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The last straw
October 12, 2005 5:09 PM   Subscribe

What would it take to revolt? There has been lots of debate, lots of outrage - both false and real, justified and not, over the various foibles of the current administration and President Bush (too numerous to list here). There has also been talk about revolution, uprising, impeachment, etc, and I wonder - theoretically - just would it take for a modern individual to engage in active revolution? This for me might be it. Fortunately at least one republican representative and perhaps 69% of U.S. households are with me.
posted by Smedleyman (126 comments total) 1 user marked this as a favorite

 
Just running some possible numbers with my wife. We might have to move out of a town I grew up in. Sucks to be middle class I guess.

On the more level headed side I see Daniel Gross' point. But the Fed's been upping the rates, Fannie Mae - I don't know what the hell is happening there, and I don't see how the government could do a slow fade over time.

But I would like to see some changes.

*Sigh* and someone to cut my grass too.
posted by Smedleyman at 5:15 PM on October 12, 2005


Let me get this straight. You're saying that a proposed cut in a tax break--one that extends only to the more privileged of citizens in the US--is cause for revolt? Please. If that's all it takes to get you up at arms, then you're going to be awfully upset when the bills start coming in to pay for the spending largess of your government.
posted by runningdogofcapitalism at 5:18 PM on October 12, 2005


Impeachment? Meh. George would have to get a blowjob for *that* to happen.
posted by clevershark at 5:19 PM on October 12, 2005


Perhaps I don't fully understand how the mortgage interest tax deduction works, but this seems like it would be of negligible impact to most homeowners in most of the country, but disastrous for regular middle-class homeowners in high-priced areas like California. A mortgage of $300k-$1m covers almost the entire breadth of the housing market in SoCal. Not everyone with a mortgage in that range is filthy rich. Many are just regular middle-class families struggling to get by in the insane housing market.
posted by Joh at 5:24 PM on October 12, 2005


Punishment for Blue states.
posted by Malor at 5:26 PM on October 12, 2005


no, he'd have to get a blowjob and to lose the House + Senate to the Democrats next year and revive the Independent Counsel Statute, with Special Prosecutor Paul Krugman snooping around the White House with subpoena power and an unlimited budget just like Judge Starr did, once upon a time

many aren't holding their breath, though
posted by matteo at 5:27 PM on October 12, 2005


You're saying that a proposed cut in a tax break--one that extends only to the more privileged of citizens in the US--is cause for revolt?

Nope. Just saying a tax structure combined with that spending largess that forces me out of my home might just do it.

I know a lot of people who can't afford to live in houses they've owned for years.
Mostly due to increases and inequites in property taxes.
There are tons of other factors involved and I'm in favor of a more equal tax code, particularly in income tax, but if this confluence leads to me not being able to afford a home I've already bought and paid for, yeah, I'll be a little pissed off.

It's not this specifically, this is just the final straw.

The question posed is - what would it take?
posted by Smedleyman at 5:30 PM on October 12, 2005


*And I'm one of those ass busting middle classers with most of my capital tied up in my property - seemed like such a good idea at the time, guess I should have invested in Exxon instead of having a roof over my head.
posted by Smedleyman at 5:33 PM on October 12, 2005


This is perplexing to me. As a home owner (in so-cal) I rely heavily on the current deduction. But I also have to ask, why is it there anyway (how did it come about?) and is it some kind of entitlement?

Can anyone set me straight?
posted by snsranch at 5:37 PM on October 12, 2005


You're saying that a proposed cut in a tax break--one that extends only to the more privileged of citizens in the US--is cause for revolt?

Well, there was this.
posted by stavrosthewonderchicken at 5:38 PM on October 12, 2005


What was the American Revolution, but a tax revolt led by a few rabble-rousing rich men who didn't want to pay the taxes for the war Britain fought to save them from French conquest?
posted by jefgodesky at 5:38 PM on October 12, 2005


On preview:*And I'm one of those ass busting middle classers with most of my capital tied up in my property - seemed like such a good idea at the time, guess I should have invested in Exxon instead of having a roof over my head.
posted by Smedleyman


Yea, me too, and I'm pissed.
posted by snsranch at 5:39 PM on October 12, 2005


What would it take? Gotta hit Americans where it hurts.

Take away their booze.

The government will fall overnight.

Short of that ... I can't think of a thing.
posted by jefgodesky at 5:41 PM on October 12, 2005


Thing is, the mortgage tax deduction just jacks up home valuations by the cash benefit, since it is given to everyone buying a home.

IOW, if everyone can afford an extra $200/mo for the mortgage, the market will push up the mortgage on that property $200.

I strongly suspect the bubble has been driven by the 2001-2003 tax cuts, which have worked the same.

RE appreciation is evil. We're all working harder for less, really, unless you can cash out of one area and move to another.

Transitioning away from the interest deduction (over say 20 years) would be a very, very good thing.
posted by Heywood Mogroot at 5:42 PM on October 12, 2005


You're in luck!! I just finished cleaning my guns. and got my 30-06 sighted in for 200 yards. Dead as a pickle.
I also have too many 'secondary' firearms that jam every once in a while, or some other reason I wouldn't take it into combat that I'd be willing to lend.

The only problem I see is... Do we take out only the leaders in power, or do we take out all their supportive base?

If we're taking out the leaders, I can make it to Washington in three days. If we're taking out the base, it would be better if I stay here, and start with my neighbor on the left.

Just say the word!
posted by Balisong at 5:44 PM on October 12, 2005


I do not think The United States of America, in it's current form, is capable of revolt. Maybe a few generations down the line, if we're still here.
posted by phrontist at 5:44 PM on October 12, 2005


i love that the death of thousands of innocents, with a war criminal for a president, and you know the destruction of reason, and the environment, with the possible result of the loss of all human life on this planet cant get people upset, but you force them out of their homes and all hell breaks loose.
posted by stilgar at 5:47 PM on October 12, 2005


That sort of change had been banded about some years ago and then people realized it would damage seriously home sales and home ownership, the one thing that most Americans aspire to...the idea was dropped.

As for revolt: American had one back in 1776. One was sufficient. Now we have learned to live with any and all things our govt dumps on us, as noted in Iraq war, which we know now was based on a number of lies. Revolt? Hardly. Deficit? Piss poor health programs? changes in mimimum wage etc etc? No. We "adjust." Some spit it out and accept; others swallow and accept.
posted by Postroad at 5:47 PM on October 12, 2005


I think it might be acceptable to adjust the mortgage-interest deduction, but I would ask a few questions first...

1> Does the current mortgage-interest dededuction apply only to the primary residence of its owners, or does it apply to multiple residences? In other words, can we encourage individual home ownership while discouraging people using the mortgage-interest deduction primarily for investment purposes?

2> The biggest concern seems to be that existing homeowners in areas with high costs of living will be unable to buy houses, or could get stuck with houses that suddenly cost much more or are worth considerably less after sale, right? The idea of adjusting the mortgage-interest deduction for each market seems flawed and troublesome, but could such a cut be phased in instead?

3> If more than 60% of families who claim the deduction have household incomes between $60,000 and $200,000 , couldn't the law be tweaked to target the other 40%, especially those who are speculators who use a tax cut designed to encourage home ownership in a way that arguably decreases the chance of home ownership for everyone else?

Also worth noting:
"the Barbaro campaign . . . slammed Rep. Vito Fossella (R-Staten Island/Brooklyn) for accepting funds from developers and for having close ties to Island architectural firms, including one operated by his father."

Something tells me that the congressman you cited might be more interested in defending the tax deduction for the 40% of home owners who make more than $200,000 a year that he didn't mention, rather than for the 60% of homeowners that he did.
posted by insomnia_lj at 5:48 PM on October 12, 2005


As for revolt: It would be nice if we could actually vote people into offices who represent their constituents. We can't so revolt.
posted by snsranch at 5:51 PM on October 12, 2005


Impeachment? Meh. George would have to get a blowjob for *that* to happen.

Maybe not -- Poll: Americans Favor Bush's Impeachment If He Lied about Iraq.
posted by ericb at 5:55 PM on October 12, 2005


Also, don't we need a new "plan" to implement once in power?

In order to 'impose' a new government, don't we need a new government, with a different way of thinking and acting to pretty much be in place, ready for power?

Or do we do it on the wing, without enough troups to make a difference, and without a plan to pull us through?

