11 ms·

Home ownership is the West’s biggest economic-policy mistake

70 points by prostoalex 7y ago

Proven 7y ago
The Economist is clueless and full of it. The biggest economic policy mistake is that there is a policy. If governments didn't spend, there would be no mistakes. Regarding this particular article, what the hell? Since when is it a matter of policy whether someone "should" own a home? Idiots.
bobsonori 7y ago
A big and diverse public housing system is the only solution that makes holistic sense. It’a the only way we can be sure people can go to where jobs are without risking homelessness.
- riddlemethat 7y ago
  The solution to bad government housing policy is less government housing policy. I like the model of forcing new construction projects to have some units setup for public housing while private owners buy or rent the rest. It takes people from lower socioeconomic parts of society and pushes them to mix with folks who are on top. Church used to do this before religion started to retreat from society. Lack of mixing of classes is killing civil society in America.
  - Red_Leaves_Flyy 7y ago
    The solution to bad government housing policy is reversing policies set by bad actors in bad faith (E.g. nimbys). Disallow speculative investment into housing markets by putting heavy taxes on: second+ homes, all rentals that cost more than 30% average area take home (with the top 10% of incomes removed). Scale said taxes with the cost of living in that area. Double the tax on short term stays in 'rentable units'. (E.g. airbnb). Everyone deserves a place to call home that is safe, insulated from the elements, has plumbing, electricity, and internet at a fair price. I simply don't care if that makes housing speculation, land ownership, and utilities, unprofitable. Making a profit off of necessities is obscene. Eg everyone should have access to a basic internet package that costs around $10-30/mo for ~25mbps. Same for everything else. Everyone should get the minimum, and if they want more they need to find a way to earn more in a way that isn't extracting value from the vulnerable. Extract from the rich instead, or don't. You shouldn't starve to death under a bridge if you can't compete in a society that needs less unskilled labor every day.
    - perceptronas 7y ago
      You seem to think housing can be just created from nothing. That is fatal mistake in your thinking as no value is created from nothing. There has to be incentive for somebody to build housing in order for it to be built. Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated? Deregulating house development will encourage many developers to build housing as there is huge demand for it. How come you offer looting other people before you offer removing obvious pillars for the developers?
      - Red_Leaves_Flyy 7y ago
        > You seem to think housing can be just created from nothing. That is fatal mistake in your thinking as no value is created from nothing. There has to be incentive for somebody to build housing in order for it to be built. That's not what I said. >Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated? Maybe tax is the wrong word. Fines might be better. These speculators consume wealth without doing work. When someone would rather leave units vacant than charge rational rates they hurt the market. When an entire industry does this they are extorting the most vulnerable. People without the means to move. People on fixed incomes. The disabled, the sick, minorities, etc. This is unconscionable behavior that should be illegal. Are you in the business of home building? The industry itself is rife with bad actors. Code gets ignored to save 20 minutes or 20 bucks. Want to report it? Snitches don't get work. Deregulation will only hurt people. Housing code is like osha. There are graves behind housing codes. Perhaps you're talking about zoning regulations? Yeah. I'm fine with telling nimbys to get bent and building a 50 story apartment complex in their ocean view so that people have affordable places to live.
- asdff 7y ago
  Seriously. Pin rent to minimum wage pinned to inflation, and build. There is no reason why the LA river doesn't look like the chicago river or something, lined with highrise housing from glendale to long beach atop public land, other than corruption and graft.
ta999999171 7y ago
With brand new vehicle "ownership" right behind.
- DarthGhandi 7y ago
  Struggling to see the connection. You won't see existing vehicle owners going to great lengths to push up the price of new vehicles.
  - Red_Leaves_Flyy 7y ago
    Seriously? The cost of used Toyota's (Avalon, Camry, Tacoma, tundra) and jeeps (wrangler/gladiators) are completely disconnected from reality. Regardless, the industry is rife with bad actors exploiting an imbalance of information. The advertising on vehicles is designed to make you feel bad for not owning the best. Get slammed with that enough and you won't even realize you just bought that $90k coupe that will cost $10k in maintenance/yr to keep running to show off how wealthy you are while you hunt for a mate. Then if you have kids you'll take a bath on it for the dealer to make a profit when they resell it.
paulus_magnus2 7y ago
