CORPORATE WELFARE UPDATE….The housing bill easily passed the Senate on Thursday:
The most expensive item is a tax break for homebuilders and other money-losing businesses that would cost the federal government more than $25 billion over the next three years. Missing entirely: A new mechanism to aid borrowers who can’t afford their mortgage payments and, due to falling home prices, owe their banks more than their homes are worth, the group most at risk of foreclosure.
One of the bill’s chief sponsors, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), called the measure “a major, positive step in the right direction,” but he acknowledged that the package offers little in direct aid to the nearly 8,000 families thrown into foreclosure each day.
I’m totally conflicted on foreclosure aid. Is it a good idea because lots of people are hurting and need help — and if Wall Street is going to get help, why not the little guys too? Or is it a bad idea because it just helps to prop up housing prices, extending a bubble that needs to be allowed to pop?
I’m not sure. But that $25 billion tax break? No conflict there. It’s right up there with ethanol subsidies in the pantheon of outlandishly rapacious corporate welfare legislation. Daniel Gross explains:
The technical term for this is a tax-loss carryback. But it should perhaps be known as a bubble-head tax break….Homebuilders argue that they need relief because their sector, which provides a great deal of domestic employment, is on the ropes, and they’re finding it more difficult to raise capital. Which is as it should be. After bubbles pop, those who screwed up really badly fail and get taken over by creditors or opportunistic investors. Those who have sound underlying franchises but merely got a little carried away can survive if they take painful restructuring moves. This is what is known as market capitalism.
….The proposal to give new tax breaks to homebuilders and banks is yet another example of the pernicious trend of privatizing profit and socializing losses, which is gnawing away at faith in the system. Dilute the shareholders, not the taxpayers.
The lesson here is this: Republicans will never give up. No matter what the problem at hand is, the solution is a corporate tax break of some kind. They will never allow a bill to pass Congress unless there’s a tax cut included, no matter how stupid or misguided. Period.
Democrats need to stop giving in to this blackmail. Let ’em filibuster for the grand cause of the extended tax-loss carryback if they want. The rest of this bill isn’t worth caving in on this, and we have to start fighting back against this kind of lunacy eventually. Why not now?