The problem is too much borrowing, too much artificial inflation of home prices.Meanwhile, GMU economist Tyler Cowen says the free money won't do what Senator Mitch McConnell hopes it will do:
On what planet should the Republican/conservative alternative be to encourage more borrowing and to prop up prices so they don’t fall “too much?”
This is more of the same old, same old: Kicking the can down the road. Real change — fiscally repsonsible change — means sucking it up, allowing housing prices to fall, and getting the government out of the home-lending business.
The tax credit will subsidize the new buyers without propping up the price of homes. Demand will go up, supply will go up, price will stay more or less on the same trajectory, and banks won't be any healthier.