I know this idea is bound to infuriate some people, but it could do more to stimulate the economy than anything the Obama administration -- or the Republicans -- have come up with so far. There's no question that the depressed housing market is a major factor stalling the economic recovery. Most Americans' wealth is tied up in their homes; housing prices have continued to fall precipitously, and largely because of the huge inventory of unsold houses. Many of those houses are foreclosures.
The Obama administration has tried a number of solutions to the problem, all of which have failed. Now they have a new idea that might help individuals who already own homes from losing them, but it won't do much to deal with the existing inventory of unsold homes. According to news reports, the administration is considering a plan that would allow all homeowners whose mortgages are guaranteed by Fannie Mae or Freddie Mac to refinance at current interest rates.
Currently, more than $1.5 trillion in government-backed mortgages involve interest rates above 5 percent, when the current rate is about 4 percent. These higher interest rates cost homeowners hundreds of dollars in higher payments each month. But even if the plan were to be approved, it's only a partial solution -- and one with some unintended consequences: possibly depressing the value of mortgage-backed securities, for example.
Increasing the country's population with affluent newcomers, however, would have few drawbacks and many benefits. First, it would stabilize home prices by drying up inventory, which would benefit every American who owns a home. Second, it would infuse the population with up to a million additional taxpayers, increasing government revenues. Third, it would help create new jobs, especially in construction, home renovation and ancillary sectors.
Since the mid-1980s, Canada has had a similar program in effect. It lets in various categories of immigrants with high net worth who would either invest in existing businesses or start new ones that would employ Canadian workers. As a result, Canada has welcomed many job-creating entrepreneurs, mostly from Hong Kong and Taiwan, who have contributed enormously to Canada's relative economic health.
Linda Chavez is chairman of the Center for Equal Opportunity and author of Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics .
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