Rhee, the former chancellor of DC Public Schools, and Moskowitz, head of a NYC charter school, were asked at an event last week what they thought of the Supreme Court decision upholding  Arizona’s K-12 scholarship donation tax credit program. The program offers a dollar-for-dollar tax cut to anyone who donates to a non-profit Scholarship Tuition Organization (and the STOs then help families pay for private school tuition).

Children’s Scholarship Fund president Darla Romfo asked the question, and here’s the answer she received.

Michelle Rhee and Eva Moskowitz on School Choice is a post from Cato @ Liberty - Cato Institute Blog

Justice Kagan’s dissent yesterday in the Supreme Court ruling upholding Arizona’s education tax credits seems to me so obviously mistaken on both the facts and the law that I feel I must be missing something. I offer my initial analysis briefly below, and if anyone can tell me if/where I’m going wrong, my e-mail address is just a Google away.

First, Kagan and her fellow dissenters express dismay at the putative novelty of the majority’s distinction between tax credits and government spending. But, more than a decade ago, this very same distinction was acknowledged by the Arizona Supreme Court in Kotternman v. Killian, and that AZ Court ruling itself cites a string of precedents from around the country supporting it. Clearly, the majority’s ruling is far from novel, and Kagan and the dissenters should know that.

Next, Kagan claims that the majority’s ruling would preclude taxpayers from suing the government for operating a program that gives tax credits exclusively to one religious group. She claims that taxpayers of other faiths would lack standing. That seems quite wrong. The pivotal issue is that taxpayers would have to show a specific personal harm resulting from the government’s actions in order to have standing. In the case of Arizona’s tax credits, as the majority acknowledged, there is no harm to taxpayers. Everyone is eligible for the credit and credits can be claimed against donations to any type of scholarship organization, of any faith or no faith. By contrast, under Kagan’s straw man example of a credit for the purchase of crucifixes, non-christian  taxpayers would suffer a specific personal harm: they would be denied the right to use the credit to purchase religious symbols of their own faith (or to buy “Who is John Galt?” posters if they happened not to be religious). This harm would be the direct result of government action–specifically, of the government’s decision to favor Christians over members of other faith groups and secular taxpayers.

A program that discriminates based on religion causes harm to taxpayers by virtue of excluding them from participation. That, in turn, is a clear equal protection violation, not to mention a violation of at least two of the three prongs of the First Amendment Lemon Test, and so such taxpayers would not only have standing to sue they would win the suit.

Again, the AZ tax credit program causes no such harm, because anyone, regardless of faith, can participate, and no one is compelled to support any kind of religious education. Why could Kagan and her co-dissenters not see this?

Credits for Crucifixes. Or: What’s the Matter with Kagan? is a post from Cato @ Liberty - Cato Institute Blog

Like a terrible remake of Groundhog Day, the White House has unveiled yet another so-called stimulus scheme. Actually, they have two new proposals to buy votes with our money. One plan is focused on more infrastructure spending, as reported by Politico.

Seeking to bolster the sluggish economy, President Barack Obama is using a Labor Day appearance in Milwaukee to announce he will ask Congress for $50 billion to kick off a new infrastructure plan designed to expand and renew the nation’s roads, railways and runways. …The measures include the “establishment of an Infrastructure Bank to leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed transportation programs,” and “the integration of high-speed rail on an equal footing into the surface transportation program.”

The other plan would make permanent the research and development tax credit. The Washington Post has some of the details.

Under mounting pressure to intensify his focus on the economy ahead of the midterm elections, President Obama will call for a $100 billion business tax credit this week… The business proposal – what one aide called a key part of a limited economic package – would increase and permanently extend research and development tax credits for businesses, rewarding companies that develop new technologies domestically and preserve American jobs. It would be paid for by closing other corporate tax loopholes, said the official, speaking on condition of anonymity because the policy has not yet been unveiled.

These two proposals are in addition to the other stimulus/job-creation/whatever-they’re-calling-them-now proposals that have been adopted in the past 20 months. And Obama’s stimulus schemes were preceded by Bush’s Keynesian fiasco in 2008. And by the time you read this, the Administration may have unveiled a few more plans. But all of these proposals suffer from the same flaw in that they assume growth is sluggish because government is not big enough and not intervening enough. Keynesian politicians don’t realize (or pretend not to realize) that economic growth occurs when there is an increase in national income. Redistribution plans, by contrast, simply change who is spending an existing amount of income. If the crowd in Washington really wants more growth, they should reduce the burden of government, as explained in this video.