Cause I've seen how that goes..
posted by Balisong at 5:56 PM on October 12, 2005


Oh yes, and I forgot to note that it wouldn't make me revolt. I might consider leaving the country though. While I know of no other country that offers such a tax deduction, if you take it away, then suddenly the US doesn't look any better than any other western country I could choose to live in. In fact it looks worse.
posted by Joh at 5:58 PM on October 12, 2005


existing homeowners in areas with high costs of living will be unable to buy houses, or could get stuck with houses that suddenly cost much more or are worth considerably less after sale, right? The idea of adjusting the mortgage-interest deduction for each market seems flawed and troublesome, but could such a cut be phased in instead?
posted by insomnia_lj


Phasing it in seems like it could work well, esp. since a lot of these pricey areas have high turnover - a lot of house sales mean a lot of transactions in which things could work themselves out.

This change actually sounds like a good idea, not cause for revolt. And I am a homeowner in one of these areas (DC).
posted by selfmedicating at 5:58 PM on October 12, 2005


I think the USA is far more likely to suffer a right wing coup a la The Handmaid's Tale than any sort of popular uprising.
posted by wilful at 6:01 PM on October 12, 2005


The mortgage interest deduction is safe. The idea is being floated by a panel, rather than suggested by the president directly, so he can see how it flies. Folks hate it, and the Republicans in Congress (who are pretty restive anyway right now) will never go along.
posted by LarryC at 6:02 PM on October 12, 2005


Its easy really: Just switch everything from individual income tax to corperate income tax. It would be plenty popular as individuals would not be paying taxes at all anymore. Wages would slowely shrink to account for the new tax, but no one would notice short term. In the long run, it would mean congressmen and corperate lobiests would be directly competing for tax money, instead of teaming up to screw everyone else.

If you want to be "progressive", you can even keep some sort of income & capital gains tax on exceedingly high incomes if you like, just keep it high enough that 99% of the population does not pay it. Of if you want to get really progressive, try increasing a companies tax rate in proportion to their "market share". Bye bye monopolies. :)
posted by jeffburdges at 6:03 PM on October 12, 2005


Americans Favor Bush's Impeachment If He Lied about Iraq.

IF?!!

What is it going to take, people?!!!
posted by sonofsamiam at 6:08 PM on October 12, 2005


Oh get a life! Unless you live in Orange County, California or some other absurd market this will not affect anyone of even above average means. The mortgage interest deduction is the big sacred cow, which perhaps needs revision. The two best reasons for keeping it are that property ownership promotes a more involved citizenry in low income neighborhoods (it puts skin in the game) and it is so popular that challenging it equates with political death. Lopping off the top end doesn't really matter much. The big problem, and why I probably wouldn't advocate it, is the regional unfairness. The last straw? Now that is funny. Good luck with your revolution.
posted by caddis at 6:09 PM on October 12, 2005


Oh, and if you want to leave, . . . don't let the door hit you on the way out.
posted by caddis at 6:10 PM on October 12, 2005


You know, the more I hear about it, a corporate income tax seems better and better than the current system...
posted by Balisong at 6:10 PM on October 12, 2005


I'm relieved to see The Wealthy finally being asked to contribute their fair share back to the society that made it possible for Smedleymen to have large homes.
posted by dand at 6:13 PM on October 12, 2005


Oh, and if you want to leave, . . . don't let the door hit you on the way out.
posted by caddis at 6:10 PM PST on October 12 [!]


Fuck off.

I'm relieved to see The Wealthy finally being asked to contribute their fair share back to the society that made it possible for Smedleymen to have large homes.
posted by dand at 6:13 PM PST on October 12 [!]


You too.

We can meet here later.
posted by snsranch at 6:21 PM on October 12, 2005


Well, I think the proper way to say it is "don't let the door hit you on the ass on your way out." So much for slightly pulling a punch.

If you are so wimpy that you feel you need to leave because the country has taken more of your precious disposable income (far in excess of most citizen's incomes)- well you said it right after you quoted me. We are better off without you. Good bye.
posted by caddis at 6:28 PM on October 12, 2005


There are already many thousands who will be forced to sell their homes when the bubble bursts. Those are the folks who will no longer be able to afford their ARM mortgages. Take away the mortgage interest deduction and thousands more will lose their homes.

If they were to implement it gradually, yes it's a good idea. However, I don't forsee the Feds bending over backwards for the sake of the middle class. Goodbye middle class! Nice knowing ya!
posted by snsranch at 6:29 PM on October 12, 2005


Before you start the revolution, you might want to look into renting as a way to avoid that $500k mortage debt, at least until the prices come down a bit.
posted by sfenders at 6:31 PM on October 12, 2005


It would take martial law, and no elections, for me.
posted by amberglow at 6:31 PM on October 12, 2005


Oh, and if you want to leave, . . . don't let the door hit you on the way out.
posted by caddis at 6:10 PM PST on October 12 [!]

Caddis, I probably didn't make my point clearly, it wasn't meant to be dramatic. I'm not a US citizen, so its not meant to be some drama-queen flouncing out of their home country in protest. What I was subtly trying to say was that the high-rate of home ownership in the US is something that makes it great (and appealed to me as an immigrant). With the current state of politics its starting to be one of the very few things, is all I meant.

And dand, in SoCal (and probably NorCal too), a mortgage >$300k doesn't mean you're wealthy. It means you have a tiny condo apt, or perhaps a very run down tiny house in a crappy part of town. Even $1m pretty much gets you a 2-bed house here. Don't imagine everyone here is some rich aristrocrat laughing into wads of cash at the tax break. Just ordinary people, trying to get by.
posted by Joh at 6:34 PM on October 12, 2005


How the hell does a middle class person afford a half-mil mortgage? If I calculated it right, the mortgage payments alone are $3,326.51 per month. What kind of middle class person has $5000/month lying around to pay bills?
posted by rolypolyman at 6:40 PM on October 12, 2005


Or do we do it on the wing, without enough troups to make a difference, and without a plan to pull us through?

Cause I've seen how that goes..


Sounds juntarrific to me!

(sorry about that ... )
posted by The Great Big Mulp at 6:42 PM on October 12, 2005


insomnia_lj writes "1> Does the current mortgage-interest dededuction apply only to the primary residence of its owners, or does it apply to multiple residences?"

The deduction applies to "qualified homes." This means your primary residence and a second home if a) you didn't rent it out during the year, or b) if you did rent it out but also lived in it for a certain defined period.
posted by mullacc at 6:43 PM on October 12, 2005


This may be what causes the real estate bubble to burst.
posted by robla at 6:43 PM on October 12, 2005


Anyone looking to move to Canada because of this, don't bother.
posted by loquax at 6:49 PM on October 12, 2005


"When Americans invest the bulk of their life savings in housing, that's a redistribution of capital from the productive business sector," said Sullivan."

Something about the worldview implicit in this quote from the Slate piece really set me off (don't think I'm gonna go revolting over it just yet, but it was a close call for a couple of seconds). Doesn't this statement, stripped of all the meaningless economic theory argot, basically just say, "Damn, if only all those pointlessly extra human beings with their petty desires to live meaningful lives and to own property would just stop leeching money away from us in the productive classes (i.e., deal-makers and hustlers) who could otherwise put all that wasted money to better uses (never mind that the tangibly productive members of the business sector are the lower-level workers, working more and more overtime every year as they struggle to pay for those very homes).

Also, don't we need a new "plan" to implement once in power?

I've been hoping for a while now to suggest a project that applies open source methodologies to the project of completely reengineering our current democratic system from the ground up, with both experts and the general public contributing their knowledge and experience. Obviously, the project is way out of my league, but I'd love to see something like it.

Basically, the idea is this: Start a web community where systems engineers, political theorists, constitutional scholars, and the general public can contribute to engineering a new system that takes into account and attempts to correct the more obvious weaknesses of the current system (I would even suggest exploring ways to make the internets the backbone of the new system, incorporating citizen web forums where people can freely sound off and participate in polls on particular political issues, secure, federally funded polling stations (with paper trails), etc--understand, these are just some suggestions for directions the discussion could take). We're not talking about some kind of utopia here, just a better system based on other models that have been demonstrated to work effectively in other places or times, along with innovations to bring the failing aspects our old system up-to-speed by leveraging newer technology and the most current human knowledge.

The next step: Draft a new constitution (or a lengthy amendment to our current constitution) based on the system, and then ratify the new constitution on-line--hopefully with enough popular support that the new constitution can't help but be recognized as legitimate.

