The words “bipartisan” and “commission” usually send a chill down my spine. I felt such a chill when I learned that the Bipartisan Policy Center (BPC) had formed a Housing Commission to “address the long-term challenges facing a struggling housing sector.” My initial reaction was confirmed when I read that it would be chaired by former government officials and politicians of the establishment type:

• Christopher “Kit” Bond – former U.S. senator (R-MO)
• Henry Cisneros – Housing and Urban Development (HUD) secretary under President Bill Clinton
• Mel Martinez – former U.S. senator (R-FL) and HUD secretary under President George W. Bush
• George Mitchell – former Senate majority leader (D-ME) and BPC co-founder

The most disturbing name is Henry Cisneros. Policies implemented by Cisneros’s HUD helped lead to the housing bubble and bust (see this section on Cisneros from a Cato essay on HUD Scandals). What’s next, Dick Cheney on a hunting safety commission?

Christopher “Kit” Bond, former appropriator and proud porker, hangs himself with his statement on the BPC’s website:

Since serving as Missouri’s Governor, and then as a United States Senator, I have worked to be an advocate for improving public housing and advancing community development. Some of my proudest achievements are helping shape housing policy and programs in homelessness, rural housing, public housing, HOPE VI, and affordable housing. None of these successes would have been possible without strong partners on the other side of the aisle.

In fact, my fellow Commission Co-Chair, and former HUD Secretary, Henry Cisneros and I, were referred to in a 1996 Wall Street Journal article as the ‘Odd Couple’ of federal housing policy – a moniker I still wear as a badge of honor. Though it was a different time in our nation’s history, Henry and I were then – as we are now – committed to coming together to address long-ignored problems with immense implications.

The federal government’s abysmal record on housing (see these Cato essays here for more) is a poster child for government failure. But not only does Bond consider his support for these programs to be among his “proudest” achievements, he actually states that collaborating with Cisneros back in the 1990s is a “badge of honor.”

I’m not sure what Mel Martinez has going for him on housing policy other than that his relatively short tenure as HUD secretary under Bush wasn’t marred by scandal like his successor’s, Alphonso Jackson. At least Martinez acknowledges that the Bush administration continued the Clinton administration’s misplaced emphasis on expanding homeownership.

As for George Mitchell, his claim to federal housing policy fame is that he authored the creation of the Low-Income Housing Tax Credit. Here’s what a Cato essay on public housing has to say about the LIHTC:

Another response to the failure of traditional public housing has been the creation of the Low Income Housing Tax Credit in 1986, which currently subsidizes construction or rehabilitation of roughly 70,000 units of low-income housing each year. This is another failed attempt to manipulate markets, and it has a variety of negative effects. For one thing, the structure of the tax credit program encourages the location of projects in particularly low-income areas, thus exacerbating the concentration of poverty in cities, just as traditional public housing did. Also, the method of allocating tax credits to the states results in many subsidies going to areas of the country where few housing affordability problems exist.

Further, the projects built under the LIHTC program have income caps for tenants, which create the same disincentive effects for personal advancement that traditional welfare programs do. Finally, the program essentially functions as a subsidy program for developers. Economists Edward Glaeser and Joseph Gyourko argue that developers effectively pocket the $4 billion or so in annual federal tax credits, while the rents in buildings constructed under the program are generally no lower than they would have been in the absence of the program.

In a nutshell: an establishment commission is planning to “reform the nation’s housing policy by crafting a package of realistic and actionable policy recommendations” for the Beltway establishment’s consideration. Hold onto your wallets, taxpayers.

Uh-Oh: Bipartisan Housing Commission Announced is a post from Cato @ Liberty - Cato Institute Blog

When government officials come up with what they claim to be a wonderful new idea, I often think of an old Saturday Night Live skit from 1990 poking fun at commercials for blue jeans. The skit’s scene is a group of middle-aged buddies getting ready to play basketball in their new “Bad Idea Jeans.” Each guy optimistically announces a plan to do something that is actually a “bad idea.” For example, a character says “I don’t know the guy but I’ve got two kidneys and he needs one, so I figured…” and “BAD IDEA” flashes across the screen. (The skit can be watched here.)

