Saturday, September 19, 2009

Free Markets Don't Exist in the US; Stop Pretending They Do

Americans cling tightly to their respect for the concept of "free markets", often citing this ideal as a principal reason behind opposition to numerous policy proposals. The concept of a free market typically extends into issues of taxation, where the free market crowd tends to excoriate any policy that contains the smallest element of the much-despised "redistribution of wealth". The problem I see with this way of thinking is that, realistically, free markets haven't existed in this country for a very long time. Furthermore, if you ever plan on enrolling in Medicare or accepting a Social Security check, you don't really have the right to criticize anything on the grounds that it is a government mandated redistribution of wealth.

Let's take the housing market for instance. I almost hesitate to use the word "market", because that would imply that real estate prices are determined via a discovery process between willing buyers and sellers. Some individuals ignorantly believe that this is the case, but it's just not true. The housing market of today has become a swollen, government supported beast that features Uncle Sam's involvement at literally every turn. Just think about it. Interest rates on home mortgages are currently being held at artificially low levels; the byproduct of the Federal Reserve's $Trillion+ experiment into purchasing Treasury bonds and Fannie/Freddie's repackaged filth. Of course, the Fannie/Freddie foray is also providing the housing market with mortgage fund availability by transferring risk from the private lender to the government entity. Next, as your mortgage goes through the origination process, it is increasingly more likely to be insured by the FHA. In 2006, less than 10% of new mortgage origination's were insured by the federal government; today, over 40% can be placed in that ignoble category. It doesn't end once you've purchased your American dream of a home though; the government has heavily subsidized housing through it's structuring of the tax code. The mortgage interest deduction effectively convinces millions of people that they can afford a more expensive house just by the virtue of top-of-napkin calculations and the perverted logic of "pay more to save more on interest". Thus is the intoxicating effect that home-ownership inspires in so many people.

Now let's talk about the federal government's entitlement programs: Medicare and Social Security. To make this a little more personal, let's talk about this issue in terms of the paycheck you bring home from your job, or to be more precise, the part of your paycheck that you don't get to bring home. These deductions are Ponzi-schemed away from every one of your paychecks, and direct-deposited into the bank account of a Social Security recipient. If we as Americans have decided that this little sleight of hand is an appropriate way to handle retirement funding, then so be it (Well actually, only "so be it" until the United States is forced, by it's creditors, to end it's profligate ways. At that point, we'll need to take machettes, not scalpels, to the federal budget. Line item #1, the biggest one by the way, is Social Security.). Nevertheless, I refuse to acknowledge Social Security as anything other than a modified version of communism. It's modified because, instead of everybody propping up everybody else (a collective sort of propping if you will) we have a situation whereby only one segment of the population is being propped up by all the rest. It's well established via civil rights legislation and Supreme Court case law that the federal government is prohibited from discrimination on the basis of - among other categories - age. Why then, is the federal government fundamentally structured to provide benefits to one age group at the expense of all the rest? If you're getting mad right now, you can go ahead and calm down; I'm not advocating that anybody be "cut off", and I understand that the circumstances surrounding aging in general merit special consideration from a societal point of view. The only thing that I would propose is that millionaires be barred from receiving social security benefits. When you look at the name of the damn entitlement - "Social Security" - you should understand that it's true purpose is to provide income to those who weren't dealt a hand which led to millions in the bank at retirement time; it shouldn't serve as a supplement for those who have already assured their personal "Social Security" through the massive accumulation of capital. In other words, if two men, we'll call them "A" and "B", pay fire insurance premiums on their home for 30 years. Let's say A's home burns down, and he receives a payout from the insurance company. B is more fortunate; his house doesn't burn down. In this case, it would make no sense for B to receive a refund for his year's worth of premiums paid; sure, he paid into the insurance pool, but in the end he didn't need it.

The most recent example of the complete lack of free markets in the US is the brewing controversy surrounding "net neutrality". The internet, at it's infancy, was kind of an un-regulated wild west of commerce. Now however, the government is gearing up to micromanage the way service providers are allowed to treat traffic that utilizes their bandwidth.

Bottom line, free markets don't exist, so let's not pretend that they do. Invoking the "free markets work best" line of reasoning is essentially a thinly veiled justification for opposing a policy which happens to not benefit you. Once you've disavowed buying a home, taking a Social Security check, and using the internet, then maybe you are qualified to preach about the merits of free marketeerism. If you haven't (and you won't) then such proselytizing amounts to little more than hypocrisy. Sphere: Related Content

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