More on the Isakson Amendment to the Senate Stimulus

Last night I wrote a somewhat (cough cough) incendiary post on why Johnny Isakson can’t tell his head from his ass.

Well, looks like I’m not the only one, and these people are experts!

1) Tyler Cowen:

“I’m not sure I understand the proposal, but here is what the NYT says:

The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession.

Like Arnold Kling, I wish to shift the economy out of housing, not into it again. I also believe that the supply of homes is relatively elastic right now.  The tax credit will subsidize the new buyers without propping up the price of homes.  Demand will go up, supply will go up, price will stay more or less on the same trajectory, and banks won’t be any healthier.  The subsidy goes to new home buyers and why should we be helping them above all others?  Aren’t they relatively wealthy on average?  (Not that there’s anything wrong with that.)  Aren’t some of them the dreaded “flippers” and speculators for that matter?  (Can we really enforce the primary residence requirement?)  Do we really want to push people into being less diversified and less geographically mobile in the labor market?  And here’s Alex’s post from earlier today.

There’s a whole other debate you could have on whether we should be encouraging people to buy outputs which are already produced.”

2) Dean Baker:

“Somehow, Isakson has this thing costing just $19 billion. Let’s break the Washington rules and try a little arithmetic. Even with weakness in the housing market, it is still virtually certain that we will sell close to 5 million homes in 2009. The overwhelming majority would qualify for the full credit. So, we get 5 million times $15,000. That sounds a
lot like $75 billion.

And this is before we get to any gaming. It’s hard to see why tens of millions of people wouldn’t figure out a way to buy a house from a friend or relative and get their $15k. If we can get one-third of the country’s homes to change hands (lots of jobs for realtors) that would be good for $375 billion. “

Well, glad to see that I wasn’t insane. I obviously don’t have the technical expertise of these guys, since they are, you know, REAL economists, whereas I’m just a guy who went to a four-year college and took some econ courses (even if Christian Romer, head of the Council of Economic Advisors). But even from a non-technical perspective, one should still be able to see that prima facie, the Isakson amendment doesn’t really do what it says it’s going to do.

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