Thursday, April 10, 2008

Home Builder Bailout

The US senate passed a bill today that would give special tax rebates to distressed home builders. Via Calculated Risk is this Reuters report:
At a cost of $15 billion over 10 years, the Senate bill would give a $6 billion tax break to home builders by temporarily extending a rule that lets businesses count current losses against taxes from prior profitable years.

Home builders such as Pulte Homes and KB Home would benefit from this proposed two-year extension of the net operating loss carry-back rule, according to analysts.
The US is supposedly a capitalist society. But it hard to see how that could be if taxpayers are expected to shoulder the burden of the mistakes of corporations like these idiotic home builders. "Privatize the profits and socialize the losses" is not capitalism.

Let's count the bailouts so far:
  1. $30,000,000,000 to JP Morgan's acquisition of Bear Stearns
  2. $200,000,000,000 or so from TAF to take worthless paper off the hands of banks
  3. $15,000,000,000 to "distressed" home builders in the form of a tax break
Let me know if I've forgotten any in comments.

I thought of one more bailout; the $165,000,000,000 fiscal "stimulus" package being sent out to US Taxpayers. Not exactly targeted per se, but it's hard to argue it's not a type of bailout.


Jmazu said...

I think the tax credit for the big builders is crap. Congress once again is bowing to pressure from the speical interests. The big builders created the housing problem we now face, they raised prices on home during the boom years, made HUGE profits, over built inventory and not face huge loses because they don't know how to run a good reasonable buisness. Pure Greed! I used to work for one of these big builders. I was layed off to cut overheads. I can't find a job, I most likely loose my house this year. Can I get the taxes I paid when I was earning big pay checks in the boom years (I was a Sr. manager, times were good). I don't think so. Once again the middle class takes one for the team and the High Paid CEO's get paid millions. Ah, the American dream, alive and well.

Afferent Input said...


Sorry to hear about your situation. It really does come down to pure greed. The moneyed interests will do whatever they can to keep as many marbles for themselves, including buying off the refs to change the rules in the middle of a game. The rest of us get stuck with the bill. American dream, indeed.

42 said...

hey, did you see where Paulson predicts that the gummint checks soon to hit cash registers all over the US (not) will create half a million jobs?

Yeah, I laughed too,

Ken Houghton said...

The $165B in rebates isn't a bailout in the same sense of the phrase.

It's a pure Bush administration bailout.

That is, the money (if some portion is spent--which it will be by the liquidity-constrained [read: most of us]) will ensure that NBER doesn't call a recession during the closing months of W's presidency.

And the bill will come due in April of 2009, after W is out of office—remember 2001's round?

It's a political bailout, not a financial one.