The problem, and expansion, of the new homeowner tax credit

In a 403-12 vote, the House overwhelmingly backed extending and expanding the new home buyer's tax credit. Where before only first-time buyers were eligible for the $8,000 credit, the expansion will make a $6,500 credit available to homeowners who have lived in their house for at least five years.

A lot of economists aren't happy with this, and their displeasure is encapsulated in the story of one Ezra Klein. Like a lot of renters, Klein took a look at the housing market this year and decided it was a good time to move from renting to owning. A few weeks ago, he closed on a new home. As a reward, taxpayers are going to give him $8,000. That's good for Klein, but the tax credit had nothing to do with his decision to purchase a new house. Taxpayers just wasted $8,000 trying to convince Klein to do something he was going to do anyway.

There's no way to separate the people who would buy a new home in the absence of a tax credit from the people who would not buy a new home in the absence of a tax credit. Which means a lot of money gets tossed down the drain, and not in a particularly progressive fashion (though the credit does begin to phase out at $70,000 in income). All stimulus efforts have a certain amount of leakage -- tax cuts aren't spent, building projects purchase Chinese steel, etc. -- so the question is whether a given policy is more of a stimulant than other measures. And I haven't heard that many economists speaking in defense of this credit.