By Smitty Harris
I admire the care, concern and planning that has been devoted to address Tupelo’s lack of growth and the out-migration of middle-income families.
Although I consider myself to be politically conservative, I have always admired the heartfelt desires of my more liberal-leaning friends to address perceived social and economic inequities by providing desired outcomes through legislation. It is my belief that almost always there are unintended consequences associated with this approach, and in the long run the results can be exactly opposite of the desired aim. An example would be guaranteed wages or direct payments provided by governmental bodies to all poor people. Once achieved, there is a reduced incentive for recipients to seek productive work and the ranks of the eligible poor would increase. The resulting costs would have to be borne by more productive people. The answer is not for our city to provide an outcome but an opportunity and incentive for people in a free, market-driven environment to provide for themselves.
At the national level, the housing bubble burst in 2006 and the subprime mortgage crisis had to be addressed by massive government intervention in 2008. This was a major cause of our current recession. A combination of factors led to this result: The Community Reinvestment Act of 1977, which rated banks in vague and subjective ways and punished them for not providing home loans in poor areas, Freddie Mac and Fanny Mae (government sponsored enterprises) which guaranteed 50 percent of all mortgages in 2008, predatory lending by mortgage companies pushing sub-prime loans, and a non-regulated Shadow Banking System (investment banks and hedge funds). I mention this with regard to Strategy 1 of the Tupelo NRP because it too intends to provide non-market-driven benefits to home buyers for their down payment. There is good reason for home buyers to provide for a down payment themselves: The owner has a greater commitment and an incentive to not go into default, and the first mortgage holder has a needed pad if the loan goes bad. Very few people foresaw that the 2008 national home mortgage crisis could occur, but it did. So could the Tupelo second mortgage program (with no needed pad). While there will be no current tax hike to fund the Tupelo NRP, bonds will be issued: i.e. this is a city debt for which the taxpayers will be liable.
I have concerns about other parts of the Tupelo NRP but for the sake of brevity will not go into as great detail. There is already a Lee County tuition program for community college. Major college tuition should not be paid for by Tupelo taxpayers (if at all) until the student has shown at least a 2.5 GPA in a community college and there is no other funding source. Home renovation grants are a giveaway with little assured benefit to attract middle class families to Tupelo.
The city of Tupelo should provide good public schools, infrastructure, police and other needed services to all its citizens, but providing socially motivated improvements to certain segments of the community (students and home owners) will always have unintended consequences and costs – I would love for many more of our citizens to be college graduates and responsible home owners but we may be encouraging more college attendees who will fail, and more irresponsible home owners who will go into foreclosure. Those outcomes should not be funded by Tupelo taxpayers.
Carlyle “Smitty” Harris is a retired attorney and banker. Contact him at email@example.com.