Of course, this kind of project could only work if anyone was really sincerely interested in achieving "a more perfect democracy," and there isn't a whole lot of support for that kind of sentimental drivel these days... (The nice thing, I think, about this idea is that it represents, at least theoretically, a completely non-violent approach to revolution: The legitimacy of the new system of government would be achieved through direct popular consent. Sounds like a nice change of pace to me, if someone could pull it off.)
posted by all-seeing eye dog at 6:51 PM on October 12, 2005


Would I be opening up a big ass ugly can of worms if I questioned the apparently universal notion that promoting homeownership is always and everywhere a great idea? Admittedly the bubble has been a rough time for average folks trying to buy a home and they're gonna' be up shit's creek when the bubble bursts. That said, why did we think it was a good idea for folks who are going to lose their shirts to buy at the top of a bubble in the first place? And isn't there, like, a fairly long line of urban dev. literature arguing that even the prototypical lower middle class folks in urban areas who we're supposed to think care so much more about their formerly decaying neighborhoods after they buy have often been talked (by, for example, cheap financing and unscrupulous agents) into buying places that they can't afford and, in fact are made worse off by their purchase? I could be mischaracterizing it but I really find it hard to believe that homeownership is the unequivocal good that this conversation assumes it is. This just smells to me like another semi-fallacy of the American Dream (such as the illusion that upward mobility is available to all based solely on merit or that we should be "rugged individualists") that might do as much harm as it does good (how 'bout exclusionary zoning? gated communities?). Or, at least some harm.

forgive the rant.
posted by leecifer at 6:51 PM on October 12, 2005


This also seems like a mostly ceremonial tax increase to me. With the way the alternative minimum tax kicks in, especially in the high state tax, high property value areas, most people won't miss this tax deduction anyway. I wonder how much income it would really generate?
posted by caddis at 6:51 PM on October 12, 2005


rolypolyman: Interest-only and negative-amortization loans. They make the monthly payments doable, but they're very risky.
posted by mullacc at 6:52 PM on October 12, 2005


An interest only loan is kind of like walking up to the craps table and putting your bet on red. It might work out either really well, or really poorly for you. It is one thing with a second home that you can afford to dump, but on your primary residence it just seems too risky to me, unless you have the means to refi at a much higher rate on a traditional mortgage. Otherwise you might lose your home. I think it is better to buy a more modest home, and save some money elsewhere in the budget than take this risk.
posted by caddis at 6:58 PM on October 12, 2005


forces me out of my home might just do it.

Metafilter: When pain of action is less than the pain of inaction, its go time.
posted by rough ashlar at 6:59 PM on October 12, 2005


An interest only mortgage sounds like a great way to make monthly payments and have no capital accumulated at the end of it.
posted by clevershark at 7:00 PM on October 12, 2005


This also seems like a mostly ceremonial tax increase to me. With the way the alternative minimum tax kicks in, especially in the high state tax, high property value areas, most people won't miss this tax deduction anyway. I wonder how much income it would really generate?
posted by caddis at 6:51 PM PST on October 12 [!]


Once we take over, we'll abolish all those taxes...
posted by Balisong at 7:01 PM on October 12, 2005


An interest only mortgage sounds like a great way to make monthly payments and have no capital accumulated at the end of it.

In a rising market they work well. [In a falling market, however, ....]
posted by caddis at 7:03 PM on October 12, 2005


Boy, talk about class warfare.

So, from the looks of it, this would be likely to push a huge chunk of the middle and upper-middle classes a rather long way further down into the lower middle class, yes?

For all that some have called the folks affected by this wealthy, they are not. REALLY wealthy people generally own their homes outright - or they have a "shell corporation" which owns the house for them, if there's a mortgage involved - the "shell corporation" being nothing but a legal entity whose CEO is the wealthy person in question. Really rich people do this all the time, it's standard operating procedure. They have a corporation which owns everything they "own," so they're all "business assets."

That corporation can declare the drop in value of the home a loss, by the way, thus reducing its corporate tax burden, so this measure will actually INCREASE the amount of money in a wealthy person's pocket.

People who make $150,000 a year aren't wealthy anymore, unless they inherited their house from their parents and have no mortgage. Even then they're not WEALTHY like the real rich people in America.

If this passes, it will do precisely nothing to the real rich, while turning a lot of people's $500K houses into $280K houses, while they're still paying on a $500K mortgage. Just like getting "upside-down" on your car loan - suddenly you'll have a hell of a time trying to sell or trade that car, and even if you do, you'll still owe the rest of the money.

On a $20,000 car, that might be a loss you can deal with; on an expensive house, you're totally screwed.

And, next Monday, the new bankruptcy law goes into effect! COINCIDENCE??? Hell no.

This doesn't affect me directly, as I rent and have only debt that has a valuable asset attached to it (which I can sell if my income drops suddenly to pay it off). However, my cousin and brother both bought houses in the $400K range in New Jersey last year, and this could literally sink them financially. Not good.

rolypolyman:
"How the hell does a middle class person afford a half-mil mortgage? If I calculated it right, the mortgage payments alone are $3,326.51 per month. What kind of middle class person has $5000/month lying around to pay bills?"

A lot of them have gone the "exotic" mortgage route, the "interest only," "adjustable rate," "negative amortization" mortgages, stuff like that which allows you to buy a $500K house while making payments more in the $2000-$2500 range, or possibly even less.

I could technically afford that on my income, but damn sure I ain't crazy enough to fall for that nonsense.

oops, on preview, covered. my late bad.
posted by zoogleplex at 7:05 PM on October 12, 2005


Oh, and if you want to leave, . . . don't let the door hit you on the way out.
posted by caddis at 6:10 PM PST on October 12 [!]


You make it sound like leaving is as simple as opening a door and not letting it hit you.
posted by rough ashlar at 7:06 PM on October 12, 2005


caddis wrote:
...kind of like walking up to the craps table and putting your bet on red...
Which "red" would that be?

Because the "COME" bets are some of the best odds in a casino...
posted by spacewrench at 7:13 PM on October 12, 2005


Start a web community where systems engineers, political theorists, constitutional scholars, and the general public can contribute to engineering a new system that takes into account and attempts to correct the more obvious weaknesses of the current system

http://www.technocracy.org/ might be the closest insofar as the 'member list' matches yours.
posted by rough ashlar at 7:17 PM on October 12, 2005


Impeachment? Meh. George would have to get a blowjob for *that* to happen.

Is this something I would have to have a penis to know about?
posted by George W. Bush at 7:24 PM on October 12, 2005


interesting link, rough ashlar... maybe i shouldn't have emphasized the engineering aspect of the project i'm proposing quite so heavily, though... the community i'm envisioning would allow everyone to contribute, in accordance with their particular skill set and personal experience. i'm imagining a lot of different subject-matter oriented forums, as on MeFi, each focused on specific, practical issues related to our system of government.
posted by all-seeing eye dog at 7:28 PM on October 12, 2005


I believe that Heywood Mogroot is the only participant in the thread thus far who displays an even rudimentary understanding of economics.

And, sure, tax those corporations instead of people. You'd have to tax them at about tenfold the current rates to make up for the shortfall.

And then jobs would then just come raining out of the fucking sky.

posted by Kwantsar at 7:32 PM on October 12, 2005


all-seeing eye dog writes "Something about the worldview implicit in this quote from the Slate piece really set me off (don't think I'm gonna go revolting over it just yet, but it was a close call for a couple of seconds). Doesn't this statement, stripped of all the meaningless economic theory argot, basically just say, 'Damn, if only all those pointlessly extra human beings with their petty desires to live meaningful lives....'"

No; you're misunderstanding. Sullivan is suggesting that, if real estate weren't so heavily valued, the American middle class would be putting their savings into bank accounts, securities, and bonds. This money would then be used by companies to expand, which would result in more jobs, and to increase their productivity, which would increase salaries and improve international competitiveness.

The savings would still be owned by the middle class, and the middle class would accrue interest, dividends, and equity appreciation from it. Further, since that money wouldn't be going into bidding up the costs of homes, housing in general would be more affordable. Right now, all the productive power of that capital is being leeched away by inflation in the housing market.

Currently, the U.S. has one of the lowest savings rates in the world. This is bad for business, because it reduces the amount of available capital. It's also bad for those of us who have all of their money in real estate, because if something happens to the real estate market, we're screwed. Diversification is impossible when high home prices require you to put all of your savings in your house.
posted by mr_roboto at 7:32 PM on October 12, 2005


once again, it's called 'divide and conquer'.
posted by brandz at 7:35 PM on October 12, 2005


I rent and have bullets!
posted by Balisong at 7:50 PM on October 12, 2005


all-seeing eye dog:

Something like this?

I really wish something like this could work, I really really do, but...

(... and what's to stop someone ingenious from fouling everything up and getting a duped majority into voting for it?)
posted by PurplePorpoise at 7:50 PM on October 12, 2005


The American Taliban can have my porn when they pry it from my cold, dead hands.
posted by homunculus at 7:56 PM on October 12, 2005


I'm blown away. In my country there is no equivalent deduction, and proposals to introduce one would be opposed on the grounds that it would lead to rising house prices while eroding the revenue base.

all seeing eye dog, in response to your first question, no. If my capital is invested in the business sector, it can return an income in the form of dividends on shares or interest on bonds. If it is in my own dwelling, the only thing it can return is a capital gain when I sell, if there is one, which there may not be. Business provides jobs, goods, and services to others; my own dwelling serves no one else but me.

