Friday, September 7, 2012

Housing is Like Solar, Wind, Ethanol, Saving GM, Saving the Middle Class and other Government "Fixes"

Now we've heard from the Presidential candidates and their allies as to how they'll fix what they can't fix.

Only We the People can fix what's broken in our debt and deficit burdened slow motion economy.

So we'll keep muddling through until WE repair the damage we've done, and allowed government to do, to our economy the past several decades.

Housing is a great example, especially its financing and its "can't miss" investment as a wealth creator for individuals. How many of our fellow citizens borrowed ~100% of the money to buy a house and now find themselves owing more than the house is worth? Remember the government program to save housing a few short years ago? Remember that it didn't work?

Well, that is essentially the way most, if not all, government savior, "I feel your pain and will fight for the middle class" programs end up. They sound good at the time, and they do great harm over time. In other words, the sound bytes come when the unrealistic promises are first made, and the harm comes later.

Look at ethanol, GM, wind, solar, Solyndra, cash for clunkers, mortgage interventions and other government savior programs?

Why The Candidates Aren't Talking About Housing is a good example of all of the above and reveals why the candidates aren't telling us how they'll fix housing or even what they'll do to try:

"Few events have reshaped the nation over the last half-decade as much as the housing crisis—particularly in key battleground states such as Florida, Ohio, and Nevada. But neither the Obama nor the Romney campaign has had very much to say about it.

Housing’s absence from the campaign debate has led to lots of head-scratching among pundits, though there is an obvious explanation for why it has taken a back seat: housing is a political loser.

All potential fixes are messy. Some are very expensive and reward irresponsible behavior. None will be a cure-all. And each will leave someone feeling left out.

That was the view articulated two years ago by Richard Berner, then the chief U.S. economist at Morgan Stanley, shortly before he joined Obama’s Treasury Department. “Many policy options are available to fix America’s dysfunctional housing and mortgage markets,” he wrote. “But the political will to deploy them is scarce.”

President Barack Obama has shied away from much discussion of his housing record (it is hard to find on his campaign website), though he continues to push Congress to liberalize rules that would allow more homeowners to refinance, the latest in a series of programs his White House has put forward.

His administration failed to spend large sums of the money it had allocated for reworking troubled mortgages, for which it has received heavy criticism from the left. White House officials have argued that those policies nevertheless helped move the mortgage industry towards providing more sustainable loan modifications, and default rates on modified loans are down significantly from four years ago.

Though it has a better record stabilizing mortgage markets to keep credit flowing to borrowers who have been able to refinance loans and buy homes at ultralow interest rates, the administration has offered little in the way of concrete plans to remake failed mortgage giants Fannie Mae and Freddie Mac. The Federal Housing Administration is also facing unprecedented losses given its role backing large volumes of low-down-payment mortgages since 2007. . . .

President Barack Obama has shied away during the campaign from much discussion of his housing record.

Mr. Romney faces a delicate balancing act. He has criticized Mr. Obama’s housing-rescue efforts as simply kicking the can down the road and says that he would focus on growing the economy instead. But that leaves an impression that he might recommend doing even less for at-risk homeowners looking to the government for more help. If your opponent is unpopular for promising to fix the problem and then falling short, it could be risky to advertise that you would offer even less.

Mr. Romney walked into this political minefield last October when he told a Nevada newspaper that foreclosures should be allowed to run their course. Nevada had recently passed a law that brought foreclosures to a standstill and has led to large declines in home sales. Critics jumped on the statement as proof of Mr. Romney’s apathy towards struggling borrowers. . . .

Mr. Obama has learned how difficult the housing problem is to fix, while Mr. Romney has discovered how hard it is to talk about in a sound-byte-driven campaign cycle.

In short, housing doesn’t fit easily onto a bumper sticker. At least until next month’s presidential debates, a serious discussion may have to wait."

Summing Up

When government intervenes, it promises to fix things.

When events prove the ineffectiveness of government fixes, government officials move on to promise to fix new problems.

And when that doesn't work either, officials promise that they "care" and are fighting to save the middle class.

Then the class warfare arguments begin. There are more non-rich than rich voters, so the politicians fish where the fish are.

Prosperity doesn't come from government. It never has and never will.

Rich people aren't any less or more caring about the middle class as a group than are non-rich people. People want to help people who need help.

The question is how: Through government OPM programs and bureaucrats or through self help where possible and through people helping people directly where necessary?

Thanks. Bob.

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