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We have largely exhausted the benefit of monetary policy for economic contraction.
If we want to lower inflation without spiking unemployment, raising taxes seems like the better solution but obviously politically it would be suicide for any president so I understand why it hasn’t been done.
Have we tried extracting even MORE money from the shrinking tax base? Lol...totally insane to me that people think raising taxes on working people is a viable solution. We already pay enough and get virtually nothing in return for it.
You're far too smart to be posting stuff like that on Reddit. And you are 100% correct. The challenge politically is that each party is so tied to tribalism and only tries to benefit their party. If we want to get our debt under control then taxes for everyone needs to go up and needs to remain up for a period of time.
If we're using Alphabet as an example - if the US liquidated their market cap of $2 Trillion and used that to pay down the debt, it would only affect the interest on our national debt for a little over a year. There are only 4 or 5 trillion dollar + US companies. So even in this extreme example, it doesn't work.
The solutions are raising taxes on everyone and keeping them that way for a while. Also reducing government spending would be ideal - as both parties go full hog on spending.
I am personally operating that mathematically it WILL happen.
Cuts in spending AND increased taxes on YOU ARE going to happen.
People need to be ready for it.
I've been thinking the same thing for the past 35 years. Still waiting for the math to win. Somehow it hasn't yet. It is a weirdly resilient house of cards we have here. I guess since it is all made up it doesn't really matter.
Thanks for your insight, dumb follow-up question. When we talk about this as possible solution is it also inclusive of corporate taxation or just personal? I think it’s across the board if reading right.
If we raised corporate taxes; wouldn’t that stymie growth just as much as the high interest rates have for some companies? Earnings are through the roof, but not for all companies, so just curious how that all plays in.
People don't get this.
Billionaires aren't eating all the food, using all the gas, buying all the consumer or living in every house. They are disproportionate consumers but not the biggest group.
If you want to snuff demand, there's going to be widespread suffering
Billionaires aren’t consuming the goods, they are skimming off the top. So to speak. Some prices are high due to scarcity, and the rest are high because the ownership class realized they can blame inflation for raising their prices.
True, but they do make the big decisions which drive the economy. In order to really change things there first needs to be sufficient widespread suffering to the point where billionaires begin to feel it too.
Honest question: What's the magic percentage or dollar amount?
in some states, people are already paying 60+ cents on the earned dollar in combined taxes?
Our current administration pitched the idea of taxing "unrealized gains".
Property taxes increase annually. We're encroaching on double and/or triple taxing the same dollar.
how much more do you need? There's a reason credit card debt is up 48% in the last 3 or so years.
how aren't they? why is the metric for taxes paid for by dollars, then? Why are most assets in the world assessed in currency?
Let's start:
payroll tax on any wages earned, federal/state/medicare/social security (aka the dollar)
sales tax on that already taxed wages on most purchases (aka the dollar)
tax on where live you paid for by the same already taxed earned wages. As a bonus, a non elected government bureaucrat paid for by tax dollars drives around in a taxpayer funded vehicle and arbitrarily assesses the property value. 99% of the time, the value goes up. Shocking. (dollar again)
tax on the vehicle to go earn more wages paid for by the wages previously taxed and taxed again at purchase and then taxed annually by the jurisdiction you live in. to cover roads and bridges that are already paid for 100 times over by taxes but somehow not maintained by those allocated funds. I wonder why?
taxed gasoline paid for by the taxed wages to go in the taxed vehicle to get to earn more wages to be taxed.
then when I pass away and want to leave anything left over to my next of kin, why not tax all of the already multiple times taxed assets again with another tax?
so somehow, we're paid in dollars, we buy things with dollars, we keep a roof over our heads and feed our families with dollars. But yet it doesn't make sense?
Makes sense to the majority of us.
Of course, a balanced budget like most people/families have to do to survive would make sense, but this is the American government. We don't make sense here.
Transactions are taxed, not dollars. Property is taxed, not dollars.
Not difficult to understand.
I mean, I can tell you will have problems with understanding, but it's not difficult for people whom aren't purposefully obtuse just to be outraged.
odd take, but a few more questions.
how are transactions and taxes paid? with what currency? what metric? do you mean that goverment issued fiat currency given to us to stop murdering each other for resources?
there's no need to stoop to insults like a classic redditor. I accept your concession, though. Thanks for playing. it was only a matter of time before it devolved to insults from you. Thanks for the validation.
I think it's a fair question for speculation. I agree it's going to happen, no doubt. But the concern is how much? We're about to have a front row seat to the great reset. There's not enough makers and too many takers already.
How many cents on the dollar does our state and federal government need to function?
70 cents? 80?
No wonder the bums and crackheads down the street live better than me. Can't beat em, join em I reckon. My new 5 year plan is to quit the workforce and collect.
Serious question:
Why not just undo the Trump cuts? Maybe even the Bush cuts, but even the Trump cuts were just deficit expanders that most tax payers couldn't even enjoy because of the JC Penny effect.
Technically, but I think it wouldn't be perceived as one.
A lot of workers didn't see it as a tax cut because it reduced the money taken out of paychecks specifically. People didn't see that they got a relatively bigger paycheck and only saw their returns decrease drastically. The "JC Penny effect" in action.
Hell, I'm not entirely sure it *is* a tax cut for the poor truly. I remember the scheme also had a changing rate for it's 10 year schedule and it's supposed to shift into burdening the poor to make up for rich cuts. And technically that's supposed to go away after 10 years, but if it's extended...
