Breaking the incentives

One of the most important principles in economic policy is “first, get the incentives right.” If you get them wrong, you will discourage behavior that helps the economy and encourage behavior that harms it.

As part of our outsourcing of economic commentary in these tough economic times, CNBC reporter Michelle Caruso-Cabrera applies her bachelor’s degree in economics to critique the new housing plan:

The new Obama housing plan is going to give a break to those who least deserve it: people who bought more house than they can afford. It will reward those who made all the wrong decisions.

I've written about this before, but I have to readdress it here because I'm absolutely gobsmacked.

Think this through for a second. Your home value, along with all your neighbors, has gone down in the last year. But now your neighbor, who bought above his means and can’t make the payments, because of a reset to the REAL monthly cost of the loan, is suddenly going to get a gift. Well what about you? You did the right thing. . You didn’t buy more than you could afford. But you don’t get a break.
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The new Obama housing plan is going to give a break to those who least deserve it: people who bought more house than they can afford. It will reward those who made all the wrong decisions.

I've written about this before, but I have to readdress it here because I'm absolutely gobsmacked.

Think this through for a second. Your home value, along with all your neighbors, has gone down in the last year. But now your neighbor, who bought above his means and can’t make the payments, because of a reset to the REAL monthly cost of the loan, is suddenly going to get a gift. Well what about you? You did the right thing. . You didn’t buy more than you could afford. But you don’t get a break.