Words for the Weekend – 11-12-10

November 12, 2010

“It’s not an endlessly expanding list of rights – the ‘right’ to education, the ‘right’ to health care, the ‘right’ to food and housing. That’s not freedom, that’s dependency. Those aren’t rights, those are the rations of slavery – hay and a barn for human cattle.”

                                                                                 — P.J. O’Rourke

Tampa’s Unspent Stimulus Money

July 19, 2010

Tampa has a problem. According to a recent St. Petersburg Times report, it still has to spend nearly half of $13.6 million in federal stimulus funds it received 18 months ago. The deadline is in two months. If the money isn’t spent, it will go back to the federal Department of Housing and Urban Development.

The plan was to use part of the money to buy up foreclosed homes and sell them to preferred buyers (low-income and first-time). Renovating rental units was also on the list.

The argument is, naturally, that such activity will ‘stimulate’ the economy. The Times report paraphrased the head of a non-profit who would benefit from the funds:

[Sara Romeo] says the project will create 237 construction jobs, two permanent full-time jobs, and take advantage of the latest green building techniques to save residents energy and transportation costs.

The obvious questions rarely asked in these type of well-intentioned government spending plans are where did the money come from and what would it have been spent on without government direction? Given that the federal government is in debt, that means the money adds to our debt. The only way to pay for it is to borrow or print more money.

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Problems with Subsidized Loan Modifications

June 24, 2010

This report from ProPublica notes the problems with the Obama administration’s subsidized loan modification program for struggling homeowners. The main problem seems to be poor service:

Since the beginning of the program, we’ve reported on problems homeowners have encountered with their servicer – lost documents, delays, and costly errors. Although Treasury Secretary Tim Geithner sharply criticized servicers for these problems earlier this year, so far it’s been all bark and no bite from the administration. The Treasury has yet to penalize any servicer for breaking the program’s rules.

[picapp align=”left” wrap=”true” link=”term=loan+modification&iid=7360948″ src=”http://view3.picapp.com/pictures.photo/image/7360948/thousands-new-york-area/thousands-new-york-area.jpg?size=500&imageId=7360948″ width=”234″ height=”147″ /]Lost in this is the fact that there is no incentive for the financial institutions to cater to those receiving loan modifications. The treasury is the one footing the bill (to the tune of $75 billion in taxpayer money), meaning it’s a third payer. When costs are shifted to third parties the incentive for the companies to cater to the needs of the lenders is diminished. After all, the homeowners aren’t the ones paying the subsidy, the government is. And, the government doesn’t appear to be interested in ensuring the money is spent wisely.

Notably, the report mentions that many have turned to private modification programs after being dropped from the program. Maybe they’ll get better service.

Freedom of Religion and Speech in Public Housing

March 9, 2010

A recent report noted that services had been stopped for a Dallas church that was holding its meetings in a public housing unit. The local housing authority president had claimed that the services violated the separation of church and state.

A federal spokesman (with HUD) attempted to clarify the move:

He said the Fair Housing Act allows religious activity in common areas of public housing as long as it does not result in unequal treatment of residents.

A new story reports that services have since been allowed to resume. The law only restricts religious activity when it results in treating residents unequally. The local housing authority president has apologized.

Lost in all of this, however, are two points. First, what ever happened to the First-Amendment wording: “shall make no law” in terms of “prohibiting the free exercise” of religion or “abridging the freedom of speech”? And second, where is the federal government constitutionally authorized to subsidize housing (see the Tenth Amendment if in doubt)?

The controversy over “public housing” being host to religious services wouldn’t be a federal problem if government was limited to its constitutional scope. A lot of the legal conundrums we find ourselves in lately stem back to government being involved in too many activities not authorized by the Constitution.

