The Conservative Reader

Bithead August 2nd, 2008

(Cross-posted from BitsBlog)

John Cole is miffed at Obama for suggesting that the solution for oil supply problems is to find more. Apparently to Cole, that’s not painful enough for us.

Look, I know that there are people who are suffering because of high gas prices. I’m one of them, although I know that, like many of you, I can probably afford the prices more than a lot of people. My problem with this is that I think democrats should be solidly be on the side of finding alternative energy. Rising gas prices have made a difference. I’ve noticed a lot more people riding MARTA in Atlanta – a LOT more. I’d be willing to bet many of these people were like me, before I made a commitment to figuring out the system and how to make it work. Pain works.

But toward what, I wonder?

Personally, I don’t want to see gas prices come down because we’re drilling and finding more. The United States is finally getting a taste of what it’s been like in Europe and the rest of the world forever. When I first moved to Atlanta from Canada, I remember gas was 89¢ a gallon. There will never be improvements made in mass transit, no one will ever complain that we’re not investing in wind energy, and no one will ever be pushing for plug-in hybrids or electric cars is gas is cheap as dirt.

Do you see what we’re up against, here, people? First of all, Europe and the rest of the world have been dealing with high gas prices forever because they’re taxing the hell out of their people, not because there was a shortage of supply. I fail to see any advantage whatever in causing people pain, causing them to pay higher prices for anything and I also see no benefit whatever in chasing ‘alternative energy’ pipe dreams.   We most certainly can… and must… drill our way out of this nonsense…. always assuming we can get the left from between us and our energy supply… we do have around 200 years worth of known reserves… and we are finding more all the time. Meanwhile, what we  certainly cannot do, is mass-transit, wind farm and solar our way out of our issues.  Oil, and individual transportation works, and this other stuff the left… Cole included… are pushing, are simply isn’t ready for prime time yet… nor will it be for at least ten years.. if it ever well be.

Come to think on it, now, …ten years…. isn’t that the length of time we were told it would take to get ANWR’s oil fields online, and that therefore we shouldn’t even bother trying to develop those energy sources? The fallacy of that kind of non-thought is now seen by the American people and they are reacting accordingly.  Obama sees the numbers of voters, and knows what is what. He has begun to understand that with 75% of the voters wanting domestic drilling to take place, they’re on the wrong side of the biggest issue of this election.  Cole, I fear, will never understand such things.

Reality rears it’s head: No matter what happens, we’re going to need oil to fuel ourselves for a long while to come. Meanwhile the never changing left wants to see us herded like cattle into buses and non-existent trains., based on the supposed European model.

But wait; does that model really work?   A short time ago, a study was done in Europe, using cell-phones as tracking devices, to see what the travel patterns of Europeans actually are. Turns out, the reason Europe’s mass transit systems work so well is Europeans seldom go beyond 6 miles away from home, even for vacations. Thereby we learn the reason the European transit systems work so well is nobody bloody well USES them.  A real advantage, huh?

The desperation of the left is amazing and terrible to see. THey’re losing their issue, here. Cole’s reaction says some of them will never understand why.

Tags: alternative energy, BitsBlog, Democrats, electric cars, energy supply, Europe, John Cole, mass transit, nonsense, oil supply, plug in hybrids, rising gas prices, transportation, wind energy, wind farm

• 2008 Congressional Election , 2008 Presidential Election , ANWR , Barack Obama , BitsBlog , Democrats , Economy , Energy , TAXES
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Art Smith July 30th, 2008

As expected, President Bush signed HR 3221 into law this morning, making billions of federal dollars available to home owners, shoring up Fannie Mae and Freddie Mac, and providing closer oversight of the financial aspects of home ownership to the Administration and Congress.

What a shame.

After speaking with a good friend of mine that is a CPA, the tax incentives, particularly the $7,500 tax credit (a topic which is burning up the search engines at this time), are going to make life harder for tax preparers, tax payers, and probably increase the cost of running the IRS.  As I’ve said before, There are going to be a lot of problems keeping track of this. 

Plus, this is just an unfair competition with banks.  The government can lend the money interest free with little in the way of rules and underwriting (and if a Bank tried to offer this program, they would get sued or have criminal charges pressed under Fair Lending laws).  Frankly, it would have been much more appropriate to manage this boondoggle as a special type of Mortgage-related product for banks to offer to ensure that appropriate controls are maintained. 

And how much fraud is this going to generate?  How about scams, like buying a house on December and selling it for the same amount in January… no mortgage, no bank, no lawyer, no real estate agent, all cash, and then sell it for the same amount in January.  Cool $7,500 and no repayment required.  I have family that live in a rental house who could pull this one off easily.  Who is going to pay for that? 

