Jenson, over at BlueOregon, has raised the issue of minimum wage reduction bills in the Oregon legislature. One of those bills piles on a capital gains tax rate reduction.

Why isn't the sponsor of reducing minimum wages also trying to lower the standard deduction? They have got to think of replacement revenue. I learned that one from the PR guy at PPS regarding any effort to lower property tax obligations, even if targeted exclusively to the poor highly-indebted home owner with effectively upside down equity.

The minimum wage needs to be adjusted, assuming that state-set minimum wages are an OK thing, to reflect the increase in housing costs derived from artificially induced increases in housing prices resulting from a host of mechanisms.

How about we disallow the recognition of interest payments as a valid expense on real property asset loans for both commercial and residential property. This would provide the replacement revenue from reduced capital gains revenue and partially neutralize the lure of using Alan Greenspan's easy money asset inflation approach to achieving growth. This would also generate real economic growth because by reducing the outflow of interest payments folks would spend wages locally rather than participating in inflating asset values with borrowed dollars.

The entire residential home buying frenzy, with debt, creates glorified renters; and the low-payment-only focus of “affordable housing” is the Republican wedge issue to get poor folks to gamble on further increases in home prices rather than on real savings and business development. The republican's get one more vote to support capital gains reductions because the poor (the poor glorified renter) thinks it is in their interest. “Look! Free money! All you have to do is promise to pay off a huge debt. And . . . not to do anything that might end the pyramid scheme to boost home prices through the roof.”

The Republican and Democratic team that is selling home debt as a home ownership are neither supporting economic development nor helping the poor become less poor (relatively).

Do not forget that wages are relative to the cost of getting stuff to survive. Housing, including rent, has gone ballistic. The Democrats, through encouragement of home debt and asset price inflation, have handed the Republicans the capital gains (business and residential alike) to which they place such great emphasis and the voters to boot. On balance, the Republicans get more voters from the mystical “ownership society” than do the Democrats, and the future only gets incrementally worse over time until the pyramid scheme runs its course. The endgame, a drop in housing prices, will be met by the banks (and other financial institutions) with a demand just is in the S&L collapse of saving the essential banks from collapse.

Guaranteed wealth protection seems a tad bit more costly to the economy than does guaranteed minimum wages, on balance.

The asset inflation game, regardless of the equity considerations over who benefits most, actually does more harm than good by disrupting the incentives for small business development by redirecting energy toward asset gambles rather than directed toward offering products and services that real people can use in the their daily lives.