There are plenty of reasons that the House Republican budget authored by Budget Committee Chairman Paul Ryan (R-WI) would be detrimental for the economy, including its trillions in tax giveaways to the rich and its undercutting of food assistance to millions of low-income Americans. Added to the mix, the budget would deal a blow to the housing market, undercutting this vital sector of the American economy when it can least afford it.
The budget says, without very many details, that the GOP would wind down government backed mortgage giants Fannie Mae and Freddie Mac, while changing accounting rules to make Federal Housing Agency programs appear more expensive than they are. As the Center for American Progress’ David Min and John Griffith noted, these efforts could derail a housing recovery because:
– Federal support is keeping the housing market alive today.
– There’s no evidence that private money could fill the void if government-backed mortgages disappeared.
– Proposed “fair value” accounting rules would unnecessarily weaken FHA’s ability to stabilize the market and make homeownership possible for more Americans.
It’s unclear what time frame the GOP envisions for ending support for the housing market, or if they think any federal role in promoting homeownership is warranted. And this isn’t the first time that the GOP has proposed recklessly kicking the legs out from underneath Fannie and Freddie while they, like it or not, are keeping the housing market afloat.
But while the two mortgage giants can’t exist in their current form in the long run, removing all federal support from the housing market is simply unfeasible at the moment (and wouldn’t make for a good system going forward anyway). But the House Republicans, with their budget, are more intent on dismantling the social safety net than in actually promoting a recovery, so perhaps the fact that their housing plan would be a disaster shouldn’t come as much of a surprise.