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The Democrats and the Coming Housing Bust

Posted by: Michael Mandel on February 13

The coming housing bust will be a golden opportunity for the Democrats to gain political ground—but only if they are ready for it. We know what Republicans will propose in response to a falling housing market—cutting taxes, of course. But what is the Democratic policy response going to be?

(see my latest column

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Reader Comments


February 13, 2006 09:54 AM


Class matters: economic class that is. Democrats have the potential of a "perfect storm" coming up:

1) The supreme court appointments are in place; which, in effect, should help put to rest abortion as a rallying factor for religious conservatives;

2) Housing prices are expected to drop, delivering a blow to working and middle class home owners (especially young first time buyers who have over-extended themselves to "get into" the market);

3) Republican corruption, the war in Iraq, Katrina leftovers, etc.

All of these should allow Democrats to rally voters around class: middle class and working class interests have never been as battered, and can mobilize voters. If the focus is class, policy should correspond: from increased focus on unions and healthcare (the cost of which is really what's bringing down American manufacturing), to increased taxes on the hyper wealthy. Class matters, and it's ok to talk about it that way. A good spokesperson would help too.


February 13, 2006 11:20 AM

I cannot fathom how we could have a discussion on further tax cuts.

I'm a Republican but I'm livid at the way they have mismanaged the fiscal house in ways that will cost us for the rest of our lives. I'd happily pay a tax increase to have NO deficit if we had no pork-barrel politics. I wish they had passed the balanced budget amendment in 1998 when it was under serious discussion (remember the social security lockboxes?)

The Democratic response will HAVE to be nothing less than raising taxes, getting us out of a deficit situation, and somehow stimulating the economy while cutting entitlement programs.


February 13, 2006 05:09 PM

The Democrats will never cut entitlement spending. Raising taxes, and reducing spending are incompatible with an expansionary (and hence) stimulative fiscal policy. Changing incentives (like reducing cap gains taxes, etc)is the most effective (and stimulative) use of fiscal policy. Unfortunately, it is largely the Democrats in Congress and the White House,(which the Republicans have emulated to a degree) that pioneered "targeted" tax cuts and the like. These have increased compliance costs and while politically popular are essential negatives to the economy as a whole.
To the first commenter, class warfare has never been particularly effective in American politics, because of the perception of economic mobility and the perception that we are richer than we are.


February 13, 2006 09:32 PM

Wow -- so it's a guarantee that there will be a housing bust? Awesome, I've been investing for years, and I haven't found a sure thing since Iomega back in '95.

Please advise how I can take advantage of this perfect foreknowledge. Can I shortsell houses or something?


February 15, 2006 08:45 PM

Keep continuing to talk about "the meant to "
housing bubble, and you will find yourself a renter or worse in a inferior home compared to your current home.
Do you even own a home? "Now be Honest?"

Yes interest rates are rising and will top 7% but for most Americans real estate is a long term hold.We raise our families there.
If I don't have to sell until 2008, 2012, or 2015, do you really believe prices are going to be less? I don't, and I am buyer of starter homes and land right now.
Why? Because our population in the USA is greater than what we are told. Another conspiracy. We are building roads to these places too.
You still have time to buy Gold at $500/ ounce.
Hurry up and get out of the way.
Paco, a Road Warrior

Gary Anderson

February 25, 2006 09:57 PM

Paco, the housing bubble in Reno is upon us. 1800 new listings in Jan 06 with 3300 already listed. Out of that 5100 inventory, 500 houses sold. We are in a major bubble here, and prices are way too high for those seeking to get in through adjustables. And those who have adjustables are sweating. The only outcome in doubt is a soft landing verses a bigtime crash. I have to view Reno as being a potential crash.


February 8, 2009 04:23 AM

Kevin, I do hope you took advantage of your foreknowledge. You should be a rich man now.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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