Housing is only expensive in (big) cities but we all need to go there because of jobs. Good hobs are only created in (big) cities because that's where the talent is. Solution is to build more cities and provide seed / anchor jobs. Government could do that easily. Rural land is cheap. Government could build a "starter pack" of 1000 homes and move one of their offices from a big city there to provide employment. Borrow / print money to do this instead of QE. Heck, with the current prices the whole thing could be financed by leasing or reselling gov owned buildings in "old city" cenres.
- fock 7y ago
  at least here in europe, the real talent (as opposed to business-people) in my experience doesn't care a lot (why should you, if you're a workaholic) about where they work, except that I know a lot of people who don't want to move a lot. What's happening instead is Google importing a 1000 employees, paying them half of SoCal (but still double the rate of local companies in the past - thougbhthe profit/employee wage ratio is probably similar, so....) and the admin-people cheer because it's such a nice cheap city. Students and service workers are less convinced about that idea of "we need this good jobs". I'm also courious who owns the land, if we are not doing private, individual ownership. What's the argument for having a (privately-owned) company own the land instead of just leasing it from the government for some dozen years and developing it? I agree that the current market-based, everyone own a home approach is really inefficient, but to reintroduce surveillance capitalistic serfdom (serve your masters, because they own everything) seems like the wrong way to go... EDIT: well, spent the hungover morning researching Google comp and if glassdoor & linkedin are correct, they actually pay a quite normal salary for basic SWEs, which also explains why they like to import a lot of people and none of the locals I know work there...
- choeger 7y ago
  Add to that the infrastructure to commute between medium-sized cities easily (either by Carbon-neutral air travel or fast trains, which both need upfront support) and you are golden, I guess.
- foogazi 7y ago
  sounds good but what government officials would want to move to a starter city? Maybe they could start it with a Space Force military base and a STEM focused college to serve the military’s needs. Congress and lobbyists would go nuts for that $$$
choeger 7y ago
Why should home owners give up their way of life just because a particular city is now hip and everyone pushes into the new hyper-dense zones? I demand space for living, a little bit of nature, and privacy. So go build some effing infrastructure instead of pushing everyone to live like a chicken in an egg factory, ffs.
- Retric 7y ago
  IMO, apply a flat 1% property tax on the value of a property ignoring zoning restrictions and as long as you pay it feel free. However, understand that tax actually represents paying for physical infrastructure and actual costs people are paying so nobody gets a tax break on it. Because what’s valuable is not the house but the infrastructure around it. Low density housing requires more infrastructure and higher transportation costs such as longer commutes. However, I realize everyone loves a hand out, especially when they can pretend it’s not a handout. So, I don’t see this changing any time soon.
  - choeger 7y ago
    Bullshit. Infrastructure and transportation have generally always been paid by the owners. There may be cases where residents have successfully lobbied their community to build something for them, but that's not how things work where I live. But even if there was such a support for honeowners, a property tax would be nothing else but theft. Charge the real cost of you want but then leave the people in peace.
    - baq 7y ago
      Please. Tax is not theft by definition.
    - yardie 7y ago
      > Charge the real cost of you want but then leave the people in peace. And thats the problem. Infrastructure has not been priced correctly. A lot of towns are still paying the bond on initial construction. Leaving very little for maintenance and replacement. And then when the road/sewer/water system needs to be replaced voters don’t have the appetite to pay for it. You see this in older towns in the northeast. Water and sewer mains are corroding. taxes go up to cover it. And the residents flee for newer, cheaper developments. The town eventually becomes insolvent.
adventured 7y ago
In the US the present order of economic policy mistakes is: Federal spending[1] > Healthcare costs[2] > Energy investment[3] > University degrees[4] > Infrastructure investment[5] > Home ownership > New vehicles [1] Economic output grows by 4%, spending grows by 12%. Entitlement costs go up, taxes go down. Military spending. $900b (3.x% of GDP equivalent) per year in debt interest costs projected for 2028 (CBO), most of which shouldn't exist and should be going to infrastructure, healthcare, Social Security, and so on. [2] Not healthcare unto itself, healthcare costs. Spending $3.6 trillion on healthcare nationally when we should be spending $2.4 trillion or less (the UK equivalent ratio would be more like ~$1.5 trillion). [3] Not building a lot more nuclear. Not phasing out coal fast enough. Not building an obnoxious amount of off-shore wind. Not upgrading our grid to widely distribute from large output centers better (the central wind corridor can probably eventually export vast wind power to the coasts). Not better preparing our grid for the all-electric consumer vehicle future that is inbound. Etc. [4] Pushing the notion that you absolutely must get at least a four year degree is akin to the dogma that you must own a home. A subset to that is the notion that you should spend a particularly absurd amount of money when you could get a degree of similar outcome effectiveness at half the price from an in-state public school. [5] Lack thereof. Including not building high-speed rail (even if only regionally) and not aggressively going after the vast urban deployment of electric buses. Maybe we can't build cheap subways or rail anymore, however we can buy relatively cheap electric buses and dedicate routes to a lot of them and we can do it damn easily.