The White House’s new “Strong Cities, Strong Communities” initiative had that BAD IDEA screen shot flashing repeatedly in my mind as I read the press release:

Today, the Obama Administration launched Strong Cities, Strong Communities (SC2), a new and customized pilot initiative to strengthen local capacity and spark economic growth in local communities while ensuring taxpayer dollars are used wisely and efficiently. To accomplish this, federal agencies will provide experienced staff to work directly with six cities: Chester, PA; Cleveland, OH; Detroit, MI; Fresno, CA; Memphis, TN; and New Orleans, LA. These teams will work with local governments, the private sector, and other institutions to leverage federal dollars and support the work being done at the local level to encourage economic growth and community development.

Additionally, communities nationwide will be eligible to compete for comprehensive economic planning assistance through a grant competition designed to spark local innovation. By integrating government investments and partnering with local communities, SC2 channels the resources of the federal government to help empower cities as they develop and implement their vision for economic growth.

The Wall Street Journal reports that federal officials from HUD, Labor, Commerce, Transportation, and the Small Business Administration will be “deployed” to the cities. In other words, the Obama administration wants to send bureaucrats from federal agencies that are notorious for wasting other people’s money to help local bureaucrats do a more “efficient” job of spending other people’s money. That’s like asking Anthony Weiner to fix your Twitter account.

A couple of the cities chosen by the administration are ironic. Seriously, hasn’t the federal government done enough to New Orleans already? Detroit is an example of why decades of federal subsidies to urban centers in decline have been a failure. As I note in a Cato essay on HUD community development subsidies, of which Detroit has been the fifth largest recipient since 2000, federal handouts create a disincentive for local officials to pursue sound policy reforms:

Despite all the abuses, perhaps policymakers believe that Community Development Block Grants are nonetheless effective at stimulating growth. After 30 years and more than $100 billion it should be easy to demonstrate the program’s success, but it’s hard to find any examples of city rejuvenation created by the program. Instead, numerous cities, such as Detroit, which have been major CDBG recipients, have fallen further into decline. The reality is that no amount of federal money can overcome the local hurdles to growth in cities such as Detroit—including political corruption and destructive tax and regulatory policies. Indeed, just like international development aid, federal aid to the cities likely increases corruption and stalls much-needed local reforms.

Some people will view this initiative as a crass effort to shore up urban support for the president’s reelection campaign. There’s probably a good bit of truth to that criticism. But both parties have been using subsidies to state and local government to curry political support for decades. Therefore, Republicans who raise a stink over the administration’s initiative should be prepared to work for the involved programs to be abolished. Otherwise, the complaints will amount to little more than political hot air.

See this Cato essay for more on federal subsidies to state and local government.

Strong Cities, Strong Communities: Bad Idea is a post from Cato @ Liberty - Cato Institute Blog

Last week I participated on a panel on federal rental housing policy, organized by Harvard’s Joint Center for Housing Studies in conjunction with the release of their new report on conditions in the rental market.  In their defense, the report does attempt to avoid offering policy prescriptions.  But the report does come pretty close to suggesting that we spend more on federal rental housing assistance.  In the post-housing bubble  environment, many, myself included, have dared suggest that there’s nothing wrong with someone being a renter, and that maybe we pushed too many into homeownership.

But saying we overdid homeowneship is not the same as saying we ignored rental.  In fact the federal government has spent massive amounts on rental housing, yet according to the new Harvard report, rent burdens have gotten worse over the last 50 years not better.  While the report doesn’t take this step, I think we have to ask: if you’ve spent hundresds of billions of dollars on an issue and it then gets worse, maybe there’s something wrong with what you are doing?

