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Globe Editorial
WHEN CONGRESS approved tax credits of up to $8,000 for first-time home buyers earlier this year, it was billed as an emergency measure - a temporary stimulus to keep an ice-cold housing market from freezing over entirely. As the Nov. 30 expiration date nears, supporters of the credit are proposing to extend it and even expand it. But the credit has served its purpose about as well as it can, and lawmakers should just let it lapse.
Legislation by a group of Senate Democrats would renew the existing terms for six months. A more ambitious proposal comes from Senator Johnny Isakson, a Georgia Republican who wants to hold the credit over for another year, expand it to $15,000, and offer it to all buyers. Both ideas assume that extending the credit will somehow draw in reluctant buyers who haven’t been persuaded up to now - a dubious proposition.
While economists disagree about the impact of the credit, it clearly has brought in at least some consumers who would otherwise have kept on renting. This influx of new buyers may have slowed the nationwide plunge in real estate prices. But the success of the program - like that of the “cash for clunkers’’ auto-sales credit - depends on the perception that the credit wouldn’t be offered forever.
Extending it would carry considerable costs. Most of the estimated $15 billion price tag for the current credit did not yield new sales; according to a recent Brookings Institution study, 85 percent of those receiving the credits would have bought homes anyway. Extending the credit and broadening eligibility for it, as Isakson proposes, would only aggravate the problem.
The federal government has long subsidized home purchases through the mortgage-interest deduction. And while adding a second subsidy might have helped stabilize the housing market at a bleak time, it can’t go on forever.
© Copyright 2009 Globe Newspaper Company.
