Dean Baker asks:

The median period of homeownership in the United States is only 7 years. This means that a high percentage of the people who bought a home in 2003 or 2004 will likely plan to move in the next two or three years. If these people are already underwater in their mortgage, with house prices falling at a 20 percent annual rate, it is extremely unlikely that they will be in their home long enough to accumulate any equity. If homeowners pay more every month than they would to rent a comparable unit and still accumulate no equity, possibly facing a short sale when they move (which has the same impact on credit ratings as a foreclosure), then it is not clear how much they are being helped under the plan.

If you had any doubts, check out these nuggets from a new study by David Rosnick and Dean Baker of the Center for Economic and Policy Research (h/t Robert Wuebker). Boomers are really screwed.

So much home equity has been lost that 30% of boomers, aged 45 to 54, are underwater in their homes, according to “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble. ” The report, released by D.C.-based think tank the Center for Economic and Policy Research, also found that 18% of boomers aged 55 to 64 would owe money at close if they sold their homes.

The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners. That’s true for all five wealth groups the study analyzed, from the poorest to the wealthiest …

Boomers between 45 and 54 have lost 45% of their median net worth, leaving them with just $80,000 in net worth, including home equity, according to the report. Older boomers have fared marginally better. Those between 55 and 64 have lost 38% of their net worth, leaving them with $140,000. But this group is rapidly nearing retirement age and they have few working years left to make up the losses.

The full study is here.

Two very useful views on the stimulus (both via Mark Thoma):

Jeff Madrick says government spending is much more effective than tax cuts or monetary policy:

The reason higher-tax nations do well economically is that government spending can and often does succor economic growth. All rich nations today have robust government. … America’s to-do list is now very long…, and many, with an unnecessary fear of budget deficits, believe it cannot do what it must. The first step will be to jettison ideology and return to America’s pragmatic roots. That has not happened yet, but push-back has already started…

Dean Baker on why we need to invest in the “right” things:

We know that some of the money in the stimulus package will not be well spent. … This is a necessary cost of getting money out the door quickly. But, it is possible to prevent projects that are not just wasteful, but actually counterproductive, from being included in the stimulus package. It should not require too much analysis to identify highway projects that are likely to promote sprawl. Such projects should be excluded from a fast-track stimulus package. … The amount of stimulus required to offset the impact of the collapsing housing bubble and the plunging stock market is substantial, but there are good ways to spend large amounts of money. The huge shortfalls incurred by state and local governments are an obvious place to start…

UPDATE:

Hal Varian, former Berkeley Professor now Google’s chief economist says private investment is the answer (also via Mark Thoma).

These days it seems like it is our patriotic duty to consume more. And if we don’t choose to spend more money ourselves, the government will do it for us. But wait a minute. Isn’t it excessive spending that got us into this mess in the first place? …

Direct stimulus of consumption is tricky. In this economic climate,… tax cuts would probably be saved, and rightly so…

That brings us to government expenditure… The danger with this form of stimulus is twofold: First, it takes too long for the government spending to kick in, and second, spending may easily focus on pork-barrel projects that have little inherent value … One further warning about government stimulus: It makes little sense for the federal government to spend more if the states are forced to spend less. A significant part of the … spending should be transfers to the … state and local level …

[P]rivate investment is what makes possible future increases in production and consumption. Investment tax credits or other subsidies for private-sector investment are not as politically appealing as tax cuts for consumers or increases in government expenditure. But if private investment doesn’t increase, where will the extra consumption come from in the future? Ultimately, we want to end up with a significantly higher savings rate in the U.S. than we have seen recently. That means some other component of demand must increase to compensate for the reduced consumption. And the most attractive candidate by far is private investment.

The unasked question is what will this mean for America’s economic geography ?The Great Depression and New Deal ultimately had huge reshaping effects on America’s economic landscape, ecouraging the rise of suburbia and the rise of the Sun Belt among other things. How might the combined effects of the crisis and subsequent effect our economic geography today?