January 13, 2016

TOMORROW’S FINANCIAL MELTDOWN, TODAY! From Subprime to Sub-Subprime, as charted by Kevin D. Williamson:

Homeownership isn’t right for everybody. For one thing, enormous debt isn’t right for everybody, and homeownership without equity (3 percent, indeed) is nothing more than that. What’s more, as National Review’s Reihan Salam has shown, the social benefits associated with homeownership — stability, civic engagement, etc. — are present only when there is significant equity held. As Salam and co-author Christopher Papagianis put it: “The traits that enabled households to build up the savings necessary for significant down payments — hard work and the deferral of gratification — were misattributed to homeownership itself.”

Which sound very much like Reynold’s Law:

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

And once again, the bureaucratic left will need to relearn that lesson yet again, likely the hard way — and possibly soon, when the financial crisis “truly takes a village,” yet again.

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