Solving The Wrong Problem
Doug Holtz-Eakin, former McCain economic adviser and former director of the CBO, wants the the $8,000 first-time homebuyers tax credit ended (it expires in November but there has been talk of extending it):
I’m not sure if it is worse if the policy “works” or if it doesn’t, but it likely won’t. The $8,000 first-time homebuyers tax credit is straight out of the same pool of bad ideas that gave us the misbegotten “cash for clunkers” program. The latter produced essentially no environmental or energy-security benefits (not too surprising when you could get $3,500 for simply raising your mileage by only four miles-per-gallon) just as a homeownership push has no real benefits.
Cash for clunkers was a superficial “success” from a sales point of view; we saw all those cars driven off the dealers’ lots powered by taxpayer subsidies. Similarly, a check from Uncle Sam has sweetened home sales. But most of the cash for clunkers sales would likely have taken place anyway, albeit later in 2009 or in 2010. All the program did was steal sales from the future and provide a midsummer bump that will soon fade. Similarly, more cash for homeowners will not represent real recovery in the housing market; it will just mean that next year and the year after will see less sales.