Stupidest policies ever

In his quasi-blog* at The Atlantic, James Fallows asked whether anyone can name a more stupid policy that passed with bipartisan support during the last 50 years than the McCain-Clinton proposal for a gas-tax holiday.  His pick from the many submissions he received is the mandates and subsidies for corn-based ethanol.  The full list of popular submissions is worth reading — Fallows notes that while some of them had worse effects than ethanol subsidies, in order to make the short list, a policy had to be obviously bad even without the benefits of hindsight.

The policy that I was surprised not to see on the list is the mortgage interest deduction, the one policy that everyone from the Center on Budget and Policy Priorities to the American Enterprise Institute agrees is terrible policy.  It’s expensive, regressive, and most people agree that it makes homeownership MORE expensive for the people likely to be on the margin between owning and renting.  I don’t know if it misses the 50 year cut off, or if Fallows’ readers are likely to be in the group that benefits from it, and so are blind to its faults.

What else would you put on the list?

*It’s a quasi-blog because it doesn’t allow comments.  This is clearly Fallows’ choice rather than The Atlantic’s because Yglesias has a real blog on their site.

5 Responses to “Stupidest policies ever”

  1. dave.s. Says:

    Mortgage interest deduction is dreadful, but I think the goal of giving a boost to middle- and lower-middle homebuyers is a good one. Probably my best choice to replace it would be a tax credit of, say, 40% on the first $15000 of mortgage interest. Does something notable for an iron-worker in Chillicothe buying a $150000 house, drops off the radar for a podiatrist in Great Falls buying one for $2 million.

  2. bj Says:

    When was the deduction passed? I think it’s an example of something that’s almost impossible to change, no matter how bad, once it’s in place. It seems like “badness” should be increased by whether you can ever change the law again. I still hold out hope that the ethanol subsidies can be changed (because they’re a special interest law — if the power of that group decreases enough, eventually the law might be changed).
    But, the mortgage interest deduction is so broad based, that the only way that it could be passed is in a “grandfathered” way. And, grandfathered removal of benefits always raises significant equity issues in my mind (especially these days, when the world seems to be trending towards more economic burdens on the younger folks).
    (Social security has similar problems, if you think it’s bad — I don’t, but it’s also a law that’s extremely difficult to change, once in place. I think conservatives worry about the same effect for any large-scale change of our health insurance scheme — that there would be no going back).

  3. MBB Says:

    The mortgage interest deduction has actually existed as long as the US has had a federal income tax. The NYT had an article about this a few years ago http://www.nytimes.com/2006/03/05/magazine/305deduction.1.html

  4. dave.s. Says:

    There is a ceiling on the mortgage interest deduction – put in by Dems, as I remember – at the $1 million level. At the time the ceiling was put in place, a $1 million house was for the rare plutocrat, and an average house in a nice coastal neighborhood went for $150-200 thousand. If our currency continues to deteriorate for the next ten-fifteen years, this will chip away at the value of the deduction.

  5. dave.s. Says:

    A great candidate for ‘stupidest policy ever’ is not allowing bankruptcy. Also in the Atlantic blogs, Megan McArdle posted on Dubai: http://meganmcardle.theatlantic.com/archives/2009/04/why_bankruptcy_matters.php. Hideous.

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