Homebuyer credit a $16 trillion boondoggle

Let those who will buy a home use their own money to do so.

President Obama signed a law that extends the first-time homebuyer tax credit âÄî up to $8,000 âÄî which was set to expire at the end of November. Despite its passage in the legislature, the extension doesnâÄôt have a lot of fans. Even liberal blogger and columnist Ezra Klein decided the move was garbage. The goal of the costly dole-out ($16.7 billion according to the congressional Joint Committee on Taxation) is to increase demand in the soft real estate market, to bolster sales and hopefully, to reduce foreclosure rates. ItâÄôs a classic real-estate stimulus package, and will do more harm than good. First off, those families well enough off to purchase a new home in this economy are now slated to receive an additional 10 percent off the purchase price, up to $8,000. Another problem is that the package works (itâÄôs one of those damned-if-you-do, damned-if-you-donâÄôt things). The Case-Shiller Index has shown four straight months of increases in home prices. Now, with the homebuyer tax credit extension, this trend will likely continue. Sounds good? Sure, until one considers what happens when the credit runs out, and potential homebuyers decide against purchase without a 10 percent off freebie. Many economic critics charge that itâÄôs essential for recovery, in a free market economy, to find the bottom, i.e. let the market determine the price of a home with the current supply and demand, despite how dismally low that price may be. This philosophy holds that once a true bottom is found, and prices are low enough to spur robust buying, then real growth can occur, instead of the confused adaptation that forms in response to easy federal stimulus money. In the end, the government should not be in the business of propping up our spending with its own. For those of us who canâÄôt take advantage to buy a new home, itâÄôs just another government program we have to fund. John Brown welcomes comments at [email protected]