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In the next few weeks the politician season will march toward its final moment, a time when good citizens should demand straight answers from those who wish to represent them.
Real estate and government are closely intertwined. Government policies influence housing demand, interest rates, taxes, where you build and how you build. Alternatively, when the real estate market sours politicians lose jobs, a fair trade by any standard.
If you're in office you have a record to defend and for the past few years the Republicans have controlled the House, the Senate and the White House -- a political trifecta that should make everyone nervous. The issue is not that the Republicans have found electoral success, it's the general view that no single party should control both houses of Congress and the presidency at the same time. A strong opposition tends to moderate legislative demands and slow government action, trends which the Founders encouraged by creating our system of governance.
The objective record for housing during the past few years has been excellent. Home sales have reached new highs, prices have risen in most areas well beyond inflation, and interest rates have fallen to levels not seen since the Eisenhower administration.
But as well as we've done in recent years, future trends are not so clear. The success enjoyed within real estate has not carried over into other fields. The apolitical Conference Board reports that its "Consumer Confidence Index, which had been on the rise since April, declined in August. The Index now stands at 98.2 (1985=100), down from 105.7 in July."
What are the questions politicians need to answer? In terms of real estate they look like this:
Deficits
During the past two years the federal government has run up a massive deficit, many times what is being spent on the war in Iraq. To finance this deficit the government must borrow, which means it will compete with the private sector for funds and inevitably drive up interest rates. Much of our borrowing now depends on the goodwill of overseas investors, a reliance which ought to make everyone nervous. Tell us Mr. Candidate, how will you resolve the looming deficit crisis? Does the term "tax increase" apply?
Estate Taxes
Warren Buffett and Bill Gates both say that the effort to end estate taxes is wrong. Given the budget deficit, do you believe that estate taxes should be returned to past levels? Do you believe that the creation of a super-wealthy patrician class is good for the county? Do you believe that inherited wealth spurs industry? Creativity?
Jobs
The latest figures show that we have a 5.5 percent unemployment rate. This percentage is contrived. It magically does not count 1.6 million people who "wanted and were available to work and had looked for a job sometime in the prior 12 months."
"There are," says Business Week, "1.1 million fewer jobs than there were at the beginning of 2001, when Bush took office." This is an amazing statistic given that our population stood at 282 million during the last presidential election and now tops 294 million people.
So, Mr. Candidate, how will you invigorate the job base, something which is necessary if the pool of homebuyers is to be maintained?
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are former parts of the federal government that have been spun off into the private sector -- but not completely. These huge firms buy mortgages from local lenders with money acquired from Wall Street investors. Unlike private companies that do the exact same thing, Freddie Mac and Fannie Mae benefit from a variety of special rules.
There is considerable debate regarding whether Fannie Mae and Freddie Mac should be required to purchase more loans from minority borrowers (thus raising portfolio risk, according to some observers), whether they should have a line of credit with the U.S. Treasury (thus implying a government guarantee in the event of problems, a presumed guarantee which allows the firms to borrow at lower cost), whether they should receive special tax and regulatory benefits (to even the playing field with private companies) and whether they should be privatized. Do tell, Mr. Candidate, what is your view?
Environmental Policies
Do you believe that major highways should be closed to protect an endangered species? Do you believe there should be a relationship between costs and benefits when it comes to environmental issues? Did you grow up in a home with lead-based paint? Do you believe that condor is better served with rice or a glazed sauce? Just curious....
At the local level, voters ought to ask about tax policies, zoning, growth restrictions, road development, rent control (where it still exists), subsidized housing and so-called "smart growth" policies.
And at the end of this process -- whether or not you can get a straight answer to any of these questions -- you ought to go out and vote in November. It's your way to exercise power.
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