Merrill 7y ago
About 37% of homeowners own their homes free and clear. The other 63% have mortgages that require regular monthly payments. The mortgage payments are in addition to regular payments of property taxes. The result is that the burden of debt and property taxes motivates young adults to work hard and progress economically. This, along with the continual stream of purchases for the home, is the mainspring of the American economy.
- hylaride 7y ago
  Switzerland has a home ownership rate that’s half the US and does fine. One of the main benefits of this is that the Swiss have more of their wealth in liquid assets and are highly mobile as a nation of renters, so they can easily move to where the jobs are. In fact, Switzerland will tax your home on the potential income you could get from it, further encouraging renting. I’m not advocating this, but home ownership is not anywhere near a prerequisite for affluence.
  - hajile 7y ago
    The good old "rent from the rich" idea. Land/housing ownership is what has historically been one of the biggest differences between lord and commoner.
    - hylaride 7y ago
      Funny, when I was there I didn’t notice that Switzerland is still run as a feudal lordship, but in hindsight the screams from the building labeled ‘Debtor’s prison” should have been a clue. In all seriousness, what are you implying? That buying houses built by the rich and then being tied to it in a downturn or loss of employment is superior? The period you’re hilariously referring to died out when the Lords could no longer afford to maintain their land as their incomes dried up and their workers moved on.
    - cylon13 7y ago
      You're creating a false dichotomy here. Not all home owners are "rich" and not all renters are "poor". Property owners are just running a different business than you. You can easily be a renter that's wealthier than the person you happen to be renting living space from.
scottlocklin 7y ago
Ah the economist. This week it's "we should all live in oligarch supplied bugman skyscrapers in rentier dystopian future." Next week it's going to be about how we all need to eat cheeseburgers made out of insects because ... reasons. "You don't need to live in a house, citizen; that is a function more efficiently supplied to you by the Disneycorp housing as a service experts."
blisterpeanuts 7y ago
I have driven a couple of times between Phoenix and the East coast of the U.S. and the spaces between cities, particularly in the Southwest, are simply vast. You can drive for hours without seeing a human structure beyond perhaps a signpost or U.S. Geological Survey marking. There's room for the entire world's population to fit into Arizona, New Mexico, and West Texas. The only limitation is availability of water, and that's solvable with technology (desalination, atmospheric capture). When existing cities become too congested, sprawling, or unaffordable, the clear solution is to build new ones. You can drop a megalopolis or two into the badlands and house an additional 20 million people in comfortable, modern neighborhoods with home ownership as the norm. The Economist has a eurocentric perspective that there's little available land, but not so in North America.
arm64future 7y ago
You really do have to wonder about the sincerity of such an article, especially coming from such a prominent publication as the Economist. Why don't they just admit what they are instead of using subtle propaganda to influence people into their political ideology? Even more concerning is how half or more of the people in here seem to actually agree with it. "Demoralization now reaches such areas that previously, not even comrade Andropov and all his experts would even dream of such a tremendous success. Most of it is done by Americans to Americans; thanks to a lack of moral standards. As I mentioned before, exposure to true information does not matter anymore. A person who is demoralized, he is unable to assess true information, the facts tell nothing to him. ... Only when a military boot crashes into his fat bottom, then he will understand." The Western world has maybe 20-30 years left before serious political upheaval turns our way of life on its head. Call me a cook conspiracy theorist or make fun of my old quote from a kgb agent being pushed around in dubious circles today.
- smallcharleston 7y ago
  I think most informed Economist readers already are aware that they are, to some extent, being influenced by the “subtle propaganda” of the publication. I believe it’s part of their “thing”.
- rmdashrfstar 7y ago
  What was the quote?
vannevar 7y ago
