You may be able to live with that. I can't. Food prices have been soaring over the past year, hitting the poor the hardest. Even core inflation is high. In contrast, unemployment, while still up over a year ago, is still at one of its lowest post-1973 levels. Every dollar the government spends without a tax raise is a guarantee of more erosion of the lower class's spending power; every dollar it spends on helping mortgage borrowers is a guarantee of saddling renters with debt on behalf of people who are still far richer than they are.

I don't know why you insist this a zero sum game, or that it's about class warfare.

Whether you're rich, poor, middle class, or something in between, you WILL be affected by this housing crisis and the impact on the economy. MILLIONS are expected to go into foreclosure over the next few years and you think nothing should be done? Do you think renters will somehow be spared the pain? Do you not think food prices will not soar even higher? Do you not think unemployment will not continue to go up? Will the poor not get hurt in a recession? To follow your logic, nothing should have been done to help the economy during the Great Depression because it started with the crash of stock market and rich people's assets.

Let me also remind you that while there obviously are a lot of middle class homeowners, many first time homebuyers are barely above the status of working poor. My grandmother was a widowed, barely educated, low income, immigrant seamstress with two children when she bought her house which she converted into a small aparmentment building and rented to people just like her.

Strip working people of the equity they have established in their home and watch how quickly the ranks of the poor grows.

I don't think it's about class warfare. It wasn't about class warfare when Reagan ensured mortgage interest would remain tax-exempt even as other interest became taxable, a policy helping the upper middle class the most. It's not about class warfare now, when the crisis involves the lower middle class.

What I do think it's about is two things. First, politicians perceive home ownership to have such a mythical value in the US that they give it undue economic benefits. That's why they gag government-sponsored commissions that report that the mortgage tax credit doesn't increase the home ownership rate, and why they're rushing to provide an economic stimulus package even though unemployment is barely up. Cars have a similar mythical value, which is why nobody's proposing expansion of public transit as a response to traffic congestion and high gas prices.

And second, nothing is easier than cutting taxes and raising spending. Bush Sr. and Clinton lost a tremendous amount of political capital when they raised taxes. Bush Jr. lost none from cutting taxes. Cutting spending is easy in theory, especially if the cuts are in welfare, but in practice there's always going to be a cranky member of Congress aghast at cuts to programs in his district. Clinton didn't gain any friends when he closed military bases that became unnecessary after the end of the Cold War.

So far, the situation seems more like 1968 to me than like 1929. A rise of 0.3 percentage points in unemployment between January of 2007 and January of 2008 is making everyone hyperventilate. An inflation rate of 4.1% in 2007, the highest in this decade, is nothing to worry about (if anything, it's getting worse: in the last quarter of 2007, the CPI grew at an annualized rate of 5.6%). This means possible stagflation. Whatever the solution maybe be, I'm pretty sure that a Johnsonian guns-and-butter policy isn't it.

Alon, I actually agree with most of your points, but not where you end up. Nowhere, for instance, do I advocate for tax cuts. And nowhere do you see me extolling the mythical values of homeownership. On the contrary,I even wrote an article (http://www.drummajorinstitute.org/library/article.php?ID=6330)which argued that homeownership is fetishized, especially as enshrined in Bush's vaccuous "Ownership Society."

However, none of your arguments refute the fact that, whether you know it or not, working class families are feeling REAL financial pain across the United States in the form of mortgage distress, looming foreclosure, and bankruptcy. And none of your arguments refute the fact that as this financial crisis deepens - and it will unless both the mortgage industry and federal government do something dramatic to stop the bleeding - low income people will also feel the pain.

Unless you are ready to argue those points, I'm not sure we are actually disagreeing about anything.

Oh, I know you're not making these arguments. I was talking about them in a more general context. I'm fairly certain that Congress wouldn't have acted so fast if the crisis had been about rents rising 20% a year. It's still ignoring the fact that food costs are soaring. A lot of politicians talk about how bad it is that gas is so expensive, but I don't see any of them mention food costs.

My main point regarding taxes and spending is that it's politically easier to fight a recession than to fight inflation. I also think it's true that right now Congress should look into ensuring a soft landing for distressed homeowners, but in a way that won't make the inflation problems worse than they are now. Too much stimulus could recreate the 1970s, wrecking the Sunbelt exurbs in the same way the previous stagflation episode wrecked the Northeastern cities.