The Tax Credit...Politics as Usual but Very Bad Policy

The Homebuyer Tax Credit is very bad policy.  Below are just some of the reasons for this:

• The tax credit artificially and temporarily slows the needed correction of house prices.
• The tax credit will further add to the national debt.  The money to pay this off has to come from somewhere, and that "somewhere" is increased taxes.
• The tax credit will tempt people to buy a house when they are not quite financially ready(sound familiar?).
• The tax credit serves as a government narcotic meant to placate the people and convince them that government is doing something good.
• The tax credit has more to do with elections than with helping the housing market.
• The tax credit will further weaken the economic and moral fabric of our country.  We have reached a stage in our country where too many people drool over and grab at any government giveaway, not realizing nor recognizing the negative long term effects of this, which includes more dependence on the government and the further deterioration of personal responsibility.

Nothing will be painless in getting us out of the economic mess our country is in.  The tax credit may ease the pain temporarily, but the pain will get worse and it will last longer because of the credit.  I believe we need to let the free market system do it's job to help correct the current housing situation.  I also believe that appropriate government regulations on how Wall Street and the banks do business is needed in order to prevent future financial debacles.  These regulations have still not been put in place.  The NAR, rather than wrongly supporting the Homebuyer Tax Credit, should be pushing for financial regulation reform.

The bottom line on the Homebuyer Tax Credit is that it is politics as usual but very bad public policy.  The tax credit is a short term band aid that will lull people to believe that the housing situation is improving.  This will only delay a true recovery and needed correction.  Until wages and home prices get back in line there will not be a true correction.  Subsidies don't correct but exacerbate the problem.