The best that can be said about the new White House proposals is that they’re probably not as poorly designed as previous stimulus schemes. Federal infrastructure spending almost surely fails a cost-benefit test, but even bridges to nowhere carry some traffic. The money would generate more jobs and more output if left in the private sector, so the macroeconomic impact is still negative, but presumably not as negative as bailouts for profligate state and local governments or subsidies to encourage unemployment – which were key parts of previous stimulus proposals.

Likewise, a permanent research and development tax credit is not ideal tax policy, but at least the provision is tied to doing something productive, as opposed to tax breaks and rebates that don’t boost work, saving, and investment. We don’t know, however, what’s behind the curtain. According to the article, the White House will finance this proposal by “closing other corporate tax loopholes.” In theory, that could mean a better tax code. But this Administration has a very confused understanding of tax policy, so it’s quite likely that they will raise taxes in a way that makes the overall tax code even worse. They’ve already done this in previous stimulus plans by increasing the tax bias against American companies competing in world markets, so there’s little reason to be optimistic now. And don’t forget that the President has not changed his mind about imposing higher income tax rates, higher capital gains tax rates, higher death tax rates, and higher dividend tax rates beginning next January.
 
All that we can say for sure is that the politicians in Washington are very nervous now that the midterm elections are just two months away. This means their normal tendencies to waste money will morph into a pathological form of profligacy.

Obama’s New Stimulus Schemes: Same Song, Umpteenth Verse is a post from Cato @ Liberty - Cato Institute Blog

Matt Yglesias thinks my assertion that we would be better off economically if education money stayed with taxpayers rather than going to public schools and universities is “totally insane.” Ouch!

Now, I can actually understand this, because many people have difficulty envisioning things other than what they’ve always known. But have I really gone all Crazy Eddie? If government didn’t spend taxpayer dough on education, would the poor be much worse off than they are today? Can we never over-invest in schooling because education is just so important? Does the college wage premium mean we should never ratchet down subsidies for college education? And is it at least possible that spending more and more public dough doesn’t lead to more or better education — by which I mean actual, valuable learning — as much as more waste?

Unfortunately, it seems Ygelsias didn’t follow any of the links I provided in the post containing the line he objected to, which furnished some valuable data answering these important questions. And, by the way, it really was just one line he seemed to dislike – the point of the post was to argue against spending yet more taxpayer dough on an education-centered stimulus, not for complete separation of school and state. And, of course, tax-credit-based school choice leaves taxpayers in control of their money without eliminating support for education.

But let’s start answering our questions in more depth so that Mr. Yglesias and others can start to think outside of the “how we’ve always done it” box.

First, let’s hit one critical point: Spending taxpayer money on government schooling does not actually mean you get better education. Let’s look at that graphically:

Here you can see nearly four decades of precipitously increasing expenditures on K-12 education plotted against student performance. And what does it reveal? No correlation between the Death Valley of academic achievement and the Everest of spending. Ever-more taxpayer dollars have gone into the government education system, but the system hasn’t improved at all. Why? Because the educators receiving the money have no need to get better – they’ve gotten ever-more dough no matter what, in large part because many people simply assume that increased government spending on education equals better education. But if you spend hugely greater amounts and get no better results, that seems like it would be an economic drain, no? Which was exactly what I was arguing.

How about higher education?

On a per-pupil basis, over the last quarter-century spending on public colleges and universities has been steady overall, while aid per student at all schools has gone way up. And what do we have to show for that?

The first thing is  incredible tuition inflation – the bane of American higher education. On a per-pupil basis, since 1988 real aid per student has risen 144 percent, while prices have inflated 81 percent at four-year-private schools and 145 percent at four-year publics. It seems, at least in part, that colleges and universities raise their prices because, well, the aid makes sure they can.

Surely, though, the schools use that money to provide more people with ever-better educations? Maybe, but much of the new money seems to have gone just to hiring more administrators, freeing professors from teaching so they can conduct research, and erecting ever more fabulous amenities. Which brings us back to the economic point: Maybe taking money from taxpayers to subsidize all this empire-building and waste might be an economic loss because taxpayers would otherwise spend the money more wisely. Maybe they’d invest in companies that provide better, cheaper products; give money to charities; buy education from stripped-down — but more educationally effective —  schools; or use it for countless other things they need or want.