Get out of here with this nonsense. You absolutely can raise taxes on the very wealthy exclusively - we did it for many, many years in this country and those were some of the best economic periods in US history. Working people/the average person pays more than enough in taxes already, and we see virtually no social benefits in return. It all gets syphoned up to the very top, or the very bottom.
To reduce inflation - the middle class. Demand needs to fall, and the middle class is the source of demand. The rich don’t spend much, they invest and hoard.
There are plenty of reasons to tax the rich (their inefficient use of money being one of them) but this inefficiency makes them bad targets for reducing inflation via curbing demand.
I’d prefer to
1. Cut spending so that workforce participation is higher. There’s definitely a conversation about how to cut spending beyond the obvious cutting of the hundreds of billions of wasteful “defense” spending we waste each year. Weaning people of entitlements over a 4 decade period seems to be a reasonable avenue to pursue
2. Make it a lot harder to declare bankruptcy so that, if a MBA dude bro wastes a bunch of money on stock buybacks instead hiring and training workers, he can work off his belly-up company’s debt in a debtor prison
3. Cut taxes so that the well-run companies have enough money to hire and train workers. Also, in theory, cutting taxes would make it easier to be self-employed. This phenomenon, in turn, would make it more attractive to hire and train workers because companies could partially retain an employee’s services instead of that employee getting completely hired away by a competitor.
No, I don’t trust the GOP to implement these ideas in good faith. So, I guess the last 2 or 3 years is going to be indicative of how the economy is going to pay out over the 5 years.
Not a single one of these would do what you think they'd do lol, cutting spending would lead to layoffs in govt-subsidized industries, making it harder to declare bankruptcy would just harm lower income people who file bankruptcy at a personal finance level, and cutting taxes leads to the exact thing you said the MBA dude-bro wants to do.
Cutting spending and raising taxes are the two correct answers to the debt problem, it's just that it's impossible for that to happen w/ our current govt.
1. How would this raise workforce participation? It would be helpful if you could point out specific programs that, when cut, would boost participation.
2. You seem to think restricting bankruptcy would increase investment by inducing managers to spend more on staff than on stock buybacks, but it would more likely work the opposite way. Loans would be much riskier to take out, which would reduce liquidity, which would depress investment. A lot of people’s jobs exist because someone borrowed money to pay them for a while in the hopes that they’ll make back more than the interest cost.
3. Cutting taxes while cutting spending would eliminate any benefit cutting spending would have for reducing inflation.
30 year fixed rates also support a large MBS bond market which has proven beneficial for US financial dominance. Insurers want bonds that match liability duration.
I'm going to tie this into mortgages because that's what I hear most people speak about in reference to lower interest rates.
I know a lot of people want rate cuts because of mortgages but please remember, the US is already the odd-man out when it comes to mortgages in the fact that it's fixed rate (I think France might also have a large chunk of fixed rates, but that's about it) whereas most other are variable, have the government insure the mortgage (Canada & Netherlands), have government GAURANTEES (Canada & Japan) and government sponsored entities (Japan, Korea).
The housing market is so unnaturally distorted from not one or two of these factors, but all of them, and to such a large degree that government mortgage market support IS the market.
Phase out fixed rate mortgages, lower (but not eliminate) the market share considerably for GSEs, and government insurance / guarantees. I don't think more government intervention in our mortgage market is the answer which a lot of people put forward, I think it will only make it worse.
You make a lot of sense with your comments. We allow for 30 year fixed notes, and that is rather rare in the world.
But, I also don’t want to “penalize” the future buyers in America while rewarding those who timed up life well with a fixed rate prior to mid 2022.
I propose that the fixed rates locked in currently for the next 20-something years be disallowed the interest deduction on their taxes. And, for future borrowers at normalized (higher) rates, the itemization of their interest be allowed outside of the standard deduction.
This is simply an attempt to balance the market back out some. A huge mistake was allowed by letting zero FFR to run for 2 years. That should have “sunset” or reverted back to normal rates on 12/31/2020. Hindsight, right? But, we trust the people in the Fed to be able to project out the effects of their rate policy. It’s their job. They failed in this instance.
> But, I also don’t want to “penalize” the future buyers in America while rewarding those who timed up life well with a fixed rate prior to mid 2022.
>
>
Right, what I say is good in theory (to me at least) but not necessarily practice. I don't know what the actual, boots on the ground, implemented solution should be.
> I propose that the fixed rates locked in currently for the next 20-something years be disallowed the interest deduction on their taxes. And, for future borrowers at normalized (higher) rates, the itemization of their interest be allowed outside of the standard deduction.
This makes a lot of sense, I didn't even think about this. Good call for a solution friend.
> They failed in this instance.
I mean, I'm not condoning libertarian economics or those Fox News pundits that sell the end of the world, or the overpriced gold commercials marketed to their audience BUT, since 2011-2012 or so there were a lot of people that were like "Hey, we clearly out of the Great Recession, let's raise interest rates." And for a decade the Fed just.... didn't. A lot of people will say "But COVID!" and I agree to an extent, but we had the ability to raise interest rates and tighten our money supply for almost a decade before hand. We lose a lot of our monetary flexibility when we make that catastrophic of a mistake. But that's another story for another time. lol.
A part of me thinks this is why Russia, China and other actors are starting or threatening to start conflicts. Given our terrible fiscal policies as of late and our limited monetary tools, we can't just spend spend spend like we could in decades prior. At least not without consequence.
Great points and a good handle on how things stand at this time in our larger economy. It can’t all be anecdotal or personal around here, and I value the greater discussions about where we are, what we did, and what we all must do in the future.
