LVTFan's Blog

Henry George's teaching in a nutshell

Henry George's teaching in a nutshell: To deprive men of the power to take what belongs to others.

-- From The Beacon, an Australian Single Tax journal, quoted in "The New Earth," (1899)

The Land Questions: #40: promoting urban housing for all who want it

40. Studies have confirmed the common wisdom that people who live in cities do more walking than those who live in suburban and rural areas, and tend to be in better shape.   What economic policies might help promote the kind of density that will encourage the development of affordable housing -- for people all across the income spectrum -- near the centers of activity?

A. Land value taxation, which will cause urban landholders to put their underused land to better use, replacing vacant lots and obsolete buildings with taller modern buildings, approaching the highest and best use for that land.

B. Land value taxation, which will capture the increases in value that are the result of public investment in new transportation systems: subway stops, bus stops, etc., instead of leaving it to raise the selling price of sites served.

C. Land value taxation, which produces the kind of density that makes public transportation systems feasible.

D. Land value taxation, which will allow people who would like to live closer to their work to afford housing there

E. LVT, which will bring down the selling price of land -- without reducing its value at all -- to make it appealing to developers who can put it to use

F. LVT, which will allow people to afford housing with smaller and shorter mortgages to live where they want to live.

G. Your suggestions?

The Land Questions: #37

37.  Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on.  How should we and our children pay back them and their children?

A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.

B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.

C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever.  (Similar to the Alaska Permanent Fund)

D.  By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years

E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.

F. Your suggestions?

 

The Land Questions: #21 -- Paying for Transportation Infrastructure

21.  The creation of a new subway line raises the land values near each of the stations.  Who should pay for the building of the subway line?

A. Riders of the new subway line

B. Riders of all subways in the system.

C. Riders of all mass transit in the metro area.

D. Drivers of cars and trucks, all over the metro area, via taxes on their fuel purchases (that is, in proportion to miles driven and the fuel efficiency of their vehicles)

E. Drivers of cars and trucks, all over the metro area, via an annual surcharge on their registration

F. Drivers of cars and trucks, all over the metro area, in proportion to the value of their cars, owned or leased

G. Drivers of cars and trucks, via tolls when they use bridges and tunnels, or HOV lanes, or certain highways

G. The taxpayers, via increased sales taxes on their purchases

H. The tourists and business travelers, via hotel occupancy taxes and taxes on rental cars.

I. Passengers in taxis, via a surcharge on their fares.

J. The homeowners, via taxes on their homes

K. Drivers, commercial and individual, via taxes on fuel purchased within the city

L. Employees all over the metro area, via a payroll tax

M. The tenants of commercial buildings in the heart of the central business district

N. All landholders, paying equally (a parcel tax)

O. All landholders, in proportion to the size of their lots

P.  Landholders, in proportion to the value of the land they hold, without regard to the buildings or their contents.  Those whose land values are raised by their proximity to the new line will see a proportional increase in their share of the tax burden; those far from the new line will not.

Q. Your suggestions?

The Land Questions: #20 Affordable Housing

20. What is the best way to insure that affordable housing -- for people of all ages and stages, all income levels -- is available, both for ownership and for rental, both near the center of activities and, if needed after the desire for housing near the center of activities is satisfied, on the fringes?

A. Lotteries

B. Community Land Trusts

C. Affordable Housing Regulations that require that for every 10 new condos built, 1 must be affordable to people earning less than the local median household income

D. Rent control

E. Shame

F. Fundraisers

G. Habitat for Humanity

H. Relaxed mortgage lending rules and more private mortgage insurance

I. Land value taxation, to encourage the redevelopment of underused sites near the center of things

J. Your suggestions?

The Land Questions: #17 -- Middle East

17. There's a conflict in Israel.  What's the real issue?

A. Respect

B. Armageddon / Apocalype

C. Land -- everyone needs secure access to some if they are not to be subject to others

D. Differences in religious tradition.

E. Water

F. Your suggestions?

A 1938 NYT Letter to the Editor: Collecting Ground Rent

I came across this rather good letter to the editor, from 1938.  (Trinity Church Corporation, a major landlord in downtown Manhattan, was the subject of a NYT article this past week, as well as the subject of a major series in the NYT in December, 1894):

1938-09-03 Letters to The Times

Collecting Ground Rent
Single-Tax System Regarded as No Detriment to Building

TO THE EDITOR OF THE NEW YORK TIMES:

Fabian Franklin, in his letter to THE TIMES discussing the demolition of John D. Rockefeller's Harlem tenements in order to save taxes, writes:

"That objection is simply that virtual abolition of land ownership, which the single-tax plan is designed to effect, would make the building of houses in a city an extra-hazardous business, because, under the single-tax regime, in the great majority of cases the investment would result in a disastrous loss to the owner of the building.  I was neither blaming nor praising Mr. Rockefeller for the demolition of Harlem tenements."