Perhaps my friends on the Left (and/or in the real estate industry) don’t believe we’ve spend all that much on rental housing.  Consider these facts:  in nominal terms the sum of all money spent by HUD, which is almost exclusively rental or “community development,” has been close to a trillion dollars.  By my estimate (based upon the American Housing Survey and the Residential Finance Survey) the current value of all rental housing in the US is about $3.6 trillion.  So the federal taxpayer has paid enough to outright buy almost a third of all rental housing.

Also consider that if we took the approximately $50 billion we now annually spend on rental housing, we could pay 100% of the rent of the almost 4 million households currently paying the lowest rents.  This translates to being able to pay all the rent for every family earning about $22,000 or less.   If we choose to only pay 50% of their rent, we could serve another 2.5 million. 

My point here is not to say we should spend all this money, for I still don’t see this as the proper role of the federal government; the point is that we already spend a huge amount.  Now why might all this money not have made a huge difference in helping renters?  Maybe because most of it gets eaten up by the providers.  For instance a recent paper in Real Estate Economics estimates that only a third of the value of the Low Income Housing Tax Credit actually makes it to the renter in the form of lower rents.  The remaining two-thirds goes to benefit the developers, owners and others who live off the process.  So before we even think about spending more on federal rental assistance, how about making sure what we do spend actually goes to help the poor and not the special interests?

Some Thoughts on Federal Rental Housing Assistance is a post from Cato @ Liberty - Cato Institute Blog

Local officials, like their federal and state counterparts, spend other people’s money. Policymakers are naturally unlikely to spend other people’s money as carefully as they would their own. This situation is exacerbated when local officials spend money obtained from federal taxpayers. At least when local taxpayers foot the bill, they have an incentive to keep an eye on how their money is spent. That incentive is largely nonexistent when the money comes from Washington.

HUD community development programs illustrate what happens when the federal government severs the relationship between local officials and local taxpayers. Originally targeted to large cities in decline, community development funding is spread widely to communities rich and poor, large and small.

Local officials love these programs because they amount to a free lunch. As a result, they lobby Washington hard for these subsidies, which means federal policymakers generally only hear wonderful tales of the “economic growth” and “job creation” fostered by the programs. However, a Cato essay on HUD community development programs explains that in addition to complexity and wasteful bureaucracy, these programs are susceptible to financial abuses.

Recent stories in the news provide further evidence.

First, years of mismanaging federal community development funds have caught up to the City of Buffalo. The Buffalo News reports that a HUD inspector general audit says the city “could not provide assurance that more than $20.1 million in transactions was properly accounted for.” According to the article, the audit findings are not surprising:

An investigation published in The News in 2004 found the city had frittered away much of its block grant money through parochial politics and bureaucratic ineptitude.

More than half the spending went to “soft costs” that include covering bad loans, paying city salaries and subsidizing an overblown network of neighborhood agencies, The News found. Relatively little went to brick-and-mortar projects, and what was spent to revitalize downtown and neighborhoods was haphazard, with money sometimes going to risky and futile projects.

The mayor and Common Council failed to make major reforms in the program in recent years, and problems have persisted. Two years ago, a HUD monitoring report found continued shortcomings that included too much spending on bureaucrats, questionable financing for upscale housing developments and sloppy fiscal management of several programs.

Next, LA Weekly reports that the City of Los Angeles plans to give $1 million in federal community development funds to the global architecture firm designing the downtown’s proposed NFL football stadium:

Gensler plans to move from Santa Monica to downtown L.A., where it will use the $1 million in federal community-development block grant funds to create a hip, new atmosphere for its relocated employees at the “jewel box,” a three-story building nestled between two skyscrapers at City National Plaza.

Unfortunately, the “hip, new atmosphere” paid for by federal taxpayers probably won’t be the “job creator” that city officials are claiming:

[Mayor] Villaraigosa and City Council members since February have claimed that enticing Gensler from Santa Monica to downtown L.A. is a job creator. But that’s debatable. Some temporary jobs will be created for the jewel box renovation, but Gensler is moving its offices just 20 miles. Many economists would describe L.A.’s action as merely shifting jobs within an intricately intertwined economic area.