But what if all this subsidizing — even with its attendant waste — resulted in impressive educational outcomes? Then maybe, just maybe, it would be an economic net gain.  But things look pretty bad: The six-year graduation rate for bachelor’s degree seekers is just 57 percent; roughly one-third of first-year students need to take remedial courses; and literacy dropped (see p. 38) roughly ten percentage points for Americans with at least a bachelor’s degree between 1992 and 2003. Oh, and that wage premium? It could very well include massive credentialism: It might be that you now need a bachelor’s degree for jobs that require only skills or abilities you could have attained on the job or in relatively brief specialized training. But at this point even half-way decent prospective employees would be expected to have gone to a four-year college.

Enough conjecture, though. Let’s go to the videotape – an actual effort to isolate the effect of government higher-ed spending on economic growth. Economist Richard Vedder has done this, and what he has found is that the more a state spends on higher education, the lower its rate of economic growth. Why? Among other possible things, it seems that when education is largely funded by third parties — especially third parties who have no choice in the matter – it decreases schools’ and students’ motivation to act efficiently. So sure, build that on-campus water park — I ain’t really paying for it!

Looking at things this way – contemplating the myriad costs, not just the assumed benefits, of taxpayer funding of education — it seems maybe my ideas shouldn’t be assigned a cell between the Joker and the Riddler quite so quickly.

But what about the equalitarian argument? Forget about economic efficiency — what about justice for the poor?

First off, I’d note that freer, more efficient economic systems tend to be better for everyone, rich and poor alike. You can read all about that here. But we need look no further than American history to see that people — including the poor — will get educated without government help. Before there was widespread government schooling there was widespread education. Indeed, by 1840 – when Mann’s common-school movement was still in diapers – it is estimated that 90 percent of adult whites in America were literate, a very high level relative to Europe. And the nation was hardly the Monopoly Man at the time. In other words, poor people got educated on their own.

But how could this be? Certainly part of the answer was that many poor people emphasized education, and much education occurred in the home. It was also provided by religious institutions, as well as philanthropists. And, of course, poor communities sometimes got together to establish their own schools.

But that was then and this is now, right? Education is much more complex because the world is much more complex. How could poor people get an education today if government didn’t provide it?

Well, for one thing, education need not be nearly as complex and expensive as it is. All those computers and other bells and whistles? There is hardly overwhelming evidence that they do any good — they may just be a huge waste of money. Meanwhile, many relatively barebones private schools seem to do just as good a job or better at educating students. Oh, and there’s that charity thing again: Religious schools provide low-cost education to millions of kids, and it could be lower if they didn’t have to compete with “free” public schools. And despite massive government subsidies to higher ed, private philanthropists give tens-of-billions of dollars to colleges and universities every year — imagine how much they might give if government didn’t say it would do the job! In other words, there is absolutely no overwhelming argument — to say the least — that just because the world is  more complicated government must run schools and pay for education. Indeed, huge, bureaucratic, plodding government is about the least well-equipped entity to handle complication and fast change.

And guess what? There is a profit-motive to furnish education to poor students with demonstrated academic aptitude: If someone lends money to a poor student to go to college so she can get an education that enables her to increase her future earnings, both parties will end up profiting. And let’s not overlook India and numerous other developing countries, where many of the poorest people in the world, using their own money, attend for-profit schools that outperform the free public schools. And why is that? Because the parents whose valuable money is being spent have huge incentives to hold schools accountable, and schools have to respond to parents to stay in business.

But maybe all that’s not enough for Mr. Yglesias. Maybe he needs to also be reminded of what he himself noted:

The current state of schooling in America is already bad enough in terms of ill-serving poor people.

That’s for sure! Currently, wealthy people can choose schools: they do it by buying a house in a good district or paying for private schools. Meanwhile, poor parents are often trapped in awful schools because they can’t afford to buy a McMansion for tuition. In higher education, flagship public colleges and universities have disproportionately middle- and high-income student bodies. And student aid? With creation of tax credit programs you have to have sufficient taxable income to use, as well as loans like PLUS that have no income maximums, aid has been targeted higher and higher up income scales. Meanwhile, the tuition inflation that all that fuels appears likely to scare low-income people away from higher education more than any other group.

