Thanks to Don Boudreaux, I found this “Inconvenient Truth” about the struggles of the middle class. As readers here know, I have long been a bear on housing, but as always those who want their hands on our wallet can take any crisis or problem as a license to take from us. Todd Zywicki writes to the Washington Post:
In his April 27 op-ed, “Don’t Blame All Borrowers,” Robert H. Frank argued that the quest for better schools for their children has led many parents to overspend on housing. He cited “The Two-Income Trap,” a book by Elizabeth Warren and Amelia Warren Tyagi, to make this argument.
But Ms. Warren and Ms. Tyagi’s own data do not support Mr. Frank’s claim. In fact, from the 1973 to 2000, the percentage of household income dedicated to mortgage payments actually declined. So where did all the money go? To taxes — which, all told, rose a whopping 140 percent in constant dollars.
In some part, this is a result of “the two income-tax trap”: When a spouse enters the workforce, he or she is immediately taxed at a higher marginal rate than one worker would be alone. But it is also because of increases in myriad state and local taxes, notably property taxes, which have risen along with real estate prices.
If Mr. Frank is concerned about the financial plight of the middle class, the answer seems clear: He should be arguing for a reduction in the tax burden, not about some chimerical “bidding war” for homes near good schools.
TODD J. ZYWICKI
About Lance
I want to thank everybody who has encouraged me over the past few years to do this. I doubt it will hold but a few people's interest, but that is okay with me. Special thanks go to Peter over at http://www.liberalcapitalist.com.
I value my privacy a great deal, so I will guess you will have to get to know me over time to find out much. I am in the financial services, wealth management, investing or whatever you want to call it business. I have children, my oldest is entering college.
I have no great or imposing academic background, my grades varied from high enough to get invited to an honors program at my university to frustrating enough to cause my father great grief. My major was history, with a minor in ethics. My main interest towards the end was in the history of economic ideas before life took a turn and I ended up never going on to graduate school. However, I have a fair knowledge of history, economics, investing and would probably be considered well read. My tastes are eclectic and I pretty much find the entire world interesting.
I have an enduring interest in how people learn about and analyze the world; my posts here will examine this topic in detail over time. I make no claims to be above the very biases and errors I see in others, in fact it is my belief that we are incapable of escaping them, only moderating their control over us.
I am a member of no political party, but I would broadly consider myself a man of the right. I am inclined to free market economics, limited government and a fairly narrow view of the role of the state. A small L libertarian if you will. However, if you are looking for broad based "the left believes..." or "wingers are so...." types of attacks on liberals, conservatives, neo-cons or whatever enemy you want to slam, look elsewhere.
Lance
