The American Dream and Incentives - What Our Politicians Can't Get Right

On the front page of today's Greenville, SC newspaper, down below the cover story of home-town boy Lucas Glover winning the PGA US Open, is an article entitled "Homebuyers may get $15,000 tax break."  I tried to find it on line to provide the link but #fail on that. 

The article is about how our brilliant lawmakers are trying to expand the tax credit from $8,000 to $15,000 for those that buy a home in this depressed market.  The real money quotes in the article are from Donald Schunk, research economist with Coastal Carolina University.  Here's the quote:

""If the goal is to have more people buy homes, it would work," he said of expanding the program.  But 'if it takes a program like this to help someone buy a home, is that really something we should be doing?  We have a pretty clear record where people were helped to get into homes' and then couldn't afford the mortgages."

The American dream, Schunk said, 'is not simply buying a home.  It's working hard to afford a home, buying it and being able to comfortably enjoy living in it.'"

Read that last statement again.  Then read it again. 

The American Dream isn't about owning a home - it's about WORKING HARD TO AFFORD A HOME!

This is the problem many incentive programs have - they define the outcome - "own a home" and provide incentives for that.  In this case the real objective is to motivate poeple to "work hard to AFFORD a home."  That's what we need to encourage, reward, and motivate.  I've said it a hundred times - results only exist at the end of a string of behaviors.   Motivate the behavior not the result.

Using this example here are some things off the top of my head (and I'm sure many of you could come up with more better options as well) that would move people toward the goal of the American Dream - "Working hard to AFFORD a home."

• Provide tax credits to those that contribute at least 20% in down payment (pick a number - the point is to have skin in the game.)
• Set up "home saving accounts" similar to Health Savings Accounts and make the deposits and the interest tax free
• Provide tax rebates to those that make payments on time
• Make financial planning fees tax deductible
• Make courses in budgeting and financial planning tax deductible
• Provide companies that make responsible loans with incentives to continue to provide those loans

I'm not a big fan of government intervention - but if we're going to let them stick their noses into our business we should at least make sure they don't do more harm than good.

Motivate the behavior not just reward the result!