The Betrayal of the Ownership Society

One of the best, if nearly forgotten, domestic initiatives to come from the Bush Administration was the "Ownership Society". That rhetoric really resonated with me because I knew--just like my wife's immigrant grandmother knew--that one of the greatest parts of the American dream was the possibility of owning your own house, and maybe even some land. In fact, said grandmother secretly pinched her pennies and bought a little lakeside cabin for her large family long ago, a source of great memories to the whole clan. But more than a dream, there is a canny political reality behind this idea:

"...if you own something, you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country."

-President George W. Bush, June 17, 2004

When I read that, I'm reminded of Cleo McDowell (played by John Amos) from Coming to America--which now that I think about it is one of the most pro-American movies I can remember. Owner of a small, eponymous fast food restaurant, McDowell is paid a visit by a foreign king (played by James Earl Jones) in his home about the relationship between the king's son and McDowell's daughter. I wish there was video of this whole scene, but the culmination of the scene is McDowell, even though he is a dollar-driven petit bourgeois (or perhaps a petit burgerois), being insulted by the king's offer to pay him off and throwing the king the eff out of his house, exclaiming that this is America, Jack, and (as I recall the scene, and though this line doesn't make it into this short clip, (mild language warning)) here a man is king in his own house.

Owning property in America, unlike other places I've lived, still means something. It means you're--maybe not a king, but something better, a free citizen with the same property rights in your bungalow or quarter-section off a county road as Bill Gates has in his mansion or a foreign prince has on his Montana hobby ranch. That's why the Ownership Society initiative tried to create more homeowners, especially among groups that haven't yet been able to become owners:

# Expanding Homeownership. The President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade. Under his leadership, the overall U.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2 percent. Minority homeownership set a new record of 51 percent in the second quarter, up 0.2 percentage point from the first quarter and up 2.1 percentage points from a year ago. President Bush's initiative to dismantle the barriers to homeownership includes:

* American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;
* Affordable Housing. The President has proposed the Single-Family Affordable Housing Tax Credit, which would increase the supply of affordable homes;
* Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program; and
* Simplifying Homebuying and Increasing Education. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners.

It's a great idea, one abandoned in the political cycles and thoroughly repudiated by the latest GW Bush/Hillary Rodham Clinton Stupid Lender/Irresponsible Borrower Bailout Plan. Michelle has lit into the plan with righteous fury and I am happy to pile on.

I'm the furthest thing from an economist but even I can see that this non-bailout bailout represents a subsidy for the inflated home market that effectively freezes out first-time homebuyers looking to join this ownership society. The prices of homes in certain areas are being maintained far above any reasonable value, sometimes by utterly fraudulent means, and the Bailout is going to keep that bubble afloat. In doing so it rewards irresponsible lending: bankers loaned money to people who couldn't make their payments, apparently without due diligence:

Today, Ms. Costa and other former Message of Peace parishioners claim that Mr. Santos was a key part of a mostly Brazilian ring that allegedly conspired to defraud people by persuading them to buy homes they couldn't afford. Ms. Costa, the housekeeper, secured a $713,000 sub-prime mortgage. In another instance, a Brazilian baby sitter borrowed $495,000. Now, the home buyers are beset by foreclosures and additional stains on their already-tainted credit.

Various immigrant groups have long been subject to financial scams. The subprime-mortgage boom offered new avenues for mischief -- by real-estate professionals as well as home shoppers. Potential buyers, especially those paying high rents, became embroiled in schemes to take advantage of banks' easy-money policies.

Who pays the price for these scams? People who play by the rules, and who find that their own honest housing dollar doesn't go as far as it should. People like Jennifer Leizear and Reese Roberts of Hagerstown, Maryland:

In an age of McMansions and budget-busting mortgages, one couple took the opposite route — they downscaled a home builder"s blueprint until they whittled it to a point they could afford.

You might say Jennifer Leizear and Reese Roberts built themselves a McHut.

Their builder says it"s the smallest home that he"s built in at least five years, although it may signal a downward trend in new homes.

“We just went through a time when everybody wanted everything,” said Dennis Swope, vice president of Home Construction Corp. “People aren"t doing that anymore. They"ve got to save money.”

The rancher in north Hagerstown is 960 square feet — about three-fourths its usual size.

Count me, a prospective member of the ownership society, among the victims of the bailout. I'm going to be looking for a house very soon in an expensive area. I'll need to take out a mortgage, but I'm not going to take out a mortgage I can't afford, even though this bailout creates a moral hazard in favor of doing so--which puts me at a disadvantage versus people who do and did. Every time they overextend themselves to buy a house, they nudge up the price of all the other houses in that neighborhood. And they nudge them right up out of reach for most families who don't have double incomes.

Home ownership is part of the American Dream. But what's not part of the American Dream is raising the bar for new homeowners. In 2004, the Bush Administration tried to make it easier for first-time homebuyers to join the Ownership Society. Today, they've flip-flopped and joined with Hillary Clinton to make it more difficult. I'm not sure whether this is just political calculation on the GOP's part; if so, I think it's pretty tin-eared (especially the congruence with Hillary) and I don't hear anyone rushing to support them.

As for Hillary: she's already blown off the moonbats, knowing they'll come around to her in the general election. But how will this play among the old-line Democrats? This is old-fashioned class warfare, except The Hillary has switched sides. Here she is standing for landed interests and reckless bankers and exclusivity versus the Working Man. I don't have a problem calling out the Bush Administration for this debacle, but will Hillary's supporters in the moderate-lefty blogsphere and the MSM have the cojones to take her to task for her incoherence on this issue?

I doubt it. I think this will be trumpeted as yet more bold-visionary-leadership, never mind that it is an unbelievably cynical triangulation, tacking to the right of a Republican administration to bail out high-risk capitalists and high-risk borrowers. If there are any pleasant surprises out there, lefties lighting into Clinton on principle, leave me a link in the comments. I doubt there will be many.

MORE: Philip Klein piles on, much more succinctly.