Updates on Housing Bubble and Health Care

Friends,

From time to time I feel the need to prove that I am not the only one who believes what I write and that other smart people feel the same way.

Housing Bubble

Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist.

His recent article (March 17th) at Bloomberg.com echoes many of my sentiments that I referenced on my blog a few weeks ago (Feb. 27th) concerning the fact that land regulations are the root of the U.S. housing mess. Excerpts from his article include:

“…a recent study by Cato Institute scholar Randal O'Toole that draws on broad economic literature documents that the price swings are, in fact, not so difficult to understand. Out-of- control government regulation started the mess.”

“When land use is constrained, supply can't respond to higher prices, forcing prices to climb even higher. This is exactly the impetus that can start a catastrophe like the current episode. ``It's a regular cycle,'' O'Toole told me last week. ``States adopted land-use regulations, and then their real estate prices skyrocketed and then crashed. Early movers like California have seen the cycle a number of times.''

“The evidence is clear. Regulations that inhibit the supply response to higher prices are the primary culprit in this mess. “

“For the long term, draconian land-use regulations must be reconsidered by local and state governments. If not, it will only be a matter of time before we experience this all over again.“

I wrote:

“Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.”

“My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.”

Clearly, I should be charging more for this newsletter :)

Health Care

Shawn Tully, editor-at-large for Fortune magazine wrote a column called “Why McCain has the best health-care plan”

He wrote:

“McCain's main pillar is the elimination of a tax break that employees receive if their employer provides their health care.”

“So what types of policies would they buy? Employees (and their families) with corporate plans - about 150 million Americans - would probably rush toward high-deductible, low-premium insurance, and use what's left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts,”

I wrote several months ago:

“I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan.”

Also in the article, he explains that McCain’s plan includes ideas that we should be able to purchase insurance across state lines. On first glance, I agree with this, and I may write something in the future about it.

As always, tell me what you think.