OPINION:
Barack Obama’s debate performances and his “change” and “hope” speeches have been rightly criticized for lacking substance. But that doesn’t mean his policy shop hasn’t been working overtime creating seemingly countless new schemes to transfer huge sums of taxpayer money to millions and millions of households through mortgage bailouts and “refundable” tax credits (essentially welfare payments to households whose income-and, in many cases, payroll-tax burdens have already been eliminated). Here’s an example that combines both approaches: On top of the $10,700 standard deduction, which is intended to compensate married couples who do not itemize their deductions because their mortgage-interest payments and state and local taxes sum to a total less than $10,700, Mr. Obama is proposing a “refundable” tax credit equal to 10 percent of annual mortgage-interest costs.
The federal government will not even begin until May mailing out the recently enacted “rebates” to taxpayers and non-taxpayers alike. These “rebates” comprise by far the largest ingredient in the $152 billion economic stimulus for 2008. Yet, Mr. Obama is already pushing for a second stimulus package. This one is designed to begin the process of using potentially incalculable taxpayer funds to bail out untold millions of homebuyers who made ill-advised, risky investments near the peak of the housing bubble. These households now find themselves in trouble because their “adjustable-rate” mortgage is about to “adjust” or because they are “underwater.” The vast majority of “homeowners” who are “underwater” are drowning because they made risk-enhancing, minuscule (if any) down payments or because they used their homes as ATM machines. In either case, their mortgage balances now exceed the value of their homes following the early stages of the housing bubble’s deflation.
Blaming lenders for extending “unfair” and “unaffordable” loans to millions of homebuyers who were incapable of understanding the meaning of an “adjustable-rate” loan or to millions of other buyers who were only too happy to lie about their incomes (because they could), Mr. Obama now demands that investors who purchased these loans unilaterally write-off huge portions of them. Community organizers and activists like Mr. Obama spent years successfully arguing that bankruptcy judges should not be able to “cram down” unilateral reductions in mortgage obligations for principal residences because such a policy would discourage lenders from making mortgage loans to risky, relatively underqualified applicants. Now that hundreds of billions of dollars in such loans have been made, Mr. Obama demands that bankruptcy judges be given retroactive power to enforce “cram downs.”
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