A HUD official called the situation “entirely healthy.”

Finally, HUD recently informed the City of Montebello (California) that it had uncovered 31 violations regarding the city’s use of HOME program funds, which are to be used for affordable housing. According to the Whittier Daily News, the report “was so damning it brought interim city administrator Peter Cosentini to tears”:

Last year, HUD demanded that Montebello repay $1.3 million because the city gave a developer HOME money to help build a housing project with affordable units and reported to the federal agency the project was complete, but construction hasn’t started. And a key document submitted to HUD appeared to have been forged, according to the report.

In February, HUD notified city officials that Montebello must also repay nearly $900,000 it used to purchase another parcel of land. The city failed to give HUD needed documents on the property acquisition, including an appraisal, documentation of expenditures and current ownership, according to a Feb. 18 letter from [HUD official] Vasquez to the city.

Cosentini responded in writing, saying city staff has been sent to training as recommended by HUD. Montebello is also conducting an internal investigation into the possible document forgery. The city’s internal investigation of the $1.3 million has been slowed because the developer isn’t cooperating and is “stonewalling” city staff, he wrote. Cosentini also asked for more time to repay the money.

But the city missed a March 1 deadline to submit a repayment plan, according to a letter from Vasquez. And HUD will seek an additional repayment of $2.7 million, Cosentini wrote in the memo.

Take heart federal taxpayers – Montebello city bureaucrats are being “sent to training” per HUD’s recommendation!

More HUD Community Development Duds is a post from Cato @ Liberty - Cato Institute Blog

Over at Downsizing the Federal Government, we focused on the following issues this week:

• Sen. Rand Paul bucks the trend of wimpy spending cut proposals with a more serious plan.
• Perhaps Charlie Sheen’s agent should consider getting him a gig with HUD.
• A Senate Democrat supports a plan that would focus on spending cuts and not tax increases.
• Policymakers should roll back the punishing regulations and taxes that make it difficult for businesses of all races and sizes to succeed.
• Federal energy policy, Newt Gingrich, and “rank gooberism.”

This Week in Government Failure is a post from Cato @ Liberty - Cato Institute Blog

That’s what the Department of Housing and Urban Development’s recently retired inspector general had to say in response to rampant malfeasance and mismanagement at public housing authorities uncovered by a joint investigation by ABC News and The Center for Public Integrity.

From the report:

The problems are widespread, from an executive in New Orleans convicted of embezzling more than $900,000 in housing money around the time he bought a lavish Florida mansion to federal funds wrongly being spent to provide housing for sex offenders or to pay vouchers to residents long since dead.

Despite red flags from its own internal watchdog, HUD has continued to plow fresh federal dollars into these troubled agencies, including $218 million in stimulus funds since 2009, the joint investigation found.

The report singles out Philadelphia’s public housing authority, which HUD reportedly considers to be a “model agency.” The Philadelphia Housing Authority’s outgoing executive director, who was paid $300,000 a year, had “spent lavishly on parties that included belly dancers, and had used more than $500,000 in housing authority funds to secretly settle claims accusing him of inappropriate sexual advances with female employees.”

Here’s the former director of the “model agency” channeling his inner Charlie Sheen on the taxpayer’s dime:

Sen. Charles Grassley (R-IA) doesn’t understand how HUD could have missed the problems:

“We expect that the agency in Washington, D.C. ought to be making sure that every taxpayer dollar is spent in a responsible way. And it seems to me that we have not had that proper oversight,” Grassley said.

Really, Senator? As a Cato essay on HUD scandals illustrates, the agency has been plagued by mismanagement and corruption since its inception. HUD has never made sure every taxpayer dollar was “spent in a responsible way.” And it never will for the simple fact that a government agency has little incentive to ensure that money coerced from taxpayers isn’t wasted. In contrast, a private charity with a record like HUD would see its voluntary donations dry up.

See this Cato for more on public housing subsidies and why they should be abolished.