Finally, let’s not forget that it was government that for centuries prohibited millions of people — especially African-Americans – from receiving either an equal education, or any education at all.   Without question during those times many private Americans would have discriminated in the provision of education, but government required discrimination by both bigot and good man alike.

So the current education system — which tends to be bent toward the will of the large, voting, middle- and upper-income blocs — already massively underserves the poor, and quite possibly makes it much harder for low-income Americans to compete with rich people than if everyone paid for schooling themselves. The system also injects huge distortions and inefficiencies into education, hurting overall economic progress. Of course, this is not an open-and-shut case — few things are in public policy – but you sure need to do more than just call removing government from education “insane” to counter it. Unfortunately, that’s not something it seems too many people — including Mr. Yglesias – are prepared to do.

Is an Education Free Market Really ‘Totally Insane’ is a post from Cato @ Liberty - Cato Institute Blog

The SCOTUS Blog reports this morning that the United States Supreme Court has agreed to hear an appeal of the Ninth Circuit’s ruling in the Arizona k-12 scholarship tax credit case. This is great news, and paves the way for the Court to ultimately overturn the 9th Circuit’s credulity-straining legal misadventure.

For the details, see the Cato brief in this case, which was joined by the American Federation for Children and Foundation for Educational Choice.

Supreme Court Will Hear Appeal of School Choice Case is a post from Cato @ Liberty - Cato Institute Blog

Washington is fretting this week over news that mortgage applications fell dramatically in November. Coupled with earlier indications of renewed softening in the housing market, there is growing fear that housing is headed for a “double-dip downturn” that could further damage the economy. As a result, Federal Reserve policymakers are considering additional stimulus, while the National Association of Realtors is suggesting an(other) extension of the “temporary” homebuyer tax credit.

Remarkably, neither policymakers nor the media are asking the obvious question: Given all of the emergency interventions in housing that government has undertaken, and the fact that the housing market continues to erode, do such interventions do much good?

Since the bursting of the bubble in 2006, the great unknown has been whether housing prices will revert to their historical trend (and possibly to below trend for a short period), or stabilize at some permanently higher level because a portion of the bubble (aided perhaps by public policy) would prove enduring. There is good reason to expect reversion to trend, but the economy can surprise us.

Let’s use an example to understand this better. The graph below depicts the course of house prices for my hometown of Hagerstown, MD, an area within commuting range of suburban DC that was hit particularly hard by the bubble and its deflation. The black line is a house price index computed by the Federal Housing Finance Agency for 1989–2009. The red line is an extended linear trendline drawn using index data from the period 1989–2002. (You can do the same analysis for your area using these FHFA data.) The question, then, is whether house prices will fall all the way back to the trendline or will stabilize at a level above the trendline. 

The sharp downward slope at the end of the price line and  the latest housing news suggest that Hagerstown is destined to revert to trend (perhaps after a period below trend). I’ve drawn similar figures for several other locations and they show similar patterns. It looks like the nation’s housing markets, for the most part, are reverting to trend.

When this crisis first began in 2007, Bush administration officials vowed to “stabilize house prices at the highest possible level.” However, despite their efforts and those of the Obama administration, Congress, and the Fed,  reversion to trend appears inevitable. At best, those efforts may have slowed the reversion — in which case, I suppose the Bush goal has been met.

It can be argued that a gentler reversion to trend may be more tolerable than a sharp return. On the other hand, there are fears that a lengthy softening of the housing market will lead to more defaults, less worker mobility, continued weak consumption, and a long period of high unemployment and stagnant wages for those who are working. Perhaps a sharp return would be the quickest way to shed the ill effects of the bubble.

This leaves us with a final question that policymakers, the media, and the public should be grappling with: If all of these emergency housing interventions only result in a slower reversion to trend, then is that benefit worth the cost?

A Double Dip for Housing? is a post from Cato @ Liberty - Cato Institute Blog

The Ethan Allen Institute has just published a report suggesting that Vermont could save $80 million a year by voucherizing its education system. What’s most interesting is how generous the prospective vouchers would be: $10,000 for K-6, and $14,900 for grades 7-12. How could such a system save money? The main reason is that Vermont was already spending $14,000/pupil on public schools across all grades four years ago. Taking into account the inevitable increase since then and the effects of inflation to 2009 dollars, the state is no doubt spending well over $15,000 per pupil today, so EAI’s ample voucher funding would still cost far less than the status quo.

