The class war we need

Austin American-Statesman - - OPINION -

The rich are dif­fer­ent from you and me. They know how to game the sys­tem. That’s one in­ter­pre­ta­tion, at least, of the re­cent news that Amer­i­cans with mil­lion­dol­lar mort­gages are de­fault­ing at al­most twice the rate of the typ­i­cal home­owner. It sug­gests an in­fu­ri­at­ing sce­nario in which the av­er­age Amer­i­can slaves away to keep Wells Fargo or Bank of Amer­ica off his back, while fat cats and high fliers cut their losses and sail off to the next in­vest­ment op­por­tu­nity.

That isn’t ex­actly what’s hap­pen­ing, most likely. Just be­cause you have a mil­lion-dol­lar mort­gage doesn’t make you a mil­lion­aire, and a lot of the fat-cat de­fault­ers prob­a­bly aren’t that fat any­more. Chances are they’re more like Teresa and Joe Gi­u­dice from “The Real Housewives of New Jersey,” tacky re­al­ity-TV climbers who re­cently filed for bank­ruptcy af­ter their deca­dent life­style turned out to be a debt-en­abled fan­tasy.

St i l l , wat ching the Gi­u­dices sashay through their onyx­en­crusted man­sion, and know­ing that thou­sands of sim­i­larly prof­li­gate home­own­ers are sim­ply walk­ing away from their debts, it’s easy to suc­cumb to a lit­tle class-war­rior fan­ta­siz­ing. (Pitch­forks, tar, feath­ers ... that sort of thing.)

The trick is to chan­nel those im­pulses in a con­struc­tive di­rec­tion. The left-wing in­stinct, when faced with high-rolling ir­re­spon­si­bil­ity, is usu­ally to call for tax in­creases on the rich. But the prob­lem, here and else­where, isn’t ex­actly that we tax high rollers’ in­comes too lightly. It’s that we sub­si­dize their ir­re­spon­si­bil­ity too heav­ily — un­der­writ­ing their bad bets and bail­ing out their fol­lies. The class war­fare we need is a con­ser­va­tive class war­fare, which would force the mil­lion-dol­lar de­fault­ers to pay their own way from here on out.

Con­sider the spread that the Gi­u­dices (pend­ing po­ten­tial fore­clo­sure pro­ceed­ings). The first mil­lion of its re­ported $1.7 mil­lion price tag is pre­sum­ably cov­ered by the fed­eral mort­gage-in­ter­est tax de­duc­tion. In­tended to boost mid­dle-class home­buy­ers, this de­duc­tion has grad­u­ally turned into a huge tax break for the af­flu­ent, with most of the ben­e­fits flow­ing to home­own­ers with cash in­come over $100,000. In much of the coun­try, it’s a McMan­sion sub­sidy, whose costs to the fed­eral Trea­sury are cov­ered by the tax dol­lars of Amer­i­cans who ei­ther rent or own more mod­est homes.

That pol­icy is typ­i­cal of the way the fed­eral govern­ment does busi­ness. In case af­ter case, Washington’s web of sub­si­dies and tax breaks ef­fec­tively takes money from the mid­dle class and hands it out to spec­u­la­tors and have-mores. We sub­si­dize drug com­pa­nies, oil com­pa­nies, agribusi­nesses dis­guised as “fam­ily farms” and “clean en­ergy” firms that aren’t en­ergy-ef­fi­cient at all. We give tax breaks to im­mensely profitable cor­po­ra­tions that don’t need the money and boon­dog­gles that wouldn’t ex­ist with­out govern­ment fa­voritism.

And we do more of it ev­ery day. Take Barack Obama’s ini­tia­tive to dou­ble U.S. ex­ports in the next five years. As The Washington Ex­am­iner’s Tim Car­ney points out, it in­volves the purest sort of cor­po­rate wel­fare: We’re lend­ing money to for­eign gov­ern­ments or com­pa­nies so that they’ll buy from Boe­ing and Pfizer and Archer Daniels Mid­land. That’s good news for those com­pa­nies’ stock­hold­ers and CEOs. But the money to pay for it ul­ti­mately comes out of mid­dle-class pock­et­books. It isn’t just a cor­po­rate wel­fare prob­lem. The same pat­tern is at work in our en­ti­tle­ment sys­tem, which is lurch­ing to­ward bank­ruptcy in part be­cause of how much Medi­care and So­cial Se­cu­rity pay to se­niors who could get along with­out as­sis­tance. In­stead of a safety net that pro­tects the el­derly from poverty, we have a sys­tem in which the Amer­i­can tax­payer is ef­fec­tively un­der­writ­ing cruises and tee times.

All of that ought to be grist for a kind of “small-govern­ment egal­i­tar­i­an­ism,” in the econ­o­mist Ed­ward Glaeser’s use­ful phrase, that seeks to shrink govern­ment by at­tack­ing Washington’s waste­ful spend­ing on the well­con­nected. And some­times con­ser­va­tive politi­cians make moves in this di­rec­tion. Pres­i­dent Ge­orge W. Bush’s Tax Re­form Com­mis­sion pro­posed sharply re­duc­ing the mort­gage-in­ter­est de­duc­tion. House Mi­nor­ity Leader John Boehner, to his great credit, re­cently floated the pos­si­bil­ity of means-test­ing So­cial Se­cu­rity. Many Repub­li­can sen­a­tors have been staunch crit­ics of cor­po­rate wel­fare.

In the age of Barack Obama, many rankand-file con­ser­va­tives have been more up­set about re­dis­tri­bu­tion of a dif­fer­ent sort — the kind that takes money from the pros­per­ous and “spreads the wealth” (as Obama put it in his fa­mous con­fronta­tion with Joe the Plumber) down the in­come lad­der.

This kind of spend­ing can be prob­lem­atic. But con­ser­va­tives need to rec­og­nize that the most per­ni­cious sort of re­dis­tri­bu­tion isn’t from the suc­cess­ful to the poor. It’s from savers to spec­u­la­tors, from out­siders to in­sid­ers, and from the in­dus­tri­ous mid­dle class to the reck­less, un­pro­duc­tive rich.

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