Today, the Wall Street Journal reported that foreclosures in commercial real estate could potentially deliver “a roundhouse punch to the U.S. economy just as it struggles to get up off the mat.” Combined with continuing delinquencies on residential mortgages, these commercial foreclosures could spell real trouble for any burgeoning economic recovery.
For the last few months, members of Congress and various economists have been looking at ways to stem the foreclosure crisis, putting forth a series of legislative solutions. However, when MSNBC needed someone to discuss the situation, it turned to Americans for Tax Reform president Grover Norquist, the anti-tax crusader who famously quipped that he’d like to “reduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub.”
When MSNBC’s Carlos Watson asked Norquist how he would prevent foreclosures, he launched into a bizarre non-sequiter about Congressional vacations and the stock market, which ultimately culminated in his advocating for corporate and capital gains tax breaks:
WATSON: So you’re saying the constructive thing that Congress could do is go on vacation for two months, number one, and number two is to say that we won’t issue or pass any additional taxes? That’s what you’re saying would be the solution to stem the foreclosure crisis, both on the residential and commercial side?
NORQUIST: Both of those would help. If we could actually get Congress to agree, we should do another repatriation — 2004, 2005, Congress said ‘companies that have money overseas, you can bring it back and not pay a prohibitive 35 percent tax’…We could do that again this year…And what we ought to do also is abolish the capital gains tax.
It’s abundantly clear that Norquist has no idea what’s happening in the mortgage sector, and merely fell back on the conservative tax cut wish-list. The inclusion of tax repatriation is particularly egregious, as not only does it have nothing to do with mortgages, but studies have shown that the 2004 version was simply a tax windfall for corporations. The break allowed corporations to bring back money that they held offshore at a lower tax rate, for the purpose of domestic reinvestment. But the National Bureau of Economic Research found that very little money was actually reinvested:
Now the most detailed analysis of what actually happened — using confidential government data as well as corporate reports — has estimated what happened to the $299 billion companies brought back from foreign subsidiaries. About 92 percent of it went to shareholders, mostly in the form of increased share buybacks and the rest through increased dividends. There is no evidence that companies that took advantage of the tax break…used the money as Congress expected.
In light of this performance, I hope MSNBC will think twice before bringing Norquist on to speak about foreclosures again.