Distorting investment choices to privilege residential housing above other option benefits no one in the long run except real estate agents.

The real problem here is that your housing market has been so distorted by this that there's no easy way to backtrack from this stupid policy without existing homeowners suffering.
posted by i_am_joe's_spleen at 7:56 PM on October 12, 2005


Joe's spleen, i am affraid that you are right on the money re: there's no easy way to backtrack from this stupid policy without existing homeowners suffering.

It only matters because It would be nice to compare and contrast, but what country are you speaking from?
posted by snsranch at 8:01 PM on October 12, 2005


Currently, the U.S. has one of the lowest savings rates in the world.

That's a bit of an understatement. The US (and Canada too) has a household savings rate of zero, or maybe a bit less. It can't really get much lower, which means that the trend of the past twenty years is about to end.
posted by sfenders at 8:09 PM on October 12, 2005


Weeell, fuck it. I'll just move back to south-western appalachia, build a shack on some un/and/or/disappropriated land, make moonshine and shoot at anyone who doesn't call me first on my cell phone. Do they have cable down there in the tri-state area?
posted by snsranch at 8:14 PM on October 12, 2005


And then jobs would then just come raining out of the fucking sky.

See, this is one of the things that makes me angry: Why is it that no one ever seems to consider anything other than employment an option these days? Why don't we all aspire to be self-sufficient business owners? People generally don't even talk about self-employment as if it were a viable option anymore (because in most cases, it isn't--after all, how many people who aren't from wealthy families can realistically be expected to compete on even terms with the corporations that dominate?)

Economists like to talk about economic systems as if they're talking about rigidly deterministic systems governed by ineffeble forces beyond human control. And the actions of many market forces are beyond our control, to be sure (supplies of things do dwindle, after all). But most of the really important factors aren't really "forces" at all, but rather individual choices we make in the marketplace and in our lives reflected at an aggregate level.

At this point in history, we're choosing not to base our economic system on the ideal of individual enterprise, but on the ideal of collective enterprise. In this respect, we are now collectivists--effectively, communists.

That's not how the free marketplace was/is supposed to work in America, as I understand it. The federal government's role is explicitly to protect private citizens from marketplace collusion and fraud, and above all, to protect private property rights (regardless of what your personal feeling on property rights may be, that's how the law was framed).

The rules of any particular economic game are stipulated; they're not a priori truths. Human history has given rise to many successful economic systems oriented around self-employment, so it's not a matter of "normal" market forces alone driving the trend toward a job-centric economic model.
posted by all-seeing eye dog at 8:16 PM on October 12, 2005


Kwantsar, I think Heywood's right too, but I'm thinking that the sorts of jobs we ought to be able to have are pretty low priority for the very wealthy. They don't care who's slaving away for them, or who is actually working in their own country, as long as they keep getting wealthier.

The jobs aren't falling out of the sky now, either. Unless you live in India and you can speak decent English, or in some other country where the equivalent of US$0.35/hour is enough to live on comfortably.

I have little problem with taxing the people as long as it's done fairly, and I think phasing this out over time would probably be a good idea in order to increase the public coffers. However I think that first we should get rid of all those tax breaks for wealthy people - not actual businesses that contribute to our GDP, but the people who make lots of money from investment income and other non-work-for-a-living sorts of stuff. The folks with the shell corporations that I refer to above, for instance. Folks that don't work yet bring in $500K a year or more from just owning stuff or moving money around. The real rich.

The really wealthy people in this country don't pay very much in taxes, because they've bought the system and rigged it that way. I'm sure they wouldn't be happy to have to go back to paying 50% of everything they make, but that would take care of a lot of our financial woes, don't you think?

Oughtn't they, the most successful Americans, pay proportionally for the freedom and the nation that gave them the chance to get rich? I pay in about 40% of my income, why shouldn't they?

On preview, joe's_spleen has it. Most homeowners these days have all their net worth tied up in the market value of their homes as opposed to how much they owe on them (equity). The market value - and thus these folks's net worth - has been inflated and is largely illusory, as Heywood said at least partly because of this deduction. When and if the bubble bursts, all that worth is g-o-n-e GONE, poof, just like that.

Doing away with this deduction, even if done slowly, would wipe out a lot of people's illusionary net worth.

Mind you, that illusionary worth has been powering our economy for quite a while; the DiTech Magic 125% Interest Only Refinance has paid off a lot of credit cards and car loans, and oh bought a lot of new dirt bikes and plasma TVs and vacations to Cancun on top of it, and driven the real estate market to new heights on the now-even-more-debt-laden middle class, who are living in the illusion that they are rich, because the value of their homes enabled them to buy all this great stuff.

The government passes this one, and suddenly they will be shown how far they are from being rich, far far from it. Smedleyman, in posting this, has taken a look at that truth and it both terrifies him and makes him violently angry.

Yep, sounds about right, as far as humans go. Smedley, that's not a slight, your reaction is perfectly understandable.
posted by zoogleplex at 8:17 PM on October 12, 2005


Heh. Jobs? Under Republican adminsitrations, the emphasis has traditionally been on low interest rates, and with Democrats the focus has been on unemployment. High unemployment is good for employers, bad for laborers.
posted by klangklangston at 8:31 PM on October 12, 2005


Business provides jobs, goods, and services to others; my own dwelling serves no one else but me.

So basically, I shouldn't be so selfishly oriented toward the interests of myself and my family, is that what you're saying? I should sacrifice the pursuit of my own interests, to help keep the economy humming along more efficiently? Why not cut out all the damn middle men and have the service providers actually be the people who provide the services?
posted by all-seeing eye dog at 8:32 PM on October 12, 2005


Here's the problem with a second American Revolution: at the time of the English Civil War, French Revolution, American Revolution, and basically all the rest of modern Western civil uprisings, the gap between the military technologies possessed by civilians and by government were roughly the same. Muskets, rifles, cannons, swords, bludgeons, various projectile-delivery devices, etc.

Now certainly those governments had the advantage of regimented troops, fortifications, and such, but those are heavily influenceable by politics and social conditions, a fact that has caused governments to fall in the past.

Even recently, revolutions that have taken place in Africa have happened where the government and the people have access to roughly the same equipment- assault rifles, mortars etc. These governments' total military spending could easily have been less than what the US spends on thinking up new ways to kill people.

Thus, any sort of American revolution becomes completely unfeasible. Although these structures are also influenced by social and political factors, it seems less than likely that the military will try to overthrow the government any time soon. Barring that, we're screwed. All the privately owned weapons in the US proficiently manned would not stand up to the US military, and not all of them would be manned against the government or manned proficiently.

The bottom line is this: ride it out or get out of town.
posted by baphomet at 8:34 PM on October 12, 2005


Actually, on second thought: What zoogleplex said.
posted by all-seeing eye dog at 8:35 PM on October 12, 2005


So basically, I shouldn't be so selfishly oriented toward the interests of myself and my family,

I don't speak for mr_roboto, but many people feel that big tax breaks shouldn't be given for selfish orientation.
posted by Kwantsar at 8:35 PM on October 12, 2005


I agree that it would be a penalty on blue states. I still agree with it in principle.

Revolt is not possible. The United States spends something like $400 billion on defense. Forget about it.

If anything, there would be some sort of insurgency-style terrorism. Are you ready to start killing people? I think not.
posted by mrgrimm at 8:39 PM on October 12, 2005


All the privately owned weapons in the US proficiently manned would not stand up to the US military, and not all of them would be manned against the government or manned proficiently.

But realistically, if it came down to this, I would guess significant numbers of current American troops would probably opt not to fight for the existing federal government against their families and friends. Still, the point stands. On the other hand, economic revolt might be a less messy option. Something along the lines of, "Fuck 'em: Let's all just quit going to work. Forever."
posted by all-seeing eye dog at 8:41 PM on October 12, 2005


baphomet, I've said in another thread that any revolution of that sort would require a substantial portion of the officers of the US Military to be at the forefront of the revolt. Most revolutions, even the more equitable ones you cite, and including revolutions in modern times like the Russian Revolution, have required this even with the relative parity.

So, I reiterate that point, but also I say that our military is composed of people, Americans like us. I'm sure they are not all of one mind about our government, even as they serve us; the question of how many of them would really fire on just plain regular old Americans is pretty open, I think.

Don't count out their humanity. George Washington was a British officer for most of his career.
posted by zoogleplex at 8:43 PM on October 12, 2005


Kwantsar: "I don't speak for mr_roboto, but many people feel that big tax breaks shouldn't be given for selfish orientation."

