The solution to America’s current and long-term economic problems is to give millions of American citizens hundreds of dollars a month to spend or save, year after year. That is the argument businessman William Ulrich and PhD economist Dennis Paulaha are bringing to the table.

“It’s simple,” they say. “The US government can’t just give everyone money month after month. But it can give you a 30-year mortgage on either a new or existing primary residence at a fixed 1% mortgage rate. And if you have an existing $400,000 mortgage with a 4.1 percent mortgage rate, refinancing it at one percent puts an extra $660 a month of disposable income in your pocket.”

They say that is just the beginning. The more disposable income you have, the more you can save and spend. The more you spend, the more you add to business profits. As sales and profits increase, companies increase employment, wages, and investment. And that’s it. Thanks to you, the economy is back on track.

“It’s trickle-up textbook economics,“ they say. “We can’t fix the economy with policies that help big business and ignore basic economic facts. And the one thing economists know, and politicians like to ignore, is that the engine that drives every free production and exchange economy in the world is consumer spending. Which means the best way to get the economy rolling again is to give consumers like you more disposable income.”

Ulrich and Paulaha want their One-Percent Solution available to all financially qualified US citizens, but with a $500,000 home-value limit, and in order to prevent abuse and profiteering, the mortgages cannot be assumed by anyone other than an immediate family member.

That is their plan. And the numbers backing it up are convincing. The average mortgage rate for outstanding mortgages is about 4.1%. The average value of  outstanding mortgages is $205,000. So every $205,000 mortgage refinanced at a 1% rate adds a little over $331 a month to the homeowner’s disposable income, or about $4,000 per year. The total value of mortgages held by financial institutions is about $10 trillion. If they were all refinanced at a 1% mortgage rate, it would add almost $200 billion to consumers’ disposable income. And because economists know money spent is re-spent and re-spent, the extra $200 billion could add as much as $2 trillion to total spending, year after year. Even if only half are refinanced, it can add about $1 trillion to total spending. Which they say is what we need to pull the economy out of the hole it is in.

“The increased spending from the increase in disposable income is a solution to the short-term crisis,” they say. “Long term, the One-Percent Solution does even more. It creates wealth through equity. A 1% mortgage rate lets more families move from renting to owning, giving more families an opportunity to accumulate wealth for retirement or for their children’s education. A homeowner accumulates equity in a home as the principle is paid off year by year and also as the value of the property increases. Mortgage payments end when the mortgage is paid off. Rent payments never end. When mortgage payments end, the homeowner has even more disposable income, and also equity in the house. Renters do not have that accumulated wealth. And because rents are virtually guaranteed to increase over time, the difference between a homeowner and a renter in retirement is massive. That’s why we need more people to be owners, not renters, if we want to increase incomes, profits, and economic growth over time.”

Ulrich and Paulaha know there are financial experts out there who claim renters can also build wealth by investing the difference between rents and mortgage payments that include property taxes and insurance. But they say that argument assumes rents, which also include property taxes and insurance, will be lower for comparable properties and will not increase over time.

They say there is absolutely no data to support that assumption. Even if it were true at a point in time, they say it will not be true over time, because mortgage payments are locked in and have an end in sight while rents just keep increasing.

“Most important,” they say, “is that the rent versus own argument only applies to wealthy families. We want to make it as clear as we can that this plan is a way to bring disenfranchised people and families into the mainstream economy. There is no way moderate income families can accumulate and benefit from generational wealth if they are trapped in a rent-for-life downward spiral. A study by Brookings Institution concluded that the single most important factor in explaining generational income, wealth, and education disparities between blacks and whites is the difference in home equity caused by prejudice that keeps home values increasing at lower rates in black neighborhoods. But the
actual inequalities are even greater than those identified by Brookings, because they compared black and white homeowners, when the fact is 80 percent of black families are renters with zero equity while 80 percent of white families are owners. And that has to change. Not by hurting homeowners, but by helping more families of all colors become homeowners.”

“Let’s get one thing straight,” they say. “This is not giving money away. It is lending money that will be repaid. And as economic growth increases, so will tax revenues from the rising profits, employment, wages, and salaries. The Federal Reserve has been giving loans to banks at 0% interest, knowing some loans the banks make will not be repaid. We think it’s time for government and the Federal Reserve to help the people. If large banks and corporations can receive loans at 0%, why not 1% mortgages for people?”

Their conclusion is as good as it gets: “It will reverse the current economic decline. It will support home prices. It will let everyone save and spend more. It will increase credit availability as existing mortgages are paid off. It will create jobs. It will increase tax revenues. It will not increase the deficit. And it can be implemented immediately.”