By Richard R. Troxell
President, House the Homeless, Inc.
The Way Forward: Devising a Plan
It is clear that funds from the Troubled Asset Relief Program (TARP) have failed to stimulate the economy as hoped. But what would also seem clear is that the money did not evaporate. It is reported by CNBC anchor Maria Bartiromo that banks and American businesses are sitting on trillions of reinvestment dollars. The government, with the collapse of Lehman Bank, sent a very clear message: If banks didn’t have enough reserve capital to meet the FDIC standards, they could be closed or placed under federal scrutiny.
As a result, when the dollars were released to stimulate the economy, the banks held onto the money instead of releasing it to borrowers, thereby undermining the original intention, to stimulate the economy.
It also seems clear that the economy still needs to be stimulated. Where the Obama Administration failed in the execution of President Bush’s TARP plan was by not putting in safeguards that would ensure that the dollars went directly into the economy.
Therefore, it is the recommendation of House the Homeless that any “stimulus” dollars must be attached to a commitment to immediately reinvest the funds back into the economy with “claw back” provisions. Simply put, if dollars are made available to states for infrastructure development or if dollars are loaned to mortgage companies to stimulate that part of the economy, then if at certain, time-staged increments, anticipated monetary releases do not occur, the notes will be called in and the money will be “clawed back.”
Paying a Living Wage
There are certain jobs in our economy that cannot be outsourced. One must be present to serve the child in the school cafeteria, to clean the hotel/motel rooms, take care of our children in daycare facilities, labor in our construction sites, serve food in our restaurants, etc.
These jobs that cannot be outsourced are the basis of our socioeconomic system. These workers are the backbone of American business. As the base of the pyramid, the more financially stable the worker situation, the better off business is.
Automobile maker Henry Ford learned this firsthand. One day, in the plant cafeteria, while passing through the food line, extending his tray to first receive a cut of meatloaf and then mixed vegetables from the second server, and dessert from the third, suddenly he had a “Eureka!” moment. He gathered his workers and raced back to the shop where he lined up tables in a one, two, three order. Voila! The assembly line was born!
But this was short-lived euphoria. Mr. Ford soon learned that while his idea was brilliant, he kept losing his highly trained workers to the competing car companies. Time and time again, he would find himself stuck with exorbitant retraining costs required to replace the exiting workers.
He stepped back and thought about the dynamics of what was happening. He decided to address this worker-drain phenomenon using wages as a means to stabilize work. Remarkably, he almost doubled the standard wage to $5.00 per day. Practically overnight, he saw a dramatic effect. The immediate results were:
1) Significant reduction in employee turnover;
2) Significant reduction in retraining costs;
3) Significant reduction in unscheduled absenteeism;
4) Almost complete stoppage of internal theft (almost 50% of theft in today’s retail world is committed by a business’ own employees);
5) Finally, Ford’s new approach created a true economic stimulus because his workers put discretionary funds right back into his company as purchasing consumers. They then bought the very cars they were making by using their newfound wages.
Full-Time Workers Who Can’t Afford Housing
According to the last several U.S. Conference of Mayor’s Reports, a person can work a full-time, 40-hour per week job at the federal minimum wage and still not be able to afford basic rental housing anywhere throughout the United States. With such a destabilized work force, is there any wonder that according to the Small Business Association, 64% of all small businesses fail in the first four years?
So, how can we bring all of these diverse components together to enhance business? What if we take a page from entrepreneur extraordinaire Henry Ford and focus on stabilizing the work force with wages that are enough, so workers can afford basic rental housing (an efficiency apartment) food, and clothing? In this fashion, the worker gets what they need minimally and business is stabilized.
Additionally, because folks at the basic economic level historically place 97% of any increase in wages right back into the economy, and because our economy is 70% consumer-goods based, this will clearly stimulate the economy. Furthermore, there are now 3.5 million people who have fallen out of the work force and (as stated) cannot afford basic rental housing. Here is an opportunity to stimulate the local housing construction industry across the nation by responding to that need. It will also enable these people to work themselves off of our streets.
In addition to all of the benefits already cited, this approach will result in retraining cost savings in the billions of dollars. Similarly, taxpayer savings from reduction of excess reliance on SNAP benefits, general assistance, temporary assistance to needy families, and TANF and Earned Income Tax Credits will also be in the billions of dollars. By planning to make this stabilizing adjustment over a 10-year period, business will know exactly what the economic future holds, and how to prepare and budget for it.
