An Email to Mr. Schoen

I read an Answer Desk article the other day on MSNBC.com that really got my blood moving. After I took a few breaths, I typed up a quick response to the author, Mr. Schoen, explaining some things that I think he missed in his article. As I think this article touches on a few important points about the issues at hand, including Obama's mortgage bailout plan, I decided to post my response. I recommend reading the article first to get the context. It can be found here.


Mr Schoen
Your recent article about the mortgage bailout and income taxes was quite disturbing, to say the least. Without going into too much detail (since I doubt you will read this anyway), I wanted to respond to your misguided attempt to cover for the failed policy of price-fixing.
You mention in your article, and I have heard many times throughout the past several months, that the government is justified in rescuing bad mortgages in order to keep the prices of houses from falling too low. You write that it is legitimate for the government to use our tax dollars to pay for the mortgages of others so that the value of our house will not fall. There are two important economic problems with this argument, besides the moral hazard it creates. The first problem is that not everyone owns a home. Not everyone is concerned with a mortgage and therefore with the falling value of houses. In fact, many people are looking forward to buying a house and have been saving their money, paying their taxes, and otherwise living frugally. And yet, our tax dollars are being used to keep housing prices high--exactly what we do not want if we are going to buy a house. This works directly against our interest.
The second problem with this plan is that it, quite simply, creates a price floor for homes, not allowing the market to fix the correct price. The simplest laws of economics teach us that price-fixing creates distortions in the efficient outcome of the market. In particular, price floors, such as would be created by keeping house prices higher than the market would set them at, create surpluses in housing and general waste. The prices of houses MUST go down in order for the surplus to be liquidated. The fact that you do not understand this should exclude you from writing about economics at all.
I also wanted to touch on another point you made in your article about the income tax. First of all, the dates you listed for the ratification by each state are heavily disputed and have not been clearly verified to have taken place in the correct manner. Second of all, there was mention in the title of your article about whether or not income taxes are legal. You actually never address this point. And NO, just because it was "ratified" does not make it legal. The Constitution clearly states that there shall be no direct tax on the people. You can dance around this all you want, but the fact is that the income tax is simply unconstitutional. This does not mean that I do not pay it. To do so would be unwise. But I have to object to your dismissal of the argument and your treatment of those who espouse it as juvenile and ignorant.