Given the surge in interest around Rick Santelli's CNBC rant, and the growing chorus of anti-stimulus folks calling for the New American Tea Party to halt the flow of government cash to troubled (and sometimes irresponsible) homeowners, keep in mind this interesting bit of history on the original Tea Party -- notably, that it actually meant more expensive tea.
And did you know that the price of tea would actually decrease under the parliamentary act that sparked the Boston Tea Party? Clarendon notes the significance of this key fact that is likely little known to American students today:
"At the same time, Parliament imposed a new tax on tea, but one that would be paid in London as a surcharge. The Americans would actually see lower prices on tea, but the tea they purchased would already come pre-taxed. Historian Benson Bobrick says it 'remains a noble feature of the whole confrontation that immediate economic interest did not determine [the colonists'] response.'
"And Americans didn't take the bribe of lower tea in exchange for accepting a revenue tax. In Philadelphia, ships bearing tea couldn't find anyone willing to lead the ships into harbor. In Charleston, South Carolina, the tea was off-loaded, but was stored in moldy warehouses where the product quickly rotted and became useless. In New York City, storms prevented the tea-laden ships from docking."
Me: There's a corollary here. The let-them-fail attitude of Tea Partiers toward foreclosures could come with a hefty price tag. As Clive Crook pointed out last week, the bailout may be unfair (as bailouts, by their nature, tend to be) but instead of pricier tea, doing nothing could mean more damage to home prices:
The administration says that its scheme does not reward people who recklessly borrowed too much. This is untrue: the plan will certainly help some people who borrowed more than they should have. No doubt, it would be fairer to help only borrowers whose standard repayments (after teaser rates expired) were no more than say 30 percent of gross income to begin with, and/or who borrowed less than 80% of their property's initial value--in other words, to help only borrowers who behaved prudently, and who are now in trouble because their income has fallen. But of course this would have meant many more defaults. Because foreclosures also hurt innocent bystanders, there is a public interest in limiting them. The second part of the plan, I think, is indeed unfair and does raise moral hazard concerns--but I'd say that is a price worth paying if it stems the tide of foreclosures.
I don't doubt that Rick Santelli and everybody else have the best interests of the country at heart. If the Tea Partiers are aware of the risks of higher foreclosures, and are willing to sacrifice that "public interest" (i.e. watching their own homes lose value as foreclosures in their neighborhood increase) then their commitment can be considered a noble stand for a set of free-market principles. If they haven't considered the risks, they should.