'No wonder houses aren’t affordable’: Economist breaks down 50-year mortgage

Key Concepts

• 50-year mortgage
• Tariffs
• Tariff dividends
• Quantitative easing
• Inflation
• Inequality
• Government spending
• GDP (Gross Domestic Product)
• Debt reduction

50-Year Mortgages: A Game Changer?

Brian Westbury, an economist, discusses the concept of a 50-year mortgage, a proposal that some in the Trump administration have described as a "game changer." Westbury acknowledges that while the term "game changer" might be an overstatement, the idea is not without merit. The primary benefit of a 50-year mortgage is its ability to reduce monthly payments for homeowners. This is achieved by spreading the repayment period over a longer duration, similar to how automobile loans have extended from three years to five, six, or even eight years. The core objective of such a policy is to lower the immediate financial burden on individuals.

The Burden of Government and Regulation

Westbury argues that the fundamental issue of housing affordability, and indeed many economic challenges, stems from the significant burden of government. He states that when federal, state, and local government spending, combined with the costs associated with complying with government regulations, is considered, it accounts for over 50% of the nation's GDP. This means that government effectively takes half of the nation's income. Westbury contends that instead of implementing policies like extended mortgages to address affordability, the focus should be on shrinking the overall burden of government and taxation on homeowners.

Tariff Dividends: A Proposed Policy

The discussion then shifts to President Trump's proposal of "tariff dividends," where revenue generated from tariffs would be distributed to taxpayers in the form of $2,000 rebates. Westbury expresses his reservations about this idea. He views tariffs as a tax and believes that if tariffs are to be implemented, the revenue generated should be used to pay down the national debt.

The Root Cause: Quantitative Easing and Its Consequences

Westbury identifies a more significant underlying issue: the policies enacted since 2008, particularly quantitative easing (QE). He explains that QE involves the Federal Reserve "printing" money, a practice that was repeated during the COVID-19 pandemic, leading to massive deficits. According to Westbury, these actions have had two primary negative consequences:

1. Inflation: The increased money supply has fueled inflation.
2. Increased Inequality: QE has exacerbated inequality in the country. Those who own assets, such as stocks and houses, benefited from these policies, while those without assets lost out.

Westbury argues that many of the current policy proposals aimed at making things more affordable or distributing money are, in essence, attempts to fix problems that were created by the excessive printing of money in the first place. He asserts that the set of policies implemented over the last 15 years have created more inequality than any previous period.

Connecting Policies to Inequality and Political Outcomes

Westbury draws a direct line between the inequality created by these monetary and fiscal policies and recent political events. He suggests that this increased inequality is the reason behind electoral outcomes like "Mamdani won in New York" and the emergence of proposals such as 50-year mortgages and $200,000 rebates. These policies, in his view, are all attempts to address the very inequality that government actions have generated.

Conclusion

Brian Westbury's analysis highlights a critical perspective on current economic policies. He argues that while measures like 50-year mortgages might offer superficial relief by lowering monthly payments, they do not address the fundamental drivers of economic hardship. The core issue, according to Westbury, is the excessive burden of government spending and regulation, coupled with the inflationary and inequality-generating effects of quantitative easing. He advocates for a reduction in government's role and a focus on fiscal responsibility, such as using tariff revenue to pay down debt, rather than implementing policies that he believes merely attempt to patch up problems created by prior government interventions.