The Nation’s Infrastructure
The Universal Living Wage is a 10-year correction. We also need economic adjustments of intermediate and immediate impact. These are labor-light and industry-intensive.
They should include:
* Upgrading our schools and including the creation of permanent buildings for portables or temporary structures that have been used to teach children for five years or longer. This should also include the upgrade/retrofitting of dilapidated structures.
* America’s bridges are in catastrophic need of repair. We can all remember when the bridge over the Mississippi River collapsed in Minneapolis, Minnesota, in 2007, killing more than a dozen people.
We were warned in 1990 that the bridge was “structurally deficient.” Inspections of the rest of America’s bridges showed that one-fourth of all U.S. bridges to be either “structurally deficient” or “functionally obsolete.” Furthermore, the U.S. Society of Civil Engineers estimates that the U.S. needs to spend $1.6 trillion to upgrade or replace 590,000 bridges. This would be an intermediate adjustment to the economy with a five-year time period.
The world’s economy is going through a readjustment period. This brings uncertainty in all economic markets. Not isolated from the uncertainties that result from these overlapping intricacies, the United States is facing its own downturn. The U.S. has a declared unemployment rate of about 9%, with 17% unemployment for African-Americans. This country experienced unprecedented upward mobility in our poor communities in the late 1970s and early 1980s with the creation of homeownership through the U.S. Department of Housing and Urban Development (HUD). We are now in very serious danger of losing all of these gains. As a nation, we must take specific steps to address this situation now.
Mortgage Foreclosure/HUD Assignment Program
HUD is the housing arm of the U.S. government. In the 1980s, HUD had a great assistance program (the HUD Assignment Program) that benefited banks, lending institutions, and mortgage holders if the homeowner ever fell behind on the mortgage due to circumstances beyond his or her control. Principally, these circumstances involved job loss, layoffs, or medical conditions that resulted in economic trauma. The relief was termed a HUD “Assignment,” which led to a temporary reassignment of the mortgage and might have entailed a temporary reduction of the monthly payment or a full recasting of the mortgage.
Arrearages might be amortized for periods up to two years or, in rare circumstances, attached to the other end of the mortgage to extend the life of the payment period. The benefits of this program are endless and have great application today.
The benefits include preventing foreclosure and reducing financial stress on the homeowner at a time when they are already under economic duress. It prevents the homeowners from losing their good credit standing that, in all likelihood, will knock them out of the homebuying market for a decade or longer. It prevents the homeowners from falling into a new financial dilemma of needing to rent another property that is probably one-third more costly than the home they have just lost at foreclosure. Clearly, they will not have the typically required rental deposit, let alone the first and last month’s rent.
The lender, on the other hand, may be a bank or other lending institution that may be relatively unprepared to foreclose on a property and then deal with that foreclosed property. In any event, the property ceases to be an asset and now becomes a liability.
The maintenance of the property now falls on the lending institution, as does locating a substitute homebuyer. If the market is glutted with other foreclosed properties, as it is now, then resolution of this situation can be seriously protracted. This will result in significant maintenance costs of a long-term nature. Additionally, multiple foreclosed properties in neighborhoods across America cause the devaluation of regional mortgage portfolios and a stagnation of the housing market in general.
It has been reported that three jobs are created for every house built. As long as the nation’s housing inventory remains bloated with foreclosed houses, the housing construction industry remains stagnated and these jobs remain hostages. Clearly, it is to the advantage of the homeowner, the lender, the local/national housing construction industry, and the economy generally to prevent foreclosure in the first place.
The Assignment Program was so successful that when the federal government ceased its involvement, the State of Pennsylvania introduced its own version to deal with an economic downturn that it faced. It is worth examining the merits of these programs today.
Rent to Stay
This is the idea of converting a foreclosed home to a rental property. The former homeowner would become the new tenant. This would prevent a home from sitting empty for weeks, months, and, in some instances, years.
The tenant/former homeowner obviously benefits by not immediately needing to come up with move-out/move-in dollars, which most likely include deposit and first and last months’ rent, when they are already experiencing financial and emotional distress. The property remains occupied and protected by people who have called it home. The new scenario continues in this fashion until economic stability returns to the foreclosed family or until the property again becomes viable on the market.
This is a slight twist on the concept that was behind the Resolution Trust Corporation, a program created to address a pool of foreclosed homes resulting from the 1980s savings and loan debacle.
