Politicians pledge to distort the economy.

Economically, we’re screwed because President Obama is offering mortgage help. That’s bad, but the Republican response shows that not even the opposition gets it. (I know, surprise.):

Republicans, who opposed the president’s stimulus package of over $800 billion largely because of its spending priorities, suggested mortgage help as well, proposing government-backed 4 percent fixed-rate mortgages for “any credit-worthy borrower,” Senate Republican Leader Mitch McConnell said.

“The availability of these low-interest loans would increase demand for houses significantly and low-interest mortgages would boost household income,” McConnell said in a separate radio address.

Unless people believe the near-future economy will be better, they’re not going to invest in housing, especially since a decent short-term memory will suggest that housing involves risk. But more importantly, isn’t artificially lowering the cost of an activity unwise?

The key is artificial. Sen. McConnell is offering no explanation for how he arrived at 4%, and I doubt he’s enough of an expert to determine that 4% is appropriate for “any (i.e. every) credit-worthy borrower”.

I don’t grasp how a low-interest mortgage increases household income, either. Does he mean disposable income? If so, does he mean only people with a high(er) interest rate mortgage already? For those who will enter the home buying market, will their mortgage be higher than their rent, even at 4%? This would decrease household disposable income. How will that help the economy?

Every time a politician interferes, that politician forgets that there are people who suffer from the decisions. Groups, as they exist for political posturing, are meaningless.