That is a new compendium from Mercatus. I wrote one of the essays, on risk-based capital.
The way I see it, the main purpose of central banking and financial regulation is to try to allocate credit to uses favored by political leaders. These leaders want credit to be cheap and available for government borrowing and for residential mortgages. So we should not be surprised that risk-based capital requirements are used to reward banks that put money into those assets.
In the essay, I explain why risk-based capital regulation has not served the intended purpose of reducing financial risk.
I understand it’s not individual neutral, but I’m pretty sure that gov’t tax subsidies & regulatory support for home ownership is a net social benefit, due to real increases in responsibility, semi-forced savings, and home ownership pride.
No gov’t nor other program can “give” self-respect. Home ownership does allow the owner to earn more self-respect.
For flippers, investors (for renting out), and multi-home owners, there is a net social cost, but most homes are owner-occupied.
I would certainly be more clear and limited in support of home ownership, replacing the current tax deductions for interest with a flat 30% tax credit for the whole house payment, up to some annual limit (~$50k?) and up to some maximum lifetime limit (~$500k?). But that’s a “how to do it better” note.
I do claim US society is better because of gov’t support for home ownership.
The central banks support for gov’t borrowing is a bigger and worse problem.
Is there a study?
“No gov’t nor other program can “give” self-respect. Home ownership does allow the owner to earn more self-respect”
This is a weird definition of “earn”.
I’d be receptive, but we might actually wonder if it’s true. I’d also be more trusting if they ever studied things before enslaving the entire economy to them and we’re not hostile to ideas like microhomes.
I wouldn’t prefer it, of course. But I can use my brain and see things from different perspectives. If I were to start a radio show I might call it “All Things Actually Considered.”
Sounds like trying to have it both ways. If you believe this distortionary, then markets should compensate, if you believe they don’t, then they aren’t good at allocation either. Now if you want to argue markets are a fiction and just a political extension that determines allocation so it is only a matter of whose allocation is chosen, that seems more consistent. I would just point out that although there are international standards, different countries have very different results.
I disagree strongly with any policy that rewards indebtedness.
You don’t have to live in a dump just because the home is rented.
The market eventually factors in the tax bribe, and will create a new equilibrium at a higher price that presents a higher barrier to renters who would like to become owners.
The only argument in favor is that it is, at least, a tax break, a way to pay less tax, and given the scum and villainy that runs Washington, that is reason enough.
However, your middle-class tax break is perfectly safe, because Americans aren’t great with numbers. I remember a caller on the Boortz show (some years ago) when he was peddling the fair tax. The caller said he would lose his mortgage income tax deduction. And Boortz replied that’s because you will pay zero income tax. And the caller said he would lose his mortgage income tax deduction, and Boortz cut to a commercial.
“loosing the mortgage income tax deduction” is a big political loser — so changing it to be “better” for most middle class folk (30% tax credit on whole payment; a bigger tax reduction; maybe 20%) can be a winner.
Lifetime max means it helps young folk the most, when they need it and it’s most valuable to them.
Replace the deduction on interest with a credit for the whole amount.
The benefit should be for encouraging home ownership, not “borrowing”; so it should be on the whole payment, not just the interest.
The mortgage interest deduction helped cause the house bubble price pop PLUS keeps home owners borrowing more rather than building up equity.