I got this news story today. Apparently Obama want to provide yet anther subsidy to property owners. I got this from Reuters:
Obama presses Congress to pass aid to homeowners
By Caren Bohan
WASHINGTON | Sat Feb 4, 2012 6:02am EST
(Reuters) – President Barack Obama on Saturday pressed lawmakers to pass his proposal to provide up to $10 billion in aid to struggling homeowners, saying a failure to address the housing crisis would put the rest of the economy at risk.
“The housing crisis has been the single biggest drag on our recovery from the recession. It has kept millions of families in debt and unable to spend, and it has left hundreds of thousands of construction workers out of a job,” Obama said in his weekly radio and Internet address.
Obama this week unveiled the details of a $5 billion to $10 billion program that would help homeowners take advantage of record low interest rates to refinance their mortgages. The assistance would be funded by a tax on large U.S. banks.
The housing initiative was one of several ideas Obama unveiled his annual State of the Union address to Congress last week.
This is so wrong for so many reasons. First of all it is based upon the common, but false, meme-propagated by our politicians, media and even academia-that the key to getting the economy going is to re-inflate the housing bubble again. This is like a heroine addict, who is going thru withdrawal, stating that they key to feeling better is to take more heroine. The first housing bubble was built upon easy debt acquisition. It was not the basis of a real economy, and when the Ponzi scheme collapsed, the economy was worse off than before due to enormous malinvestment, and crushing debt. A debt that we are still unable to pay off. What people don´t want to realize is that an expensive housing market is an indicator of wealth (or scarcity), not a long term creator of wealth. Simply having houses go up in price is not the basis of a real economy. It is simply a transfer of wealth from once group of people to another. In this case property owners and banks make our like bandits, and everyone else suffers correspondingly. A prosperous economy is based on competitive production-not on creating asset bubbles. Like the heroine addict, who prefers to destroy his health, because going thru withdrawal and coming clean is just too painful to face, our leaders prefer to desperately try to re-inflate the housing bubble, instead of going thru the pain of putting our economy on a competitive and realistic footing.
The fact is that economies do best when they are set by the market. All of these government attempts to “support” housing just distort the market and the greater economy and weaken it. In fact the first housing bubble would not have happened if the government and FED had not put in place a whole series of incentives (low interest rates, tax incentives, Community Reinvestment Act, support for Freddie and Fanny) to do so, all in the name of making housing “affordable”. Of course it did just the opposite and made housing completely unaffordable. That is why prices are going down to market levels, because people can no longer afford the prices. And they could not even afford them during the bubble, but instead relied upon easy credit, and now they cannot pay back the debt that they took on.
By having housing prices decline to prebubble market rates we are making housing affordable again, which should be considered a good development. However this return to prices that people can actually afford, angers the property owning class, and the banks, who foolishly invested in the bubble, and now are outraged that bubbles can actually pop and that prices and go down instead of just up. So in comes the government and Obama with all kinds of “rescue” plans using taxpayer money to make sure that the property owners and the banks don´t have to face reality. Essentially the whole society is having to pay so that the upper income half can avoid the consequences of their stupid and reckless speculative decisions. Just another example of privatizing gains, and socializing loses. Everyone got to keep their massive easy profits during the bubble, but once the house of cards falls down, the government is supposed to rescue them with public money from a state that is bankrupt, so that housing prices remain above market rates.
The losers in all of this are the taxpayer, the economy, people who were prudent during the bubble (moral hazard), and those who do not own property (the young, lower income people, blacks, etc). These Obama initiatives are a way to bride the haves with public money. Obama is ignorant or unwilling to take the steps to make the economy competitive again, so he must resort to endless handouts and bribes to various influential parties to keep him popular and electable. This is what our government and political system has devolved into: a giant patronage machine that uses public funds to reward and buy off various pressure groups (corporations/cartels, unions, scientists, government workers, feminists, retirees, higher education, fellow politicians, etc). Little thought is given as to whether the money spent will benefit the nation or the people. Instead it is just a political calculation. With this type of system it becomes impossible to allocate finite resources intelligently and fairly. What we end up with is waste, bloat and corruption, and an economy that suffers. That is why we cannot get out of this recession, because government wastes money and the economy is not allowed to function according to a healthy market system.