I lived in Miami in 2006 and the speculation was rampant. So I was around younger people in a professional degree program that had no interest in living permanently in Miami and they were taking on huge amounts of student loans AND they were considering taking out a mortgage on a condo to flip to make a quick buck. I also happened to be around and older guy that did buy a new condo earlier in the decade and by 2007 he was already trying to sue the builder because the condo measurements were slightly off.
When I look at various metrics of those years one stands out and that is tax revenue as a percentage of GDP. So under Bush we had record low tax revenue as a percentage of GDP in a growing economy in his first term…and I wonder how much of the Housing Bubble was just “dumb money” being pumped into a dysfunctional economy?? So credit card debt spiked and student loans spiked and mortgage debt spiked…why weren’t people focused on getting a career job with a salary as a way to make money??
15.4% is record low in a growing economy. And total tax receipts never recovered in that decade. So roughly every 10 years gross tax receipts double….except in the 2000-2010 decade gross tax revenue was pretty much the same at the beginning as at the end—that is an anomaly and in the next decade we actually pretty much doubled gross receipts and so it got back on track. So that’s two metrics—gross and %—that are anomalous in the Bush years.
Where is the 18% from 2000-2010??? They don’t look normal to me on both the downside and the upside. And sure enough roughly $2 trillion gross to begin the decade and $2 trillion to end the decade. That’s an anomaly!
Gross tax revenue has gone up pretty much every year outside of recessions. And Reagan’s tax cut can be spotted in gross revenue in one year and guess what happened?? Taxes were raised and gross revenue went back to trend. So if you take for example 1960 gross and compare it to 1970 and the amount doubles give or take a year. Also, tax cuts degrade over a 10 year period because upper income wages increase significantly faster than cost of living. So that’s why Obama focused on the top rate because Gore supported cutting taxes in 2000 and the Bush Tax Cuts included those advocated by Gore for lower incomes.
So I’m pointing out anomalies in tax revenue, % and gross, that happened because of the massive Bush Tax Cuts that ostensibly led to over 3% GDP growth…except the decade ended with the GFC. I personally believe the Bush administration oversaw a dysfunctional economy and their policies exacerbated the negative aspects of that dysfunctional economy. The Bush Tax Cuts were the signature domestic achievement of the Bush administration and that’s why I believe they should factor into the analysis of the GFC.
Btw, the Bush administration also invaded Iraq which was asinine and waged war against the Taliban that made very little sense (OBL was killed in Pakistan, did we invade that country?). My overall hypothesis is that the Bush administration was White House centric and decisions were top-down…and they were making decisions laser focused on winning in 2004 and so almost every decision in the first term was designed to juice the economy and foreign policy decisions were designed to juice approval rating with “rally ‘round the flag” effect.
You are welcome. Real estate pricing is extremely hard to understand or model. You have arbitrary geo limits to the urban areas; unnatural supply constraints in most large urban areas (except Houston) - zoning; a massive dependence on leverage and resultant impact of Federal Reserve rate setting; unusual characteristics in the US mortgage market (put optionality for refinancing down, but not up); more or less unfettered migration movement between urban areas within the US, and differing productivity in various urban areas due to industry cyclicality and "progress" (eg. Detroit).
Your paper here cuts through a lot of that in a cogent way and provides some meaningful understanding of housing market behavior and differentials in the example markets you list (Austin, Phoenix, Las Vegas, SF, LA). I am very impressed.
I lived in Miami in 2006 and the speculation was rampant. So I was around younger people in a professional degree program that had no interest in living permanently in Miami and they were taking on huge amounts of student loans AND they were considering taking out a mortgage on a condo to flip to make a quick buck. I also happened to be around and older guy that did buy a new condo earlier in the decade and by 2007 he was already trying to sue the builder because the condo measurements were slightly off.
When I look at various metrics of those years one stands out and that is tax revenue as a percentage of GDP. So under Bush we had record low tax revenue as a percentage of GDP in a growing economy in his first term…and I wonder how much of the Housing Bubble was just “dumb money” being pumped into a dysfunctional economy?? So credit card debt spiked and student loans spiked and mortgage debt spiked…why weren’t people focused on getting a career job with a salary as a way to make money??
It looks like tax receipts were low in 2003-2004 and back up to normal in 2006-2007.
15.4% is record low in a growing economy. And total tax receipts never recovered in that decade. So roughly every 10 years gross tax receipts double….except in the 2000-2010 decade gross tax revenue was pretty much the same at the beginning as at the end—that is an anomaly and in the next decade we actually pretty much doubled gross receipts and so it got back on track. So that’s two metrics—gross and %—that are anomalous in the Bush years.
Oops. I thought I had included a link.
Federal receipts in 2006-2007 look pretty normal.
https://fred.stlouisfed.org/graph/?g=1jhVM
Where is the 18% from 2000-2010??? They don’t look normal to me on both the downside and the upside. And sure enough roughly $2 trillion gross to begin the decade and $2 trillion to end the decade. That’s an anomaly!
I'm not sure what value there is in bringing 2010 into it. I don't think your assertion is that low taxes in 2010 was fueling a credit bubble.
Gross tax revenue has gone up pretty much every year outside of recessions. And Reagan’s tax cut can be spotted in gross revenue in one year and guess what happened?? Taxes were raised and gross revenue went back to trend. So if you take for example 1960 gross and compare it to 1970 and the amount doubles give or take a year. Also, tax cuts degrade over a 10 year period because upper income wages increase significantly faster than cost of living. So that’s why Obama focused on the top rate because Gore supported cutting taxes in 2000 and the Bush Tax Cuts included those advocated by Gore for lower incomes.
https://www.thebalancemoney.com/current-u-s-federal-government-tax-revenue-3305762
So I’m pointing out anomalies in tax revenue, % and gross, that happened because of the massive Bush Tax Cuts that ostensibly led to over 3% GDP growth…except the decade ended with the GFC. I personally believe the Bush administration oversaw a dysfunctional economy and their policies exacerbated the negative aspects of that dysfunctional economy. The Bush Tax Cuts were the signature domestic achievement of the Bush administration and that’s why I believe they should factor into the analysis of the GFC.
Btw, the Bush administration also invaded Iraq which was asinine and waged war against the Taliban that made very little sense (OBL was killed in Pakistan, did we invade that country?). My overall hypothesis is that the Bush administration was White House centric and decisions were top-down…and they were making decisions laser focused on winning in 2004 and so almost every decision in the first term was designed to juice the economy and foreign policy decisions were designed to juice approval rating with “rally ‘round the flag” effect.
This is a nicely reasoned and explained analysis. Thanks for sharing it.
Thank you!
You are welcome. Real estate pricing is extremely hard to understand or model. You have arbitrary geo limits to the urban areas; unnatural supply constraints in most large urban areas (except Houston) - zoning; a massive dependence on leverage and resultant impact of Federal Reserve rate setting; unusual characteristics in the US mortgage market (put optionality for refinancing down, but not up); more or less unfettered migration movement between urban areas within the US, and differing productivity in various urban areas due to industry cyclicality and "progress" (eg. Detroit).
Your paper here cuts through a lot of that in a cogent way and provides some meaningful understanding of housing market behavior and differentials in the example markets you list (Austin, Phoenix, Las Vegas, SF, LA). I am very impressed.