Barron’s / Homebuyers’ Handout — Worse Than Cash for Clunkers
October 23, 2009    Disclosures    POSTED IN  Personal FinanceEconomyTax & Estate Planning
EXCERPT: The $8,000 tax credit for first-time homebuyers is due to expire Nov. 30, but our solons in the Senate are looking to push back that deadline and possibly expand the credit to $15,000 to most homebuyers, not just newbies. Each additional home sale generated by the $8,000 first-time homebuyers’ tax credit actually costs the government $43,000…the tab for a possible one-year, $15,000 tax credit for all home buyers  could cost the Treasury $73.9 billion.”

COMMENT: The article states that it is estimated that 85% of homebuyers that will get the $8,000 tax credit would have purchased a home even if the credit had not been available. The real danger in any federal stimulus is that a program is too wide spread and as a result is not as stimulative as Congress would hope it to be. Another unknown at the time of passing a stimulus bill is the reaction of the public to the measure. If the price tag is estimated at $15 billion then Congress was off by a factor of 2 as to the popularity of the program. Ultimately the price tag could reach $30 billion. This summer the auto cash for clunkers bill was passed by Congress and included up to $1 billion for the program, only to extended it to $3 billion a month later. According to the LA times new car sales were 23% less this September, after the program ended, then they were for the previous September. The real question becomes, are we bringing future consumption forward?

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