Originally published February 26 2006
Business expert claims housing bubble is covering up the GOP's failing economic policies
by Mike Adams, the Health Ranger, NaturalNews Editor
Michael Mandel of Business Week writes about how the housing bubble is protecting Republicans from public backlash for a flailing economy.
Democrats have been searching for the right way to politically exploit the country's undeniable economic problems, including weak wage growth for most Americans and fears of globalization.
Democratic politicians fail to understand that their economic attacks on the Bush Administration can't really take hold until the housing market goes south.
Until that engine goes in reverse -- which may be starting to happen -- doom-and-gloom politics won't really resonate (see BW Online, 2/7/05, "Is the Bell Tolling for Housing?").
To understand why the housing boom makes such a difference, let me introduce you to the typical American worker, one in the middle of the educational and occupational distributions.
First, the typical American is less educated than you think, with some higher education but no college degree, not even a two-year one.
These are all jobs with average wages at or near the median of the pay distribution.
Throw a dart into a crowd, and you are likely to hit someone who is paying a mortgage or grousing about real estate taxes.
For that typical American, the most important thing that has happened over the past five years is not the decline in wages, but the fall in interest rates, combined with the dramatic rise in home prices.
Certainly the typical American would have taken advantage of the lower rates by refinancing.
Thus, with a $150,000 mortgage, interest payments would have dropped by roughly $3,000 a year, or $4,500 after adjusting for inflation.
No wonder the typical American, while grousing over slow pay gains, isn't ready to turn totally pessimistic.
We know how Bush will react when the bust comes: He'll argue for cutting taxes yet again, in order to prop up housing prices.
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