The USA Job Party has an interesting jobs proposal. They propose to lower the nations’ unemployment level from about 9.1% to 7%. Their plan is to hire a teacher’s aide for every public school teacher for one year. This immediate employment program targets veterans and benefits the maxed-out, unemployed workers who pass the required background checks. They would fund aides at $30 thousand per year. Applicants would be tested to establish the best level for the aides to assist.
The USA Job Party suggests funding from a number of sources, including bringing home about a third of the troops from the Iraq and Afghanistan wars. Promoters believe that the program could be up and running with the commencement of the new school year.
Economic Dependence on Military Spending
We have what we term a “waste product economy.” Our economy is based on consumables, be it toilet paper or cars. The military economy, or as President Eisenhower put it, “The Military Industrial Complex,” operates much the same way, but with one noticeable downside — war. Yes, people are put to work when there are guns, bullets, or the 22-million-dollar military plane to be made, but if we want to meet the true needs of “supply and demand” in this country, we must reinvest in American infrastructure and manufacturing, the kinds of jobs that truly grow our economy and increase our standard of living.
President Eisenhower warned us of the Military Industrial Complex. We have now gone well beyond defensive balance and instead find ourselves needing to feed the beast. As of 2009, the war in Iraq has passed the price of the Viet Nam war. When combined with the war in Afghanistan, not to mention what’s happening in Libya, American taxpayers are spending 160 billion dollars a year. As a Marine and a Viet Nam war veteran who looks back at 58,000 dead brothers and sisters, 350,000 American casualties, at a cost of 133 billion dollars, I see little gained from wars that do not end. The only ones who really benefit are the arms dealers who continue to create the “need for war.”
The point here is that it will serve us better to find ways to bolster the individual consumer as opposed to the military component of our economy. I’ve always felt space exploration was a good alternative. It beats making bullets.
There are those who call for what has been described as additional taxes against the wealthy. House the Homeless says that the rich are entitled to their wealth and their civil rights just as much as the next fellow.
A reporter called the other day, beaming with pride and enthusiasm, wanting my comments on the fruits of a local nonprofit to build 12 housing units that would be made available to the “poor” for $100,000 each. He sought my comments as the president of an all-volunteer homeless organization.
My response was to ask him a question: “What does this have to do with homelessness?” I assured him that, as a taxpayer, I was offended. While these may be very good and deserving families consisting of first-year teachers or firefighters struggling economically, they are not homeless, nor will anyone experiencing true poverty benefit from the program.
At House the Homeless, we fight to end homelessness through the creation of opportunity. We believe that ending homelessness must be viewed in terms of those who can work and those who cannot work. For those who are disabled and unable to assist themselves, we must step up and assist them. However, for the other half of the homeless, those who can work, we should provide opportunity, and a pathway for people to engage in work/society, etc.
Tax dollars for social supports should be reserved for those who cannot make it on a level playing field. The U.S. Constitution provides for the pursuit of happiness. It does not guarantee achieving it. In a similar vein, no one beyond the eighth grade buys the argument that ending tax supports equates to tax increases. Corporate tax supports or “corporate welfare,” as it has been termed, for established businesses is also unacceptable and unnecessary.
It was reported today that Consumer Confidence is at its lowest point since April 2009. With 70% of our economy being driven by the individual consumer, we need to build consumer confidence.
This begins with a national plan and living-wage jobs that afford the basics: food, clothing, and shelter. By ensuring living-wage jobs for the least of our workers, they realize that if they just put in their 40 hours of work each week, they will be able to afford the basics. At least half of the 3.5 million folks experiencing homelessness now will be able to support themselves. By preventing foreclosures and devising a plan that catches people when they stumble economically, we build their confidence. If we devise a plan that ensures that people can keep themselves off the dole if they just put in their 40 hours of work, then we will bolster their confidence and stimulate the economy.
Finally, the simple creation of a plan — a pathway that incorporates these core tenants — will steady American consumers, and their response will be felt in the marketplace. Taxpayers, businesses, and workers alike will benefit. Their self-confidence and self-esteem will return and even skyrocket. By breaking the logjam of foreclosed homes, we free the housing industry for growth. With stimulus dollars guaranteed to be reinvested in the economy, small businesses and even larger ones that rely on jobs that cannot be outsourced will become stabilized and begin to grow again.
The time to act is now.