I have been following the campaigning on both Democratic and Republican sides very closely over the past week. I know for sure that I am supporting either John McCain or Mitt Romney. I'm going to have a to make a decision on that before voting next Tuesday.
I'm not allowed to vote in the Democratic primary but I can tell you that I'm hearing some scary economic stuff from Hillary Clinton and Barack Obama.
In the Democratic debate on CNN this week Hillary called for a moratorium on home foreclosures along with a cap on interest rates for mortgages. Talk about a blow to the gut of the financial industry. The foreclosure moratorium would cause a sharp spike in mortgage rates due to the increased risk borne by the lenders. Hence the rate cap. This is dangerous territory as the fate of mortgage lenders would be in the hands of the government.
I feel bad for people who are losing their homes. But many of those people knew the risks of taking out mortgages that they might not be able to afford if they lost their jobs or if home values declined. I've been more fiscally responsible. So why should I pay (via my taxes and increased mortgage rates) to reverse bad decisions? I hope to be a homeowner again in the next year but if rates are pushed to seven or eight percent it might not be worth it to buy a home.
The proposal reeked of political pandering. Both sides do it and it makes me ill. California has been rocked by foreclosures due to their crazy housing prices and that's obviously an idea that plays very well with the locals.
At a rally in Boise, Idaho today Barack proposed eliminating all income taxes for 'seniors' making less than $50,000 per year. Pretty shocking and naive if you ask me. The goal is to reduce the financial burden on older people. Unfortunately it is also a disastrous proposal.
By removing taxes based on age you are perpetuating age discrimination. The assumption is that people who are older and have modest incomes can't take care of themselves. This isn't true. The vast majority of seniors actually need less money than when they were in their younger years. Most no longer support their children. Most have paid off their homes. Most are benefiting from pensions and social security. Plus they may even have a job.
I would say that its more likely that younger people would need a tax break. Even so I wouldn't be in favor of any sort of tax reduction based on age and income. And he's talking about total elimination of income tax. Crazy.
It's crazy for a couple of basic reasons. First ,you shift the burden to younger people who are more likely to need the extra money they will pay in taxes. Second, you create an amazing incentive to suppress, or even hide income so that people could benefit from the tax forgiveness scheme. If I'm a senior citizen who earns $55,000 a year in income under this scheme I'm gonna figure out a way to get my income below $50,000. Finally, you'll benefit millions of accountants who will begin working hard to figure out ingenious ways for people to shelter their income. Those who can afford the best accountants will make hay on this deal.
The country is at a point where we should be trying to close tax loopholes, not create them. We are also at a point when the system needs to be come simpler. Barack's plan makes things more confusing.
Both Hillary's and Barack's plans are wrapped in the cloak of the aim to provide relief for American's who need it most. Hillary's plan focuses on punishing the lenders and fails to consider that people should be held responsible for their own decisions. Barack's plan is just plain silly and discriminatory. Probably more pandering.
If politicians really want to help and provide relief to average Americans they can do two things. First, stop spending all of our money. Why are we sending billions in aid to foreign countries when there are still many social and economic problems that need to be solved here? Second, cut taxes for people of all ages and income brackets. The money that gets spent in Washington belongs to everyone who pays taxes.
Its a very simple situation from my perspective. People who have more money in their pockets from lower taxes will better positioned to pay their mortgage every month. And people who have more money in their pockets at younger ages will have the opportunity to save more money for the future.
If people choose to buy too much house and fall behind on their payments, or save less money and have little to live on in the future, they should be responsible for that. Following generations should not be made to bear a burden in the name of relief in an election year.
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