This week Senator Elizabeth Warren unveiled her plan, “Protecting and Empowering Renters,” which promises to reduce rent by 10% through several measures, most notably funding the construction or rehabilitation of 3 million housing units with a $500 billion tax increase over ten years.
Like every other one of Washington’s bright ideas and lofty campaign promises, Warren’s plan sounds good, but it’s short-sighted. CNBC’s Abigail Hess says Warren’s housing agenda is centered on “the economic principle of supply and demand.” But it’s centered on a dangerously unsophisticated account of the supply and demand forces at work in the housing market and broader economy.
As Stanford University economist Thomas Sowell once quipped:
The first lesson of economics is scarcity. The first lesson of politics is to disregard the first lesson of economics.
Warren’s plan to reduce rent disregards the first lesson of economics.
Why should voters believe Warren’s plan will work when the federal government has such a dismal record of making anything more affordable for the American people?
In fact, Washington has a perverse ability to make anything it touches more expensive, and at the same time lower quality and less satisfactory.
The federal government has undertaken many similar initiatives over more than half a century to reduce prices and increase access to health services and insurance in this country. The result has been a byzantine mess of costly bureaucratic machinery, huge profits for special interests, and perverse incentives that drive up prices.
Like Warren, Barack Obama promised to lower the cost of health insurance and increase access to health care. But seven years after passage of his signature legislation, the Affordable Care Act, the price of health care had increased dramatically, health insurance premiums skyrocketed, and health insurance deductibles were through the roof.
After decades of these socialist interventions, American consumer satisfaction with the health care industry is lower than that for any other sector – except for the federal government itself!
It’s the same story with college education. Washington politicians called it a right and wagged their finger at the mean, Ebenezer Scrooges of the free market for not making college more accessible to everyone. Since the 1960s the federal government began markedly increasing spending on college education.
After 2000, federal subsidies ballooned dramatically. Today, state and federal subsidies for college top $200 billion annually, four times more than Elizabeth Warren is promising to spend to boost housing access and decrease rent. Yet the price of college tuition is higher than ever, and increasing eight times faster than wages.
It’s the same story with the housing market. Even a former public housing manager called federally-subsidized public housing projects a “failure” on the pages of the center-left Huffington Post.
For another account of the federal government’s misadventures in centrally planning and subsidizing the housing market, read: “How Housing Policy Is Failing America’s Poor,” at The Atlantic (subtitled: “Section 8 was intended to help people escape poverty, but instead it’s trapping them in it”).
“It will be different this time,” is the hollow refrain of the serial abuser – and socialists. Federal economic interventions will not be different this time either if Elizabeth Warren gets her way. The draconian environmental regulations in her plan will dramatically increase the costs of building new housing for everyone.
And even if you don’t believe in the Reaganomic principle that profits trickle down, even a progressive can believe that the cost of tax increases on the wealthy and businesses trickle down to the poor. And you can be sure Warren’s plan will cost more than $500 billion. The federal government’s cost overruns are legendary.
Washington is running up the national debt in a fever of unsustainable spending. Since Warren is a bankruptcy lawyer, if she drove the US government toward bankruptcy faster, would that be considered a conflict of interest?
Growing Washington won’t help low-income Americans. It will siphon away more of their money to line the pockets of the special interests that lobby for the contracts Elizabeth Warren would hand out like candy to big, well-connected corporations.
While posing as a champion of the poor, she would continue to serve the interests of the elite. The real way to help the poor is not to grow Washington’s size, role, and influence, but to curtail them – and grow the economy.
Last modified: September 23, 2020 1:17 PM