The recent financial crisis has affected Maine people in two critical ways.

First, failure to regulate the mortgage lending industry hurt Maine homeowners.  Predatory lending practices trapped consumers in unaffordable or unreasonably structured loans, leading to delinquencies and foreclosures. Maine’s subprime delinquency rate hit 25% as of the 3rd Quarter of 2009. The lack of oversight in both banking and real estate sectors over-extended the burden of consumer debt and overheated the housing market. As a result, homeowners in general have lost wealth. This is especially acute for middle and low income families.  For a median income family their home equity represents about 35% of their wealth.

Second, the real estate and financial market meltdown and subsequently the “Great Recession” hurt Maine’s economy. The Consensus Economic Forecasting Commission estimates that through the end of last year, the recession cost Maine nearly 32,000 non-farm jobs. The unemployment rate, 4.7% in December 2007, hit 8.3% in February 2010. In construction alone, Maine lost about 4,000 jobs over the last two years. 

Under the pressure of both a depressed housing market and a falling job market, Maine’s mortgage delinquency and foreclosure rates have risen steadily.  These trends will likely continue as high unemployment and underemployment persist through the end of 2010.

To avoid such disasters in the future, MECEP strongly supports extensive financial reform as laid out in Senator Christopher Dodd’s bill, the Restoring American Financial Stability Act.  We need an independent consumer financial protection agency to protect the public from financial malpractice. More importantly, we need independent watchdogs to ensure a sound and healthy banking environment and eliminate the kind of systemic risks that threaten to bring down the entire economy. Financial reform means both financial and job security for Maine families.

The AmericaSpeaks national town meeting on the federal budget took place on June 26th, with over 3,500 participants nationwide, including more than 60 people at the University of Maine Augusta. Participants voted on issues using individual keypads, and all votes were summarized in a preliminary report distributed at the end of the day. The most popular proposals give us a good idea about what Americans think about the federal spending, taxes and the deficit.

Regarding the current recession, a slight majority (51%), was “supportive” or “somewhat supportive” of Congress spending more on programs to encourage recovery, even if the spending increases the budget deficit. A greater majority (61%) agreed government should currently be doing more to strengthen the economy.

Participants discussed how to close the deficit through a combination of raising revenues and cutting spending. Several propositions received majority support: raise the age for receiving full Social Security benefits to 69 (52%), raise the limit on taxable Social Security earnings to 90 percent of total earnings (85%) and reduce defense spending by 15% (51%).

In the arena of tax reform, 68% of participants support creation of an extra 5% tax on incomes over $1 million per year. Another popular idea was raising the tax rate on capital gains and dividends (59%), and a bare majority (51%) supported limiting the corporate deduction on the depreciation of equipment. Creation of two new taxes also received strong support: a tax on carbon emissions (64%) and a .5% tax on securities transactions (61%).

What do you think about these ideas? How would you reduce the deficit? Let us know by leaving a comment.

Additional reading:

“Deficit reduction should take a back seat to job creation” (John Irons, Fiscal High Road, a partnership between Demos, EPI and The Century Foundation, 6/30/2010)

“In deficit ‘town meetings,’ people reject AmericaSpeaks stacked deck” (John Rickey, Campaign for America’s Future, 6/27/2010)