The U.S. Commerce Department released the following statistic this week: new-home sales plummeted by a staggering 33% during the month of May, resulting in the slowest new-home market in 46 years. Why did the housing market vanish? Why else: an attempt by the government to manipulate the private sector, and to create a veneer of prosperity. The worst part? President Obama, John Hall, and other Democrats ignored an object lesson from less than a year ago in why this was bound to happen.
In July 2009, the brainchild of President Obama that came to be known as “Cash for Clunkers” began offering steep discounts for new car buyers: if they turned in their old gas-guzzlers (which were scrapped and their engines disabled), they would be given a rebate of up to $4,500 on a new, higher-mileage car fitting certain government criteria. The program didn’t have the effect the Administration intended. The money for the program was grossly mismanaged, and national car sales rose for a month and then immediately nosedived to rock-bottom levels, resulting in a wash. Hence, what might have been a slow car market became a spike followed by an absolutely miserable market…and we taxpayers paid billions for the privilege of watching it happen.
Among the long list of flaws in this program, a fundamental one was that it appealed mostly to consumers who were already planning to buy a car, and simply spurred those buyers to buy sooner than they otherwise would have. The rebates caused the market to burn through those buyers at an accelerated rate, and in the meantime nothing in “Cash for Clunkers”, or anywhere else in the President’s economic recovery plan, did anything to create new buyers and expand the market (i.e. exactly what a nation in recession needs)!
So it goes with the May 2010 housing market, and the huge dropoff from April. Expensive “stimulus” spending previously voted into law by John Hall and the Pelosi Congress included a window of tax breaks for buyers of new homes. These tax breaks only spurred already-existing prospective buyers to buy their new homes sooner and in greater numbers, stimulating the market without expanding it. Then, on April 30, the tax breaks expired, and there was no one left in the exhausted market to buy a new home.
As the Associated Press reports:
“We all knew there would be a housing hangover from the expiration of the tax credit,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”
President Obama, John Hall, and most congressional Democrats rushed headlong into both programs hoping to convince us all that the experts are wrong and the government actually can make the private sector work. They couldn’t accept — not after “Cash for Clunkers”, not after the President’s failed foreclosure protection program, and likely not even after this latest heartbreaker over new homes — that the way to get more people to take part in our economy is not by interfering in the market, but simply by letting people keep more of what they earn to do with as they (not the government) know best.