I'm usually a Paul Krugman fan, but I've just read his latest piece on why homeownership isn't something we should encourage, and I'm stunned.
I couldn't disagree more, but I guess I shouldn't be surprised. Krugman opposes President Bush's promise to increase homeownership, and in fact celebrates its failure. And that's what Paul does about Bush.
But he goes farther, saying our tax code and other policies shouldn't encourage ownership. In fact, Bush was right on this -- we should encourage ownership in every way we can. This is a fundamental New Deal, American Dream policy.
Why is Paul wrong? Let me count the ways.
- Krugman says there's too much risk; home values can (gasp) go down. True, over short periods. But over time, homes have proven to be a great investment. There are millions of retired people in America who've been able to do so comfortably because they built equity. You can tap that, or live without paying rent.
Is there risk? Sure. But like stocks, homes are a far better investment than putting your money in a mattress. And they're better than stocks, too.
- He also frets that it ties workers down. When your job gets outsourced, I suppose, it's harder to move on. But is being tied down a bad thing? How do you build solid communities, a ripe political life, or even maintain a democracy if people have no stake.
I certainly remember when business owners were fixtures in community life, when part of success was employing your neighbors and keeping your community thriving. Now they've gone mobile -- chasing cheap workers in the third world, incorporated in the Caymans -- and has it been good for our country and our community? Does it make me want to see the average worker become a nomad, rootless and renting and retiring -- exactly where? Nope.
- He also cites the cost of commuting to distant suburbs, to some extent a valid point. But consider that those 'homes' we own could as easily be townhomes or condos near public transit or a city center. This is a planning problem, not a problem with homeowneship.
Lastly, or really first in his piece, Paul suggests that by encouraging homeownership, we say renters are worthless. That's just nonsense.
But there is a value in ownership. Simply put, you can tell a neighborhood of owner occupants from a rental neighborhood. Owners do have more of a stake than renters and take more of a role in their community; and owners who live on site take better care of their property as well.
But really, the simple fact is that for much of modern history, the difference between upper and lower classes was ownership of property. Paul knows this -- and notes that he and his wife are in fact owners. He's no doubt one of the upper crust (and more power to him) and they own.
The policies we have encouraging ownership have long been a basic part of the ladder to the middle class. Let's not abandon it simply because, on this rare occasion, Bush supported a good policy.
Mr. Krugman can still find solace in Bush's failure to execute it well.