More spending on general economic stimulus does not make sense. Everything except housing is doing fine.
Had residential investment or housing equaled its 31-year median percent of GDP, the economy would have grown an annual rate of 5.1% versus 3.0% and 4.3% versus 2.2% during the past two quarters, respectively.
Housing underperformed against its historical median by about 50% or 200 plus basis points during the last three years. The good news is the near vertical drop in housing investment, which began in 2006 finally turned into a ski jump the first quarter of this year.
Housing now contributes less as a percent of the economy than at any time post WWII. The prior low of 3.2% was set in 1982. By 1985, it rose 220 basis points to 4.4%.
Interest free federal loans for down payments to otherwise fully qualified buyers may be necessary to break the dead lock and speed the economy's recovery. The target should be homes priced below the national average. Loans repaid upon sale, less any voluntary repayments by the homeowner.
This kind of focused broad acting short-term stimulus could be a win win for all. Not everyone gains but all are better off. Real estate always appreciates from the bottom up.
Two points of GDP is worth about 3 million jobs.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.