The Plank

Bob Samuelson's Elitist Economics

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According to Robert Samuelson in this morning's Washington Post, the heart of the housing crisis isn't foreclosures, but the lack of demand, driven by the self-fulfilling expectation that prices have further to fall. But "the Obama administration," he writes, "essentially ignores this problem, though it can be addressed."

Except that Obama is addressing it, with an $8,000 tax credit for first-time homebuyers--a fact that Samuelson concedes later in the piece, but then dismisses. The credit, he writes, "was restricted to first-time buyers and made 'refundable,' meaning people could receive the money even if they didn't owe taxes. These are younger and poorer buyers--the weak credit risks of today's crisis. They won't rescue housing." So, according to Samuelson, the only way to rescue housing is to help the wealthy buy more houses--many of whom, presumably, are among those who got us into this mess in the first place.

Set aside the administration's goal of not only rebuilding the economy, but building a more equitable economy as well. And set aside the fact that diminishing expectations is only one barrier to housing demand--unemployment, which Obama tackles directly with the stimulus plan, is probably more important. It's Samuelson last paragraph that is particularly galling:

All this is telling. The administration and Congress, though pledging to restore economic growth, care more about protecting foreclosure victims and promoting homeownership among the young and poor. Politics trumps economics.

Because of course, the only possible explanation for disagreeing with Samuelson (who, in turn, baldly channels the National Association of Home Builders) is that Obama doesn't understand or care about economics.

But it seems to me that getting first-time buyers into the housing market is actually a much better economic move in the long term. Current homeowners are already in the market; if they want to move they will probably do so as soon as the market improves. And, in any case, giving them a reason to move just puts another house on the market, and so there's no net gain in demand.

Potential first-time buyers, on the other hand, who have never experienced the upside of homeownership, could easily be turned off completely by the current market, contenting themselves with a life on the rental market. Bringing them into the housing market, on the other hand, would help reduce inventory, which Samuelson concedes is a critical step. In other words, it's Samuelson who is letting politics--elitist, anti-egalitarian politics--trump economics.

--Clay Risen

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