Thursday, February 19, 2009

The Insanity of it all...

If you haven't heard the news, Obama plans on a $275 Billion dollar housing bailout.

Jeff Perren at Shaving Leviathan writes:

The insanity continues unabated.

Fresh from signing the largest legislative suicide pact in American history, Obama plans to intrude the Federal government still more into the housing market, amplifying the bad effects of the intrusions that led to the crisis by engaging in still more Federal welfare...

...explicit discussion of moral issues plays little part in public debates these days, even though it animates most of them. Instead, they focus almost exclusively on which route will maximize social utility and an abstraction called "the economy." They too frequently ignore that individuals have their own private economy and that should be the heart of their concerns.

Whenever moral issues do play a part in online debates, they tend to center around the personal motives of Congress and Obama himself. But it doesn't matter whether they are the accumulation of more power, as is likely, or simply a sincere belief that 'the strong' should help 'the weak'. It's irrelevant whether or not he and they are simply soft-hearted, to go along with their soft heads, or are just a bunch of calculating opportunists.

The effects will be the same regardless of their intentions and the first effect is to violate the right of dozens of millions who didn't default on their mortgage payments to choose whether or not to help the others.

The entire post is spot on. In the long run, Obama's plan to shore up struggling homeowners is close to removing risk from the housing market. Hey, don't worry if you can't pay your mortgage because Uncle Sam will always have your back. Eventually, it won't matter what your reason is to not pay your mortgage because you have a "right" to have a home. Right? I can see some angles here, Fannie Mae and Freddie Mac get some validation by being injected with 200 billion dollars; they both can rest assured that they will never have to compete with others or fear poor performance since their stockholders are the American taxpayer. Yes, even responsible taxpayers that avoided personal debt and "too good to be true" mortgage payments get to pitch in for this transfer of wealth.
Alas, another market distortion gets to be created. Home prices will once again be adversely "stimulated" by the lumbering forces of government trying to "do something." All of this will not end well. I can almost feel unintended consequences creeping up behind us.

5 comments:

Jason said...

However you feel about the stimulus or bailout, I would think that it's nice to see regular struggling people getting bailed out as well as the fat cats.

Jeffrey Perren said...

"it's nice to see regular struggling people getting bailed out as well as the fat cats."

At whose expense? It isn't just the "fat cats"; it's you and me,and when it's a government bailout I'm given no choice. Charity should be voluntary.

VH said...

Jason- I don't want "regular struggling people" or "fat cats" bailed out. There is simply no such thing as a free lunch. If the Obama plan doesn't work as proscribed, then taxpayers are left holding the bag.

Jason said...

All's I'm saying is that if there's going to be a bailout, I'd rather see something that might benefit somebody like myself, working my ass off to keep a family afloat, than some executive who is contributing to making life too damn expensive for most people. I'm not entirely sure how I feel about the bailout itself. I guess at this point we really just have to see if it helps or if it's throwing good money after bad.

Jeffrey Perren said...

The history of Keynesian style economics is thick with examples showing that Obama's policies can not possibly improve the economic situation.

If it improves, it will be despite the additional burdens placed on every individual taxpayer for the welfare that HR 1 is filled with.