The Housing Bailout as a Public Good
By Arnold Kling
Why do we have a housing bailout that spends $75 billion, plus $200 billion in “support” for Freddie Mac and Fannie Mae? By what test is this a public good?
My test is this: would an overwhelming majority of Americans be willing to donate a significant amount of their personal funds to the cause of bailing out troubled homebuyers? If the answer is “no,” then it is not a public good.
The answer probably would be “yes” for courts, police, national defense, or cleaner air. If so, then those are indeed public goods.
In a libertarian society, government would not undertake programs for which it could not obtain substantial amounts of voluntary donations. Indeed, one version of an ideal libertarian society is one in which government is funded by donations rather than by coercive taxation.
I do not insist on this latter ideal. However, I do think that it is legitimate to evaluate programs as if they had to be funded by donations. If a program cannot meet that standard but instead is forced down people’s throats by our technocratic representative democracy, then that program is immoral. Into that category get placed the housing bailout, the bank bailouts, and the stimulus bill.