To start, the White House explains that “because of the irresponsibility of the past decade, the President inherited a $1.3 trillion projected deficit upon taking office and an economic crisis that threatened to put the nation into a second Great Depression. He moved quickly to get the economy moving again. Now, the economy is growing, and we have gained private sector jobs for the past 10 months.”

This is nonsense for two reasons: First, one needs to look at the bigger picture, the Bush Administration racked up a deficit of $4.35 trillion over eight years according to official Treasury Department figures. This was after four years of surpluses originated under the Clinton Administration and talk of actually paying off the entire deficit by now.

Second, the problem is not just the Bush deficit. The problem is the unwillingness of the current Congress to raise taxes on higher income households, specifically those making $250,000 and more.

Buffett & Taxes

Warren Buffett, one of the richest people in the world, explained the situation on ABC News very simply: “If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further. But I think that people at the high end — people like myself — should be paying a lot more in taxes. We have it better than we’ve ever had it.”

Just how good does Buffett have it?

The current top tax rate is 35 percent. According to Stanford University, the top federal tax rate in 1950 was 84.357%. That’s not all: The top rate was 91% in 1960, 71.75% in 1970 and 70 percent in 1980.

In other words, today we’re arguing over 35 percent versus 39.6 percent when the real argument should be 35 percent versus 50 percent or 60 percent or more. Even the minimal 39.6 percent rate would increase federal revenues by $700 billion annually yet impact only 2 percent of our households — money that could be used to reduce the federal deficit and right the economy, goals that seem to be widely supported.

Foreclosures

The Obama pay plan will freeze the wages of civilian federal employees but not those in the military. Unfortunately, the impact of such a freeze is not limited to government workers.

Federal employees are people who live near you. They buy things. The more things they buy the more they inherently help local economies. Alternatively, the estimated $2 billion that will be “saved” this year and the $28 billion that will be “saved” in the next five years is money that’s being removed from local businesses. States will also have less income to tax, which means services will be further limited.

My arguments is that as a result of less employment you can be certain that some people will lose their jobs and others will lose hours. Less money in tough times translates into less employment and less employment means less buying power, more foreclosures and continuing pressure to hold down home values — including the value of your house.

The argument on the other side is that if the rich can keep their money than benefits will trickle down to the rest of the public. This argument has been made for years and it doesn’t work. If it did work then no doubt with today’s 35-percent rate we would have a booming economy, more employment and a smaller deficit.

The Right Argument

There shouldn’t be an “Obama Plan” to freeze federal wages. Instead, the President, the White House and its assorted surrogates, spokesmen and allies ought to get their argument straight: If we do not fairly tax the rich we must then freeze the wages of lower and middle-class workers — if we allow them to keep their jobs at all.

That’s the right equation — and that’s the connection the White House isn’t making.

Obama fed pay plan to swell mortgage foreclosures is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Bigger homes, of course, require more dollars to buy, finance, refinance, insure, heat, air condition, and carpet. The equation is bigger homes = bigger mortgages — and we all know how bigger mortgages impact monthly payments.

It’s not just that we have more interior area, we have also packed more features into today’s houses including, says the NAHB, whirlpool bathtubs, gas fireplaces, gourmet kitchen appliances, state-of-the-art home security systems and low-maintenance exterior materials, make new homes more comfortable and livable than ever. Also, homes built today are also more energy efficient. In fact, new homes are about twice as energy efficient as new homes were just 20 years ago.”

In most communities you can almost date the housing stock by the size of local palaces. The trend seems to be massive footprints on small lots — an approach which creates a lot of interior square footage with little exterior space to maintain.

At a time when there is a strong need for affordable housing, huge and expensive homes are virtually required by the economics of land acquisition. You can’t build small and cheap in most metro areas because the cost to acquire and develop property is so great. In addition, zoning ordinances and minimum lot sizes assure an effective housing shortage in many areas — thus a major reason for rising prices.

People with large holdings and big incomes have choices while those on the cusp of subsistence do not. The failure of our housing market is that we are very good at plans, restrictions and zoning — and not so good at affordable housing. We’ve taken the reward motive out of affordable housing because builders in many communities cannot profitably-construct cheap homes and still meet zoning requirements.

But less expensive homes are possible, sensible and necessary. Smaller lots combined with smaller homes can certainly be built — if allowed. And such homes can easily work for many households: Just look at the typical home sizes from five decades ago — and then look at the number of occupants per house. According to the Census Bureau, the average household had 3.37 people in 1950 — and 2.56 people in 2007.

What we have now are fewer people per household and cavernous, echo-filled structures in which they are housed. This makes little sense in terms of land usage, energy consumption, environmental issues or cost.

Today we increase home values by limiting supply, a better approach would be to increase home prices by enlarging the pool of qualified buyers. We’d have more buyers if we had more affordable housing, homes that can appreciate in value and allow owners to build equity, increase household wealth over-time and re-enter the marketplace as move-up buyers.

As an owner it’s in your self-interest to want the largest possible pool of move-up buyers, a group that represents some 60 percent of the existing home marketplace. Increase the number of move-up buyers and your home is likely to sell faster and for more money. The catch is that you can’t have move up-buyers unless they have properties to replace — thus the need for affordable housing.

Community planning today favors the upwardly mobile, the already settled, growing congestion and a numbing architectural sameness. We are using land regulation to limit affordable housing at the very same time we claim that affordable housing is an attractive and desirable goal — except where we live.

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Published originally by Realty Times on October 24, 2003 and posted with permission.

Mega Homes Versus Real Estate Sanity is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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