Friday, September 5, 2008

How About that Free Market?

The Treasury "seizes" Fannie Mae and Freddie Mac. Or, should we call it "nationalization"?

All along, our suburban build-out has been subsidized by the taxpayer or its costs have been socialized - through transportation bills that favored automobiles, through farm policies that made it impossible for family farmers to hold out when developers come knocking, through policies that made it possible to throw up plywood and alumnium shell housing without developers having to worry about inevitable public costs, in tax and zoning policies that favor big companies whose headquarters are distant over local businesses - and so on.

Tonight we can see more transparently than ever that the public trough was always available to expand "home ownership" - a.k.a. development spread like a blight on the land. We will be told piously that these corporations were established to make the dream of home ownership available to as many Americans as possible. That would ring a little truer if the tax policies of the U.S.A. didn't permit mortgage interest deduction on two houses - for starters. How about supporting first-time home ownership by closing up that particular give away? How about capping mortgage interest deductions up to a certain amount (if it was home ownership that mattered, and not unlimited square footage)? In reality, the public backed up the writers of sub-prime mortgages, the real estate speculators, the myriad ancillary workers in real estate, all the Big Box companies that filled up our big, ill-constructed houses... Will all the people who made considerable profits in these businesses over the last few decades offer to pony up to avoid an expansion of government? Will we hear denunciations about creeping socialism and welfare kings? Don't bet on it - not when it's socialism for the rich.

It's unclear how much the U.S. taxpayer will be asked to cough up for this bailout. The two "private" corporations hold 5 TRILLION dollars in mortgages. Still looking forward to "tax cuts" after the election?

The next time Wall Street starts denouncing the dangers of statism, RUN in the other direction....


Anonymous said...

Perhaps in a future article you could explain how it is that eliminating morgage interest deductions on a 2nd house would encourage more initial home ownership. Not exactly obvious.

Patrick Deneen said...

I don't think it merits extended commentary - it was really just a small point to suggest that while we talk a lot about using government programs and incentives to promote home ownership, we're providing quite a lot of tax relief for people who own second homes. If the object were really home ownership _simpliciter_, then we'd get rid of that particular deduction, and could use any additional revenue to promote first time home ownership. We won't, though (you'd be threatening a tax break on a small but very influential constituency - the wealthy), and that's the point I was making.