Thankfully, though I missed it until today, this feature is only available for first time principal residences purchased between April 9, 2008 and July 1, 2009.  But we’ve got the aftereffects until 2026.  And the IRS still needs to track it until at least 2029 (or 2033, not sure). 

Clearly, Bush is on the same wagon that most of Congress is: “it’s an election year, we need to give people money”.  I know, the economy is a mess and people are suffering.  Frankly, many people are suffering because they’ve built up expectations over the years from all of the existing handouts and inflated values in the housing and stock markets.  I won’t deviate from the topic here, but I will post something at a later time on the topic of Suffering.

Sorry, back to the Housing Bill, so it’s understood that there is a need to solve the current ecomomic dilemma.  It’s unfortunate that we think bailing out the Home Loan Banks is part of that.  No one is really maintaining accountability on the whole Market model that we always propose: “if you do well, you make a lot of money, if you do poorly, you lose a lot of money”.  This bailout definitely gives the riskier players an edge now since they get a safety net they don’t need or deserve.

And it all comes on the backs of American taxpayers.   As usual.

Senator Charles Grassley, who is the ranking member of the Finance Committee which is responsible for tax legislation, voted against the bill.  In June, he hosted a mortgage assistance event in Iowa to bring lenders and consumers together.  Here are his comments about his vote: 

“The problem with this massive bill is that it could do more harm than good.  It started out to help Americans who are losing their homes, but it ended up giving banks a $4 billion incentive to foreclose rather than work something out with homeowners who are in trouble due to downturn in the housing market.  The bill’s bailout of Fannie Mae and Freddie Mac doesn’t even begin to reform the excesses and the conflicts of interest that contributed substantially to the problems the mortgage giants face today.  And, more broadly, the bailout fosters moral hazard by diminishing any incentive for the housing sector to act more responsibly in the future.  Even the tax package, which I was involved with during Senate consideration of the measure, has been discredited by changes made by the House of Representatives that unraveled bipartisan tax reforms and did things like give favor to tenants who are artists or literary figures over low-income families.  I voted to proceed to this legislation because I very much wanted Congress to address the important housing issues facing the country today, but this bill has fallen prey to the special interests on Wall Street and K Street at an unjustifiable expense to taxpayers and homeowners on Main Street.”

Lastly, now that the Housing Bill is law, the language of the Fair Tax bill is going to have to be changed in order for it to be passed during the next 15 years.  Something to the effect of forgiving the remaining recapture amount.

Tags: $7500 Tax Credit, 15 Year Recapture Period, Charles Grassley, Chuck Grassley, Energy Efficient Mortgage, Fair Tax, Federal Housing Finance Agency, Federal Housing Finance Board, Hope, Housing and Economic Recovery Act of 2008, Housing Bill, HR 3221, HR 5720, HUD, Office of Federal Housing Enterprise Oversight, President Bush, US Congress

• 2008 Congressional Election , 2008 Presidential Election , Banks , Economy , FairTax , George W. Bush , Housing , Mortgages , TAXES , US Congress
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Art Smith July 28th, 2008

In reference to my post on Saturday regarding HR 3221, the “Housing and Economic Recovery Act of 2008″, I discovered a site where there is a copy of the Congressional Budget Office Cost Estimate for HR 3221. Over the next ten years, according to the estimate, this bill will create a nearly $25 Billion deficit.

Another blogger, John D. Thornton, has some interesting insights regarding the OFHEO.

I’ve been getting some hits on Saturday’s post that are searches like this “explain the $7500 tax credit on the new housing bill that was just passed“.   I’m glad to see there are people wanting to understand it better.  This could be achille’s heel of the bill.

There is additional information available (this is where I found the cost estimate) at WashingtonWatch.com.

Tags: $500 Tax, $7500 Tax Credit, 15 Year Recapture Period, Economy, Housing and Economic Recovery Act of 2008, HR 3221, HR 5720, Office of Federal Housing Enterprise Oversight, OFHEO, US Congress, WashingtonWatch.com

• Economy , Energy , Housing , Mortgages , TAXES , US Congress
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Art Smith July 26th, 2008

Well, it took almost 3 months, but Congress finally passed the bill today, on older version of which was  passed by the House in May, after some considerable back and forth between the Senate and the House.  The bill is HR 3221 (pdf), titled: “Housing and Economic Recovery Act of 2008″.

The entire bill is over 600 pages long.  The table of contents is 7 pages.  And technically, this is a bill that began its life over a year ago.  Sponsored by none other than Nancy Pelosi.  And apparently Bush is planning to sign.

He should not.

