The 99%

What if I told you that Congressional leaders were maneuvering right now to enact a policy that literally benefits only the top 1% of Americans? If you were an "Occupy" protester, you'd probably tell me that's the only thing Congress ever does! Others know better, of course, but in one way it's absolutely true. Despite overwhelming opposition from conservatives, including NTU, I'm hearing lots of buzz that negotiators on the "minibus" appropriations bill are considering including a provision to raise conforming loan limits for the FHA (which insures mortgages) back up to an absurdly-high $729,750 (from an already-high $625,500 limit).

In a hilariously convenient coincidence, it turns out that the higher limit would quite literally only benefit roughly the top 1% of home purchasers. Not content to insure mortgages at a level that would cover 92% of all home purchases (like we did at the pre-bailout loan limit of $417,000), or even 97.8% of home purchases (which a $625,000 limit would cover), some in Congress are apparently insisting on allowing FHA to insure mortgages at a level that would cover nearly 99% of all home purchases. It would be funny if it wasn't so sad (and angering).

Federal involvement in the mortgage market has already cost taxpayers a staggering $169 billion, but that is apparently not enough of a disincentive for some Members of Congress. Not only would the higher conforming loan limit increase risk for taxpayers, it would stomp on a willing private mortgage insurance market and dramatically undermine the prospects for true housing policy and GSE reform in the future. We should be spending this time figuring out how to wind down Fannie and Freddie and the FHA's outsized role in housing finance. 

The "99% movement" protesters are wrong as it relates to income taxes, where the top 1% of earners paid nearly 37% of all income taxes in 2009. When you broaden the scope to all federal taxes (including corporate, social insurance, and excise taxes), the story is basically the same: the top 1% shouldered 28% of the burden in 2007. Our tax code is not, by and large, rigged for rich folks. But if the conforming loan limit reports are true, we're about to hand the gift of federal backing to the richest 1% of homeowners in the country in a shameful and completely unnecessary act.