By the way, please document the left is better educated than the right? Also, number of years of education is not necessarily a measure of how informed a person is. Just as a matter of note, listeners to talk radio have been found to be very well educated, as well as being a good percentage of business owners and so forth.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on, the majority always votes for the candidates promising the most money from the public treasury, with the result that democracy always collapses over loose fiscal policy followed by a dictatorship. The average of the world's greatest civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependency, and from dependency back to bondage.
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April 2010
Stephen Markman
Justice
Michigan Supreme Court
The Coming Constitutional Debate
Stephen Markman was appointed Justice of the Michigan Supreme Court in 1999, and was re-elected in 2000 and 2004. Previously, he served as United States Attorney in Michigan; as Assistant Attorney General under President Ronald Reagan, where he coordinated the federal judicial selection process; and as Chief Counsel of the Senate Subcommittee on the Constitution. He has published in such journals as the Stanford Law Review and the University of Chicago Law Review, and has been a distinguished professor of constitutional law at Hillsdale College since 1993.
The following is adapted from a speech delivered in Washington, D.C., on February 25, 2010, at an event sponsored by Hillsdale College’s Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship.
AS ASSISTANT ATTORNEY GENERAL under President Ronald Reagan, I prepared a report for Attorney General Edwin Meese entitled “The Constitution in the Year 2000: Choices Ahead.” This report sought to identify a range of areas in which significant constitutional controversy could be expected over the next 20 years. As critical as I believe those controversies were, they pale in significance before the controversies that will arise over the next several decades. The resolution of these emerging controversies will determine whether the Constitution of 2030 bears any resemblance to the Constitution of 1787"the Framers’ Constitution that has guided this nation for most of its first two centuries and has rendered it the freest, most prosperous, and most creative nation in the history of the world.
Proponents of a “21st century constitution” or “living constitution” aim to transform our nation’s supreme law beyond recognition"and with a minimum of public attention and debate. Indeed, if there is an overarching theme to what they wish to achieve, it is the diminishment of the democratic and representative processes of American government. It is the replacement of a system of republican government, in which the constitution is largely focused upon the architecture of government in order to minimize the likelihood of abuse of power, with a system of judicial government, in which substantive policy outcomes are increasingly determined by federal judges. Rather than merely defining broad rules of the game for the legislative and executive branches of government, the new constitution would compel specific outcomes.
Yes, the forms of the Founders’ Constitution would remain"a bicameral legislature, periodic elections, state governments"but the important decisions would increasingly be undertaken by courts, especially by federal courts. It will be the California referendum process writ national, a process by which the decisions of millions of voters on matters such as racial quotas, social services funding, and immigration policy have been routinely overturned by single judges acting in the name of the Constitution"not the Framers’ Constitution, but a “constitution for our times,” a “living constitution,” resembling, sadly, the constitutions of failed and despotic nations across the globe.
This radical transformation of American political life will occur, if it succeeds, not through high-profile court decisions resolving grand disputes of war and peace, abortion, capital punishment, or the place of religion in public life, but more likely as the product of decisions resolving forgettable and mundane disputes"the kind mentioned on the back pages of our daily newspapers, if at all. Let me provide a brief summary of six of the more popular theories of the advocates of the 21st century constitution. In particular, it is my hope here to inform ordinary citizens so that they will be better aware of the stakes. For while judges and lawyers may be its custodians, the Constitution is a document that is the heritage and responsibility of every American citizen.
1. Privileges or Immunities Clause
Since shortly after the Civil War, the privileges or immunities clause of the 14th Amendment has been understood as protecting a relatively limited array of rights that are a function of American federal citizenship, such as the right to be heard in courts of justice and the right to diplomatic protection. In defining the protections of the privileges or immunities clause in this manner, the Supreme Court in the Slaughterhouse Cases (1873) rejected the argument that the clause also protects rights that are a function of state citizenship, asserting that this would lead to federal courts serving as a “perpetual censor” of state and local governments. This decision has served as a bulwark of American federalism.
Although a considerable amount of federal judicial authority has since been achieved over the states through interpretations of the due process clause of the 14th Amendment, many proponents of a 21st century constitution seek additional federal oversight of state and local laws. Their strategy in this regard is to refashion the privileges or immunities clause as a new and essentially unlimited bill of rights within the 14th Amendment. The practical consequences of this would be to authorize federal judges to impose an ever broader and more stultifying uniformity upon the nation. Whatever modicum of federalism remains extant at the outset of this century, considerably less would remain tomorrow.
