This was originally posted in a series on Live Oaks in March 2009. Comments have not been migrated.
Last week it came to light that the city was considering a plan to help potential home buyers pay off debt in an effort to improve their credit scores. Though that plan was quickly pulled following public outcry, the essence of that plan has existed in Houston for several years. The outrage voiced over last week’s plan should be extended to the Houston Hope Initiative.
Houston Hope is a pseudo-private, non-profit organization. Mayor White has made supporting the program a major part of his agenda–through the Houston Hope Initiative– and a press release from 2007 shows the level of the city’s commitment:
The City of Houston is working closely with experienced community development corporations with a proven track record of neighborhood involvement and of successfully building homes. Eligible home buyers can receive up to $30,000 in down payment assistance through the City’s Housing Assistance Program.
In principle this is no different from the plan to pay off debt. In both instances, taxpayer money is used to help some individuals purchase a home. Whether that money is used to pay off debt or make a down payment is a mere detail.
As Gus Van Horn noted last week, programs such as this have visible benefactors and invisible victims. Politicians such as Mayor White love to grandstand with the recipients of their altruistic largess and bask in the accolades of their peers, but they never seek out those whose lives are harmed by confiscatory taxes. They pat themselves on the back for helping some people, while ignoring the fact that the tax money they so freely dole out had to be taken from someone. And that someone is often unable to afford his own home as a result.
Typical of politicians, Mayor White has promoted contradictory agendas. He has pushed for “greener” building codes, which have increased the cost of housing. Simultaneously, he has supported a program that has the stated purpose of providing affordable housing. Not surprisingly, no matter which side of his mouth is speaking, he is calling for more government intervention into our lives and the economy.
If I were Mayor, abolishing such unjust programs would be a priority. Combined with the repeal of building codes and land-use regulations, housing prices would become even more affordable in Houston. Rather than promote feel-good programs like the Houston Hope Initiative, which take from some for the benefit of others, I would promote freedom–the right of each individual to act according to his own values and judgment without interference, so long as he respects the mutual rights of others.
While housing prices in Houston are among the most affordable in the nation, increasing government intervention–whether through land-use regulations, building codes, or taxation–is driving the cost of housing (and everything else) higher. We cannot maintain affordable housing while enacting the policies and programs that create housing problems.
But affordable housing is not a primary–it is the consequence of freedom. Affordable housing has two aspects. From the supply perspective, freedom allows property owners to use their land as they judge best. On the demand side, potential home buyers are in a better financial position to afford a home when they are not taxed for the purpose of helping others purchase a home. Affordable housing is neither a supply not a demand issue–it is a freedom issue.
Programs such as Houston Hope are not a legitimate government function. They are nothing more than a wealth transfer and they should end–yesterday.
Pay Off City Debt
On Monday the Chronicle reported that the city has had to pay an additional $9.3 million on its debt of $12 billion due to ties with troubled banks. The city has taken steps to reduce the high interest rates on some of the debt, including an investment of $118 million from Harris County. City Controller Annise Parker said, “We took prudent steps to deal with a very unusual situation.”
The city’s debt is approximately four times its projected revenues for fiscal year 2009. To put it another way, if the city used every dollar of revenue it would take four years to pay off its debt.
I do not consider the city’s debt load to be prudent, as hundreds of millions of dollars are spent each year simply to pay for the spending of previous years. In other words, today’s taxpayers are paying for the roads, libraries, parks, and other improper government activities undertaken years ago.
If I were Mayor, we would pay off the debt. Doing so would require several specific steps:
- Begin to limit government to its proper functions–the police and courts. This would dramatically reduce current expenditures and eliminate the need to use bonds or other debt to finance improper activities.
- Sell assets–such as parks and libraries–to raise millions of dollars in revenue, which could be used to retire debt.
- Privatize city services–such as water and trash collection–to raise substantial sums, as well as reduce the city’s capital expenditures.
It is a gross injustice to mortgage the lives and property of future Houstonians through debt. Future taxpayers will be forced to pay for today’s profligate spending, and that burden will undoubtedly continue to grow as city government increasingly expands its involvement in our lives. Indeed, in fiscal year 2004 the city spent nearly $206 million on servicing tax bonds. That increased to an estimated $272 million in 2008, an increase of about 32%.
