There is a Big Cow (not an Elephant) in the room when any discussion takes place about the US and its present credit crisis. Neither the Democrats nor the Republicans will touch this Holy Cow; Mortgage Interest Deductibility.
At its conception in the early 1900’s it was a great boon for a young growing economy but what it has created is a Society that has flourished on great amounts of debt.
A Canadian will proudly tell you that their Mortgage is paid off, an American will look at the Canadian and wonder why they would do something so foolish. Why not use the equity to buy something else until there is no more equity left, just debt. Sadly, the Bush Government has been running the Country the same way.
Canadian Banks allow Buyers to borrow up to a 33% of their gross income; American Banks allow 60% due to the deductibility of Mortgages.
In the US right now 20% of homes for sale are in default, in Canada, 1/4 of 1% of mortgages are in arrears. Interest Deductibility was a great idea at the time; however, it is time for tough talk in the States.
The US is a great country and will weather this crisis but will it do so with quick fixes or can it get everyone back on track. If not, the American Dream may become a nightmare.