The Middle Class Welfare State

In the 1980s, left-liberals talked about homelessness as a plague and human rights issue. It has been over a decade since I’ve even heard about homeless people as a political issue. Now the victim class is the middle class. The Democrats and Republicans both talk about shoring up the middle class with targeted tax cuts, subsidies, entitlements and other goodies.

Now, in a sense, the middle class are particularly victimized by the state. They do the work, run small businesses, and lack the political connections of the rich. I share Murray Rothbard’s long-time dream of seeing a bourgeois revolution against the state. I believe George Carlin was onto something when he said the political establishment squeezes the masses dry while using the poor to frighten the taxpaying middle class.

But there is another sense in which the middle class have become the favorite victim class for left and right to appeal to, not in their aim of greater liberty, sound money and truly lower taxes, but in their goals to expand the state. The Democrats have long said they were the champions of the middle class, thus throwing under the bus the poorest Americans they used to claim to speak for, and the Republicans with Bush embraced an “Ownership Society” geared toward subsidizing artificially cheaper mortgages for the middle class.

Also, the main features of the entitlement state are aimed at pleasing the middle class. Social Security helps the middle class more than the poor, who are often deprived of the same benefits and die off younger, and the rich. The public school system, while a drain on the middle class, does not neglect them as much as it does the inner city poor.

On the issue of home ownership, we see this cynical politics in play. Obama is now proposing to bail out homeowners from having to pay the full principal on their mortgages. While the Democrats no longer use the homeless as a political football, they now talk as though there is some inalienable right never to lose one’s home that was never really paid for.

This is disastrous and unjust in many ways. Yes, it is unfair that marginal homeowners were suckered into deals too good to be true. But many Americans did the responsible thing—qqqthey did not buy homes they could not afford. They rented. They maintained modest living standards. They did not upgrade to McMansions or redo their kitchen just because the credit was available for them to do so. For the last decade or so, renters paid a premium for the security of knowing they could leave their homes without owing anyone anything. They avoided debt. This is the ethic of a responsible people, and to encourage debt beyond what is sustainable is not just fostering poor economic planning, it is decivilizing.

We can all sympathize with people losing their homes, and many of us know people close to us in that very sad situation. But there is no right to continue living in a home that doesn’t truly belong to you, that you cannot afford and never truly could. It is tragic many Americans were bamboozled into a fantasy of ever increasing home prices and ever decreasing mortgage liabilities. But on the other hand, many Americans were responsible, saw past the fantasy, did not buy the snake oil and instead chose to live within their means. They decided to save up, knowing that home prices would indeed fall one day and maybe they could afford to move into a house with a responsible and traditional short-term mortgage over a few years, rather than the ridiculous 30-year mortgages that have become the norm. These people—renters, those with modest homes, those who resisted the government’s easy credit—are the forgotten men and women who will be fleeced to prop up the unsustainable bipartisan “Ownership Society” program of keeping people in nice homes that they could not afford on the market. The more this house of cards is propped up, the worse it will crash when the true bust transpires. The state wants to maintain high home prices with low mortgages. This is a dangerous recipe. With millions of vacant houses on the market, there is no excuse for not letting the correction occur.

By nationalizing the middle class, the state has succeeded in making bourgeois Middle America, the people who have as much to gain from liberty as anyone else, become partisans of the government on which they depend. This is a shameful affair. It will mean that people will have to become that much more vigilant and cautious with their resources, resist the false market signals being put out by Washington, and live well within their means—not within the means they expect to have assuming house prices continue to rise and their income stays the same and no extra living costs pop up unexpectedly, but within their real means. In a free market and a responsible society, many would rent and many would buy houses much cheaper than they currently find—but what would be discouraged is moving into a big house valued at 20 or 30 years of one’s income under the assumption that it will be paid off sometime near retirement or the house could be sold off at a much higher price. The natural course of things is not for a house to raise in value reliably. Homes are liabilities, with expensive maintenance costs, and indeed probably lose value over time, and they should generally be bought only by people with the full intention to live there a long time and who have the means to buy them.

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