Saturday, February 28, 2009

The individual and our economic crisis

If you had never met Milwaukee County Executive Scott Walker, you'd be hard pressed to spot him in a crowded room.  Mr. Walker is an average-looking man, with plain features and an unassuming demeanor. Even his name is common. He looks like a million other guys. I made his acquaintance last year after he introduced himself before a debate with his election opponent, Lena Taylor.

Scott Walker
Wikipedia image
Yes, a common guy he is, but don't be fooled -- Mr. Walker packs a wallop and his piece in this morning's Wall Street Journal, "Why I'm Not Lining Up for Stimulus Handouts" defines his fiscal moorings and shows why he has drawn acclaim among conservatives and some moderates in Wisconsin.

Walker mentioned what other politicians know -- but too often fail to highlight -- which is that our current fiscal calamities, were abetted by individuals -- not just banks, not just regulators, not just mortgage brokers, not just government. Those were all culpable parties to be sure, but what Walker reminds us today, is that our current turmoil began,

"...when millions of people were allowed (or encouraged) to spend borrowed money on homes they couldn't afford and were later forced into foreclosure." 

Amen!  I've been dismayed by the lack of discussion about individual responsibility and reckless borrowing. In due course, we'll see more acrimony coming from the public, or at least the part of it that still believes in living within one's means.

There are two arguments currently offered to defend bailouts for homeowners who bought too much house, or who should have remained renters until their income and assets warranted otherwise, or who foolishly sucked all the equity out of their homes to buy more stuff they couldn't afford. Here are those arguments:

Argument #1) "This is no time to teach people a lesson."

Who said anything about teaching? This isn't about vengeance either. Those who advocate for mortgage bailouts are appropriating money from responsible Americans to pay for the sins of others. Bailouts simply perpetuate that pattern.

The only way to help a heroin addict is to take away his opiate (in this case easy money), then encourage him or her to live healthfully. I see no reason why the responsible many should pay the freight of the irresponsible few, simply because the irresponsible few no longer meet their obligations. And in the cases I reference, we're discussing a self-induced foreclosure on a house, not a death sentence visited upon the falsely accused.

I believe many foreclosure so-called "victims" are personally responsible for their circumstances. There was too much predatory borrowing going on that is now being characterized, as predatory lending.  Yes, I know there were exceptions, people who were truly duped, or were improperly foreclosed upon -- but do you think that those cases constitute the majority of borrowers who suffered a foreclosure?  I do not.

Argument #2) "If we don't have mortgage bailouts to stem foreclosures, housing prices will continue to fall precipitously, including yours, so you should support this plan."

Well, I'd just as soon make my own mistakes, thank you. You're trying to use taxpayer money to reward people who don't believe in personal responsibility.

Markets work if we let them work. If housing prices continue to fall, they'll only be receding to a real level of value. The continuing collapse of our financial system and our way of life, which is rapidly careening toward Euro-Socialism, is as disturbing as the trajectory of home values.

However, if we allow the eggs to break and take our necessary economic pain, the values of our homes could appreciate again one day. Things can get better after the hangover. The reality that too few wish to acknowledge is this: we can't have a painless recovery.

Although the thrust of Mr. Walker's piece today is not about individual responsibility, it's about government's financial stewardship -- he gets it. We cannot, individually, or as a society, continue to kick the can down the road. It's immoral and stupid.

Our current state Governor, unfortunately, wants to continue to leverage our future, reward his supporters like public teachers' unions and expand government programs we don't need and can ill-afford.  It's widely speculated that Mr. Walker will run for Governor in the next election. If he does run, I intend to support him. I hope like-minded voters in this state will do the same, unless a stronger candidate emerges.

Right now, I don't see a stronger one.