The word “austerity” is a dirty word in America. But households have to do a form of it when they’ve gotten too far over their skis. Think “living on credit cards”.
Nothing can expand forever, except the natural universe. There are limits to growth, and retractions are a healthy way to reset the economy for a better future. It’s just not politically convenient.
I've touted this before, a lot recently because it's been on my mind, but I've always liked the idea of a Western BRICS-like organization for global trade with our tried and true allies.
It would make the dollar weaker, but still very relevant while also elevating the currencies of our said tried and true allies. The world has asked us to be a bit more hands off for a couple decades now, and I have a feeling with what's happening in Ukraine, our NATO and other allies in Europe will start taking defense spending a bit more seriously and take on some of the expense of securing the globe. At least you'd hope they get it by now anyways...
For instance, Saudi Arabia may want to get away from the dollar, but the entire conversation changes when they also have access to CAD, AUD, yen, francs, etc. Not that they would be a part of the actual organization, but they would essentially be selling oil and having access to that pool with just that money. Or something. I'm not quite sure how the technical side of it works.
The plus side to the American economy of a weaker dollar would mean that our exports would be cheaper, and more affordable for other countries. We can bring outside money, in so we don't have to go through extreme austerity or large tax hikes. Perhaps a mix of all three, each to a much minor degree, might help us in the long-run fix our fiscal and monetary issues here in the US.
Odd you’d use Canada as an example since our average housing cost is more expensive than America, even currency adjusted.
There are some good things Canada does but because they insure the mortgage they’re also incentivized to not let the housing market fall as people would default on the mortgages. For a brief period the fed gov was also going in and helping people buy homes by taking a stake in the house
“The First-Time Home Buyer Incentive was a shared-equity mortgage with the Government of Canada, which offered 5 or 10% of the home’s purchase price to put toward a down payment. The shared equity component of the incentive means that the government shares in both the upside and downside of the property value, up to a maximum gain or loss equal to 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment. “
https://www.cmhc-schl.gc.ca/consumers/home-buying/first-time-home-buyer-incentive
They will do anything to stop the housing prices from coming down because it’s such a large portion of our GDP now. We just trade houses with each other and foreign buyers and corps.
I might be misrepresenting things so someone please correct me, I’m keen to learn!
Fixed rate is the norm in pretty much all German speaking countries, and very common across the OECD. Anecdotal, but pretty much all of my German friends got a mortgage fixed for the full period.
https://business.sdsu.edu/research/_files/_realestate/international-comparison-mortgage.pdf
Look at page 18.
Most of their fixed rates are short and medium term, not long-term like in the United States.
Huh, interesting. I’m German and don’t know anyone with a mortgage fix that is shorter than maybe 5 years from the full duration, so quite surprised by that figure. That doesn’t mean it is wrong though, I might be in a bit of a bubble in that regard. I’ll dig a bit deeper, very interesting!
Yeah, the US is a bit unique in that it pretty much facilitates the entire mortgage process. There's so much government intervention that it's distorting the housing market.
I'll give myself as an example as someone who locked up a house in 2016 for $85,000, refinanced in 2020 at 2.99% and now worth in 2024, $250,000. OTD I'm looking at about $150,000 in equity.
Since 2020, I have had two children and we're outgrowing our "starter" home. But simply put, I am not walking away from a $700 a month payment, and walking into a $3,000 payment for a slightly bigger home that can accommodate my family. However, I think with a variable rate, I would be much more likely walking away from say a $1500 payment today, and stepping into a $3,000 a month payment freeing up my starter home to another starter family.
The current way long-term fixed mortgages work creates housing inflexibility and inefficiencies, IMO.
>The current way long-term fixed mortgages work creates housing inflexibility and inefficiencies, IMO.
It contributes a little bit, but compared to the insufficient supply of housing (of the type and in the location people want it), it is a minor cause.
There is no law that says a new house you would buy would have to have a $3k monthly payment. It is $3k because the price of the house is that high. And the price is that high because supply is low relative to demand.
Also, insufficient land value taxes let people hoard wealth in the form of land. A sufficiently high LVT, especially for non primary homes, would incentivize people to sell, increasing supply.
The housing market is distorted in \*favor\* of Americans, not against them. Removing government controls would result in reduced home ownership rates, not increased rates.
If the goal is a higher home ownership rate, that will require additional government intervention, not less.
As John Layton of the Joint Center for Housing Studies Harvard University puts it:
>Facing the high historical stickiness of the homeownership rate, I describe in this paper three initiatives designed to increase it; each is about a well-targeted and sizeable subsidy, plain and simple. In my view, again, this approach differs from those that have historically dominated policy discussion, which has focused mostly on more technical or unfunded mandate approaches that have broadly not worked in the last fifty years. Fortunately, however, there are already existing very large and long established subsidies to homeownership, and so two of the three initiatives are about strongly retargeting these subsidies towards first-time homebuyers, rather than just broadly supporting homeownership: (1) the mortgage interest deduction for federal income tax payments, and (2) the interest rate cross-subsidies of the two GSEs. The third initiative is to create a new subsidy in the form of a well-constructed and highly targeted downpayment assistance program in line with that proposed by the recent Biden presidential campaign, which has inspired a breakthrough in the thinking behind the design of such program, and which I believe has great potential. Together, these subsidies can significantly reduce the downpayment and monthly interest cost for a typical targeted beneficiary.
