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1 aagcobb  Tue, Oct 18, 2011 7:37:17pm

“It should be recognized that if real estate prices have dropped 30% and if the cost of home ownership or renting is 35% of one’s income, a reduction of salaries and benefits approximating 10-11% should be tolerable, as a starting point.”

The problem with that theory is that my mortgage didn’t drop 30% when the real estate bubble burst.

2 Joanne  Tue, Oct 18, 2011 7:54:40pm

The IMF disagrees.

washingtonmonthly.com

3 mikiesmoky2  Tue, Oct 18, 2011 8:33:02pm

re: #1 aagcobb

“It should be recognized that if real estate prices have dropped 30% and if the cost of home ownership or renting is 35% of one’s income, a reduction of salaries and benefits approximating 10-11% should be tolerable, as a starting point.”

The problem with that theory is that my mortgage didn’t drop 30% when the real estate bubble burst.

You are, absolutely, correct, but I am seeking the “best” resolution of a problem; in this case, the finances of the various states, municipalities, and federal agencies.

Unfortunately, due to the mess we have had created for us during the past 30 years and accelerated these past 11 years, there will be pain and dislocations.

Efforts should be made to mitigate the pain and to “legislate” balanced solutions.

My comment was directed at new entrants.

There are best solutions for existing homeowners and renters.

Without going into the various logistics, here, there should be refinancing solutions for everyone with a mortgage, including “underwater” mortgages.

Re: “Underwater mortgages” - assume a $400,000 mortgage on a home purchased for $550,000 and, now, valued @ $350,000.
If the owner is still working, he or she should have no problem with making the payments.

If he or she is one of the government workers taking a reduction of 11%, most of that should come from deferred income, i.e., retirement, with perhaps 3-4% coming out of current earnings.

Further, there should be the availability for re-financing even if the LTV were not standard. There would be a 2nd which would be entitled to be in a program whereby the loan would be interest only and the interest, if not paid for any month, would be added to the principal. (roughly speaking, but a “starting” point - i.e., there are always “best” solutions).

mz

4 mikiesmoky2  Tue, Oct 18, 2011 8:47:00pm

re: #2 JustJay

The IMF disagrees.

[Link: www.washingtonmonthly.com…]

Again, I agree with the fact that “austerity” without “adjustments” can be problematic.

I advocate for the total elimination of ALL minimum wage laws.
Now, hold on for a moment!!

I, also, advocate that the EITC (Earned Income Tax Credit) be expanded to include citizens and those with work permits, who are over 17, to have their income supplemented by tax credits, e.g., if one makes $4.00 per hour @ McDonald’s, is over 17, is a citizen or has a green card, he or she would be entitled to receive tax credits to increase income to a stated minimum, perhaps $7.50/hour.

This would create two ancillary benefits; allow new industries to evolve, because labor costs (above the line) have been reduced, and will mitigate the reason for illegal immigrants to seek employment, since they would not be eligible for the income tax credits.

mz


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