I can’t believe what I just read in the Washington Post.
The Obama administration plans to overhaul how it is tackling the foreclosure crisis.
The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower’s mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.
I own a little house in the ‘burbs of Phoenix, which I bought with a variable-rate mortgage at the end of 2004. It is now worth about half of what I paid for it.
A few months ago, the principal on my mortgage was comfortably more than the place was worth, and my low income was in decline. So I did the responsible thing, cut my expenses back to the bone, and raised and moved whatever money I could to cover it, and to try to pay it down. I wanted to deal with the fact that I was upside down on the mortgage and dangerously exposed to future rate increases; most of all, I wanted simply to reduce my monthly payments.
Why did I bother?
If I had not been so responsible, Obama’s plan (I still cannot quite believe it) would have given me (via my bank) YOUR money, humble tax-payer, as a gift to reduce my mortgage, and I would have gained to the tune of many thousands of dollars.
However, because I did the responsible thing, MY tax money will be going to help those who were in exactly the same situation as I, but weren’t responsible enough to live within their means and meet their obligations, perhaps because they bought a bigger car than they needed, were paying interest on credit cards they shouldn’t have been using, or whatever…
How dare the government do this? How dare they? This isn’t capitalism. It isn’t even communism. It is some upside down, messed-up mediocracy.
And it’s worth asking why I, with my low income, pay any taxes at all to reward the misfortune (at best) or irresponsibility (at worst) of others? 53% (last time I checked) of adult Americans pay no income tax. The overwhelming majority of them pay no tax because they have deductions for children. I am not one of them because I have no children. And I have no children because I cannot afford children. That too, I believe, is a responsible decision.
So now, not only will I be subsidizing the procreative choices of others that I, out of my own sense of basic responsibility (Thanks Mom) will not make, but also, my wealth will be transferred directly to a subset of them for the particular purpose of bailing them out of exactly the same situation that I had to bail myself out of – and was only able to do so precisely because I have been so careful to live within my means and save what I could for an emergency.
Libertarians like to say that “taxation is theft”. There are many good theoretical arguments for that, but somehow it just “feels” not quite right in practice. That word “theft” just feels too dramatic… and there is the (admittedly weak) argument that the theft is not quite theft because it is at least indirectly sanctioned by the majority (in theory).
But THIS does feel like theft. It feels personal. It feels like a violation. It feels like an element of society wants to exploit my carefulness and sense of responsibility to serve those who don’t live their life like me. I don’t feel like part of the investment class, barely even the middle class, but this feels like, if not a class battle, then at least a values battle – and one that I did not ask for. Are the new classes the responsible class and the irresponsible class? God knows.
For years, I have voluntarily sponsored children in the third world. I am happy to help those who are in greater difficulty than I, and I appreciate that many of them are victims of an economic system into which they are born and which is far from perfect. My neighbors in my Phoenix suburb are not those people. And even if they were, how dare you bring the force of law against me in this way when the only difference between me and those who will benefit from my money is my prudence?
When it comes to those who live in the richest country in the world, let us make our mistakes, and learn, and do better next time. Losing a house is horrible, but not the worst thing that can happen to a person. Denying the basic human right to learn from failure – think about it; it is a corollary of the right to the pursuit of happiness – and taking from those who try keep their failures from hurting others will be the death of us.