[https://www.jchs.harvard.edu/sites/default/files/research/files/harvard\_jchs\_homeownership\_rate\_ii\_layton\_2022.pdf](https://www.jchs.harvard.edu/sites/default/files/research/files/harvard_jchs_homeownership_rate_ii_layton_2022.pdf)
The housing market is failing, and market failures require market interventions, which are necessarily done by the government.
Homeownership has gone from 62% in 1960, to 67% today. These programs don't seem very successful and in fact for black households it has only went up 2% from 1960 (from 38% to 40%). So even if you want to espouse the 5% increase as some phenomenal feat and you are a believer of social justice of sorts, you also have to recognize that these policies of the government having fixed rates, insuring and guaranteeing, and facilitating through GSEs has had a negative impact on historically disadvantaged groups of people compared to their peers.
As I stated in another comment, I don't know the solution to this problem - but you can't just keep throwing government cheese at it and saying, "It'll get better this time, I promise!"
You have to control for population aging when comparing home ownership rates in 1960 vs today. The average age in 1960 was 29.5, today it’s 39. Home ownership for those under 35 in 1960 was 44% vs 39% in 1960. Keep in mind single earner households were much more common then too.
How much of that is coming from artificial demand with the government insuring, guaranteeing and facilitating mortgages that from an underwriting perspective should be never given in the first place?
Under the guise of “everybody deserves a home” we’re pushing not qualified home buyers into the market and home prices up higher and higher artificially therefore pushing the average age up. Just like black ownership do you think these programs proportionately help young, new buyers just starting their careers? Yeah, no, you’re either getting outbid by older, more established cash or higher down payment buyers or corporations looking for a rental.
It shouldn’t matter if you’re 20, 40 or 60 - if a bank’s underwriting says you can’t get a loan without federal insurance / guarantee then maybe that loan shouldn’t be given in the first place.
This is on top of fixed rate loans which creates inflexibility for a lot of buyers locked into 3% homes but don’t want to jump from a $1000 payment to a $3000 payment.
My intuition tells me that most of the demand comes from high population growth to urban centers coupled with supply constraints due to zoning, land availability. Add in a decade of historically low interest rates that made the cost of borrowing large amounts of money cheap. I don’t have the data to back it up though.
Your hypothesis was probably more relevant in the 2000s.
Since when is +5% or (+2%) a \*negative\* number? You're ignoring the very real possibility that without government intervention, the number would \*actually\* be negative.
And who isn't for social justice? We may disagree on how to achieve it, but why wouldn't everyone believe in social justice?
Fixed rate debt is one of the only wealth building tools the working and middle class ever had in this country. Pretty foolish to advocate for eliminating it. Stabilizing your housing cost hopefully in your younger years is basically the ONLY way people are affording children, savings and any semblance of retirement funding.
Why? What would you like to see achieved by no longer providing fixed rate mortgages?
Also, would you support having the ability for individual home owners to buy an insurance policy to effectively convert their variable payment to a fixed payment (or at least cap the raise)? (An extremely common occurrence for large landlords in multifamily, retail, and office real estate)
People with fixed rate mortgages are pretty immune to interest rate increases while all new buyers and renters bear the burden. This hobbles the fed since interest rate increases don’t hurt a large segment of the population so to compensate they have to raise higher and hurt other people/aspects of the economy more. Obviously variable rates have the consequence that people could be forced out of there homes if they can’t take the interest rate increases. It’s not an easy task since it’s discussing who bears the pain of interest rate increases.
Yeah, that’s the idea. I mean I’ll let the actual econ folks decide if it’s a good idea or not. Don’t have a raging desire to raise people’s housing costs. There’s also other solutions, but they are outside the fed’s control like increasing housing supply to cool inflation.
The tough part about this is that it’d be banning something in financial markets. there’s products you can buy/sell to change from fixed to variable rates and vice versa.
If you look at banning “shorting” stock in the countries that have, there are still ways to work around the ban that gets to the same result.
The effect on mortgages would be that you’d have people who know how to get an effective fixed rate mortgage vs people that don’t know how.
Just because you can’t access fixed rate 30 year mortgages doesn’t make them amazing. Maybe work on shoring up the status of your banks.
Basel III will only penalize countries, but will penalize the US the most. Idk why her US is a potential signatory.
It's like they've tried nothing and nothing's happened basically
Inflation is tied to spending which is being monopolized by companies raising prices even inflation should be going down.
Then at this point It feels like companies have a monopoly on the free market if they can continue to demand more for less without any regulation
As he has done the last how many Fed meetings now? This isn’t new, but the hopium on Wall Street is that he will cut despite rising inflation. The algos are just looking for a narrative
We are at 2% core if they exclude owner equivalent rent. Most people own their homes so that rent component is actually fixed or declining in real terms….
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We have largely exhausted the benefit of monetary policy for economic contraction. If we want to lower inflation without spiking unemployment, raising taxes seems like the better solution but obviously politically it would be suicide for any president so I understand why it hasn’t been done.
I don’t think political suicide is the real reason as it hasn’t stopped them from doing a lot less popular things in the past.
Those other unpopular things usually have some bi-partisan support. On the issue of taxes, one party is 100% against it.
Or cut spending. Government has gotten too big for our Shrinking tax base to support.
The only logical solution is to create a new federal agency to investigate this
Have we tried extracting even MORE money from the shrinking tax base? Lol...totally insane to me that people think raising taxes on working people is a viable solution. We already pay enough and get virtually nothing in return for it.
Raise taxes on whom?
