Morning Action: Fannie and Freddie Should Be Eliminated for Taxpayers’ Sake

FANNIE AND FREDDIE.  The Heritage Foundation recommends unequivocally that Congress should end Fannie Mae and Freddie Mac and not replace them with anything remotely similar.  Taxpayers are already responsible for $4 trillion in GSE guarantees.  It’s time to get beyond a “Depression-era mortgage market” because:

  • The government guarantees that originated in the 1930s were nationalized versions of market-driven innovations. Instead of eliminating financial risk, nationalizing these innovations only expanded that risk and shifted it onto taxpayers.
  • The government guarantees in the housing finance system were not the main driver of the postwar housing boom, and they remained a small part of the market until the 1990s. As the GSEs became dominant, they nearly destroyed the housing market.
  • The GSE system is one of the main ways that government policy has encouraged investments in the housing sector at the expense of other areas of the economy. Government policy should not favor one industry over another.
  • After billions in taxpayer subsidies, the long-term homeownership rate in the U.S. has remained virtually unchanged—from 63.9 percent in 1968 to 65 percent in 2013. Yet taxpayers remain responsible for approximately $4 trillion in GSE guarantees.
  • Removing the government guarantee from housing finance would have minimal impact on the overall U.S. economy and would likely result in lower housing costs, less personal debt, and higher personal income and savings.

DEBT LIMIT.  The Senate is likely to clear the debt limit deal today (sub. req’d):

The Senate today is expected to clear a debt limit extension once Republican demands for a 60-vote majority are satisfied. GOP lawmakers object to passage of a “clean” debt limit bill by a simple majority vote, arguing that it only encourages more profligate spending. GOP leaders in the House, however, have taken an approach that should expedite the extension, by inserting it in an already passed Senate bill. That allows Majority Leader Harry Reid to take up the measure immediately, without the usual motion to proceed. 

MEDICAID.  Obamacare will raise the cost of Medicaid by $36 billion to $39 billion over the next decade:

Health insurers told to pay $150 billion in taxes over a decade to help fund Obamacare are now shifting at least part of that cost back to taxpayers.

Congress passed the insurer tax four years ago to help cover the uninsured under the Patient Protection and Affordable Care Act. Now, the industry is pushing to include some of the cost in contracts with Medicaid programs for the poor that are jointly funded by state and federal governments.

The strategy may add $36 billion to $39 billion to the cost of Medicaid over a decade, depending on how quickly the health program expands, according to an industry-funded study released today by the actuarial firm Milliman Inc.

IMMIGRATION.  The Heritage Foundation explains the House standards for immigration reform are nearly identical to the flawed Senate bill:

Both chambers promise new enforcement, border security, and visa reforms in exchange for amnesty—a costly, unfair, and unworkable policy that did not work in 1986 and will not work now. Rather than repeat the mistake of 1986, House leadership should focus on how it can encourage President Obama to enforce existing law. 

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Senate expected to pass clean debt limit suspension today.

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