Sunday Edition: September 30, 2007

Posted In: Crash Prophets, Economy, Housing, Politicians, Recession, Sunday Edition

Baby Bond Boondoggle
On Friday, U.S. Senator and 2008 presidential candidate Hillary Clinton floated the idea of providing every child born in the United States a $5,000 “baby bond” from the government to help pay for the future costs of college or buying a home. Senator Clinton said, “I like the idea of giving every baby born in America a $5,000 account that will grow over time, so when that young person turns 18 if they have finished high school they will be able to access it to go to college or maybe they will be able to put that down payment on their first home, or go into business.” According to ABC News Friday, with around 4 million babies born in the U.S. each year, the program would cost more than $20 billion annually, not counting administrative costs. Clinton and her aides provided no details on how the baby bond program would be paid for, what it would cost, or how it would be applied or enforced. Republican presidential candidate Rudy Giuliani said on the Sean Hannity radio show that the Clinton campaign is “based on pandering to the point where I think they think the American people are stupid.”

Senator Clinton is studying up on her history. This sounds an awful lot like the 1928 presidential campaign, where a circular published by the Republican Party claimed that if Herbert Hoover won there would be “a chicken in every pot and a car in every garage.” Our predecessors bought into it, however, and elected Hoover the 31st President of the United States.

Ironically, several months after Hoover took office, Americans witnessed the 1929 stock market crash and the Great Depression. Will history repeat itself?

The Fiscal Wake-Up Tour
Tonight I learned about “The Fiscal Wake-Up Tour” that is being sponsored by the Concord Coalition. From their website, The Fiscal Wake-Up Tour is a joint public engagement initiative by The Concord Coalition, the Budgeting for National Priorities Project at the Brookings Institution, and the Heritage Foundation. U. S. Comptroller General David Walker, who I’ve talked about before in Boom2Bust.com, is an advisor and has participated in each of the events. The purpose of the Tour is to explain in plain terms why budget analysts of diverse perspectives are increasingly alarmed by the nation’s long-term fiscal outlook. Many events are scheduled for the remainder of 2007 and for 2008, including Atlanta, GA (October 1), Hartford, CT (October 23), and Baltimore, MD (October 29). I have never attended one of the Tour events, but would like to in the future. If you’re interested in finding out more about “The Fiscal Wake-Up Tour” you can visit their website.

Perhaps Senator Clinton should attend one of these sessions. Just an idea…

Cramer Follow-Up
Last Wednesday I told you how Jim Cramer of CNBC’s “Mad Money” went on NBC’s “Today” show and said not to buy a home right now or “you will lose money.” On Friday, Cramer went back on “Today” to talk about his comments, along with Charles McMillan, president-elect of the National Association of Realtors. Cramer was unapologetic. In fact, he had this to say:

Charles has to sell real estate, and I have to try to save or make people money. I can’t save or make people money by telling them to buy real estate.

At least he’s being honest. You can watch the conversation here on YouTube.

Parting Shot
Back on September 10 the Financial Times (UK) ran a story about how recession “is the word on everyone’s lips.” The Times noted that the word is usually avoided by Wall Street economists. David Rosenberg, chief economist at Merrill Lynch had this to say about its usage: