The recent overwhelming passage of the JOBS Act proves that when the business community unites behind legislation, even a bitterly divided Congress can act.
So next up on the business agenda should be an issue that’s less obviously a business concern but arguably more beneficial to the economy — pushing to unleash the spending power of millions of US households by clearing away barriers to refinancing for homeowners who are current on their mortgage payments.
That’s the single biggest step Washington can take to kick-start anemic consumer spending and boost businesses’ bottom lines. With mortgage rates finally creeping up from historic lows, the window of opportunity for such a sensible economic policy may be closing.
Despite a recent uptick in consumer spending, the disposable income of households dropped for the first two months of 2012. Without more customers, clothing stores, restaurants, and retailers of all types will have little incentive to expand and hire.
A broad-based refinancing program could allow as many as 25 million households to refinance from interest rates of over 5.5 percent to today’s rates of around 4 percent, according to estimates by Glenn Hubbard, dean of the Columbia Business School and George W. Bush’s former chairman of the Council of Economic Advisers. That would free up a collective $70 billion per year for stronger consumer spending, according to Hubbard and his colleagues.
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