Those are all good points. The mortgage interest deduction is of particularly dubious value: not only do renters not get it, so many people factor it into their home buying decision that any value it once had has probably been lost to the inflation in home values that it has caused.

Until recently, I've always thought that most government programs were at least well intentioned. Of course, because of the complexity of human societies most will have unintended side effects. Programs that try to provide incentives for particular behaviors and charity style systems seem to backfire most spectacularly as people alter their behaviors to game the system. But I can definitely see it your way as well: this isn't a well intentioned system backfiring, it was designed that way from the start.

I really enjoyed your post; it's refreshing to read something written by someone who understands how money works.

I have been trying to decide whether I expect this whole mess to turn into a deflationary or inflationary event. It's the sort of government behavior that you've described here that's settled the issue for me on the side of deflation. The fed and the government are pumping hundreds of billions into the economy but it isn't reaching people willing to work for it doing something useful. It's going into the black hole of finance. It's being used to prop up car companies that are going to end up shutting down their production lines anyhow. It's given to people as a one time tax rebates that, while certainly appreciated, does little to help them service more recurring monthly debt. Without an increase in median wages the whole thing seems doomed to slowly fold in on itself.

This is a point of view that I actually haven't heard before and I'm curious about it. How would you do government services differently so that they weren't geared towards the rich?