The government creates another housing bubble – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise

Home prices are booming. So far, 2018 has posted the strongest growth since 2005. “About 60% of all U.S. metros saw an acceleration in the rate of price increases through February this year,” according to Housing Wire. Since mid-2012, real home prices have increased 28%, according to data from the American Enterprise Institute. Entry-level home prices are up about double that rate. In contrast, over the same period household income has barely kept pace with inflation. The current pace of home-price inflation is increasing the risk of another housing bubble.

The root of the problem is declining underwriting standards. In April Freddie Mac announced an expansion of its 3% down-payment mortgage, the better to compete with the Federal Housing Administration and Fannie Mae . Such moves propel home prices upward. Because government agencies guarantee about 80% of all home-purchase mortgages, their underwriting standards guide the market.

Making lending even more dangerous, CNBC recently reported that “credit scores may go up” because new regulatory guidance allows delinquent taxes to be excluded when calculating credit scores. These are only some of the measures that “expand the credit box” and qualify ever-shakier borrowers for mortgages.

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During the last crisis, easy credit led home prices to rise at an unsustainable pace, leading marginally qualified borrowers to stretch themselves thin. Millions of Americans’ dreams became nightmares when the housing market turned. The lax underwriting terms that helped borrowers qualify for a mortgage haunted many households for the next decade.

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Some initial reactions to the Iraqi election – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise

The results of last Saturday’s national elections in Iraq may have been shocking, but they should not have been surprising.

Employees of the Iraqi Independent High Electoral Commission check electronic counting device at a warehouse in Dohuk, Iraq May 16, 2018. REUTERS/Ari Jalal

The place to start is with the turnout. Less than 45% of eligible voters cast a ballot. That is down from 62% in both 2010 and 2014. This is distressing, but widely expected. All of the reporting in the run up to the election indicated many Iraqis were choosing not to vote. The reason that Iraqis gave was very consistent: They were frustrated with their current crop of leaders, who they saw as having consistently failed to improve their wretched lives, but who continued to dominate politics to the exclusion of new faces, new voices, and concrete plans of action. Journalist after journalist warned that the turnout would be low because so many Iraqis had decided that the best way to register their anger at the entire Iraqi governing class was to not vote at all.

For several years now, Iraqis were telling anyone who would listen that they felt betrayed by their leadership for its corruption, indolence, and callous disregard for their misery. They protested in the streets, vented on social media, shouted from the rooftops, and said it to perfect strangers. Even in early 2016, I had found that Iraq’s three primary communities had become badly divided in their primary interests, and all of them felt alienated from the elite. Iraq’s Shi’a Arab community was focused on government reform, curbing corruption, and improving public services. Its Sunni Arabs wanted money for reconstruction, better political representation, and their fair share of Iraq’s economic benefits. And the Kurds wanted independence, in part for historical-cultural reasons and in part because they were sick of being treated like second-class citizens by the rest of Iraq. For all of them, defeating Da’ish/ISIS had become a secondary or even tertiary priority. Yet Iraq’s political class was wholly fixated on taking credit for the that victory and then divvying up the power pie in Baghdad.

All of this explains why Muqtada as-Sadr’s Sairoon Coalition appears to have won a plurality. First, the preliminary results suggest that as-Sadr’s support simply went down less than that of most other candidates, parties, and coalitions. Part of that relates to the fierce support that his family name still elicits among many Iraqi Shi’a, who remember his father, Muhammad Sadiq as-Sadr, and his uncle, Muhammad Baqir as-Sadr, as revered Ayatollahs and sources of emulation. That is a loyalty that has been transferred to Muqtada. Second, especially in recent years, Sadr has cultivated a status as an arch-Iraqi nationalist and the champion of average Iraqis. Sadr has repeatedly encouraged his supporters to mount large public demonstrations to demand an end to corruption, more responsive administration, more government services, and more effective bureaucracy. All of this made Sadr the most authentic voice for average Shi’a Iraqis and that consistent stance was rewarded in this election.

