Here’s How the Land of the Free Became the Home of the Broke
No doubt about it: Uncle Sam is broke. As in busted, down-at-heel, impoverished. The U.S. economy is managing to stay afloat only because countries like China and Saudi Arabia choose to keep lending the American government mind-boggling amounts of money. America is surviving because the rest of the world thinks it’s a good idea to prop up the American dollar.
Of course, they aren’t doing it out of the kindness of their hearts. They are pursuing their own self interest in bolstering the world’s largest economy. An American crash would topple the entire global house of cards and nobody’s money would be worth anything. But Americans are going to have a huge debt to pay when the note comes due.
Ironically, some of the key countries that have come to America’s aid have philosophies diametrically opposed to the American ideal of freedom. For example, China’s billion and a half people are anything but free, and Saudi Arabians are pretty much under the thumb of King Abdullah and the Saudi princes. So when you hear Americans at protest meetings wailing about their loss of “freedom,” you might want to consider how that “freedom” got them into their current fix.
I could go on and on trying to define “freedom” without coming to any kind of reasonable conclusion. Mankind is not born free. We are subject to nature’s laws to start with. And no community can be based on absolute individual freedom. The concept of community demands that individuals surrender some freedoms for the common good. If you didn’t learn that in grade school, you weren’t paying attention.
Which brings me (finally!) to the subject of today’s blog. I blame a misguided concept of freedom for America’s housing crash, which most economists see as the underlying cause of the Great Recession. That and – of course – the “freedom” that let a bunch of greedy speculators play high-stakes poker with investors’ hard-earned money (yes, I’m talking about those mortgage based derivatives).
What got me thinking about the dangers of “freedom” today was a column in the St. Petersburg Times by Dan DeWitt (photo below), which welcomes a glimmer of restraint in the state’s government. Here’s how DeWitt began:
Considering that builders seem to write the laws in Tallahassee and that our county government is usually willing to let landowners — at least rich, powerful landowners — turn their pastures into subdivisions, you may have given up on the idea of government having any control over development.
Then, last month, there was a responsible decision in Tallahassee. This has led to another responsible decision in the county Planning Department. And now, maybe, there’s hope that growth management isn’t quite dead yet.
DeWitt cited a recent decision by Tom Pelham, secretary of the state Department of Community Affairs, to stand up to developers for a change. Pelham is enforcing a state regulation that says if a local government wants to change its comprehensive plan to allow more houses, it must prove the houses are needed for future population growth. And, according to Dewitt:
Gov. Charlie Crist and the Cabinet not only agreed with him on Sept. 15, when it rejected the development; they also backed his insistence that the need for new houses be calculated a certain way…. This forced the developers of the proposed Quarry Preserve project to refigure whether Hernando County really needs what they want to build in the mostly played-out Florida Rock Industries quarry 6 miles north of Brooksville: as many as 5,800 houses and apartment units.
So what, I hear you asking, does a proposed development in remote Hernando County, Florida, have to do with America’s economic woes, much less China, Saudi Arabia and the rest of the world? My response is: everything. I used to cover city commission meetings in Tarpon Springs and Plant City – a couple of other remote Florida communities – and I used to sit there wondering where the limitless giveaway to developers would end. City commissioners kept citing a constitutional provision that apparently gives landowners the right to “the highest and best use” of their property. Commission members argued that if they stopped a development the developer could sue the city for violating his “freedom” to do whatever he wanted with his land. During the last two or three years before I retired, I witnessed a runaway development boom with an accompanying spiral in the prices of land and homes. It was nationwide and it was dizzying. Government officials seemed to lack the power or the will to curb the insanity.
Meanwhile, the Federal Reserve Board kept lowering interest rates, and politicians in Washington kept leaning on housing agencies to relax restrictions so that everyone could have the “freedom” to own a home. Lenders made the most of their “freedom” to write as many bogus mortgages as they liked.
It could end only one way, and it did. One morning, America woke up to find an enormous glut of unsold houses on the market. Real estate prices tumbled. Mortgage based derivatives became worthless. People like me, who thought their homes were the safest place to stash their savings, watched as their equity dwindled. Foreclosures proliferated, layoffs multiplied, retail buying dried up, stores and factories closed…
Suddenly, Americans had a lot more freedom (they were free to stay home and collect unemployment insurance, for one thing) but a lot less money. The world’s largest economy was on the skids. And nobody yet knows what the future holds. So you can tell those protesters you see on TV yelling at President Obama to give them back “their America” and stop messing with their “freedom” to be careful what they wish for as they might get it.