Tax Break Contributed to Bubble
Don’t blame it all on Bush, or on deregulation-crazed Republicans. An article in the NY Times today suggests that the housing bubble, and its subsequent bursting, may have been aided by a Clinton cut on capital gains tax. One real estate broker made $700,000 in three years, “and thanks to a tax break proposed by…
Don’t blame it all on Bush, or on deregulation-crazed Republicans. An article in the NY Times today suggests that the housing bubble, and its subsequent bursting, may have been aided by a Clinton cut on capital gains tax. One real estate broker made $700,000 in three years, “and thanks to a tax break proposed by President Bill Clinton and approved by Congress in 1997, he did not have to pay tax on most of that profit. It was a break that had not been available to generations of Americans before him.” Such situations enticed more and more folks into real estate, making homes “tax-free windfalls” and increasing sales by 17 percent. The tax breaks caused a zeitgeist shift, whereby a home became less an abode than an investment. They admit, though, that a tax break alone is not responsible for the mess. Other reasons include “a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall.” And it turns out the tax cut came from the Clinton administration, but was in the mind of the Dole camp; they rolled out the idea first, making Clinton nervous; he pledged to cut capital gains to catch up.
Tax Break May Have Helped Cause Housing Bubble [NY Times]
Photo by Paul Graham Raven.
OK Stop the Barney Frank only bashing. The reality of this mess is mainly 2 prongs – FM/FM lenient credit practice (the Barney Frank, Clinton, W – factor) – the subprime of things.
But AIG, Lehman and others was not bankrupt because they gave out loans – but they BOUGHT and LEVERAGED bad loans. If they never “invested” in the subprime market AIG and Lehman would be functional as we speak. Some banks would have still gone down but it would have not taken down investment firms like Lehman.
And yes you can also blame the deregulation on the government (Bush, Repubs, etc) but there is no regulation to be stupid. AIG and Lehman did that on their own.
Leveraged subprime loans.
the UAW has given major concessions to the auto industry in the last few years. salaries starting around $17/hr in most plants for skilled workers. even with benefits factored in, not that much more than at non-unionized plants.
decades of lack of imagination, design, innovation, management — and still they blame labor. yawn.
OK Stop the Barney Frank only bashing. The reality of this mess is mainly 2 prongs – FM/FM lenient credit practice (the Barney Frank, Clinton, W – factor) – the subprime of things.
But AIG, Lehman and others was not bankrupt because they gave out loans – but they BOUGHT and LEVERAGED bad loans. If they never “invested” in the subprime market AIG and Lehman would be functional as we speak. Some banks would have still gone down but it would have not taken down investment firms like Lehman.
And yes you can also blame the deregulation on the government (Bush, Repubs, etc) but there is no regulation to be stupid. AIG and Lehman did that on their own.
Leveraged subprime loans.
The UAW actually conceding something? jeeze louise.
Open the borders!!!!
“the housing bubble, and its subsequent bursting, may have been aided by a Clinton cut on capital gains tax”
I say we blame it on the Sedition Act that President John Adams signed while in office.
Looks like we are getting some concessions from the UAW as part of the bailout conditions. Reality bites!!!!!
CMU;
I agree 100% with you. These tax breaks are nothing more than a subsidy for a type of consumption: home ownership. The sooner this country gets over the notion that owning a home is an “investment”, the sooner we’ll get our economic house in order.
A home is nothing more than a hard asset that depreciates over time – akin to a car. The amount of capital that we throw at this sector to prop up the value of this asset is ill-advised.
I travel to Japan often, and I believe that they have the better economic model for home ownership. In their system, the only thing of long-term value is the land itself (which in Japan especially, is a scarce commodity). The housing structure is not viewed as an “investment”, but as a depreciating asset – again, like we view a car.
I believe, therefore, that it is no accident that Japan has retained much more of its industrial infrastructure than us. They deploy more of their capital there.
I thought the republicans were responsible for everything that went wrong!!!!!??????