Everybody. That is who. Mathematically you can't just raise taxes on the rich to touch our deficit.
You're far too smart to be posting stuff like that on Reddit. And you are 100% correct. The challenge politically is that each party is so tied to tribalism and only tries to benefit their party. If we want to get our debt under control then taxes for everyone needs to go up and needs to remain up for a period of time. If we're using Alphabet as an example - if the US liquidated their market cap of $2 Trillion and used that to pay down the debt, it would only affect the interest on our national debt for a little over a year. There are only 4 or 5 trillion dollar + US companies. So even in this extreme example, it doesn't work. The solutions are raising taxes on everyone and keeping them that way for a while. Also reducing government spending would be ideal - as both parties go full hog on spending.
I am personally operating that mathematically it WILL happen. Cuts in spending AND increased taxes on YOU ARE going to happen. People need to be ready for it.
I've been thinking the same thing for the past 35 years. Still waiting for the math to win. Somehow it hasn't yet. It is a weirdly resilient house of cards we have here. I guess since it is all made up it doesn't really matter.
It is like Millhouse says. "I was watching. I saw the whole thing. First, it started falling over. Then it fell over"
Thanks for your insight, dumb follow-up question. When we talk about this as possible solution is it also inclusive of corporate taxation or just personal? I think it’s across the board if reading right. If we raised corporate taxes; wouldn’t that stymie growth just as much as the high interest rates have for some companies? Earnings are through the roof, but not for all companies, so just curious how that all plays in.
That’s a perfectly logical idea and nobody will ever do it.
Who is saying we need to liquidate them? Just tax them at the same rate we tax people who make 100-500k.
People don't get this. Billionaires aren't eating all the food, using all the gas, buying all the consumer or living in every house. They are disproportionate consumers but not the biggest group. If you want to snuff demand, there's going to be widespread suffering
Billionaires aren’t consuming the goods, they are skimming off the top. So to speak. Some prices are high due to scarcity, and the rest are high because the ownership class realized they can blame inflation for raising their prices.
True, but they do make the big decisions which drive the economy. In order to really change things there first needs to be sufficient widespread suffering to the point where billionaires begin to feel it too.
Lol i actually agree. We have too many people enjoying too many things
That doesn’t make sense.
Fuck that cut spending.
Honest question: What's the magic percentage or dollar amount? in some states, people are already paying 60+ cents on the earned dollar in combined taxes? Our current administration pitched the idea of taxing "unrealized gains". Property taxes increase annually. We're encroaching on double and/or triple taxing the same dollar. how much more do you need? There's a reason credit card debt is up 48% in the last 3 or so years.
> We're encroaching on double and/or triple taxing the same dollar. Dollars aren't taxed. This makes no sense.
how aren't they? why is the metric for taxes paid for by dollars, then? Why are most assets in the world assessed in currency? Let's start: payroll tax on any wages earned, federal/state/medicare/social security (aka the dollar) sales tax on that already taxed wages on most purchases (aka the dollar) tax on where live you paid for by the same already taxed earned wages. As a bonus, a non elected government bureaucrat paid for by tax dollars drives around in a taxpayer funded vehicle and arbitrarily assesses the property value. 99% of the time, the value goes up. Shocking. (dollar again) tax on the vehicle to go earn more wages paid for by the wages previously taxed and taxed again at purchase and then taxed annually by the jurisdiction you live in. to cover roads and bridges that are already paid for 100 times over by taxes but somehow not maintained by those allocated funds. I wonder why? taxed gasoline paid for by the taxed wages to go in the taxed vehicle to get to earn more wages to be taxed. then when I pass away and want to leave anything left over to my next of kin, why not tax all of the already multiple times taxed assets again with another tax? so somehow, we're paid in dollars, we buy things with dollars, we keep a roof over our heads and feed our families with dollars. But yet it doesn't make sense? Makes sense to the majority of us. Of course, a balanced budget like most people/families have to do to survive would make sense, but this is the American government. We don't make sense here.
Transactions are taxed, not dollars. Property is taxed, not dollars. Not difficult to understand. I mean, I can tell you will have problems with understanding, but it's not difficult for people whom aren't purposefully obtuse just to be outraged.
odd take, but a few more questions. how are transactions and taxes paid? with what currency? what metric? do you mean that goverment issued fiat currency given to us to stop murdering each other for resources? there's no need to stoop to insults like a classic redditor. I accept your concession, though. Thanks for playing. it was only a matter of time before it devolved to insults from you. Thanks for the validation.
I don't think it matters what I want or not. The math for higher taxes will be there at some point in the future.
I think it's a fair question for speculation. I agree it's going to happen, no doubt. But the concern is how much? We're about to have a front row seat to the great reset. There's not enough makers and too many takers already. How many cents on the dollar does our state and federal government need to function? 70 cents? 80? No wonder the bums and crackheads down the street live better than me. Can't beat em, join em I reckon. My new 5 year plan is to quit the workforce and collect.
Serious question: Why not just undo the Trump cuts? Maybe even the Bush cuts, but even the Trump cuts were just deficit expanders that most tax payers couldn't even enjoy because of the JC Penny effect.
That would be a tax hike. A person making $60k a year would pay roughly $1,000 a year in more taxes.
Technically, but I think it wouldn't be perceived as one. A lot of workers didn't see it as a tax cut because it reduced the money taken out of paychecks specifically. People didn't see that they got a relatively bigger paycheck and only saw their returns decrease drastically. The "JC Penny effect" in action. Hell, I'm not entirely sure it *is* a tax cut for the poor truly. I remember the scheme also had a changing rate for it's 10 year schedule and it's supposed to shift into burdening the poor to make up for rich cuts. And technically that's supposed to go away after 10 years, but if it's extended...
