Get ready to get your financial ass kicked. That’s the message the bond market sent last week, although almost nobody in the corporate press bothered to translate it into English. If you’ve ever lived in a condo or home with an HOA, though, you may understand what’s happening better than you realize.
First, the current crisis:
Our federal government pays its bills two ways: using tax revenue, and borrowing when it’s short by issuing IOUs we call Treasury bonds. The single most important of these for you and me is the ten-year bond because our banking system sets mortgage, car loan, student loan, and credit card rates based on it.
Last week, that rate hit 4.92 percent, just a hair below the 5 percent rate that could trigger a freak-out reaction on Wall Street. The nationwide average 30-year mortgage is already hitting 6.7 percent, which is both shaking the housing market and crushing low- and middle-income people both in mortgage payments and mortgage costs that get passed through as rent.
That, in turn, threatens a recession; when lenders get nervous about being paid back, they charge more, and right now they’re getting very, very nervous.
The main thing that’s driving all this nervousness is that the national debt crossed the $40 trillion threshold three weeks ago; we’re now paying more than $1 trillion a year — enough to fund a national healthcare system and give everybody free college, if done right — in interest payments. That’s more than we spend on the entire military or on Medicare.
Our Treasury is writing interest checks of $95 billion a month, our nation’s debt is growing by nearly $7 billion a day, and that works out to about $117,000 for every man, woman, and child in the country. (Into this mess, on Wednesday night, Donald Trump tossed a promise to mail every adult a $5,000 “Trump Dividend” if Republicans keep Congress, a stunt that would cost well over a trillion dollars, further freaking out the bond market.)
If you’ve ever lived in a home or condo that has a homeowners association (HOA), you may already have a meaningful insight to what 45 years of Republican irresponsibility have done to America, because you’ve probably had it happen to you or watched it happen to your neighbors.
Two friends of mine here in Oregon have been through this in just the past five years, and Louise and I briefly lived in a community that was heading in the same direction.
Our friends bought into what seemed to be well-maintained communities that had seductively low monthly dues. And then came the shock: in one case the roofs and another the parking structure hit the end of their useful lives and there was no money in the HOA’s account to pay for the necessary — and major — repairs. One was hit with a $40,000 “special” assessment, the other a bit less. Neither saw it coming.
The problem was that a previous generation of homeowner board members, wanting to keep their own costs low, kept the HOA dues down by simply ignoring the reality that one day the roofs and parking area would have to be repaired. The more recent purchasers ended up having to suddenly cover costs that should have been saved for over decades in what HOAs call “reserves.”
This is the same scam Republicans have been running on us since Reagan started it in 1981 on the advice of a Republican consultant named Jude Wanniski.
In essence, the boards that were keeping their HOA dues low and not bothering to build reserves for future maintenance were giving their then-current owners (and themselves) a tax cut.
The roof doesn’t care if there’s money to pay for its repairs; it’s going to deteriorate no matter what. And the longer the board waits, the more the repairs will cost until one day ceilings start leaking and it can’t be put off any longer. That’s when the current board has no choice but to hit everybody currently owning a property in the HOA with a special assessment.
— After the Surfside condos collapsed in Florida killing 98 people, that state finally passed a law requiring HOAs to both maintain their properties and build reserve funds for future maintenance.
— Owners at the Cricket Club condo complex in North Miami got hit with a proposed assessment of nearly $30 million for a new roof and facade work, which worked out to more than $134,000 per unit; one owner there had cashed out his 401(k) to buy a $190,000 condo and simply couldn’t pay.
— At the Mediterranean Village homes in Aventura, some owners were assessed up to $400,000. A 79-year-old woman in South Florida got hit with a mind-boggling $224,000 assessment on top of monthly fees that had already doubled from $1,500 to $3,000.
And it isn’t only Florida. Just this week a condo owner in Torrance, California opened a bill for $49,000, levied equally on all 499 units, because his board was finally forced by disintegrating properties to pay for $19 million in decades-deferred projects.
It turns out this isn’t a rare event; more than 75 million Americans live in communities with homeowner associations, and nearly 10 percent of all those associations hit their homeowners with a special assessment last year, up from 7.8 percent in 2021. That’s somewhere north of seven million people who got hit with a massive surprise bill in just one year (more recent stats aren’t yet available, but odds are things are getting worse because everybody’s so badly financially strapped right now).
But, of course, it’s not just people who live in HOA communities: America is on the verge of having to go through the same thing because our “board” policies have been run (or restrained) by corrupt Republicans for most of the past 45 years.
When Ronald Reagan took office the national debt was $914 billion. When he left, having slashed the top income tax rate from 70 percent down to 28 percent, our debt was $2.6 trillion, nearly tripled, and the annual interest payment had more than doubled.
And this HOA-level irresponsibility was neither an accident or the response to a crisis. We’d been steadily paying down our national debt every year since the end of World War II, to the point where when Reagan took office it was less than one trillion dollars.
But then, as I laid out in The Hidden History of the American Dream, Republican strategist Jude Wanniski laid out what he called his “Two Santa Clauses” strategy to screw Democrats and make Republicans look like financial geniuses.
