Congresswoman Maxine Waters won’t be happy.
The California Democrat, known for her Freudian slips, has
demanded that $4.19 billion be included in the stimulus
package for Housing and Urban Development’s Neighborhood
Stabilization Program. In theory, the funds would enable local
governments and nonprofits to purchase and then resell foreclosed
homes, ostensibly avoiding blight. The House version, passed Jan.
28, included the earmark. The Senate version, passed Tuesday, did
not.
The neighborhood stabilization program was one of several
appropriations that got the axe before the Senate approved the
package 61-37. Three Republicans broke ranks and joined Democrats
in supporting the bill. The package is now in a conference
committee where House and Senate leaders can hammer out
differences.
Whether the stabilization funds will be included in the final
version remains to be seen, as negotiators are
aiming for a compromise in the $800,000,000,000 range. (Yes,
it pains me to juxtapose the word compromise with a number that
contains so many zeros.) But lawmakers would be wise to keep the
funding out, given the probability that it will be ineffective
and mismanaged.
Granted, that claim could be made about most of the porkulus
bill. The federal government’s last go at stimulating the economy
produced some nice bonuses and parachutes for CEOs, but not much
in the way of real economic relief. The potential for fraud is
especially acute for the NSP, which essentially gets Uncle Sam
into the house-flipping business.
The U.S. Office of Inspector General recognizes the danger of
misuse — it has identified NSP funds as “high risk.” Republican
lawmakers fear the funds could end up in the pockets of leftist
nonprofits.
Chief on that list is the Association of Community
Organizations for Reform Now, or ACORN, infamous for voter fraud
last year.
ACORN has denied all interest in the money. “We have not received
neighborhood stabilization funds, have no plans to apply for such
funds, and didn’t weigh in on the pending rule changes,”
said Bertha Lewis, chief organizer for ACORN.
Even if you buy that line, hundreds of other nonprofits are
applying (some of them clearly leftist), and plenty of money is
already up for grabs. Congress allocated an initial $4 billion
for the NSP in the mortgage industry bailout passed in July. That
money is now in the coffers of state governments awaiting
distribution to counties, municipalities, and nonprofits.
It isn’t hard to imagine the myriad openings for fraud in this
scheme. HUD has pledged to monitor where the money goes and hold
organizations accountable for its use, but let’s not kid around.
Billions in taxpayer dollars are being spread to every corner of
the country. Much of it will slip through the cracks.
Even if the money is used for its stated purpose, though,
supporters ignore one inconvenient fact: devoting federal dollars
to foreclosed homes has the unintended consequence of
encouraging foreclosure.
That goes back to the left’s inability to understand moral
hazard, either in culture or the marketplace. Offering welfare
incentives for working fewer hours or having a child
out-of-wedlock will produce — shockingly — more people who work
fewer hours and have children out-of-wedlock. Likewise, doling
out government bucks to buy foreclosed homes gives incentive for
banks to foreclose on more homes.
To boot, it’s generally not a good idea to get the federal
government involved in the real estate market. Congresswoman
Virginia Foxx, a Republican from North Carolina, puts it well:
“If you liked the way the federal government handled Hurricane
Katrina relief, you’ll love the way they handle real estate
investments.”
Aiding homeowners in tumultuous economic times is a noble goal,
but it’s critical to weigh the consequences. Lawmakers must
think, not feel — a tall order in a panic-stricken economic
atmosphere, but an essential one. Here’s hoping they have enough
sense to keep at least this earmark out of the porkulus
juggernaut.
