This week, the Wall Street Journal’s Holman Jenkins returned to his hobby horse of propping up housing prices by having the federal government pay for the destruction of houses. ($ article)
“So far, Washington has put its political capital into trying to refinance salvageable homes for unsalvageable homeowners, when a relevant policy would consist of judiciously buying unsalvageable houses and demolishing them. Fannie and Freddie’s strength is housing market software: They could be put to work devising a least-cost, maximum-bang strategy for demolishing unoccupied homes to preserve as much value as possible for the homeowners and mortgage creditors who remain.”
I invite readers of this blog to propose other examples in which the US government could provide a service to some portion of the market it has wrecked with excess credit creation, subsidies or other counterproductive interventions. For example, why not tax the public and use the money to demolish ethanol plants, thereby improving the supply/demand balance for the subsidized but ailing ethanol producers? Or how about a Rescue Fund to pay above market prices for – and then destroy – used Big 3 cars and vehicles coming off-lease? This would relieve oversupply and prop up the aftermarket/residual values for the unwanted products of American automakers, helping them to avoid imminent bankruptcy.
Maybe Jenkins’ Republican and crony capitalist friends should propose a cabinet level National Supply Destruction Agency that would judiciously demolish what it considers to be unsalvageable products throughout the economy?
Mr. Jenkins concludes his article with a proposal to fix Freddie Mac and Fannie Mae:
“Of course, right now their [Fannie/Freddie's] overriding imperative is to avoid recognizing losses rather than rushing toward them — which is why Fannie and Freddie should be nationalized (and later privatized).”
This would merely set them up in the private sector with “non-explicit” federal guarantees, further moral hazard, and re-nationalization some time in the future. Why not bulldoze them, Mr. Jenkins?
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I invite readers of this blog to propose other examples in which the US government could provide a service to some portion of the market it has wrecked with excess credit creation, subsidies or other counterproductive interventions.
According to WSJ logic, falling wages is the result of an excessive number of people.
Therefore, the WSJ Solution is to round up these excess people and bulldoze them.
“According to WSJ logic, falling wages is the result of an excessive number of people.
Therefore, the WSJ Solution is to round up these excess people and bulldoze them.”
As long as they only bulldoze the voters, magnus, I’m fine with that.
Two birds with one stone. Sounds good.
“According to WSJ logic, falling wages is the result of an excessive number of people.
Therefore, the WSJ Solution is to round up these excess people and bulldoze them.”
LOL
Well bulldozing some GM and Ford plants would actually not be so bad…
when a relevant policy would consist of judiciously buying unsalvageable houses and demolishing them
Whaaaat…? Is he being facetious?
I read this too and was quite surprised. Here is an editorial page that advertises itself (often) as staunchly free market, and yet Jenkins updates the worst of the New Deal economic schemes for today. (Does he really want to associate himself with “Drop-a-Crop”?) Then our latter day Henry Wallace argues that we should outright nationalize Fannie and Freddie, which is justified because (he says) we can always privatize them later, after things die down and trillions of dollars of coerced capital makes it way to the parties that created this mess. Oh WSJ editorial page, we hardly knew ye!
I’d like to know: Is there any foreclosed property that will not sell at some positive price? The obvious free market solution is to allow properties to sell at whatever price the market will bear, while stuttering Fannie and Freddie and selling off their assets to the highest bidders. Will anyone in the media make this case, or are we stuck with glowing Time exposes on the great suffering servant Paulson, accompanied by Jenkins’ anointed view from the right and Krugman’s from the left? If this reflects the quality of acceptable opinion, there’s little wonder why the the housing bubble occurred and why intelligent people are ditching mainstream news sources.
Or how about a Rescue Fund to pay above market prices for – and then destroy – used Big 3 cars and vehicles coming off-lease?
Robert Heinlein got there first; in his science fiction novel The Door into Summer, published in the 1950s, the hero goes from 1970 to 2000 via suspended animation, and gets a job demolishing unwanted automobiles that are being purchased by the government price support program.
Or how about a Rescue Fund to pay above market prices for – and then destroy – used Big 3 cars and vehicles coming off-lease?
Robert Heinlein got there first; in his science fiction novel The Door into Summer, published in the 1950s, the hero goes from 1970 to 2000 via suspended animation, and gets a job demolishing unwanted automobiles that are being purchased by the government price support program.
Holman Jenkins is usually a sound thinker.
Decades of subsidies to higher education have produced massive malinvesments in human capital.
How about a national campaign to lobotomize millions of overeducated-underemployed workers produced by the federal student loan/state university system? Have Sallie Mae devise least-cost, maximum-bag strategies to mindwipe underutilized art history and sports mangament majors to preserve as much value as possible to remining graduates.
Instead of just bulldozing the home, I suggest a nuke. Not only would this effectively “bulldoze” a large number of homes, but the radiation would leave the land uninhabitable. This, in turn, would increase the value of land throughout the country! It would also have the regrettable effect of killing innocents and causing cancer, but we all have to do our part for the state!
Excellent idea, Andy! Just think, too, of all the newly-created demand for radiation cleanup and mitigation services. We could achieve house pricing nirvana and full employment in one fell swoop!
I was thinking that too Andy only slightly different. The U.S. government should declare war on these houses. That way they can go around blowing them up legally. Not only would this eliminate excess houses but it would create jobs for military contractors and the defense industry. It would be like killing a whole flock of birds with one stone (:
Or hey, how about this. Declare those houses as fuel. Then the energy companies can go around ‘harvesting’ them and burning them for electricity
LOL!
I better be careful here, someone may take these ideas seriously
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