What is the so-called single-tax system?  It is the collection by the government, through the taxing officials, of the entire economic or ground rent of land and the repeal of all taxes on buildings and other products of labor and capital.  That ground rent is estimated to be 9% of the capital value of the land.  New York City is now collecting one-third of this ground rent.  The market value of the lots is the remaining two-thirds, capitalized.  Dr. Franklin's thesis is that if the entire ground rent is collected no one would erect buildings, because "in the great majority of cases the investment would result in a disastrous loss to the owner of the building."

Some of the finest buildings in New York City are erected on leased land and the lessee pays the ground rent 100% besides a tax on the building.  There are hundreds of buildings erected by lessees of lots owned by Trinity Church, Astor estate, Rhinelander estate, Sailors Snug Harbor and others.  The lessees must pay all the taxes, both on land and building, amounting to 3% of the assessed value of both, and to the landlord 6% of the market value of the land.

Thus the entire ground rent is paid by the lessee, but only one-third to the government representing the people who made that value by their presence and activities, the remaining two-thirds to the landlord.  Notwithstanding that they are thus obliged to pay 100% of the economic rent, bankers and business men erect buildings costing millions.  Under the Henry George plan they would have to pay less, for the taxes on these costly structures will have been repealed.

Perhaps if Mr. Rockefeller had not been obliged to pay taxes on the buildings he might not have pulled them down; or, if he had, would have erected better buildings in their place in order to get a return on his investment in buildings.  The ones who will benefit most from the adoption of the Georgian philosophy are the owners of humble homes.  The average small homeowner's house is assessed for at least twice the assessed value of the lot.  If the house is relieved from taxation and the lot taxed the entire ground rent, his tax will be less than it is now.  The difference will be made up from vacant lots and lots that are worth more than the improvements.

After all, the building of houses is like any other business.  The builder takes the risk of lessened demand because of changes in fashion, obsolescence, competition.  It is estimated that 95% of new businesses ultimately fail. With the adoption, however, of the philosophy of Henry George, commonly called the single tax, failures in the housing and other businesses will be much fewer.  This is because neither houses nor goods nor anything else will be taxed.  The collection of the entire ground rent will not lessen the area of the surface of the earth one inch.  On the contrary, it will open to occupation and use land that is now held for speculation purposes. 

The taxation of any product of labor and capital will add the amount of the tax to the price, lessen demand and thus curtail production.  The result is unemployment and misery.

Frederic Cyrus Leubuscher
Essex Fells, N. J., Aug. 31, 1938

Shalom and Taxation

This quote came across my inbox today, and I thought it worth sharing:

“We operate from the concept of ‘shalom,’” Forrister said when he reported on that meeting to The Huntsville Times. “’Shalom’ means more than the absence of war, it means the well-being of all. Ezekiel said to seek the ‘shalom’ of the city you’re in – and he was writing to people in exile in Babylon. We’re to seek the good of the whole community, of all of society.”

I came very slowly to the point of view that the nature of the ways we fund our common spending is at least as important as the spending side of the budget.  That taxation can be destructive or constructive.  That it can be used to create vital healthy communities or ones in which wealth and power concentrate into a few hands.

I grew up with the benefit of grandparents who understood this, and I still didn't "get it" until well after they were gone.  Certainly my college education didn't provide me any glimpses of it, despite being concentrated in fields in and around it.  I hope that others who are seekers after peace -- after Shalom -- will investigate what Henry George's "Remedy" -- land value taxation -- has to offer for their community and their country.

And here's the final paragraph from the email that the first quote came from:

Taking care of each other is simple kindness, not something sinister, said Forrister, who was trained as a Church of Christ minister.

