Personal Finance 

$250 Social Security Stimulus Check

I’ve been getting a lot of emails lately about the $250 Social Security stimulus check so I thought a post would be the best way to answer all of your questions. If you’re wondering where your $250 Social Security stimulus check is, wait until June 4th before trying to contact the Social Security Administration. The American Recovery and Reinvestment Act of 2009 gave all social security recipients (SSI included) a one-time $250 payment, so if you are one of the 50 million individuals who get those benefits, the check is in the mail!

Who is eligible? You must be eligible for Social Security, SSI, Veterans, or Railroad Retirement benefits during November 2008, December 2008, or January 2009. If you were not eligible at that time, you will not receive the check. If you are eligible for multiple benefits, you will only receive one payment.

When and how will I receive the payment? You will get it the same way you are getting your current Social Security and Supplemental Security Income benefit. If you get it by check, you’ll receive the payment as a separate check. If you get it by direct deposit, you will get it as a separate direct deposit. The government has staggered the mailing of those payments throughout May so if you haven’t received it, it’s likely in the mail or in processing. You don’t have to do anything to receive the check and the Social Security Administration will not contact you for any information.

What if it’s after June 4th and still no sign of a check or deposit? Visit the Social Security Administration’s website for the one-time economy recovery payment information page to find out who you need to contact for more information. If you just want more information, this electronic booklet about the one-time economy recovery payment is also very informative.


Make Work Pay Stimulus Tax Credit

PaycheckI’ve been getting a lot of emails about what people are calling a 2009 stimulus check, passed by Congress and signed by President Obama last month. People are confused, wondering what the stimulus check is, if it’s a tax credit, who is eligible, etc. It’s a little confusing but I think I can put it all to rest.

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Beware Stimulus Check Scams

Stimulus Checks!I went to a conference of internet marketers a few weeks ago and spent some time learning from some of the best and the brightest in the industry. One of the things I came away with was the prevalence of “stimulus check” related scams that were floating around the web. I don’t think any of the people attending were involved in pushing these offers because the general consensus was that if you were involved, it was only a matter of time before the FTC dropped the hammer and penalized you heavily for your involvement.

Well, surprise surprise, the FTC released a consumer alert warning consumers about stimulus scams:
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American Recovery & Reinvestment Plan Details

The Committee on Appropriations released an executive summary on the details of the American Recovery & Reinvestment Plan, the formal name for President Obama’s stimulus package, and it’s thirteen pages long with a decent level of detail. First I’ll list the high level overview then point out some of the things that might affect you. If you’re curious about a stimulus check, it’s not in there.

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Obama’s 21st Century New Deal: An Economic Stimulus

Between 1933 and 1936, President Franklin D. Roosevelt initiated a series of economic programs and policies that would be termed the New Deal. It was intended to give relief to the unemployed, reform business and financial practices, and help the struggling economy fight through the woes of the Great Depression. While many of the programs and regulations were unwound in subsequent years, many of its programs are still in place today such as the Federal Deposit Insurance Corporation, the Federal Housing Administration, the Tennessee Valley Authority, the Social Security System, and the SEcurities and Exchange Commission.

On December 6th, 2008, President-elect Barack Obama unveiled, in his weekly address, his version of the 21st Century New Deal, designed to achieve similar goals, most notably to bring the United States out of the recession it currently faces. He seeks to achieve this aim by investing billions of dollars into improving the transportation infrastructure in this nation, roads and bridges, that has been severely underfunded (as evidenced by the studies following the tragic collapse of I-35W in Minnesota, killing 13 and injuring 145). Today, President-elect Obama outlined the principles of his plan (5 minutes) to create 2.5 million jobs.

Here were the major points of his program:

  • Improve energy efficiency of public buildings, by upgrading those buildings with new HVAC systems and energy efficient lightbulbs.
  • Extend funding to improve the infrastructure of the federal highway system (“single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s”), with a deadline for allocation so that states move quickly to use what is allocated. This is intended to create a great many jobs.
  • Modernize and upgrade school buildings from both an energy efficiency perspective, like public buildings, as well as outfit them with new computers.
  • Extend the reach of broadband internet access, improve the United States’ rank of 15th in the world in broadband adoption.
  • Interconnect hospital medical records through the internet by modernizing the health care system.

