Make no mistake: President Obama’s recently announced $US75 billion housing plan is a long-term policy disaster insofar as it merely treats the symptoms of the calamity in an extremely costly manner via crude short-term interest rate relief – read good taxpayers bailing out bad – and remarkably does nothing at all to prevent the next generation of US borrowers experiencing exactly the same problems in the future. In fact, it can be argued that it only creates a higher tax burden for tomorrow’s taxpayers.
As I previewed here, I recently had the honour of being parachuted into the crucible of the US policymaking debate when I was invited by the Rockefeller and MacArthur Foundations to present at the private Transforming America’s Housing Policy summit for Obama Administration officials in New York.
While in New York I was overcome by an unearthly feeling that the world I perceived was conspicuously different to that which my US colleagues could see. In trying to work out why, for instance, Australia’s financial system has to date been in such radically better shape than its US counterpart, I began to realise that there is a fundamental frailty that rests at the heart of the US financial architecture, which sets it apart from almost all other developed countries, and which has been largely responsible for both precipitating the current crisis and subsequently propagating it around the rest of our increasingly interconnected world.