The Uncertainty Tax
By THOMAS L. FRIEDMAN
NYT
If you want to understand why the unemployment rate has been stubbornly lodged around 9 percent, a good place to start is with the eye-popping mortgage statistics released last week by the economic analysis firm CoreLogic: 38 percent of homeowners with second mortgages are underwater. They borrowed against the value of their homes, and they now owe more than their houses are worth. The total number of underwater homeowners in America, with first and second mortgages, is a stunning 22.7 percent. In Nevada alone, 63 percent of all mortgaged properties are worth less than the owners paid; in Arizona 50 percent, Florida 46 percent, Michigan 36 percent and California 31 percent.
When people are so underwater, they find it hard to move to take new jobs, they find it hard to borrow or raise cash for education or start-ups, and banks become even more cautious about lending. Until we as a country figure out how to divvy up these losses on housing and let these markets clear and move on, they will be a serious drag on employment.
Indeed, this mortgage mess just feeds the three other big problems undermining U.S. job growth today: weak aggregate demand, structural impediments and an epidemic of uncertainty about what the future holds for everything from health care to the rate of taxation to Social Security and Medicare spending to the availability of credit to the general direction of the economy — the sum of which has people holding back and thus undermining the government’s stimulus.
We need to be working on all three at once, and urgently. How? Others have focused on the aggregate demand problem, so I’d like to address some of the structural impediments and uncertainty.
(More here.)
NYT
If you want to understand why the unemployment rate has been stubbornly lodged around 9 percent, a good place to start is with the eye-popping mortgage statistics released last week by the economic analysis firm CoreLogic: 38 percent of homeowners with second mortgages are underwater. They borrowed against the value of their homes, and they now owe more than their houses are worth. The total number of underwater homeowners in America, with first and second mortgages, is a stunning 22.7 percent. In Nevada alone, 63 percent of all mortgaged properties are worth less than the owners paid; in Arizona 50 percent, Florida 46 percent, Michigan 36 percent and California 31 percent.
When people are so underwater, they find it hard to move to take new jobs, they find it hard to borrow or raise cash for education or start-ups, and banks become even more cautious about lending. Until we as a country figure out how to divvy up these losses on housing and let these markets clear and move on, they will be a serious drag on employment.
Indeed, this mortgage mess just feeds the three other big problems undermining U.S. job growth today: weak aggregate demand, structural impediments and an epidemic of uncertainty about what the future holds for everything from health care to the rate of taxation to Social Security and Medicare spending to the availability of credit to the general direction of the economy — the sum of which has people holding back and thus undermining the government’s stimulus.
We need to be working on all three at once, and urgently. How? Others have focused on the aggregate demand problem, so I’d like to address some of the structural impediments and uncertainty.
(More here.)
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