Moral hazard

I just can't get that excited about the complaint that the Bush administration wants to spend taxpayer money on people with bad mortgages. The government spends amazing amounts of money on amazingly stupid things. Giving money to people who want to own houses seems markedly less outrageous than, say, giving money to people who want to produce sugar in the northern United States.

To be sure, I am not a homeowner, so I do not chafe under the knowledge that irresponsible people are getting a better deal than I did. But it doesn't seem like this is going to affect all that many people--certainly, a lot fewer than the ARM freeze that Hillary was proposing. Besides, as a libertarian, I've had to inure myself to the notion that the government thinks its primary job is to prevent the chickens from coming home to roost. If I let myself get outraged by that sort of thing, I would have had a heart attack the first time we developed a federal jobs program for people who drown campaign volunteers.

What I worry about is whether this creates bad incentives. Will people be encouraged to take on risky loans in the future because of the bailout? Will we be freezing people into homes when they really ought to move? Probably. On the other hand, it's not clear to me that these effects will be extensive enough to worry about.