Obama Administration and Economists Don’t Agree on Role of Mortgage Debt in Economic Recovery
A year and one month before President Barack Obama won reelection, he invited seven top economists to a private meeting in the Oval Office to get their advice on how to fix the economy. The said meeting was not reported before.
Among the attendees of the meeting include a former Federal Reserve vice chairman, chief economist of the International Monetary Fund, a Nobel laureate, an expert on financial crises, among others. They said that Obama should introduce a plan to forgive some of mortgage debt owed by millions of homeowners who are struggling with their properties.
President Obama was reserved with his response but Treasury Secretary Timothy F. Geithner said that he didn’t think it was possible. He added that it would not be approved by Congress. The meeting was highlighted the biggest disagreement between the world’s top economists and the White House.
The economists said that President Obama could improve the economic growth if he addressed the overhang of mortgage debt left when housing prices collapsed. The president’s advisers said that they did everything they could on the housing sector.
Now that President Obama won reelection earlier this month, majority of voters say that the economy is weak and not getting better. Lawmakers in Washington are now focused on another form of debt, which is public debt all taxpayers owe. The problem is hard to solve due to the slow economic recovery that depresses tax revenue.
Around 11 million Americans or more than a fifth of homeowners are struggling with their mortgages. They owe more than the actual value of their properties after using their life savings on the properties. This is a problem left unaddressed and economists call it the missing link with regards to the administration’s strong response to the recession.
President Obama’s economic advisers said that the administration opted for the best options available to deal with the housing crisis. They believe that the slow pace of recovery is understandable due to the financial crisis as well as the collapse in housing prices.