2. Positive Rights
For the 21st century constitutionalist, perhaps the greatest virtue of redefining the privileges or immunities clause is the prospect of transforming the Constitution from a guarantor of “negative liberties” into a charter of “affirmative government,” guaranteeing an array of “positive” rights. As President Obama has observed in a radio interview in criticism of the legacy of the Warren Court of the 1950s and 1960s, “[It] never ventured into the issues of redistribution of wealth and . . . more basic issues of political and economic justice in this society. . . . [T]he Warren Court . . . wasn’t that radical. It didn’t break free from the essential constraints that were placed by the Founding Fathers in the Constitution. . . that generally the Constitution is a charter of negative liberties, says what the states can’t do to you, says what the federal government can’t do to you, but it doesn’t say what the federal government or the state government must do on your behalf.”
President Obama is correct. The Framers’ Constitution defines individual rights in terms of what the government cannot do to you. For example, the government cannot inflict cruel and unusual punishment, and therefore the individual has a constitutional right not to be subject to such punishment; the government cannot engage in unreasonable searches and seizures, and therefore the individual has a constitutional right not to be subject to such searches and seizures, and so forth. By contrast, the Framers’ Constitution does not guarantee rights to material goods such as housing, education, food, clothing, jobs, or health care"rights that place a related obligation upon the state to obtain the resources from other citizens to pay for them.
Proponents of a 21st century constitution have many grievances with the individual rights premises of our Constitution as written"such as the largely procedural focus of the 14th Amendment’s due process clause, with its old-fashioned conception of such rights as those to “life, liberty, and property”; the negative cast of the specifically-defined rights in the Bill of Rights; and the limited application of the equal rights clause to things that have been enacted by legislatures (as opposed to things that they should have been required to enact). Each of these “limitations” poses significant barriers to what 21st century constitutionalists hope to achieve in reconfiguring America. This explains their interest in employing the privileges or immunities clause, which seems to them open-ended and susceptible to definition by judges at their own discretion.
As various advocates of a 21st century constitution have urged, a privilege or immunity might be interpreted to allow the invention of a host of new “rights,” and thus be construed to guarantee social or economic equality. However pleasing this might sound to some people, there should be no mistake: adopting this interpretation will supplant representative decision-making with the decision-making of unelected, unaccountable, and life-tenured judges. Should the privileges or immunities clause be used in this way, as a charter of positive rights, ours will become an America in which citizens are constitutionally entitled to their neighbors’ possessions; in which economic redistribution has become as ingrained a principle as federalism and the separation of powers; in which the great constitutional issues of the day will focus on whether porridge should be subsidized and housing allowances reimbursed at 89 or 94 percent of the last fiscal year level; and in which a succession of new “rights” will be parceled out as people are deemed worthy of them by berobed lawyers in the judiciary.
3. State Action
A barrier posed by both the due process and the privileges or immunities clauses, and viewed as anachronistic by 21st century constitutionalists, is the requirement of state action as a precondition for the enforcement of rights. In the Civil Rights Cases (1883), another post-Civil War precedent, the Supreme Court asserted that these provisions of the 14th Amendment prohibited only the abridgment of individual rights by the state. “It is state action of a particular character that is prohibited. . . . The wrongful act of an individual is simply a private wrong and if not sanctioned in some way by the state, or not done under state authority, the [individual’s] rights remain in full force.” However, for advocates of 21st century constitutionalism, if fairness and equity are to be achieved, the Constitution must become more like a general legal code"applicable to both public and private institutions.
Consider, for example, Hillsdale College. Despite being the embodiment of a thoroughly private institution, government officials have sought to justify the imposition of federal rules and regulations upon Hillsdale by characterizing the college as the equivalent of a state entity on the grounds that it received public grants-in-aid. When in response to this rationale, and in order to retain its independence, Hillsdale rejected further grants, the government then sought to justify its rules and regulations on the grounds that Hillsdale was the indirect beneficiary of grants-in-aid going to individual students, such as GI Bill benefits. Once again in response to this rationale, Hillsdale asserted its independence by barring its students from receiving public grants, even those earned as in the case of GI benefits, and instead bolstered its own private scholarship resources. We have witnessed a steadily more aggressive effort by governmental regulators to treat private institutions as the equivalent of the state, and thereby to extend public oversight.
