The Senate bail out party

Senators this week will debate and pass a so-called housing measure that they claim stabilizes housing prices and provides economic stimulus. It will likely do neither, but then again, what does that matter? The real impetus for this legislation is CYA, which politicians in Washington have become extraordinarily good at. The Wall Street Journal this morning has a must read editorial on the subject:

Majority Leader Harry Reid's bipartisan "housing stimulus package" hits the Senate floor on Tuesday afternoon, and what it proves is that, whatever their other differences, both parties can agree to throw good money after bad. The bill is a $15 billion list of subsidies that won't do much for housing markets but will please the homebuilders, local politicians and other influential lobbies.

Among the largest items is $4 billion for notorious Community Development Block Grants. The money is intended to purchase and redevelop foreclosed properties. It's hard to think of a less promising vehicle than the CDBG program, which is managed after a fashion by the Department of Housing and Urban Development. A February 2008 report from the White House budget office calls the program "ineffective," which is putting it mildly. On a 100-point scale of achieving results, CDBG scored a 27. In 2005 and 2006, the Government Accountability Office recommended more oversight and better methods of targeting grant recipients.

In addition to being a proven-failure of a program, this funding for CDBG will take housing out of private hands and put it in the government's hands. According to the legislation, the local governments are not obligated to do anything with their new-found property. It could be sold, turned into low-rent housing, redeveloped or whatever they want. Since when should the government be in the business of flipping houses?