Real Recovery

No Sir!

People are not waiting for government stimulus. The astonishing lack of control that congress has shown in 2009 has people afraid that worse economic conditions are ahead - especially when taxes begin to rise.

They are not exactly passive - just fearful. While the Washington DC area is experiencing a boom (a reminder of the Carter years), the mood in places like Atlanta is pretty dark.

When the economy improves (and it will, it is only the timeline that is uncertain)(including housing demand), there will be pent up mobility. Similar to the post WWII baby boom, after the low fertility of the Depression, there will be a mobility boom after this recession.

It is the effect of the coming mobility surge that will leave lasting marks, just as the baby boom left greater effects on the US than the low birth rates of the 1930s.

Entrepreneurs get made as teens -- and the quality seems to last a lifetime.

Countless bios describe the phenomena.

Moving rates are highly correlated to age structure, so given that Americans have been getting older the decrease in moving is at least partially due to this long term secular demographic trend. This recession has emphasized this to some extent and we'll know more whenever the census data comes out for 2009, but calling the decreased moving rate a legacy of the recession is under emphasizing the importance of demographics.

As an "underwater mover", I can tell you that the marginal tax rate increase in moving from an "underwater stayer" to an "underwater mover" is pretty high, as you are no longer get the interest deduction on your "primary residence", even if you can only rent your new "primary residence" as you'd never get a mortgage, and even if you can't rent out your underwater "rental property".

I moved during the time selling my house went from break-even to hundreds of thousands of dollars underwater if you could manage to sell it. Luckily, I think my new job is worth it, but if I had to make the decision today, it would be tougher.

If you want to allow people to move to 1) get employed and 2) maximize their value in our economy, make the interest deduction applicable to one house, regardless of whether you live in it or not, at least for a few years while the real estate market recovers.

Of course, we probably should get rid of the mortgage interest deduction completely, but there is no way to realistically achieve this without a 10-year phase-out.

Mr. Econotarian,

Additionally, you could add a housing credit that covers rentals as well, with the deduction being the greater of the mortgage payment or credit. In this way, you still promote ownership over rentals, but still provide incentives for being mobile. Of course, that would benefit young people, and everyone knows the role of government is definitely not to represent us.

> He points out that a real recovery will come from people embracing change and starting new businesses, but in today's environment people seem more fearful. In my view, this suggests that if people are waiting for government stimulus, this will promote passiviity rather than a real economic recovery.

I would expect very little overlap between (1) people with the drive and ability to start new businesses and (2) people with the infinite patience for the government to get its act together.

In other words, if government action/inaction has the ability to render you passive, you actually possess insufficient gumption to start a successful business.

(I am working on the assumption that there is no economic/societal benefit from many unsuccessful businesses starting.)