Detailed Abstractions

For more than 20 years now, with legislation leading back almost 40 years, the United States government has been pushing the idea that every citizen should have a home.

Based upon several studies showing high correlations with positive societal behavior for homeowners, politicians, leaders, non-profits, lots of people pushed for easier access to affordable housing.  In a Federal Reserve report published in 1999, they state:

A number of recent studies attempt to measure whether there are nontraditional benefits to homeownership, such as increases in the success of children (Green and White [5]), citizenship (DiPasquale and Glaeser [3]), and a variety of family outcomes and attitudes (Rossi and Weber [11])….

This is only 1/2 the story of course.  What these studies, our politicians, our leaders, & the rest of them  can’t conclude from this data is whether home ownership actually affects any of these additional traits.  The study itself hints at this:

…Because of the preferential tax treatment accorded homeowners, particularly low-income homeowners, and the large degree of wealth accumulated in housing, these authors argue that it is important to know the full range of homeownership benefits and costs. However, given the difficulty of credibly assigning causality to housing externalities, it is not surprising that such factors have been previously ignored.

In one such paper, Green and White [5] find a strong statistical correlation between homeownership and the likelihood of dropping out of school or becoming pregnant. Yet a reasonable interpretation of their result is that of omitted variable bias. Clearly, homeowners are different from renters along a variety of dimensions. As a result, those factors that are latent in their work, such as parental skills, interest in the educational process, wealth, and family stability, potentially bias upward any homeownership effect….

In other studies, they show correlations between home ownership & wealth accumulation, to help give more force to the “everyone needs a home” meme (study dated 2004):

For many years the federal government has promoted homeownership as an important goal for low-income families. A primary motivation of this policy goal is the concept that owner-occupied housing can be an important means of wealth accumulation, particularly for those lower-income and minority families that are able to purchase homes….

They as well admit the difficulty with this assessment:

…However, very little has been done in the housing literature to determine the importance of housing and non-housing sources of wealth accumulation. This determination has been difficult to address for three reasons. First, detailed wealth information on families is seldom available on a consistent basis. Second, such information on wealth is even less likely to be available over time so that changes in wealth can be observed. Third, the process of housing wealth accumulation is dynamic. Housing wealth accumulation depends critically on how soon a family that is renting becomes a homeowner, whether or not the family graduates to more highly valued owned units over time, or becomes a renter again and never regains homeownership….

With the current practice of press & political standards however, you might be hard pressed to find any evidence that assigning non-traditional benefits to home ownership is anything but an unqualified good.  The majority of reports dealing with low income housing stimulus are positive  (here & here).

In some cases, overly emotional logic is used (here):

After business dried up in May, Jodi Morris’ employer, an insurance agent, stopped sending paychecks.

Since then, the 43-year-old single mother has had to sell almost all of her furniture – her kitchen table and chairs, bed frames, dresser and armoire, and living room set – to pay the bills.  Morris and her 7-year-old daughter, Karly, now sleep on mattresses on the floor of their two-bedroom Ahwatukee apartment. And with no table, the two eat dinner on their cream-colored couch.

An eviction notice that arrived this month threatened to put Morris and Karly out on the street.  But Morris could be the first Phoenix resident to receive a lifeline from the federal government that seeks to rescue those on the verge of homelessness….

& without exception, our government is not immune.  The US government is right now, before the housing crisis even fully contracts (I wrote about it here), spending money to help low income families purchase homes.

Even before the housing crisis though, economists, experts, non-profits, were asking whether home ownership should be considered an unqualified good.  Unfortunately, reports questioning these basic assumptions are a very low percentage compared to the constant noise.

