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6 months in, GOP tax bill an utter flop

phattonez said:
I don't deny it, but this is a classic boom bust cycle that happens when you interfere with interest rates. Did a decline in delinquency contribute? Surely, I'm not denying that. All I'm saying is that you have to consider monetary policy also and see how that contributed to the cycle.
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The interest rates don't matter when you're lowering the standards for who (or what) can get a loan. If the interest rate was lowered, but standards were maintained, there would not have been a subprime bubble. If the interest rate stayed the same, but standards were lowered, then a bubble would have appeared just as much as; one appearing if the interest rate was lowered and if they reduced standards for subprime loans...which is exactly what happened.

I'm contending that even if the Fed didn't lower the interest rate, there still would have been a surge in subprime lending because it wasn't the interest rate that was holding back the flood of subprime loans, it was the standards for underwriting those loans that were "held back" (in this case, lowered).
 
Vern said:
and boy did they get it wrong that state anti predatory laws were not needed.
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You'll get no argument from me. I'm not in favor of exploitation, even if it is with mutually agreed upon terms.
 
Vern said:
Sorry phat, your graph shows an overall trend of home prices increasing relative to income for 50 years. What makes "3.52" the magic number? and it didn't even go below 3.52 after the collapse. "Highest ever" is just rhetoric.
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This isn't rhetoric. The ratio actually hovers around a multiple of 3 for all those years until 2000 outside of 1970 where prices were extraordinarily low. This new normal isn't good for family formation, and as the last economic downturn showed, it certainly isn't sustainable.

Phat, "a result of interest rate adjustments" is your narrative to prove. And phat, I've already posted this:

Historically, mortgages that are underwritten well are unlikely to default in the first year of origination. Thus, the reports at the end of 2006 from lenders such as Ownit, New Century, and Novastar that an unusually high share of their loans were becoming delinquent almost immediately were a cause for alarm.

“Almost immediately” means interest rates had nothing to do with it. And as I clearly stated, interest rates couldn't even begin to affect default rates for at least a year if not more. I'm just not aware of a 1/29s but were 2/28s were quite popular. this is from 2007

More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.
Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by 35 percent or more. ………….

"There were increasingly poor quality loans made starting in the spring of 2005," he said, "with the poorest of all made during the fall of 2006."
Lenders approved many borrowers who had little chance of being able to afford the payments two and three years out. They approved applications without any proof of income or assets ("liar loans") and others that barely could make the low teaser-rate payments. Some borrowers chose interest-only ARMs, which left the principal of the loan untouched.

https://money.cnn.com/2007/07/09/real_estate/resets_are_coming/index.htm
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I understand that there were very few defaults prior to 2004. Of course there were. Prices still had room to move upward and rates hadn't moved up yet. What I'm arguing is that even those supposedly good loans that were signed prior to 2004 defaulted in 2007 and 2008, and that much of the reason that they didn't default as much as that they weren't nearly as underwater as those loans signed in 2006. Price played a big role; it's not just lending standards. You're going to be more willing to walk away from a mortgage when you're 20% underwater vs. maybe 2%.
 
The Derp said:
He wasn't a big spender...he was a responsible spender, which meant his signature policies, like Obamacare, were deficit neutral.

After all, Obama took a $1.4T deficit and reduced it to about $500B by the time he left office. Only he and Clinton are the only Presidents over the last 40 years to leave office with a smaller (or no) deficit than when they were sworn in.

Obama grew spending by only 13% which is the lowest rate of spending of any President since before Reagan, perhaps even the lowest rate of spending of any President in the last 120 years.
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To emphasize the point...

2009 to 2016 was Obama. The previous period was Bush. Notice how the slope was much higher under Obama? Me neither.

usgs_line.php
 
The Derp said:
What are the standards?

Documentation, the borrower's ability to repay the loan, employment.

What do you think "NINJA" stands for in "NINJA" loans? "No Income, No Job, Approved".

So that's an example of weakened standards.

Your sea-lioning is pathetic and pretty weak sauce.
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No, I wanted to know what changed. Vern thankfully did finally provide documentation about what changed, and I thanked him for that.
 
The Derp said:
I agree with all this except for the bit about monetary policy. That, I don't agree with as the cause or even as a major factor in the explosive growth of subprime lending that started in 2004.
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But why wouldn't it? Why wouldn't dropping rates to 1% encourage people to borrow? When you lower the cost of something, you're going to increase demand.

Apologies for tying you to Bush and the Conservatives, no one should have that burden placed on them unfairly.
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Many thanks. I'm in no way beholden to banks or large corporations in any way.
 