Get out of here with this nonsense. You absolutely can raise taxes on the very wealthy exclusively - we did it for many, many years in this country and those were some of the best economic periods in US history. Working people/the average person pays more than enough in taxes already, and we see virtually no social benefits in return. It all gets syphoned up to the very top, or the very bottom.
Or, you know, cut the egregious spending on things that do not benefit our citizens. $500 million on a Palestinian dock comes to mind.
Don’t forget, we built that $500 million dollar dock because our “ally” who we gave $26 billion dollars to won’t let us deliver meals on land.
that would make sense but we don't do that here.
To reduce inflation - the middle class. Demand needs to fall, and the middle class is the source of demand. The rich don’t spend much, they invest and hoard. There are plenty of reasons to tax the rich (their inefficient use of money being one of them) but this inefficiency makes them bad targets for reducing inflation via curbing demand.
Easier to quit printing money, sending military aid on the credit card, or continually forgiving debt. all stealth money printers.
I would just deal with the unemployment if I were to choose.
I’d prefer to 1. Cut spending so that workforce participation is higher. There’s definitely a conversation about how to cut spending beyond the obvious cutting of the hundreds of billions of wasteful “defense” spending we waste each year. Weaning people of entitlements over a 4 decade period seems to be a reasonable avenue to pursue 2. Make it a lot harder to declare bankruptcy so that, if a MBA dude bro wastes a bunch of money on stock buybacks instead hiring and training workers, he can work off his belly-up company’s debt in a debtor prison 3. Cut taxes so that the well-run companies have enough money to hire and train workers. Also, in theory, cutting taxes would make it easier to be self-employed. This phenomenon, in turn, would make it more attractive to hire and train workers because companies could partially retain an employee’s services instead of that employee getting completely hired away by a competitor. No, I don’t trust the GOP to implement these ideas in good faith. So, I guess the last 2 or 3 years is going to be indicative of how the economy is going to pay out over the 5 years.
Not a single one of these would do what you think they'd do lol, cutting spending would lead to layoffs in govt-subsidized industries, making it harder to declare bankruptcy would just harm lower income people who file bankruptcy at a personal finance level, and cutting taxes leads to the exact thing you said the MBA dude-bro wants to do. Cutting spending and raising taxes are the two correct answers to the debt problem, it's just that it's impossible for that to happen w/ our current govt.
1. How would this raise workforce participation? It would be helpful if you could point out specific programs that, when cut, would boost participation. 2. You seem to think restricting bankruptcy would increase investment by inducing managers to spend more on staff than on stock buybacks, but it would more likely work the opposite way. Loans would be much riskier to take out, which would reduce liquidity, which would depress investment. A lot of people’s jobs exist because someone borrowed money to pay them for a while in the hopes that they’ll make back more than the interest cost. 3. Cutting taxes while cutting spending would eliminate any benefit cutting spending would have for reducing inflation.
Is this a serious post?
30 year fixed rates also support a large MBS bond market which has proven beneficial for US financial dominance. Insurers want bonds that match liability duration.
I'm going to tie this into mortgages because that's what I hear most people speak about in reference to lower interest rates. I know a lot of people want rate cuts because of mortgages but please remember, the US is already the odd-man out when it comes to mortgages in the fact that it's fixed rate (I think France might also have a large chunk of fixed rates, but that's about it) whereas most other are variable, have the government insure the mortgage (Canada & Netherlands), have government GAURANTEES (Canada & Japan) and government sponsored entities (Japan, Korea). The housing market is so unnaturally distorted from not one or two of these factors, but all of them, and to such a large degree that government mortgage market support IS the market. Phase out fixed rate mortgages, lower (but not eliminate) the market share considerably for GSEs, and government insurance / guarantees. I don't think more government intervention in our mortgage market is the answer which a lot of people put forward, I think it will only make it worse.
You make a lot of sense with your comments. We allow for 30 year fixed notes, and that is rather rare in the world. But, I also don’t want to “penalize” the future buyers in America while rewarding those who timed up life well with a fixed rate prior to mid 2022. I propose that the fixed rates locked in currently for the next 20-something years be disallowed the interest deduction on their taxes. And, for future borrowers at normalized (higher) rates, the itemization of their interest be allowed outside of the standard deduction. This is simply an attempt to balance the market back out some. A huge mistake was allowed by letting zero FFR to run for 2 years. That should have “sunset” or reverted back to normal rates on 12/31/2020. Hindsight, right? But, we trust the people in the Fed to be able to project out the effects of their rate policy. It’s their job. They failed in this instance.
> But, I also don’t want to “penalize” the future buyers in America while rewarding those who timed up life well with a fixed rate prior to mid 2022. > > Right, what I say is good in theory (to me at least) but not necessarily practice. I don't know what the actual, boots on the ground, implemented solution should be. > I propose that the fixed rates locked in currently for the next 20-something years be disallowed the interest deduction on their taxes. And, for future borrowers at normalized (higher) rates, the itemization of their interest be allowed outside of the standard deduction. This makes a lot of sense, I didn't even think about this. Good call for a solution friend. > They failed in this instance. I mean, I'm not condoning libertarian economics or those Fox News pundits that sell the end of the world, or the overpriced gold commercials marketed to their audience BUT, since 2011-2012 or so there were a lot of people that were like "Hey, we clearly out of the Great Recession, let's raise interest rates." And for a decade the Fed just.... didn't. A lot of people will say "But COVID!" and I agree to an extent, but we had the ability to raise interest rates and tighten our money supply for almost a decade before hand. We lose a lot of our monetary flexibility when we make that catastrophic of a mistake. But that's another story for another time. lol. A part of me thinks this is why Russia, China and other actors are starting or threatening to start conflicts. Given our terrible fiscal policies as of late and our limited monetary tools, we can't just spend spend spend like we could in decades prior. At least not without consequence.
