Again, you are misrepresenting my point. Let’s call the individual I described the “careful borrower”. Agreed, this is not how everyone acts, but it is a counterexample to the notion that the typical person would do otherwise. Why? Because the careful borrower is a rational actor. He wants the best option, the choice that is better for himself. He is also psychologically plausible.
Now, as I understand your argument, you want to say that there are other actors, not so rational actors, that are also psychologically plausible. Agreed, but next you go too far in claiming that the non-rational actors have such an adverse effect on the economy that it outweighs the rational actors. And, you don’t address the issue of regulation. You assume that the bankers will be able to maintain their profit through lending to the non-rational actors. Ok, let’s continue.
Let’s assume that the non-rational actors can actually pay the loans. Otherwise, the bankers aren’t making money anyway, and that kills your point. What’s the problem here? You seem to be concluding that the non-rational actors create so much more debt (than we have now) that the deduction is wrongheaded. But you haven’t presented any examples of the non-rational actors. Maybe if you show an example of how the non-rational actor creates more debt (than he does now), I will be more swayed by this boogeyman.
Very possible. I misunderstand people all the time.
Thankfully, I’m not the only one.
I said nothing about any non-rational actors.
All actors in my explanation are rational, or at least potentially so.
Having a different attitude toward debt is not a sign of irrationality. People are different. Being different from you, or different from my parents, is not an indication that someone else is funny in the head. We’re in serious trouble if we start believing that people are irrational just because they aren’t like us.
I said nothing about non-rational actors. I said nothing about an adverse effect on the economy.
What I said was that subsidizing debt will increase the amount of debt.
Demand curves slope downward. That’s another way of saying the exact same thing.
We have to understand one piece before we can move on to the next.
There is no point in adding complexity, adding piece after piece to the analysis, if we can’t understand how the situation changes with a much simpler case. The demand curve is a simpler case, so I started with that. I’m not going to move on from it.
I want to discuss the fact that subsidizing debt will increase the amount of debt. To start with, to aid understanding, this should be divorced from other considerations. I want to discuss this effect in isolation, all else held equal.
I’m assuming nothing of the sort.
What I said was that subsidizing debt will increase the amount of debt.
Banks will be profitable if the debt is good. Banks won’t be profitable if the debt later goes bad. (The latter case has been in the news in recent years.) I don’t know whether banks will be able to maintain their profit level. But I do know that they will try. Their revenue stream comes from debt. If debts are repaid by one group of people, then they will find a different group of people. It’s the only chance they have to maintain their revenues. Whether their new choices are ultimately profitable or not is another story.
I said nothing about whether the deduction is wrongheaded.
What I said was that subsidizing debt will increase the amount of debt.
I didn’t offer any value judgments about this. Make debt cheaper, and people will take on more of it. To aid in simplicity, the typical qualification here is “all else equal”. The demand curve slopes down: all else equal, if you decrease the price of something, then the quantity demanded will increase. If you want to add new regulations, then all else is no longer equal and it’s a more complicated case. If you believe current regulation will serve to restrain bank lending, then I will point at you and laugh. Subsidizing debt will lead to more debt. It will happen for the reasons I and others previously outlined. Whether that’s a good or bad thing, I leave for others.
I described the effect at the end of Post 80. Your response was not a response. In three paragraphs, you managed to attribute four false positions to me. You made up a bunch of shit that I didn’t say, and then attacked that fantasy instead of dealing with the words I actually wrote.
How am I supposed to address “specifics” under those circumstances? If you have specific criticism about my actual argument, then you need to address my actual argument. Otherwise I’m just going to document your careless and sloppy reading, because that’s all I have to work with. If you didn’t understand something, that’s fine, but you need to point out exactly where my post is unclear so that I can elaborate. Asking questions is fine. That’s much more constructive than arguing against a fantasy version of my argument. I have no “specifics” to address when you’re arguing with strawmen.
Hey, you might be right.
But here’s the thing. You’re not the judge of that.
I’m not trying to convince you of anything. I don’t mean to be rude, but I don’t care what you think. My audience is everyone else in the thread. What this means is that I’m helping my case if I convince them of my position, regardless of what your own opinion of my persuasiveness is. Under those criteria – which is what actually matters to me – I don’t really know whether I’m helping my case. Sometimes I fuck things up. Sometimes I take the wrong approach and I’m unpersuasive, or unclear, or even dead wrong in what I’m saying. I’m far from perfect. But in my defense, I’m not the one in this thread who keeps attributing false positions to people. Know what I’m saying? That’s the sort of behavior which doesn’t help a person’s case, by the standards I care most about.
If you ask questions with specifics, I’ll try to address those specifics. If you make shit up, I won’t address specifics because I won’t see any. It’s as simple as that. This is my own method of helping my case. It’s the one that works best for me. Address Post 80 directly, and I can try to give a direct response.
Thank you. I hope you have a good day, too.
PS: The mortgage deduction increases the amount of debt, as other posters have told you and as I explained in conspicuously on-topic fashion at the end of Post 80.
You’re assuming no other deductions, which is not necessarily a good assumption.
For years, my non-mortgage-interest itemized deductions have been just a bit below the standard deduction, so I just took the standard. If I bought a house at any price, I’d receive just about every penny of the mortgage interest deduction.
I don’t know what the range of itemized deduction totals would be for people who take the standard deduction is, but I doubt very much that it’s close to zero.
If you pay income tax to a foreign government then the US lets you deduct that. The idea is to avoid double taxation. So if you pay $20,000 in income tax to Foreign Landia, and then calculate your US tax burden at $25,000 you only have to pay the difference - $5,000 - to the US.
But if the same US expat with the same income lives under a foreign government that is funded by other higher taxes and fees instead of an income tax then he gets bupkis for a US tax deduction. If your vehicle registration is $4,000 per year, sales taxes and import duties on basic groceries are another $6,500, and other such taxes and fees add up to $30,000 he would still owe the US the full $25,000 in tax.
Of course Americans residing stateside get hit with various fees and such in addition to income tax but more in line with the costs of providing the service. So to even things out, perhaps allowing the expat to deduct government taxes and fees paid to the foreign government in excess of x% of his AGI.