The Derp said:
The interest rates don't matter when you're lowering the standards for who (or what) can get a loan. If the interest rate was lowered, but standards were maintained, there would not have been a subprime bubble. If the interest rate stayed the same, but standards were lowered, then a bubble would have appeared just as much as; one appearing if the interest rate was lowered and if they reduced standards for subprime loans...which is exactly what happened.

I'm contending that even if the Fed didn't lower the interest rate, there still would have been a surge in subprime lending because it wasn't the interest rate that was holding back the flood of subprime loans, it was the standards for underwriting those loans that were "held back" (in this case, lowered).
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There may have been a surge with lowered standards. What I'm saying is that lowering the cost of getting a loan is only going to serve to increase demand for loans. Take a look at what Paul Krugman was arguing in 2002:

Paul Krugman said:
The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
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https://www.nytimes.com/2002/08/02/....html?scp=4&sq=krugman mcculley bubble&st=cse

Note he said Greenspan. How does Greenspan create a bubble? Simple. By lowering interest rates.
 
phattonez said:
No, I wanted to know what changed. Vern thankfully did finally provide documentation about what changed, and I thanked him for that.
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I just told you what changed:

No income, no job, approved. (NINJA)

Yeesh.
 
phattonez said:
But why wouldn't it? Why wouldn't dropping rates to 1% encourage people to borrow? When you lower the cost of something, you're going to increase demand.
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I think under ordinary circumstances, it would. But these were not ordinary circumstances. There was no great demand for consumer credit in 2003-4, that's why the regulators reduced the standards. It's like how in order to meet target numbers, the Border Patrol had to lower their standards in order to get new recruits. They did that because they couldn't find qualified candidates to fill those positions; and because of that, you ended up with a whole mess of corruption. Same thing happened in the US Army too; they had to lower their standards in order to recruit qualified soldiers. The banks likewise had to lower their standards in order to find qualified candidates to give loans to. And the standards were reduced so dramatically that they were giving out loans to people with no income and no jobs (NINJA).
 
phattonez said:
There may have been a surge with lowered standards. What I'm saying is that lowering the cost of getting a loan is only going to serve to increase demand for loans. Take a look at what Paul Krugman was arguing in 2002
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But the demand wasn't there. That's the thing. If the demand was there, then there wouldn't have been a need to reduce the standards. They had to reduce the standards in order to find "qualified" borrowers. The Fed Interest rate didn't have anything to do with that. And Krugman was 100% correct, and it's exactly what I've been saying this whole time; Bush and the Conservatives deliberately inflated a housing bubble to give the impression the economy was growing as a result of tax cuts, when it was really growing as a result of debt.



phattonez said:
Note he said Greenspan. How does Greenspan create a bubble? Simple. By lowering interest rates.
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But lowering the interest rate on loans doesn't magically create demand for loans; if it did, then there was no need to reduce the standards. The demand would have been there which would have meant more qualified borrowers. But that's not what happened at all. Instead what happened was that even with a lowered fed rate, they still couldn't generate enough demand among qualified borrowers to fill the demand for the subprime-backed assets and products these loans were being used to create. So they simply reduced the standards in order to increase the volume.
 
The Derp said:
I just told you what changed:

No income, no job, approved. (NINJA)

Yeesh.
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I wanted to know what regulation changed. Vern explained it.

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The Derp said:
I think under ordinary circumstances, it would. But these were not ordinary circumstances. There was no great demand for consumer credit in 2003-4, that's why the regulators reduced the standards. It's like how in order to meet target numbers, the Border Patrol had to lower their standards in order to get new recruits. They did that because they couldn't find qualified candidates to fill those positions; and because of that, you ended up with a whole mess of corruption. Same thing happened in the US Army too; they had to lower their standards in order to recruit qualified soldiers. The banks likewise had to lower their standards in order to find qualified candidates to give loans to. And the standards were reduced so dramatically that they were giving out loans to people with no income and no jobs (NINJA).
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If there was no point to lowering rates, then why was it done?

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The Derp said:
But the demand wasn't there. That's the thing. If the demand was there, then there wouldn't have been a need to reduce the standards. They had to reduce the standards in order to find "qualified" borrowers. The Fed Interest rate didn't have anything to do with that. And Krugman was 100% correct, and it's exactly what I've been saying this whole time; Bush and the Conservatives deliberately inflated a housing bubble to give the impression the economy was growing as a result of tax cuts, when it was really growing as a result of debt.





But lowering the interest rate on loans doesn't magically create demand for loans; if it did, then there was no need to reduce the standards. The demand would have been there which would have meant more qualified borrowers. But that's not what happened at all. Instead what happened was that even with a lowered fed rate, they still couldn't generate enough demand among qualified borrowers to fill the demand for the subprime-backed assets and products these loans were being used to create. So they simply reduced the standards in order to increase the volume.
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Why can't both be true? Why isn't it that they were both trying to increase demand?

