New Ideas Needed: Tax Breaks

Allan Meltzer, a former Fed economist who teaches at Carnegie Mellon University, appeared on the NPR's Morning Edition today, stating that while some of the bailout maneuvers are helpful, he is "dubious" of the Fed's strategy. Says Meltzer: "Throwing all this money into mortgage and credits is addressing the wrong end of the problem...What needs to be done most is to clean up the excess supply of housing. Until we get rid of the housing, the excess supply of housing, we're not going to see an end to the drop in housing prices...What I want them to do, is say, look if you buy a house this year, and make a down payment, and it's important there's a down payment, we'll give you a tax credit for the down payment, and if you don't pay taxes, we'll give you the money. That'll stimulate the demand for housing from now until the rest of 2009." He also believes the recession will last until summer 2009. [NPR]