Housing Law Rewards Bad Behavior

In May, I posted a short rant on my frustrations with the whole housing crisis situation and the attention it was getting in the media. Well, the housing bill "bail out" was signed into law recently and I guess Barbara from Santa Barbara will now get her wish. She can move out of her SUV and back into the million dollar home she probably couldn't afford in the first place...

I thought this fox business news article (posted below) did a nice job of calling it as they see it.

Housing Law Rewards Bad Behavior

Milton Friedman once said that the most important concept in economics boils down to two words: incentives matter.

It's so simple. A child figures that out the first time he's rewarded for good behavior. On the other hand, a smart parent quickly discovers that if you reward bad behavior, it won't go away.

What's amazing is how something so simple can be so difficult for politicians to understand.

The housing bill, recently signed into law with no cameras present, proves like nothing else that they just don't get it. Never before has our government spent so much money rewarding so many different examples of bad behavior -- whether it's the folks who bought a house they couldn't afford, or folks who lent money to people they shouldn't have, all that bad behavior is about to be rewarded by taxpayers who have no say in the matter. And you can be sure, when you reward bad behavior, you'll get more of it. So the hundreds of billions of dollars that this housing law is handing out will turn into trillions of dollars, once word gets around that bad behavior is being rewarded so well.

This law epitomizes everything that is wrong with government: trying to solve a problem by throwing money at it; overriding the popular will in favor of lobbyists; politicians accepting favors from direct beneficiaries of the law (something that used to be called a bribe); creating new bureaucracies. But what's worst about the law is that it provides incentives for people to do the wrong thing, which they will continue to do as long as they're getting bailed out. It will be a huge drag on our economy for years to come. And the reason politicians don't get it is because Washington is one of those few places where incentives really don't matter, and where bad behavior is constantly rewarded.