The city’s need for debt financing has one essential cause–the city’s involvement in providing services that are outside of its legitimate sphere. By limiting the city government to its proper purpose of protecting individual rights, the city’s financial needs would be a fraction of what it is today.
Debt financing can be legitimate in the realm of production–it can be used to purchase equipment, raw materials, and expand productive capacity. It that context, debt can pay for itself through increased production.
Government however, is not a producer. It is a consumer–its activities do not create bread, or computers, or jobs. As the economist Henry Hazlitt puts it in Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics
Everything we get, outside of the free gifts of nature, must in some way be paid for. The world is full of so-called economists who in turn are full of schemes for getting something for nothing. They tell us that the government can spend and spend without taxing at all; that it continue to pile up debt without ever paying it off, because “we owe it to ourselves.”
Hazlitt concludes by saying that all government expenditures must ultimately be paid through taxation. If they aren’t paid today, they will be paid by tomorrow’s taxpayers.
If today’s citizens and voters are not willing to pay for a particular project with current revenues, they have no moral justification for saddling their children with that expense. If today’s citizens and voters are not willing to voluntarily write a check from their own account, they have no moral justification to force other taxpayers to do so.
Most citizens recognize the irresponsibility of running up debts far beyond their ability to pay. Most citizens recognize the fact that the hamburger, or stereo, or BMW that is bought on credit today must be repaid tomorrow. To believe that this changes when the government is involved, and the items purchased on credit are roads, or libraries, or anything else is pure fantasy.
In fiscal year 2009 the city is scheduled to sell more than $1 billion in new bonds. This is not how one gets out of debt. You cannot borrow your way out of debt. The city is simply ignoring fiscal responsibility and passing it off to future generations.
It is time for the city to govern responsibly by limiting itself to the protection of individual rights. It is time for the city to live within its means by spending less than it brings in. It is time for the city to pay off its debt.
Water Rate Increase
The city recently announced plans to increase water rates. According to the Chronicle’s political blog on March 3:
This year’s inflation-related increase will be 3.3 percent, and the proposed population increase on top of that is 1.79 percent for a total of 5.09 percent.
The Chronicle correctly asks why an increased customer base requires an increase in price.
As for the salient question of why population increases justify higher rates given that in most businesses more product sales can lead to cheaper goods – the answer is that the fiscal situation of the water and wastewater department is more dire.
In other words, the city has a monopoly on water service, it can’t operate efficiently, and it has the power to force consumers to pay more money for water.
I have previously said that if I were Mayor, selling the city’s water and wastewater services would be a priority. Providing water, or trash collection, or libraries, or a myriad other things is not a proper function of government. And if we needed more evidence, this latest rate increase demonstrates that government does not and cannot provide these services efficiently. The only reason they can provide them is that they have a monopoly on the service–which means, the city uses force to prohibit competitors.
For decades we have been told that only government can provide certain services, such as water, mail, roads, etc. Yet, the government prohibits (with very few exceptions) private companies from offering these services. In that sense, the claim is true–only government can provide these services because it is illegal for anyone else to do so. (As an aside, it is the height of hypocrisy for government to prosecute businesses for “anti-competitive” behavior while simultaneously prohibiting competition in certain areas.)
The fact is, private companies can provide any service desired by consumers–if they are willing to pay for it. Just consult the yellow pages or a local mall for evidence. If consumers desire water, mail, roads, etc. there will be an abundance of businesses providing these services, just as there are a multitude of companies providing tanning, limousines, tutoring, and a large number of other services.
These services exist because consumers want them and entrepreneurs seek to fill that need. But unlike government, entrepreneurs cannot get their customers by prohibiting competition. Entrepreneurs get their customers by offering a better service, or better quality, or a lower price, or by offering some other value. Entrepreneurs get their customers by voluntary consent; governments get their “customers” through coercion.
The fact that the government will not compete with the private sector speaks volumes. It is time for the city government to get out of the water business and restrict itself to its proper function–the protection of individual rights. If I were Mayor, this is precisely what would happen.