In some cases, even questioning the wisdom of subsidizing low income home ownership has resulted in kill the messenger attacks from non-profit groups, community leads, and even Democratic leadership, by leveling charges of racism.  With a simple misdirection trick, questioning the basic assumptions is anti-low income & since low-income households are generally minorities, questioning these assumptions must be due to institutional racism.   Politicians and leaders everywhere have a grand ole time setting up straw men in a fields of hay while standing by with gasoline and matches, but we should expect more.  We should expect to be able to ask all relevant questions we can and to get answers to as many questions as possible.  Lastly, we should let the data lead to its natural conclusion.

Assuming we truly want the best answers we can get and the best progress we can have, we must be willing to ask tough questions and live with the answers reality presents.

Anything less is little better than just allowing random superficial rhetoric to control policy.  It’s almost like we never moved away from the world Richard Feynman spoke about in 1974:

…But even today I meet lots of people who sooner or later get me into a conversation about UFOS, or astrology, or some form of mysticism, expanded consciousness, new types of awareness, ESP, and so forth. And I’ve concluded that it’s not a scientific world.

This past Friday, the 25th of June, Democrats, with 8 Republicans in the House have passed sweeping environmental regulation known as Cap and Trade.

Democrats narrowly passed historic climate and energy legislation Friday evening that would transform the country’s economy and industrial landscape.

But the all-hands-on-deck effort to protect politically vulnerable Democrats by corralling the minimum number of votes to pass the bill, 219-212, proves that there are limits to President Barack Obama’s ability to use his popularity to push through his legislative agenda. Forty-four Democrats voted against the bill, while just eight Republicans crossed the aisle to back it…

Despite the numerous problems with the bill and still open questions remaining as to what the full financial impact will be on average consumers, Nobel prize winning economist, Paul Krugman is full of praise (here):

So the House passed the Waxman-Markey climate-change bill. In political terms, it was a remarkable achievement.

Which is perfectly fine.  I honestly tend to expect more out of an economist, like asking questions about cost versus benefits and the like, but I’ve gotten use to Mr. Krugman using his very large bully pulpit for his politics, and not economic principles.

As is his trademark for completely disregarding anything that fails to comport with his world view, he moved from praise directly into false logic:

But 212 representatives voted no. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

So from the very beginning, he places everyone into two basic camps – those who voted for the legislation and those who are anti-science, treasonous bastards, how don’t understand the fundamental science behind climate change.

Instead of acknowledging the well known fact that many opponents of this legislation are not global warming deniers, he presents a false dichotomy in which there are only two sides – his side and those that don’t believe in global warming.

From this basic setup, his article flows smoothly as he defends the science behind global warming all the while pretending the strawman he is busy burning exists in real life.

As usual, outside of his partisan world, the issue is not nearly as cut and dry.  Many of the best argued positions come from people opposed to this bill have absolutely nothing to do with the science of global warming at all.  The generally tread a few main points:

1. What are the true costs of the bill to individual consumers? This question is almost impossible to ask as 300 additional pages were added to the 1000 page bill just a couple of hours before a forced vote.  None of Congress had time to read the additions prior to voting.
2. If we can detail a good cost estimate, do we fully know what benefits to expect in order to balance costs with benefits?
3. & lastly, the politics of the bill are being setup for corruption.  Instead of opening an exchange where the initial carbon offsets can be purchased through a free market system, the government will be handing out those directly to business.  They will get these carbon credits free of charge and be able to resell them on the market once that happens.  Allowing congress the ability to decide who gets free money is a system setup for corruption.

Critiques :Reason, Cato.org, and just a lot of additional BS on politics of the entire thing

Of course Mr. Krugman should know and likely does know exactly what he’s doing.  He frames the debate as a false dichotomy, only allowing two choices, then pretends to make one choice look completely stupid by comparison through the ceremonial burning of the strawman he invented.

Not terribly surprising from a columnist who was arguing in 2004 that the economy needed a housing bubble to get us moving forward again, only to completely reverse course and pretend he never did any such thing after the collapse of that market (here).

Is it really any wonder why the self proclaimed 4th branch of the government is trusted less and less everyday?