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View Diary: Killing Sacred Liberal Cows, or What Economists Think About the Economy (105 comments)

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  •  Apparently these economists are idiots (6+ / 0-)
    Their reasoning: in essence, the mortgage interest deduction gives a check to every American who owns a home and pays a mortgage on it, and the more expensive the home you own, the bigger your check.
    No, it's not the expense of the house, it's the size of the loan. The more you BORROW the bigger the potential interest write-down. But wait, they're wrong on that as well, because unless your mortgage is large enough that it makes sense to itemize your deductions AND your income is low enough that you don't bump into the AMT there isn't an opportunity to get the government to subsidize your McMansion.

    Hard for me to take much of the rest seriously after that load of horse excrement.

    To me progress is not so much a goal as it is a process and I believe it will not follow a straight course. Remember, the drops of water that form the river may not take the shortest path but they will still reach the ocean.

    by ontheleftcoast on Thu Nov 15, 2012 at 11:25:14 AM PST

    •  you sound so sure (0+ / 0-)

      facts are facts and the facts are that most people don't look at the cost of the house they are buying as much as what the size of their payment will be.  The mortgage deduction is factored into those calculations.  Take it away and payments go up so in turn prices would have go down.  Measures like this are examples of the law of unintended consequences.  The deduction was set up to help people afford homes but what happened instead was homes actually became less affordable.  Same thing happened when restrictions on student loans were lessened.

      •  The real problem with any of discussion (1+ / 0-)
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        on the mortgage deduction is nobody wants to talk about the group that benefits most from it -- banks. As you mention, they can raise the rates because they can convince homeowners they'll "make it back in tax deductions". But as I point out, that isn't always the case. So the real advantage to removing the deduction would be to remove a huge cash cow for the banking industry. Of course there's another way to do that -- regulation. Prevent the banks from jacking up the mortgage rates to artificially milk profits from government on the backs of middle class homeowners.

        To me progress is not so much a goal as it is a process and I believe it will not follow a straight course. Remember, the drops of water that form the river may not take the shortest path but they will still reach the ocean.

        by ontheleftcoast on Thu Nov 15, 2012 at 12:16:58 PM PST

        [ Parent ]

      •  Why do we give bankers the right to (3+ / 0-)

        skim money off of the top of the transaction between a student and an educational institution?

        In some countries, people are accepted and get to go to school without having to put their future into hock.

        As for the mortgage deduction, the housing market which is still shaky is probably not going to get stronger if they remove it.  People who can't afford to lose it are going to be screwed.

    •  Not complete BS but I must (3+ / 0-)

      agree that anyone that lets Koch Bros. shill Russ Roberts describe himself as a libertarian is shoveling hard.

      The point about the politically popular mortgage interest deduction is more nuanced,I'd say,because it is a deduction that favors the wealthier among us.Currently,we allow this deduction on mortgages up to 1M,and include both 2nd homes and yachts. In the spirit of bipartisany,I support Simpson-Bowles changes on this. 500K mortgage cap,no second home deduction,no home equity deduction. (kinda wobbly on the last bit I admit) Here is why:

      But it does have an impact in states where income and housing prices are higher. Melissa Labant, technical manager at the American Institute of Certified Public Accountants, calculated two situations for middle- and upper-income homeowners in more expensive states.

      lIn the first situation, consider a couple who earn $137,300 a year and are in the 25 percent tax bracket. If they owned a $350,000 house paying 5 percent interest on their mortgage, they would save $4,375 a year on interest of about $17,500.

      For the wealthiest homeowners the deduction is far better. People with $1 million homes with the same 5 percent rate would be paying $50,000 a year in interest. As they would most likely be in the top 35 percent tax bracket, they would save $17,500 a year in federal taxes through the deduction.

      Whole article is here

      A similar take is here

      "George RR Martin is not your bitch" ~~ Neil Gaiman

      by tardis10 on Thu Nov 15, 2012 at 12:22:15 PM PST

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    •  The "Dismal Science" (0+ / 0-)

      I don't know much about economics.  I think it is called the "dismal science" because economists are so often wrong, and so rarely agree with each other.

      After all, wasn't Ben Bernake convinced that banks should be allowed to bundle mortgages together to form a unique investment product?  And that turned out really bad.

      I am thinking there is a large positive correlation of the expense of the house and the size of the loan.  But what do I know: I am not an economist.

      "The fool doth think he is wise: the wise man knows himself to be a fool" - W. Shakespeare

      by Hugh Jim Bissell on Thu Nov 15, 2012 at 12:51:46 PM PST

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      •  Then cap it. Don't kill the weak housing rebound. (1+ / 0-)
        Recommended by:

        And eliminating corporate taxes is just plain wrong.

        look for my eSci diary series Thursday evening.

        by FishOutofWater on Thu Nov 15, 2012 at 02:03:19 PM PST

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        •  Eliminating corporate taxes makes sense (0+ / 0-)

          ...if all Americans benefit equally from corporations.  But we don't.

          The direct benefit of incorporation is legal protection from personal bankruptcy and liability.  That's useful for business, I guess.  But it allows the owners of a business to cap their losses and leave the whole country to sweep up the debris--privatizing the profit and sticking the public with the losses.

    •  Amt allows the mortgage deduction (0+ / 0-)

      Most deductions are not allowed under AMT, but that one certainly is.

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