Malanga: Housing Won't Lead Us Out of Recession

Last week both Democrats and Republicans in Congress floated housing proposals which say a lot about how politicians misunderstand our country’s economic fundamentals. Republicans in the Senate backed an amendment to the federal stimulus package that calls for a government-subsidized, four percent mortgage rate designed to spur home purchases and hence bolster falling prices, which Republican Senator Mitch McConnell described as “the underlying cause of the recent downturn.” Although the proposal, lauded in some conservative circles, was defeated easily by the Democrats who control the Senate, the stimulus may well contain the Dem’s version of housing incentive, namely boosting the current tax credit for those purchasing a new home to $15,000.