Progressive Nudges for Household Savings
If I were a card-carrying progressive, I would not stoop to being a lapdog for Wall Street and the real estate industry, playing the violin for “affordable housing” and low-down-payment mortgages. True, if somebody buys a house with little money down, they may accumulate equity both by paying off loan principal and through house price appreciation. But they are still gambling, and most of the people who gambled that way five years ago have lost everything. In fact, even when house prices were rising, the asset-accumulation was dissipated as households discovered home equity credit lines and cash-out refis.
Instead, I propose:
1. Saved-income tax credit. Like the earned income tax credit, except that you don’t get to use the cash on current consumption. It goes into a saving account, where it might be used for a down payment or for paying for your kids’ tutoring or private schooling. (Or is only government-run education acceptable to a progressive?)
2. Rent ‘n’save. To mimic the automatic discipline of mortgage payments, create a program where your monthly rent payment includes an extra 10 percent that the landlord deposits in a saving account for you. Again, the saving account can only be used for some long-term purpose.
3. Get rid of the mortgage interest deduction, and instead lower the taxes on savings and corporate profits.