“Thinking about looking out for the common good is not socialism,” Forrister said. “Capitalism has to be tempered by social policy that responds to human needs that capitalism won’t respond to.”

Our current form of capitalism is, among other things, land monopoly capitalism.  Were we to remove the land monopoly aspect, through land value taxation, we would have a purer capitalism, one which I think would better serve the ideals we claim to hold dear.

The Superficial Reformer

If you've just arrived at this page, this is the first (last) of perhaps 10 items I've picked up from reading a year's worth of an 1895-6 weekly called The San Jose Letter. I'm amazed how topical they are 115 years later!

From The San Jose Letter, of November 28, 1896:

THE SUPERFICIAL REFORMER.

A great fault of the human family today, when starting out on reform measures, is to battle with effects and neglect the primary causes of the evil. What man, be he the most uneducated tiller of the soil, would start out to eradicate weeds by cutting them off at the surface of the ground? Would he not dig down and remove the roots? And yet all the great reform parties, temperance people and labor organizations, are fighting effects, all claiming to be right, while the "ignis fatuus" is luring them on to their own destruction.

What, then, is the primary cause of the evil that is today filling our jails and insane asylums, making prostitutes of women and placing a premium upon drunkenness and suicide, while the products of industry are taxed to their utmost to keep up this damnable retrograde movement of our civilization? Are these the results of man's development in freedom, or are they the results of present conditions over which he has, or thinks he has, no control? Cannot this entire brood of evils be laid at the door of poverty and want, the result of bad laws? Anything, therefore, that will better man's condition will certainly lesson crime. Such a state of affairs is what the single tax will bring about. It has already been shown that taxing a thing has a tendency to discourage it, hence we are going to stop taxing industry and production, because these are the mainstays of existence, and to discourage them is to say that we have no right to that which nature decreed should be ours, but our entire revenue for community purposes, we propose to take from land values created by reason of the presence of the community.

—George W. Loehr in National Single Taxer.

If we don't go to the root of the problem, we and our descendants are going to be spending centuries trimming the weeds.

"Radical" has an honorable root: Radix, radicis --the root!  Radish, radius, eradicate, radical ...

The current conversation about "tax reform" seems to mostly consist of arguing about federal income tax brackets.  It doesn't go to the root of the problem.  Most of those carrying on the conversation wouldn't know the root if they stumbled across it.

Delaware Single Tax Platform, 1896

How does this strike you?  If this is the first thing you've read here, it may seem very odd to you. I invite you to explore the ideas involved, through the tags (below this post) and in the cloud, at left.  Comments welcome, of course!

Single Tax Platform

The single taxers of Delaware are conducting a red hot campaign. The single tax will be the issue in that state this fall, and Justice, the state single tax organ, published the following as their Single Tax Platform:

We assert as our fundamental principle, that all men are equally entitled to the use of the earth;

Therefore, No one should be permitted to hold land without paying to the community the value of the privilege thus accorded; and from the fund so raised all expenses of government should be paid. We would therefore abolish all taxation, except a tax upon the value of land exclusive of improvements. This tax should be collected by the local government and a certain proportion be paid to the state government.

This system of taxation would dispense with a horde of tax-gatherers, simplify government and greatly reduce its cost.

It would do away with the corruption and gross inequality inseparable from our present methods.

It would relieve the farmer, the workman and the manufacturer of those taxes by which they are unjustly burdened, and take for public uses those values due to the presence of population.

It would make it impossible for speculators to hold land idle, and would open unlimited opportunities for the employment of labor and capital, which is essential to the solution of the labor problem.

reprinted in The San Jose Letter, June 13, 1896

Young Men and Their Opportunities - 1896 and today

This appeared in a California weekly 115 years ago.  Much of it could have been written in 2011.  Does this mean that these problems are eternal, necessary and simply can't be avoided?

Or does it mean that when we continue to maintain the structures that create these problems, we ought not to be surprised that the problem continues to show up?

These problems can be solved -- and prevented -- by a simple, logical, just, efficient reform of our tax structure.  But almost none of our elected representatives are the least bit familiar with it.  You might send yours a copy of Walt Rybeck's book, "Re-Solving the Economic Puzzle," if you think yours might have an open mind.

