Jan. 5th, 2017

Jordan Weissman has an article in Slate saying that the Republican tax plan will hose homeowners. His reasoning is that raising the standard deduction will mean fewer people itemizing deductions, and in particular, fewer people writing off mortgage interest, therefore less demand for houses, therefore lower prices, therefore homeowners hosed. He does acknowledge that lower prices will benefit young people who wish to become homeowners, but he regards that as less important.

He also thinks that the "wealth effect" is good for the economy: people find that their land -- uh, I mean that their homes -- have risen in price, so they figure they're richer, so they go out and spend more, stimulating the economy. It is Keynesian doctrine that people need to spend, and not invest, in order to stimulate the economy, and I'm not aware of any evidence for it. Mr. Weissman doesn't seem to understand the connection between bubbles in land prices and the boom-bust cycle, but then, most people don't.

He isn't wrong that falling prices may be genuinely unpleasant for some homeowners, but I do disagree about the broader economic effects. Also, why give special consideration to existing homeowners over would-be buyers?



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