03 October 2008

Biden's Bailout Via Bankruptcy

One of the several "you gotta be kidding me" moments during last night's VP debate for me was Sen. Biden's declaration that bankruptcy courts ought to be able to not only change the interest rates on mortgages, but also reset the principal owed. I'm sure that Sen. Biden thinks that this would be a great way to support middle-class Americans. But there is a huge problem with his plan.

It seems the logic of his idea is that if something is worth far less than it was at inception, then the amount borrowed - the principal - should be adjusted accordingly. Of course, this adjustment would only be allowed in a downward manner. No politician would dare think to raise the principal on loans whose value had actually increased.

But think about other things that may decrease after purchase, much to the buyer's surprise. The obvious target would be cars - but US automakers are already getting a nice chunk of money.

Instead, consider the college graduate who, tens of thousands of dollars in debt, suddenly realizes that his degree in "(insert group name here) studies" is worth next to nothing in the marketplace. Or the student who discovers all too late that going to a wildly overpriced private college is not worth the debt incurred. Under Sen. Biden's logic, shouldn't these graduates be able to renegotiate their student loans based on the revealed "value" of their education? Surely there must be a court to remedy these poor choices.

I did not think that Gov. Palin did a particularly good job at the debate last night, but she did hit one very high note concerning personal responsibility. Greater individual responsibility would necessarily result in a more responsible citizenry as a whole. Just as I suggested in a previous article on education, it's a bottom-up approach. And it would be of great benefit to each citizen, each community, and ultimately the country. Sen. Biden and his running-mate offer a top-down approach which will grow government intervention, weaken communities, and render helpless individuals.

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