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Atlas Struggles Under Home Loans and Businesses

Statue of Atlas holding the world
The end of the Great Recession was officially announced in June of 2009. Over two years have passed in our apparently recession-free nation, but we are still experiencing financial hurt that hasn’t been seen since the 1930’s. Unemployment is still sitting at the head of the table, mocking us and refusing to leave. It’s craftier and more concealed cousin, Underemployment, is enjoying an even more luxurious seat, as our nation’s highly skilled and highly educated workers are being forced to take any job opportunity that comes their way. After mailing and emailing resumes to employer after employer, many ditch their seemingly useless career summaries and instead fill out pre-fabricated applications at fast food restaurants and coffee shops. Our recession-free nation is experiencing a serious lag in its recovery movement, and people are physically suffering as a result.
 
What’s more is they’re mentally and emotionally suffering as well.
 
The nation is watching their home loans default, their property stripped away from them, their businesses crumble, their skills go unappreciated, their minds ignored, and their opinions laughed at. The small amount of money they do earn isn’t going towards the luxuries that America was known for. Instead it’s being taxed at high rates and given away to programs that benefit the nonworking and nations that our country is indebted to.
 
It’s an ugly realization, but America’s new manifest destiny may reside not in exploration, innovation, and progress, but instead in reduction, confinement, and a lower standard of living.
 
A Nation of Renters
 
Less than a decade ago a common question asked of students by their high school economy teachers was, “How on Earth do you think you’re going to afford a home loan in our housing market?”
 
Home loans were being taken out for ridiculously high amounts of money—some single home loans with seven, eight, or even nine digit figures.
 
But the truly frightening fact is that now, six years after the housing market’s implosion, that exact same teacher-to-student question—“How on Earth do you think you’re going to afford a home loan in our housing market?”—is being asked of houses costing between 20 and 30 percent less than they did at their height.
 
People can’t afford home loans at virtually any cost right now because they either don’t have jobs or they don’t have the credit necessary to acquire a mortgage. Those who lost their home to foreclosure or short sale found their FICO score’s decimated. In the event homeowners walked away from their upside-down home loans by strategically defaulting, Fannie and Freddie have imposed a seven-year lockout, effectively blacklisting these previous homeowners from obtaining another mortgage loan. Our population is simply unable to take advantage of record-breaking low interest rates and the favorable costs of housing.
 
Consequently, the nation—as a whole—has resorted to renting.
 
Renting has always been a very popular, and often necessary, means of housing for the younger generations and city dwellers who couldn’t afford high-priced home loans. But the important part of this observation is the qualifier “as a whole.” The collapse of the suburb and homeownership is happening right before our very eyes.
 
The good part about this housing shift is that some jobs are starting to see an uptick in productivity. As November’s housing starts were reported, a sharp rise in the stock market of 9.3 percent occurred this week (Dec. 18-24). But these housing starts aren’t for the luxury homes and four-car garages we saw at the turn of the millennium. Rather, they’re for multi-family complexes and small, single family units that will serve as perfect rental properties.
 
It’s Not Only Houses—It’s Also Location
 
American’s aren’t just accepting lower standards of living by ridding themselves of mortgage loans and taking on a monthly rental bill. There is also a monumental migration trend occurring.
 
Over the last decade the United State’s population has risen 9.7 percent, according to a Population distribution and change report by the Census Bureau. But the largest, most prosperous cities and communities are undergoing periods of stunted growth unlike anything they’ve experienced in the past.
 
Case in point, many locations (particularly coastal regions) have had their population growth percentages cut in half.
 
According to a Yahoo Finance article, Los Angeles experienced a low 2 percent increase in population over the past 10 years. Santa Barbara, the beach community sitting a few hours north, saw a decline of 4.2 percent. Reports show that the population is either migrating away from California or refusing to come to California due to high costs. The California culture of free spirits, crashing waves, sunshine, palm trees, orange trees, avocado orchards, and, of course, Hollywood, is experiencing a loss of power that some felt was never possible. Instead, its eastern and northern neighbors—Oregon, Arizona, Nevada, and Texas—are receiving the would-be Californian migrants.
 
The other side of the country isn’t faring any better. New York’s fate is mirroring that of Los Angeles as the median prices on its home sales sat at an astounding $464,900. When compare to the price of $159,500 that Houston, Texas proudly boasts it’s no wonder New York kicked off the first ten years of the new millennium with a meager 3.1 percent increase in population. Many simply cannot afford home loans of that magnitude in today’s economic climate.
 
Combine that with the fact that California and New York both hold spots amongst the top five highest income tax states, and it should come as no surprise why this monumental population shift is occurring: people are making very little money and they want to hold onto what little money they can.
 
Who is John Galt?
 
The shift to typically less-desirable states is not exclusive to a micro or individual level. Rather, small and big businesses alike are participating in the exodus.
 
Part of the reason for this flight is because businesses, according to some owners and analysis firms, are being treated unfairly. The Tax Foundation, a nonpartisan tax research group based in Washington, D.C., rated California and New York as the 49th and 50th worst business tax climates in the nation, respectively. If a business owner is being taxed excessively within one border, the natural, more profitable response would be to move out from the confines of that border.
 
Another possible explanation for businesses leaving is the feeling of being unfairly represented. The Civil Justice Association of California (CJAC) reports that California is ranked 49th in the nation for unfair legal treatment and court rulings against businesses. While protecting the consumer is of the utmost importance, supporting undeserved or excessive litigation will not encourage any business owner to remain in the state. Rather, they will migrate to a less hostile environment.
 
Finally, businesses aren’t appreciated. When states forget what businesses provide for them, and when a state’s constituency becomes oversaturated with non-producers, they look to exploit money from wherever money remains. The regulatory burden cast upon businesses in the most economically successful states has contributed to the recent downward spirals each of these locations have found themselves in.
 
Like current and previous home loan holders, businesses are finding themselves sinking and struggling for air.
 
Ayn Rand would be rolling over in her grave.
 
The Accepting Will Be Rewarded
 
Before, it was Europe and other nations that envied the American environment depicted in movies and television shows. The large houses, beautiful weather, and sleek cars were the envy of the world. But now, as Americans’ standard of living declines, America itself will look back on those shows and movies—the past itself—and salivate at “what used to be.”
 
But as Americans realize their fantastical residences and movie-like lifestyles are a thing of history, the states with the most accepting attitudes will be rewarded. As individuals migrate inland looking for the most affordable home loans, and businesses migrate inland seeking the lowest tax rates, the states that once flourished will be left with nothing more than the non-producers and a strong few who seek to hold on to a thing of the past.
 
Mortgage loan holders are no longer putting payments towards underwater assets. Entrepreneurs are no longer allowing looter-supported politicians to dictate their lives and their checkbooks. Texas and Nevada will grow into financial giants if California and New York continue with the entitled money-sucking policies they’ve become so fond of.
 
This seemingly inevitable crash landing America is headed for can only be averted if capable pilots push the inept aside and reach for the controls themselves.