FormerSanDiegan, if removing housing subsidies would likely reallocate capital to more productive activities (and I agree), then why shouldn’t we target getting that completed, and get a schedule with an end date, and make sure that each step we take is in the direction of the ultimate target, and not some other direction? That is a rational response.
Other responses seem to me to be designed to continue to funnel general taxpayer money into the pockets of homeowners, under the guise of “saving our economy”. It’s hard to call homeowners a “special” interest group, since they are 2/3 of the population, but you get the idea.
I find myself agreeing with HLS: It is perfectly possible to have no special government subsidy (including indirect subsidies like loan guarantees) for homeowners. Most, but not all, current buyers would be able to afford a home, but at a much lower price. Is that such a terrible world?
I like the idea of owning a home, but not if the only way to get there is to inflate the price radically, and then force others to fork over most of the difference (through subsidies). And most of the benefits to society at large attributed to turning evil reckless renters into good responsible homeowners are confusions of cause and effect. Responsible people save enough and budget enough to pay for a home without any subsidy. Handing all the purchase money for a home to a reckless person doesn’t make them responsible. Homeownership in Germany is much less common than here. I haven’t heard people characterize Germans as irresponsible wastrels, or the country as an economic basket-case.
Smart people in power always knew that homeownership itself was no magic cure for irresponsibility, but 2/3 of the population loved seeing their home values go up, and smiled on any theory or action that would allow it to continue one more year, and lashed out at any threat to the free lunch source. With that support behind them, a few people who gained very large personal benefits from the bubble acted as agents for the 2/3 of the population and put through tax deductions, FNMA expansions, etc. It was always a scheme to feed on the free lunches provided by home price increases, to be funded from the public money trough, or any other source ready to give money without getting it all back (e.g the Chinese central bank).
