Stimulus Plan Could Be Worse

HELICOPTER Money. That’s what Larry Kudlow calls it. The economic stimulus deal between the White House and House leaders announced today primarily amounts to a plan to borrow money from investors and give it to taxpayers. Up to $600 per person and more if you are married with children.

But if you want economic stimulus instead of the satisfaction of “doing something” then the way to stimulate the economy is to lower the marginal cost of doing business. You could lower the marginal tax rate on corporate profits. Or you lower the marginal tax rate on capital gains.

There is also to be a “temporary” increase in the maximum size of mortgages bought by Fannie Mae and Ginnie Mae. So that means we are going to increase the subsidy on home ownership.

Don’t mind me, but wouldn’t it be a good idea to start moderating the subsidies for home ownership? If you want someone to blame for the mortgage mess then it starts with the Home Loan Bank started in the Great Depression. Then there were the politically-connected Savings and Loans with their 30 year fixed rate loans. Then there was the government-insured FHA loan. Then there were Fannie Mae and Ginnie Mae. And every time there was a blip in home prices the subsidies were cranked up another notch.

I have a dream of an America in which house prices were not sky high. It would really help young people. A good way to do that would be to slowly reduce the amount you can borrow against your house. And another way would be to slowly unwind the government-sponsored mortgage giants like Fannie Mae and Ginnie Mae.

When you subsidize something you get more of it and you jack up the price for it. The folks who owned the “something” before the subsidy get a windfall. The rest of us just end up paying more for less.

Don’t mind me. I bought home construction stocks a month or so ago, so increased subsidies for housing will just crank up the value of my investment.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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Dorothy L. Sayers, Strong Poison

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Francis Fukuyama, Trust

Hugo on Genius

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E. G. West, Education and the State

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Postmodernism

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Faith and Politics

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US Life in 1842

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Michael Novak, The Spirit of Democratic Capitalism

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