American Dream or American Nightmare (Housing, Bubbles, and the FairTax)

What does the American Dream mean to you? Perhaps each of us has our own definition but at its core it probably includes to live a peaceful and prosperous life. But where does home ownership fit in? Isn’t that part of the dream? Well, if you ask many at this particular snapshot in time, home ownership is definitely a dream… a nightmare.

Why did our government put so much emphasis on home ownership as part of the American Dream? One key reason is that it needed to create more demand for home building. As our manufacturing/industrial base has declined over the past several decades, construction was a key sector that promised growth and jobs… until it didn’t.

The Community Reinvestment Act coupled with low-interest mortgage rates post-internet bubble along with the tax incentive… (mortgage interest write-off) propped up housing and construction. Demand rose. The mindset of those who didn’t own a house in this appreciating market was… “if I don’t get in now, I may never get in”… The mindset of those who have owned one or more houses was… “time to buy another… housing prices ALWAYS appreciate”… The mindset of the home-builders was… “prices and demand are rising… time for more development!” Homebuilders prospered, Realtors prospered, mortgage brokers prospered, home supplies prospered, all levels of government saw increase in tax revenues and prospered, homeowners were able to use their home equity to consume, until…

Interest-only loans reset, demand dried up, foreclosures increased, prices tumbled, construction contracted, realty contracted, lending contracted, property taxes tumbled, and the home equity credit card dried up. Is this the fault of the Wall Street greedy? Probably to an extent… but the lion’s share of the blame for this nightmare falls directly on our government for propping up this bubble to begin with.
The fix? We need our manufacturing/industrial base back. What chased it away? Manufacturers realized that they could set up shop overseas and avoid Corporate Taxes and Payroll Taxes which enabled them to produce goods more cheaply. US competition died since these U.S. taxes (and tax compliance costs) had to be priced into the end product.

The FairTax fixes this problem by removing all production-related taxes (and compliance costs) with a simple 23% national retail sales tax on NEW goods and services whether they are domestically produced or imported. This means that American-made goods would arrive at the stores, show-rooms, etc. untaxed just like their foreign competing goods do and that the national retail sales tax would apply to both foreign and domestic goods at the point-of-retail-sale.

The FairTax further fosters a business friendly environment by eliminating Capital Gains tax. Within months, our nation would see $13+ trillion of U.S. wealth held off-shore repatriate back to our lands to invest in plant build-out and supporting services.
The FairTax has many advantages for individuals as well (no more filing of personal income taxes, FairTax Prebate to un-tax the poor, etc.) but the main point of this writing is to highlight the need to manufacturing back to the U.S. which would return result in economic prosperity for all in our lands.

There are no other bubbles to inflate… unless you want to inflate the government bubble (i.e. socialism). History has proven that socialism doesn’t work.

Please learn more about the FairTax by going to www.fairtax.org and consider joining the grass roots effort to get it enacted.