Nevada's housing problems: Do you want solutions or sound bites?
Yesterday, before Rep. Paul Ryan came to Las Vegas, Jon Ralston tweeted the following about Gov. Mitt Romney and Ryan's view of our nation's housing problems.
@RalstonFlash: Ryan on PBS on 11/15/10: "Housing is going to have to hit bottom.... If you put a moratorium on..you`re simply delaying the inevitable."This is the clear dichotomy between the two sides of the housing debate. Do you want hollow sound bites or a solution?
@RalstonFlash: Romney to "newspaper" edit board, 10/17/11: "One is, don't try to stop the foreclosure process. Let it run its course and hit the bottom."
@RalstonFlash: So Romney and Ryan are on video saying let housing market "hit bottom." I wonder if Dems/OFA salivating to use those in NV ads. #wematter
@RalstonFlash: FYI, tweeps: Not saying Romney/Ryan wrong about letting market run its course in housing. Just suggesting "hit bottom" echo is ad fodder.
In Nevada, for the last few years, government has tried numerous "sound bite" policies - policies that sound good for five seconds, but after four years have failed to fix the problem.
Those policies have included the Federal Reserve's manipulation of interest rates; Congress passing an $8,000 tax credit for new home buyers; Nevada passing an unconstitutional Foreclosure Mediation Program; the feds subsidizing those who can't make their mortgage payments; and the Nevada legislature passing AB 284, which has brought the foreclosure process to a standstill and which housing experts have said "could postpone a housing recovery in the area by two to three years."
And let's not forget that government interventions in the housing market led to the housing bubble. Keynesians like Paul Krugman actually called for a housing bubble to boost the economy in 2002. We had "the government's distortion of mortgage finance through the Community Reinvestment Act and the government-sponsored enterprises Fannie Mae and Freddie Mac." And, of course, we had the Federal Reserve's manipulation of interest rates.
Government created the housing bubble and has failed to fix the inevitable housing crash that followed - even after four years of trying.
So what do believers in liberty and free enterprise propose? Freedom.
Enforce contracts. Let the market work by allowing foreclosures.
Is it going to be painful for some? Absolutely. But that pain - created by government inflating the housing bubble - is inevitable. Prolonging it is only hurting more and more people by delaying the recovery.
And that's the true tragedy in this. By rewarding foreclosure, current government policy is ensuring that Nevada will have more foreclosure not less. This doesn't just harm those additional folks who face foreclosure; it's also a drag on their neighbors and even city and county tax rolls (because if someone stops paying their mortgage, he will likely stop paying his property tax as well.).
Nevada's policymakers and voters should look to Arizona, where allowing the market to work is already leading to a sustainable recovery.
If Nevada had tried a free-market solution four years ago, we'd likely be one to two years into a recovery, instead of four years into a slump.
Do you want empty sound bites or solutions?