In his easy-to-read, yet profound book Something for Nothing, Brian Tracy lays out the economic and psychological causes of the increasing social desire to live at the expense of others. Tracy’s book was written before the current housing crisis.
Yesterday CNN Money reported on prudent homeowners, such as Teresa Nelson, who resent the bailout of those who have been imprudent. When Teresa bought her home in 2005, she opted for a less risky, but higher priced, 30-year fixed-rate instead of a low teaser-rate adjustable mortgage.
Teresa told CNN, “I was well aware of what an ARM meant, and was staying far away from those snake-oil pipe-dream promises. I also wasn’t shopping for a short-term, big payoff investment—I was looking for my home, until I retire.”
CNN reports that while Nelson is paying off her fixed-rate mortgage, delinquent borrowers are having their teaser-rates extended for 5 years; this bailout brings their interest rate substantially below Nelson’s.
Although currently these bailouts are being done voluntarily by mortgage companies, as the number of foreclosures grow, these bailouts are unlikely to be sustained without taxpayer money.
Nelson observes, “The American taxpayer has been paying through the nose for corporate handouts for too many decades now. Our nation is closer to a recession, and it may be just what we need to get people to tighten their belts and live within their means.”
Living within our means is unlikely to happen anytime soon. Spending by federal and state governments continues to grow at alarming rates. Homeowners continue to take out home equity loans at record rates. The dollar continues to fall in value as the Fed continues to cut interest rates. Huge corporations, such as Archer Daniels Midland, continue to feed at the public trough. And behind it all is the sense of entitlement.
This sense of entitlement is a reflection of many things. It reflects growing economic illiteracy—many do not understand basic economic principles. It reflects a growing willingness to play the role of a victim. Most alarming, it reflects widespread ignorance of the principles upon which this country was founded.
All these trends feed on themselves. Brian Tracy observes, “As soon as there is any way for people to fulfill their desires other than by working and cooperating voluntarily with others, some people find and take advantage of that loophole. And then more and more follow their lead.” I should add those “more and more” soon become a powerful political force.
The CNN story asked whether homeowners such as Nelson were “chumps?” A follow-up question to ask is this: When honest, hard-working citizens are called “chumps,” what is the prognosis for the long-term economic health of the economy?
The late Nobel laureate in economics, Friedrich Hayek wrote, “There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means…a new form of servitude.”
In other words, societies prosper when they treat all equally but do not attempt to fix the game after it is played. The latter is corrosive to our freedom and to our prosperity.
I will let Brian Tracy have the last word:
The simplest explanation, requiring the fewest number of steps to explain any human behavior is the desire of people to get what they want for as little as possible and if at all possible for nothing at all…Therefore, the only way to create and maintain peace, harmony, and cooperation is cut off all avenues to achievement except those of peaceful cooperation and healthy competition aimed at serving and satisfying other people in some way. This is the role of laws and enlightened public policy.