Reward The Irresponsible, Punish The Prudent

The primary problem of American government as it functions (or disfunctions) today is that politicians routinely facilitate and encourage the unprincipled and the irresponsible while punishing the honest and the prudent. Unfortunately, one thing that never receives any consideration during deliberations in Congress is whether new legislation will be fair and equitable to the public in general rather than serving to benefit specific interest groups. The primary focus is typically to reward particular lobbies and constituents rather than address real problems faced by the citizenry.

Providing incentives and subsidies that affect the few is certainly not fair to everyone, particularly when that action encourages or rewards irresponsible behavior to the detriment of the far greater number of people who act responsibly. Both the enormous government bail-out of the financial system and the massive stimulus program are examples of government actions that are not fair and equitable to the majority of Americans.

The economic problems we face today are the result of an outrageously excessive amount of debt created with the active support of our monetary authorities and the explicit encouragement of elected representatives in Congress. The use of borrowed money that was easily obtainable with favorable payment terms caused the price of assets throughout the economy to rise to unsustainable levels, particularly real estate.

Despite the plunge in prices of homes and other assets, prices still remain too high. Prices must fall to levels that clear the market and naturally balance supply and demand before sustainable economic progress can resume. Providing tax incentives and other targeted stimulus with taxpayer dollars to rescue reckless financial institutions and consumers will result in the maintenance of prices at current inflated levels, causing any bounce from this spending to be short-lived, thereby wasting the massive amounts of money spent on these programs.

Most importantly, the bail-out and stimulus plans do not pass the test of fairness and equity for the majority of citizens. For example, the intent of the Troubled Assets Relief Program (TARP) to rescue the mortgage market is to limit losses on loans made by financial institutions and reduce the prospect of foreclosure for those who paid too much for property by supporting prices above the current real market. This does nothing but reward those who irresponsibly played this game, often because they greedily assumed they were guaranteed to make a profit, while punishing the far greater number of Americans who prudently refrained from these irrational transactions. The response by Congress to the damage caused by it's own mindless policies does nothing but keep prices too high for those who desire to buy a home at a rational price, ensuring that the crisis will be prolonged much longer than necessary and that all the taxpayer dollars carelessly tossed to financial institutions will be gone forever.