Liberal Forum

TheAmerican » 21 Feb 2016 7:21 pm » wrote:Link?

The End Of The Ownership Society
February 14, 2009

The recent push to expand homeownership actually began with President Clinton’s ‘National Homeownership Strategy’ in 1995, after which the homeownership rate shot up 5 percentage points in the next decade (having remained stagnant for the three proceeding decades).

Yet while new initiatives to promote home ownership began under President Clinton, the Bush administration pushed hard for using “the mighty muscle of the federal government…to encourage owning your own home.” These measures included tax credits, down payment assistance, vouchers, financial education, regulatory reforms, and pressure on the private sector.

The Social Security privatization movement also became popular in the 1990s, when a number of bipartisan commissions, outside think tanks, and members of Congress began proposing that Social Security have a private accounts component. In running for President, George W. Bush advocated such accounts, and in the first State of the Union address of his second term, he argued that: President Bush put considerable political capital into both of these ideas. In 2002 he launched “America’s Homeownership Challenge to homebuilders, realtors, nonprofits, and government-sponsored enterprises that purchase the mortgages made by lenders” in order to “dismantle barriers to homeownership.”
In particular, the administration established the goal of fostering at least 5.5 million new minority homeowners, lifting the minority homeownership rate above 50%.

In 2005, after winning reelection, President Bush declared that he had “earned capital in the campaign, political capital, and now intend[ed] to spend it…[and] reforming Social Security [would] be a priority of [his] administration.” This was followed by the launch of a massive effort to reform Social Security in which he and his surrogates toured the nation advocating for personal accounts.

Ultimately, both of these initiatives failed, although for different reasons.

Social Security privatization represented a political failure, demonstrating the limits of the ownership society’s popularity. Despite early favorable polls, a massive publicity campaign, Republican majorities in both houses, considerable outside support, and strong ideological commitment to reform, President Bush was unable to convince the Congress or the people to support the creation of Social Security private accounts. The large benefit reductions or tax increases necessary to restore solvency to Social Security and finance the accounts themselves made reform inherently unpopular. Meanwhile, think tanks and interest groups on the left launched an aggressive counter campaign to stop partial-privatization, which they argued would infuse unnecessary riskiness into workers’ retirement security, and ultimately “dismantle Social Security.” All this, combined with poor political decisions and bad luck, led supporters of personal accounts to fall flat on their faces. Although some type of Social Security reform remains inevitable, Bush’s failed effort has likely destroyed the chance of replacing part of the Social Security system with private accounts.

While Social Security failed politically, home ownership initiatives failed economically, demonstrating the real limits of ownership expansion. Increasing the homeownership rate required either making homes more affordable or raising real incomes for would-be homeowners. Yet with home values rising rapidly (as was desired) and real income stagnant, this meant reducing the price of or barriers to borrowing. Lending standards were therefore relaxed, as Fannie Mae, Freddie Mac, and private investment firms began investing in high-risk Mortgage Backed Securities.

This new capital caused a large expansion of questionable loans, such as so-called sub-prime mortgages, many of which offered seemingly cheap loans to high risk borrowers who couldn’t afford them over the long run.

Ultimately, these mortgages collapsed under their own weight, bringing down global financial markets along with them. Incidents of foreclosure have skyrocketed, home values have plummeted, mortgage availability has disappeared for many Americans, and the prospect of an ever-expanding homeowning class seems to have become a thing of the past.

With the administration’s two largest ownership initiatives in shambles, conservative ownership advocates appear to have lost. The disastrous political fallout from Bush’s attempt at Social Security reform effectively erased private accounts from the debate, and the economic turmoil created from the housing crisis has made expanding homeownership both unpopular and economically untenable in the near future.

Whether or not the idea of the ownership society had value, it has been tainted. And the government’s participation in what is arguably the conceptual reverse of the ownership society – the $700 billion public purchase of private capital under the Troubled Asset Relief Program – will probably serve as the nail in the coffin.

- See more at: http://historynewsnetwork.org/article/6 ... xNDVw.dpuf