Easing the pain in the wake of the Great Recession may be politically if not morally correct. It may even be smart economics, depending on the details and the timing. But 1 +1 still equals 2 and in the end there’s a risk that we’re stimply trading the acute for the chronic. Ideally, finding some middle ground is the goal, but it’s devilishly hard in practice. Meantime, what looks like progress on paper all too often ends up as counterproductive in practice. The best laid plans and all that jazz.
The latest example comes from a report in The New York Times that the government’s efforts at easing the fallout from rising foreclosures in residential housing may be making things worse. The key quote in the article comes Kevin Katari of Watershed Asset Management, a hedge fund in San Francisco:
“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis. We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”
We can debate the merits of providing aid to homeowners at risk of losing their homes. We can also discuss the details of how to structure a plan that makes sense in offering financial support. But let’s be honest and recognize that assistance comes with a cost. The price tag may be tolerable, perhaps even negligible. But not always. Sometimes the blowback from helping and intervening can be substantial, even if it’s not immediately obvious today.
There’s still no free lunch, but that doesn’t stop us from thinking (hoping) that it’s different this time.