Tuesday, August 4, 2009


Newsweek International editor Fareed Zakira has written an odd, nonsensical column urging – or maybe warning about – Americans lurching back into spending mode to ease the worldwide recession. I’ve read it several times and still can’t fathom what he’s talking about.

He seems concerned that Americans will emerge from this recession riddled with debt. He also seems concerned that other countries – he mentions Germany and China – seem to be idling, waiting for Americans to spend again to get the world economy moving. And then he goes on about the savings rates, lambasting the government for “a series of government policies and programs [that] subsidized debt and expenditure and did nothing to reward savings.”

The most nonsensical thing he writes is this:

The biggest of these, of course, is the tax deductibility of mortgage interest, which costs the country almost $100 billion every year. Please don't tell me it creates an ownership society. Margaret Thatcher eliminated a similar program in Britain, and Canada doesn't have one either—and both have the same home-owner-ship rates as America. The policy does not encourage home-owner-ship; it encourages the accumulation of debt.

On the planet I’m from, this home mortgage interest deduction is a no-nevermind. Yes, I pay mortgage interest. So does everyone else with a mortgage. But I’ve not once been able to deduct it, because my itemized deductions never exceeds that of the standard deduction. I can’t believe I’m alone in this. It makes no difference to me if that interest is deductible or not. Maybe it does to others. But he just kind of inserts this paragraph into the column, without really explaining why. Does he want the tax deduction eliminated so that federal government can get more money through taxation? Does he think eliminating the deduction will encourage more frugality among Americans, or that the absence of such a deduction would have encouraged Americans to buy smaller homes? I don’t know. And I’m not sure he does, either, because he doesn’t really say.

He also seems to advocate a national sales tax, citing that as another “incentive” Americans have – over others in other countries, I suppose – to spend. He misses the boat here entirely, because in some countries that have national sales taxes, there are no such things as regional or state sales taxes, which most states in the US have. So once again is he lamenting that there’s tax money out there that’s not being fed to the Federal government? I don’t know. And he doesn’t really say. Do we need a national sales tax? I’d have to have a good reason to say yes. Health care? Sure. But having a tax merely to remove an incentive to spend seems a silly reason and surely wouldn’t stem the government’s need to spend whatever it takes in, plus some. I hope that’s not what he’s talking about.

In the end, he seems convinced that once somebody in the media makes the announcement: “The recession is over!” we’re all going to lurch back into our overspending habits. That may well be. But he’s got to figure out that there are people, like us, who didn’t overspend to begin with, who are scratching our heads over the whole mess.

For instance, my wife and I have been laughing over this “Cash for Clunkers” program which rewards those who bought gas-guzzling vehicles but doesn’t really help people like us who may actually have clunkers they’d like to trade in for a better-operating vehicle but don’t qualify for the program, so we’ll continue driving our cars into the ground while those whose cars work but get poor gas mileage can get new vehicles. Not that we want a new vehicle – but it’s just that with these government programs, they always start out with the aim of helping a certain group, and they miss every time.

Do we get government help? Sure. Show me anyone in the country who doesn't have their hand in the pie somehow and I'll show you a rotten liar. We get reduced school lunch prices for our kids. We get tax breaks because of our kids. All sorts of goodies come our way because of our kids.

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