Biggest problem facing the economy over the next few years?

[Dawgs]

Poll question: Biggest problem facing the economy over the next few years?

If other, please list only one.

[slackmaster]

1. State and federal budgets, out of balance

The Bandini hasn't yet hit the Westinghouse on that, but it's coming for sure.

Home values and foreclosures will just work themselves out, as they always do.

[Dawgs]

3. "Home values and foreclosures will just work themselves out, as they always do."

We have never seen anything like this, so what does "as they always do" mean?

[slackmaster]

4. I've seen several cycles. This one is deeper than most, but it's not unprecedented.

There's nothing fundamentally different about it compared to other boom/bust cycles.

In some ways we're a lot better off than some past situations, like the early 1980s when interest rates were astronomical. The 30-year fixed rate hit about 18% in 1981.

http://mortgage-x.com/trends.htm

People are going to be very upset when states like mine (California) start making drastic cuts to service levels. People are probably not going to vote to maintain the current "temporary" hikes in income and sales taxes.

[Dawgs]

11. I think we're going to have to disagree on this one.

I know of people that are underwater over $50k on their homes (some over $100k). And I'm talking about lower middle class folk. These home prices will not come back.

Totally different apple than interest rates.

[slackmaster]

20. Being underwater on a house is not a critical problem unless you really need to sell it

Never is a long time. Prices will recover eventually, if only from inflation.

[ProSense]

12. The crisis isn't simply about high rates.

The foreclosures and housing prices are a real drag on the economy.

This is by far worse than the past cyclical downturns, and the fix isn't going to be easy.

It's interesting to see this claim:

Private Mortgage Modifications Were Double Obama Program in 2010

<...>

Loan servicers including Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. made 1.24 million modifications through proprietary programs in 2010, according to a report today from HOPE NOW, a coalition of more than three dozen lenders. The government’s Home Affordable Modification Program, or HAMP, had 512,712 permanent loan adjustments, the group said.

<...>

So three of the biggest banks averaged about 400,000 modifications compared to the roughly 500,000 via the government program.

None of this has solved the problem.

[slackmaster]

19. There is no "fix" other than more private-sector jobs. It's just going to have to work itself out.

:hi:

[ProSense]

25. Jobs aren't going to fix the foreclosure/mortgage crisis.

There are people losing their homes and walking away from their mortgages who have jobs. In fact, some of those walking away are rich.

[slackmaster]

26. The "losing their homes" part is what's going to have to work itself out.

Some will lose their homes by choice, others by circumstances beyond their control. Eventually it will all come out in the wash.

Every home that is lost to foreclosure ends up on the market, often at a lower price than the person who lost it paid. In every heartache, a potential dream home.

[ProSense]

27. "Every home that is lost to foreclosure ends up on the market"

Seriously, that's not a solution. That's the free market will work it out: So what if there are millions of people losing their homes because of serious problem in the market? Eventually, someone will buy them.

[slackmaster]

28. The "millions of people losing their homes" don't end up homeless, in general

They usually end up renting.

So what if there are millions of people losing their homes because of serious problem in the market? Eventually, someone will buy them.

That is a harsh reality, but it's an economic truth. I haven't seen any alternative that doesn't shift the harm to someone else who doesn't really deserve it, e.g. the investors who own the notes, or the general public.

[ProSense]

29. "That is a harsh reality, but it's an economic truth."

So was the Great Depression.

So is record unemployment. So is poverty and inequity.

Will those problems just work themselves out too?

[slackmaster]

30. We're not in the Great Depression.

The way out of the present situation will ultimately be businesses being created and expanded. Government can help by maintaining a stable and predictable economic environment, and by providing a hand up to people who really need one.

[ProSense]

31. "The way out of the present situation will ultimately be businesses being created and expanded. "

Is that the way out of the inequity that's been building over decades while businesses thrived and the rich got richer?

Is that the way to reduce poverty?

"We're not in the Great Depression."

Evidently, we're not even in a crisis, just something that will work itself out if businesses are allowed to do what they've always done, profit.

[slackmaster]

33. Keep flinging straw

:hi:

The answer is certainly not giving people free houses.

[ProSense]

34. Keep believing that free-falling housing prices and foreclosures are no sweat. n/t

[slackmaster]

35. They're not free-falling. You are indulging in a lot of hyperbole.

Prices will bottom out. In some places, they probably already have.