If you are one of those people, then you shouldn't have a problem with a proportionally high tax rate on ALL income that rich people make, now should you. Assuming you feel that way, which you don't make clear.
posted by zoogleplex at 8:45 PM on October 12, 2005


as far as the boston tea party and the american revolution:

i think it's important to note that no additional money was asked for by the british government at that time. in fact, a large import levee on tea had been reduced by the bill that the americans objected to. They'd save money, but they'd have to agree that the former levee now be called a TAX, which was the point of contention. A tax is paid by the people of a country to its acknowledged ruler. A levee is paid by a people who are governmentally independent but financially and practically dependent on another nation. The americans decided that they would not be taxed like british citizens because they had no represnetation in the government that wanted to tax them. Hence, "no taxation without representation."

It had nothing to do with money. it was about the role of british government in their lives and the authotiry they'd let that government exert. that's why they revolted over something that, at the time, SAVED them money.

so much for ignorance.
posted by shmegegge at 8:46 PM on October 12, 2005


zoogleplex, I don't disagree with much of what you're saying. However, even though the jobs aren't currently falling out of the sky, you've (not you , per se) got to be a total fucking moron to think that severely jacking up the corporate tax rate isn't going to have serious consequences. It has the obvious side effect of discouraging capital formation and capital expenditure, but also the less obvious side effect of increased bankruptcies as corporations, rushing to take advantage of the debt tax shield, issue fucktons of debt and buy back shares. Debt multiplies the consequences of distress, everyone's restructuring, bankruptcy judges decide to cut a few pensions to save jobs, less consumption, soft labor market, et cetera, et cetera.

I know that people own tax shells (I was in the business of selling them, once upon a time), but I don't think you're going to free up too much money chasing after the .0005% (talking out my arse, but it's a small fucking number) of Americans who place their homes within these structures.

Another problem is that the longer we keep up blowing air into these asset bubbles, the more severe will be the consequences of the illusory wealth.

I think it would be fun to hash it out with you on what percentage of their incomes the wealthy ought to pay, and I'd like to see some numbers to back up your assertions, because I think they're a wee bit strong. And don't knock those top-heavy tax cuts too hard...
posted by Kwantsar at 8:53 PM on October 12, 2005


I know a lot of people who can't afford to live in houses they've owned for years.
Mostly due to increases and inequites in property taxes.
There are tons of other factors involved and I'm in favor of a more equal tax code, particularly in income tax, but if this confluence leads to me not being able to afford a home I've already bought and paid for, yeah, I'll be a little pissed off.


Sorry, I haven't read the other 80 comments, but, property taxes are paid to local governments, not the fed. How much is your house worth? A civil war would definitely damage property values, lowering your property-taxes but also destroying your investment, not to mention the economy (other then the military industrial complex, but it wouldn't make too much sense to invest in your enemy's suppliers. You'd have to be pretty sure about a victory before investing revolutionary suppliers)
posted by delmoi at 8:57 PM on October 12, 2005


I don't speak for mr_roboto, but many people feel that big tax breaks shouldn't be given for selfish orientation.

Good for you. I agree. But the enlightened pursuit of self-interest is supposed to handle evenly distributing wealth and resources in a free market system. And intentionally shaping policy to the benefit of an economic system in which the vast majority of the resources always end up back in the same hands doesn't make a whole lot of sense, from that perspective.
posted by all-seeing eye dog at 8:57 PM on October 12, 2005


Disclaimer: I'm an economist who worked for some time in the secondary mortgage industry and am now taking a tax class in law school. Just wanted to make a few basic observations.

1. Giving tax breaks for mortgage interest reduces the cost of investing in housing relative to other investment vehicles. If people actually respond to the incentive (and they do, they do in spades), then it is indeed the case that we will have relatively more of our wealth tied up in housing than in non-housing assets—as compared to what we would choose in the absence of an income tax altogether. mr_roboto is mostly right (though I'd argue about the diversification problem—the liquidity of the secondary market actually makes diversification much easier, as costs are dropping rapidly for pulling equity out of housing). This shift in incentives may be good social policy over a short horizon, but it may mean very bad things in the long run, as you'll see an influx in foreign investment and a decline in US wealth relative to countries without such strong housing incentives (basically everyone else). Coupled with the already alarmingly large trade deficits for the past many, many years, the US will be in a world of hurt in the coming centuries.

2. A pure corporate income tax would exacerbate the problem, by essentially taxing only investment returns. It may seem paradoxical, but a pure wage tax, with no corporate taxes, would be essentially equivalent to a consumption tax, which would leave investment incentives unchanged, unlike our current system. And naturally, such tax systems could be structured to avoid regressivity problems.

Crap. Gotta run. Perhaps more later/tomorrow.
posted by dilettanti at 8:59 PM on October 12, 2005


(sorry--don't know what that snarky "Good for you" thing was about. getting blurry-eyed drunk, at this point. best check out now.)
posted by all-seeing eye dog at 9:01 PM on October 12, 2005


There are a few things I would kill and die for.

The right of Smedleyman to keep his house in California is not one of them. If you bought or refie'd a house with income margins so thin as to require a government subsidy (and lets be clear, that is exactly what it is) to make it work, then I'm sorry, but my sympathy does not extend to taking up arms to defend your. fucking. lifestyle. choice.
Apologies if that seems harsh, but I imagine a fair portion of America would agree with me.

*Sigh* and someone to cut my grass too.
No offense, but if you can't afford to pay a neighbor kid 25 bucks a week to cut your grass when you don't feel like it, you aren't middle-class enough to own a 300-500K house.
posted by Chrischris at 9:02 PM on October 12, 2005


But the enlightened pursuit of self-interest is supposed to handle evenly distributing wealth and resources in a free market system.

Says who?
posted by Kwantsar at 9:04 PM on October 12, 2005


If I'm getting it wrong kwantsar, just say so, and explain why. I'm a humanist; I would literally never claim to be an economist.
posted by all-seeing eye dog at 9:06 PM on October 12, 2005


okay--fair enough. I'm mixing up a few concepts. No wealth distribution; just optimization of market values.
posted by all-seeing eye dog at 9:07 PM on October 12, 2005


FWIW, most of the american independence wars, including the US one, weren't precisely "popular uprisings", but rather led, financed and pushed foward by the landowners who were tired of paying taxes to the king/queen in the old country and wanted to start collecting taxes for themselves.
So who would pay for a revolution in the US now?
posted by signal at 9:14 PM on October 12, 2005


Well, I'm not up for a game of educate-the-drunk-guy, and I can't replicate three centuries of economic thought in a MeFi comment, but enlightened self interest is supposed to allocate capital to its most productive uses, reward work (and talent), and provide incentives. Remember that in a free exchange, each party gives up something he values less in exchange for something he values more.

I think it's damn good at #1 and #3, and piss poor (but better than the alternatives) at #2.

I am growing increasingly sympathetic to Georgism-- I think capitalism does a good job with 2/3 of the factors of production, but land is really a bitch.
posted by Kwantsar at 9:18 PM on October 12, 2005


Whoever thinks that American will ever assemble in large enough numbers to stand successfully against even just their local PD -- which in some cases can rival small national armies in terms of numbers and firepower -- has to be trippin'.
posted by clevershark at 9:23 PM on October 12, 2005


Whoever thinks that Americans will ever assemble in large enough numbers to stand successfully against even just their local PD -- which in some cases can rival small national armies in terms of numbers and firepower -- has to be trippin'.
posted by clevershark at 9:23 PM on October 12, 2005


Kwantsar: "However, even though the jobs aren't currently falling out of the sky, you've (not you , per se) got to be a total fucking moron to think that severely jacking up the corporate tax rate isn't going to have serious consequences."

Heh, we sure agree there. I advocate no such thing! Although, I'd like to see the "offshoring" of corporate "headquarters" stop, so that at least they'd pay in a reasonable share of taxes. Of course, that's the same as jacking up their taxes... it's certainly going to have serious consequences, in any event.

"I know that people own tax shells (I was in the business of selling them, once upon a time), but I don't think you're going to free up too much money chasing after the .0005% (talking out my arse, but it's a small fucking number) of Americans who place their homes within these structures."

Since I've read that apparently the top 1% in terms of annual income in the US command some 50%+ of the actual dollar figure of that income, I'd have to disagree (although we're both pulling numbers out of our butts, heh... was it good for you?). Since I've also read that apparently the top 1% in personal net worth have an even higher percentage of the actual wealth, I'm thinking that hitting up that top 1% for a tax rate similar to my own (about 30% effective Federal, not including SSI and Medicare) would get a rather large chunk of cash. See here for some of the info I'm working from.