The address lacks details and numbers because it’s impossible to give details and numbers until January 20th. What you will hear is him explaining the major points of his plan, none of which include a stimulus check to families. I’d argue though that the stimulus checks did nothing to improve our situation and a family facing job loss would much rather have the option of working on an infrastructure plan than cashing a $300 check.

Breaking: Obama unveils 21st Century New Deal [Politico]

 Personal Finance 

Second Stimulus Package

Money Money MoneyBack in June, Democrat Presidential nominee Barack Obama suggested that a second stimulus check was necessary. I wrote about it because this was hot on the heels of the first stimulus check and it appeared as though Obama was catering to the masses. In reality, he was running point on a proposal House Democrats were pushing because so many of their proposals were left out of the first stimulus package.

With the credit freeze only now thawing, with both consumer borrowing and spending down, and with the prospects of a weak retail holiday season and rising unemployment, a second stimulus package designed to give our economy a shot in the arm looks pretty appealing now. Even Fed Chairman Ben Bernanke, in testimony given before the House Budget Committee, endorsed the idea of a stimulus package. More importantly, the White House said it would consider additional spending measures; it’s not an all-out endorsement of a second package but it’s better than flat out rejection.

Before anyone gets all giddy, most experts are saying nothing would happen until after the November 4th election. As it stands, most reports are saying that most of the proposals being pushed for the second stimulus package involved measures that were dropped from the first stimulus package. Those proposals included infrastructure improvements and extension of unemployment benefits & food stamps, all told costing about $150 billion or more.

Specifically, Speaker Pelosi wants to bring back a $61 billion House-passed bill:

  • $37 billion in public works spending (infrastructure)
  • $6 billion for jobless benefits (unemployment)
  • $15 billion to help states pay for Medicaid bills
  • $3 billion in food stamp assistance
  • A stimulus check (tax rebate) of some kind, though no details

I am not a fan of the “stimulus check” concept (is it really spending if we are just borrowing from the future?) and I don’t see how all the other spending is going to stimulate the economy (it’s said that the public works spending could be implemented very quickly, thus producing jobs… but it’s public works, that just sounds like it would take a long time). Jobless benefits and food stamp assistance will lessen the pain but they don’t stimulate the economy. Finally, in most states you already get twenty-six weeks of unemployment, that’s six months, isn’t that fair?

I guess we’ll have to see what gets proposed.

(Photo: Tracy O)


Obama’s Emergency Economic Plan Released: Second Stimulus Check & Growth Funds

Barack Obama at St. Paul 2008In early June, Democratic Presidential hopeful Barack Obama’s mentioned a need for another stimulus check. Then, in late July, there were rumblings in Congress that Democrats were looking to put together another stimulus package that may or may not include a check to families. There was a move by Democrats to try to pass the aspects of the first stimulus package, which included a check, that were struck down in the name of expediency.

Senator Obama released this six-page policy paper that outlines a two-part stimulus package.

Part 1: Emergency Energy Rebate Checks: The first part would include an “emergency energy rebate.” Individuals would receive $500 and married couples would receive $1000. The checks would be paid for over five years by a windfall tax on oil company profits. The six-page document explains the nature of the checks but doesn’t illustrate how the windfall profits might be taxed (granted, given the political nature of the document, it might be out of scope).

Part 2: $25B State Growth Fund & $25B Jobs and Growth Fund. The second part has itself two parts. The State Growth Fund would help prevent state and local cuts in services like education and housing assistance as well as alleviate the need to increase taxes, tolls, and fees. Many states are feeling the pinch as housing prices fall, foreclosures rise, and real estate tax revenue falling. The Jobs and Growth Fund is really an infrastructure bill that would support maintenance of highways, roads, and bridges; as well as fast-track school repair projects. There is no mention of how this would be funded.

My Thoughts: I didn’t like the stimulus checks but having listened to their use in the 70s in Greenspan’s anecdotal Age of Turbulence, I’m not wholly against them as a mechanism for thwarting an economic slowdown. However, it’s becoming increasingly evident that the checks are as much about politics as they are about prevent a slowdown. While I would imagine the economic policy advisors on Obama’s staff are well versed in macr- and microeconomics, I wonder how much of it is influenced by a desire to win in November.