Touted by most of the media is the section that provides up to a $7,500 tax credit is 1,800 words.  And the  media manage to mention it without explaining that the taxpayer that gets the credit is then taxed (called a “recapture”) an additional 6-2/3% of the amount of the original credit for the next 15 years.  Yeah, that’s a 0% loan, not a tax credit.  As far as I know, there is no precedent for repaying a legitimate tax credit, so this is unique and is probably going to take a LOT of people by surprise.  And not today, not even next year, but you watch in the Spring of 2010 when people actually have to start paying this thing back… an extra $500 in tax that they were not expecting.  Keep your eyes on the shells and tell me where the pea is.

And 5 or 10 years from now when Congress wants to make another sweeping change to the system, these recaptures are going to create more complexity.  And don’t even get me started on the impact of ever getting the Fair Tax passed now.

So, briefly, here’s what the bill does:

1. Establishes a new agency called the Federal Housing Finance Agency.  Yeah, that’s right, yet another agency.  The section is referred to as “Improvement of Safety and Soundness Supervision”.
2. Specifies loan limits, capitalization levels, reporting, availability of some data to the public domain, housing goals.
3. Enforcement requirements, actions, penalties, subpoena authority.
4. Committees, directors, etc. for the new agency.
5. Abolishment of the OFHEO (Office of Federal Housing Enterprise Oversight, a sub-agency of HUD), and transfer of everything it does and owns to the new FHFA.
6. Abolishment of the Federal Housing Finance Board and transfer of everything it does and owns to the new FHFA.
7. Some attempts to reduce paperwork (always appreciated).
8. What appears to be sweeping changes in voucher and tax incentive programs.
9. Extending the length of time some programs such as PHA project-based assistance.
10. Updates to Federal Home Loan Bank code.
11. Establishment of HOPE for Homeowners Program.
12. A bunch of rule changes to make it easier for homeowners to avoid foreclosure.  Interestingly, this section includes an “Emergency Declaration”, that appears to allow Congress to break it’s budgetary rules to get this bill passed.  Someone a lot smarter than me is going to have to explain where in this part of the bill there would be substantial costs.
13. Special conditions for manufactured homes.
14. Emergency assistance for foreclosed and abandoned homes.
15. Counseling services.
16. For those of us who hate all the papers we already have to sign to close a mortgage, this disclosure is now added: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.’” Unbelievable.
17. Servicemembers and Veterans get some special considerations, for which I cannot possibly disapprove.  As far as I’m concerned, we owe these folks a free and clear home.
18. Adding $30,000,000 to the McKinney-Vento Homeless Assistance Act (financing programs for Homeless Assisstance).
19. Changes to REIT rules.

Trust me, that was brief.

I’m going to admit that the Revenue Provisions section at the end of the bill is somewhat confusing to me, especially the “Bonus Depreciation” section.

Oh yeah, and the bill also encourages “energy efficient mortgages”, that is, mortgages on homes with energy efficient features and/or improvements.

I’ve skipped a LOT of little details that seem to amount to tweaks (some small, some large) to the system, or to adjustments required to realign the agency responsibilities or other administrative issues.

And this is an interesting item, a section titled: Secure and Fair Enforcement for Mortgage Licensing Act of 2008. The first four word’s initials spell “SAFE”.  Nice.  It states:

In order to increase uniformity, reduce regulatory burden, enhance consumer protection, and reduce fraud, the States, through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, are hereby encouraged to establish a Nationwide Mortgage Licensing System and Registry for the residential mortgage industry that accomplishes all of the following objectives:

1. Provides uniform license applications and reporting requirements for State-licensed loan originators.
2. Provides a comprehensive licensing and supervisory database.
3. Aggregates and improves the flow of information to and between regulators.
4. Provides increased accountability and tracking of loan originators.
5. Streamlines the licensing process and reduces the regulatory burden.
6. Enhances consumer protections and supports anti-fraud measures.
7. Provides consumers with easily accessible information, offered at no charge, utilizing electronic media, including the Internet, regarding the employment history of, and publicly adjudicated disciplinary and enforcement actions against, loan originators.
8. Establishes a means by which residential mortgage loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer.
9. Facilitates responsible behavior in the subprime mortgage market place and provides comprehensive training and examination requirements related to subprime mortgage lending.
10. Facilitates the collection and disbursement of consumer complaints on behalf of State and Federal mortgage regulators.

So, the bill attempts to modernize some of the technology, some of the dollar values, and elevate the accountability of the Financing arm of HUD.  Plus hand out some money.

This is going to cost quite a bit.

Maybe some of it is needed.  I doubt Bush really understands all of the implications of the bill, but then, I know I don’t either.  It would be interesting to hear some feedback from someone that is well versed in the law.

