McCain the Dishonest Thief?

In the recent debate, John McCain proposed to use taxpayer money to give a price break to people who took on mortgage loans which they could not pay back.

Not only is this stealing from taxpayers to benefit the unwise and dishonest, it's also stealing from those people who stayed renters and tried to save their money to purchase a house, hoping for the bubble to burst and prices to fall.  McCain's plan is expressly designed to prop up real estate prices, thus preventing the prudent from receiving the just reward of their patience and foresight.

We've previously discussed the consequences of this plan: a long period of no economic growth, just as happened in Japan in the 90s.  At least, we thought, McCain meant well, and was wanting to help American families; we assumed that this horrific idea came from ignorance, not malevolence.

For that matter, what about the other members of Congress who pled through muffled tears for billions to save the economy?  Like McCain's plan, the bailout is a desperately wrongheaded assault on our economic freedoms that is clearly failing to do the job, while sacrificing essential liberties.

One again, though, we'd like to think that our elected representatives are merely ignorant; after all, there's hardly anyone who truly understands the arcane financial instruments scattered throughout our economic structure and those that do are so intimately involved in the collapse already that their motives are suspect.  McCain himself said that his understanding of economics was inadequate; the same is equally true of almost everybody else in the Capitol except they aren't honest enough to admit it.

Or are there other, more sinister, games afoot?  Those of you who are now receiving your property tax bills may wish to ponder this possibility.

All across America, local government subsist mostly on local property taxes.  Of course there are other sources of income - local sales taxes, subsidies from the state, speeding tickets, civil forfeiture and so on, but the lion's share of local revenue is based on real estate taxes.  The tax is calculated as a fixed percentage of the value of each piece of property as determined by impartial appraisers.

This system works fine most of the time.  Property values gently rise, and people pay increased taxes as their wealth increases, thus providing more income to the town to offset inflation and pay for the occasional new program.

Right now, though, with property values plummeting, local governments have a problem: Their revenues are plummeting too.  The obvious solution would be to increase the tax rate to make up for the value that property values have dropped, but voters are hardly in the mood to put up with that; a smaller property tax bill is a rare silver lining to this economic storm.

Thanks to public-sector unions, however, the majority of government expenses are tied up in union contracts that cannot readily be reduced.  You can only cut back so far on library hours; when property values and tax revenues are down by 20%, more drastic action is required.

Enter John McCain.  The most devastating economic consequence of his plan to buy bad mortgages, let the mortgagees stay in their house, and allow them to simply pay what the house is worth instead of what they originally agreed to, is that spending our money will artificially prop up house prices.  Instead of being foreclosed on and thrown out, bad borrowers will stay put.

This will reduce the number of foreclosures and stem the fall of home prices, preventing wiser savers from purchasing homes and driving banks from the mortgage market.  The bad loans will still be there; they just won't be allowed to equalize in the market, polluting the economics of home-buying for years to come.

The intended purpose of the plan, once again, is explicitly to prop up house prices.  That's bad for all of us that aren't about to face foreclosure, with one exception: it's good for local towns.

With house prices propped up, the local towns will be able to continue to collect the revenue to which they have become accustomed.  They won't be forced to slash union contracts, lay off bureaucrats, and bid adieu to the swarms of officers sent forth "to harass our people."  Instead, they'll be able to sail merrily on as they were before, continuing to squeeze almost as much juice from a smaller economy and more suffering people - while being able to truthfully say "We have not raised tax rates!"

John McCain has made reducing government waste his signature issue, to his credit, but waste and corruption are not found only in Washington, D.C.; they are found to just as great a degree, albeit in smaller dollar amounts, in every town hall and county office across this land.  Just as in your home budget, it's when hard times come that the fat is squeezed out.

This is as necessary and essential an exercise for a nation as for a family.  Families all over America are being forced through this process and they should expect the recipients of their tax dollars to be doing the same.  Could it be that McCain and the rest of Congress have heard the pleas of the lesser pols and are granting what amounts to a local tax increase under the guise of helping homeowners?

We can't really know the motives of anyone, least of all politicians.  But if there's something other than a desire for power that motivates most officeholders, it's money for their particular corner of authority.

We may have here not just a situation of theft, but of dishonesty as well.  How sad that we don't find this the least bit surprising or implausible.