A recent issue of Hillsdale College?s Imprimis features Amity Shlaes? thoughts about the importance of good economic ?rules of the game? in contributing to economic recovery.
In returning frequently to the metaphor of the Monopoly board game ? which developed during the Great Depression ? Shlaes decries a government that shoves other players aside to ?monopolize the board?:
It is not hard to see some of today?s troubles as a repeat of the errors of the 1930s. There is arrogance up top. The federal government is dilettantish with money and exhibits disregard and even hostility to all other players. It is only as a result of this that economic recovery seems out of reach.
The key to recovery, now as in the 1930s, is to be found in property rights. These rights suffer under our current politics in several ways. The mortgage crisis, for example, arose out of a long-standing erosion of the property rights concept?first on the part of Fannie Mae and Freddie Mac, but also on that of the Federal Reserve. Broadening FDR?s entitlement theories, Congress taught the country that home ownership was a ?right.? This fostered a misunderstanding of what property is. The owners didn?t realize what ownership entailed?that is, they didn?t grasp that they were obligated to deliver on the terms of the contract of their mortgage. In the bipartisan enthusiasm for making everyone an owner, our government debased the concept of home ownership.
Property rights are endangered as well by the ongoing assault on contracts generally. A perfect example of this was the treatment of Chrysler bonds during the company?s bankruptcy, where senior secured creditors were ignored, notwithstanding the status of their bonds under bankruptcy law. The current administration made a political decision to subordinate those contracts to union demands. That sent a dangerous signal for the future that U.S. bonds are not trustworthy.
Three other threats to property loom. One is tax increases, such as the coming expiration of the Bush tax cuts. More taxes mean less private property. A second threat is in the area of infrastructure. Stimulus plans tend to emphasize infrastructure?especially roads and railroads. And after the Supreme Court?s Kelo decision of 2005, the federal government will have enormous license to use eminent domain to claim private property for these purposes. Third and finally, there is the worst kind of confiscation of private property: inflation, which excessive government spending necessarily encourages. Many of us sense that inflation is closer than the country thinks.
