Smoke Gets In Your Eyes
By Ed Goldman
The December passing of former Federal Reserve Chairman Paul Volcker conjured up some memories.
On the plus side, he appears to have loved cigars even more than I do. While I smoke only one per day—and not even every day if, for example, I come down with laryngitis, strep or double pneumonia—he was rarely pictured without a haze of smoke surrounding his formidable head.
Had the haze lifted, we might have seen just how pleased everyone around him was to be in his perpetual inferno. When a guy is 6’7’ tall and blowing acrid clouds of tobacco exhaust onto and around your nose and mouth, as though he were a wicked wind deity, I’m not sure the effect should be classified as second-hand smoke. With the exception of your lips not being directly involved, it’s about as first-hand as it comes.
On the dubious side, I, along with millions of you, bought a home in the 1980s, when interest rates rose so high (to as much as 21-and-a-half percent, if memory serves), that its dollar equivalent could equal or even surpass your principal payment. And frequently did.
On the other hand, in those fondly remembered days, your mortgage interest was tax-deductible—meaning that when you factored in your likely end-of-year returns, a home you paid $3,500 a month to hang onto might have cost you only about $450.
This is why a lot of us even bought vacation homes at those ridiculous rates, since those second-home mortgage payments were also deductible.
You could also write off property taxes back then. My monthly mortgage bills looked like this:
- Stupidly large house in Sacramento’s allegedly Fabulous 40s neighborhood (five bedrooms, four baths, 4,800 square feet): $4,000 per month.
- Second home in Capitola-by-the-Sea (two bedrooms, one bath, 1,100 square feet): $2,500 per month.
- Property taxes for both homes each month: under $800.
- How much I’d actually spend per month for two homes, after taxes: around $1,650.
- Real estate bragging rights: priceless.
To be sure, it could be burdensome: I still had to come up with the dough for the monthly payments. But I was young and making a nice living both as a writer in numerous media and as a marketing consultant, so I was able to manage. And then, at the end of the year, I’d receive a large chunk of change from my dear friends at the IRS (motto: “Of course we’re not after you. Don’t be silly. Have a big smelly cigar with Paul Volcker”). It was one of those moments you feel almost guilty saying aloud, “Is this a great country, or what?” Especially when you do so every time you think of it and everywhere you go.
Me: Is this a great country or what?
Greengrocer: Yeah. You gonna get those snap peas, or what?
Volcker’s gamble, that astronomical interest rates would eventually help inflation descend to recognizable terra firma, was scoffed at back then. After all, the prime rate’s climb led to the recession of the 1980s, when the country’s unemployment rate climbed to more than 10 percent.