Not Only is Your House Worth Less, You're Gonna Pay Higher Taxes (for Everything)

Do you feel a squeeze? You probably said, yeah. Well, what you may not realize is the domino effect the mortgage mess has on everything else connected to your wallet. The Wall Street Journal has a terrific explanation as to how the first domino of the mortgage mess kicks off a cycle.

Step one: Defaulting mortgages bring down home prices.
Step two: Consumers pull back on spending for fear of rising prices and or their jobs.
Step Three: Less homes sold, cars sold, etc. means less tax collected by the states.

Here's why you care: The states HAVE TO make up that money as the Wall Street Journal rightly points out because many of them have to balance their government checkbook.

THAT MEANS they take a multiple choice test:
A) Raise taxes
B) Raise prices on the things your state does for you (like transportation or community college).
C) Cut back on things the state provides (everything from the Park Ranger to health care).

But there's something that is going to make it feel like a double whammy. That something is those bonds we talked about a week or so ago and pointed to another Wall Street Journal article that deserved more attention.

Why you care is because when the state wants to do things it gets a bond. When the market is tight that means the state pays more. And, if the state has less money, but paying more over the long haul it is the equivalent of the state taking a credit card balance and pushing on a new card with a higher rate but over a longer period. In other words, it will cost more money. That's your money, and you'e gonna pay for it either in choice A, B, or C.

Now do you feel squeezed?