Is Japan the harbinger for all of the west?

Originally posted by spruce112358
You didn't look at the Case-Shiller graph, did you?

Did you give a link?

Originally posted by spruce112358
1997 was when that exclusion went into effect. And if you look at the Case-Shiller index, that was exactly the time when house prices started to rise exponentially.

Smoking gun, eh?

If you go to Table 9 here: http://www.huduser.org/portal/periodicals/ushmc/fall09/hist_data.pdf

you'll see that the price of existing homes rose modestly in the late 1990's by about 4-5% (without adjusting for inflation) per year. This is hardly "expotential" growth. When Wall Street entered the secondary mortgage market and started buying up any mortgage they could get their greedy hands on, prices of existing homes started shooting up by 7-12% per annum from 2000-05.

Not much support for your theory, Spruce.

Originally posted by no1marauder
Actually not:

The first modern federal income tax was created in 1894. Interest — all forms of interest — was deductible; the Supreme Court, however, quickly ruled that the tax was unconstitutional. In 1913, the Constitution was amended and a new income tax was enacted. Once again, interest was deductible.

There is no evidence, how ...[text shortened]... y to the upper-middle and wealthy and they are the ones who wield political power.

It's been retained because it's a sizable tax giveaway to the upper-middle and wealthy and they are the ones who wield political power

Would be a real shame if someone came along waving the Tea Party banner, but had enough of his own money that he could tell Dick Armey and the Koch brothers where to stick it, built up a large coalition among those who don't own a house, and then pushed to eliminate this giveaway. And told anyone who complained that y'all wanted less government, well, now you're gittin' it.

Originally posted by no1marauder
You want studies, I got studies:

Empirical research has found little evidence that the MID increases homeownership. Glaeser and Shapiro (2003) note that the value of the deduction has risen and fallen by tenfold in the past 50 years while homeownership rates have remained nearly unchanged between 63 and 68 percent. Their formal analysi ...[text shortened]... st deduction.

http://www.taxpolicycenter.org/uploadedpdf/412099-mortgage-deduction-reform.pdf

I never said it increases home ownership rates. I said it increases prices.

If you can take a deduction, then you're willing to pay more to purchase the same house.

Originally posted by sh76
I never said it increases home ownership rates. I said it increases prices.

If you can take a deduction, then you're willing to pay more to purchase the same house.

You said both several times:

sh76: The ability to take the mortgage interest deduction is an enormous incentive to homebuyers and a factor that inflates housing prices throughout the country.(Emphasis supplied)

sh76: If so, wouldn't the deduction be an incentive to buy? I don't see why it would not be. It was certainly a huge incentive for me when I bought a house. In calculating your monthly budget, you factor in the benefit of the deduction and you adjust how much you're willing to pay as a purchase price accordingly.

Originally posted by Melanerpes
[b]It's been retained because it's a sizable tax giveaway to the upper-middle and wealthy and they are the ones who wield political power

Would be a real shame if someone came along waving the Tea Party banner, but had enough of his own money that he could tell Dick Armey and the Koch brothers where to stick it, built up a large coalition among tho ...[text shortened]... told anyone who complained that y'all wanted less government, well, now you're gittin' it.[/b]

It would a $100-125 billion per year tax increase and there's no way Republicans would support it. Bush had a commission back in 2005 that recommended ending the mortgage interest deduction but that was promptly shelved with politicians of both the big money parties reconciling in horror.

Originally posted by no1marauder
If you go to Table 9 here: http://www.huduser.org/portal/periodicals/ushmc/fall09/hist_data.pdf

you'll see that the price of existing homes rose modestly in the late 1990's by about 4-5% (without adjusting for inflation) per year. This is hardly "expotential" growth. When Wall Street entered the secondary mortgage market and started bu ...[text shortened]... y 7-12% per annum from 2000-05.

Not much support for your theory, Spruce.

You prove my theory. Graph the data in Table 9 and you'll see the exponential departure.

Or look here: http://en.wikipedia.org/wiki/File:Case-shiller-index-values.jpg

As for Wall Street -- sure, they got into the act. Any rising market attracts them. Probably a lot of them own gold these days.

Originally posted by no1marauder
It's been retained because it's a sizable tax giveaway to the upper-middle and wealthy and they are the ones who wield political power.

http://en.wikipedia.org/wiki/Home_mortgage_interest_deduction

"The standard justification for the deduction is that it incentivizes home ownership."

But as we all seem to "furiously" agree, it doesn't seem to do that very well. What it does do is raise prices.

Originally posted by no1marauder
It would a $100-125 billion per year tax increase and there's no way Republicans would support it. Bush had a commission back in 2005 that recommended ending the mortgage interest deduction but that was promptly shelved with politicians of both the big money parties reconciling in horror.

Which is a perfect argument for more limited government -- misguided policies get into place and then can't be removed. If the government respected limits on where it should not fiddle, we wouldn't have so many of these.

