In democracies the people get what they want. In America, we've always dreamed of owning a house—a 1,500-square-foot stake in the community. We demand roots—with a rec room. So over the past decade our government obligingly delivered a heady brew of monetary policy, tax breaks, and loan guarantees that made home-ownership look too attractive to pass up. Accordingly, subsidized Americans went on a giddy binge of sometimes irresponsible, sometimes outright fraudulent, house-buying. Home-ownership rates hit their all-time high—just shy of 70 percent—in late 2004. It was intoxicating for a few years there, but (as you may have noticed) it ended ugly.

Wall Street, up to its fat neckties in mortgage-based derivatives nobody ever understood, was thrown into total chaos by the housing bubble's blowout. With all the calm of a shrieking teen flinging garlic at a movie vampire, Washington heaved hundreds of billions of taxpayer dollars at failing financial firms. Economic growth screeched to a halt and reversed. The collapsing market value of bungalows and McMansions made Americans feel squeezed and tightfisted. Consumer spending plunged, sales plunged, profits plunged. And, predictably, unemployment soared.

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Will Wilkinson is a research fellow at the Cato Institute and editor of Cato Unbound. He writes on topics ranging from Social Security reform, happiness and public policy, economic inequality, and the political implications of new research in psychology and economics. He is a regular commentator on public radio's Marketplace and his writing has appeared in The Economist, Reason, Forbes, Slate, Policy, Prospect, and many other publications.