Please tell me why the economy went so deep into the shitter under the Bush tax cuts, you know, the ones we are under right now. The dems are not trying to remove all those above mentioned cuts, only the cuts to the top 2%. It is the repukes that are holding the tax cuts for the middle class hostage in order to give the top 2% their 3% cuts. The repukes claim that extending the tax cuts for the wealthy will provide jobs. Uhhh, didn't we lose 6 million jobs under Bush and the bush tax cuts. Seems to me the wealthy didn't pony up with their cuts and start up new enterprises providing jobs but moreover they horded the money and actually cut more jobs and sent their factories overseas.. It is ludacrous to suggest that giving the rich a 3% break on their taxes would bring us out of this depression/recession. It is pure hype and rhetoric to even suggest such a thing, pure bullshit.
BTW, under Dwight Eisenhower, a republican, the top tax rates were 90%. I would like to see those re-instated. That would cure our deficit in a few years. Of course there would have to be stipulations, like if you move out of the country to avoid taxes, none of your earnings could come from the USA, And a few other remedial rules.
Well, the current problems were caused by a collapse in the housing sector. This bubble did not begin under Bush 43's watch, but did pop under his watch. I hold him partly accountable for the bubble, but I also hold every POTUS prior to him all the way back to Jimmy Carter partly accountable as well.
To explain as succinctly as possible, here is the timeline of how the housing bubble occurred. POTUS Carter's administration pushed for and passed the Community Reinvestment Act, which was originally intended to keep redlining from occurring in low income, primarily minority, communities. At this point the CRA did not have any real teeth and Fannie and Freddie (GSEs) were not required to underwrite these loans, but the stage was set for later.
Enter the years of the Clinton presidency. POTUS Clinton pressured the two primary GSEs through HUD to begin underwriting the market that the CRA had targeted. With this underwriting of sub-prime mortgages, the GSEs now put the government on the hook for these debtors who had shown (via their credit scores) that they were not a good investment. As banks and mortgage companies knew that ultimately they would be passing the buck (and the poor credit rating debtors) on to the GSEs they basically approved everyone who applied for a mortgage.
Enter the Bush presidency. POTUS Bush removed the restrictions on Wall Street dealing in CBOs and MBSs (basically repackaged mortgage debt securities) and Wall Street eagerly joined the banks and mortgage companies in feeding the bubble. These CBOs and MBSs were so complex that few people, even among those who were creating and selling them, could articulate what the basis of these hyped products actually were. To make matters worse, the top rating services rated these investments as Grade A, since most were underwritten by the US federal government via the GSEs. This caused them to be rapidly disseminated throughout the US (and the rest of the world).
As a sidenote, Bush is on record stating that Freddie and Fannie were in danger from their underwriting of these sub-prime loans. So why did he allow them to be disseminated even further through Wall Street? Maybe I am a bit cynical, but I think since he knew he could not stop sub-primes from being written, he was simply trying to kick the can down the street, so to speak, and force another administration to deal with the fallout of the rapidly increasing housing bubble. I think he was hoping that by allowing Wall Street to repackage these bad loans with the good ones he could keep the money flowing and stretch out the day when the whole house of cards came crashing down. What that did is make the bubble that much bigger when it did burst.
Now is this a simplistic view of how we got to where we are? Sure it is. It would take me more time than I am willing to give to this thread to go into detail in how we got to where we are at.
But to blame Bush? Well you are partially correct, but far from completely correct. If you want to place the blame, not only do you have presidential administrations reaching all the way back to Carter (some would say FDR) to place blame upon, but also a myriad of other politicians (Barney Frank comes immediately to mind as a key player) and innumerable bureaucrats, as well as the private enterprises that saw an opportunity to make some money off of a well-intentioned but foolish program to put everyone into housing of their own.
Now? Well now we have a huge hangover from the false increase in housing due to the government artificially inflating the number of people able to purchase a home through its GSEs. As of 2010 approximately 25% of all existing mortgage holders are upside down on their home. That is because during the artificial boom about 85% of all mortgages written were some form of a non-traditional loan. So now we have one in four mortgages where the homeowner has an incentive to default on their mortgage.
And now that I have pointed out how government and private enterprise worked together to put us in the situation we are in, I think we might want to take a look in the mirror. Part of the problem related to the housing bubble is also related to the consumer credit bubble that has been steadily growing now for decades.
When banks began tightening up on credit card debt, many homeowner began using their home as a type of ATM. With the rapidly escalating prices in houses, and the lack of readily available consumer credit, some people just began tapping into their home for spending money via second (or third) mortgages and lines of credit instead of cutting back on spending.
So now we have roughly 24% of all existing mortgage holders having multiple mortgages on houses that they are either upside down on or almost so. With the tightening of consumer credit and the fallout of about a 10% unemployment, my expectation is that we will be experiencing a double dip recession. I think the key that will cause this second dip into recession will also be due to the housing market, primarily due to the number of people who have a disincentive to continue to pay their mortgage on a house that they owe more on than it is worth. Add those people to the continuing high default rate by sub-prime holders, along with the unemployment numbers and unless our politicians are willing to make some drastic changes in both our system of taxation as well as how government interacts with the market economy, we are almost guaranteed to see additional hard times ahead.
But it appears as if our current government believes higher taxes is the answer, even though any economist, even the most socialistic can tell you that any government taxation is a drag on economic growth, and the more and higher taxes you have the more drag you have.
I hope that answered your question (and no that is not a smart ass statement, I really do hope I helped).