Of all the content I see here, the $7,500 tax credit (text of this section here) is the most disturbing.

1. It will cost us money, both in interest expense to disperse it (since the pay back is interest free) and and the conditions that appear to allow for reduction of the repayment.  Such as if you sell the property and the gain is less than the amount still owed to the government, you only have to repay the amount of the gain.  Other exceptions to repayment include death and involuntary conversion.
2. It will promote the same kind of over-extentions by homebuyers that led to the mess we’re in to begin with.  Homebuyers will either convince themselves or be convinced by realtors or bankers that they can borrow up to $7,500 more than they really should because they’ll get it back on their tax return.  Without telling them about the $500 per year tax hit.
3. It will create substantial frustration in 2010 when people go to pay their 2009 taxes, the first year they would experience the “recapture”.  Because they won’t understand it, and it will increase their tax burder by $500.  That can be enough to create a huge backlash and economic impact that may force Congress to give out more money.  Just what we need.
4. The IRS is bound to mess up the forms and the rules.  Tax preparers may be ill-prepared to handle this.  Tax payers will be confused.  Chaos will grow and cause Congress to have to create yet another agency to oversee tax preparation for homeowners that used this tax credit.  (okay, maybe not, but I never thought I’d see this kind of credit before either).

I don’t want to see people suffer.  It’s hard to question all of this bill as there are probably some very appropriate adjustments to caps and other details to accomodate inflation and other changes in the market, technologies, etc since 1992.

But bad law is still bad law.  Fix the big problems, the $7,500 tax credit and the new agency, and I might be willing to work with this.  Helping the people that are hurting right now by no fault of their own is all well and good.  Helping the people that were pushing the envelope or simply gaming the system and lost, that’s just stupid.  And encouraging more first-time homebuyers to enter the market when they’re really not ready is just wrong.

My previous comments (in May), cover some of my thoughts here in more detail, but we just have to stop coddling people.  Please.

Tags: $500 Tax, $7500 Tax Credit, 15 Year Recapture Period, Bonus Depreciation, Emergency Declaration, Energy Efficient Mortgage, Fair Tax, Federal Housing Finance Agency, Federal Housing Finance Board, Homeless Assisstance, Hope, Housing and Economic Recovery Act of 2008, Housing Bill, HR 3221, HR 5720, HUD, McKinney-Vento Homeless Assistance Act, Military, Nancy Pelosi, Office of Federal Housing Enterprise Oversight, President Bush, REIT, SAFE, Servicemembers, US Congress, Veterans

• Economy , Energy , FairTax , Featured , George W. Bush , Housing , IRS , Military , Mortgages , Nancy Pelosi , Swamp Stompers , TAXES , US Congress
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Art Smith June 17th, 2008

Legislative Leaders in Iowa are continuing to talk about a special session of the General Assembly, which makes sense. The Governor is doing a good job of expressing the need to prioritize working on the current relief effort AND establishing a solid assessment of the costs before holding a session.

The bad news is, the only option being mentioned by the media (although there are almost certainly others) is an increase in the gasoline tax. That would be a bad idea. Better to raise the sales tax than the gasoline tax. Gas prices are already creating too much of a burden for everyone… a 1% increase in the sales tax with a well planned time-limit to cover flood related needs would be more appropriate. And even that should come after first using a portion of the state’s emergency fund (never use it all).

More importantly, I think we need to take another look at the budget and see where we can cut some more fat. Obviously, there will be critical infrastructure needs to address… and ensuring we can see people get back into their homes, even if rebuilding is necessary. However, there are probably dozens of items in the current budget that just should be suspended until we resolve this.

Notice I did not make any suggestions about federal funds. Those will be coming, of course, and will be a help to many property owners. I’m also sure there will be some emergency farm accommodation as well, so we need to be sure we take all of these sources into consideration. I’m not, however, a fan of taking money from people in other parts of the country to solve our problems. I really do think we can take care of things ourselves. The problem we face, however, is the entitlement mindset in the midst of disaster. Somehow we automatically have an obligation to return everyone’s fortunes to the way they were before a disaster. If we can accomplish this through charities, donating time and resources at the community level and such, then I think that’s awesome. But to have an automatic system to make sure everyone gets the same level of restoration is unnecessarily costly, prone to overspending and abuse. If we can get this kind of thing out of the hands of the government altogether it would be perfect!

But at the same time, I do want to make sure that the needs of families and individuals are well-met. And I don’t mean throw a blanket on them and wish them well. Help them, house them, feed them, help them up until they can get back on their feet. But try not to FEMA them… that might hurt more than it helps.