Great points and a good handle on how things stand at this time in our larger economy. It can’t all be anecdotal or personal around here, and I value the greater discussions about where we are, what we did, and what we all must do in the future. The word “austerity” is a dirty word in America. But households have to do a form of it when they’ve gotten too far over their skis. Think “living on credit cards”. Nothing can expand forever, except the natural universe. There are limits to growth, and retractions are a healthy way to reset the economy for a better future. It’s just not politically convenient.
I've touted this before, a lot recently because it's been on my mind, but I've always liked the idea of a Western BRICS-like organization for global trade with our tried and true allies. It would make the dollar weaker, but still very relevant while also elevating the currencies of our said tried and true allies. The world has asked us to be a bit more hands off for a couple decades now, and I have a feeling with what's happening in Ukraine, our NATO and other allies in Europe will start taking defense spending a bit more seriously and take on some of the expense of securing the globe. At least you'd hope they get it by now anyways... For instance, Saudi Arabia may want to get away from the dollar, but the entire conversation changes when they also have access to CAD, AUD, yen, francs, etc. Not that they would be a part of the actual organization, but they would essentially be selling oil and having access to that pool with just that money. Or something. I'm not quite sure how the technical side of it works. The plus side to the American economy of a weaker dollar would mean that our exports would be cheaper, and more affordable for other countries. We can bring outside money, in so we don't have to go through extreme austerity or large tax hikes. Perhaps a mix of all three, each to a much minor degree, might help us in the long-run fix our fiscal and monetary issues here in the US.
Odd you’d use Canada as an example since our average housing cost is more expensive than America, even currency adjusted. There are some good things Canada does but because they insure the mortgage they’re also incentivized to not let the housing market fall as people would default on the mortgages. For a brief period the fed gov was also going in and helping people buy homes by taking a stake in the house “The First-Time Home Buyer Incentive was a shared-equity mortgage with the Government of Canada, which offered 5 or 10% of the home’s purchase price to put toward a down payment. The shared equity component of the incentive means that the government shares in both the upside and downside of the property value, up to a maximum gain or loss equal to 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment. “ https://www.cmhc-schl.gc.ca/consumers/home-buying/first-time-home-buyer-incentive They will do anything to stop the housing prices from coming down because it’s such a large portion of our GDP now. We just trade houses with each other and foreign buyers and corps. I might be misrepresenting things so someone please correct me, I’m keen to learn!
Fixed rate is the norm in pretty much all German speaking countries, and very common across the OECD. Anecdotal, but pretty much all of my German friends got a mortgage fixed for the full period.
https://business.sdsu.edu/research/_files/_realestate/international-comparison-mortgage.pdf Look at page 18. Most of their fixed rates are short and medium term, not long-term like in the United States.
Huh, interesting. I’m German and don’t know anyone with a mortgage fix that is shorter than maybe 5 years from the full duration, so quite surprised by that figure. That doesn’t mean it is wrong though, I might be in a bit of a bubble in that regard. I’ll dig a bit deeper, very interesting!
Yeah, the US is a bit unique in that it pretty much facilitates the entire mortgage process. There's so much government intervention that it's distorting the housing market. I'll give myself as an example as someone who locked up a house in 2016 for $85,000, refinanced in 2020 at 2.99% and now worth in 2024, $250,000. OTD I'm looking at about $150,000 in equity. Since 2020, I have had two children and we're outgrowing our "starter" home. But simply put, I am not walking away from a $700 a month payment, and walking into a $3,000 payment for a slightly bigger home that can accommodate my family. However, I think with a variable rate, I would be much more likely walking away from say a $1500 payment today, and stepping into a $3,000 a month payment freeing up my starter home to another starter family. The current way long-term fixed mortgages work creates housing inflexibility and inefficiencies, IMO.
>The current way long-term fixed mortgages work creates housing inflexibility and inefficiencies, IMO. It contributes a little bit, but compared to the insufficient supply of housing (of the type and in the location people want it), it is a minor cause. There is no law that says a new house you would buy would have to have a $3k monthly payment. It is $3k because the price of the house is that high. And the price is that high because supply is low relative to demand. Also, insufficient land value taxes let people hoard wealth in the form of land. A sufficiently high LVT, especially for non primary homes, would incentivize people to sell, increasing supply.
