One of the great fake bedrock principles of America may finally be crumbling like so much papier mâché: the belief that tax policy, spending decisions, and even bank lending rules should all be designed to "promote homeownership" for all Americans.
USA Today reports on the growing (dare we say, almost bi-partisan?) sense that the governent has gone wrong in getting into the housing business. The Obama Administration is, of course, avoiding the obvious solution of not interfering in the market at all, but it is considering changes in mortgage financing and down payment requirements:
Congressional Republicans doubt the administration has the nerve to make bold changes. They say the White House squandered an opportunity to deal with what they see as the No. 1 problem — limiting taxpayer losses on Fannie Mae and Freddie Mac — in an overhaul of financial regulations Congress passed last month. "What you've seen is two years of lip service," says Rep. Spencer Bachus of Alabama, ranking Republican on the House Financial Services Committee. "The administration and the congressional Democrats have not shown any willingness to address the issue other than to talk about it and have planning sessions."
Other critics say eliminating or overhauling Fannie and Freddie isn't enough: The government must reconsider such bedrocks of housing policy as the mortgage interest deduction and the tax exemption of most capital gains from home sales.
They say these misguided or outdated government policies encourage the United States to massively overinvest in housing, shortchanging other parts of the economy. "There's only so much subsidy to go around at the end of the day," [author Alyssa] Katz says.
As I have argued here, there and everywhere, promotion of homeownership is a piece of social engineering that inflicts a painful price on this country. The ideas under discussion are really just social engineering in the other direction, but it's a good sign that what was once considered a core principle is being called into question by somebody other than cranky libertarians.