I’ve been thinking about this for a long time. At the outset, let me say that I support an extension of the first time buyer tax credit. But I worry–or at least my inner economist worries–that at this point it’s bad policy. Not for the usual reasons. I’m not worried about the additional public cost of the program: in a world of trillion dollar deficits, $15-20 billion is chump change. I worry a little that it costs so much: in the first round, we’ll spend about $20 billion to pursuade about 360,000 households who would otherwise not have bought (NAR’s estimate, not mine) to become homeowners. Do the math; that’s a lot more than $8,000 per household. But that doesn’t matter much either. The real estate sector is important to the economy and we needed it. No, two other things bother me. First, historically aggressive government economic policy has overshot its goals, either providing too much restraint (1982) or two much stimulus (1964-70). This may be too much juice for a real estate sector that–despite the number of distressed properties–is coming out of a severe, but otherwise normal, cycle. Interest rates are low and prices are heavily discounted. If we cannot come out of the cycle without the credit extended, it’s because of the lack of consumer confidence largely generated by an abysmal jobs climate.  The second thing that bothers me is the nationalization of real estate. The market is already subsidized by the mortgage interest tax deduction. Now, we flirt with the possibility that real estate will become hooked on another government subsidy. What if the credit is extrended and the market still lays flat? Do we make it permanent? And if it is so easy to justify a large and central role for government in real estate, why not health care? I can’t answer these questions. I do know that I don’t want any more of a permanent role of the government in the housing market, and netiher should you.