HUD ‘Failing the Taxpayers’ is a post from Cato @ Liberty - Cato Institute Blog

Federal taxpayers helping foot the tab for renovations to a local wine bar? It sounds crazy, but that’s par for the course with HUD’s Community Development Block Grant program.

A Connecticut newspaper recently ran an article on CDBG money being used to spruce up storefronts in the town of Putnam:

The Small Cities Community Development Block Grant money slated for Cohen’s building comes shortly after a similar grant project finished across the street, said Economic Development Director Delpha Very.

Facade improvements to the Glimpse of Gaia florist, Pangaea Wine Bar and Panache consignment shop finished last month, said building owner Sean Marchionte, of Providence-based Blue Dog Investments.

The building’s owner — go figure — thinks it’s just great:

“It’s very encouraging when you get help from the town. That’s what helps developers like myself make improvements to our buildings, attract tenants and keep the economic ball rolling in the right direction,” he said.

First, the help came from federal taxpayers — not the town. Second, robbing from Peter to pay Paul, which is what federal grant programs accomplish, does not keep the “economic ball rolling.”

The building owner either does not recognize — or does not care — that when the government picks winners, it also creates losers. And as is unfortunately all too common when it comes to local reporting, the uncritical nature of article results in a de facto press release for the economic planners in Washington.

Last week I discussed why it’s time to move beyond the anti-earmark crusade. As I explained, earmarks are a symptom of a deeper problem: the existence of programs that enable the federal government to spend money on properly local activities:

There just isn’t much difference between the activities funded via earmarking and the activities funded by standard bureaucratic processes. The means are different, but the ends are typically the same: federal taxpayers paying for parochial benefits that are properly the domain of state and local governments, or preferably, the private sector. As a federal taxpayer, I’m no better off if the U.S. Dept. of Transportation decides to fund a bridge in Alaska or if Alaska’s congressional delegation instructs the DOT to fund the bridge.

In a related op-ed, I cited the example of the $8 billion CDBG program, which provides grants to localities for a range of development projects such as parking lots, museums and street repairs — the same sorts of activities that members of Congress are fond of funding with earmarks:

Just as earmarks have achieved notoriety for wasteful and ineffective spending, community development programs funded through traditional means have had the same problem…

Even if CDBG funds went entirely to “worthy” projects, federal funding is still an inefficient way to foster local economic development because of the excessive bureaucracy that results from funneling money through multiple levels of government.

Federal administration costs are about 5 percent of the value of CDBG grants, with local and state governments taking a 17 percent and 8 percent cut, respectively. A large share of the CDBG budget disappears before any actual work is done.

See this Cato essay for more on community development programs at HUD, including the CDBG program.

Earmarks and Federal Grants is a post from Cato @ Liberty - Cato Institute Blog

Yesterday the Treasury and HUD hosted a “Conference on the Future of Mortgage Finance.”  It was an invite-only of Washington insiders.  Somehow I found myself on the invite list, which was almost enough to make me believe that the Administration was finally serious about reforming Fannie and Freddie.

After getting over the nausea of being in a room full of people who I personally knew bore some responsibility for the mess we are in, I was then shocked that, compared to the rest of the room, Treasury Secretary Geithner came across as the radical.  On one hand Geithner was very clear that the Administration was going to push for some sort of government guarantee, but also that the current structure, particularly Fannie and Freddie, were broken.  He also went as far as admitting that Fannie and Freddie were a cause of the crisis.

Such statements only became radical in contrast to the rest of the room.  Maybe about 80 percent of the attendees were blindly and violently attached to the status quo.  Most offensive to those us who fight for free markets was that the industry representatives were the most vocal advocates for the status quo.  To even suggest that lenders should bear the risk of loans they make was crazy to this group.  It was a clear reminder that being pro-market and pro-business are generally two very different things.   In fairness, not all lenders were busy plotting to find ways to profit while dumping their risk onto the taxpayer; some, such as Wells Fargo, were far more supportive of the private sector actually bearing the risk.