A foreclosure is unfortunate for the family that loses its home, but it's a necessary and natural process. As I mentioned earlier, any solution that artificially stops foreclosure shifts the harm to someone else who doesn't deserve it.

[ProSense]

36. Really?

Robert Reich

<...>

According to the Wall Street Journal’s latest quarterly survey of housing-market conditions, home prices continue to drop. They’ve dropped in all of the 28 major metropolitan areas, compared to a year earlier. And remember how awful things were in the housing market a year ago! In fact, the size of the year-to-year price declines is larger than the previous quarter’s in all but three of the markets surveyed.

Home prices have dropped most in cities already hard hit by the housing bust – Miami, Orlando, Atlanta, Chicago. But declines increased in other markets that had before escaped most of the downdraft, such as Seattle and Portland.

Things could easily get worse on the housing front because millions of owners are in various stages of foreclosure or seriously delinquent on their mortgages. Millions more owe more than their homes are worth, and, given the downward direction of the housing market, are going to be sorely tempted to just walk away. This means even more foreclosure sales, pushing housing prices down even further.

<...>

Summary Box: Home prices fall in major US cities

[slackmaster]

38. It's not bleak everywhere.

http://www.forbes.com/2010/12/08/healthy-housing-prices-business-washington-home-cities.html

[ProSense]

39. That's supposed to be reflective of what:

a handful of "suburbs" unaffected?

<...>

However, there are bright spots scattered across the country. Looking at the numbers on a national, statewide or even metro-area basis misses some standouts. Prices in the Cleveland metro area were down 3% in September according to the Case-Shiller Index, the biggest decline nationwide. Yet home values in the Cleveland suburb of Westlake have increased for three straight quarters, with a healthy slate of sales and almost no foreclosures, according to Zillow. All real estate is local, as the saying goes. The typical home in Westlake is worth $199,700, up 2.2% in 2010.

<...>

Take the Atlanta metro area, where the typical home is worth $136,900, down 3.8% in 2010, according to Zillow. The home value decline has accelerated since the tax credit expired in April. Yet in Sandy Springs, an affluent suburb north of Atlanta, home prices are up 2.5% this year, and the gains have accelerated since the credit expired. Sandy Springs is the corporate home of United Parcel Service ( UPS - news - people )and Newell Rubbermaid ( NWL - news - people ). The median home there is worth $335,800.

California has been among the states hardest hit by the collapse of the housing bubble. In 2005 and 2006, 30% of mortgage originations in the Los Angeles area were considered subprime, according to Moody's Economy.com. In Riverside 38% of mortgages were subprime. Foreclosures have been rampant statewide in the years that followed; in the third quarter this year 40% of California home sales were foreclosure-related, according to RealtyTrac.

There are exceptions in the Golden State. Manhattan Beach, Calif., ranks as the most stable housing market in the Los Angeles metro area. It is the priciest city to make our list: The median home is worth $1.2 million, almost three times the typical home in the Los Angeles metro area. The foreclosure rate in Manhattan Beach is almost non-existent, with only one in 5,376 homes facing foreclosure.

<...>

Does that look like good news?

[ProSense]

37. In fact, the state budget crisis is what's most exaggerated

CBPP

<...>

While the huge deficits of recent years have caused severe problems for states and localities that are struggling to maintain needed services, this is a cyclical problem that ultimately will ease as the economy recovers.

As we explained in a major report last week, these cyclical deficits are distinct from the longer-term issues related to bond indebtedness, pension obligations, and retiree health insurance. States can address these latter issues — the size of which often has been exaggerated in recent months — over the next several decades. It is not appropriate to add these longer-term costs to projected operating deficits and declare that states are in a crisis that’s too deep for them to handle.

[DJ13]

2. Declining wages

With our tax system based on income everything else would correct itself if wages once again rose as they used to.

[Strawman]

9. Yep. It's been the problem we've had for 40 years.

Flat or declining wages for 3/5 of workers, concentrated income gains at the tippy top. Fewer good paying jobs for less-educated workers due to automation and outsourcing.

The economy doesn't work for most people. The economic structure that allowed widely shared prosperity and a large middle class from the end of WWII to the 1970's has been eroding for decades. You either have capital, are highly skilled and well paid, or you're on a sinking ship if you're not already sunk.

[xchrom]

5. i went with state and local budgets.

i feel like we've all lost our minds when 'taxes' are brought up.

and if jobs don't get seriously robust soon -- what are strapped states going to do?

