October 31, 2009: Night of the Living Dead, Part 2?
Yesterday, the WSJ reported that, according to the U.S. Department of Commerce, the U.S. economy grew at a healthy rate of 3.5% in Q3 2009, leading many commentators to declare victory against recessionary forces.
However, economists point out that this growth was entirely the result of government stimulus, and, in particular, the "cash for clunkers" program and tax credits for first-time home buyers. These economists also point out that car and home sales resulting from these programs largely borrowed against, and wiped out much of, future home and car sales. This means that future GDP growth will be even lower; effectively, we “borrowed” from future GDP growth. Wasn’t too much borrowing what got us into this problem to begin with?
According to numerous news outlets, analysts at the car-buying research website Edmunds.com have estimated that the $4,000 cash-for-clunkers tax credit cost taxpayers $24,000 for each additional car sale that wouldn’t have taken place anyway. The average price paid for a car in August was only $27,000. In other words, we might as well have had the government buy these cars and give them away!
Similar numbers have emerged from economists at the left-leaning Brooking Institute for the first-time homebuyer tax credit: $43,000 per additional home sale for homes with values of $100,000 – $150,000. These programs showered massive windfalls on those who participated, at the expense of the rest of us taxpayers. And for those suffering in foreclosure, they have the added joy of subsidizing the sale of what used to be their home.
So what is Congress considering? How about another round of credits? And it gets worse. The homebuyer program is going to be extended to other than first-time home buyers. These costs have been estimated at $240,000 per additional home sale. Pretty expensive.
Now how about the fraud? Children as young as four filed for and received the tax credit. At least 50 IRS employees are being investigated for taking the home tax credit illegally. More than 100,000 potentially fraudulent claims total are being investigated as part of this $15 billion plus program. The true cost won't be known until everyone has filed their tax returns for 2009.
As for costs, the cost of the original clunkers program tripled while the cost of the original home-buyer tax credit has doubled (so far) from initial estimates. Look for the costs of both of the "new" programs costs to double or triple again.
Why is the government in the lottery business?
Shouldn't we be helping the people who are losing their homes to foreclosure, instead of the subsidizing speculators who are buying those very same homes?
When will this fiscal madness come to an end?