The only problem is that, as the EAI report notes (see p. 10), Vermont’s state supreme court has ruled against state funding of sectarian schools. So tax credits would be a better option for that reason, among others.

Vermont Could Save Millions with Private School Choice is a post from Cato @ Liberty - Cato Institute Blog

In a recent Washington Post op-ed, Professor Joseph Gyourko, chair of the Wharton School’s Real Estate Department, lists what he sees as the five biggest myths about homeownership. Given the central role of federal housing policy, particularly Fannie Mae and Freddie Mac, in our recent financial crisis, it is worth following Professor Gyourko’s suggestion and question whether a national policy of ownership, all the time for everyone, really makes sense.

Professor Gyourko’s five myths:

1.  Housing is a great long-term investment.

2.  The homebuyer tax credit makes buying a house more affordable.

3.  Homeowners are better citizens.

4.  It’s safe to buy a house with a very low downpayment.

5.  Owning is always cheaper than renting.

You’ll have to read the op-ed to see his explanations.  An important qualification on his analysis is that in many cases what can be good for the buyer, such as putting no money down, may not be good for the economy if it results in additional foreclosures.

Homeownership Myths is a post from Cato @ Liberty - Cato Institute Blog

The U.S. sustainability standard currently requires ethanol production to emit at least 20% less CO₂ than the gasoline it is assumed to replace. In a new study, authors Harry de Gorter and David R. Just argue that sustainability standards for ethanol are, by definition, illogical and ineffective. Moreover, say de Gorter and Just, those standards divert attention from the contradictions and inefficiencies of ethanol import tariffs, tax credits, mandates, and subsidies, all of which exist whether ethanol is sustainable or not.

New Paper: Why Sustainability Standards for Biofuel Production Make Little Economic Sense is a post from Cato @ Liberty - Cato Institute Blog

This is from the Reagan administration’s deregulatory 1981 energy plan: “All Americans are involved in making energy policy. When individual choices are made with a maximum of personal understanding and a minimum of government restraints, the result is the most appropriate energy policy.”

Many modern Republicans claim devotion to Ronald Reagan’s ideas, but they often seem to forget about the “minimum of government” thing. The following points are from Republican Virginia gubernatorial candidate Bob McDonnell’s “More Energy, More Jobs” plan:

• “McDonnell was the chief sponsor of legislation creating the Virginia Hydrogen Energy Plan.”
• “McDonnell also supported grant programs for solar photovoltaic manufacturing, tax exemptions for solar energy and recycling property, and tax credits for solar energy equipment.”
• “In order to protect Virginia’s citizens from the skyrocketing wholesale prices of electricity seen in other states, McDonnell brought together all the necessary stake holders to re-regulate electricity in Virginia.”
• “Currently, Virginia is the second largest importer of electricity behind California.  This is unacceptable.”
• “Bob McDonnell will establish Virginia as a Green Jobs Zone to incentivize companies to create quality green jobs. Qualified businesses would be eligible to receive an income tax credit equal to $500 per position created per year for the first five years.”
• “The Virginia Alternative Fuels Revolving Fund was established to assist local governments that convert to alternative fuel systems . . . Bob McDonnell will expand the purpose of this fund to include infrastructure such as refueling stations, provide seed money and aggressively pursue additional grants.”
• “Bob McDonnell will make Southwest and Southside Virginia the nation’s hub for traditional and alternative energy research and development…To assist with the attraction, building and operation of major energy facilities in Southside and Southwest Virginia, we will also support the establishment of the Center for Energy.”
• “To help Virginia universities gain access to federal stimulus money, as Governor, Bob McDonnell will establish the Virginia Universities Clean Energy Development and Economic Stimulus Foundation.”
• “As Governor, Bob McDonnell will leverage stimulus funding to incentivize individuals and businesses to conduct energy audits and encourage public private partnerships between small businesses and government.”

It’s true that McDonnell’s plan has some free market elements, and also that Ronald Reagan supported some wasteful energy boondoggles. However, the degree to which the modern Republican wants to micromanage and manipulate the energy industry is remarkable. McDonnell is almost setting out a Soviet five-year plan for a substantial part of the Virginia economy. For goodness sakes, he wants to treat Virginia like a separate country and try to fix the supposed problem that it is “importing” too much energy from other states!