 

Young Men and Their Opportunities
The San Jose Letter, February 1, 1896

But what are young men to do for a living? Did it ever occur to you that thousands of young Americans between the ages of 16 and 21 are pondering over that very question? What are they to do, indeed? Shall they study for a profession? Scores of young professional men in San Jose are not earning enough to pay their office rent, young lawyers, doctors, dentists, waiting for the practice that does not come.

The professions are overcrowded, some one says, let them learn a trade. What trade, pray? Would you have any of them learn the carpenter's trade, for instance? The valley is over-run with idle carpenters. Would you have them become house painters? Every other tramp one meets appears to be a painter. Would you have them learn the printer's trade? A dozen idle printers are clammoring for every place.

I was talking with a gentleman who is in the hardware business the other day. This question of idle young men came up. The merchant got down a list containing probably a score of names. Applicants, he told me, for a chance to learn the plumber's trade. "I have not a place," he said, "for one in twenty of them. They offer to work for nothing, if permitted to learn the trade. But idle journeymen apply for work every day."

It is so with every trade that may be named. Plenty of young men are fitting themselves for a $20 job, by spending months in learning shorthand and type writing. There was a time when a book-keeper could earn a living-assuring salary. He cannot now. Book-keepers, good enough for any average retail business, are hunting $40 jobs.

What are the young Americans of this generation to do, then? Such as have parents to furnish them with a home can work for $20 a month. Those with no home cannot compete with home-cheapened labor. The result is, San Quentin is filling up with young fellows under 25 years of age. Most of our tramps appear to be under 30.

Since the land is filled with idle doctors one can safely conclude that none want for medical assistance and advice. Since idle carpenters are begging for work, the people of America must have all the houses they want. There can be no more plumbing to do, for plumbers are idle; no houses that need painting for painters are tramping the country seeking work, no one without bread for there is no sale for breadstuffs, and bakers are without employment.

But, strange to say, hundreds of men are suffering for the services of the idle doctors. Families are shelterless, while carpenters are begging to build them houses. Men and women and children are suffering for bread while bread-stuffs rot, and bakers starve to death because they can find no one who can command their services.

Doctor A wants to build a house, and carpenter B is anxious to build it for him; but the house is not built. In the meantime Carpenter B's children die for the lack of medical assistance. Blacksmith C is unable to furnish his family with wood, for he "has no work." However, Wood-dealer D sees his horses go lame because he cannot afford to have them shod.

A very interesting state of affairs, is it not? Work that should be done, and plenty of it; while the young men of the nation are drifting to State prisons and the road because they can find no work.

This condition of affairs is new in America. Hungry men startle the well-fed, until they, too, hunger for the luxuries that once seemed necessities, then they are more than startled.

Along with this an evil is growing up in America that cannot be too earnestly condemned; it is that of the steadily growing custom of giving charity. The recipient of charity is demoralized. The American laborer wants work, not charity. When you give him charity you sink him to a condition lower than that of the negro slave. I know philantropists who employ Chinese, while white labor goes begging for a purchaser, who pompously "pay the white man's butcher bill." The white man wants to pay his own butcher bill, and demands work that will enable him to do it.

The evil results of this charity are doubled when school children are taught to "give to the poor." San Francisco has been turned into a pauper-making, pauper-sustaining educational institution. The papers reek with "charity," and the children are given lessons in pauperizing their elders. A year ago last winter the children were encouraged to feed the men employed at $1 a day in the Golden Gate Park. What did this mean? It meant that the children were made accustomed to see laboring Americans want for food, while the laborers, although working ten hours a day, were obliged to stoop to accept charity, and charity at the hands of children. It is very pathetic, this picture of Susie or Johnnie giving a ham sandwich or a piece of sponge cake to a hungry laboring American — a pretty picture, if you like; but the children are not benefited by it and the laborer can know no greater degradation. But, what are the young men who are leaving schools, colleges and universities each year to do for a living? Must the majority of them become objects of charity, to be given work, charity work, at wages which will not sustain life, only to be helped out of the difficulty by a lot of idle society women, who have nothing better to do than to take up the fad, charity; and by a parcel of school children who are encouraged in doing their little towards the ultimate pauperization of the American laborer?

This was most likely written by Franklin Hichorn, editor of The San Jose Letter.

Rent and the Cost of War

 

Temple Artisan. 17:119-21. January, 1917.
Rent and the Cost of War.
Sydney L. Milliard.

