Housing & Bailouts

on Jul 25 in Financial Market, Politics tagged by Trevor Hicks

Today I want to point you to a couple of good articles on the housing bubble and financial bailouts.  Also, I’m taking vacation for the next two weeks, that may result in increased posting with more free time, but don’t count on it.

First up is John Makin discussing one of the root causes of our current economic problem, and that’s the government’s policy of encouraging home ownership by providing a mortgage interest deduction.  Not only is this a subsidy for the wealthy, but it also encourages people to purchases houses using debt.  I understand why banks and realtors favor this policy, but I don’t see any justification for this tax deduction as a matter of public policy.

Next is Jeffrey Miron, economics professor at Harvard, explaining why the bailout response was such a bad idea.  I think of the bailouts similar to our health care financing.  There doesn’t seem to be any bad situation that the federal government can’t make worse by increasing its involvement.

Regarding health care, if we as a nation have decided that we want to help poor or unemployed people get better access to health care why the solution has to be anything more complicated than cutting them a check or maybe some sort of health care voucher?  Pay for it by ending the tax deduction for employer provided health insurance.  It’s compensation, just like wages, I don’t see any reason not to tax it like cash payments.