A big step backwards

Kevin Drum correctly lands on the $25b homebuilder cookiejar in the Senate’s housing bill (passed on Thursday) with both feet. Is it fair to pile on? You betcha; anyway fairness has almost nothing to do with the part of this outrage Kevin doesn’t mention, which is the lunacy of subsidizing housing in any way with the earth heading for a world climate disaster.

This part of the bill allows homebuilders who are losing money now but made profits back to 2004 to get back taxes they paid in their good years; “get back taxes” of course means “to reach into your pocket and help themselves”. But of course if you didn’t have profits back then, you can’t get anything from this deal, so it’s a subsidy to the fattest cats most complicit in building too many houses, each too big. It’s also a particularly cowardly and disreputable way to give away everyone’s money, because tax breaks don’t look like actual spending.

But that’s not the worst part of it. We have a housing bubble breaking, and a lot of people are suffering for it, but we also have a global warming bubble, and the suffering that one is going to dish out, left unchecked, is on another whole level of misery. One more time: we have global warming because we’re using too much fossil fuel, and we’re using it (i) to drive among houses, shopping, and work that are too far apart to reach any other way, and (ii) to heat and cool houses that are much bigger than they should be. Why is this happening? In large part, because for seventy years, the US has subsidized housing, especially suburban housing, and made it look a lot cheaper than it really is compared to the other things we could be buying. Subsidizing the providers of X get you more of X, because they sell it for less and people buy more. (They keep some of it for themselves, which is the part Kevin is fulminating about, but not all.)

Housing and gasoline are two things that should never be the X in a recipe like that, and for the foreseeable future. Both are offered to Americans now at prices that systematically deceive us about what they really cost (the mortgage interest deduction alone is a Niagara of money pumping up house and lot sizes), and they need to go up, not down, to give people a chance of doing the right thing for the planet. Want to help the poor? Absolutely, but we have to do it…have to…within the constraint that things with a big carbon footprint cost more, not less, even though that makes it harder to do the right thing, and splits off supplier lobbyists from political coalitions.

The housing bubble is a big deal, and the recession, and the stock market shredding retirement wealth. But global warming is bigger than all of them put together, and patching any of them with tools that accelerate rather than brake the worldwide slide into a climate disaster is about as bad as policy can get. (Further recent venting on the folly of trying to deal with bad driving and housing habits without actually costing anyone anything here.)

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.