Yet the overall economy has grown at a reasonable pace over the past four years. Where did the economic growth go? The answer is that it went to the same economic elite that received the lion’s share of those tax cuts. ...Meanwhile, Busted - the housing market implodes is in Newsweek:
The absence of any gains for workers in the years since the 2003 tax cut is a pretty convincing refutation of trickle-down theory. So is the fact that the economy had a much more convincing boom after Bill Clinton raised taxes on top brackets. It turns out that when you cut taxes on the rich, the rich pay less taxes; when you raise taxes on the rich, they pay more taxes — end of story. ...
[T]he whole idea that a rising tide raises all boats, that growth in the economy necessarily translates into gains for the great majority of Americans, is belied by the Bush-era experience. As far as I can tell, America has never before experienced a disconnect between overall economic performance and the fortunes of workers as complete as that of the last four years.
Walking through the gated community of Black Mountain Vista on a hill in Henderson, Nev., Thomas Blanchard offers a guided tour of real-estate woe. A row of stucco duplexes that recently sold for as much as $500,000 sit empty. "That's a repo," the real-estate agent says as he stands in front of 678 Solitude Point Avenue. Then he points to the adjacent houses, where yellow patches blot the spartan lawns and phone books lie on front porches, their covers bleached from weeks under the desert sun. "No. 680, repo; 684, repo. Those two at the end, repo."....I turned to the internet after listening to the PR general and then the droning ambassador. If I had listened to the ambassador drone on more, his monotone reading inspiration seemed to be Soviet farm reports, I would have started pounding nails into my ears.
No sooner did the housing market peak last summer than pundits and home builders assured the public the bottom had been reached. But with each passing month, the shoes continue to drop. First, dozens of subprime lenders were forced to close their doors. Then in July the nation's largest mortgage lender, Countrywide Financial, reported that mortgages held by borrowers with better credit were starting to curdle. Nearly 180,000 homes fell into foreclosure in July, up 93 percent from a year ago....
The decline in housing construction and sales has had an immediate economic impact. From the perspective of job creation, real estate was the best sector in which to have a boom, providing jobs at every rung of the ladder: real-estate agents and mortgage brokers, architects and lawyers, investment bankers and decorators, movers and painters, contractors and landscapers. Between November 2001 and April 2005, housing and housing-related industries created 788,300 jobs, or 40 percent of the total created in the United States, according to Asha Bangalore, an economist at Northern Trust in Chicago. The demand for mortgage brokers in Las Vegas was so strong that "every stripper, waiter and bartender on the Strip had a broker's license," says Boyd Nyborg, a former mortgage broker who now tends bar at the Tao Las Vegas.
But since August 2006, employment in housing-related industries has declined 119,400, according to Bangalore....
The collateral damage is spreading. Because home sales and moves stimulate purchases of appliances, electronics and furniture, the giant chains that catered to house flippers and renovators have reported recessionlike results. In the second quarter, same-store sales were down 5.2 percent at Home Depot and 4.3 percent at Sears.
The nation's biggest retailing sector—automobiles—is likewise feeling the effects. In July, auto sales were down 12 percent from the year before. When CNW Research asked consumers who were putting off plans to buy new cars why they were doing so, 17.6 percent cited housing issues like falling home equity or rising mortgage payments. That compares with just 2.3 percent in 2005. John Crane, general sales manager at Ron Smith Buick Pontiac GMC Jeep in Merced, Calif., a farming community of 80,000 that has experienced an influx of Bay Area refugees, has seen a tremendous slowdown in the past six to eight months. "People don't have the money to look at cars," he says. "They're having a hard time paying house payments. Now their second mortgages and 1 percent loans are coming up."
Which brings up another problem. Roughly $370 billion in adjustable-rate mortgages will reset this year, according to First American CoreLogic, and millions of Americans will have to pay significantly more per month just to stay in the same home. Mark Zandi, chief economist for Moody's Economy.com, says that in the peak month of October 2007, some $50 billion worth of mortgages will reset at higher rates. Meanwhile, new mortgages are getting harder to come by, and not just for borrowers with subprime credit. Freaked-out lenders are ratcheting up requirements for minimum-credit scores and down payments. Kim Dicce, a Realtor in Tampa, where housing inventory is piling up, notes that lenders now seem to be requiring buyers in her area to put 15 to 20 percent down and have a credit score above 700. "Now we only have one third of the eligible buyers that we had before, and five times as many houses." Higher-income earners with good credit haven't been spared, as chastened lenders focus on making loans that they can quickly sell to Fannie Mae and Freddie Mac, which buy mortgages only up to $417,000.
Tags: Bush economy, housing, Krugman
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