"I think it would be fun to hash it out with you on what percentage of their incomes the wealthy ought to pay, and I'd like to see some numbers to back up your assertions, because I think they're a wee bit strong."

That would be interesting. I'm not an economist or any sort of financial person, I'm an artist, so I can only offer my opinion regarding stuff I've read and chased down. I'm sure we're both a bit off in one direction or the other, but I'm pretty certain that right now rich folk aren't paying their fair share.

Rich Dad, Poor Dad was quite an eye-opener for me, as was seeing some of the author's live presentations; someone asked him how much income you have to be making in order to embark on his recommended real estate deals, he said (quoting as nearly as possible), "if you make less than $500,000 a year, I recommend starting a home business to get to that level."

$500,000??? The number of people with salaries that high in the US can't be more than 1 million people, at best (according to L-Curve.org, the number of Americans reporting income greater than $1 million was only about 144,000 in 1997, so I'm being generous even 8 years later for folks making half that). Most people don't make a tenth of that - so the truth about Kiyosaki's blue-sky promises is that you already have to be rich to be successful at getting rich. Plus it seems like he's gotten rich simply by doing seminars and selling his book. Kudos to him for achieving this, but his pronouncements are deceptive.

For everyone who is successful in that sort of game, there are dozens who fail - just like in every venture in life.

"But the enlightened pursuit of self-interest is supposed to handle evenly distributing wealth and resources in a free market system.

Says who?"


I believe his name was Smith!

However... this is not a free market. The people with the most invested in the market have the most influence on it, and on the governments that oversee it. Them ain't us, kids. They continue to manipulate the markets and circumstances so that all the money gets sucked up to them, allowing us just enough "consumer power" at each level to keep us happy.

It's not an enlightened pursuit, it's just the same old crap humans have always done - a few sneaky bastards have gamed the system in their favor, and the rest of us are their slaves, of one kind or another. Debt is just another kind of slavery, although the cage is pretty nicely furnished with all the TVs and SUVs etc. :)

"Georgism-- I think capitalism does a good job with 2/3 of the factors of production, but land is really a bitch."

Yeah, no kidding - but the land problem is driven not by economics, but directly by population, and really nothing else. More people, same amount of land, but it has to support more people. The economics of that are second-order function of the physical energy production limits of the land.
posted by zoogleplex at 9:36 PM on October 12, 2005


I think it's damn good at #1 and #3, and piss poor (but better than the alternatives) at #2.

I agree kwantsar (and to be fair, I'm not that drunk yet); in fact, that's not too far off of the general thrust of my argument. But I'm bowing out before I expose any more of my general ignorance of the rigorous science of economics...
posted by all-seeing eye dog at 9:41 PM on October 12, 2005


snsranch, I live in New Zealand, which has one of the simpler income tax codes in the developed world. No state taxes, because we have no state or federal subdivisions. Goods and services tax of 12.5% on everything, no exceptions. Almost no deductions for anything except childcare (up to $900 per year, I think) and charitable donations.

The party most likely to form a goverment from our recent election campaigned on changes to the tax code that will allow rebates for families with children; something you already have that we don't yet. And people complained that breeders would be unfairly privileged by this poicy.

Our equivalent problem to your mess is that we have no capital gains tax on property sales, unless you are in the business of trading in property for a living (in which case the profit is treated as taxable income). The effect of this is that people speculate in residential property, hoping that by staying "amateur" they will evade the tax department. Thus we have our own wee housing bubble arising from a different tax distortion.
posted by i_am_joe's_spleen at 9:43 PM on October 12, 2005



I think the USA is far more likely to suffer a right wing coup a la The Handmaid's Tale than any sort of popular uprising.

How the hell does a middle class person afford a half-mil mortgage? If I calculated it right, the mortgage payments alone are $3,326.51 per month. What kind of middle class person has $5000/month lying around to pay bills?

If I married a female duplicate of myself me and my wife could cover the payment, and have a whole $2k/mo left over for beans and rice for me and our four genetically identical children as well as student loan payments. (I bike a couple blocks to work, and so would she, I guess).

Personally, I would never buy a home as an investment. There's a lot more money to be made in Oil these days. I pay, lets see, $7k/year in rent and another $1.2k/year for the electrical bill in this poorly engineered shithole. Paying rent for the rest of my life might cost me about a million 2005 dollars if I stay in the same level of APT for my whole life. I figure: eh.


And, sure, tax those corporations instead of people. You'd have to tax them at about tenfold the current rates to make up for the shortfall.

And then jobs would then just come raining out of the fucking sky.


What I'd like to see is an anti-capital gains tax. If earn less then the growth of the GNP on all your assets in that year, you have to pay a tax relative to your (relative) loss. People living check-to-check wouldn't pay a dime, regardless of how large the check was. If property values went up, you wouldn't have to pay any taxes on your property that year.

Actualy we would probably exempt the first $500k of house or something like that, depending on how all the spreadsheets turned out. (And there would be a lot of 'em, I'm sure)

The jobs aren't falling out of the sky now, either. Unless you live in India and you can speak decent English, or in some other country where the equivalent of US$0.35/hour is enough to live on comfortably.

Sell your house and move to India. It's not very hard to immigrate, and the economy is going gangbusters (not growing as fast as china, but better then the US, I believe). Your mansion will probably appreciate a lot more there then here over 20-30 years, I would imagine. And English is widely spoken, by the way. And it's not like Japan where half the population "knows" English but no one can speak or understand it…

Finally, bit more on the economics of revolution. You don't really need to conquer the government, just convince people to vote your way. That's called "terrorism" of course, but for a small issue like yours, (which only affects a small class of people) I would imagine that a 10-20 year terrorist campaign could effect the electorate and get your way.

Hell, if all you want to do is make money, just buy stock in certain companies, and then bomb their competitors. You'd be buying back your house in no time.

Or you could simply become a common criminal, I would imagine robbing small-town banks would pay better dividends then fomenting revolution.
posted by delmoi at 9:44 PM on October 12, 2005


large enough numbers to stand successfully against even just their local PD

Dude, didn't you see Robocop 3? You don't need large numbers, you just gotta teach Robocop to fly.

dilettanti: the liquidity of the secondary market actually makes diversification much easier, as costs are dropping rapidly for pulling equity out of housing

How's that work? That secondary market no doubt plays some role in keeping mortgage interest rates down, but they've been rising for a while now. So shouldn't the cost of "equity extraction" be rising?

Anyway. Many countries have ridiculous house price inflation. It's a global phenomenon, and I think it has little to do with the tax deduction. Removing the tax deduction might cause some sudden price decline, but at this point any other excuse would do just as well. This market is not in the mood to respond rationally to incentives right now.
posted by sfenders at 9:51 PM on October 12, 2005


I think the USA is far more likely to suffer a right wing coup a la The Handmaid's Tale than any sort of popular uprising.

Err, that was supposed to be italicized in my above comment. I suppose I had a response to it, but I've forgotten it now.

/sleepy + drunk.
posted by delmoi at 9:53 PM on October 12, 2005


Sorry, I haven't read the other 80 comments,

If you had, you would have noticed most of the lets-have-a-revolution have the 'tude only AFTER their homes have been taken via the tax law change.

so "property damage" ain't an issue as they lost the property.

Almost any 'armed revolution' will just result in the 'revolutionaries' be branded terrorists, with new laws/enforement to 'protect the citizens' (read: keep the present power structure)

Your only "vote" is where you spend your money - wanna be a 'revolutionary' - start thinking about how you are going to spend your money to not support the power structure. And when you've figured out what works, let us all know.
posted by rough ashlar at 9:54 PM on October 12, 2005


Oh now delmoi. You're just talking crazy talk. Highly entertaining, though!

I am actually somewhat seriously considering buying a house in a nice little town somewhere in Mexico, where I can get something rather nice for a pittance monthly payment, that I can afford on top of my current rent. I'm told $70,000 will get you a pretty large house with servant's quarters - imagine that?! - golly I would never want servants, so I'd go for something modest and comfortable, which would cost what? $30K?

I'd rent it to someone local to at least partially offset the payments. By the time I pay it off I will be ready to retire, and I can expatriate and live in relative comfort off my Social Security (at least if it still exists... but I have some other retirement money). Gives me plenty of time to become fluent in Spanish, too.

Anyway, back on topic, I feel pretty bad for anyone who's bet the farm, so to speak, on the real estate bubble. It's probably going to pop regardless of whether they change the deduction, and it will hurt all of us.
posted by zoogleplex at 9:55 PM on October 12, 2005


This market is not in the mood to respond rationally to incentives right now.

You make it sound like markets arn't being manupulated?
posted by rough ashlar at 9:59 PM on October 12, 2005


Related AskMefi.

