To Help or Not to Help?

Via the opinion section of the New York Times:

Tens of millions of Americans are being crushed by the overhang of mortgage debt. And Congress and the White House have yet to figure out that the economy will not recover until housing recovers — and that won’t happen without a robust effort to curb foreclosures by modifying troubled mortgage loans.

There is little doubt that the housing bubble, followed by the housing bust, has left millions of Americans with huge debt on an asset that will never be worth what they paid for it.  As homeowners scrimp every last dollar to pay their mortgage, less money is spent in other areas that boost the economy, such as personal investing or consumer spending.

But I think this situation gets to the heart of the larger debate we are having in this country about the role the government should play during economic recessions.  A stronger effort to reduce mortgage principle balances would undoubtedly give the economy a jolt, but some view any intervention by the government as a distortion in the market and an unscrupulous use of taxpayer dollars.  Others argue that the "free market" got us into this situation, and that we are letting our fellow citizens and the larger economy down by refusing to address the root of our economic woes.