General Discussion
In reply to the discussion: Just had a right-winger, a banker, in my office this morning [View all]mainer
(12,022 posts)(continuing from above tweet)
...6. Flooding a strong economy with $ leads to inflation.
7. Monetary policy must counter that kind of reckless fiscal policy.
8. Fed will increase interest rates to avoid runaway inflation.
9. Higher interest rates make mortgages less affordable
10. Home values drop further
The cycle of home value collapse caused by the 1986 tax bill led to the collapse of the savings and loan industry in 1989. Cost us $500 bill in bailout.
The cycle of home value collapse caused by unregulated Wall Street push of subprime loans led to bank collapses of 2008....
....it doesn't happen immediately. Home prices have to absorb the impact, and people are resistant to dropping prices of an illiquid asset to recognize market changes. But drop they will. It is unavoidable.
Housing crash number 3 is on the way.
...for those saying "It's only for houses more than $750,000."
1. That's 4 million houses.
2. Housing prices is the only place where trickle down is real. The top price falls, the next one down falls and on and on. It is a cascade....
....
3. 1986 bill only went after second homes. Those prices fell, setting off the cascade. S&L industry collapsed. We paid $500 billion bailout.
But it gets worse.....
....
4. The tax bill allows deductibility for only $10,000 of property taxes and sales taxes combined.
5. That affects $500 billion.
6. That $500 bill is ALSO included in home values.
7. Red states, like Texas, rely on property and sales taxes to fund schools.....
...8. So not only will the prices of homes collapse as interest rates go up - and banks fail - but funding of schools will collapse. Not as badly as economy though.
This is what happens when you have a tax bill written without input from economists.