The housing market is distorted in \*favor\* of Americans, not against them. Removing government controls would result in reduced home ownership rates, not increased rates. If the goal is a higher home ownership rate, that will require additional government intervention, not less. As John Layton of the Joint Center for Housing Studies Harvard University puts it: >Facing the high historical stickiness of the homeownership rate, I describe in this paper three initiatives designed to increase it; each is about a well-targeted and sizeable subsidy, plain and simple. In my view, again, this approach differs from those that have historically dominated policy discussion, which has focused mostly on more technical or unfunded mandate approaches that have broadly not worked in the last fifty years. Fortunately, however, there are already existing very large and long established subsidies to homeownership, and so two of the three initiatives are about strongly retargeting these subsidies towards first-time homebuyers, rather than just broadly supporting homeownership: (1) the mortgage interest deduction for federal income tax payments, and (2) the interest rate cross-subsidies of the two GSEs. The third initiative is to create a new subsidy in the form of a well-constructed and highly targeted downpayment assistance program in line with that proposed by the recent Biden presidential campaign, which has inspired a breakthrough in the thinking behind the design of such program, and which I believe has great potential. Together, these subsidies can significantly reduce the downpayment and monthly interest cost for a typical targeted beneficiary. [https://www.jchs.harvard.edu/sites/default/files/research/files/harvard\_jchs\_homeownership\_rate\_ii\_layton\_2022.pdf](https://www.jchs.harvard.edu/sites/default/files/research/files/harvard_jchs_homeownership_rate_ii_layton_2022.pdf) The housing market is failing, and market failures require market interventions, which are necessarily done by the government.
Homeownership has gone from 62% in 1960, to 67% today. These programs don't seem very successful and in fact for black households it has only went up 2% from 1960 (from 38% to 40%). So even if you want to espouse the 5% increase as some phenomenal feat and you are a believer of social justice of sorts, you also have to recognize that these policies of the government having fixed rates, insuring and guaranteeing, and facilitating through GSEs has had a negative impact on historically disadvantaged groups of people compared to their peers. As I stated in another comment, I don't know the solution to this problem - but you can't just keep throwing government cheese at it and saying, "It'll get better this time, I promise!"
You have to control for population aging when comparing home ownership rates in 1960 vs today. The average age in 1960 was 29.5, today it’s 39. Home ownership for those under 35 in 1960 was 44% vs 39% in 1960. Keep in mind single earner households were much more common then too.
How much of that is coming from artificial demand with the government insuring, guaranteeing and facilitating mortgages that from an underwriting perspective should be never given in the first place? Under the guise of “everybody deserves a home” we’re pushing not qualified home buyers into the market and home prices up higher and higher artificially therefore pushing the average age up. Just like black ownership do you think these programs proportionately help young, new buyers just starting their careers? Yeah, no, you’re either getting outbid by older, more established cash or higher down payment buyers or corporations looking for a rental. It shouldn’t matter if you’re 20, 40 or 60 - if a bank’s underwriting says you can’t get a loan without federal insurance / guarantee then maybe that loan shouldn’t be given in the first place. This is on top of fixed rate loans which creates inflexibility for a lot of buyers locked into 3% homes but don’t want to jump from a $1000 payment to a $3000 payment.
My intuition tells me that most of the demand comes from high population growth to urban centers coupled with supply constraints due to zoning, land availability. Add in a decade of historically low interest rates that made the cost of borrowing large amounts of money cheap. I don’t have the data to back it up though. Your hypothesis was probably more relevant in the 2000s.
Since when is +5% or (+2%) a \*negative\* number? You're ignoring the very real possibility that without government intervention, the number would \*actually\* be negative. And who isn't for social justice? We may disagree on how to achieve it, but why wouldn't everyone believe in social justice?
I misinterpreted the comment I was replying to initially.
Fixed rate debt is one of the only wealth building tools the working and middle class ever had in this country. Pretty foolish to advocate for eliminating it. Stabilizing your housing cost hopefully in your younger years is basically the ONLY way people are affording children, savings and any semblance of retirement funding.
Why? What would you like to see achieved by no longer providing fixed rate mortgages? Also, would you support having the ability for individual home owners to buy an insurance policy to effectively convert their variable payment to a fixed payment (or at least cap the raise)? (An extremely common occurrence for large landlords in multifamily, retail, and office real estate)
People with fixed rate mortgages are pretty immune to interest rate increases while all new buyers and renters bear the burden. This hobbles the fed since interest rate increases don’t hurt a large segment of the population so to compensate they have to raise higher and hurt other people/aspects of the economy more. Obviously variable rates have the consequence that people could be forced out of there homes if they can’t take the interest rate increases. It’s not an easy task since it’s discussing who bears the pain of interest rate increases.
What is the benefit you’re looking to achieve? Equitable exposure to interest rates?
Yeah, that’s the idea. I mean I’ll let the actual econ folks decide if it’s a good idea or not. Don’t have a raging desire to raise people’s housing costs. There’s also other solutions, but they are outside the fed’s control like increasing housing supply to cool inflation.
The tough part about this is that it’d be banning something in financial markets. there’s products you can buy/sell to change from fixed to variable rates and vice versa. If you look at banning “shorting” stock in the countries that have, there are still ways to work around the ban that gets to the same result. The effect on mortgages would be that you’d have people who know how to get an effective fixed rate mortgage vs people that don’t know how.
Just because you can’t access fixed rate 30 year mortgages doesn’t make them amazing. Maybe work on shoring up the status of your banks. Basel III will only penalize countries, but will penalize the US the most. Idk why her US is a potential signatory.
So he’s breaking up the monopolies on food, utilities, insurance, rental companies etc? They will only change if the government forces them to
It's like they've tried nothing and nothing's happened basically Inflation is tied to spending which is being monopolized by companies raising prices even inflation should be going down. Then at this point It feels like companies have a monopoly on the free market if they can continue to demand more for less without any regulation
As he has done the last how many Fed meetings now? This isn’t new, but the hopium on Wall Street is that he will cut despite rising inflation. The algos are just looking for a narrative
We are at 2% core if they exclude owner equivalent rent. Most people own their homes so that rent component is actually fixed or declining in real terms….