Bob: I've got an idea for a new government program to help homeowners. Ray: Alright, what'd you have in mind?
Bob: Hear me out. The government should send people a check every year to people who own a home--you know, to help them cover their costs a bit.
Ray: I’m not saying no, but why would we do that?
Bob: Home ownership is GOOD! Mom, apple pie, American flag, all that. People owning their own homes is good for America--people behave better when they own a home, right?
Ray: I thought it was the other way around, that people who behave better are more likely to have the wherewithal to buy a house.
Bob: Tomato, tomahto, right? We’re talking about the same thing, essentially.
Ray: No one says "tomahto," Bob.
Bob: Whatever. What about my idea?
Ray: The thing is, we don’t have a lot of money at the moment--if you hadn't noticed we’re running a $600 billion deficit, and that’s only going up the next few years.
Bob: We don’t have to give it to all homeowners, just a select group.
Ray: Oh. Well, maybe if it could be done in an affordable...
Bob: The wealthiest ones.
Ray: Pardon?
Bob: The checks should go mainly to the wealthiest homeowners, and the subsidy should increase with income and home value so that the richest people in the priciest houses get the biggest benefit.
Ray: You lost me.
Bob: Oh, I wasn't aware you were against home ownership.
Ray: Of course I'm for home ownership! Don't you dare question my fidelity to the importance of home ownership! It’s just that your plan sounds like it will cost a lot of money.
Bob: The way we keep costs down in my plan is to not give anything to the middle-class folks.
Ray: What?
Bob: Okay, we can give a few middle class folks a token sum, but most of the money would go to the wealthy people in big houses. I’m very insistent on this.
Ray: I don’t follow, but tell me how much you think this'll cost.
Bob: Seventy-five billion dollars next year, and about a trillion dollars over the next decade.
Ray: Gee, that sounds like a lot, Bob. You know, we have a lot of other things we can do with that kind of money. I’m not saying that increasing home ownership isn’t worth doing...
Bob: Oh, my plan won’t help anyone actually buy a home--all it will do is increase property values and help people buy bigger homes than what they've got now.
Ray: Come again?
Bob: Under my plan, people who are on the cusp of being able to afford a home would get nothing.
Ray: Uh huh.
Bob: The subsidy won’t kick in until we get to the income levels at which people can already afford a home.
Ray: How, precisely, would your homeownership subsidy formula work?
Bob: A middle-class family in Peoria buying a $200,000 house would get maybe $2,000 a year.
Ray: Okay...
Bob: Families earning less than that, or buying cheaper houses, wouldn’t get a subsidy at all.
Ray: But…
Bob: And rich people living in a mansion in Greenwich would get $25,000 a year.
Ray: ...
Bob: I know. It’s great, isn’t it?
Ray: ...
Bob: Ray?
Ray: WHY ON EARTH WOULD WE DO SUCH A THING? THIS IS LUNACY!
Bob: This is the mortgage interest deduction in a nutshell.
Ray: ...
Bob: Ray?
Ray: We must protect it at all costs.
END SCENE
Ike Brannon is an economist in Washington DC.
