Moneybeat: The ownership paradox

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MARY REICHARD, HOST: Coming up next on The World and Everything in It:

The Monday Moneybeat.

NICK EICHER, HOST: It’s time now to talk business, markets, and the economy with financial analyst and advisor David Bahnsen. David heads up the wealth management firm the Bahnsen Group, and he is here now. Good morning to you.

DAVID BAHNSEN: Good morning, Nick. Good to be with you.

EICHER: Well, David, let’s begin with some news—what’s being described as the biggest federal housing bill in a generation.

It’s not a big money bill, but rather seems aimed at housing affordability by encouraging local markets to make it easier to build homes, streamlining permitting, encouraging denser kinds of development, removing barriers to manufactured housing.

What do you think: Does Congress have at least the diagnosis right that it’s looking at the supply side rather than trying to stimulate demand, as so many of these things try to do?

BAHNSEN: Well, I think that there is no question that the diagnosis of it being a supply issue is right. The question is whether or not this bill is able to do much about that, or any bill, from a federal government standpoint. You talk about the kind of zoning and various issues that are restrictive of new supply, and none of that is under the purview or jurisdiction of Congress.

So this bill is kind of interesting because it will say that it encourages local municipalities. I don’t know what that means. Yes, there is—what is it?—$200 million for grants. I know it seems like a lot of money in the grand scheme, but what we’re talking about here would be equivalent to a paperclip to encourage local municipalities with grants to ease up on zoning laws.

Look, I think there’s a couple things in this bill I like. There’s a couple of things in it I don’t like. I don’t mean to be cynical, but I do want to be very realistic and honest for WORLD listeners. If you got 85 or 90% of this Congress to vote for it—Democrats and Republicans—then how good can it be?

The fact of the matter is that it is a pretty classic case of a bill passed for the purpose of them being able to say they passed a housing bill.

On the margin, there are a couple things that I think are good. The National Environmental Policy Act on specific housing projects, trying to streamline some approvals where that stuff is relevant—there is a federal jurisdiction in certain cases that has been problematic, and it attempts to deal with some of that.

Putting cosmetic limits on institutional ownership of housing is, I think, totally silly and counterproductive. But again, the president did end up calling it a “nothing burger” himself and decided not to sign it. But it had enough votes. It got through anyways.

EICHER: David, interesting New York Times piece over the weekend, provocative headline: “Babies Are the New Investor Class.” The notion that investing is becoming something that ordinary families do from the time that a child is born.

It was only lightly concerned with specific policy, but it did discuss the new Trump Accounts program. I wanted to get your view on that. Do you think that this possibly portends a kind of expansion of the ownership society in America? Is there a positive here?

BAHNSEN: Well, I do. I think that it’s not the way I want it done. I don’t believe in expanding the ownership society through redistribution.

Michael Dell voluntarily wanting to give billions of his net worth, or other employers wanting to contribute from their corporate money like a 401(k) match does now—I’m all for that. And parents and grandparents putting into an account and getting a tax advantage to build up their own savings—that’s all classic ownership society stuff.

My problem with this is it being funded with deficit-borrowing dollars for the initial funding. That part is a transfer payment, but it is held by the individual. They own something in the stock market.

It’s not like Social Security, where you just have a promise of a future payment and you don’t really know where the asset that is going to make that payment is. It’s a good thing you don’t, because it isn’t anywhere.

So there are things about it that I like better than other things we have going, but it isn’t necessarily the way I like. We promoted an ownership society with 401(k) accounts. We promoted an ownership society with IRAs. This is adjacent to that, but it is the fact that the funding is coming from taxpayer dollars that I have a problem with.

EICHER: I’m going to hit a political-slash-economic theme here in a couple of different ways. I’ve got some audio of Vice President JD Vance talking about the repudiation in some Republican circles of the economist Milton Friedman. Kind of came out of nowhere. What does he mean when he says that, do you think?

BAHNSEN: Well, first, I think he is wrong to go after Milton Friedman. He’s claiming that Milton Friedman had this kind of radically laissez-faire, hands-off libertarian approach to economics. It represents a misrepresentation of Milton Friedman’s views.

Friedman gave us school vouchers. Milton Friedman was an advocate of a social safety net. There was nothing extreme about his views. What he was was an absolutely profound defender of a free society.

So it’s unfortunate that, when I hear others talk so much about the need for us to have a big tent, the vice president chose such a 20th-century iconic legend as Milton Friedman as a source of criticism.

So I was quite disturbed by the comments. But I’m also really pleased to say that a lot of other people were too.

EICHER: I want you to hear this bite. It’s an interview with conservative commentator Michael Knowles, someone I listen to fairly regularly. I happened to miss his interview with the vice president, but I did go back and catch it. Vance touches on a theme you emphasize in your own thinking and writing, and I want you to interact with it. Let’s listen, Vice President Vance on the Daily Wire with Michael Knowles.

VANCE: Part of why Milton Friedman’s ideas made more sense in the 1980s is because they were being advocated in a country that still had a very rich and powerful institutional Christianity, and so, like being laissez-faire in a world where there are Christian guardrails on everything, yeah, is a much different proposition than being laissez-faire in a world where globalized liberalism has become the sort of status quo of American elites.

How do you evaluate that?

BAHNSEN: Well, I have developed an entire economics course around the very principle that markets work better in a free and virtuous society.

The notion that, because we don’t have the virtuous society that would be the optimal condition for free enterprise, therefore we need to bring the government in—I am not quite sure where that argument goes.

I’ve heard it made by others before who were generally socialists or progressives or Marxists. I would like to know if we believe that this government has the virtue, that our current political realm has the morality necessary to enforce what some people seem to believe free citizens, left up to their own devices, won’t.

We all deal with the limitations imposed upon us by the Fall, by a sinful world. The idea that free society and a market economy should be sacrificed and exchanged for greater government intervention because various moral pillars are breaking down is a confusion of category.

What we need are stronger families, stronger churches. We do not get that by limiting freedom. We get that by enhancing freedom—enhancing both religious, social, moral, and economic freedoms, not pitting these things against each other.

This is something, by the way, Nick, our Founding Fathers knew very well.

EICHER: All right. I’m going to leave it right there. David Bahnsen is founder, managing partner, and chief investment officer at the Bahnsen Group. You can read him each week at Dividend Cafe, which is helpfully located at DividendCafe.com. David, thanks.

BAHNSEN: Thanks so much Nick.

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