Dear citizens:

Free to Choose was the title that American Nobel Laureate and economist Dr. Milton Friedman gave to his landmark book in 1980 in which he illustrated the effectiveness of free market policies versus centralized economic planning by bureaucrats and politicians. Dr. Friedman did not live to see today’s economic crisis, but he clearly saw the gathering clouds that foretold it.

Today, our choice is to shrug off to our children a day of reckoning made inevitable by the encroachment of government on our economic system or to create a path that will enhance our position as the world’s foremost economic power. Those who suggest that the federal government, with taxpayer dollars, should bail out the private firms on Wall Street by providing hundreds of billions of dollars are offering a Band-Aid remedy, not a solution.

Politicians, who wish to throw money at the housing crisis, are attempting to cure a symptom not the chronic disease: our lagging economy and the loss of confidence in our markets. This is the problem we should be attacking. Mortgage failures will continue to occur if the health of the economy is not restored. The primary factor that will determine whether 5 percent, 25 percent, or 30 percent of “sub-prime mortgages” will default is the future strength of our economy. Increasing the size of American’s public debt by assuming a $700 billion liability is not the answer.

A more prudent legislative solution would focus on resolving the current problems of our economy, not just growing the size of government at the expense of the taxpayer. Such market-oriented proposals would create a government backed insurance fund for subprime debt which would restore confidence in the market. Lenders participating in such a program must agree to work with borrowers to restructure loans where possible, thus curbing default rates. Such lenders would also be required to do away with lavish “golden parachutes” given to CEO’s despite poor performance. In addition, so called “mark to market” accounting rules should be removed in order to stabilize market values.

The oldest cliché of Wall Street is: “there is always opportunity in chaos.” We should use the present crisis as an opportunity to move forward with common sense steps to truly make us competitive in the global economy. This crisis should not be used as an excuse to bring our financial sector under government control. Such common sense steps should include eliminating capital gains taxes, as well as the elimination of the “death-tax.” Billions of American dollars are currently sheltered overseas for the purpose of avoiding taxes. A bold step would be to offer a three year “tax holiday” to firms that bring their monies back within our borders, which would put those monies to work creating jobs and developing newer, more competitive technologies.

Individuals, who fear such cuts would eliminate vital revenues, need only to look at the tax cuts engineered by Presidents Kennedy and Reagan. Both increased revenues to the U.S. Treasury, because they spurred economic growth and reinvestment. It is an economical and historical fact that is indisputable and, if given a chance, would repeat itself.

Wall Street is not the enemy of taxpayers. Its problems with mortgages that often came about as a response to government mandates of “affordable housing for all” are understandable. Government’s role now should be to provide assistance in developing a plan that is not a bailout but a user funded insurance program with federal guarantees.

At this difficult time, we have before us two philosophical and practical options that will result in a generation of consequences. Either taxpayer funded bailouts as Band-Aid remedies or the healing of our economy by providing incentives to the private sector. We are, after all, free to choose.

Richard Mourdock

Indiana State Treasurer