Transfer of Cash to the Rich

President Obama on November 6th signed the "Homeownership and Business Assistance Act of 2009," which sounds nice, doesn't it? It provides for: "Extending unemployment benefits yet again by 20 weeks and Extending first-time home buyers a tax credit of $8,000 until May 2010." So, we have taxpayers handing over dollars to either those not working, or those who are buying a home and getting $8,000 that you and I never enjoyed. Saying that, I can see how from one's "normative" economic perspective that providing extended unemployment benefits is the moral thing to do.

However, much worse is the following: The Act provides for homebuilders to use losses in 2008 and 2009 to offset profits booked as far back as 2004, creating a $33 billion windfall for these organizations.

The administration piously spoke of how this bill would help "struggling businesses." Once again, let's look at the "FACTS" to see how poor some of these homebuilders really are.

1. Pulte Homes(PHM), which will receive refunds of $450 million, has $1.5 billion of cash in the bank.

2. Hovnanian Enterprises (HOV) is getting back $275 million and has $550,000,000 in the bank.

3. Stanford Pacific Homes (SPF) will get a $80 million check to deposit into its account that already has $523,000,000.

How did these companies pull this off? Lobbying, of course (And, I thought this administration was going to stop the practice of lobbying in Washington, DC. How naive was I!)

How much did Pulte's $450,000,000 refund cost? $210,000 in lobbying. That's about $2,100 returned for every $1 invested in lobbying! The entire industry spent $8.2 million lobbying that yielded $33 billion extraction of cash from you and me to the homebuilders. Therefore, the overall return is even better, which amounts to approximately $4,000 in tax refunds for every $1 of lobbying expense. By the way, I wonder how many new jobs were created with that $33 billion.

So as you gaze at your paycheck, with close to 50% of the money extracted by various government organizations (federal, state, and local), at least you know now where it's going. So, if this administration is not going to be transparent, I, at least, will be for them.

Source: Tim Knight