Dollars for Dumps: Apply Obama Economic Magic to Housing Market?
Dollars for Dumps
Why can’t we apply the economic magic of the Obama Administration to the home market, and launch a “Dollars for Dumps” program? Today, John Hayward, better known as Doctor Zero, provides some answers to start off a regular feature, Impertinent Questions.
Dollars for Dumps
By John Hayward
08/28/2010
The Cash for Clunkers program was touted as a huge success by the Obama Administration. The program offered hefty taxpayer subsidies when old, environmentally insensitive cars were traded in for new vehicles. The old cars were then destroyed, ending their menace to our fragile ecosystem. Their metal was recycled to build the Deepwater Horizon oil rig. Or it was launched into space. I forget which. At any rate, those Clunkers threaten the biosphere no longer.
Besides wasting a fantastic amount of taxpayer money, including the usual millions vanishing into thin air, Cash for Clunkers took a lot of used cars and spare parts out of the market. As a result, affordable used cars have become scarce, and the overall price of such automobiles has risen by 10% over the past year. You’re welcome, America!
Meanwhile, many brows are furrowed over the collapsing value and sales of existing homes. The gloomy housing market threatens to blow out the back tires of Recovery Summer, which has been wobbling along with blue smoke farting from its muffler… stuck in second gear and grinding metal, while the radio refuses to budge from a Carter-era disco station. “A double dip in the housing market and house prices would not be enough to generate another recession. It would certainly help to hold back the recovery,” economist Paul Dales tells the Wall Street Journal. He predicts another five to thirty percent drop in the price of existing homes during the recession. The market is heavy with excess inventory, and not enough home buyers.
Why can’t we apply the economic magic of the Obama Administration to the home market, and launch a “Dollars for Dumps” program?
We’ll tack another trillion on the deficit – why the hell not? – use the money to buy up existing homes, and demolish them. I’m sure we can trust the President to find a qualified Home Wrecking Czar to drive a hard bargain with our money. Ideally, it will be someone who is highly experienced at community organizing, and playing Monopoly. Also, in keeping with the portfolio of past nominees, the ideal applicant will be an avowed communist.
Once we’ve pulled a sizable number of existing homes off the market, the price of remaining homes will surge, the same way it worked with used cars. Also, the money we’re throwing at the owners of the doomed homes will be pumped right back into the economy, because they’ll spend it. It will be a great stimulus, just like Paul Krugman says unemployment checks are.
Speaking of unemployment, get ready for some delightful fourth-quarter numbers, because we’ll need to hire a lot of people to demolish those old dumps. We should be careful to use only union labor, of course, to ensure the highest quality of destruction. It’s win – win – win, my friends. In fact, to properly describe its brilliance, you would have to say “win” so many times that you’d sound like a ceiling fan on overdrive.
In reality, Dollars for Dumps is a stupid idea, just like Cash for Clunkers was. Obama’s used-car demolition derby produced no long-term increase in new car sales – it just shifted sales ahead by a quarter, at a cost of three billion taxpayer dollars. The artificial surge in sales was exciting, and useful to politicians. We’re not supposed to ask about the cost, or study the aftermath.
Home prices were artificially inflated during the housing bubble, because government policies compelled the loan of billions to people who had no business dropping a few hundred grand on a house. Construction companies and real-estate brokers sprang up to get a piece of the action, as new buyers flooded the market… ignoring the black-robed liabilities following them around, with sickles clutched in their skeletal fingers.
The system short-circuited, houses went into default, and vast amounts of value were lost. Do you know what the lost money from all those rapidly depreciating empty houses represents? It’s the value of all the things we could have been doing, if we weren’t trying to ride that artificial housing bubble into the wild blue yonder. Like every other ham-handed intervention by politicians, including Cash for Clunkers, the housing bubble was an expensive and futile exercise of ideology. Taxes and subsidies are forms of compulsion. Compulsion makes us poor.
by John Hayward
image: dbkp file
John Hayward writes under the name of Doctor Zero, where his pieces are a staple of Hot Air’s Green Room and a favorite of readers. John also maintains Doctor Zero.org where readers can find his superb collection of essays, Doctor Zero: Year One, available on Amazon.
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