Playing With House Money And Losing

Published By: kassie on April 14, 2012

(By Donna Quanrud and Peter Vessenes of American Citizens for Economic Freedom. ACEF ( is a newly formed PAC, led by prominent business entrepreneur, Peter Vessenes

“Congratulations you’ve just won a boom box!!!” screamed the headline.  At the time it was an awesome prize that seemed too good to be true.  All I had to do was fill out the form, send it in and wait eight weeks for my prize to arrive.  I was excited thinking about all the songs I could listen to, where I could take it and wishing it would come quickly.  After weeks of waiting the anticipated package arrived.  To say I was shocked at the contents of that box would be an understatement.  It was the smallest boom box I had ever seen.  The imagery painted in my mind by the words “boom box” was quite different from the reality of the product I received.

This is exactly what happened with the government’s promise of stimulating the housing market with the first-time homebuyer tax credit.  It sounded too good to be true. It was.  The free gift ended up costing the taxpayers and the first-time homebuyers dearly.  Giving first-time homebuyers an $8000 tax credit was suppose to stimulate more home sales and stop sliding values. While it did result in 350,000 additional home sales, it came with a price tag to the taxpayers of about $43,000 per home sold.[1] That’s over $15 billion in added taxes that you and I will have to pay for.  It wasn’t free money, it was the American taxpayers’ money.

And what became of those first time homebuyers who got the credit?  The Brookings Institute stated that 85 percent of the 1.9 million buyers who were expected to receive the credit would have bought a home without it.  It would be like buying free drinks for a crowd that’s bellied up to the bar with their wallets already open.  The tax credit just accelerated the home purchases they were already planning to make while only giving a temporary lift to the market. The credit stole buying demand from the summer and fall for a short-term gain in the spring.

Our hard earned money was redistributed by the politicians to secure future votes and retain power.  James Madison, hailed as the author of the Constitution, once wrote:

I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.

The government intervention didn’t stop the slide in property values as was promised either.  A buyer who purchased a median priced home of $170,000 in March 2009 has seen their home value drop by $20,000.   Today 28.6% of all homeowners have underwater mortgages, meaning they owe more on the home than it’s worth.[2] Because of government’s intervention in the housing market, American homeowners continue to lose significant value in their homes.

And if the tax credits weren’t bad enough, then we find out that 14,132 individuals defrauded the government by filing false claims for the tax credits totaling at least $26.7 million.[3]  There were claims from children as young as four years old,[4] from 1295 prisoners, 241 of which who were serving life sentences,[5] and even 87 IRS employees claiming the credit.[6] The IRS opened 107,000 civil cases related to the credit and identified 167 criminal schemes.[7]

The first-time homebuyer tax credit was business as usual for the power elite in Washington.  It was Washington’s plan to fix a Washington-caused problem.  They used a political strategy known as mercantilism.  Mercantilism is an economic system where politicians decide to interfere in trade by controlling the behavior of targeted private institutions through favors and legislation.  They interfered with the housing market in an attempt to control consumer behavior and direct business toward realtors, builders and mortgage bankers. But did the fix actually worsen the original problem?

Their system of picking winners and losers turned out to be picking all losers. It was nothing more than redistribution of wealth to make people dependent on the government’s handouts and in turn win their votes come election time.  We have yet to see an end to the decline in house values and the foreclosures that have devastated our neighborhoods.

It’s time to tell Washington to stop their business as usual policies.  We need to find and support candidates in 2012 who understand what’s at stake and refuse to play the same old game.  Our future depends on it.

[7] USA Today –

Additional Resources


Comments are closed.

Videos, Slideshows and Podcasts by Cincopa Wordpress Plugin