Most of those who were not industry insiders were housing and community advocates.  While this group did seem a little less self-interested, they appear to have learned little about the risks of over-expanding homeownership.  Repeatedly, access to homeownership, as if it could solve every social ill, was pushed as the primary goal.  A few dissenters reminded us that rental is a viable option too, although they were mainly looking to continue/expand Fannie and Freddie’s support of the multifamily rental market.

If the Administration was hoping that this group was going to come up with answers, then they must have been sorely disappointed.  If Obama is serious about taking the taxpayer off the hook for risk in the mortgage market, then he is going to have to take on the special interests.  My fear is that the event was just the beginning of how health care reform played out:  cut a deal with the industry, pay off the Democratic base, and screw the taxpayer.  Let’s hope we actually see some change on this one.

Reflections on a Mortgage Summit is a post from Cato @ Liberty - Cato Institute Blog

The same federal agency that brought us monumental failures like public housing wants to play a bigger role in fostering so-called regional “smart growth.” HUD secretary Shaun Donovan recently traveled to Portland, Oregon to announce the Obama administration’s new Office of Sustainable Housing and Communities.

This new bureaucracy will distribute $140 million in grants for regional “smart growth” planning:

With OSHC’s grant programs, HUD will provide funding to a wide variety of multi-jurisdictional and multi-sector partnerships and consortia, from Metropolitan Planning Organizations and State governments, to non-profit and philanthropic organizations. These grants will be designed to encourage regions to build their capacity to integrate economic development, land use, transportation, and water infrastructure investments, and to integrate workforce development with transit-oriented development. Accordingly, OSHC’s grants will be coordinated closely with the Department of Transportation (DOT) and Environmental Protection Agency (EPA).

Donovan told a Portland State University crowd that “We at HUD are big admirers of what you’re doing here.” However, Randal O’Toole’s dismantling of the Portland planning utopia myth in a Cato Policy Analysis shows that the city is nothing to be emulated. That is unless other cities want less affordable housing, more congestion, higher taxes, and businesses relocating elsewhere.

Donovan then met up with his EPA and DOT colleagues in Seattle at smart growth conference. HUD isn’t the only one opening up the taxpayer’s wallet:

And the Department of Transportation is proposing $527 million to promote “livable communities” through grants to states and cities. Transportation secretary Ray LaHood says those grants, too, must meet the goals of his partner agencies.

LaHood: “It supports any new initiatives we develop on our own like expanding transit in low–income neighborhoods, or what our friends at HUD and EPA are working on in collaboration.”

Local coalitions are already forming to seek those federal dollars.

Let the rent-seeking begin.

The merits of Portland’s urban planning can be debated all day. But it stands federalism on its head when the federal government takes a particular city’s policies and then tries to shove it down the throats of the rest of the country. Based on what I know of Portland’s planning, I certainly wouldn’t want it where I live. Other cities, like Houston, have reached the same conclusion. But, I guess if Shaun Donovan likes it, then damnit, we’re all going to like it.

“Smart Growth” from a Dumb Agency is a post from Cato @ Liberty - Cato Institute Blog

• Three decades of politics and failed policies at HUD.

• Michael D. Tanner on the Senate Sell-Outs: “At a time of 10.2 percent unemployment, they voted to make it more expensive to hire workers, especially low-wage workers. With the economy struggling, they voted for $485 billion in tax hikes. They voted to raise the payroll tax, limit your flexible spending account, and tax your health insurance plan. This is moderation?”

• The limits of U.S. power in Afghanistan: “Even if more troops were better deployed, the odds of reasonable success in reasonable time at reasonable cost are long.”

• Republican and Democratic senators pushing for subsidizing prayer.

• In Washington next week? Tom Palmer will be here Tuesday, Dec. 1 to discuss his new book, Realizing Freedom. Can’t make it? Watch live online.