The question has been asked, "Where, before war breaks out, is the money which is later spent on the war?"

It has been shown that it is not in the laborers' pockets, because the laborers are better off when the war has broken out, and that they have more and not less during the war. It is not being distributed in legitimate profits because legitimate profits are greater after the war has broken out. It is not being distributed in interest because interest is higher after war has broken out. It must be somewhere, in some location that is hurt by the outbreak of war. Money comes from somewhere for war purposes. Therefore the people who had that money before the war must be poorer. Who are they?

They are owners of rents and of spurious capital. By spurious capital is meant various bonds and stocks that represent merely the power to tax industry and which do not represent real bonafide industrial machinery at all. And principally they are the owners of economic rent.

It has been asked why France made such a quick recovery after 1870. Before 1870 one third of the wealth of France went in rents. The owners of these rents had to be kept by France in idle luxury. The war broke land values into nothing. France had not this money to pay away to useless aristocracies so she was able to pay for the war with it, and later to pay the indemnity, too. And in addition to this the demand for produce so increased that every worker had plenty to do at good wages, and was therefore able to buy the produce of other workers, and this condition caused the war to be not only not a disability to France, but a positive benefit.

In England before the great war one third of the national income went direct to the pockets of the ducal landowners. These men constituted a vastly greater charge upon English production in the long run than any war, big or little, has ever done. This charge of one third of the national income has been going on for ages, and always increasing in volume. It is a total national loss. There is absolutely no come-back from these ducal families. One third of the nation has to work for them, and they do nothing in return. Nothing reaches this condition but the Single Tax and war. The single tax we cannot get — not yet; war we have. What does war do?

The war has sent thousands of the British aristocracy to the front where they fight for their living; it has sent the country estates to the bargain counter at such figures as never were heard of before — they are almost giving them away. Even in the big cities land sales at former figures have abruptly stopped, and in Paris, with the German army in sight, land values ceased to exist. Should the kaiser really set foot in force on British soil the value of London real estate would vanish.

To revert to our original proposition, — "Where, before war breaks out, is the money which is later spent on war?"

It is inherent in the price of land; it inheres in rent; it goes into the pockets of a few owners of economic rent who are just as direct a charge on the community as is war. Wipe these people and their charge out and you can easily pay for your war. Take away this national charge of one-third of the national income to the owners of the soil and you can keep your war going in perpetuity and never miss the money. You are simply spending money that is already lost. You are not spending money on the war that you already had; you are spending money on the war that some one else already had to the infinite detriment; are throwing away bad money, money that could otherwise be put to a worse use than war, namely, luxury and degeneracy.

As it is in Europe, so will it be in America if a real war ever breaks out here. If the combined European fleets were bombarding New York, and you owned New York real estate you would not expect to realize very much on your property. Still less could you realize if the combined European armies were encamped around New York. Since the wars have been going on in Mexico, rents have almost disappeared and much land value has entirely so. But in Mexico the destruction has gone beyond the wiping out of land value and has destroyed actual necessary commodities.

Henry George said that "All taxation ultimately falls on rent." War is taxation. It falls on rent. Then comes an added advantage. It breaks loose the foundations of industry which so-called over-production has bound up. It enables the workers to get to the machinery of production and the idle land and produce goods which they by this time have money enough to buy. The state, which before the war was simply a negative observer of a cancer eating its own vitals, now becomes a positive agent in spreading employment, wealth, and general business. The state demands everything that can be produced, and at good prices. Now everyone is in demand, and at good wages. Before the war the aristocracy could not buy the products of mill and mine and field; the aristocracy couldn't consume these products, therefore the mills shut down. War can consume them, so the mills open up at full speed and wages! "Where, before war breaks out, is the money which is later spent on war?" Answer: In the pockets of the owners of economic rent. War breaks this down and distributes it amongst the workers in payment for value received. How can we produce this condition in time of peace? Answer: By doing away with economic rent through the imposition of the single tax, and then using that wealth to buy up the product of the national toil to be used for the benefit of the whole people.

Nein nein nein to the 9-9-9 tax plan - Fred Foldvary

by Fred E. Foldvary, Senior Editor, The Progress Report 17 October 2011:

The tax plan being promoted by one of the presidential candidates, Herman Cain, seeks to impose a federal personal and corporate tax rate of 9% and a national sales tax of 9%. The word for "no" in German is "nein." Since the 9-9-9 plan would be neither equitable nor efficient, we can respond in German, "nein, nein, nein!"

