Is Congress Creating Another Housing Bubble?

Mother Jones ^ | 06 November 2009 | Nick Baumann

[Lorianne]

Economists agree that the home-buyer tax credit is risky and stupid. So why does Washington love the policy? ___ Ted Gayer of the centrist Brookings Institute issued what one CNN blogger described as a "smackdown" of the credit. Simon Johnson, the former chief economist of the International Monetary Fund, and James Kwak, who writes a Washington Post column with Johnson, have called the credit "throwing good money after bad." And conservatives—Kevin Hassett, the director of economic policy studies at the conservative American Enterprise Institute, and Ronald Utt, a senior research fellow at the Heritage Foundation, have penned pieces slamming the home-buyer credit. Even the Obama-aligned Center for American Progress got in the act; Andrew Jakabovics, the think tank's associate director for housing and economics, criticized the credit's extension on National Public Radio.

So why is a policy that diverse experts think is a bad idea so popular in Washington?

"Never underestimate the massive amount of political pull that the real estate industry and the home builders have," Calabria says. The real estate industry gave $136 million to federal candidates during the 2008 election cycle, putting it fourth overall in terms of campaign contributions. The industry also spent nearly $750 million lobbying the federal government over the past two decades, $81 million of that in 2008 alone.

[ModelBreaker]

“Is Congress Creating Another Housing Bubble?”

Yes. And a stock bubble and a gold bubble . . . This is goofy time for the markets.

[Black Birch]

So why is a policy that diverse experts think is a bad idea so popular in Washington?

Americans aren't complaining about it. Homeowners aren't going to complain if they think this will help increase the value of their home. First time home buyers aren't complaining about getting the subsidy.