• Podcast: “Money, Greed and God“

Monday Links is a post from Cato @ Liberty - Cato Institute Blog

The HUD Inspector General’s Office released an audit earlier this week on the department’s progress in making sure local public housing agencies aren’t subsidizing the deceased. According to the report, local “agencies made an estimated $15.2 million in payments on behalf of deceased tenants that they should have identified and corrected.”

The audit found the following “significant weaknesses:”

• HUD and local agencies did not have effective policies related to deceased tenants.
• Local agencies did not provide accurate and reliable information to HUD.
• HUD and local agencies did not safeguard assets to ensure correct assistance payments.

This report is a small illustration of the fundamental problems with the federal government subsidizing local governments. The local public housing agencies are supposed to be monitoring how money is spent and reporting to HUD. HUD is supposed to be monitoring the local public housing agencies. But no one does a very good monitoring job, despite the piles of regulations and paperwork that every level of government has to deal with for such subsidies. The muddled web of responsibilities also makes it easy for fraud artists to take advantage.

Last week, HUD’s IG reported that the department is sending $220 million in stimulus funds to local agencies already known to misspend taxpayer dollars.

From USA Today:

The government is sending millions of dollars in stimulus aid to communities and housing agencies that federal watchdogs have concluded are unable to spend it appropriately, increasing the risk that the money will be wasted.

Since July, auditors working for the Department of Housing and Urban Development’s inspector general have scrutinized at least 22 cities, counties and housing authorities in 15 states and Puerto Rico to measure whether they can handle stimulus funds effectively. Only six, they found, could do so.

The rest — in line to receive more than $220 million in stimulus aid — had shortcomings ranging from poor management to inadequate staffing that threatened their ability to spend the money quickly and appropriately, a series of audit reports show.

According to a HUD spokesperson, the department is “spending millions of dollars to help local officials spend stimulus money effectively.” Maybe that’s true, but all monitoring help is a pure loss to taxpayers and the private sector economy.

Even when the federal oversight does find problems, the money often keeps flowing anyway. As the article notes:

USA TODAY reported in April that HUD planned to send $300 million in stimulus money to public housing authorities that had been repeatedly faulted by outside auditors for mishandling other forms of federal aid. Congress gave the Obama administration permission to withhold stimulus money from some of those agencies, but HUD opted earlier this year not to do so.

For more on fraud and abuse in federal programs, including housing subsidies, see this essay.

Public Housing for the Dead is a post from Cato @ Liberty - Cato Institute Blog

Republicans are all over the ACORN scandal and calling for an end to federal subsidies for the group. Well that’s great, but it’s not exactly going out on a limb and pushing for a major budget reform.

Why doesn’t the GOP use this as an opportunity to call for completely ending the programs that funded ACORN? Wouldn’t it be better to save the $13 billion a year that HUD spends on so-called “community development” programs, rather than just the few million dollars a year that taxpayers spend on ACORN?

The federal programs that funded ACORN are particularly wasteful ones, including Community Development Block Grants, Housing Counseling Assistance, and others as Tad DeHaven has explained.

At a minimum, the GOP should be arguing that with deficits of $1 trillion the federal government cannot afford to intervene in classic local and private activities such as community development. Boehner and Canter want the IRS to cut ties with ACORN, but they should be leading the charge to end porky “community development” spending altogether.

ACORN Challenge for the GOP is a post from Cato @ Liberty - Cato Institute Blog

An article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.

Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.

Before swallowing the article’s thesis, consider two thoughts:

One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.

Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.

Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.

That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.

Have Mexican Dishwashers Brought California to Its Knees? is a post from Cato @ Liberty - Cato Institute Blog

A month ago, President Obama issued a list of proposed spending cuts that I dismissed as “unserious” due to the fact that they were trivial when compared to his proposed spending and debt increases.  Today, the House Republican leadership released a list of proposed spending cuts.

I’d love to say I’m impressed, but I can’t.

Both proposals indicate that neither side of the aisle grasps the severity of the country’s ugly fiscal situation, or at least has the guts to do anything concrete about it.