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phattonez said:
This isn't rhetoric. The ratio actually hovers around a multiple of 3 for all those years until 2000 outside of 1970 where prices were extraordinarily low. This new normal isn't good for family formation, and as the last economic downturn showed, it certainly isn't sustainable.
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Phat, you need to post something other than your opinion that anything over 3.52 is a bubble. You can post "highest ever" and "not sustainable" but that's just you posting it.

I understand that there were very few defaults prior to 2004. Of course there were. Prices still had room to move upward and rates hadn't moved up yet. What I'm arguing is that even those supposedly good loans that were signed prior to 2004 defaulted in 2007 and 2008, and that much of the reason that they didn't default as much as that they weren't nearly as underwater as those loans signed in 2006. Price played a big role; it's not just lending standards. You're going to be more willing to walk away from a mortgage when you're 20% underwater vs. maybe 2%.
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Phat, just like your "3.52 proves a bubble", you have simply repeated rhetoric concerning interest rates. And your "rate" rhetoric requires you to ignore that I've proven beyond all doubt the massive increase in mortgage defaults starting 2005 had zero to do with "interest rates". You just don't get to ignore the Early Payment Default data proves it had nothing to do with rising interest rates. That many mortgages only default because they were so poorly underwritten. And that's exactly what Bush and the Fed said because that's exactly what the data said. Read this again

Historically, mortgages that are underwritten well are unlikely to default in the first year of origination. Thus, the reports at the end of 2006 from lenders such as Ownit, New Century, and Novastar that an unusually high share of their loans were becoming delinquent almost immediately were a cause for alarm.

And of course you can argue that " supposedly good loans that were signed prior to 2004 defaulted in 2007 and 2008" but nobody is arguing that. The bush Mortgage Bubble popped in late 2006. Even good loans with no interest resets defaulted in large numbers in 2007 and 2008 but "dramatically lower lending standards" caused the Bush Mortgage Bubble. Remember the part where loans were "becoming delinquent almost immediately were a cause for alarm".
 
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Vern said:
Phat, you need to post something other than your opinion that anything over 3.52 is a bubble. You can post "highest ever" and "not sustainable" but that's just you posting it.



Phat, just like your "3.52 proves a bubble", you have simply repeated rhetoric concerning interest rates. And your "rate" rhetoric requires you to ignore that I've proven beyond all doubt the massive increase in mortgage defaults starting 2005 had zero to do with "interest rates". You just don't get to ignore the Early Payment Default data proves it had nothing to do with rising interest rates. That many mortgages only default because they were so poorly underwritten. And that's exactly what Bush and the Fed said because that's exactly what the data said. Read this again

Historically, mortgages that are underwritten well are unlikely to default in the first year of origination. Thus, the reports at the end of 2006 from lenders such as Ownit, New Century, and Novastar that an unusually high share of their loans were becoming delinquent almost immediately were a cause for alarm.

And of course you can argue that " supposedly good loans that were signed prior to 2004 defaulted in 2007 and 2008" but nobody is arguing that. The bush Mortgage Bubble popped in late 2006. Even good loans with no interest resets defaulted in large numbers in 2007 and 2008 but "dramatically lower lending standards" caused the Bush Mortgage Bubble. Remember the part where loans were "becoming delinquent almost immediately were a cause for alarm".
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Aw, yes, Vern, that Terrible Bush with the authority to manipulate a multi trillion dollar industry. Interesting how all the links posted defining the crisis and assessing blame were ignored by you as you are a one trick pony, simply spreading your BDS in every thread. None of this has anything to do with the thread topic but it does provide diversion from the results being generated and continues to hate Bush rhetoric which is the left's campaign slogan.

How about it, Vern, the new campaign slogan, " I tried to keep people for realizing their dream of owning a home, VOTE FOR ME!!"
 
WHOA ! What happened here??

https://www.investors.com/politics/editorials/income-tax-revenues-trump-tax-cuts-economic-growth/

e latest monthly budget report from the nonpartisan Congressional Budget Office finds that revenues from federal income taxes were $76 billion higher in the first half of this year, compared with the first half of 2017. That's a 9% jump, even though the lower income tax withholding schedules went into effect in February.

The CBO says the gain "largely reflects increases in wages and salaries."

For the fiscal year as a whole — which started last October — all federal revenues are up by $31 billion. That's a 1.2% in increase over last year, the CBO says.

The Treasury Department, which issues a separate monthly report, says it expects federal revenues will continue to exceed last year's for the rest of the 2018 fiscal year.
 
