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My BusinessWeek colleague Michael Mandel has an insightful post on his Economics Unbound blog yesterday on the political ramifications of the housing downturn, which I’m taking the liberty of “re-purposing” here given its relevance to the debate that’s been occurring on this blog here. I turn it over to Michael:
Back in early 2006, I wrote:
When the housing boom is over, the politics will begin…Democratic politicians fail to understand that their economic attacks on the Bush Administration can’t really take hold until the housing market goes south. Rising home prices are an engine of prosperity for the typical American family. Until that engine goes in reverse — which may be starting to happen — doom-and-gloom politics won’t really resonate….
Democrats have to be ready with their own package of reforms to cushion the housing downturn, even if the measures add to the budget deficit. There’s no excuse for not having made plans in advance.
Well, that time has come. It will be much easier for the Democratic nominee—whomever he/she is—to make the case that the economy is heading in the wrong direction if the housing market is in crisis.
That point is now being made by others. A Boston Globe article
The more the crisis ripples through the economy, the more it will help Democrats make the case that Republican economic policies have spurned middle- and lower-income families, some campaign watchers said.
“It’s an enormous opportunity for the Democrats to criticize the failures of the Bush administration, the fallout we are seeing from laissez-faire economic policies,” Alan I. Abramowitz, a political scientist at Emory University, said yesterday.
And if the unemployment rate starts to rise? Then the Republicans might as well kiss the White House good-bye.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.