Congress has extended the popular first-time home-buyer tax credit. About 1.2 million people have received the $8,000 credit, at a cost of $8.5 billion. The program would have ended this month, without this intervention. 

While the credit has been hailed for buoying the American housing market. Nationwide, home sales ticked upwards 8 percent over last year, and in Maine, single-family home sales spiked 23 percent in September alone. (In New England states, the average increase was 9 percent, the best rate of increase in the country.)

The credit was intended to rescue the free-falling housing market following the mortgage crisis, so jolly good show. Congress and the Obama administration could have easily declared this a policy victory and enjoyed a nice round of applause for it. Here’s a question: Why didn’t they? 

Instead, they limply renewed it. Congress reduced the subsidy to $6,500 and raised the income eligibility to a maximum of $225,000 for couples (up from $150,000). This will cost taxpayers another $11 billion, according to estimates. This makes sense only from a political, but not practical, approach.

And it proves that government giveaways never die, they only are spread thinner in hopes of withering away.

This new credit offers fewer dollars, to more people, who need them less. Instead of saying the job is over and the problem solved, (which the housing numbers clearly support) Congress caved to fierce lobbying pressure from the real estate industry to continue an incentive that, like its close cousin cash-for-clunkers, spends billions of dollars with perhaps minimal economic effect.

Even the New York Times took a dim view of the extension, saying the money would be better spent on anti-foreclosure efforts rather than housing sales. This is cold, hard, pure logic.

There were other, not-so-positive reasons to end the tax credit.

For example, The Wall Street Journal called the home-buyers credit “so silly, even a four-year-old can exploit it” when a report by the Treasury found the child (along with 500 people under 18) had gotten the credit fraudulently; the WSJ dubbed the four-year-old kid a “Pre-K housing whiz.”

All told, there might be 75,000 filers who received fraudulent credits, totaling $500 million. This is a fraction of the total $13 billion appropriation, but more than enough to raise flags about its lax oversight and administration. If the credit was this simple to bilk, it was time to stop offering it.

Still, the best reason to have done so, however, was the credit was successful in stabilizing the housing market.

It worked! It would have been OK to let this credit expire as a government success story and move on.

Instead, it’s lingering, albeit in a much less useful state.

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