Wednesday, January 16, 2008

The American Dream

The local sports radio station is playing a series of ads promoting the newest get rich quick scheme: foreclosed real estate. There’s a testimonial from a guy who paid $25,000 for a house and sold it a month later for a $65,000 profit. It’s a reasonable assumption he was looking for three more 25 grand specials on his way home from the settlement.

This is great for those who have the cash on hand to pay for these discount houses. Period. No one else. It does not help the economy. The banks took a bath, and the construction industry isn’t going to build something new when you can pick up something almost new – that the original owner worked the bugs out of – for ten cents on the dollar.

It also doesn’t help those who are trying to get into the housing market for the first time, unless they were fortunate enough to have their financing lined up well in advance. More likely they’ll pay the speculator three to five times what he paid for it. His value add? Call me if you think of something.

What we have here is another wedge driving incomes apart. Those with money will make more; those without have probably already lost it through the mortgage payments they were able to make before the ARM went up, or the balloon payment kicked in. No sympathy here for them; they accepted terms they couldn’t afford. That’s life. Others shouldn’t get rich from their misfortune.

This is a golden opportunity for Congress to take action that won’t cost a cent, and will actually do some good. Since housing prices are going to fall anyway, let’s stabilize them and get some new homeowners set up. Impose a confiscatory tax rate on any property bought at a distress sale that is flipped in less than five years. If you bought it to live in, you’re cool. If you bought it solely to get someone else to pay you more for it, then who is it really hurting if you don’t make all that much off of it?

They won’t, though. Know why? Because they have money, and most people figure they will too, someday. They don’t want to lose their opportunity to screw someone else when it’s their turn. It’s what’s made America what it is today.

2 comments:

Runs with Scissors said...

Dichotomies are funny things. In a previous post you claim to be a “Jeffersonian Liberal” while in this post you extol the virtues of “confiscatory tax rate” on those who invest, speculatively and at personal risk, to gain a filthy lucre. This would be a risible contradiction, a mere philosophical bitch slap to that pesky concept of intellectual rigor, were it not such a widespread technique to corrupt the memory of the founding fathers to espouse concepts that, to them, would be anathema.

"[If government have] a right of demanding ad libitum and of taxing us themselves to the full amount of their demand if we do not comply with it, [this would leave] us without anything we can call property." --Thomas Jefferson: Reply to Lord North, 1775. Papers 1:233

"The first foundations of the social compact would be broken up were we definitely to refuse to its members the protection of their persons and property while in their lawful pursuits." --Thomas Jefferson to James Maury, 1812. ME 13:145

"Nothing is ours, which another may deprive us of." --Thomas Jefferson to Maria Cosway, 1786. ME 5:440

"A right to property is founded in our natural wants, in the means with which we are endowed to satisfy these wants, and the right to what we acquire by those means without violating the similar rights of other sensible beings." --Thomas Jefferson to Pierre Samuel Dupont de Nemours, 1816. ME 14:490

In reading Jefferson, beyond the quotes, several themes come to the front clearly and unequivocally. The first is that while a necessary evil, government is still an evil, guided by the flawed hand of man, that will take unto itself “un-natural” powers over those endowed on the individual by the creator.

It is also a basic pretext of Jeffersonian thought, in league with the limit of government, the right of one to profit from their own industry. The role of the Constitution then, was to bind down the government that these rights were protected in perpetuity and not subject to momentary whims.
It is key to recognize that these rights be protected, as the industry of the individual and the right to keep the fruits of that labor. The protection of government, as you quoted earlier, is limited here to the protection from expanding government, and does not extend to the non-industrious, the foolish, or dare I say it, the misfortunate. To quote Jefferson, “The policy of the American government is to leave their citizens free, neither restraining nor aiding them in their pursuits.”, and “I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”
You make it sound as if those in foreclosure are being victimized by the filthy rich, those born with a silver spoon in their mouths, or blessed with working capital falling from the trees. In fact, those buying these properties are mostly middle and lower class people who have saved sufficiently to apply capital speculatively for future gain with a given risk. I would challenge you to find the likes of Ross Perot or John Edwards actively engaged in the real estate market. The rest of your argument seems to imply that it just gets your dander up when people make money.
There is a vast difference between the thought of Thomas Jefferson and Liberalism of today. Jefferson feared government and its voracious appetite for power, through promise and guile or through force. He thought things through based on an inseparable anchor to natural law and personal liberty. Modern liberalism strives to meet the extemporaneous wants of a perpetually adolescent society through government fiat and accretion of power, with little or no regard for long term impact. The only criteria for legislation seems to be “wouldn’t it be nice…”
If you are going to declare to all that you are a Jeffersonian, please take the time to understand Jefferson and what he stood for. Do not take, at face value, what the DNC web page interpretation of Jefferson.

Dana King said...

Being a Jeffersonian liberal in principle doesn't require a knee-jerk reaction to everything that happens. If the goal is to promote homw ownership to as broad a base of the population as possible - and both parties seem to agree it is - then keeping these homes out of the hands of speculators is the way to do it.

Let's not built too high a monument to the selfless dedication to these scalpers, er, speculators. They provide no vale to anyone but themselves. As for the risk, I hardly think a hundred million dollar developer is risking his retirement fund by buying houses for twenty cents on the dollar.