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Yes otherwise price will fall and the world will collapse. Let the people struggle to pay mortgages and property taxes so that our banking system, local and federal governments have good health.
But the problem is it will all work until we run out of money.
The saddest part is housing and banking systems have become our core industries. They were supposed to be supporting industries.
I like to make fun of Prof. Schiller. Any one who has read my responses to the "sky is falling" threads that were getting posted as looney birds were overreacting to the S&P owned Schiller Report knows that I do not agree with the methods he has devised for charting the value / direction of home prices...
That aside, Schiller is a very bright guy, and I think it is commendable that he thinks through things that probably could use some fresh ideas. It is completely true that too many people in the US do not understand enough about the hows and whys of home ownership. When folks buy places that they'd be better off renting I am one of the first to sound a wake-up on 'em.
Big picture wise it is just about impossible to use any other country as model for having a better overall system than the US. I think economists like to pretend that Switzerland is great model for some things, but this is mostly because a) Switzerland is really terrific place to be economist, they have great conferences there and they impress the heck out of visting economists. I have been there and it is wonderful. If I could figure out a way to get invited back for free you bet I would keep saying nice things about Switzerland. Really. Awesome.
b) Switzerland has over many decades managed to keep more capital more productive than any other country. Very impressive feat. To economist this might look like a very successful economic model, but any one that knows even a little about politics will instantly see this measure of productive use of capital is really more about slow moving politics than anything else. They are more just 'neutral' in terms of the shifts internally and externally they are like lead. They don't change so much as sorta ooze when well heated.
c)Culturally it is easy to think the Swiss are sorta like Americans -- they have their frontier types, with a sorta melting point of languages, (Italian, German, French, English are all pretty universally spoken) but his is a mistake. They have MUCH MORE of a "forced common experience" than Americans. You can talk some hedge fund banker that is literally a millionaire and he really do serve in their version of the military right next to some guy that is now a truck mechanic or baker or what have you. The mechanic and baker are probably making more in take home than they would in any other country in the world, but they are far from millionaires. They do, however, have the same committment to the nice lead like politics that the bankers do. There is nothing like what happens at a US State of the Union address where the frickin' Chief Justice of the Supreme Court is scared for his safety as the President whipsaws negative emotions....
So while I think it is nice of Prof . Schiller to mention Switzerland, there is no way anything like that would work in the US. Heck the REITs that do own rentals in Manhattan are very different than the REITs that have had melt downs just a few miles away in Brooklyn. The US cannot whipsaw around into promoting renting without being more of a bull in a very fragile china shop right now.
An honest assessment of the net effect of the deductibility of real estate interest and property taxes would clearly show this is a good thing that gives our entire population a reason to model the most desirability of the Swiss: stability. The benefits you get from finding a nice place to live and sticking with it and being active in promoting the betterment of your local neighborhood are something very important.
If Schiller does not understand he really needs to get a permanent appointment at a Swiss university and leave us alone...
I believe we should subsidize those institutions that benefit our society overall, such as eduction, health care, and home ownership.
Studies show that, compared to renters, home owners stay in their communities longer, have a higher civil involvement in their communities, participate more in elections, their children demonstrate higher educational achievement, owner-occupied homes are better maintained and the home improvement benefits the economy, there is less crime in neighborhoods with high percentage of owner-occupied homes... I could go on and on.
In my opinion, the meager subsidies toward home owners are well worth the benefits.
I believe we should subsidize those institutions that benefit our society overall, such as eduction, health care, and home ownership.
Studies show that, compared to renters, home owners stay in their communities longer, have a higher civil involvement in their communities, participate more in elections, their children demonstrate higher educational achievement, owner-occupied homes are better maintained and the home improvement benefits the economy, there is less crime in neighborhoods with high percentage of owner-occupied homes... I could go on and on.
In my opinion, the meager subsidies toward home owners are well worth the benefits.
The subsidies are only worth it if home ownership is the cause and not just another benefit of something else.
The problem is, I haven't seen a study that proves that owning the home is the trigger to desired results. Just because there's a correlation between home ownership and civic involvment, does not imply that home ownership is the cause. It may very well be opposite. People who are involved in their communities perhaps are more likely to buy homes. Which, if true, would imply that the money being thrown to increase home ownership is wasted and should be spent on trying to get people more involved instead.
I believe we should subsidize those institutions that benefit our society overall, such as eduction, health care, and home ownership.
Studies show that, compared to renters, home owners stay in their communities longer, have a higher civil involvement in their communities, participate more in elections, their children demonstrate higher educational achievement, owner-occupied homes are better maintained and the home improvement benefits the economy, there is less crime in neighborhoods with high percentage of owner-occupied homes... I could go on and on.
In my opinion, the meager subsidies toward home owners are well worth the benefits.
Home ownership and propping up prices are different things. What our govt is currently doing is propping up prices by subsidies.
There is nothing like what happens at a US State of the Union address where the frickin' Chief Justice of the Supreme Court is scared for his safety as the President whipsaws negative emotions....
Is this in reference to Obama calling out The Supreme Court for their decision to allow corporations to donate unlimited amounts to political candidates? I saw nothing to indicate John Roberts was scared and I'm glad Obama said it.
And if people are really concerned about the government subsidies, maybe they should start with the ridiculous amount of money we poor into military spending. Now there's a perfect example of an unnecessary subsidy.
Just because there's a correlation between home ownership and
civic involvment, does not imply that home ownership is the cause.
Excellent post.
There's also a correlation between mass murder and having a driver's license.
( Most mass murderers have driver's licences. )
There is no reason that interest on a home loan should be tax deductable.
There is no reason that capital gains from the sale of a personal residence
should be tax-exempt.
Quote:
Originally Posted by DennyCrane
.... ridiculous amount of money we poor into military spending.
Now there's a perfect example of an unnecessary subsidy.
Note that pouring too much money military spending into will make
us poor, but that isn't a subsidy. That is an expense. That debate
also doesn't have anything to do with real estate so would be better
left out of this [Real Estate] forum -- see Military Life and Issues
or -- Politics and Other Controversies
There's also a correlation between mass murder and having a driver's license.
( Most mass murderers have driver's licences. )
There is no reason that interest on a home loan should be tax deductable. There is no reason that capital gains from the sale of a personal residence should be tax-exempt.
Note that pouring too much money military spending into will make
us poor, but that isn't a subsidy. That is an expense. That debate
also doesn't have anything to do with real estate so would be better
left out of this [Real Estate] forum -- see Military Life and Issues
or -- Politics and Other Controversies
There is no reason to tax wealth. There is no excuse for the existence of capital gains taxation. There is no valid reason for tax deductions once we stop taxing wealth.
There is no excuse for the existence of capital gains taxation ... taxing wealth.
Taxing property is a tax on wealth.
Taxing capital gains is a tax on income.
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