Payroll Tax Deal Is Middle Class Tax Hike, Fannie/Freddie Perma-Nationalization In Drag
Founder, ML-Implode
Only in Washington.
True to “sausage-factory” form, Congress and the Obama administration have figured out how to pay for an extension of the payroll tax cut: by a tack-on fee to Fannie and Freddie, amounting to an average of approximately $11 per month over the life of the typical loan.
Now, around here, we aren’t necessarily opposed to the idea of raising the fees on government-subsidized mortgages to better reflect the comprehensive costs of that subsidy (all-inclusive of heretofore “external” costs).
But this has nothing to do with pricing-in the subsidies for providing the underlying service: mortgage-holders (mostly the middle class) will be soaked in order to pay for a completely unreleated policy priority.
And so, for perhaps the first time ever, we find ourselves agreeing with the likes of the Mortgage Banker’s Association head (David Stevens) that this is a bad idea, if not unfair, and downright puzzling.
For the middle class, it is a circular transfer of wealth. They will now subsidize their own payroll tax cut (out of their soon-and-distant future mortgage payments). Of course, the payroll tax cut is disproportionately enjoyed by those even lower on the income spectrum — and they could certainly use the relief; no argument there. But it’s not as if the “middle class” is rolling in the dough either.
The other disturbing aspect of this deal is that it is merely a two-month stop-gap. So the GSEs get a permanent fee increase for two more months of stimulus sugar-high.
For that, as many industry commentators pointed out, we get a permanent reliance on Fannie and Freddie as yet another welfare till (one of many to be raided as public finances worsen). It’s a lot like taking the axe to your furniture to burn the wood for heat. It buys you a little time, but you’ve really worsened matters for yourself permanently (if you are too poor to buy firewood, you’re also too poor to buy furniture).
Recall that the GSEs are supposed to be “private”, and merely in “conservatorship” at the moment.
Well, if the illusions of that status were not already dashed by the open and unlimited cash-infusion lifeline from the Treasury (~$150 bln so far), this new role as stimulus piggybank seals the deal.
As a result, it will be that much more difficult to reform the GSEs into something with a separate, self-sustaining existence.
And as much as we at Implode hate all taxes, eliminating tax breaks on the super-rich would be preferable to coming up with the stimulus in this disgraceful fashion. As Fannie and Freddie are the housing market for the middle class, and are now all but officially nationalized, this is a middle class tax hike in all but name.
Count on Washington to always find a sleazy, back-door path to forge a reprehensible bi-partisan “deal” that actually screws the people rather than helps them.
Further to my comment of 9 August 2016, unlike the old Bank Rate system with its high interest rates, Quantitative…
Comment by Robert Zraick on 26 December 2011:
Well here is another fine example of the political deception socialistic con job.
When you look past the redistribution of wealth (socialistic) aspects off this, the truth becomes clear. The more the government spends, the more you pay in taxes or are saddled with debt.
This one sad fact seems beyond the mental zombies who walk around looking for a free lunch. There is no such thing. The government does not help you. They steal from you. Get it?
The only prosperity the government is capable of providing comes out of your pockets or the pockets of future generations.
There is a phrase which I like. “The people should not be afraid of its government; the government should be afraid of its people.”
I say that we start expanding this logic and apply it to all aspects of our society when it comes to dealing with the government.
“The people should not serve the government; the government should serve the people.”
“The guns should not be taken from the people. The guns should be taken away from the government.” Except to when used in defense of the people. And the government cannot use their guns against the people. Nor against any peoples of the world except in defense.
“The government should not be expanded with compliance of the people; the government should be contracted at the insistence of the people.”
The government should receive no salaries. Let them take office as a public service rather than as a way to make themselves rich. At very least their salaries should be small and only determined by the people, not by themselves. Believe me, you will not have to worry about term limits again. They can serve the people and they will be eager to return to the private productive sector where the rest of us have to work and earn a living. Make all contributions illegal, including campaign contributions. . Make it a crime for public servants to take money from anyone.
Let them campaign for office on the internet.
You see, my friends, the government is force. It must be kept small and constrained and stripped of the powers which corrupts it.
And we must get rid of the Central Banks. Local private banks will do just fine. And we must so NO to the robbery of the government through the criminal IRS.
Our country prospered for well over a century without them. They have brought us to the mess we are in now.
The lie is that the government has your best interests and welfare at heart. They do not. They care about their own power period. Stop falling for their BS. Stop listening to them. Lying is their greatest skill. Do not believe the lies. Look for the truth. You will not get it from them.
And get Ron Paul elected. A man of the people, not of the government. The truth is so obvious. Just open your eyes. But most of all stop living in fear.
The only thing to fear is the government. Reduce them to their Constitutional limitations. Looking for an easy way out? There is not one. Get serious about opposing the government. It is your right to do so.
Comment by Sean on 27 December 2011:
Very Good article Aaron… As always.
Pretty decent comment, Robert, right up until you said, “get Ron Paul elected.” : )
It will never cease to amaze me how the “marketing machine” of the govt. finds the way to spin things like this. How many times over the past three weeks did I read or hear some top ranking Democrat yelling about how this extension put $1000 into the avg. American’s pocket. I guess after a while you learn that when the Govt. is putting money in your pocket it’s only because they already have taken your wallet.
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