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{Published in the Colorado Springs Gazette on 2012-02-08, this is a joint article written by John Horner and Barry Fagin, used by permission of both}

LEFT: Think before we say ‘never’


Before Julius Caesar was killed at the hands of his fellow senators, there was the murder of Tiberius. In Tiberius’ day, every Roman citizen who owned land had to serve in the army. Conscription could be long, so many soldiers had to leave their farms in the hands of their wives and children to serve. Often, a soldier’s family couldn’t keep the farm running in his absence, and so were forced to sell it to wealthier landowners. Tiberius conceived of a law that redistributed these ill-acquired lands to returning soldiers. But this redistribution took land away from the powerful families of Rome — many of whom were members of the Senate. Of course, these land reforms were hugely popular with the army, but met with stiff resistance in the Senate. No one wants to have their property “redistributed”— even if it is in the service of a national cause. Tiberius was killed by his fellow senators for his impertinence.

This tension between the desires of various constituencies has haunted governments ever since. When is it appropriate to redistribute wealth among citizens? Before you say “never” you might want to consider the circumstances under which modern democracies choose to do just that. Let’s ignore for the moment that all governments simply to function raise revenues through taxation, which redistributes that wealth from one group of its citizens to another, and instead concentrate on programs that transfer wealth between nongovernmental entities — for example, Social Security and Medicare. While many people see these government programs as a government-enforced savings plan, they are actually intergenerational wealth transfers between working people and seniors. Most seniors realize far more returns from Social Security and Medicare than they ever put in, and so these programs are not only popular, but most people rely upon them to retire. And, they work! Before Social Security or Medicare, most seniors lived in poverty and got inadequate medical care; today, they are the wealthiest age group in America.

So wealth transfers are acceptable under the right circumstances, but they also have their limits. Just as in Rome, blatant transfer of wealth among classes is considered theft and almost always results in social upheaval. Think about the disruption that occurred in many countries when they became communist or nationalized businesses. So where is the dividing line between acceptable transfer of wealth and those that rankle our sense of fairness? When aren’t wealth transfers seen as a violation of property rights?

Let me venture a guess that most citizens in a democracy are willing to allow wealth transfers when they involve programs in which everyone, not only receives a benefit, but also suffers a cost through participation, such that both the costs and benefits are distributed among the populous. Of course, the distribution of those costs and benefits are often uneven. Some people realize different gains relative to their costs, but then some also suffer less cost, relative to their wealth. Take Social Security, most Americans get back far more from Social Security than they ever put in. Only for the wealthy is this not true, but then again the proportion of what is taken out of their checks is also much less than it is for most citizens.

But that is not all. In order for these social programs to be acceptable, they must also increase the value of a society. They can’t be simple zero-sum games in which wealth gets moved, they must actually contribute — often substantially — to society’s value. In other words, they must expand the pie. And the pie needn’t be simply monetary. In fact, rarely do these programs simply move money.

Again, take Social Security, not only do most people get back more than they put in, but seniors gain a level of independence from their children and vice versa because children don’t directly support their parents in old age. Thus both generations gain by the indirect wealth transfer that Social Security represents.

Almost all government programs work this way. Think of education, or building and maintaining infrastructures, or even maintaining a professional military. At their base they add value to a society that would not otherwise be there. As Tiberius understood, even a citizen army adds value to a society that paid mercenaries would not.

RIGHT: A bill of good things to have


Mr. President:

What a pleasure to see your byline on The Gazette’s opinion pages. Of course, you must have had your people write that column on your “Housing Bill of Rights.” But you’re a busy man; that’s completely excusable.

What is less excusable is the idea that what a dozen previous administrations of both parties have screwed up, your administration can somehow fix.

Were I less cynical, I might think you’re just throwing homeowners a bag of goodies, in hopes that they’ll vote for you. True, I’m a homeowner, and proposing legislation that benefits me is at least superficially appealing. But my vote is not bought so cheaply. I know there’s always a catch.

The housing bubble didn’t simply happen. It was the direct and predictable result of the expansion of the money supply and artificially low interest rates a few years before, based on the same “stimulus” ideas your party continues to embrace.

Making things worse were the legions of rules, regulations, subsidies and distortions of lending and housing markets promulgated through HUD, Freddie Mac, and Fannie Mae. Why did you not mention them?

Have you forgotten your efforts and those of your party to subsidize mortgages to buyers who otherwise could not qualify for them? Have you forgotten the rules, regulations and mandates you and your party imposed on banks? Have you forgotten that the reason banks foreclose is to get liquidity, an area of vital importance to any bank’s regulatory compliance officer?

You say that “others” played by different rules.

You mean the rules written by members of both parties in Congress over the past three decades?

Why exactly would lenders “sell mortgages to people who couldn’t afford them”, unless they knew they would be bailed out? Why exactly would buyers “buy homes they knew they couldn’t afford” unless they were responding to incentives from Washington? 

When people play by the rules and things go bad, is it the players’ fault? Or those who made the rules in the first place?

And yet, you are asking us to believe that this time you’ve got it right. All the hundreds of national regulations designed to “fix” problems of home ownership, from the creation of HUD in 1965 to the Housing and Economic Recovery Act of 2008, those don’t really matter. You’ve got a Homeowners’ Bill of Rights that will finally fix things. Forgive me, Mr. President, but I doubt it.

What you are proposing is not a bill of rights. Rights are things that human beings have simply because they’re human.

Governments don’t grant them, they are instituted to secure them. What you are proposing is a bill of entitlements, a Bill of Good Things To Have.

Mr. President, America is in crisis. We are trillions of dollars in debt, we have made financial promises we cannot keep, and we are at risk of producing the first generation that may not live as well as its parents.  To fix this, we do not need more tweaks to failed programs and attempts to buy off interest groups. Including homeowners like me.

We need rules all right, but only the basic ones that all civilized societies have to permit their economies to flourish. We need sound, stable money. We need a government that lives within its means. We need fraud to be punished. We need more freedom to contract. 

Canada, according to one prominent think tank, now has more economic freedom than we do. That is unacceptable.

We need the freedom to earn more of our keep, and to keep more of what we earn.  And no bailouts for anyone, rich or poor. As you point out, everyone needs to be held responsible for their actions.

In other words, Mr. President, we don’t need yet another Bill of Rights. The first ten amendments of the Constitution do just fine.

What we need, Mr. President, is liberty.