Fiscal Commission Release Recommendations

[Peace]

I don't believe so, the lefties will still vote for him in large numbers (maybe at 90% capacity compared to the last election), the blacks will vote for him no matter what he does, the hispanics will still overwhelmingly vote for him (considering the rights rhetoric against illegal immigration) and if he got tough on spending the independents would start to move more in his direction.

 

He won't do it, he doesn't have what it takes. The Unions are the major roadblocks to getting a meaningful deficit reduction plan.

 

Just one road block. No one has the political chutzpah to do this. You think some politician is signing up for more unemployment by cutting government payrolls?

 

We will start debt reduction when it's past the breaking point. But I am pleased this is in the news. I wrote my letters yesterday.

[Magox]

You think some politician is signing up for more unemployment by cutting government payrolls?

Ummm, yes.

 

This would be wildly popular amongst conservatives and moderates.

[Alaska Darin]

There certainly would be a lot of pain in the short to mid-term forecast if the this mortgage deduction were to be eliminated, without a doubt. However, there is a strong correlation between rates of home ownership and excesses in the housing market.

 

1. Spain 85.3

2. Greece 83.6

3. Ireland 77.0

4. Italy 75.5

5. Belgium 72.9

6. Luxembourg 70.8

7. United Kingdom 70.6

8. United States 67.5

9. Portugal 65.0

 

 

This stat is a list that was comprised back in 2003, and I know for a fact that the homeownership rate went higher during the housing bubble.

 

So what can we learn from this list? I made the argument a while back that there has been a housing and credit bubble that was a couple decades in the making. US housing policy is a large contributor to the housing ownership bubble that we had and still have.

 

If you look at this list, you will see that 7 out of the top 9 in this list all had a housing bust. Is there a correlation? Yes, but does it automatically indicate causation? No. But if you look at housing policies in each one of those countries, they all promoted homeownership through one means or another.

 

You really could make the case that pro homeownership policies began during the Great Depression with the creation of Fannie Mae. When you couple Fannie Mae's more generous and accomodative mortgages that were being offered along with the beginning of the baby boomer phase when families were looking to house their new families, it is quite clear to me that there is a direct link of a dramatic spike of homeownership (which many of these homes during the financial crisis were used as fuel for the credit boom) to the bust that we went through. Homeownership was as low as 45% in 1940, by 1980 it reached 65%. Of course at that time we were going through the peak of inflation, rates soared and that number dipped back down to 63%, then of course it went back up to near 70% during the peak of our housing and credit bubble. You can see these charts on hoover.org

 

I am not making the case that large homeownership is why the bubble was burst, the case that I am making is that the bubble was made even larger because of US homeownership policies. Also, I am not saying that US homeownership policies is the sole reason for the excesses we have in US homeownership, what I am saying is that it is a CONTRIBUTING reason to excess US homeownership. There is a clear distinction between the two. Many people took equity out of their homes at peak levels. So even though many of these people bought their homes well before the year 2000, they still contributed to the credit/housing/banking bust by taking equity out of their homes at overinflated prices. Some of those people defaulted on their loans, which of course contributed to banking losses. This in fact did CONTRIBUTE to the housing/credit bubble. The larger the bubble, the larger the bust, the larger the bust, the more carnage that was left.

 

There are other ideas to lessen the pain in eliminating the mortgage deductions. First you can phase it out, and then replace it with a homebuyer savings account scheme where the government provides matching contributions to encourage access to homeownership. This is something that was proposed by the OECD. Also if we were to pursue this deduction we would have to have a major overhaul in the tax code.

 

Anyway, if you look at that list I find it more than coincidental that those countries that have high housing ownership along with pro housing policies were the countries worst hit by the Financial Crisis.

 

If you look at Germany, they have a home ownership rate of 42%. Also, they don't have homeownership subsidies like here in the U.S or like their neighbors in Europe. If you look at Germany, just about all the damage they incurred during the global credit/housing bust, was collateral damage, not one that was domestically induced.

 

I believe the evidence is overwhelming.

I believe in this completely and have said so in the past. However, cherry picking what they're going to remove/add from the tax code won't change anything. It's time for a flat tax, which will get rid of a ton of Washington bureaucracy, let people know what they truly pay, and cut off the payola crap that goes on to curry favor.

 

Of course it'll tear down the tax infrastructure, which will be horrible in the short term but it will free up the IRS to actually investigate the things they should be.

