This week the President gave an address to a joint session of Congress. I was honored to be in the House Chamber for this historic event. While the style of the speech was impressive, I was underwhelmed by the financial obligations it places on the American people, now and in the future.
Most of us agree that our country is facing many challenges, namely the lagging economy and struggling housing market. President Obama announced a housing plan that, while well intentioned, raises a host of troubling issues. The administration’s housing plan has two main components. The first component would allow homeowners to refinance their mortgage at current market rates. However, most homeowners in our region would not qualify for the program because the sharp decline in home values would make them ineligible. The second component of the plan would allow struggling homeowners to have their mortgage payments reduced to an amount that is no more than 31% of their gross income. To reduce mortgage payments, the program will utilize a number of options, including reducing interest rates, extending the length of the loan, and reducing the principal amount. Under the plan, the federal government will be responsible to pay the lender for half of the cost for any modification as well as other bonus and subsidy payments.
I agree that market-based loan modifications make sense for homeowners who are on the margins, but in some cases, people simply bought homes they could not afford. While I agree that foreclosures adversely impact other homeowners, I do not believe homeowners who pay their bills on time and renters, who have saved up to buy a home, should foot the bill. The moral hazard in this case is simply too great and establishes a troubling precedent. Where a reasonable workout can occur, every effort should be made by both the lender and the homeowner. We must also find ways to spark some demand in our housing markets, so I have introduced legislation that would provide a $15,000 tax credit for buying a home as well as a bill (H.R. 755) which would eliminate the capital gains taxes on up to two investment houses purchased over the next three years.
The President also touched on several other issues in his address such as education, healthcare, energy and the environment. Again, I agree that there are many challenges facing America however, I simply do not agree that government is always the answer to our problems.
The President talked about making clean, renewable energy profitable and in the next sentence called for market-based caps on carbon pollution. History has shown us that we cannot regulate our way to a profitable and workable product. Mandates and subsidies for the production of corn-based ethanol are a perfect example of how government manipulation negatively impacts a specific market. If government provides strong incentives, for example tax credits for hybrid cars, then consumers can weigh the different options as they make decisions on how to spend their money.
I am also unclear about how the President will pay for the expansions of healthcare, education, energy and other programs while also cutting the deficit in half. While he stated that only the top 2% will see their taxes increase, which I oppose, the level of spending is simply not sustainable without future tax increases for all Americans. I was also disappointed that the President spent very little time addressing foreign policy and the wars in Iraq and Afghanistan.
I hope that the President will work with House Republicans and that we can come to agreement on solutions to some of the problems that he has laid out. However, I will not vote for a budget that creates an unsustainable level of spending that may lead to burdensome taxes and regulations – the beginnings of a socialist system. As former British Prime Minister Margaret Thatcher so eloquently stated, “The trouble with socialism is, sooner or later you run out of other people’s money.”
Member of Congress