Tags: charity, Disaster, FEMA, Floods of 2008, Gasoline Tax, Governor Culver, Iowa General Assembly, Needs, Sales Tax, Special Session, TAXES, Weather

• FEMA , Floods of 2008 , Iowa , TAXES , Weather
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Art Smith May 12th, 2008

We’ve kept it pretty loose here at TCR with regard to the continued havoc being wrought by Hillary Clinton against her party. Every day, the lack of her stepping down extends further and further the demise of Democrats and Obama’s chance to manipulate his way into high office.

Amazingly enough, however, the party faithful are undeterred and completely convinced that their nominee is the right person for this job. It is odd to see serious grownup people behave at a level of maturity that doesn’t seem to align with how those people deal with everything else in their lives.

I wish I were talking only about Democrats.

I would contend that Barack Obama and John McCain are not the best representatives of their parties.

Democrats have been on a romantic tour for months now thanks to the hope that “history” will be made (and already has been within their party, but they still look for the big emotional hit) as either the first woman or first African American President of the United States may be elected in 2008. Watching the throngs of supporters and their comments has convinced me that most, if asked why they support their candidate, would gush as they proclaim “I’ve been waiting for years and had hoped to see a [choice of non-white or female] become President, and finally it’s becoming a reality!” What is truly amazing is that for years we have (on both sides of the aisle) promoted a mindset that skin color and gender do not make one better than someone else, and yet today the party that traditionally panders to both demographics is saying it matters.

Hillary actually seems to better represent her party than Obama, but she has gotten so far off message that one cannot hear the tax and spend policies coming through the roar of what’s wrong with Obama and what’s wrong with the Democratic Party because she’s being left out in the cold.

I have no problem with a woman or any minority as President. I could make a list of people who fit that description that I would vigorously support if they ran for office. But that fact would not compel me to vote for them. Having the right policies and positions (truly, more important is the principles that they use for decision making) drives me to a candidate. Unfortunately, Obama’s supporters (and to a large part, Clinton’s as well) really don’t study the issues and seek to understand their candidates.

This generation of voters doesn’t have the attention span to own a real position. And again, I speak not just about Democrats.

Today’s news brought a story of a second-hand conversation that sounds like McCain’s camp is raising a trial balloon to see how Mike Huckabee’s name sits with voters as a running mate. Not well it seems. I’m not a fan of Huckabee, but having him on the ticket would allow us to get the FairTax pushed back into the national debate. But it won’t happen. Not this year. Romney would an even worse choice, I think. My dream is still Fred Thompson. Not likely either, but a possibility. I’d support Mitch McConnell, but I’d rather have him in the Senate right now. Along with any other Republican Senator or Congressmen, despite the less than stellar positions some have taken in recent months.

But the reaction of people to the Huckabee idea (the trial balloon is lead-filled) has been almost as distasteful as the initial shock about McCain being the Republican candidate. Far too many within the party are promoting a “stay home, let Obama win, watch the country fall apart for 4 years, and clean up the mess in 2012″. There are multiple problems with that idea, not the least of which is this: if we sit back and let things fall apart, we’ll have a nation that is not convinced there is a problem 4 years from now because the message from the Right is consistently “we don’t care enough to fight for what we believe in, this is okay with us and we’ll just try again later”. This is not a game. An unopposed Obama Presidency is not okay.

But we’re just too lazy and too soft to put up a real fight for what we believe in. Or it really isn’t all that important to us… sure, we don’t mind pushing our position as hard as we can, making personal attacks on people who disagree with us and shouting “I told you so” every time something bad happens. But when the work gets hard, yes that means when we have to work with something less than ideal like John McCain, we just throw up our hands and say it’s okay that all the bad stuff happens. We say we want Obama as President. We want open borders for the Terrorists to walk through. We want taxes to shoot up, the economy to totally tank, add 4 and maybe 8 years to the things that we need to start now just to be where we need to be in 10 years (ANWR), continuing down the road of Socialism, Pacification and decline of civilized society. And 5 brand spanking new Liberal Activist Judges on the Supreme Court. Nice. All because we want to prove we’re right.

Except, no one will care that we were right. Bush will get blamed for the bad economy. Most won’t even notice how badly we’re being fleeced by Congress. And the silent conservatives simply stand by and watch it happen with approval. Like Saul.

Not I.

If we really care about these things, if we want to see others care in 4 years (yes, even if Obama does win, or McCain for that matter), we have to engage, and beyond just the blogosphere. We have to carry the message about what’s right and what’s wrong into the public square (including the blogs) into our local politics, into the National Convention. The Party needs a unified face, not a torn up left and right, but a merging of minds to show that while we may not agree on everything, we can work together to bring America closer to its best. I’ve been very impressed with the party caucuses and conventions I’ve attended so far at the precinct, the county and district levels this year. Our party in Iowa is not perfect and not 100% unified, but we engaged and worked together to reach a reasonable consensus that some did not like (I did not agree completely with all the decisions) but I saw none of the bitterness that I’ve seen elsewhere, and I pray we avoid that. Further, we have significant challenges for Congressional seats and a lack of real effort to keep and reclaim lost seats. We have a solid message, but we’re seem to have lost our voice.

