Bush Gives His All to Crush his Approval Numbers

So let’s recap:

He’s pissed off conservatives by nominating Harriet Miers.

He couldn’t win with democrats.

So how can he piss off one of the few segments of the population that has done well under his administration??? Wait for it… Wait for it…

I’ve got it!

Eliminate the Home Mortgage Interest Deduction

And this is to be done in the wake of:

  1. Repealing the Inheritance tax
  2. Re-affirming the tax cuts on the uber-wealthy
  3. Passing the bankruptcy bill

And while some are just about to suggest that they’ll cap it rather than eliminate it, which is indeed a possibility, either way this will send a huge shock through the housing market, which will destroy a bunch of my struggling friends who have just recently scraped together enough money to buy median-priced homes in California. It won’t do much for me either, but I’ll get by, I’ll just be really pissed off.

But of course, since it is likely to disproportionately affect blue states (ya know the places that actually prospered during the past 4 years), this is a plan our tax and spend republicans can really get into…

What the hell is going on in the White House?

Hmm, interesting. I would think that the banks would be up in arms trying to stop this. They love the home equity lines of credit because they can tack fees and nice high interest rates on them. Consumers of course like them for the tax break. Heck, I was about to use mine to finance a car purchase.

I’ll tell ya, if I lose the tax deduction that line of credit is going to get shut down really quick.

I think that would be disasterous to the economy.

Could this be a distraction? It’s outrageous.

It seems like on one side you have a weird mix of republicans who want to pay the bills from Hurricane Katrina and the upper class tax cuts by passing the buck to the middle to upper middle class in blue states and leftish democrats who think the home mortgage interest deduction is an evil subsidy.

Opposing them are realtors, lenders, home builders, and I suspect an ever increasing number of homeowners. But it’s early. I think this was just a trial balloon to see if they can get away with it. I think the answer is a resounding no, but god only knows what’s next with this wacked administration.

I for one will vote for any and all candidates who oppose this. This will turn me into a one issue voter and I intend make all my elected representatives aware of it.

Hey, I’ve got an idea: take away the SUV gas guzzler deduction.

It’s a good thing you guys actually read the articles. Since that’s EXACTLY what it said was going to happen. :roll:

I have an entire family full of leftish democrats, some of whom believe all sorts of crazy shit, but I’ve yet to hear that argument put forward.

I have an entire family full of leftish democrats, some of whom believe all sorts of crazy shit, but I’ve yet to hear that argument put forward.[/quote]
Well, then, I’ll give it a shot just off the top of my head.

Let’s see … The mortgage tax deduction

  1. Encourages people to buy homes they cannot quite afford
  2. Encourages people to go deeper into debt than they can afford
  3. Artificially increases housing prices by greatly increasing demand, making people go even further into debt because of 2) and making it very difficult to afford a first home
  4. Is a deduction that greatly favors the wealthy at a given income level, since the poor are less able to own homes, therefore:
  5. Is a highly regressive deduction and very anti-worker
  6. Contributes to the stratification and lack of social mobility of this nation for the above reasons.

I’m sorry, that was poorly phrased. I have heard the argument, just not from someone I consider to be a “leftish Democrat.” More like center-right economists, typically.

Although this may just be a statement of my own ignorance.

Right-o! Carry on, then!

In fact, the current situation in San Diego is probably the single best argument that government subsidizing of home ownership has been a horrible failure. But you already knew that.

One reason for the shift: the expected demise of the alternative minimum tax. Originally designed to make sure those with high incomes didn’t deduct their tax liabilities away, the alternative minimum tax is not indexed for inflation.

As a result, the number of people who will have to pay the tax is expected to increase dramatically over the next decade, eventually incorporating much of the upper middle class.

At a meeting in July, the nine members of the tax reform panel agreed unanimously to recommend eliminating the alternative minimum tax as an unfair and poorly designed parallel tax system.

boggle

so, the AMT doesn’t work? fine, get rid of it. but how about offsetting the cost by fixing the loopholes that made it necessary in the first place instead of fucking all the rest of us over?

I have an entire family full of leftish democrats, some of whom believe all sorts of crazy shit, but I’ve yet to hear that argument put forward.[/quote]
Well, then, I’ll give it a shot just off the top of my head.

