Tuesday, July 27, 2010

Eliminating Housing Subsidies Will Improve the Economy

Excellent article at Irvine Housing Blog

Eliminating housing subsidies may cause house prices to drop, says Irvine Renter, but it will free up capital for more productive uses.

How many  "more productive uses" can you think of for the $3.4 Trillion that we've committed to mortgage assistance, tax credits for new buyers, backstopping the GSEs like FMAC and FNMA against their hundreds of billions of dollars in losses on bad mortgages, and other assistance and subsidies for the sinking housing market? How much do FHA loans with their average 20% delinquency and default rates cost the taxpayers? How much do we lose to the mortgage interest deduction?

And how many poor people are living any better with Section 8 subsidies than they would be without this welfare program for slumlords?

$3. 4 Trillion would repair every dangerously deficient dam and bridge in this country. It could rebuild St. Louis' collapsing sewers, and rebuild Chicago's lakefront and rail system.

It could rebuild the aging water treatment infrastructure in all the older cities.

We could build a completely electrified rapid-rail (not High Speed) to every city and town in this country with a population of more than 5,000.

It could be put against our towering public debt load, most of all.

We might once again have productive industries making the things we badly need, to the benefit of every socio-economic group in this society, while housing costs would drop steeply. Poor people could find more "first-rung-on-the-ladder" jobs, and our middle classes could have more opportunities for advancement and more job niches utilizing a greater variety of skill sets and talents, while the rich would have more profitable investment opportunities where their capital would be utilized building new industries providing the technologies and systems we will need to maintain our technological amenity while transitioning to a low-energy regime.

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