Did anyone not see this coming? An article in yesterday’s Wall Street Journal reports that new home sales plunged. Why? The government’s meddling tax credit for first time home buyers expired and gee, the trend didn’t continue? What a surprise. Meanwhile the government has another program, Making Home Affordable, to help homeowners refinance their home mortgages that they can no longer afford. Instead of letting the chips fall where they may and have prices find a bottom and adjust, we have the drip-drip-drip torture of these programs and the recession drags on.
New home sales fell 32.7% from April to a record low seasonally adjusted annual rate of 300,000. Compared to last year the sales fell 18.3%. In addition the previously reported sales numbers for March and April were adjusted downward.
Here is what we have. Our government is taking our tax dollars and giving them to people to help them buy a house. You may be struggling to pay your own mortgage and instead of the government letting you keep more of your own money and perhaps make an extra payment on your own mortgage to lower your outstanding debt or increase spending which would help grow the economy, you are paying for your mortgage and your neighbor’s. Instead of letting those who can’t afford their mortgage face that reality, the government steps in and drags out the process. If government got out of the way, then the banks would have the incentive to negotiate in good faith rather than looking for a government bailout. If a mortgage is salvageable, they should renegotiate with the homeowner and take a small loss rather than a big one. If the mortgage is not salvageable, then foreclose or short sell it and be done with it. The housing overhang on the economy would get quickly sorted out and we could return to a more stable housing market. Get the government out of the way and let us keep our tax dollars.
In 1920-21 there was a steep and serious recession. This was before the age of government intervention of Hoover, FDR and all who followed. Businesses were able to cut wages and react to the circumstances in that freer market. Unemployment peaked at 11.7%, almost 2% higher than we have now, but by the following year it was down to 6.7% and they year after it fell further to 2.4%. We are a year and a half into the current mess and the current administration seems intent on matching FDR’s record of stretching this out for eight years. We have a robust economy that can rebound sharply, if the government gets out of the way. But this government keeps tinkering and the economy keeps bouncing along the bottom. And let’s not forget fraud.
The Treasury’s Inspector General for Tax Administration, J. Russell George, reported that 19,000 filers for the first time home buyers credit hadn’t purchased a home and there were 74,000 filers had purchased a home but it was not their first. In additiona there were 53 cases where IRS employees filed “illegal or inappropriate” claims for the credit and today we learn that $9 million was stolen by prisoners who were incarcerated when they filed for the credit. So don’t worry folks your tax dollars are not only prolonging the recession, but they are being stolen as well. Feel better about your benevolent government? Aren’t you glad we live in a country where your government can forcefully take the fruit of your labor and throw it to the wind?
Government that governs least governs best. Let’s cut the beast down to size.