[Peace]

http://www.youtube.com/watch?v=PTUY16CkS-k

 

I might take exception with a little of this but not a lot.

Edited November 13, 2010 by Peace

[Magox]

youtube.com/watch?v=PTUY16CkS-k

 

I might take exception with a little of this but not a lot.

That is the best video EVER!!!!

[....lybob]

Don't worry about the Goldman Sachs they are doing the God's work.

[Peace]

That is the best video EVER!!!!

 

Yeah...it makes up for a few flaws with it's easy-to-digest accuracy. The best are the economists (TPS, I'm talking to you) who chime in in the comments with "I'm an economist: It's not printing money." Yeah. Whatever.

 

And regarding your note, this is me. Or I'm me. Or whatever. I am who am.

 

Are you sh&^ting me?

[DC Tom]

Yeah...it makes up for a few flaws with it's easy-to-digest accuracy. The best are the economists (TPS, I'm talking to you) who chime in in the comments with "I'm an economist: It's not printing money." Yeah. Whatever.

 

And regarding your note, this is me. Or I'm me. Or whatever. I am who am.

 

Are you sh&^ting me?

 

More than a few flaws. But it was freakin' hilarious nonetheless.

[Passepartout]

Well it is a good start. And would be great if word of mouth. Keeps it going.

[/dev/null]

youtube.com/watch?v=PTUY16CkS-k

 

I might take exception with a little of this but not a lot.

[Magox]

Check this one out:

 

 

http://www.youtube.com/watch?v=MjCBUmxVMJY&feature=related

 

[/dev/null]

Check this one out:

 

 

youtube.com/watch?v=MjCBUmxVMJY&feature=related

 

 

That's like a pixelated conversation with conner

[Peace]

Check this one out:

 

 

youtube.com/watch?v=MjCBUmxVMJY&feature=related

 

 

I am not a racist.

 

Like I am going to take the word of a racist.

 

It really does capture the essence of conversing with some here. When I try to defend my sympathy for what the Tea PArty is doing to my liberal friends, I get exactly that reaction. "They are racists, flat out." "They are Bible whackos." Its messed up.

[/dev/null]

I am not a racist.

 

Like I am going to take the word of a racist.

 

It really does capture the essence of conversing with some here. When I try to defend my sympathy for what the Tea PArty is doing to my liberal friends, I get exactly that reaction. "They are racists, flat out." "They are Bible whackos." Its messed up.

But you support the Tea Party

The Tea Party opposes Obama

Obama is Black

Therefore you support people that oppose a black man

Therefore you support the opposition to a black man

 

Ergo you are racist

 

Not trying to be a smart ass or draw unrealistic conclusions, but I have had conversations with people who think that way

[LeviF]

But you support the Tea Party

The Tea Party opposes Obama

Obama is Black

Therefore you support people that oppose a black man

Therefore you support the opposition to a black man

 

Ergo you are racist

 

Not trying to be a smart ass or draw unrealistic conclusions, but I have had conversations with people who think that way

Why would you ever do that? I mean, it's one thing on the internet when you can just go to a different web page whenever you want, but in real life you can't just click something to make the stupid go away.

[Magox]

Just one road block. No one has the political chutzpah to do this. You think some politician is signing up for more unemployment by cutting government payrolls?

 

We will start debt reduction when it's past the breaking point. But I am pleased this is in the news. I wrote my letters yesterday.

This is what I was talking about:

 

Then, on Wednesday, the co-chairmen of Obama's debt commission, unable to forge consensus among the deadlocked commissioners, came out with their own version of a plan to conquer the deficit, reduce the debt, overhaul the tax code and put entitlement programs on solid ground. It was quickly pronounced dead on arrival by no-regrets Pelosi, who called it "simply unacceptable."

 

Is this how the next two years will look? Probably. But the outline released by the commission co-chairmen, Democrat Erskine Bowles and Republican Alan Simpson, also presents an opportunity for Obama - if he's willing to triangulate. He'll have to take the perilous path of turning against his liberal base, but it just might work.

 

The Bowles-Simpson plan has something to offend everybody, as it should. It would slash spending - including for the military. It would raise tax revenue by rewriting the tax code and eliminating popular deductions. It would seek to cut Medicare costs, reduce Social Security benefits and gut agriculture subsidies.

