Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future. Here are a few more I just emailed to him myself at 12pm on May 9, 2011.
Senator Rand Paul on Feb 7, 2011 wrote the article “A Modest $500 Billion Proposal: My spending cuts would keep 85% of government funding and not touch Social Security,” Wall Street Journal and he observed:
Here are some of his specific suggestions:
Housing and Urban Development
Agency/Program Funding Level Savings % Decrease
HUD $0 $53.082 100%
Public Housing and Rental Subsidies
Rather than providing a one-time stop for families on their way out of poverty, public housing has largely been a failure. Public housing projects have become havens of crime and dysfunction, driving away the very business investment and homeowners that would revitalize a city block.
The Low Income Housing Tax Credit, which subsidizes construction or rehabilitation of low-income housing, is a perfect example of market manipulation that does nothing to further the mission of public housing.
· The structure of the credit encourages projects to focus on particularly low-income areas, exacerbating
the concentration of poverty within cities.
· The tax credit is also allocated to areas where few housing affordability problems exist.
· Finally, the program does nothing to facilitate its goal of lower rents – developers pocket $4 billion in
annual tax credits while the rents in the buildings constructed under the program are generally no lower than they would have been in the absence of the program.
Replacing public housing with Section 8 vouchers has not improved upon delivery of services – in a landmark story by Atlantic Monthly on the rise of community crime rates associated with Section 8 vouchers, Urban Institute expert Susan Popkin said that the voucher program “has not lived up to its promise. It has not lifted people out of poverty, it has not made them self-sufficient, and it has left a lot of people behind.”
Furthermore, Section 8 vouchers remain an open-ended benefit that recipients can remain on permanently. There are no mandatory time limits and no work requirements. Families or individuals can stay as long as they want. And since the Section 8 voucher is linked to income, Section 8 recipients have very little incentive to expand their income or seek personal advancement. And why would they? The Section 8 benefit is large – the value of a New York City Housing Authority voucher for a two-bedroom apartment in 2010 was $1,543 a month.
As a result, subsidized tenants remain stuck in public housing and Section 8 buildings for years, even decades. They remain tied to a low-income area, preventing the community from enjoying the natural changes and upgrading over time, and preventing themselves from improving and advancing their lives.
Contributions to the Housing Crisis
Policies perpetuated by HUD and its related agencies played a key role fostering subprime lending that brought the financial system to its knees in 2008. By implementing policies that expanded risky mortgages to under qualified borrowers, HUD is directly implicated in the loss of over 1 million homes in 2008. Three of HUD’s policies had a direct impact on the housing crisis that still plagues many parts of the country today:
Loosening down-payment standards on mortgages guaranteed by the Federal Housing Administration
(FHA).
FHA was originally founded to provide liquidity in the mortgage market by insuring mortgage loans made by private firms to qualified borrowers. Their standards for qualification continued to relax – by 2004, the required down payment on the FHA’s most popular mortgage program had fallen to only 3 percent. Mortgages with very low down payments have historically had very high default rates.
In its rush to meet affordable housing goals, FHA was putting unqualified borrowers into mortgages they couldn’t afford. In September, 2010, a report by the HUD inspector general revealed that in FY 2009, serious flaws in the FHA’s automated underwriting process resulted in more than $6.1 billion in loans winning automatic approval for FHA insurance even though these borrowers had too much debt and posed a greater risk of default.
Strengthening the Community Reinvestment Act
The Community Reinvestment Act requires commercial banks to report the extent to which they lend funds back into the neighborhoods where they gather deposit. In 1995, regulators were allowed to deny a bank the ability to merge with another bank if their CRA ratings were low. This implicit pressure to lend resulted in some banks distributing mortgages to low-income borrowers previously considered non credit-worthy.
HUD’s Pressure to Lend
Congress exerted pressure on HUD to put more low-income families into their own homes. As a result HUD required that the two government-chartered mortgage finance firms – Fannie Mae and Freddie Mac – purchase far more “affordable” loans made to these borrowers.
For 1996, HUD required that 42 percent of Fannie and Freddie’s mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50 percent in 2000 and 52 percent in 2005.
However, the agency neglected to examine whether borrowers could make the payments on the loans that Fannie and Freddie classified as affordable. From 2004 to 2006, the two GSE’s purchased $434 billion in securities backed by subprime loans, creating a market for more lending of the same.
The Daily Hatch 