All that notwithstanding, Sadr did not win by much. In 2010, Ayad Allawi’s Iraqiyya won 91 seats and Nuri al-Maliki’s State of Law won 89. Sadr’s Sairoon looks like it will win about 55 seats this time, which will make it nothing but first-among-equals.  Hadi al-Ameri’s Fatah, and Prime Minister Haidar al-Abadi’s Nasr, look like they will win close to that number — perhaps 54 and 52 seats respectively according to some sources. Moreover, Maliki’s State of Law, Allawi’s Wataniya, and Ammar al-Hakim’s Hikma should all garner at least 20 seats. (Hikma may win far more according to some reports.)

Iraqi supporters of Sairun list celebrate with portraits of Shi’ite cleric Moqtada al-Sadr, after results of Iraq’s parliamentary election were announced in Baghdad, Iraq May 14, 2018. REUTERS/Thaier al-Sudani

What that ultimately demonstrates is that those Iraqis who did show up at the polls really could not agree on a clear favorite because there was no candidate who convinced large numbers of voters that he or she had both the will and the skill to tackle Iraq’s countless challenges and remake the government so that it provided for its people, rather than just lining the pockets of its politicians.  Inevitably, such confusion begets political fragmentation and that is really what this vote produced. Which is why the election itself is nothing but a prologue to the real political action. The vote was just an appetizer. The main course of Iraqi politics is always the process of government formation that follows.

Unfortunately, because Iraq’s political system is so flawed, government formation can take months and produce an outcome completely at variance with the vote itself. That could easily be the case here. By winning a plurality, it is likely that Sadr’s coalition will become part of the future government coalition, although even that isn’t guaranteed. Since Sadr only won such a narrow plurality, his ability to determine that coalition — let alone dictate and dominate it — is going to be very limited.

In the coming weeks, and probably on into months, Iraq’s politicians are likely to try out every single possible governing coalition, reject every one of them, and then try them all again. Which one ultimately emerges as the winning combination is anyone’s guess. Sairoon may end up choosing the prime minister and holding other key governmental posts, or it could get shut out completely. Prime Minister Abadi could easily retain power as a reasonable compromise candidate. The Iranians might squeeze the various Shi’a parties until they ultimately agree to Tehran’s preferred candidate — whoever that might be — as they eventually did in 2010. Or the Iraqi politicians might fail to agree and after many, many months of deadlock, pick a total unknown as a placeholder unthreatening to everyone, which is how we got Maliki back in 2005.

The most interesting and important question of all, however, is not who becomes prime minister with what coalition now. It is what happens when that person and that government fail to deliver the better governance that the Iraqi people so desperately desire and that drove their behavior in this election. Because it is all-too likely that they will fail, especially since the United States seems uninterested in providing the kind of help and guidance that would probably be necessary for them to have a reasonable prospect of success.

In a year, or two, or three, when the government remains just as corrupt, impotent, and dominated by Iran as it is today, what then will the Iraqi people do? Will they storm the barricades to demand a change of leadership (or government)? Will they fatalistically accept their miserable lot, give up on politics altogether, and so leave the field entirely open to the worst of Iraq’s leaders to employ bribes and violence to take what they want? Or will they find some third way, as yet unknown?

Given their long suffering, their poignant faith in democracy, and their willingness to endure in hope that someday things will improve, the Iraqi people deserve better than what they are likely to get from this election and the politicking that will follow. Unfortunately, it seems unlikely that they will.

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Kansas National Education Association responds to talk of schools closing

The Kansas National Education Association has offered guidance to education leaders to concerns about schools closing and district funds running out this summer because of funding problems. “We expect the Kansas legislature to act responsibly and ensure …

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Maximus (MMS) Updates FY18 Earnings Guidance

Maximus issued an update on its FY18 earnings guidance on Thursday morning. The company provided earnings per share guidance of $3.30-3.40 for the period, compared to the Thomson Reuters consensus earnings per share estimate of $3.49.

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