(4/8/2011) Erate Exclusive - Sparking an economic bust that could have
been avoided, the federal government bungled its responsibility to the
housing sector.
That doesn't mean the Feds abandoned housing. Its an economic cornerstone
generating premium fuel to helps drive consumer spending and economic
growth.
After Washington, D.C. left the real estate market in shambles, it
continued to spend substantially more on housing
than energy, transportation and nonprofit sectors combined, according to a
new study, "Subsidies to Housing Dwarf Those to Other Sectors", by
Pew Charitable Trust's Subsidyscope project.
Like a deer caught in the headlights of disaster, legislators were
blindsided by their own ignorance and acted too slowly.
Federal regulators, hoodwinked by the lack of transparency in financial markets, rolled over and played dead.
Both the legislative and executive branches of government bowed
and scraped to a pro-business political environment that allowed risky
business to flourish.
Even after housing crashed, taking the economy down with it, government
mismanagement grew. Relief efforts failed under the much-too-little and way-too-late doctrine, numerous
studies reveal.
Part of that debate stems from the fact that the federal government spend
so much on housing, about $244 billion for grants and tax breaks in the
fiscal year 2009, or roughly $2,085 per household, according to Pew.
Compare that to the per household average of $212 for the energy sector,
$400 for transportation and $429 to nonprofits.
The housing subsidy figures don't even include cost estimates for
federally backed housing loans and guarantee programs, nor the billions in
substantial liabilities the government assumed when it took over Fannie Mae
and Freddie Mac. Those numbers are too uncertain, unfinished and likely
underestimated, says Pew.
"Not surprisingly, housing subsidies are a key component of the federal
debate on how to reduce the debt and the deficit," said Subsidyscope project
manager, Lori Metcalf.
"With billions of dollars going to this sector, it is important that
legislators have data to understand this spending," she added.
So long as they don't use the data to stick it to housing and stuff the
budget with pork barrel provisions.
Seventy percent ($171 billion) of the total $244 billion went to programs
that support homeownership. Twenty-four percent ($58 billion) went to rental
housing programs and 6 percent went to programs that support both.
The Feds fund homeownership largely through the tax code, old and new, while rental housing is mostly supported
through grants.
The largest tax subsidy for homeownership is the now-under-siege mortgage
interest deduction, which totaled $79.4 billion in fiscal year 2009. The
largest rental housing subsidy is the Section 8 voucher program, which cost
$16.3 billion in 2009, Pew says.
Over the next several months, the Pew Studyscope project
plans to release federal expenditures on additional sectors, including
health care, agriculture and defense.
We already know who wins that war.
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