Stimulas_Package

The United States Government has done a number of programs to help to improve and stimulate the economy. A couple of these stimulus packages were specifically designed to help failing industries; for example, Cash for Clunkers, and the Housing Stimulus package. There is also the HR3221SEN program that worked to help the housing industry and much more. These government stimulus programs have been successful so far, but how long can the government stimulus programs last without having a negative effect on the economy' Breakdown of HR3221SEN HR3221SEN was sponsored by Speaker of the House, Representative Nancy Pelosi. Provision HR3221SEN, signed by the president July 26, 2008, was designed to increase limitations on mortgage lending, stimulate home buying, provide assistance to those facing foreclosure and increase the national debt limit by $.8 trillion, from $9.82 to $10.62 trillion. The provision, HR3221SEN, also known as the “Housing and Economic Recovery Act of 2008,” has become very well known but not for it is name. The HR3221SEN is very well known for what it has done for the economy of the USA and around the world, especially for providing homebuyers with $8,000 tax credit known as the Homebuyer Tax Credit. Something not commonly known include a $6,500 Tax Credit for those resident home-sellers who have put their house on the market or sold their home before April 30, 2010. The first thing that ‘HERA’ did was to increase FHA loan limits for Fannie Mae and Freddie Mac, which provided the resources needed to approve more government loans to home buyers. In addition, the government made room for a Neighborhood Stabilization Program (NSP) that provided $2,000,000,000 additional funding to help communities normalize housing stability. These funds were to be distributed through grant applications for the use of “purchases, manage, repair and resell foreclosures.” These funds were to be provided in the highest priority, those families whose incomes were below “120% the area median income.” In this way, many Realtors have been able to provide valuable service and decrease job loss. Regardless of purchasing or selling, all homeowners are provided additional property tax deductions under HERA (HR3221). With the new provision, homeowners allow deductions of up to $500 or $1,000 for married couples filing jointly; however, deductions must be made through utilizing standard deduction practices and not through itemized. Foreclosures are increasing in an astonishing rate. To combat this, HERA sponsors the FHA with a foreclosure rescue of “problematic subprime loans. Lenders would write down qualified mortgages to 90% current appraised value.” Borrowers, in return, would give 50% of all equity built in the future to the government. Many other programs were created with the passing of HERA. VA loan limits were increased; modifies Risk-based pricing for the FHA; placed Fannie Mae and Freddie Mac in conservatorship; authorized the issuing of $10 billion in Bonds to be used to assist in refinancing homes; establish a Trust Fund filled with the profits obtained through the conservatorship on Fannie Mae and Freddie Mac, designed to cover the cost of defaulted loans; revitalization funds; optimize the Low Income Housing Tax Credit; tighten Loan Originator Requirements; and modifies/removes the $250,000/$500,000 exclusion to gain tax on the principal residence. Cash for Clunkers The Car Allowance Rebate System (CARS), commonly known as "Cash for Clunkers," was a wasteful $3 billion U.S. federal program intended to provide economic incentives to U.S. residents to purchase a new, more fuel-efficient vehicle when trading in a less fuel-efficient vehicle. The program was promoted as providing stimulus to the economy by boosting auto sales, while putting safer, cleaner and more fuel-efficient vehicles back on the roadways.  The Cash for Clunkers program officially started on July 1, 2009, but the processing of claims did not begin until July 24, 2009. The program ended on August 24, 2009 as the appropriated resources were exhausted. According to estimates of the Department of Transportation, the first initial $1 billion dollars appropriated for the system was exhausted by July 30, 2009, well before the anticipated end date of November 1, 2009. In response to the high demand Congress approved an additional $2 billion dollars to be added to the program (“What is the Car Allowance Rebate System'” 2009). On August 26, 2009 the Department of Transportation reported that the Cash for Clunkers program resulted in 690,114 dealer transactions submitted requesting a total of $2.877 billion dollars in rebates. At the end of the program Toyota accounted for 19.4% of sales, followed by General Motors with 17.6%, Ford with 14.4%, Honda with 13.0%, and Nissan with 8.7%. It led to a gain in market share for Japanese and Korean manufacturers at the expense of American car makers, with only Ford not taking a significant hit. The Department of Transportation also reported that the average fuel efficiency of trade-ins was 15.8 mpg, compared to 24.9 mpg for the new cars purchased to replace them, translating to a 58% fuel efficiency improvement (“What is the Car Allowance Rebate System',” 2009). A study published by researchers at the University of Delaware concluded that for each vehicle trade, the program had a net cost of approximately $2,000, with total costs outweighing all benefits by $1.4 billion dollars. Another study by researchers at the University of Michigan found that the program improved the average fuel economy of all vehicles purchased by 0.6 mpg in July 2009 and by 0.7 mpg in August 2009 (“"Cash for Clunkers Wraps up with Nearly 700,000 car sales and increased fuel efficiency, U.S. Transportation Secretary LaHood declares program”) ("wildly successful,” 2009). There is a few studies published after the Cash for Clunkers program finished. These studies just go to show that this program cost way more money than it was suppose too. At least the government was able to get the 58% in fuel efficient cars back out on the roadways, seeing how that was what they were trying to achieve. The Housing Stimulus Rebate The housing stimulus is a tax credit that helped stimulate the housing market. Housing sales spur the economy in more ways than just generating mortgages. There are many other large industries that are involved with home sales. The people that purchase a home under the tax stimulus may also buy different items; for example, new furniture, house landscaping, or remodeling, these are just a few new items that help all other areas of the economy. One needs to think of the big picture on this issue and look at the long term benefits that far outweigh the negative from the tax credit. What people need to know is without the housing stimulus the United States housing market would see both a substantial fall in sales from where the United States housing markets are today, continued price declines in most of the housing markets and that the tax credit did spur sales to first time home buyers. The housing stimulus also helped current home owners to make changes to their mortgages by refinancing and lowering their monthly payment. Having the credit will assure that a larger number of buyers purchase homes early, which will stimulate the economic recovery. Trouble is if the United States housing market is unable sell new homes the United States will see a huge number of new layoffs not a positive situation going into the future. At this point with unemployment as high the United States has seen in a long time, one thing that is needed is for people to be encouraged to have confidence in the American dream. This could be the perfect reason to start to extend the credit that everyone needs. Conclusion In conclusion the government stimulus programs have been successful at stimulating the economy and helping to save the United States auto industry, and the housing market. But these programs can last for only so long before the government will need to take a step backward and let the economy run on its’ own without any outside stimulus packages. Once this happens the economy will be running, the way most people think it should, with little or no government involvement. References (2008). Summary of Key Provisions of HR3221 - The Housing Stimulus Bill, Re trieved from http://www.realtor.org/government_affairs/gapublic/hr_3221_key_provisions (2008). HR3221: Housing and Economic Recovery Act of 2008, Retrieved from http://www.govtrack.us/congress/bill.xpd'bill=h110-3221&tab=summary (2008). HR3221: Housing and Economic Recovery Act of 2008, Retrieved from http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home#fannie "Cash for Clunkers Wraps up with Nearly 700,000 car sales and increased fuel efficiency, U.S. Transportation Secretary LaHood declares program "wildly successful. (2009). U.S. Department of Transportation, (), . Retrieved from http://www.dot.gov/affairs/2009/dot13309.htm. Federal Housing. (2009). Home Buyer Tax Credit. Retrieve from http://www.federalhousingtaxcredit.com/ What is the Car Allowance Rebate System' (2009). "Car Allowance Rebate System, (), . Re trieved from http://www.cars.gov/