The Latest Transfer of Cash to the Rich

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In the Sunday New York Times, I read Gretchen Morgenson's article in the business section providing details of Obama's latest farcical "help" to the middle class. Prepare to have your stomach turned.

According to the article, Obama on November 6th signed the Homeownership and Business Assistance Act of 2009 (sounds nice, doesn't it?) It provides for:

  • Extending unemployment benefits yet again by 20 weeks;
  • Providing first-time home buyers a tax credit

So, in each of the above, we have taxpayers handing over dollars to either those not working, or those who are buying a hope and getting a free multi-thousand dollar gift that you and I never enjoyed. (I imagine most everyone here who owns a house actually paid for it and didn't get any special gimmicks and giveaways in doing so).

But much worse is the following: it provides for homebuilders to use losses in 2008 and 2009 to offset profits booked as far back as 2004, creating a $33 billion windfall for these organizations.

The Obama administration piously spoke of how this bill would help "struggling businesses". Here are some examples of these poor, beleaguered organizations:

  • Pulte Homes, which will receive refunds of $450 million, has $1.5 billion of cash in the bank
  • Hovnanian Enterprises is getting back $275 million and has $550,000,000 in the bank
  • Stanford Pacific will get a $80 million check to deposit into its account that already has $523,000,000

How did the companies pull this off? Lobbying, of course. And what a return on their investment!

How much did Pulte's $450,000,000 refund cost? $210,000 in lobbying. That's about $2,100 returned for every $1 invested in lobbying! The entire industry spent $8.2 million lobbying which yielded the $33 billion extraction of cash from the Treasury (that would be you and me) to the homebuilders. So the overall return is even better – over $4,000 in tax refunds for every $1 of lobbying expense.

So as you gaze at your paycheck, with about 50% of the money extracted by various government organizations, at least you know where it's going. It'll make you feel extra warm and fuzzy next April 15.