Let’s see … The mortgage tax deduction

  1. Encourages people to buy homes they cannot quite afford
  2. Encourages people to go deeper into debt than they can afford
  3. Artificially increases housing prices by greatly increasing demand, making people go even further into debt because of 2) and making it very difficult to afford a first home
  4. Is a deduction that greatly favors the wealthy at a given income level, since the poor are less able to own homes, therefore:
  5. Is a highly regressive deduction and very anti-worker
  6. Contributes to the stratification and lack of social mobility of this nation for the above reasons.[/quote]

So, the immediate effect here is a 30% or so drop in home prices. This is like throwing a hand grenade at the Federal Reserve in order to get them to raise interest rates. The housing bubble is taking care of itself right now. The ending was starting to look a lot less dreadful than it could have been.

What is now proposed will ruin anyone who bought a house assuming the existence of this deduction, which has been around forever, and which has never been adjusted for inflation, so it was becoming less of an issue all on its lonesome.

As for your individual points, now that homes will be less affordable, and rental properties will cost more to maintain, rents will go up, way up. Way to go helping the working class (point 5)! As for points 1-3, when will they ever not be true? Home ownership will remain the American dream no matter what idiotic financial planning that bureacrats throw at it. And right after home prices drop, they’ll creep back up as the people with money start buying them with cash and turning them into rentals, thus helping to complete the scenario in point 6.

While we’re on point 6, long-term investments in real estate have been pulling people out of poverty for decades. It’s an amazing way to invest on margin without nearly as many of the risks as doing margin investing elsewhere (that is until some asshole president decides to raid the game and screw the middle class).

So if points 5 and 6 are your real issue, how 'bout that inheritance tax repeal and those tax cuts for the uber-wealthy? Oh wait, don’t tell me, that’s just supply-side entrepeneurism at work, eh?

Finally, can you guess what’s going to happen to the economy itself when people stop getting all those HELOCs? But never fear, the bankruptcy bill is around to put them all into indentured servitude for the rest of their lives. Go team go!

In closing, if we were living with 2000’s tax code, I might even be persuaded to go along with reducing this deduction as part of a package of cuts aimed at curbing the deficit (oh wait, we didn’t have one of those before chimpy cut taxes and started a war with Iraq), but this situation is entirely of our government’s creation, and it remains bogus. It is political and economic suicide to promote it.

This is a tempest in a teapot. Yeah, cutting home mortgage interest deductions is an incredibly stupid idea that could very possibly cause our economy to collapse. But an idea is all it will ever be, because it will never get pass Congress. Especially not in an election year.

Oppressor, seems someone else sees this exactly the way you do (and probably more than that but reading this blog entry reminded me of your post here).

I’m starting to honestly wonder if George W. Bush hasn’t sized up his political fortunes and decided to just throw the game to see just how unpopular a President can become. Hot on the heels of the announcement that a White House panel has suggested scrapping the popular mortgage interest tax deduction, the administration has proposed an easing of pollution restrictions on power plants.

I’m only half kidding about the premise that the administration is trying to drive down Bush’s approval numbers. However, their sense of timing, putting forward a pro-polluter proposal like this right now, is stunningly awful. At the rate they’re going, I wouldn’t be surprised if next week, the administration unveils a new federal puppy kicking program to be paid for by eliminating funds for Head Start.

http://www.mydd.com/story/2005/10/14/1561/1232

He’ll probably ban Nintendogs…

I agree with Mikesofaer.

I’m having trouble making sense of your rebuttal here, since you seem to be arguing my side. You are saying that the mortgage deduction drives up home prices which drives up rents, and that is true, but that’s an argument for removing the deduction. As for points 1-3, it’s true that people go in over their heads to buy a home, but as you make it more desirable for tax reasons more people go in further over their heads. You can’t just say “American Dream” and think that makes the effect of the deduction on home purchasing decisions go away, particularly when there is already anecdotal discussion in this thread that it is a key decision-making factor. Your comment about the drop in home prices causing a flood of people buying them for rentals and a concomitant rise in home prices doesn’t really make sense, in fact if people did that it would drive rents way down as the supply of rental units ballooned.

Your comment about the tax cuts for the uber-rich don’t make any sense. The mortgage deduction is a break for the rich. There is no rent deduction, so it shifts the tax burden onto those who cannot afford a house, while simultaneously increasing home prices and pricing more people out of owning a house. This is a tax on the poor.

A reminder is in order here, I’m still just making this up. I’m sure there are actual economists out there who have better arguments.

No need to read. It’s a Bush idea, so it’s complete shite! Nevermind that it doesn’t actually change anything on a first home which is what matters for 90% of us. Come on Bob, get with the QT3 agend^M^M^M^M program!

Back in 1986, the Government removed many of the tax incentives for Commercial properties. In 5 years, the price of Commercial properties dropped 30%.