It’s not just energy. Look at the top-down central planning ideas that McDonnell has for “creating jobs”:

• “Expanding use of the Governor’s Opportunity Fund by roughly doubling the funding available and broadening Fund rules to allow companies that generate additional state and local tax revenue to qualify.”
• “Appointing Lieutenant Governor Bolling to serve as “Virginia’s Chief Job Creation Officer” in the McDonnell/Bolling Administration.”
• “Designating one Deputy Secretary of Commerce to Focus Solely on Rural Economic Development.”
• “Providing a $1,000 tax credit per job to businesses that create 50 new jobs, or 25 new jobs in economically distressed areas.”
• “Double the funding for the Virginia Tourism Corporation. Currently Virginia trails 14 states including West Virginia and Tennessee in tourism funding.”
• “Increase funding for the Governor’s Motion Picture Fund by $2 million.”
• “Providing a $1,000 tax credit per job to businesses that create 50 new jobs, or 25 new jobs in economically distressed areas.”

Again, McDonnell mixes some pro-market proposals in with these Big Government interventions. And his opponent, Creigh Deeds, is promoting his own interventionist schemes, many very similar to McDonnell’s.

In 1980, the difference between Jimmy Carter and Ronald Reagan on economic policy was clear. But today, we seem to have arrived at a point where it’s virtually impossible to tell the difference in economic platforms between a self-proclaimed conservative Republican and a liberal Democrat.

Bob McDonnell: The Modern Republican is a post from Cato @ Liberty - Cato Institute Blog

A story in the Washington Post today is headlined: “Obama Would Keep $85 Billion in Tax Breaks for Working Poor.”

The “tax breaks” in question are expansions in the earned income tax credit and the child tax credit. The Post story repeatedly calls the expansions “tax breaks” and “tax cuts.” The budget expert quoted in the story calls them “tax cuts,” and so does a House staffer and a spokesperson for the president.

But these are not tax cuts. They are expansions in the refundability of provisions in the tax code. That means that households that pay no federal income tax will receive larger welfare checks from the government under these Obama proposals.

Obama has proposed a slew of “tax cuts” that are partly welfare payments. The chart below shows the share of the 2010-2019 dollar values of these proposals that are actually increased federal spending, and not reductions in taxes. (Calculated from OMB’s May summary tables).

The Post reporter and the budget analyst quoted in the story are both fiscal experts, and they know that these “tax cuts” are not really tax cuts. But there is a growing problem in fiscal discussions that words are getting flipped upside down to mean the opposite of what a layman would understand them to mean. A classic example is how the dollar value of true tax cuts is nearly always referred to in news articles as a “cost” rather than a “saving.”

Steny Hoyer’s use of the phrase “paid for” in the health debate is another example of how Washington-speak is confusing the heck out of people.

‘Tax Cuts’ and Welfare Spending is a post from Cato @ Liberty - Cato Institute Blog

As discussed in a recent Bloomberg piece, several U.S. senators from both parties are pushing to almost double the recently enacted $8,000 tax credit for first-time homebuyers to $15,000. The same senators are also pushing to remove the current income restrictions — $75,000 for individuals and $150,000 for couples — while also removing the first-time buyer requirement.

The intent of the increase, and the original credit, is to increase the demand for housing and to create a “bottom” to the housing market. The flaw of this approach is that it creates a false bottom, one characterized by government-inflated prices and not fundamentals. It was excessive government subsidies into housing that helped create the housing bubble, additional subsidies to re-inflate the bubble will only prolong the actual market adjustment.

If it were only a matter of prolonging the adjustment, then the huge cost of the tax credit might be easier to justify. Yet by encouraging increased housing production, the tax credit will increase supply when we already have a huge glut of housing. Despite housing starts being near 50-year lows, there is still too much construction going on. The way to spur demand in housing is the same way you spur demand in any market: you cut prices.

Removing the income limits makes clear the real intention of the tax credit, to help the wealthiest households. About three-fourths of existing families already fall under the income cap of $75,000. As we move up the income latter, home equity makes up a smaller percentage of one’s total wealth. The richest families can make do with a decline in their housing wealth and continue spending; they have other substantial sources of wealth. If we have learned anything from the housing boom and bust, it should be that continued government efforts to rearrange the housing market have been costly failures.

Senators Want to Delay Housing Recovery is a post from Cato @ Liberty - Cato Institute Blog