However, it would be more convenient simply to nullify the state action requirement altogether. Professor Mark Tushnet of Harvard Law School, for example, would reconsider the Civil Rights Cases:
The state-action doctrine contributes nothing but obfuscation to constitutional analysis. It works as a bogeyman because it appeals to a vague libertarian sense that Americans have about the proper relation between them and their government. It seems to suggest that there is a domain of freedom into which the Constitution doesn’t reach. We would be well rid of the doctrine.
If Professor Tushnet succeeds in this mission, Hillsdale’s policies concerning such things as tuition, admissions, faculty hiring, curriculum, and discipline will each have to pass the scrutiny, and receive the imprimatur, of judges.
4. Political Questions
In areas that were once viewed as inappropriate for judicial involvement, federal courts have begun to assert themselves in an unprecedented and aggressive manner. The limited role of the judiciary, for example, with regard to matters of national defense and foreign policy is not explicitly set forth in the Constitution, but such matters have from time immemorial been understood to be non-justiciable and within the exclusive responsibility of the elected branches of government. As far back as Marbury v. Madison (1803), Chief Justice John Marshall recognized that “Questions in their nature political . . . can never be made in this Court.”
Yet just in the last several years, the Supreme Court, in a series of 5-4 decisions, has overruled determinations made by both the legislative and executive branches regarding the treatment of captured enemy combatants. Most notably, the Court ruled in Boumediene v. Bush (2008) that foreign nationals captured in combat and held outside the United States by the military as prisoners of war"a war authorized by the Congress under Article I, Section 8, and waged by the President as Commander-in-Chief under Article II, Section 2"possess the constitutional right to challenge their detentions in federal court. Thus, in yet one more realm of public policy"one on which the sovereignty and liberty of a free people are most dependent, national defense"judges have now begun to embark upon a sharply expanded role.
If there is no significant realm left of “political questions,” if there are no longer any traditional limitations upon the exercise of the judicial power, then every matter coming before every president, every Congress, every governor, every legislature, and every county commission and city council can, with little difficulty, be summarily recast as a justiciable dispute, or what the Constitution, in Article III, Section 2, describes as a “case” or “controversy.” As a result, every policy debate taking place within government, at every level, will become little more than a prelude for judicial resolution.
5. Ninth Amendment
Another looming constitutional battleground concerns the meaning of the Ninth Amendment to the Constitution: “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” Many 21st century constitutionalists understand this amendment to say that there is some unknown array of unenumerated rights that lie fallow in the Constitution, waiting only to be unearthed by far-sighted judges.
Professor Thomas Grey of the Stanford Law School has suggested, for example, that the Ninth Amendment constitutes a “license to constitutional decisionmakers to look beyond the substantive commands of the constitutional text to protect fundamental rights not expressed therein.” Rights to abortion, contraception, homosexual behavior, and similar sexual privacy rights have already been imposed by judges detecting such rights in the Ninth Amendment. The problem is that, in the words of Justices Stewart and Black, this understanding of the amendment “turns somersaults with history” and renders the courts a “day-to-day constitutional convention.”
The more conventional understanding of the Ninth Amendment has viewed it in the historical context of the Bill of Rights, of which it is a part. By this understanding, it was written to dispel any implication that by the specification of particular rights in the Bill of Rights, the people had implicitly relinquished to the new federal government rights not specified. Like the Tenth Amendment"which serves as a reminder that powers neither given to the federal government nor prohibited to the states in the Constitution are reserved to the states or to the people"the Ninth Amendment was adopted to emphasize that our national government is one of limited powers. Its principal purpose was to prevent an extension of federal power, not to provide an open-ended grant of judicial authority that would have the opposite effect.
6. Transnationalism
Professor Harold Koh of the Yale Law School, and now State Department Legal Counsel, is perhaps the leading proponent of what he calls “transnationalism,” which he contrasts with the “nationalist philosophy” that has characterized American constitutional law for the past 220 years.
Transnationalists believe that international and domestic law are merging into a hybrid body of transnational law, while so-called nationalists persist in preserving a division between domestic and foreign law that respects the sovereignty of the United States. Transnationalists believe that domestic courts have a critical role to play in incorporating international law into domestic law, while so-called nationalists claim that only the political branches are authorized to domesticate international legal norms. Professor Koh predicts that these disagreements will play out in future Supreme Court confirmation hearings, and that these appointments will be “pivotal” in determining by 2020 the direction in which the jurisprudence of the United States proceeds.
