Whose Ox Was That?

One of America’s most enduring fault-lines is around convictions of personal self-sufficiency, and the very real degree of contempt that accompanies indicators of other people’s dependency. The “makers and takers” narrative is the most recent manifestation of this phenomenon, where people who “stand on our own two feet” engage in moral indignation aimed at those perceived as “sucking at the public tit.’

What is so ironic about this simplistic construct is that the self-proclaimed “makers” are the recipients of the largest percentage of government largesse. They just don’t see it that way. What they get is their due; what that other guy gets is charity.

It isn’t limited to corporatism, or crony capitalism or the tax loopholes and immense amounts of outright subsidy enjoyed by our so-called “captains of industry.” It goes much farther, and is frequently a product of well-meaning public policies.

I thought again about the multiple ways taxpayers subsidize the “haves” while I was reading a fascinating book about housing policy: The End of the Suburbs: Where the American Dream is Moving.

The mortgage interest deduction provides nearly 400 billion in subsidies to homeowners each year, propping up the market for single-family homes. Renters, of course, enjoy no such assistance. The unintended consequences of FHA mortgages have been amply documented–FHA regulations encouraged new construction to the detriment of repairs and improvements to existing housing stock, encouraged redlining (making it much more difficult for African-Americans to buy homes), and (by stipulating that homes had to be built far from “adverse influences” and in areas of “economic stability”) favored suburban over urban homeownership.

It’s not just FHA. Suburban development has been subsidized by everything from highway construction to artificially low gasoline prices. William Wimsatt wrote an article for the Washington Post a couple of years ago in which he detailed–and rebutted–five “myths” about the suburbs: myth number three was “the suburbs are a product of the free market.”

Taxpayer subsidies are everywhere–from the public schools that educate most American workers, to the “free” highways over which we ship our goods (if you ship by train, no such luck–pardon the pun, but you pay full freight), to the food stamps and other benefits that the makers scorn even while they supplement and thus enable the below-living-wage compensation paid by Walmart and its ilk.

The next time you hear a Tea Party crank fulminating over the cost of the hateful “Obamacare” and the illegitimacy of requiring that we all chip in to keep poor folks from dying, you might consider the fact that long before passage of the ACA, seventy percent of all medical costs in the US were being paid with tax dollars. From medical research to medical education to Medicare and Medicaid to emergency room services to the uninsured–we all paid for all of it. We just did it in the most inefficient possible way–a way that also, conveniently, allowed us to maintain the fiction that we had a “free market” health system. We didn’t, and we don’t.

What we have is an attitude: If a public service benefits me, it’s a natural outgrowth of the market. If it benefits poor people, it’s socialism.


  1. I would love to see a list of the intransigent House Tea Party folks and how much each one of them benefits from corporate welfare. I’ll bet not one of them is as independent as he/she would have you think, and that the total would astound you. Methinks that they protest too much, and what they accuse others of doing, they do in spades.

  2. A couple of years ago I wrote a short comment on the “mortgage interest deduction” which is in economic effect a “subsidy”. One objection I received was that I was not mindful of the degree to which middle income families depend on the deduction. I have no data to verify that this objection is or is not accurate. Nevertheless, I added an addendum to my original proposal in an effort to assuage this concern.
    My comment was:

    “Mortgage Interest Deduction Subsidy

    Many ideas about how to reduce our federal deficits are under discussion. One is elimination (or at least modification) of the home mortgage interest deduction (MID). You can tell whether your representative is serious about deficit/debt reduction by where she/he stands on this issue. To understand why, it is necessary to consider certain facts.

    Fact one: the MID is a subsidy, i.e. the money of all taxpayers is used to benefit a particular group of tax payers, namely those with mortgages. This fact alone does not make it bad, but you may think it is, given a few additional facts.

    Fact two: the MID is at least an 80 billion dollar per year subsidy.

    Fact three: the MID provides a much greater subsidy to owners with 1 million dollar mortgages than it does for those with 250,000 dollar mortgages. The ratio is roughly 9 to 1 in favor of the owner with the bigger mortgage.

    Fact four: the MID is ineffective. OK, so this is an opinion. But think about it. How does
    my receiving a subsidy help the country reduce the inventory of existing homes? Or help the builder who would like to build or the families who would like to buy a new home? No one promised me or any other taxpayer a permanent subsidy.

    Using just part of the MID to reduce the existing inventory of houses and to make it easier to purchase a newly built home would stimulate the home building industry in a way that the MID in its present form cannot. Owners of existing homes and the builder/employers of new homes need buyers.

    If the MID subsidy is divided with 50 billion dollars going to deficit reduction and 30 billion dollars to assist buyers of new homes, we could restore full employment in the homebuilding industry. What good are deregulation and lower taxes when you have no income because potential buyers cannot afford to buy? Thirty billion dollars in the form of $30,000 grants, no interest or deferred loans would make it possible for builders to build and qualified buyers to buy up to 1,000,000 new homes per year.

    Home starts now are 600,000 per year. We need at least 1,200,000 starts to restore health to the homebuilding industry. Each new home equals three jobs. Do the math. Ok, I’ll do it. An additional 600,000 home starts equals an additional 1,800,000 constructions jobs.

    Can we really afford to waste huge amounts of taxpayer dollars on a gigantic subsidy which is inequitable and ineffective?

    Reps. Dan Burton (R-IN), Maxine Waters (D-CA) and the President of the Builders Association of Indianapolis (see Letter to Editor 8/29/11) want to preserve the MID subsidy as is. . There is no doubt that the MID is very popular, but I do not think we can afford it. Do you?

    Mitigation of Repeal of MID

    The Section 8 housing subsidy program for very low income families requires that those families pay 30% of their adjusted gross income (AGI) toward their rent. If the MID is modified, it seems that it would be fair to say to existing homeowners that the MID will continue to be allowed in whole or in part if the loss of the MID results in the current debt service exceeding 30% of AGI. If after loss of the deduction, the debt service, for example, is still only 20% of AGI, the likelihood of mortgage foreclosure would be nil; whether it causes hardship depends, I guess, on the definition of hardship.

    Using my suggested formula, the family with a 250,000 mortgage and an effective interest rate of 5% could receive the full MID if the family’s AGI is below 43,280; would start losing the MID if the family’s AGI exceeds 43,280; and would lose the entire MID if the family’s AGI exceeds 53,680.”

    Jim Beatty

  3. Great post. Unfortunately, it will have no effect on those who need it most, because they live in a mythological world that exists only in their minds, the world of the brave, self-sufficient cowboy out on the plains – brave Clint Eastwoods all, shaming the meek and vanquishing villains.

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