I would argue that failure to adequately address the power of the wealth-income feedback loop is the West's biggest economic mistake, and that this is at the root cause of rising housing costs. Housing is consuming a bigger and bigger share of median income because growth in housing is not keeping up with growth in income of the top tiers of the population, who can afford to pay disproportionately more than the median, and the trend is accelerating. While it's true that increasing supply would help relieve some of the pressure, it would have to skyrocket to keep up with the meteoric rise in income of the top 10% of the population. All the well-meaning housing policy in the world can never speed up supply fast enough to keep up with the rate at which the wealthy are giving themselves raises.
- karmelapple 7y ago
  If large amounts of 1- and 2- bedroom condos or apartments are built in a fairly densely-populated city, how much are the very rich going to want to buy or rent these? They may want to own them and rent them out, but if they can’t make a profit, I don’t see why they’d want to do that. Luxury condos attract investment from richer people all around the world, but imho, fairly standard 1 and 2 bedroom apartments likely wouldn’t, especially if they have to be rented. Could that be a way to combat the inequality? The biggest problem I can see: developers love building luxury condos since the profit is much higher than building non-luxury places.
  - javagram 7y ago
    What exactly is the difference between a luxury and non-luxury condo/apartment? I think it’s mainly a few cheap cosmetic features like countertops and stainless steel refrigerators. Of course developers label everything new luxury because why wouldn’t you spend an additional 1% of your investment on these types of things? The cost of building a “non-luxury” building is almost identical. In either case, you need investors to put up the money to pay for construction and maintenance of the building until enough units have sold/rent to be self sustaining. So even if you build a slightly less cosmetically appealing building, you still need investor capital / “the rich” to do so.
  - vannevar 7y ago
smkellat 7y ago
So I see this article extolling the virtues of being a nation of skyscrapers and flats. Then I smack into a paywall. Looking around at my nice, rural century home that has a monthly mortgage payment still far lower than the cheapest local rent...I’m not going to bother trying to find the article elsewhere. Living in a skyscraper is just not for me. Even the apartments I’ve lived in previously were comfortable ranch-style ones out in Nevada that weren’t very densely packed. I have no need or desire to move to Manhattan or Silicon Valley for the time being let alone Cleveland or Pittsburgh. That shouldn’t be problematic yet the current crop of economy optimizers might not leave me that choice. We shall see in due time.
TheHeretic12 7y ago
That had to be one of the most half-baked articles Ive seen out of "The Economist," and Ive read their stuff on and off for years. They identify the symptoms correctly, and then spend 1000 words misleading you on the cause, so they can sell you "The Fix." Here's the real problems: 1. Rent-seeking behavior by the land-owning generation, seeking to retire and live off rental income and a reverse mortgage, instead of building generational wealth. 2. Rent-seeking behavior by local councils and cities, all but demanding bribes and kickbacks; they hold up permitting for building anything beyond single-family dwelling. 3. Rent-seeking behavior by the majority holders of capital - the banks. Because a majority of properties are subject to mortgage, this has allowed for massive speculation, in funny money, on limited amounts of real property. This drives up prices. 4. Rent-seeking behavior by all levels of government. Property taxes are the most efficient means of destroying wealth. To be brief, the rents are too damn high! Theres no law you can write that will fix these issues, either. It will bloat and overheat until it collapses like a cake in the oven.
- perl4ever 7y ago
  The phrase "rent seeking" is a technical term with a meaning. How can the government be accused of it? When private entities engage in rent seeking, they are manipulating the government for profit. And when private entities do things that do not involve manipulating the government, then how can it be rent seeking? Rent seeking does not mean literally, simply, "seeking rent". I know people like to say the meaning of words change, but you have to be talking about the same thing as other people using the same word.
  - beatgammit 7y ago
    As far as I understand it, rent seeking means increasing your share of existing wealth without creating any in the process. Raising rent generally on physical properties is one way of doing that, as is mucking about with government to get tax dollars and whatnot coming your way. As I see it, governments themselves are often rent seeking operations. By increasing taxes, they increase their share of the wealth of the nation, and depending on how that money is used, it could very well be considered rent seeking. Usually the term is used for business sectors interacting with government to get those tax dollars, but I don't think that's the only valid use.
teslaberry 7y ago
lies and deception