The first "nein" is on the 9% business flat-rate income tax. This would impose a tax on gross income minus purchases from US firms, investment in capital goods, and exports. That would be much better for enterprise than the current top income tax rate of 35%. However, recognizing that any taxes on production has an excess burden, the best tax rate of all would be a flat zero.

The second "nein" is on a personal income tax rate of 9% on gross income minus charitable donations. The plan complicates this with special tax rates in "empowerment zones." Such enterprise zones often just shift business away from other areas, and then the land rent in the zone goes up to soak up the locational advantage, so the ultimate gainers are the landowners, especially those who are politically well connected and are able to buy up land in the zones prior to being established.

The poorest workers pay little or no income tax today, or even get cash under the "earned income tax credit". The flat-rate 9% tax would make the poor pay higher taxes. Again, a 9% tax is better for most taxpayers than the current tax rates that go up to 35%, and a flat tax that eliminates real estate deductions and exemptions is also better, but best of all would be a flat wage and profits tax of 0%.

The worst part of the 9-9-9 plan is the 9% national sales tax. While to some extent the effect of the sales tax would be offset by the reduction of income taxes, still, sales taxes get added to the cost of production to increase the price of goods. For companies that were making little profit, they would have paid little income tax, so the tax could end up raising their prices by more than the current tax system. If they employ low-wage labor, those workers would have been paying little or no income tax, and would now have to pay the higher nine-percent income tax, which would further increase costs to those enterprises. The 9-9-9 plan would dramatically increase income inequality at a time when inequality has already been rising rapidly.

The 9-9-9 plan is supposed to be revenue-neutral, but analysts have found that it would generate less revenue than the current system, so the 9-9-9 numbers would probably be raised to 10-10-10 or higher. Once a national sales tax or value added tax is in place, the tax rates could be raised, as they have been in Europe.

It has been pointed out that the tax plan being promoted by Herman Cain is the same as the tax structure in the 2003 video game "SimCity 4". This video game simulates a city, and the default tax rate is 9-9-9. According to some analysts, in this simulation game, the 9% tax rates were not enough to finance the desired public goods.

The favoring of one tax plan implies the rejection of the other systems. The advocacy of a national sales tax implies the rejection of alternatives such as a national land-value tax. So we can ask why a candidate is rejecting a tax on land value in favor of a tax on produced goods.

Herman Cain is correct in saying that the natural state of the economy is prosperity, and that freedom promotes prosperity. He is right in saying that government must get out of the way of production. He is right in saying that production drives the economy. But he does not go to the logical conclusion of the free-market argument: marginal tax rates of zero. To best promote employment, investment, and growth, place no tax on additional production, trade, or consumption.

A land-value tax would best let the economy rise to its natural rate of prosperity. LVT would be levied on the economic rent of all land. Taxing land value is equivalent to taxing its economic rent, also referred to as ground rent or geo-rent. LVT would be based on the most productive use of a plot of land, regardless of current use, and regardless of current rental payments. Thus if a plot of land were not being used as productively as possible, the tax would push landowners to make the best possible use of their lands, or else pay the same as those who do.

LVT would promote equity and greater equality of income and wealth, because it would equalize the benefits from land, and equalize the gains from economic progress as captured by higher rent.

The prices of goods, including wages and interest rates, provide information about their scarcity relative to the desire for those items. Taxes both on production and on goods twist, distort, and skew these numbers, so that the economy is operating on false signals. LVT does not change the market rent, and rather than acting as a tax, it acts to remove a subsidy. Land value gets subsidized as the public goods provided by government, but not paid for by landowners, pumps up rent and land value. If this rent is not collected for public revenue, then it is a gigantic subsidy to land ownership. Thus taxes on goods and on income from production and not on land value end up subsidizing land value and shifting wealth from the poor to the rich.

Thus if the 9-9-9 plan increases wealth, the gains would go to the rich at further expense to the poor. The worst part of the plan is its continuation of the massive subsidy to land value, and even if the plan generates more growth, the benefit will ultimately go to higher rent and land value, generating an even greater real estate boom to be followed by another big crash.

