Every decision has consequences. Most decisions are thought about for the short term; failing to look at the long term effects on the planet, world, country, economies or your home.
Many years ago, when Alan Greenspan was Chairman of the Federal Reserve, financial policies were written that encouraged us with ways to save and spend our money. During this era, your home was considered a form of savings, instead of actual money in the bank or tucked away in a shoebox. At that time, your home was a good place to save your money and supported the American dream to own our own home.
Decisions in years past originated within our U.S. Congress that helped contribute to the current housing/automotive crises. We are now feeling some of the long term effects of that decision. During the early 90’s Congress changed the income tax deduction that Americans could claim on their 1040 income tax return. We could no longer deduct interest on bank loans- only the deduction of interest on our home mortgages. So for example, the car we financed- that costs as much as the price of a home 20 years ago, the interest was no longer a tax deduction. This now created the potential for two major U.S. economic sectors to be affected by a simple decision to increase our taxes. We are now living that reality.
Once the interest deduction was lost, greedy new businesses emerged with new ideas to give us easy money to buy our cars, toys, etc.. But the catch was to use the equity in our houses-our former “savings account”. The “easy money loop hole” allowed the American people to still receive an interest tax deduction. This all worked fine until all equity was eroded caused by 2nd and 3rd mortgages and at the same time housing value decreases occurred throughout the United States. The housing crises had to happen. The housing glut and fewer qualified buyers are some of the consequences of bad decisions; resulting in homes for sale on the market for extended periods of time. Primarily because Congress made a change in our income tax deductions in a feeble attempt to increase taxes. The vision of Former Chairman of the Federal Reserve Alan Greenspan to consider our homes as another safe and solid form of saving is a thing of the past. We all lose.
Not only did the U.S. housing market suffer, look at the failing automotive industry. Any increase in tax revenue obtained from the loss of the interest deduction on automobile loans is negligible compared to the billions of tax payer dollars used to bailout General Motors and Chrysler.
Our country was founded by wise people that had the foresight to plan for our future. Decisions were based upon sound and grounded principles. Their foresight stood the test of time for over two centuries. Our elected leaders of today took less than ten years to cripple our financial strength. So are there no wise men and women in government today? Every two to four years our country posts job openings for key people to run our government. I encourage those wise and unselfish people to send in their resumes and run for an elected office.
Douglas Lee
Taro Systems, Inc.
Grand Rapids, MI
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