Monday, May 4, 2009

Economic Stability Requires Property Rights

The more the economy is politicized, the more special interest groups will be able to successfully lobby for laws which work in their favor to the detriment of someone else. The most important victims of this economic downturn continues to be property rights and the rule of law.

The newest push in the recent spate of abusive government power is the attempt by Congress to rewrite private contracts. The "Helping Families Save Their Homes in Bankruptcy Act," sponsored by Rep. John Conyers of Michigan, could also be named "The Overturning Private Contracts Act."

In a recent Wall Street Journal editorial, two investment advisers explain some of the complex, yet well-established relationships which exist between mortgage debtors, creditors and investors. The proposed legislation would use the brute force of legislation to favor not just the debtors, but also the banks who provided second mortgages--many of which just happen to be the same banks in partnership with the government through the defacto-nationalization effects of TARP. And who loses in this scheme? Owners of security-backed first mortgages, which means those who have invested on behalf of pension funds, retirement plans, college endowments and others such strategies for savings and investment.

In their rush to act as our saviors, politicians are abandoning the very principles necessary for a sound and stable economy, as well as a sound and stable society! The political push-and-pull of special interests directly undercuts all individual rights, but here the attack is primarily on the right to property. The protection of private contracts is central both to the predictability needed for long-term economic and personal planning, and more, fundamentally, to the concept of justice. The Framers of our Constitution did their best to devise a system to protect individual rights from the tyrannical tendencies of both government and of popular whim, but its preservation depends on our ability to understand and defend the requirements of a free and moral nation: a government limited to the protection of the rights to life, liberty and property.


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