In practice, transnationalism would legitimize reliance by American judges upon foreign law in giving meaning to the United States Constitution; it would bind federal and state governments to international treaties and agreements that had never been ratified by the United States Senate much less enacted into law by the Congress; it would render both the domestic and international conduct of the United States increasingly beholden to the review and judgment of international tribunals in Geneva and the Hague; it would expose American soldiers and elected leaders to the sanctions of international law for “war crimes” and “violations of the Earth”; and it would replace the judgments of officials representing the American people, and holding paramount the interests of the United States, with the judgments of multinational panels of bureaucrats and judges finely balancing the interests of the U.S. with those of other nations"including authoritarian and despotic governments"throughout the world.
* * *
It is with the intention of generating debate, and of providing a roadmap to help us better navigate the constitutional forks-in-the-road that will soon be facing our nation, that I offer these thoughts. While there has never been a time in our history in which there was not serious constitutional debate among our people, I would submit that there have been few times in which this debate was more fundamental in defining the American experiment.
Quote:
By the way, please document the left is better educated than the right? Also, number of years of education is not necessarily a measure of how informed a person is. Just as a matter of note, listeners to talk radio have been found to be very well educated, as well as being a good percentage of business owners and so forth.
ROFLMAO....
That is funny....
So listeners of talk radio are well educated but not well informed? I would agree that they are not well informed. You demonstrate that daily.
http://www.ncpa.org/sub/dpd/index.php?Article_ID=19320&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
ARIZONA LAW IS HATED BECAUSE IT COULD BE EFFECTIVE
To understand the hysterical reaction to Arizona's new immigration initiative, consider the numbers, says Heather Mac Donald, a contributing editor at City Journal and a co-author of "The Immigration Solution."
For example:
• There are 6,000 federal Immigration and Customs Enforcement agents tasked with restoring the rule of law in a country that already contains between 12 and 20 million immigration law-breakers.
• Any intending illegal immigrant knows that if he can get across the border undetected, he faces a minute risk of being apprehended on U.S. soil.
• By comparison, the New York Police Department, with a current headcount of 35,000, feels itself greatly understaffed in a compact city of eight million residents, only a portion of whom are law-breakers.
The Arizona law, were it to be widely emulated, threatens to disrupt the calculus of illegal immigration, says Mac Donald. There are 650,000 state and local police officers in the United States. If a significant portion of those officers received the mandate of the Arizona law -- to inquire where practicable into the immigration status of an individual they have legitimately stopped, if they have a valid reason to believe he is in the country illegally -- the balance between law enforcement and law-breaking would be changed enough to likely deter illegal border crossings and to persuade many illegal immigrants already in the United States to return to their home countries rather than face arrest and deportation.
The opponents of Arizona's law -- SB 1070 -- detest it not because it will lead to racial profiling (it will not), nor because it is unconstitutional (it is not), but because it just might work, says Mac Donald. Texas is reportedly already considering a similar law. The illegal immigrant lobby knows that it has to stop SB 1070 if it wants to maintain its monopoly over border matters, a monopoly that has led to the chaos that is now engulfing Arizona.
Source: Heather Mac Donald, "Arizona law is hated because it could be effective," Washington Examiner, May 5, 2010.
Then if that uniform tax rate were for example 10%, a gross income of $1,000 would be taxed $100, and a gross income of $1,000 million would be taxed $100 million. There would be zero pay backs, zero deductions, zero exemptions, and zero double taxations (e.g., corporate and inheritance income taxes).
Not only would such a tax system make it difficult to buy votes with tax deductions, it would comply with the Constitution of the USA, Article I, Section 8, 1st paragraph, which says:
Okie, I consider gross BUSINESS profits not to be the same as gross BUSINESS revenue. Gross business profits are what is left after all businees expenses are subtracted from gross business revenue. These profits are then distributed to individual share holders and/or owners, or invested in the business.
I consider an individual's annual gross income to be the total annual income received by that individual before individual expenses. It is that individual annual gross income that I proposed be taxed at a uniform flat rate after eliminating all other federal income taxes.
My disagreement with a consumption tax is that it effectively taxes high income individuals a lower percentage of their annual gross income than it does low income individuals. That is because higher income individuals invest--and do not consume-- a larger percentage of their income than do lower income individuals.
The so-called fair tax is even worse. The low gross income individuals will not pay any tax--because of the fixed refund all tax payers would receive from the feds--and the middle gross income individuals will pay a greater percentage of their gross income than will the high income individuals. That of course is true because the high gross income individuals invest a higher percentage of their income than they spend, than do the middle gross income individuals. Worse yet, fed politicians could buy more low income votes by their manipulation of the size of that refund.