Semi-related AskMefi.
posted by orthogonality at 10:59 PM on October 12, 2005


so much for ignorance.

Fair enough. I went for the quick score without thinking it through. So sue me, I'm Canadian.
posted by stavrosthewonderchicken at 11:47 PM on October 12, 2005


In order for impeachment proceedings to commence, I think Bush would have to either:

--come out of the closet,

--admit that he knew there were no weapons of mass destruction in Iraq, or

--rape a small child on the White House lawn with the press in attendance.
posted by deusdiabolus at 2:20 AM on October 13, 2005


stavros,

check my history, though. I did very poorly on it in high school. I could be wrong. In which case I went for the quick score without thinking it through.
posted by shmegegge at 5:14 AM on October 13, 2005


sfenders: "dilettanti: the liquidity of the secondary market actually makes diversification much easier, as costs are dropping rapidly for pulling equity out of housing"
How's that work? That secondary market no doubt plays some role in keeping mortgage interest rates down, but they've been rising for a while now. So shouldn't the cost of "equity extraction" be rising?


There are two issues here. At this moment, interest rates are rising, so any new loan costs more in that respect than a fixed-rate loan originated a year ago. But this is an accident of the current economic environment, and you'd be facing increasing rates on new loans with or without the secondary market. Moreover, if you bought a house with an adjustable-rate mortgage, or you buy it now, then it's a wash, anyway. Of course, the necessary comparison is what rate you'd be paying in the absence of a secondary market. Interest rates would be even higher (at least for conforming loans).

But there are additional costs to pulling equity out of a home. The additional "costs" include the origination cost of the loan and the portion of the interest rate you pay on the loan that is due to increased default risk (and also credit constraints, if they bar you from obtaining a bigger loan). When you pull equity out of your home by refinancing, taking out a second mortgage, or drawing on a home-equity line of credit (HELOC), you pay higher interest rates because you have less of a stake in your home and pose a greater risk of not paying your loan. The secondary market has driven origination costs down by standardizing the loan application process, automating the process, and increasing the consistency and accuracy of risk evaluations on loan applications. The dramatic improvements in credit risk evaluation has also made credit more accessible and has driven down the risk premium. It can now cost as little as a few hundred dollars to originate a new loan (after sitting in front of a broker/lender for as little as half an hour) and lenders have a much better view of the additional risk you'll pose, and no longer have to charge you for their uncertainty. Compared to twenty years ago, it is now much easier and less costly (in terms of origination and credit risk costs) to pull equity out of a home.
posted by dilettanti at 6:43 AM on October 13, 2005


I think the policy is a good one. Property values have skyrocketed, especially in the past few years. Many people are unable to afford decent housing and those that do have to spend SO much of their net worth to obtain it. What's more, if the housing "bubble" (which almost everyone agrees we're on) bursts (which bubbles have a tendency of doing) it would be disaster for lots of people and our economy as a whole.

Repealing this tax break would mean less people like Smedleyman buy houses. That would make demand - and prices - fall.

I think it's a good way of letting some air out of the tires gently.
posted by b_thinky at 6:46 AM on October 13, 2005


"I am a lawyer and I represent illegal aliens in deportation. In all but one of 35 cases I currently have on docket the illegal owns a home. But it is the loan terms that fascinate me. One lady finished school at second grade, speaks no English, and works for a recycling company binding cardboard boxes. She makes about $30K per year and is a single mom with three children. She has a $430K interest only loan that she used last year to buy a $430K condo - 100% financing - she paid $3,000 in closing costs. I tried to explain that her monthly payments will rise substantially in four years. She does not believe me, did not understand what I said and told me the loan and real estate agents specialize in real estate and would have told her if her payments could go up. If 34 of my clients with risky loans and no school past at best eighth grade are surprised by rising loan payments, we should be afraid. This is the last group desperate lenders pander to, meaning we're near the end."
posted by sfenders at 6:53 AM on October 13, 2005


dilettanti: Compared to twenty years ago, it is now much easier and less costly (in terms of origination and credit risk costs) to pull equity out of a home.

Yeah. I just don't think it can or will go any further than it already has.

Credit of all kinds is just absurdly easy, compared to ten years ago. So it seems at my bank, anyway. They don't even care what I want to use the money for, they just hand it out on request, no questions asked. Wasn't like that ten years ago. Won't be like that ten years from now.

In the news: Mortgage banking production profits fell to $657 per loan in 2004 from $1,272 per loan in 2003 according to the Mortgage Bankers Association's annual cost study released Tuesday. As volume declined in 2004, per-loan operational costs increased and were only partially offset by increases in secondary marketing income, including servicing values.

"The year 2004 marked a departure from the recent years of unprecedented mortgage activity and profitability"

posted by sfenders at 7:17 AM on October 13, 2005


Of course, all of this discussion is moot anyway, since the US government can take your property at any time by way of eminent domain.
posted by Rothko at 7:54 AM on October 13, 2005


sfenders
Yeah, the lack of consumer understanding is rather frightening, and lenders are behind the ball on this issue. It is unsettling to think of so many people losing (or shifting/reducing) their housing when their principal comes due (of course, they would not have such housing at all without the IO loans). The lack of consumer education up front means a lot of people will have to move to more modest housing and will incur closing and moving costs again, and many may end up defaulting before they can move or refinance. Add to that that many people think we're in a bubble environment, and interest rates are rising, many of these people stand to lose substantially. But there is substantial risk also faced by holders of the loans (or of bonds backed by such loans), where the risk of non-payment may have been underestimated by lenders (it's a relatively new product, with little performance experience). When all these loans go bad, lenders will take a significant hit. Essentially, they are subsidizing the overconsumption of housing by risky borrowers, and they don't know how big the subsidy is.

Interest-only loans are dangerous for less savvy borrowers who don't understand what they're getting into, but I suppose they can be a good tool for people who intend to move (or refinance) before the principal comes due. IO loans allow consumers to speculate on interest rates and housing prices at relatively low costs. Of course, it seems odd that so many people would choose to bear the interest risk themselves when there's a tremendously sophisticated infrastructure in the US that allows them to avoid such risk... namely, the long-term fixed-rate mortgage market, which is virtually unique to the US.
posted by dilettanti at 7:58 AM on October 13, 2005


I think reinstating the draft to provide more fodder for the "War On Terror" would get me into the streets.
posted by waltb555 at 9:25 AM on October 13, 2005


Don't worry about revolution: the mortgage interest deduction isn't going anywhere. The commission is engaging in the class "firemen first" bureaucratic dodge -- countering a demand for a tax cut (in this case, the elimination of the AMT) by saying it can only be achieved by way an utterly-intolerable offsetting spending cut or tax increase.

While I pay, and therefore personally loathe, the AMT, I must admit that as far as incentives go, continued AMT is far better than decreased mortgage deductions. The mortgage tax deduction encourages homeownership, which is an (almost) complete social good, whereas the AMT encourages people to cut down on the profligacy of of state and local government (the non-deductibility of whose taxes is the primary impact of the AMT on most people).
posted by MattD at 11:15 AM on October 13, 2005


No offense, but if you can't afford to pay a neighbor kid 25 bucks a week to cut your grass when you don't feel like it, you aren't middle-class enough to own a 300-500K house.
posted by Chrischris at 12:02 AM EST

People who do not live in So Cal have no clue as to how insane the housing market is. My mother bought her home in 1965 for $19,000. It is a crappy, 3 bedroom ranch house with one wall heater and drafty, shoddy construction. The present market value is $350,000. Fortunately, Mom paid the mortgage off before she retired. But she still can't afford to pay some guy $25.00 a week to mow the lawn.

My ex-husband earns about $60,000 a year but owns a $500,000 house. We bought it 15 years ago for $250,000 and for 10 years it accumulated almost no equity. Then the price doubled in the last 5 years.

The problem is that people will pay astronomical sums to get out of commuting more than an 1 1/2 to 2 hours ONE WAY. In LA the congestion is so bad that a 2 to 3 hour a day round trip commute is considered "normal." So how much would you pay to bring your commute time down from 4 hours a day to 2?

And as for my mom and my ex, they are stuck with their homes unless they want to trade down to apartments or move out of state.
posted by Secret Life of Gravy at 12:26 PM on October 13, 2005


"property taxes are paid to local governments"

I know delmoi, I was poorly expressing what dilettanti stated well in the post containing: “...Coupled with the already alarmingly large trade deficits for the past many, many years, the US will be in a world of hurt in the coming centuries.”


I suppose revolution aside, what I am worried about is becoming one of those bastards who rips people off. You can’t eat principles. And if it comes to bread on my table or bread on yours, it’s an easy choice.
But I’d rather not. Not only because I enjoy having a soul, but because you see the same pattern elsewhere and elsetimes. Poor hitting on the poor, the rich untouchable.
But I am indeed terrified and violently angry exactly because that supposed merit system is failing me.

