can be little doubt as to why there is no economic growth. Nor, can there be any wonder as to why there is a palpable atmosphere of no confidence in the future of the US economy on the part of the typical citizen, business owner, and many investors.
All is not lost; at least not yet.
Positive change is certainly possible. But, not without the active involvement of every citizen.
If “we, the people” take action, by continually contacting our congressional representatives and senators either in person, by phone, by fax and/or by email, and continually express our displeasure with the present policies that are damaging our economy, and if we financially support candidates, either new-bees or incumbents, that we believe will promote and support legislation to lower income tax rates, reduced government regulation, and a prevent government from confiscating private businesses, we can certainly improve our economy and the future of our children.
It’s up to each and every one of us.
So, what are YOU going to do today to help to improve our economy?