70 points by prostoalex 7y ago

The Economist is clueless and full of it. The biggest economic policy mistake is that there is a policy. If governments didn't spend, there would be no mistakes. Regarding this particular article, what the hell? Since when is it a matter of policy whether someone "should" own a home? Idiots.

bobsonori 7y ago

A big and diverse public housing system is the only solution that makes holistic sense. It’a the only way we can be sure people can go to where jobs are without risking homelessness.

riddlemethat 7y ago
The solution to bad government housing policy is less government housing policy. I like the model of forcing new construction projects to have some units setup for public housing while private owners buy or rent the rest. It takes people from lower socioeconomic parts of society and pushes them to mix with folks who are on top. Church used to do this before religion started to retreat from society. Lack of mixing of classes is killing civil society in America.
- Red_Leaves_Flyy 7y ago
  The solution to bad government housing policy is reversing policies set by bad actors in bad faith (E.g. nimbys). Disallow speculative investment into housing markets by putting heavy taxes on: second+ homes, all rentals that cost more than 30% average area take home (with the top 10% of incomes removed). Scale said taxes with the cost of living in that area. Double the tax on short term stays in 'rentable units'. (E.g. airbnb). Everyone deserves a place to call home that is safe, insulated from the elements, has plumbing, electricity, and internet at a fair price. I simply don't care if that makes housing speculation, land ownership, and utilities, unprofitable. Making a profit off of necessities is obscene. Eg everyone should have access to a basic internet package that costs around $10-30/mo for ~25mbps. Same for everything else. Everyone should get the minimum, and if they want more they need to find a way to earn more in a way that isn't extracting value from the vulnerable. Extract from the rich instead, or don't. You shouldn't starve to death under a bridge if you can't compete in a society that needs less unskilled labor every day.
  - perceptronas 7y ago
    You seem to think housing can be just created from nothing. That is fatal mistake in your thinking as no value is created from nothing. There has to be incentive for somebody to build housing in order for it to be built. Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated? Deregulating house development will encourage many developers to build housing as there is huge demand for it. How come you offer looting other people before you offer removing obvious pillars for the developers?
    - Red_Leaves_Flyy 7y ago
      > You seem to think housing can be just created from nothing. That is fatal mistake in your thinking as no value is created from nothing. There has to be incentive for somebody to build housing in order for it to be built. That's not what I said. >Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated? Maybe tax is the wrong word. Fines might be better. These speculators consume wealth without doing work. When someone would rather leave units vacant than charge rational rates they hurt the market. When an entire industry does this they are extorting the most vulnerable. People without the means to move. People on fixed incomes. The disabled, the sick, minorities, etc. This is unconscionable behavior that should be illegal. Are you in the business of home building? The industry itself is rife with bad actors. Code gets ignored to save 20 minutes or 20 bucks. Want to report it? Snitches don't get work. Deregulation will only hurt people. Housing code is like osha. There are graves behind housing codes. Perhaps you're talking about zoning regulations? Yeah. I'm fine with telling nimbys to get bent and building a 50 story apartment complex in their ocean view so that people have affordable places to live.
asdff 7y ago
Seriously. Pin rent to minimum wage pinned to inflation, and build. There is no reason why the LA river doesn't look like the chicago river or something, lined with highrise housing from glendale to long beach atop public land, other than corruption and graft.

ta999999171 7y ago

With brand new vehicle "ownership" right behind.

DarthGhandi 7y ago
Struggling to see the connection. You won't see existing vehicle owners going to great lengths to push up the price of new vehicles.
- Red_Leaves_Flyy 7y ago
  Seriously? The cost of used Toyota's (Avalon, Camry, Tacoma, tundra) and jeeps (wrangler/gladiators) are completely disconnected from reality. Regardless, the industry is rife with bad actors exploiting an imbalance of information. The advertising on vehicles is designed to make you feel bad for not owning the best. Get slammed with that enough and you won't even realize you just bought that $90k coupe that will cost $10k in maintenance/yr to keep running to show off how wealthy you are while you hunt for a mate. Then if you have kids you'll take a bath on it for the dealer to make a profit when they resell it.