Wanniski pointed out in an op-ed in The Wall Street Journal that Democrats had been winning elections for forty years by playing Santa with everything from Social Security to Medicare, Medicaid, the minimum wage, the GI Bill, food stamps, housing supports, free college, and dozens of other “gifts” to the American public.
Republicans had openly opposed every single one of them, making the public view them as Scrooge.
The key, then, was for Republicans to become what Wanniski called the “tax-cut Santas” and, at the same time, start spending money hand-over-fist when a Republican was in the White House. That would artificially stimulate the economy, making people think Republicans knew how to produce “good times,” and would also have the benefit of running up the nation’s debt.
When a Democrat came into office, Wanniski said, Republicans should flip the script and start screaming about the debt they’d run up — “Oh, the agony, our children will have to pay for this!!!” — to force that Democratic president to cut his own social spending.
Bill Clinton fell for it hook-line-and-sinker, giving us “the end” of both “big government” and “welfare as we know it.” And it’s worked every time a Republican has taken the Oval Office since Reagan; they all know the script and follow it to a T.
Reagan tripled the debt, and Clinton had to play the role of the grownup. George W. Bush cut taxes on billionaires twice, put two illegal wars on the national credit card, and doubled our national debt; when Obama took office he spent eight years being lectured about deficits by Republicans and right-leaning billionaire-owned media.
Now Trump has signed tax cuts that the Congressional Budget Office says could push our debt to 200 percent of GDP over the next two decades; he added $7.8 trillion to our debt in his first term and is now merrily running a debt of over $2 trillion a year.
This GOP scheme is the exact equivalent of the HOA board members who live cheap for 20 years and then sell their homes or condos to the poor suckers who inherit the disintegrating roof or parking garage.
But, in our nation’s case, the roof is the bond market. And the bond market is going nuts right now, which is giving serious jitters to everybody from Wall Street to foreign countries that are starting to dump US treasuries.
There are already three members of the Fed who are openly lobbying to raise interest rates this Wednesday to slow down the inflation all this deficit spending has created, oil is over $100 a barrel because Netanyahu finally found a president and defense secretary stupid enough to go along with him and attack Iran, and we’ll hit the $41.1 trillion debt ceiling sometime early next year.
When our “special assessment” finally arrives, it’ll show up as a mortgage you can’t refinance, a 15 percent car loan, a Social Security “reform” that cuts everybody’s checks, exploding Medicare premiums, and inflation that continues to eat away at your paycheck month after month.
It’ll hit, in other words, the average working people who just happened to be living in the HOA building when the roof started to fail, while the former owners who’d voted for 45 years of skipped maintenance have long since cashed out.
The fix for HOAs is pretty much the same thing as the fix we’ll need for this country: we need a special assessment and a return to regular taxation, but let’s make sure it hits the right people.
We require the board to fund the reserves — raise taxes on the morbidly rich — and claw back some of that money they’ve stolen from us (with $40 trillion worth of tax cuts and illegal wars over the past 45 years) via a tax on wealth like California is contemplating.
If we fail, our eviction notice will come in the form of a repeat of the last Republican Great Depression, courtesy of the bond and equities markets just like last time.
So, check your registration at vote.org, find out who’s running for your state legislature at openstates.org, and if this was useful to you, please subscribe to and share the Hartmann Report. Somebody in this building has to read the reserve study out loud.
Louise’s Daily Song: “They Got the Fortune, We Got the Debt”
Comments on Satirday’s Special:
When a Physicist Follows the Data Somewhere He Didn’t Want to Go
The premise of this book resonates with the Truths I’ve been encountering! It’s exciting to see!
~ Pamela Eisen
Holy s__t!! I must get this book! After saying that, I must also say that I am very skeptical although intrigued. I would like to believe there is more to reality than what our senses tell us. Certainly even the physical universe is far from being explained (dark matter, dark energy, particle entanglement).
~ Linda Silfven
Fascinating and terrifying in equal measure.
~ Michele Dukinfield
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Thom Hartmann’s Well-Read Troublemakers Book Club
The September book of the month is Looking Backward, From 2000 to 1887, by Edward Bellamy. Buy a copy or download it for free here.
This is a utopian science fiction novel published in 1888. When Julian West falls into a hypnotic sleep in 1887 Boston, he awakens 113 years later to find America transformed into a socialist utopia. Through conversations with his guide, Doctor Leete, West discovers a radically reimagined society where industry is nationalized, goods are equally distributed, and citizens retire at 45. This bestselling novel sparked a political mass movement and inspired over 162 discussion clubs across America.
Having been on three HOA boards and president of two, I can attest to the truth of Thom's essay. However, (Democrats, are you listening?), my HOAs had surpluses. I achieved that by pointing out the cost to replace the hot water heater for the building, our 2 elevators, and the roof of our 9-story building. Then I shared the life expectancy of each, pointing out that most were already past their life expectancy. Next, I showed how we could avoid a whopper special assessment by raising monthly fees vs a special assessment. The fee raise was almost unanimous.
But when, besides Bernie or Liz Warren, have the Democrats sincerely pointed out what Thom just did? Pay me now, or pay me later, but you are going to pay a whole lot more if you choose later.
And, both oddly and poetically, HOA's are notoriously corrupt.
Just like your government.