Friday, November 21, 2008

UI-Steriods: 1,000,000 doses

It's more widespread that I thought: creditors who, in the form of extra forgiveness, reward borrowers for having low incomes. cnnmoney.com wrote yesterday:
"[Freddie and Fannie's] Streamlined Modification Program, set to launch Dec. 15, enables delinquent borrowers to get a modified mortgage that lowers payments to no more than 38% of their gross incomes. ...Several major servicers -- including Bank of America, JPMorgan Chase and Citigroup -- have recently announced expansions of their foreclosure prevention efforts, which could aid nearly a million more borrowers."

Some of these one million borrowers are dual earner households, so let's call it 1.4 million = one percent of the U.S. workforce whose incomes are going to be examined. If we take the 108% year-long forgiveness-based marginal tax rate I calculated earlier, plus a 40% tax rate on federal, social security, and state income tax, we have one percent of workforce subject to almost 150% marginal tax rates for a year. That's not pretty, but still not so widespread to reduce employment as it was in the 1930s.

But how many other people are anticipating that they will ultimately be plugged into a forgiveness formula like that?!

With banks running their own UI programs, Bush's federal extension of UI isn't helping.

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