paulus_magnus2 7y ago

Housing is only expensive in (big) cities but we all need to go there because of jobs. Good hobs are only created in (big) cities because that's where the talent is. Solution is to build more cities and provide seed / anchor jobs. Government could do that easily. Rural land is cheap. Government could build a "starter pack" of 1000 homes and move one of their offices from a big city there to provide employment. Borrow / print money to do this instead of QE. Heck, with the current prices the whole thing could be financed by leasing or reselling gov owned buildings in "old city" cenres.

fock 7y ago
at least here in europe, the real talent (as opposed to business-people) in my experience doesn't care a lot (why should you, if you're a workaholic) about where they work, except that I know a lot of people who don't want to move a lot. What's happening instead is Google importing a 1000 employees, paying them half of SoCal (but still double the rate of local companies in the past - thougbhthe profit/employee wage ratio is probably similar, so....) and the admin-people cheer because it's such a nice cheap city. Students and service workers are less convinced about that idea of "we need this good jobs". I'm also courious who owns the land, if we are not doing private, individual ownership. What's the argument for having a (privately-owned) company own the land instead of just leasing it from the government for some dozen years and developing it? I agree that the current market-based, everyone own a home approach is really inefficient, but to reintroduce surveillance capitalistic serfdom (serve your masters, because they own everything) seems like the wrong way to go... EDIT: well, spent the hungover morning researching Google comp and if glassdoor & linkedin are correct, they actually pay a quite normal salary for basic SWEs, which also explains why they like to import a lot of people and none of the locals I know work there...
choeger 7y ago
Add to that the infrastructure to commute between medium-sized cities easily (either by Carbon-neutral air travel or fast trains, which both need upfront support) and you are golden, I guess.
foogazi 7y ago
sounds good but what government officials would want to move to a starter city? Maybe they could start it with a Space Force military base and a STEM focused college to serve the military’s needs. Congress and lobbyists would go nuts for that $$$

choeger 7y ago

Why should home owners give up their way of life just because a particular city is now hip and everyone pushes into the new hyper-dense zones? I demand space for living, a little bit of nature, and privacy. So go build some effing infrastructure instead of pushing everyone to live like a chicken in an egg factory, ffs.

Retric 7y ago
IMO, apply a flat 1% property tax on the value of a property ignoring zoning restrictions and as long as you pay it feel free. However, understand that tax actually represents paying for physical infrastructure and actual costs people are paying so nobody gets a tax break on it. Because what’s valuable is not the house but the infrastructure around it. Low density housing requires more infrastructure and higher transportation costs such as longer commutes. However, I realize everyone loves a hand out, especially when they can pretend it’s not a handout. So, I don’t see this changing any time soon.
- choeger 7y ago
  Bullshit. Infrastructure and transportation have generally always been paid by the owners. There may be cases where residents have successfully lobbied their community to build something for them, but that's not how things work where I live. But even if there was such a support for honeowners, a property tax would be nothing else but theft. Charge the real cost of you want but then leave the people in peace.
  - baq 7y ago
    Please. Tax is not theft by definition.
  - yardie 7y ago
    > Charge the real cost of you want but then leave the people in peace. And thats the problem. Infrastructure has not been priced correctly. A lot of towns are still paying the bond on initial construction. Leaving very little for maintenance and replacement. And then when the road/sewer/water system needs to be replaced voters don’t have the appetite to pay for it. You see this in older towns in the northeast. Water and sewer mains are corroding. taxes go up to cover it. And the residents flee for newer, cheaper developments. The town eventually becomes insolvent.

adventured 7y ago

In the US the present order of economic policy mistakes is: Federal spending[1] > Healthcare costs[2] > Energy investment[3] > University degrees[4] > Infrastructure investment[5] > Home ownership > New vehicles [1] Economic output grows by 4%, spending grows by 12%. Entitlement costs go up, taxes go down. Military spending. $900b (3.x% of GDP equivalent) per year in debt interest costs projected for 2028 (CBO), most of which shouldn't exist and should be going to infrastructure, healthcare, Social Security, and so on. [2] Not healthcare unto itself, healthcare costs. Spending $3.6 trillion on healthcare nationally when we should be spending $2.4 trillion or less (the UK equivalent ratio would be more like ~$1.5 trillion). [3] Not building a lot more nuclear. Not phasing out coal fast enough. Not building an obnoxious amount of off-shore wind. Not upgrading our grid to widely distribute from large output centers better (the central wind corridor can probably eventually export vast wind power to the coasts). Not better preparing our grid for the all-electric consumer vehicle future that is inbound. Etc. [4] Pushing the notion that you absolutely must get at least a four year degree is akin to the dogma that you must own a home. A subset to that is the notion that you should spend a particularly absurd amount of money when you could get a degree of similar outcome effectiveness at half the price from an in-state public school. [5] Lack thereof. Including not building high-speed rail (even if only regionally) and not aggressively going after the vast urban deployment of electric buses. Maybe we can't build cheap subways or rail anymore, however we can buy relatively cheap electric buses and dedicate routes to a lot of them and we can do it damn easily.

