“A rising tide (in the economy) lifts all boats.” — John F. Kennedy
Alexandria Ocasio-Cortez, a democratic socialist US Congressional candidate, recently proclaimed, “Our economy needs to work for us. And we need to measure ourselves not just by GDP, but how many people have homes in the United States.”
Rhetoric like this caused the housing crisis of ‘08. Home ownership in and of itself is not a path to financial success, but rather a measure of it.
Home ownership is a result of a healthy economy.
The goal should be to ensure the pathway, not provide the outcome. The outcome should be a result of the journey. If more people own homes, then that’s good, but the process to get there cannot be averted. Just having more people in homes doesn’t qualify as success. It can spell disaster, as we found out when all those people who were given ridiculously easy loans for homes—that they could not afford—suddenly found themselves in foreclosure.
According to Justin Pritchard, on thebalance.com, in his article, The Mortgage Crisis Explained: “Borrowers were able to borrow more than ever before, and individuals with low credit scores increasingly qualified as subprime borrowers. Lenders approved ‘no documentation’ and ‘low documentation’ loans, which did not require verification of a borrower’s income and assets (or verification standards were relaxed).”
Much of these high-risk loans ended up in default and banks foreclosed on homes. People went back to their rentals in bleaker financial condition than before. The false propping up inflicted real damage. Families suffered. And, for what? So, the dream of home ownership could be realized.
Only it wasn’t.
The best way to ensure a strong economy is to lower taxes and get people working. More people in the workforce means more money for households and therefore more money in the economy. Families can buy houses, send their kids to camp, take vacations. To pin hopes on the government to solve all problems gums up the works and stalls economic growth. Average people don’t get wealthy through government programs, they accumulate wealth with good jobs and lower taxes.
“Either immediately or ultimately every dollar of government spending must be raised through a dollar of taxation. Once we look at the matter. In this way, the supposed miracles of government spending will appear in another light.” — Henry Hazlitt
Going back to the basics of high employment and low taxation leads us to better economic health. Propping up people leads to their ruin. Home ownership is great and noble, but it’s better for people to get there on their own rather than have government do it for them.