When you truly believe in central planning of the economy, and you find yourself occupying the Oval Office, you sometimes get to experiment with schemes like the one President Obama laid out Wednesday – the latest phase of his plan to rebuild the nation’s housing market and transfer all the risk to taxpayers.  His central planning economic experiments have failed to live up to their promises so far, but Obama continues to try to sell voters and their representatives in Congress more of the same, adding new layers of bureaucracy and costs to the plan with each step, and with each step transferring more responsibility to taxpayers.

The latest is phase two of the Obama plan to let homeowners refinance their mortgages at today’s low interest rates, even if they are underwater – that is, they owe more than their home is worth, and therefor can’t get anyone to refinance the loan. Under Obama Refi II, a government-owned agency will guarantee your loan, and if you are very obedient, the taxpayer will even pay your closing costs.

The program has a direct price to the government of $5 to $10 billion, and Obama wants to pay for that with a new tax on big banks.  The real costs come later.

The new Obama plan would extend refinancing to roughly one-third of all mortgages that aren't already backed by the government through Freddie Mac or Fannie Mae.  Instead, the mortgages in Obama’s crosshairs are still private loans - owned by banks or bundled by private firms that sold them off to investors as private mortgage-backed securities. Those loans would be replaced with loans guaranteed by the Federal Housing Administration.

Keep in mind this fact about the FHA. At the end of September, the FHA guaranteed nearly $1.1 trillion in mortgages but had just $1.2 billion as a cushion for unanticipated losses. To repeat, the FHA already has $1.1 trillion in exposure and only $1.2 billion in assets – only one dollar in assets for every $1,000 worth of exposure. That’s a lot of uncovered exposure – and the taxpayer insures all the risk.

Senior Obama officials said the plan would make refinancing possible for an estimated 3.5 million underwater homeowners who owe up to $729,000 on their homes, depending on the price of homes in their geographic area. They would qualify with a credit score as small as 580.

Because central planning theoretically works best when the central planner makes most, if not all, financial decisions for individuals, Obama is also offering this incentive. If you will use his refinancing program to more rapidly pay off your principal, instead of lowering your monthly payments, he’ll use taxpayer dollars to pay your closing costs.

For the record, refinancing to more rapidly pay down principal is a very good decision for nearly anyone capable of doing so, but a decision bearing its own wisdom doesn’t need a government bribe to attract responsible homeowners. Central planners, on the other hand, can never resist the temptation to add enticements, or even make mandatory, things most people would do voluntarily. It lessens resistance to mandating financial decisions.

Are you ready for the day when taxpayers guarantee every home loan in the country? Why not? It fits in perfectly with what our government has become – a provider of last resort for every personal need, and the provider of first resort for a growing segment of the population – at a cost of 40% of the society’s total production.

That’s the approximate total tax rate for federal, state and local government – about 40 percent of the economy. The U.S. economy is about $15 trillion annually and the total cost of government is about 40% of that.

Most of what we pay for through taxes is programs that guarantee what Americans once believed were a uniquely personal responsibility: food, housing, education, health care, transportation, child care, income when we are retired or are out of work, and the list continues. Sometimes, these programs are for everyone for the asking (tax deductions and credits) and sometimes we’re expected to jump through hoops to get them. They are often used as a way to try to control our financial decisions, or even personal decisions, so too many “rogue” decisions don’t interfere with the smooth operation of the plan.

It should come as  no surprise that President Obama would want to control the housing market, and might start by making refinancing irresistible with low interest rates (controlled by his friends down the street at the Fed) and then making all the new loans government guaranteed loans.  Just like retirement, health, food and income, the taxpayer will soon be the guarantor of last resort for more $ trillions worth of privately owned homes, including mini-mansions valued up to $759,000.

Republicans in Congress are showing resistance. House Speaker John Boehner said such programs "delay the clearing of the market," and postpone the time when it will become clear "where the prices really are."

But, President Obama has a centrally-controlled plan to “clear the market” too. Obama unveiled an auction process for bulk sales of foreclosed homes that federally controlled mortgage entities would sell to investors who maintain them as rentals. So, the taxpayer, not the homeowner or the bank, will absorb the loss in the market value of homes. Expect more of the same. He’s dumping homes at fire sales and requiring the buyers to keep them off the market, at least for now, starting in Southern California, Atlanta, Las Vegas, Chicago, Phoenix and parts of Florida.

Sen. Bob Corker (R-TN), a member of the Senate Banking Committee, also warns about new taxpayer exposure. "I have concerns with any plan that increases taxpayer exposure to mortgage losses, particularly by massively growing the FHA's balance sheet with loans that are already underwater," said Corker.

Obama will counter the economic and fiscal arguments with a political one - that "the Republicans are the party standing between you and a lower rate on your mortgage," according to Jeb Mason, a Treasury-policy adviser from the Bush administration who now works for the Cypress Group, a financial-services consultancy. I’m not sure how Jeb knows this – but it sounds about right.

I don’t know if Obama is getting what he wants from his tinkering with the housing market, but I doubt if he’s promising continued falling prices and less home ownership, which is what he’s getting. While Obama has been transferring more of the exposure to the housing market risk from individuals and banks to taxpayers, housing prices have fallen to 2003 levels – including a 1.3% drop in November, the latest month on the books. Home ownership has continued its seven-year drop, to 66% in the fourth quarter last year, from a high of 69.2% high in 2004.