The Bush Cut Extension Is The Wrong Kind Of Stimulus To Facilitate An Economic Recovery

This is a copy of a letter I send to President Obama If you want smaller deficits and lower taxes or your mortgage is underwater or your  mortgage is being foreclosed upon, you need to read this letter.

Dear President Obama

Since 1982, when we had the other Great Recession, I have been concerned about how the middle class people have been treated to control inflation and inflation psychology. I have been trying to change our guiding policies since then to avoid another Great Depression. I failed to accomplish what I wanted to do. We are now in another Great Recession, and too much unnecessary misery has been created. 

I know that all the numbers tell us, and the Federal Reserve believes we currently do not have a problem with inflation and inflation psychology. But, look at what the prices of gold and commodities are doing. They are all going up, which will mean higher prices in the future for almost everything. People do have inflation, and dooms day expectations. 

When the Fed raises interest rates by tightening credit, this reduces demand from the bottom of the economic ladder by increasing unemployment, bankruptcies of small businesses and foreclosures. I believe higher interest rates are the wrong tool to use to control inflation and inflation psychology. It is a major flaw in our economic policies. 

I believe we should use the income tax to maintain the value of our money. When inflation begins to occur in our economy the income tax should change automatically based on the inflation rate as outlined in my articles on my web site. This change in our guiding policies will reduce the excess demand in our economy from the top of the economic ladder and make our economy more productive and efficient. It will allow normal production and consumption to continue while the income tax controls inflation and inflation psychology. There is no reason for so much misery to be created in the working class to correctly guide our economy to create jobs, and maintain the standard of living for our citizens. 

Please read the following  article, and go to my web site to read my other articles, which go into greater detail on how to stimulate the economy to create jobs without using deficit spending policies. 

Thank you sincerely for your effort to improve the middle class families lives, but I think you are getting the wrong advise from your Wall St. and Federal Reserve member bank connected advisers. The advisers that support Keynesian economic policy are also ill advising you.

Leonard C. Tekaat 

P. S. If you do not find the article I posted, The Bush Cut Extension Is The Wrong Kind Of Stimulus To Facilitate An Economic Recovery, you will find this letter and the article on my web site at www.recoverygovforthepeople.wordpress.com/

The Bush Tax Cut Extension Is The Wrong Kind Of Stimulus To Facilitate An Economic Recovery!

The Bush tax cuts are in existence now. Have they done anything to improve the economy for Main Street, and the middle class in the last two years? The unemployment and foreclosure rate have gone up in the last two years. We have increased our national debt by trillions of dollar to solve these problems, and they have only gotten worst. If the tax cut does not expire for people with an income of $250,000.00 the deficit will increase by more than 850 billion dollars. If the first deficit spending stimulus recovery plan failed to bring down the unemployment and foreclosure rate, which among us is insane enough to believe a second deficit spending stimulus recovery plan, almost as large as the first one, will result in a different outcome. 

There is a better way to increase the disposable income of the middle class, than to extend the Bush tax cuts to the upper income people. 

When there is dooms day talk or inflation expectation in the economy, as there is currently, the people in upper income levels do not create jobs. Most of them move their money into protective positions, and make unproductive investments, in gold, inflation hedges, and commodities “investments”, causing more increases in food prices, and production materials.    

We can help the middle class and the economy (reduce unemployment and foreclosures) more by doing the same thing they did in the Great Depression. In the Great Depression the government created a new mortgage that fit the then current economic conditions. It created the Home Owners Mortgage Corp., which created the 30-year fix rate mortgage. The new mortgage terms allowed people to stay in their homes. The banks did not need to foreclose on the homes. People that lose their homes to foreclose can create more government dependent people and a larger deficit. When the HOLC closed down in the 1950s it returned the excess funds it had collected to the U S Treasury. It was a very successful program.    

I have created a mortgage with terms that fit the current economic conditions. www.recoverygovforthepeople.wordpress.com/ Unlike the Home Owner Mortgage Corp., it is unnecessary for the government to purchase the bad and underwater mortgages. The financial institutions and investors should be willing to restructure the mortgages with the terms that are outlined on my web site, instead of foreclosing or short selling the homes. 

The mortgages do not need to be refinanced. When you restructure a mortgage, you only need to send the borrower a modification letter with the new terms. The new mortgage terms should be offered to everyone, even the people whose mortgages are underwater.    

The reason this mortgage would be good for the economy, the middle class, the government, investors and the financial institutions is that it will increase a large number of people’s disposable income, all at the same time, similar to a decrease in tax rates, but by a much larger amount, and without cost to the taxpayer or the government.   

 With an increase in disposable income, extended over a long period of time, the middle class will restart the economy with increased economic activity. Businesses will see demand pick up, and hire the unemployed. This will reduce the unemployment rate, which will lower the foreclosure rate.   

 With the new mortgage terms the foreclosed inventory will be sold very quickly. With the foreclosure inventory eliminated home prices will stabilize and then slowly rise.

This will maintain the tax base for state and local governments and their financial condition will improve. They will not need further assistance from the Federal Government, which will help lower the federal deficit. 

I do not want the tax cuts extended for anyone that has over 250 thousand dollars of  income. The deficit must be reduced. The middle class cannot afford an increase in their taxes. If people with over $4500 per week income do not pay the 4.6% increase in their tax rate, the middle class, you and I will have to pay more taxes in the future. Tax increases on the middle class will depress normal economic activity further.

Spending should be cut after the economy is operating more efficiently with new guiding policies.  

With the federal government increasing the amount it is borrowing, interest rates will increase and suppress our fragile recovery.    

There is a second part to this recovery plan that I explain in my articles posted on my site. It is more important than the first part. It helps prevent the creation of another Great Recession. 

Leonard C. Tekaat 12/1/10 economysflaw@yahoo.com JOIN ME ON FACEBOOK    Join R.E.B.L.E.S We support the American dream of a better future for our posterity, the middle class, and  small businesses www.facebook.com/leonard.c.tekaat/ 

Leonard C. Tekaat is a retired economic analyst and an economic scholar, small businessman, investor, financier, and author. He has over 40 years experience in the financial world. He has a California teaching certificate.  He is the Chairman of a special Committee for Economic Reform and A Better Economic Future. 

If you want smaller deficits and lower taxes or your mortgage is underwater or being foreclosed on, please e-mail or send a copy of this article and letter to your representatives in Congress, Rep. Kevin McCarthy, Senator Barber Boxer, and Senator Dianne Feinstein, and President at www.WhiteHouse.gov/