However, I agree that currently, my "proposal does not have a snowballs chance in you know where."
http://www.morrisonreport.com/fax_test/index.php?faxID=88
Full report:
Texas State Representative Debbie Riddle (R-Tomball) found herself
in the middle of a firestorm the other day after she gave an
interview to an obscure left wing talk show host in Houston. An
attorney named Geoff Berg hosts a weekly talk show called Partisan
Gridlock on station KFPT which, just like Berg's politics, is on
the far left end of the FM dial. KFPT is affiliated with the
notoriously radical Radio Pacifica network. For an idea of where
Berg and KFPT are coming from, just look at a few of the programs
on the station's schedule: Queer Voices, Proyecto Latino
Americano, Uprising, Arab Voices, Nuestra Palabra and Voz de la
Tierra.
Berg was interviewing Rep. Riddle about her call for a crackdown on
illegal immigration. Rep. Riddle has promised to introduce
legislation this year that will be very similar to the recent bill
passed in Arizona; in other words, she wants a [Texas] law on illegal
immigration that will actually be effective. During the interview,
Berg employed a typical left wing tactic - he prefaced his question
with "Without making it a racial issue...", and then proceeded to
bluntly make opposition to illegal immigration into a racial issue.
Berg said that the vote on the tough illegal immigration bill in
Arizona broke down along racial lines - with almost all of the
white legislators voting for it, and almost all of the non-white
legislators opposing it. He then asked Rep. Riddle how she planned
to generate support for her bill from "people of color."
That's how liberals talk when they supposedly want to avoid "making it a
racial issue." They love to play the race card themselves, and
then turn around and accuse their conservative opponents of
injecting race into the discussion. Clearly, Berg was being
disingenuous; he was hoping to goad Rep. Riddle into either making
a verbal "gaffe" that could be twisted and denounced as "racist" by
leftists, or shaming her into backing off of her tough stance on
immigration by playing the race card.
This time, though, it didn't work. Debbie Riddle simply stated
things matter-of-factly. She told Berg that it would be hard to
generate equal support for action on illegal immigration from every
group: "When you have people that are used to entitlements, then
they like the entitlements and they want the entitlements to keep
coming."
That may not be politically correct, but it's true that
illegal aliens do get entitlements, and they want to continue to get
them. Of course, there are many conservative Hispanic Americans
who are strongly opposed to both illegal immigration and free
handouts from the government, but, if voting patterns are any
guide, then they are unfortunately in the minority, and pretending
otherwise is nothing but intellectual dishonesty. In 2008,
Hispanics voted 2-1 for Obama, even after John McCain shamelessly
pandered to them. They didn't vote overwhelmingly for Obama and
the Democrats because they want to see a reduction in entitlement
spending.
It's even more dishonest to pretend that entitlements aren't one of
the main reasons illegals are coming here by the millions. In just
one city in America, Los Angeles, the local government is spending
nearly fifty million dollars per month on welfare and food stamps
for the children of illegals. Educating them may be even more
costly - the Supreme Court ruled decades ago that it's somehow
unconstitutional to deny free public schooling to the children of
illegals. For all the problems facing our schools, they are far
superior to the average school in Mexico and we spend billions of
dollars a year on educating the children of illegals. The same
goes for health care - politicians in Washington have ruled that
hospitals must treat illegal aliens in emergency rooms, and they
take advantage of this entitlement to the tune of billions more
each year. In California alone, over eighty hospitals have closed
down because they went bankrupt treating illegal aliens who don't
pay. In Houston, illegals constitute nearly twenty percent of
patients in the Harris County Hospital District, and officials
there are warning that the county hospital system may not have a
viable future if they don't attract more paying customers to cover
the costs of treating illegals.
Even though she spoke the truth, and didn't come close to
committing a "gaffe", liberals immediately denounced Debbie Riddle
as a "racist." Of course, it's becoming clearer every day that
anyone who opposes illegal immigration is a "racist" in the eyes of
liberals. It's been said that a racist is simply a conservative
who's winning an argument with a liberal. If left-wingers can't
refute someone, they simply resort to calling them vicious names.
It didn't stop with "racist", either - she's been called "an idiot"
and "a Nazi", and many other names too crude to repeat here.