The point is, disengaging when the ideal is not reached, will only allow things to slip further into the opposite direction. Once that’s done, ground is lost that may never be recovered. Staying engaged helps keep the truth and a reasonable message in front of people. We’ll never educate everyone to the point we’d like them to be, but we can get them further and closer to understanding truth. Most importantly closer to making decisions on their own instead of letting others (myself included) make those decisions for them.

My dream is to see the Democrats keep themselves distracted with the infighting long enough that more and more people can see how selfish and emotionally charged they are in making decisions and working out “solutions” (to the point of knee-jerking their way through legislating). For Conservative Republicans to give up is not strategic. It’s giving up and over, perhaps permanently.

Tags: 2008 Presidential Election, 2012 Presidential Election, Barack Obama, Democratic Party, Economy, Educating Voters, Fred Thompson, Giving Up, Hillary Clinton, John McCain, Lazy, Mike Huckabee, Republican Party, Saul, The FairTax, US Congress, Working Together

• 2008 Congressional Election , 2008 Presidential Election , Barack Obama , Blogging , Democratic Party , Economy , FairTax , Fred Thompson , Hillary Clinton , John McCain , Mike Huckabee , Political Philosophy , Republican Party , TAXES , US Congress
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Art Smith May 8th, 2008

Not so much because tinkering with the economy on a regular basis is messy as much as having Congress doing the tinkering is just dangerous. Remembering that the Prime Directive of nearly every member of Congress is “Do nothing that interfere with my re-election”, and the corollary is “Take care of my deep pocket special interests”, it is exceptionally difficult to trust anything that Congress does, especially when it is wrapped up in the “we’re here to help” blanket.

So today (Thursday), the House passed a bill to spend yet another $300 billion that we don’t have in order to firmly entrench the new entitlement: home ownership.

We won’t spend any time bemoaning the end of apartment dwelling as we know it. Nor the fact that the riskiness of investments are going to slowly erode (erasing the potential of high returns in its wake).

No, we’ll just camp out on the fact that this bill is taking money out of our pockets and being used not just to help those who have exhausted all recourse with their lenders (many of whom, by the way, are working vigorously to help homeowners who are at risk of foreclosure without the governments help, thank you very much), but to make borrowing and lending money for homes a no-risk, no-fault arrangement.

The bill creates a $7,500 tax credit for first time home buyers and billions to communities to buy and fix abandoned homes, and a special FHA guarantee to lenders who write down the principal on homes that have significantly dropped in value (for about half a millon homes).

The biggest problem in my mind is the tax credit. That’s going to make a real mess of things. It will make it much easier for borderline borrowers to be convinced to buy a bigger home than they can really afford. It will certainly make the whole mortgage experience seem so much easier for the first year.

But wait, what do mortgage lenders do when they know there’s more money available as part of a deal? They figure out how to add it to the deal itself. If this bill passes, I guarantee that lenders will find a way to turn that $7,500 into down payment money… it will end up thrown into the escrow account as soon as it’s available. An automatic $7,500 taken off the bottom line, lowering the mortgage payment. And realtors will use this money to convince people they can afford a lot more house than the really can.
Wait, why make it hard in the first place? Why not just give the first time home buyers $7,500? Wouldn’t that be easier, more effective, simpler? Cut through all the red tape? Oh, yeah, then it looks like te Bank was doing it instead of the Government. Or, as I’ve said recently, Congress just likes to use the tax system to manipulate behavior… in this case, stimulating home buying.

But what is not showing up very clearly in the news (I see it in a few places, but not all), is the fact that the tax credit is really just a loan from the Government. Yup, that’s right, the poor sucker thought he got a free $7,500 just for buying a house, and now he’s stuck paying the IRS an extra $500 every year for 15 years. Has that ever been done before?

And here’s what’ll happen. The first year they have to pay it back, they won’t even know they have to pay it back, and instead of owing perhaps $675, they’ll owe $1,175. And they might not have have it, so the IRS fines them for being over the $1000 “owing” limit, and more for being late. Then, the next year, they might have the money, but they’ll still not have adjusted their W4, so they’ll go over the “owing” limit again. Finally, they’ll get it right the next year, but they’ll have figured out what a scam the government has played on them. PLUS they will have paid for part of the money the first year since they’re taxpayers just like me, and we’re all going to be paying for this. Because when the Government lends money out at zero percent, they still have to pay the interest on the $7,500 they borrowed in the first place. That means we’re all paying that interest. And, by the way, this eats up a third or more of the money saved on the mortgage interest deduction (which most people don’t take anyway).

