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The Homebuyers Tax Credit and Free Market Fundamentalism

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Dean Baker
TPM Café, November 5, 2009

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The Senate just voted unanimously for extending unemployment compensation. The bill also included an $8,000 handout of taxpayer dollars to some people who buy homes (first time buyers and long-time homeowners). This $8,000 credit is not chump change. It is more than twice what it costs to pay for health care for a child for a year on the State Children's Health Insurance Program. It is about 50 percent higher than the average cash grant to a family on the much-maligned Temporary Assistance for Needy Families program (i.e. welfare).

The tax credit is noteworthy not only because it is an incredibly bad use of tax dollars. It is a great example of how so-called free market, anti-government conservatives are perfectly happy to use tax dollars to help people they like, specifically realtors, builders, bankers, and the relatively affluent people who will be the primary beneficiaries of this tax credit.

This is not free market fundamentalism; it is crony capitalism. It is redistribution. It is "spreading the wealth around." However, the direction is upward. This should be obvious, but yet many progressives insist on denouncing free market fundamentalists. They should get paid by conservatives for these denunciations.

The point is simple. The concept of the market has real appeal. If the alternatives are leaving matters to the market or letting some pointy-headed government bureaucrat decide issues, most people will pick the market. If progressives let the conservatives hide their government-for-the-rich agenda behind "market fundamentalism" then we have done them an enormous favor.

The truth is that the conservatives also have an ambitious agenda for the pointy-headed bureaucrats. The big difference is that conservatives want the pointy-headed bureaucrats to be giving taxpayer dollars to the people who already have lots of money. They have no interest in leaving matters to the market, at least not if the outcome is to reduce the income of those at the top.

Progressives should expunge the term "free market fundamentalism" from their vocabulary. The bad guys are not believers in the free market; they are believers in using the government as a tool of the rich. We should never let them get away with pretending otherwise.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.