That being said, people are getting pinched. Not everyone is getting pinched, but a lot of people are and additional funds would help some remain solvent. My concern is that with a deficit nearing half a trillion dollars, we’re sacrificing our future prosperity for relief today. This is exactly the same thinking that gets many people into deep credit card debt. “Just a little more relief…”

Finally, what are the chances this actually happens? Democrats had difficulty extending unemployment benefits and those go only to those who have already lost their jobs. You can argue that some people getting the first stimulus checks didn’t need them, but unemployment benefits only go to those who are unemployed! It’s difficult to say if this plan would even fly, but it makes for an interesting discussion. So, what do you think? 🙂

(Photo: chadwho1ders)


Housing Stimulus Bill Explained

Foreclosure! Housing Stimulus BillThis week, the Senate passed a housing bill a little over a week ago (the House joined last Wednesday) that seeks to give the housing market a shot in the arm. With 1 in every 171 homes going into foreclosure, the cries for help are getting loud and loud and, with the next year’s deficit nearing half a trillion dollars, we might as well pile it on. What’s another few hundred billion? Personally, I don’t like the idea but economic turmoil doesn’t help anyone. It doesn’t help the people who erroneously got themselves into bad loans, it doesn’t help the people who intelligently avoided them, and it doesn’t help everyone else standing on the sidelines. Considering we can’t pass energy legislation and likely won’t before Congress recesses in a week, we might as well take what we can get.

So, what’s going on? Here are the bits that are likely to affect you.

The Main Bailout

The FHA will be allowed to insure up to $300 billion in 30-year fixed mortgages for those at risk and who are living in owner occupied homes. The net result of this is that some loans will be restructured from their current state to an FHA insured loan. It’s help but it’s not a get out of jail free card, you’ll see why in the second paragraph of the gotchas section.

Who is qualified? You qualify if you have a loan that was issued between January 2005 and June 2007, must be spending at least 31% of your gross monthly income on mortgage debt, the total debt cannot exceed 95% of the home’s appraised value, and prove that they will not be able to continue to pay their mortgage. They can be defaulting or current, that won’t matter, but they have to retire all other debt on the home.

What happens? If you think you qualify, go to an FHA-approved lender and they will take it from there.
Any gotchas, catches, or tricks?There are two types of gotchas. First, in order for this go through, the lender will have to write down the value of the existing loan to 90% of the home’s current value and take the hit. Lenders won’t do this unless they think they’ll lose more than that, so you will probably really have to be in trouble to qualify.

The second type of gotcha is the restrictions and extra payments the borrower will have to bear. You can’t get a home equity loan for at least five years, you’ll have to pay the 1.5% annual insurance premium to the FHA for the guarantee, you’ll have to pay a 3% exit fee on the principal to the FHA if you sell or refinance, and finally you’ll have to give up all profits to the FHA if you sell or refinance within a year. After a year, you’ll only be on the hook for 90% of the profits and drops by 10% each year until it gets to 50%, where it will be forever. That’s a long time.

The Supporting Cast Measures

There are a few other additions to the bill that may be of interest.

Conforming Loans ceiling set to $625,500. A temporary measure increasing the maximum value of a “conforming loan,” or loans that would be guaranteed by Fannie Mae or Freddie Mac, was increased and pegged to home prices in a geographic region. I mentioned it as the Little Footnote on the 2008 Tax Stimulus Package and it really was a boon for the higher end housing market. Well, it’s permanent now.

10% home-buyer “credit,” up to $7,500. It’s not really a credit, it’s a 15 year no-interest loan of up to 10% of a home’s purchase price, no greater than $7,500. I don’t know if this will induce many folks into buying, there’s no sense rushing to buy something if you think it’ll still go down in value. No one loses money by sitting on the sidelines in this market.

My Thoughts

Overall, I think the way the “bail out” was structured was reasonable. Borrowers might be bailed out, only if the lenders accept the writing on the walls, but they don’t get to reap any rewards on the back end. I like the idea that the government gets at least 50% of a bailed out home’s appreciated value if it’s sold or refinanced. That’s a hit and the cost of doing business. Qualified borrowers get to keep their homes, lenders don’t lose as much, both sides seem to win.

It appears that the only losers are those excluded from the deal (taxpayers included). Lenders may be stubborn and refuse to take the hit, borrowers may find themselves close but not quite over the 31% gross income rule, and others may be left out because of the date of issue on their loan.

You can’t save everyone.

(Photo: respres)

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