Thankfully, Rep. Riddle not only has the courage to speak the
truth, she also refuses to be intimidated. Most politicians would
have backed off and groveled an apology in the face of this
onslaught, but not Debbie Riddle. She's standing firm, and issued
a statement defending her remarks about why race based groups like
the Mexican-American Legislative Caucus oppose enforcing our
immigration laws:
"...I gave my honest answer: I think that those lawmakers believe
that illegal immigrants are entitled to services that we reserve
for our citizens, services that must be paid for by the tax dollars
of our citizens, and are too often given to illegal immigrants
instead of our citizens. I think this is not just wrong, not just
unjust, but truly and utterly immoral in every sense of the word.
As our state deals with the largest financial crisis we've seen in
recent memory, lawmakers have unpleasant and unpopular decisions
that must be made. We must choose to provide for the safety and
security of our citizens before we make concessions to those who do
not have a legal right to be here in the first place.
I will not send our citizens to the back of the line in order to
appease the politically-correct left."
It's extremely heartening to see a politician speak the truth and
let the chips fall where they may. Not to mention Rick Perry's
name, but unfortunately, some of our politicians have "concerns"
about an illegal immigration bill that would enforce our laws and
say that it "would not be the right direction for Texas."
Meanwhile, Debbie Riddle simply pointed out the obvious - it's the
organized liberal Hispanic groups that openly base their policies
on race when it comes to illegal immigration, not conservatives.
Politicians like her are a rare specimen these days, and she is to
be commended for putting American citizens first, and for having
the courage to speak the truth and not back down when liberals go
on the war path.
Okie, I think shifting to a tax on consumption will reduce consumption and subsequently will limit economic growth more than will shifting to a flat tax on annual individual gross income. However, I cannot prove that.
Another problem with a tax on consumption is that it requires the seller to pay the expense of collecting the tax and transferring it to the feds. There is too much opportunity in that for the seller to defraud the fed by falsely claiming lower sales in consumption taxed items than actually occurred.
One could argue that there is equal or more opportunity for fraud in a flat gross income tax. However, I think the fed can more easily track individual gross ncomes than it can taxable sales.
Finally, I think it easier for politicians to buy votes from selected portions of the populace by manipulating individual paybacks than they can by changing the rate of a flat tax for everyone.
However, I agree that either tax will be fairer than the current system of taxes.
http://www.ncpa.org/sub/dpd/index.php?Article_ID=19341&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
THE MENACE OF STRATEGIC DEFAULT
During the run-up to the bursting of the housing bubble, home buyers were confident that house prices would never stop rising. Most Americans never bothered to check what would happen if they defaulted. After all, who would walk away from a house worth more than the mortgage, asks Luigi Zingales, a professor of entrepreneurship and finance at the University of Chicago Booth School of Business.
Today, the matter is far from theoretical for the 15.2 million American households holding mortgages that exceed the value of their homes. It will help determine how many of them choose to "default strategically" -- that is, walk away from their mortgages even when they can afford them, because they've determined that it's no longer worth it to keep paying. And that, in turn, will help determine the future health of the American housing market -- and thus of the U.S. economy, says Zingales.
Though the rate of strategic default is hard to determine, one thing seems certain -- the more you owe, relative to the value of your house, the likelier you are to default strategically (nobody will do that if his mortgage is just 10 percent larger than his house is worth).
Of households that owe 50 percent more than their houses are worth, the same survey suggests, 25 percent will default strategically.
And a New York Fed study estimates that of households that owe 62 percent more than their houses are worth, a full half will default strategically.
If the underwater homeowners who currently refuse to default changed their minds and decided to abandon their mortgage commitments, the results could be catastrophic. The more people walk away, the more houses get auctioned off, further depressing real estate prices. This additional decline would push more homeowners into negative territory, leading to still more defaults. Adding to the deadliness of this cycle would be the fact that as more strategic defaults occurred, the social stigma associated with them would lessen, says Zingales.
Source: Luigi Zingales, "The Menace of Strategic Default," City Journal, Spring 2010.
ican, a point that perhaps I did not make as clear as I should have, by not taxing production, the goods can come to market at a significantly lower price, and the consumer will have more money to spend, so that even though taxing consumption will dampen consumption, the already lower price built into the products plus more spending money before tax will jumpstart the ability to purchase the goods, and so the end result of how much goods will ultimately be purchased or consumed may not be much different than what would otherwise occur. This has been one of the big selling points of the people that are pushing the "Fair Tax," or consumption tax, and I believe the argument makes alot of sense.