It’s not through poor financial choices that I might lose my home, it’s because the system was set up in such a way. I played by those rules. And now it looks like the rules are going to be changed against people like me - again.

Bit of background. My dad was a vet. I’m one of the few conservative types who dislikes Reagan - why? Because he took away free college benefits for the children of widows (thanks Ron!). So I was the kid of a single mom who worked 12 to 16 hours a day. My family is blue collar. I was the first one who went to college which I was able to afford only because I joined the service. My wife went to an ivy league school on a scholarship. We’re not business people. We don’t make money off of other people’s losses. Our jobs are - without tooting my own horn - rather altruistic. We’re not rich, but we have what we have because we busted our asses and worked hard.

Eight years ago this country had a surplus, a growing economy and we were doing well - I grant that is subjective. But nothing has changed from our side. Now we’re paying more, I see friends of mine struggling or out of a job and I see policies being considered to take more money out of my pocket. And that’s my fault? Hell, I vote third party on general principles. I’m involved in my local government. Exactly how much more do I have to do to avoid getting crushed by the juggernaut I see coming in 10 or so years (give or take 10)?

I must say tho’ I like all-seeing eye dog’s (et. al) concept on revolution. Better than my ideas.


“The right of Smedleyman to keep his house in California is not one of them. If you bought or refie'd a house with income margins so thin as to require a government subsidy (and lets be clear, that is exactly what it is) to make it work, then I'm sorry, but my sympathy does not extend to taking up arms to defend your. fucking. lifestyle. choice.”

Chrischris, normally I wouldn’t take the time, but this is everything that sucks about metafilter. Very few people take the trouble to understand - or even really read. Also I don’t live in California.... there are other glaring flaws there, but I don’t care enough to point them out.

“*Sigh* and someone to cut my grass too.
No offense, but if you can't afford to pay a neighbor kid 25 bucks a week to cut your grass when you don't feel like it, you aren't middle-class enough to own a 300-500K house.”

I will respond to this tho - self-deprecation doesn’t come across well, which is what the ‘cut the grass’ thing was. See, lots of times folks recognize they are flying off the handle while they’re doing it. So they cushion that by recognizing the fact and advertise they recognize it to others by adding something obviously trite.
I cut my grass myself. I enjoy it. I have a weber grill. I’m looking at building a shed. I am a suburbanite. If you were, or knew anything about home ownership you’d know the rule of thumb is about 2.5 to 3 times your income. I’m comfortable with that and my wife makes more than I do. But housing prices and property values have skyrocketed out here. Plus LOADS of other factors previously addressed.

I’m not upset about what’s happening now, I’m upset about what I see as an inevitability coming down the road if all these trends continue (again - very well and amply addressed in the thread).
Why, given that my wife and I both are college educated, hard working, reasonably intelligent individuals, who have no desire to live beyond our means (e.g. we’ve taken one of week vacation over the past 4 years. Camping. Cost us next to nothing) should I then not be able to afford a home in a neighborhood I grew up in as my. fucking. lifestyle. choice?

So I’m not a citizen because I don’t want the headache or risk of investing?

I’m not as good as the next guy because I don’t make as much money or I’m not obsessive about it? Why the hell do I have to be an economics professor to look at my gas & electric bills (projected to increase about 50 to 100% this year) and my mortgage and all the other stuff rolling in and say if I’m not getting large enough raises to cover this, we’re not going to make it?


Get a clue. My lifestyle choice is to be left alone enough to work hard and enjoy my house, my lawn and my kids.
Policies change and start driving that into the ground and I’m the bastard?


"I think reinstating the draft to provide more fodder for the "War On Terror" would get me into the streets."
I’m with you there waltb555
posted by Smedleyman at 12:55 PM on October 13, 2005


Molly Ivans took the ‘outrage’ tack in todays Chi Trib.



http://www.chicagotribune.com/news/opinion/chi-0510130296oct13,0,5384075.story?coll=chi-newsopinioncommentary-hed
posted by Smedleyman at 1:51 PM on October 13, 2005


considering all of Mehlman/GOP outreach, this is telling, too: Bush approval rating at 2% among African-Americans

(and from the comments: Presidents who owned slaves had a better approval rating than that.)
posted by amberglow at 2:00 PM on October 13, 2005


zoogleplex writes "I'm told $70,000 will get you a pretty large house with servant's quarters - imagine that?!"

Yes, but unless you're a Mexican citizen, you cannot own real estate in Mexico. Oh sure, you can lease it and/or otherwise rent it, but you can't own it. I know a couple people for whom that became a serious issue later. It's cheap to live there, but if you don't own a home and that's your only home, you're in a pretty vulnerable position, particularly if you don't have more money put away. If you get royally ripped off and find yourself without a place to live in a country where you're not a citizen, and where the local authorities are unwilling to do anything (as they may be in on it, themselves), things can get pretty tricky. My aunt and uncle live there most of the year now and will likely go year-round when he finally retires. They love it, but they're thinking about keeping their place in the states, just in case, and they can maintain the tax payments and upkeep through renting it. Something to think about.
posted by krinklyfig at 2:02 PM on October 13, 2005


It would take martial law, and no elections, for me.
posted by amberglow at 6:31 PM PST on October 12 [!]


I agree, but if this were to come to pass you would be more of a counter-revolutionary because at that point the people in charge would be participants in a coup-de-tat.


I've been hoping for a while now to suggest a project that applies open source methodologies to the project of completely reengineering our current democratic system from the ground up, with both experts and the general public contributing their knowledge and experience. Obviously, the project is way out of my league, but I'd love to see something like it.
posted by all-seeing eye dog at 6:51 PM PST on October 12 [!]


You're soaking in it.
posted by Mr T at 2:29 PM on October 13, 2005


I've been in revolt since 1972. The rest of you are welcome to join me whenever you're ready.

And yes to what Chrischris said. There are worse things in life than not being Middle Class.
posted by davy at 6:28 PM on October 13, 2005


There are worse things in life than not being Middle Class.

Indeed. So let's just call the whole thing off.
posted by Smedleyman at 11:08 PM on October 13, 2005


krinklyfig, you are mistaken about home ownership in Mexico. This is important to me, since my father-in-law owns a house in San Miguel de Allende that he is leaving to us in his will. I asked him for clarification, and he told me the law had changed recently.

Foreigners can own property, just not in the "restricted zone", which is basically the coasts. Quoting Mexonline about the new law:

"The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the "restricted zone." The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline."
posted by Invoke at 11:13 PM on October 13, 2005


That's one of the places I'm looking at, Invoke. Perhaps someday we'll be neighbors! :)

Thanks for this info.
posted by zoogleplex at 6:24 PM on October 14, 2005


> the US will be in a world of hurt in the coming centuries.

Lowering the mortgage interest rate deduction cap from a mill to $350K will have such an economic tsunami effect?
posted by dand at 12:10 AM on October 15, 2005


No. I meant that overconsumption of housing, at the expense of other investments, together with massive exportation of capital stock (by trading claims to future investment for current consumption, i.e., a massive and sustained consumption-driven trade deficit), if left unchecked, may quickly exhaust the economic advantages we currently enjoy. In my first comment I was suggesting that the tax break may lead to bad economic consequences, so reducing or eliminating the mortgage deduction may actually be a Good Thing (sorry if that wasn't clear). I'm not entirely convinced that broader home-ownership is an unqualified social good, and I'm certainly not convinced that a McMansion for every family is a goal we should be much concerned about attaining any time soon.

Moreover, the current tax break isn't terribly nuanced. Housing prices vary dramatically across the country, and the current deduction is insensitive to market conditions. What allows regular middle-class families in LA to afford a small apartment (while keeping those prices artificially high!) allows a similarly situated family in other parts of the country to afford very large houses, indeed. Also, the Federal housing subsidy is given to the consumers of housing, rather than the suppliers, which means that it doesn't reward smart local planning; it just blindly fuels housing demand, encouraging suburban sprawl. It's not a targeted incentive to fix any particular housing problem; it's just a generic housing subsidy. I'd love to see the thing eliminated.

Of course, there are a large number of people who are currently dependent on the deduction to afford their current houses; they were promised the subsidy and responded to the government offering. I think it would be a terrible move for the government to take the promised benefit away from people currently enjoying it. But eliminating it for new purchases sounds just dandy to me. If the Federal government wants to encourage home ownership, it can do so by subsidizing innovative local initiatives that increase the housing stock and/or by working to extend credit to our large non-banked [pdf] population.
posted by dilettanti at 1:16 PM on October 16, 2005


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