How We Turned the American Dream Into a Nightmare

houses as investment

I think there's a little confusion in these comments about the meaning of 'investment'. When a company invests, it spends money to acquire greater capacity to produce whatever it produces. Buying a house does not serve this function whatsoever. Buying a McMansion does nothing to help the larger economy. Buying a new computer system that increases efficiency and leads to lower prices does. The tax on buying a house and the tax on investments are serving very different ends.

amos of MA @ Jul 23, 2008 18:20:09 PM

Bailout

All aspects of the bailout bills before congress seem to benefit the housing and mortgage industries and not so much the consumers it was supposed to be for, (E.g. the Foreclosure Prevention Act which became so ludicrously for business.)

It seems the point of these bills is what the industries wanted and lobbied for; to get more home sales going. Relatively few homeowners will qualify for any benefit. Some of the perks for homeowners have to be paid back they are not permanent.

And do we really think our govt can figure out who "qualifies" for help? The govt had it's head buried when these very industries were inventing, pushing, and re-selling, toxic loans.

In an actual capitalistic economy these foolish companies would be allowed to fail just as foolish consumers are told they must learn from their failures and not expect the nanny govt to bail them out. So why are these "capitalism" loving corporations lobbying for corporate welfare? Because they are greedy hypocrites, that's why. They knew their actions were detrimental to consumers, banks, investors, and the U.S. economy in general. There were plenty of warnings but no one in a postition of authority was listening.

Helena Handbasket of AZ @ Jul 23, 2008 18:07:01 PM

problem with point one

If I remember correctly, there was a massive boost in productivity in the U.S. in recent years, and yet real wages have remained stagnant, leading to economists and business writers pooh-poohing all this talk of real wages. So I don't think it necessarily follows that productivity gains necessarily leads higher wages.

Jwarren @ Jul 23, 2008 17:23:07 PM

Umm, Stuart, you miss the point. What exact benefit do you gain by having a zero tax on a one type of investment and a 22% tax on another? Since investing money is one of the primary ingredients in economic growth, by favoring one type of investment over others you are creating a distortion in incentives. As for your critique of #3, your naivete shows. Investing is not solely limited to the rich. Do you have a 401(k)? An IRA? Annuity? Mutual Fund? Appreciated Home? More and more Americans are investors, and all benefit from lowered investment taxes. We are trying to get more people to invest their money, not close the market to them.

Ultimately, Stuart, purchasing a home is a consumption expenditure. Yes, it can be treated as an investment, but doing so can be an expensive proposition (as many are now finding out). A home's primary purpose should be home first. In this regard, because of perverse incentives in the tax code homeowners are buying more home than they need, or, in my particular case, buying homes in areas that appear to be in prime appreciation markets, but end overspending on a mortgage instead.

Chris of AZ @ Jul 23, 2008 15:19:11 PM