[Marsala]

6. Unemployment

The U.S. economy has lost its ability to quickly create new jobs for the past decade. Persistent unemployment is a huge drag on the entire economy.

[FogerRox]

17. You are correct

http://portalseven.com/blog/2010/03/05/february-2010-unemployment-rate-holds-stady-at-9-7-percent-but-u6-rate-climbs-up-to-16-8/

U3 is 14.9 million, U6 is 6.1million , thats 21 million jobs.

[Wwagsthedog]

7. Wars

[Dawgs]

13. Damn. I knew I was forgetting a couple.

:hi:

[geek tragedy]

8. It appears that the consensus is

"all of the above."

[JoePhilly]

10. Other ... GOP House and GOP Governors are the biggest problem ...

Their plans to cut all spending will severely impede any economic recovery.

[Dawgs]

14. I would put that under cuts in social programs.

:hi:

[JoePhilly]

18. I would not ... because ...

The GOP does not only plan to cut social programs, but infrastructure, energy, research, EVERYTHING.

High speed rail is not a social program. Renewable energy not a social program.

The GOP does not care about home foreclosures. They do not care about health care reform. And they only care about State budgets to the extent that the Federal government can bail them out (see Rick Perry of Texas).

I considered voting "all of the above" ... but when you go to the root issue, it is the GOP, and their desire to make the country suffer so they can remove Obama, nothing else.

[craigmatic]

15. It's clearly unemployment but we could use more social spending.

[applegrove]

16. Price of oil & unemployment

[Avant Guardian]

21. 'Other'

The biggest problem facing the economy is the two party system.

Why? Because in a two party system, the other side will take back power eventually. When that happens, the GOP will go full throttle on tax cuts and deregulation, and the economy will completely collapse. It is only a matter of time.

After this happens, all the kings horses and all the kings men wont be able to put the economy back together again.

[KeyserSoze87]

22. If unemployment is below 8.5% by 2012...

Obama will easily win reelection.

[bemildred]

23. Other: banks and bankers. nt

[jmowreader]

24. Republican obstructionism.

We simply have to fix the tax system, to make it more fair and equitable by reinstating Nixon's tax code in its entirety. I'm not saying Nixon was a great president or anything, but in his era the Republicans who could get elected didn't think you could increase tax revenues by cutting tax rates.

Until we figure out some way to keep the Republicans from filibustering anything that doesn't contain a tax cut for the rich, we're screwed.

[baldguy]

32. Republicans

[bhikkhu]

40. Its not on the list - the decline in net energy vs population increases

That is to say specifically - the availability of energy (oil and electric) is on a long decline, while the population is still trending upward. More people and less resources equals a decline in living standards and an increase in poverty.

[dwilso40641]

41. With the corp's blackmailing the cities and states

to keep them there, they now have no tax base, cannot maintain the infrastructure. Now they are talking bankruptcy to steal the earned pensions from the workers.
This being a result of voo doo economics.
that was one Rat Bastard we would have been better off without.

[TheKentuckian]

42. Wage destruction, high unemployment, and cutting social services

combine to kill demand in the economy.

Too many people with too few resources in an economy scaled to the top 20% who have about everything.

[Igel]

43. Gen X.

They're the ones that should be producing a lot of start ups. Start ups are responsible for most of the real growth in jobs when a recession ends. More jobs = more competition = higher wages, by and large.

Instead we're in a start-up slump.

Pretty much everything else in your list follows from this lack of start-ups. So it's the biggest problem.

I'd actually like to go one step further and say why there's a lack of start ups. But I can't.

[spacelady]

44. Insurance

Home, Life, Health, Auto, Fire, Flood, Funeral, Nursing Home, Mortgage, Accident, Unemployment etc. ad nauseum. Some elective, some not. When the purveyors of this speculative investing are subject to some oversight maybe we will get closer to a level playing field. Don't misunderstand - I am very grateful for the UC when I was laid off - it is just the cycle of the system I am talking about.

[harun]

45. Other: Corruption.

Biggest problem for the populace is of course unemployment. The biggest problem for the economy is widespread corruption and the inability of government to address it at a meaningful level.

[Blue_Tires]

46. 1. The widening gap between the top 0.1% and the rest of us.

2. Erosion of workers' rights
3. Outsourcing of manufacturing jobs
4. Shitty foreign trade policies
5. A 'business-friendly' congress unwilling or unable to act
6. The Military Intelligence complex

[DCBob]

47. National debt.

without a doubt.