Merrill 7y ago

About 37% of homeowners own their homes free and clear. The other 63% have mortgages that require regular monthly payments. The mortgage payments are in addition to regular payments of property taxes. The result is that the burden of debt and property taxes motivates young adults to work hard and progress economically. This, along with the continual stream of purchases for the home, is the mainspring of the American economy.

hylaride 7y ago
Switzerland has a home ownership rate that’s half the US and does fine. One of the main benefits of this is that the Swiss have more of their wealth in liquid assets and are highly mobile as a nation of renters, so they can easily move to where the jobs are. In fact, Switzerland will tax your home on the potential income you could get from it, further encouraging renting. I’m not advocating this, but home ownership is not anywhere near a prerequisite for affluence.
- hajile 7y ago
  The good old "rent from the rich" idea. Land/housing ownership is what has historically been one of the biggest differences between lord and commoner.
  - hylaride 7y ago
    Funny, when I was there I didn’t notice that Switzerland is still run as a feudal lordship, but in hindsight the screams from the building labeled ‘Debtor’s prison” should have been a clue. In all seriousness, what are you implying? That buying houses built by the rich and then being tied to it in a downturn or loss of employment is superior? The period you’re hilariously referring to died out when the Lords could no longer afford to maintain their land as their incomes dried up and their workers moved on.
  - cylon13 7y ago
    You're creating a false dichotomy here. Not all home owners are "rich" and not all renters are "poor". Property owners are just running a different business than you. You can easily be a renter that's wealthier than the person you happen to be renting living space from.

scottlocklin 7y ago

Ah the economist. This week it's "we should all live in oligarch supplied bugman skyscrapers in rentier dystopian future." Next week it's going to be about how we all need to eat cheeseburgers made out of insects because ... reasons. "You don't need to live in a house, citizen; that is a function more efficiently supplied to you by the Disneycorp housing as a service experts."

blisterpeanuts 7y ago

I have driven a couple of times between Phoenix and the East coast of the U.S. and the spaces between cities, particularly in the Southwest, are simply vast. You can drive for hours without seeing a human structure beyond perhaps a signpost or U.S. Geological Survey marking. There's room for the entire world's population to fit into Arizona, New Mexico, and West Texas. The only limitation is availability of water, and that's solvable with technology (desalination, atmospheric capture). When existing cities become too congested, sprawling, or unaffordable, the clear solution is to build new ones. You can drop a megalopolis or two into the badlands and house an additional 20 million people in comfortable, modern neighborhoods with home ownership as the norm. The Economist has a eurocentric perspective that there's little available land, but not so in North America.

arm64future 7y ago

You really do have to wonder about the sincerity of such an article, especially coming from such a prominent publication as the Economist. Why don't they just admit what they are instead of using subtle propaganda to influence people into their political ideology? Even more concerning is how half or more of the people in here seem to actually agree with it. "Demoralization now reaches such areas that previously, not even comrade Andropov and all his experts would even dream of such a tremendous success. Most of it is done by Americans to Americans; thanks to a lack of moral standards. As I mentioned before, exposure to true information does not matter anymore. A person who is demoralized, he is unable to assess true information, the facts tell nothing to him. ... Only when a military boot crashes into his fat bottom, then he will understand." The Western world has maybe 20-30 years left before serious political upheaval turns our way of life on its head. Call me a cook conspiracy theorist or make fun of my old quote from a kgb agent being pushed around in dubious circles today.

smallcharleston 7y ago
I think most informed Economist readers already are aware that they are, to some extent, being influenced by the “subtle propaganda” of the publication. I believe it’s part of their “thing”.
rmdashrfstar 7y ago
What was the quote?