The GOP proposal claims savings of more than $375 billion over five years, the bulk of which ($317 billion) would come from holding non-defense discretionary spending increases to no more than inflation over the next five years.

First, it should be cut — period.  Second, non-defense discretionary spending only amounts to about 17% of all the money the federal government spends in a year, so singling out this pot of money misses the bigger picture.  At least, defense spending, which is almost entirely discretionary, should be included in any cap.  But it has become an article of faith in the Republican Party that reining in defense spending is tantamount to putting a white flag in the Statue of Liberty’s hand.

The second biggest chunk of savings would come from directing $45 billion in repaid TARP funds to deficit reduction instead of allowing the money to be used for further bailing out.  That’s a sound idea as far it goes, but I can’t help but point out that the signatories to the document, House Republican Leader John Boehner and Minority Whip Eric Cantor, voted for the original $700 billion TARP bailout. Proposing to rescind the Treasury’s power to release the remaining funds, about $300 billion I believe, should have been included.

According to the proposal, the rest of the cuts and savings comes out to around $25 billion over five years.  Like the specific cuts in the president’s proposal, they’re all good cuts.  But the president detailed $17 billion in cuts for one year and I generously called it “measly.”  What am I to call the House Republican leadership specifying $5 billion a year in cuts?

Take for example, proposed cuts to the Department of Housing and Urban Development (HUD), which is likely to spend around $65 billion this year.  Having recently spent a couple months analyzing HUD’s past and present, I can state unequivocally that it’s one of the sorriest bureaucracies the world has ever seen.  Yet, the House Republican leadership comes up with only one proposed elimination: a $300,000 a year program that gives “$25,000 stipends for 12 students completing their doctoral dissertation on issues related to housing and urban development.”  The only other proposed cut to HUD would be $1.7 billion over five years to the Community Development Block Grant (CDBG) program.  This notoriously wasteful program is projected to spend over $8 billion this year alone.  Eliminate it!

The spending cuts the country needs must be substantial, serious, and put forward in the spirit of recognizing that the federal government’s role in our lives must be downsized.  Half-measures are not enough, and from the Republican House leadership, wholly insufficient for winning back the support of limited-government voters who have come to associate the GOP with runaway spending and debt.  For a more substantive guide to cutting federal spending, policymakers should start with Cato’s Handbook chapter on the subject.

The GOP Is Not Serious about Cutting Down Spending is a post from Cato @ Liberty - Cato Institute Blog

The National Center on Family Homelessness has generated headlines today by releasing a report that claims “one in 50 children is homeless in the United States every year.” That would be a total of 1.5 million homeless children, a truly shocking figure. The number is all the more shocking because the U.S. Department of Housing and Urban Development says there actually only 671,000 people were homeless in 2007 (the last year for which data is available), of which only about 249,000 were people in families. Assuming even one adult per family would mean there were around 166,000 homeless children, far too many, but also far fewer than 1.5 million.

What accounts for the discrepancy? First, the National Center uses an incredibly broad definition of homeless. For example, in addition to those we usually think of as homeless (those living in shelters or on the streets), they also include people “Sharing the housing of other persons due to loss of housing, economic hardship, or a similar reason.” Under this definition, when your out-of-work in-law crashes on your couch, he’s homeless. The National Center also includes people “living in motels, hotels, trailer parks, or camping grounds,” children awaiting foster care placement, and children of migratory farm workers. And, a child needs only to fall into one of these categories for a single day to qualify as homeless.

Second, this study, like the HUD study as well, are not actual counts of the homeless, but estimates and extrapolations based on reports by various government agencies. The Census Bureau does attempt to do an actual head count of the homeless (170,000 in 2000), but that estimate is both out-of-date and generally criticized as an undercount. Still, going from that estimate to 1.5 million homeless children seems quite a stretch.

Homelessness is clearly a problem, and for the children involved, a tragedy, but scare headlines are a poor substitute for thoughtful public policy.

Homeless Scare Numbers is a post from Cato @ Liberty - Cato Institute Blog