You are providing some excellent arguments for the conservative case, no1m.

BTW, taxes overall don't have to go up under such a scenario -- one could lower the income tax rate, for instance.

Originally posted by Teinosuke
Japan's birth rate is one of the lowest in the world, and immigration too is relatively low. Consequently, Japan is one of the few countries in the world where population is actually falling. It is not therefore surprising that economic growth should be low. But since a static economy with a falling population actually means that GDP per capita is still gr ...[text shortened]... nomies may look more like Japan's - but again, that may not be a problem in per capita terms.

Dont you think that an ageing population (with the highest longevity in the world) with a declining birth rate and a very heavily government supported social welfare system would have problems on its hands as to the annually increasing cost of supporting itself with a declining revenue pool?

Just a thought.

Originally posted by nook7
Dont you think that an ageing population (with the highest longevity in the world) with a declining birth rate and a very heavily government supported social welfare system would have problems on its hands as to the annually increasing cost of supporting itself with a declining revenue pool?

Just a thought.

Yes, I do - but I'm not sure that was the question at issue. As regards the low birth rate, I've advocated pro-natalist policies in other threads. Still, I've heard some Japanese commentators argue that greater use of mechanisation and robotics will compensate for a declining labour pool!

Originally posted by spruce112358
http://en.wikipedia.org/wiki/Home_mortgage_interest_deduction

"The standard justification for the deduction is that it incentivizes home ownership."

But as we all seem to "furiously" agree, it doesn't seem to do that very well. What it does do is raise prices.

Well you can quote wikipedia if you wish; I prefer quoting actual figures (which do not show any correlation between the size of the home interest deduction and housing prices).

Originally posted by spruce112358
Which is a perfect argument for more limited government -- misguided policies get into place and then can't be removed. If the government respected limits on where it should not fiddle, we wouldn't have so many of these.

You are providing some excellent arguments for the conservative case, no1m.

BTW, taxes overall don't have to go up under such a scenario -- one could lower the income tax rate, for instance.

This is hypocritical of you since you favor all kinds of tax policies which favor the wealthy. Getting rid of tax policies that are skewed to help the well to do is hardly part of the "conservative case" these days. Ronald Reagan insisted on retaining the mortgage interest deduction when other deductions for consumer interest payments were done away with.

I'm a firm believer in limited government and always have been. I just don't think it should be a tool to increase the rich's control of the economy at the expense of the working class by action OR inaction.

Originally posted by no1marauder
It would a $100-125 billion per year tax increase and there's no way Republicans would support it. Bush had a commission back in 2005 that recommended ending the mortgage interest deduction but that was promptly shelved with politicians of both the big money parties reconciling in horror.

Obviously, the big money parties are going to recoil in horror. But the Tea Party is supposed to be a backlash against this sort of thing. It's supposed to be about forcing the GOP in particular to actually live up to its eternal promise to reduce the size of government.

So here we have a nice $100-125 billion per year that the government is spending*, with there being almost no benefit in return -- its obviously a major example of waste. So it's time for the Tea Party to take an axe to it.

*all special tax breaks are actually a form of spending - essentially, everyone else's taxes are higher so the government can give certain people "tax breaks" -- there should be new accounting rules that require the government to call these things (tax expenditures) real spending.

Originally posted by sh76
An article in Friday's Journal (can't find it online) speculated as to whether Japan's 2 decade economic malaise caused by enormous real estate and credit bubbled in the late 80s is the harbinger for the west at this point.

Of course, most of the article quoted optimists stretching to find inherent differences between Japan and the US, etc. But, frankly, the ...[text shortened]... es of economic stagnation, deflation and near zero interest rates or are we really different?

Maybe you are working from false premises. At least there is another view.

http://www.guardian.co.uk/commentisfree/cifamerica/2010/aug/11/paul-krugman-japan-lost-decade


Selected quote:

Japan's economy has been and remains successful. So is Germany's. They have reached an economic steady state in which they don't need roaring growth rates to provide for their people. But for the economic Cassandras, apparently, it doesn't matter if people's needs are being met; what matters is whether their theories and equations balance.

Unfortunately, there is a common sense aspect to this that gets lost amid the rhetoric. Two lessons of our times are that economic bubbles eventually burst, and that the environmental consequences of unbridled growth in this age of global warming are severe. In other words, the real game is no longer strictly about economic growth; it's about sustainability and learning to do more with less. The era of US-style trickle-down economies is over for wealthy countries because trickle-down is neither economically sound nor ecologically sustainable. The developed nations must lead the way towards a different path of development.

This is not an easy challenge, yet it is the course that Japan and Germany have chosen. Americans would be wise to learn from them. If the US didn't have such a trickle-down economy that has produced so much inequality – if it was, in fact, better at sharing its wealth – perhaps it wouldn't need so much fiscal stimulus and growth.