Suspending Reality in the Housing Crisis

March 2, 2010

Given that one major source of the country’s current economic situation was nefarious activity in housing and mortgage lending, it’s not much of a surprise that one of the government-sponsored mortgage backers, Fannie Mae, recently reported a $72 billion loss for last year. It’s companion company, Freddie Mac, also posted a loss ($21.6 billion), though significantly less than Fannie. Part of that is simply because Freddie is smaller.

Both companies played a key part in encouraging risky home loans to those who, in the end, could not afford them. Over several years, government promoted the notion of home ownership and the availability of “affordable housing” for those who couldn’t really afford such a hefty long-term financial obligation. Many politicians touted home ownership to the detriment of reason — and despite the warnings of others. (Take for example this Fox News report from 2008 recapping the lead up to the sub-prime mortgage crisis.)

The result of this campaign for more home ownership was a host of foreclosures, a housing bubble accompanied by a burst and a crisis in the credit market that gave government another excuse to meddle in the economy to “solve” a problem it actually helped create. Despite the best wishes and good intentions of many politicians pushing home ownership for low-income families, eventually, reality set in.

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Stimulating Government

February 23, 2010

A recent story from the St. Petersburg Times attempts to highlight the impact of last year’s stimulus bill on local jobs. It touts as examples of the supposed benefit to jobs all of the following:

  • renovations to a public housing complex
  • more work for companies to construct “affordable” (read: government-subsidized) housing
  • funds to help “teachers keep their jobs”
  • funding of research at the University of South Florida
  • employment at Tampa International Airport and the Tampa Port Authority
  • “kept police officers and firefighters working”

Notice the trend: All of these examples are either government jobs or government projects. The major benefactor: local governments and their employees.

Also, keep in mind that the “funds” used to pay for this “stimulus” represent money no longer available to individuals in the private sector to spend and invest as they see fit. Perhaps the “American Recovery and Reinvestment Act” should have instead been named the “Increase in Government Employment and Debt Act.”

Obama Spending Cuts = a Drop in the Bucket

May 7, 2009

This article on Obama’s latest budget spending cuts reports that he intends to cut only $17 billion out of a budget that is more than $3 trillion. While some of the programs cut are definitely worth slashing, by my math, that’s a cut of less than one percent. The article says that Obama referred to the cuts as “belt-tightening he likened to that of most Americans in difficult times.” Yeah, a whole one percent. Wow! I’m pretty sure most struggling families right now have cut their spending by a little more than that.

Note also the spending increases he intends to make:

• Plowing $2 billion more into merit-based teacher pay to help failing schools turn around. He would spend $370 million on a successor to the Reading First literacy program, a key element of Bush’s No Child Left Behind law.

• Spending an additional $584 million for pandemic flu efforts, on top of the $1.5 billion in emergency money for 2009 that he asked Congress for in the wake of the swine flu outbreak.

• Increasing child nutrition programs by $1 billion, partly to pay for a 20 percent increase in the number of food inspectors.

• Setting up a $1 billion program to develop or rehabilitate housing for the poor.

Way to sacrifice, Mr. President! Never mind the question of if these items are permissable under the Constitution. With fiscal responsibility like this, we should be out of debt by, oh, I don’t know … never!

Sowell: “The Housing Boom and Bust”

April 29, 2009

Thomas Sowell’s latest book, “The Housing Boom and Bust,” is highlighted in his most recent column. The book and, in a less detailed manner, the column note how the crisis in the housing market (which was the spark that ignited our current encomic downturn) was caused chiefly by government in its desire to promote the “good” of home ownership despite financial realities.

For far too long, too many people have regarded home ownership as “a good thing.” It is certainly true that home ownership has its benefits. But, like everything else, it also has its costs and its risks. Weighing such trade-offs is something that each individual and each family can do for themselves. It is when such decisions are made by politicians– of whatever party– that trade-offs tend to vanish into thin air, replaced by pursuit of a “good thing.”

Politicians often cover their actions in appeals to the “common good,” despite how fuzzy a concept  that may be.