The Washington Post has a story this morning about a new Bush administration plan to help homeowners who are "underwater," that is, whose home is worth less than their mortgage and can't sell or refinance it because they don't have the cash they would need at closing.  Contrary to the president's often-repeated assertions that he wouldn't do it, the plan apparently will require taxpayer dollars.

Anyone who has watched the mortgage situation deteriorate over the the past year could see this coming.  The early "over my dead body" statements by the administration were slowly, incrementally, and sometimes imperceptively replaced with positions that tilted increasingly toward "not yet."  In other words, it was only a matter of time.

Then, of course, it's an election year, and with all signs pointing to continued and perhaps even growing economic problems by Election Day, congressional Republicans have been signalling the White House for weeks that they might be forced to vote for a Democratic homeowner bailout that used taxpayer funds and would prefer an administration-proposed alternative.

The Bear Sterns intervention made by the Federal Reserve made a taxpayer bailout even more politically acceptable.

On top of everything else, in spite of White House anti-spending rhetoric, the Bush administration has never really been that reluctant to spend more when it wanted to.  All you have to do is think about the Medicare prescription drug program, the highway bill, the agriculture bill, and the president's statement immediately after Hurricane Katrina (we'll spend whatever it takes) to know that a taxpayer funded bailout in this housing situation was always possible.

According the Washington Post, the program is still being developed and will require some combination of legislative and regulatory changes.  This means that its impact on fiscal 2008, which will end in six months, will be limited, and that the fiscal 2009 deficit could be the one most affected.