KLATTU said:
e latest monthly budget report from the nonpartisan Congressional Budget Office finds that revenues from federal income taxes were $76 billion higher in the first half of this year, compared with the first half of 2017. That's a 9% jump, even though the lower income tax withholding schedules went into effect in February.
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So what was the increase from 2016 to 2017, for context?

And it's expected that they would collect more revenues since they collect more revenues every year anyway.

Say, what's the budget deficit the CBO is saying we'll have this fiscal year? Oh right, back to $1T.

Weren't you guys the ones who screamed about trillion-dollar deficits 8 years ago? Yeah...I remember because you all stapled teabags to your faces and tried to convince everyone you were concerned about debts and deficits.

Funny how things change. Now the party of the teabag is supportive of trillion-dollar deficits caused by tax cuts.
 
KLATTU said:
For the fiscal year as a whole — which started last October — all federal revenues are up by $31 billion. That's a 1.2% in increase over last year, the CBO says
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So what's the CBO's projected deficit for this fiscal year?

Oh right, about $1T.

I thought you hated trillion-dollar deficits?

I guess you were just faking that.
 
KLATTU said:
The Treasury Department, which issues a separate monthly report, says it expects federal revenues will continue to exceed last year's for the rest of the 2018 fiscal year.
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Didn't federal revenues exceed 2016 in 2017 too? And didn't federal revenues exceed 2015 in 2016? And 2014 in 2015, and 2014 in 2013, and 2013 in 2012, etc...

So you're crowing about something that was happening anyway.

And you're creating trillion-dollar deficits.

I thought you hated trillion-dollar deficits. Isn't that why you stapled teabags to your face 8 years ago? Guess you were just faking that outrage, huh?
 
The Derp said:
Didn't federal revenues exceed 2016 in 2017 too? And didn't federal revenues exceed 2015 in 2016? And 2014 in 2015, and 2014 in 2013, and 2013 in 2012, etc...

So you're crowing about something that was happening anyway.

And you're creating trillion-dollar deficits.

I thought you hated trillion-dollar deficits. Isn't that why you stapled teabags to your face 8 years ago? Guess you were just faking that outrage, huh?
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This is what CBO said specifically in its April 2018 report:

CBO projects that, if current laws generally remain unchanged, total revenues will rise by less than 1 percent in 2018, to just over $3.3 trillion. Revenues are expected to decline as a percentage of gross domestic product (GDP)—from 17.3 percent in 2017 to 16.6 percent in 2018—below the average of 17.4 percent of GDP recorded over the past 50 years. In CBO’s baseline projections, after a further slight decline in 2019, revenues rise markedly as a share of the economy, growing to 18.5 percent of GDP by 2028. Revenues over the past 50 years have been as high as 20.0 percent of GDP (in 2000) and as low as 14.6 percent (in 2009 and 2010).
What Key Factors Explain Changes in Revenues Over Time?

The decline in revenues as a percentage of GDP in 2018, and to a lesser extent in 2019, results from the enactment in late December 2017 of Public Law 115-97, referred to here as the 2017 tax act. That law made many significant changes to the individual and corporate income tax systems. Those changes, on net, lowered taxes owed by most individuals and businesses beginning in calendar year 2018. Most of the provisions that directly affect the individual income tax are scheduled to expire at the end of 2025.
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The Committee for a Responsible Federal Budget said this:
The Congressional Budget Office (CBO) released its ten-year budget and economic outlook today, showing that recent legislation has made an already challenging fiscal situation much worse. CBO’s report projects that:


  • The budget deficit will near one trillion dollars next year, after which permanent trillion-dollar deficits will emerge and continue indefinitely. Under current law, deficits will rise from $665 billion (3.5 percent of Gross Domestic Product) last year to $1.5 trillion (5.1 percent of GDP) by 2028.

  • As a result of these deficits, debt held by the public will increase by more than $13 trillion over the next decade – from $15.5 trillion today to $28.7 trillion by 2028. Debt as a share of the economy will also rise rapidly, from today’s post-war record of 77 percent of GDP to above 96 percent of GDP by 2028.
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The Derp said:
So wh

Funny how things change. Now the party of the teabag is supportive of trillion-dollar deficits caused by tax cuts.
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The Tea party was bout controlling the size and scope of the Federal Government. Funny how some people consider that 'radical'.
 
KLATTU said:
The Tea party was bout controlling the size and scope of the Federal Government. Funny how some people consider that 'radical'.
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That's weird because all they screamed about were deficits and debt. So we're saying the same thing, just in different ways.

And that concern was all fake, by the way.

No teabags now that the deficit is back to $1T.
 
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