Hidden in the $900 billion tax cut for the rich is a tax hike on middle class mortgage holders and prospective home buyers. The latter group consists of the vast majority of the Millennial that supported Obama by a 66-33 margin for his election.
What is this tax hike?
Well, recently jerome a paris had an excellent diary noting that the bond markets were not particularly thrilled about the Obama/McConnell plan:
The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts. (...)
In other words, bond vigilantes are telling us that they don't want tax cuts for the rich. Just sayin.
But picking off where jerome a paris left off, it appears that mortgage rates have indeed surged since Monday .
Mortgage rates surged to a five-month high this week, tracking a jump in bond yields after President Obama and congressional Republicans agreed to a plan that, if approved, would extend tax cuts for two years.
(...)
The average rate for a 30-year fixed loan increased to 4.61 percent this week from 4.46 percent, the fourth consecutive weekly gain, Freddie Mac said.
The average rate on a 15-year fixed loan rose to 3.96 percent from 3.81 percent. Rates on five-year adjustable mortgages averaged 3.6 percent, up from 3.49 percent. Rates on one-year adjustable-rate loans edged up to 3.27 percent from 3.25 percent.
Of course, this means higher payments for millions. It will also depress home sales as prospective borrowers face higher payments. This will further hurt the economy. The end effect will be the same as a big tax hike for the middle class-- so the wealthy can have their tax cut.
It is also undermining the Federal Reserve, which is trying to stimulate the economy through "quantitative easing", spending $600 billion to lower interest rates. All of that is being undone by this week's rise in yields.
In fact, if yields rise too high, Larry Summers' double dip just might materialize:
Bernard Baumohl, chief global economist for the Economic Outlook Group, said the economy can still function with Treasuries at 4 percent, but if they rise to 5 percent the recovery could stall.
This is an important point as the "stimulative" effect of this tax cut for the rich proposal has been heavily milked for all the talking points possible.