What is troubling here is that Congress appears to be making things better, but they’re actually going to make things worse (at least they’re consistent). They believe they are making it easier for people to “live the American Dream” (home ownership is evidently the American Dream). Instead, they will manipulate people into buying more house than they can afford (in a market where it’s easier to buy a lot of house anyhow) and put them into a potentially worse position than they needed to be. Remember, home ownership is more than the purchase price of the home. Property taxes, heating & cooling, upkeep, furnishing, cleaning… you get the idea. So this bill, intended to fix a mess caused more or less by people buying more house than they could really afford, will simply create the same exact problem it’s supposed to solve. Nice.

I’ll add, just for perspective, that my wife and I lived in apartments for the first 11 years of our marriage and we don’t regret that for a moment. I do think that home ownership is great, and I know it means a lot especially for families with children. While I don’t begrudge that opportunity for anyone, I reject the notion that home ownership is a promise we should make to all Americans. It is inconceivable to me that we make it an entitlement. This is a steep and very slippery slope… we should stay away from it. Thankfully, President Bush plans to veto the bill, but the White House has stated they are open to discussion since they like of the features of the bill. We’re going to need to keep an eye on this one.

Of course, if Congress could loosen up another $15,000 in cash for each and every home owner for the next 2 years, without the pay back clause, that might be more effective. (for any US Congressmen are reading this, please, that was sarcasm).

If Congress really wants to make things better with the housing market, the stock market, and the economy as a whole, let’s get the FairTax passed. That’s HR 25, S 1025.

Update:  The more I think about it, the worse this gets.  The US Government now wants to compete with banks and does so unfairly by offering not only an interest-free loan for 15 years, but without any of the rigor the banking industry is required to use: credit analysis and appropriate contracting.  What happens if the homeowner dies?  Does his estate still own the money to the Government?  And again, I think this will end up as a deceptive program that if put together by any bank to an average Joe borrower would get them shut down.

Tags: Banks, Entitlement, Home ownership, Housing Market, HR 3221, HR 5720, Lenders, Mortgages, Repay The Government, Tax Credit, US Congress

• Banks , Economy , FairTax , Housing , IRS , Mortgages , TAXES , US Congress
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Art Smith May 7th, 2008

You may recall a few months ago I mentioned I had started reading The FairTax Book. It only took about 5 or 6 hours of reading time, but it kept bouncing around in priority, and I just finished a couple of days ago.

It is really tough to explain the whole idea in a few short sentences (making the book a great resource if you want to be able to speak intelligently to the subject). I was cynical of the idea before reading the book, and now I’m convinced it is the right way to both solve our current tax issues and help stimulate our sadly sagging economy.

Forgive me if I make this sound too simple, and I know it really isn’t, but what the I got out of it in a nutshell:

First of all, the numbers and impact assessments referenced in the book have been researched by economists… obviously, we have to take that with a grain of salt, and even the writers (Neal Boortz and Congressman John Linden) will state that there will be some painful periods and that not everything will work out exactly as expected. That said, I am operating, for the sake of discussion, on the assumption that the economists in question got it right.

I don’t need to go into all of the setup around how evil our current tax system is. That said, even reading the first few chapters of the book and getting an understanding of the history around our income tax system is enough to get one a little hot under the collar.

The basic contention is that all of the products and services we pay for today have approximately a 22% embedded tax cost. That means out of a $100 purchase, $22 goes to pay income taxes, corporate taxes, Social Security and Medicare taxes. If we eliminated all of these embedded taxes, pay the same $100 but have 23% ($23) passed on as a consumption tax (on all new product sales and services), we would experience the following:

• Elimination of all payroll deducted taxes. That means you get to keep your entire paycheck.
• No further need for the IRS (a small bureaucracy would be needed to support some of the system administration, but nothing like the IRS). No tax day. No keeping a million receipts. It all goes away.
• No Inheritance Tax (aka Death Tax).
• Corporate taxes are eliminated, so the cost of managing corporate taxes and the tax-based decisions companies have to make go away. That helps companies be more profitable, which helps stimulate the economy.
• Everyone would know how much tax they are paying.
• Taxation becomes more voluntary. If you don’t buy things, you don’t pay taxes. (Regressiveness is addressed with a prebate check to cover the taxes on the amount of the bare necessaries required for the household).
• Social Security and Medicare will not become bankrupt as currently expected. These systems will be funded from the FairTax.
• No more tax shelters.
• No more off-shore banking.
• Manufacturing and services that having been moving off-shore will be motivated to return to US soil.
• And my personal favorite: the current taxes will no longer be used to manipulate and/or punish. This is probably fodder for another article, but the income tax system as it exists today is one of many tools used by the Elite Left to engage in Social Engineering. Manipulating people into doing good things (such as charitable giving) by giving them money is not an appropriate role of the government.