 

On the left, the sturm und drang was predictable: The National Organization for Women called it an "assault on Social Security," the AFL-CIO said it tells "working Americans to drop dead," and Rep. Jan Schakowsky, a member of the commission, called it a "non-starter."

 

It's unsurprising that liberals feel this way, because the plan is a centrist approach developed under the supervision of Bill Clinton's former domestic policy chief. It calls for a hard-to-swallow $2 or $3 in spending cuts (depending on whether you count interest payments) for every dollar of increased taxes.

 

There were similar reactions from some of the usual suspects on the right, such as Grover Norquist's Americans for Tax Reform, which proclaimed that "support for the commission chair plan would be a violation of the Taxpayer Protection Pledge."

 

Interestingly, though, the reaction from Republican lawmakers has been significantly more favorable than McConnell's no-way, no-how view of compromise. Republican Reps. Paul Ryan (Wis.), Jeb Hensarling (Tex.) and Dave Camp (Mich.), all members of the commission, called it "a provocative proposal." Another commissioner, Sen. Tom Coburn (R-Okla.), said that "if we do the cuts, I'll go for it."

 

If a budget hawk such as Coburn can get on board, any Republican can. Beyond that, the U.S. Chamber of Commerce, which led the opposition to Democrats in 2010, conceded Thursday that "any solution will require commitment and sacrifice on both the spending and revenue fronts."

 

In those statements are the contours of a deal Obama could strike with Republican lawmakers such as Ryan, the incoming House budget chairman. For a president in urgent need of regaining his standing, the possible results must be tempting: a balanced budget, a shrinking federal debt, a long-overdue rewrite of the tax code, improving Medicare and Social Security solvency in the long run, and easing health-care costs. The political benefits could be equally enormous: taking over the main issue of the Tea Party and building a good relationship with business.

 

The questions are whether Obama is willing to stand up to Pelosi and whether he can weather the consequences of triangulating against the liberals. So far, so good. "Before anybody starts shooting down proposals, I think we need to listen," he said from Seoul, in an implicit rebuke of Pelosi. He also said that he's "prepared to make some tough decisions" and that "we're going to have to take actions that are difficult and we're going to have to tell the truth to the American people."

[finknottle]

Someone smarter than me (everybody) explain how cutting the mortgage interest deduction doesnt kill "the American Dream" of home ownership deader than Dillinger. Becuase getting that deduction is the ONLY way most can afford a home where I live.

 

I think it is quite simple.

 

People approach buying a house different than other purchases. The decide to buy, figure out what they can pay (hence the proliferation of monthly payment calculators), and - factoring in that deduction - figure out a house price they can afford, and then go shopping. Remove the deduction, and you lower the house price they are targeting.

 

So if you are a house seller and there is no deduction, you will need to adjust your selling price if you want it to move. In other words, I contend that interest deduction inflates the the cost of housing. It does not effect the number of people who buy, but simply the selling price that people name. Removing it will result in a lower priced market, with housing offering slower appreciation as an investment.

[Peace]

I think it is quite simple.

 

People approach buying a house different than other purchases. The decide to buy, figure out what they can pay (hence the proliferation of monthly payment calculators), and - factoring in that deduction - figure out a house price they can afford, and then go shopping. Remove the deduction, and you lower the house price they are targeting.

 

So if you are a house seller and there is no deduction, you will need to adjust your selling price if you want it to move. In other words, I contend that interest deduction inflates the the cost of housing. It does not effect the number of people who buy, but simply the selling price that people name. Removing it will result in a lower priced market, with housing offering slower appreciation as an investment.

 

The deduction is still in place for up to 500K.

[Nanker]

If the mortgage deduction remains on a primary residence, then the real property should not be available for use as collateral on a subsequent loan, e.g., a HELOC or a second mortgage.

Don't borrow money against the asset until you outright own that asset.

[finknottle]

The deduction is still in place for up to 500K.

 

I know. I was simply putting forward a general thesis: that housing is an example of a market where, when all is said and done, the subsidy actually goes into the pocket of the seller. A buyer buys to fit his budget. But a house is not sold to fit the sellers investment needs, or based on the cost of production. Sellers who need to sell do not have the luxury of holding out indefinately for what they think they need or deserve. Rather, the price is based on what the market will pay. Subsidize home buyers across the board, and average listing prices go up. Remove the subsidies entirely, and prices will fall.

 

In fact, we often see this phenomona with interest rates. Listing prices move to meet what people can pay, and when rates drop the prices go up.