vannevar 7y ago

I would argue that failure to adequately address the power of the wealth-income feedback loop is the West's biggest economic mistake, and that this is at the root cause of rising housing costs. Housing is consuming a bigger and bigger share of median income because growth in housing is not keeping up with growth in income of the top tiers of the population, who can afford to pay disproportionately more than the median, and the trend is accelerating. While it's true that increasing supply would help relieve some of the pressure, it would have to skyrocket to keep up with the meteoric rise in income of the top 10% of the population. All the well-meaning housing policy in the world can never speed up supply fast enough to keep up with the rate at which the wealthy are giving themselves raises.

karmelapple 7y ago
If large amounts of 1- and 2- bedroom condos or apartments are built in a fairly densely-populated city, how much are the very rich going to want to buy or rent these? They may want to own them and rent them out, but if they can’t make a profit, I don’t see why they’d want to do that. Luxury condos attract investment from richer people all around the world, but imho, fairly standard 1 and 2 bedroom apartments likely wouldn’t, especially if they have to be rented. Could that be a way to combat the inequality? The biggest problem I can see: developers love building luxury condos since the profit is much higher than building non-luxury places.
- javagram 7y ago
  What exactly is the difference between a luxury and non-luxury condo/apartment? I think it’s mainly a few cheap cosmetic features like countertops and stainless steel refrigerators. Of course developers label everything new luxury because why wouldn’t you spend an additional 1% of your investment on these types of things? The cost of building a “non-luxury” building is almost identical. In either case, you need investors to put up the money to pay for construction and maintenance of the building until enough units have sold/rent to be self sustaining. So even if you build a slightly less cosmetically appealing building, you still need investor capital / “the rich” to do so.
- vannevar 7y ago

smkellat 7y ago

So I see this article extolling the virtues of being a nation of skyscrapers and flats. Then I smack into a paywall. Looking around at my nice, rural century home that has a monthly mortgage payment still far lower than the cheapest local rent...I’m not going to bother trying to find the article elsewhere. Living in a skyscraper is just not for me. Even the apartments I’ve lived in previously were comfortable ranch-style ones out in Nevada that weren’t very densely packed. I have no need or desire to move to Manhattan or Silicon Valley for the time being let alone Cleveland or Pittsburgh. That shouldn’t be problematic yet the current crop of economy optimizers might not leave me that choice. We shall see in due time.

TheHeretic12 7y ago

That had to be one of the most half-baked articles Ive seen out of "The Economist," and Ive read their stuff on and off for years. They identify the symptoms correctly, and then spend 1000 words misleading you on the cause, so they can sell you "The Fix." Here's the real problems: 1. Rent-seeking behavior by the land-owning generation, seeking to retire and live off rental income and a reverse mortgage, instead of building generational wealth. 2. Rent-seeking behavior by local councils and cities, all but demanding bribes and kickbacks; they hold up permitting for building anything beyond single-family dwelling. 3. Rent-seeking behavior by the majority holders of capital - the banks. Because a majority of properties are subject to mortgage, this has allowed for massive speculation, in funny money, on limited amounts of real property. This drives up prices. 4. Rent-seeking behavior by all levels of government. Property taxes are the most efficient means of destroying wealth. To be brief, the rents are too damn high! Theres no law you can write that will fix these issues, either. It will bloat and overheat until it collapses like a cake in the oven.

perl4ever 7y ago
The phrase "rent seeking" is a technical term with a meaning. How can the government be accused of it? When private entities engage in rent seeking, they are manipulating the government for profit. And when private entities do things that do not involve manipulating the government, then how can it be rent seeking? Rent seeking does not mean literally, simply, "seeking rent". I know people like to say the meaning of words change, but you have to be talking about the same thing as other people using the same word.
- beatgammit 7y ago
  As far as I understand it, rent seeking means increasing your share of existing wealth without creating any in the process. Raising rent generally on physical properties is one way of doing that, as is mucking about with government to get tax dollars and whatnot coming your way. As I see it, governments themselves are often rent seeking operations. By increasing taxes, they increase their share of the wealth of the nation, and depending on how that money is used, it could very well be considered rent seeking. Usually the term is used for business sectors interacting with government to get those tax dollars, but I don't think that's the only valid use.

teslaberry 7y ago

lies and deception