Some of this assumes that the people keep the politicians honest after the new system kicks in. It requires some careful thinking to truly understand the idea… don’t be tempted to believe you understand it without digging into the details. I’m glad I went through the effort.

The Conservative Reader supports The FairTax Act (HR 25 and S 1025). For more information, read the book, or go to the FairTax website. Then, contact your Representatives and Senators in Congress. This has already taken too long to accomplish.

Tags: Economy, IRS, John Linden, Neal Boortz, TAXES, The FairTax Book, US Congress

• Economy , FairTax , IRS , TAXES , US Congress
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Art Smith April 30th, 2008

Thankfully, the voters of Polk County in Iowa have managed to do better than the legislators in the Iowa General Assembly. While the state is busy raising as many of our taxes as they could get away with, the voters, the people that gave them the power (at least in Polk County) rejected the attempt by local officials to borrow $132 million (and raise our property taxes) to renovate and expand the county courthouse.

Thankfully, we won’t be borrowing more money while we’re trying to pay new taxes and deal with the challenges we have with the economy.

Our previous local attempt to raise taxes (Project Destiny) was no more successful. We have some smart voters here in Central Iowa. It’s too bad we don’t have the same benefit in our State Legislature. Maybe those same voters (and other voters around the state) can choose some better representatives this fall for the next session. Maybe.

Tags: County Courthouse, Iowa, Iowa General Assembly, Polk County, Project Destiny, TAXES

• Iowa Politics , TAXES
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DJ Durant April 9th, 2008

I’ve been subscribing to Fortune magazine for about 15 years now, and in the last couple of years I’ve given serious thought to letting my subscription go for something more substantive and/or right-leaning, as I’ve watched the editorial staff at Fortune take their publication further and further left.  And then, just when I begin to think it’s a total waste of precious time and money, an issue strikes at the heart of all I hold dear and I think, “At last, someone in the mainstream media gets it”.

This is a serious time for America.  The next POTUS, regardless of who it is, has to make some serious decisions, not just about taxes, Social Security and Medicare, but Iraq, foreign policy in general and, oh yes, this little recession we seem to be in.  This requres a serious person for the job, and with all candor, I just don’t see Senators Clinton or Obama as being serious about anything other than pandering to the electorate via a populist message in order to obtain and maintain power.  They do not strike me as serious enough to handle the issues we face.

Which brings me back to Fortune.  In the April 14, 2008 issue, Geoff Colvin (if you’ve never read him, clearly the brightest writer in the media today) has written a piece entitled “The Tax Debate We Should be Having”.  Here are his statistics:

• 50% of the people who file returns pay 97% of the income taxes.
• the top 10% of wage earners pay 70% of the taxes.
• the top 1% pay almost 40% of the taxes.

How does this square with the Democrat candidates’ respective messages?  It doesn’t.  What we hear from the Clinton and Obama camps is that “Bush’s tax cuts [were] for the rich”.  Huh?  I guess that explains the statistics outlined above.  Mr. Colvin’s response:  the income of the top 1% of wage-earners has gone from $119,000 in 1986 to $365,000 in 2005.  I need to understand how that’s a bad thing.  It’s not.  Second, Mr. Colvin makes it clear that Bush did cut taxes for the rich, but he cut taxes for the poor even more, as reflected in the effective tax rate.  Finally, Mr. Colvin writes:  “Since the well-off pay the overwhelming majority of taxes, any tax cut with a prayer of influencing the economy would have to go mostly to them.  You could completely eliminate income taxes for the bottom half of the population, and the Treasury would hardly notice.”  The result:  “…a shrinking minority of citizens pay most of Washington’s bills.  Social cohesion falls apart.  The majority who pay nothing resent those with higher incomes; the minority who pay heavily resent those who don’t pay”.

Colvin gets it.  That’s why we need a serious President, and that’s why neither Clinton nor Obama are serious candidates.  Either they truly believe their populist message, which is downright scary, or they’re pandering for votes, which makes them dishonest.

As for my subscription to Fortune, it’s safe for the time-being, but only in order to have access to Geoff Colvin’s thoughts.

Tags: 2008 Presidential campaign, Clinton, Hillary, Obama, populism, Rich, TAXES

• Barack Obama , George W. Bush , Hillary Clinton , POTUS , TAXES
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