So let's say in German: Nein! Nein! Nein! Let's also say Zero, Zero, Zero! Zero tax on wages, zero tax on goods, zero subsidy to land value. The tax emperor appears to be dressed to the nines, but like in the story of the naked emperor, the cloth is imaginary. -- Fred Foldvary

Copyright 2010 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.

0-0-0-0-100

I have a family member who, when Herman Cain says "9-9-9," plays a sound bite of another voice shouting "nein! nein! nein!"

Georgists have a better proposal for how we ought to fund our common spending.

• 0% tax on wages
• 0% tax on sales
• 0% tax on corporate profits
• 0% tax on buildings and equipment
• 100% recovery of our commonwealth

This probably raises several questions in your mind:

• what is "recovery of our commonwealth"?
• how will it affect me?

Our commonwealth includes the value of land -- not the improvements made by the present or previous owner, but the value of the site itself, which is created by the gifts of nature; by the investment of the local, state and national communities in public goods and services (including most "pork"); by the presence of the community and its economic activity.  While good farmland may be worth $5,000 or $10,000 per acre, depending on climate and proximity to markets, suburban residential lots might be $35,000 to $1,000,000 -- or far more! -- per acre, and an acre in midtown Manhattan can be worth $250,000,000 or more.  The landholder doesn't create that locational value.

Our commonwealth includes the value of ecosystem services.  It includes the value of electromagnetic spectrum (the airwaves which most people would agree rightly belong to the American people, not to corporations).  It includes the value of water, particularly fresh water for drinking and water for irrigating crops and for corporate use.  It includes the value of government-granted privileges.  It includes the value of geosynchronous orbits -- those parking spots in space for satellites whose owners and customers would not want to see crashing into each other.  It includes the value of landing rights at busy congested constrained airports, such as LaGuardia or JFK, particularly at their rush hours.   It includes the value of scarce on-street parking in congested cities.  It includes the value of nonrenewable natural resources extracted from below the earth and the oceans, for 200 miles beyond our land borders.  It includes a whole range of other similar things.  

As you look at that paragraph, compare it to the 0-0-0-0 list above, and notice that it collects upfront certain values, and leaves the rest to those who produce.   It is direct taxation rather than indirect, and one could reasonably argue that it isn't even really taxation; rather it is more in the nature of a user-fee.

It is Natural Public Revenue.

Once one has sat with this idea for a while, it seems quite unnatural to permit the value to continue to accrue to private individuals, or to corporations publicly or privately owned, or to entities other than the community as a whole!

Recall how concentrated wealth is in the US: The 2007 SCF [the Federal Reserve Board's Survey of Consumer Finances] reported that aggregate net worth is "distributed" as follows:

• Top 1% of us have 33.8%
• Next 4% of us        26.6% [cumulative: 60.4%]
• Next 5% of us        11.1% [cumulative: 71.5%]
• Next 40% of us      26.0% [cumulative 97.5%]
• Bottom 50% of us    2.5%

Recall also that the Forbes 400 families are specifically and intentionally omitted from the SCF, and that Forbes estimates that they represent 2.5% of aggregate net worth. So add that 2.5% to the numerator and denominator.  And note, as Michael Moore did, that it is very similar to the value of the Net Worth of the bottom 50% of us.

And it seems quite unnatural to tax wages, and sales, and corporate profits, and buildings at all before we've fully collected Natural Public Revenue.

Will Natural Public Revenue be sufficient to meet all the needs of all levels of government? 

Quite possibly not, at least today when we are so reliant on a social safety net because current conditions have kept a significant share of our people from providing well for themselves.   But I regard it as altogether possible that within a generation or two, it could be quite sufficient, in part because it would have the effect of redistributing some of the wealth which today is pouring into the pockets of a relative few of us.

How much of corporate profits are coming from (quite legal) privatization of the value of natural resources, the value of being able to get away with polluting air, water and soil, and the value of other privileges which corporations -- public and private -- are used to enjoying?  One of the interesting findings in the SCF is that the value of privately held businesses [BUS] actually exceeds the value of publicly held ones [EQUITY] in household wealth -- and the value of both is highly concentrated:

                                    EQUITY          BUS              

[value, billions, 2007] $13,694.3    $14,893.7

• Top 1%            36.0%            62.7%
• Next 4%          30.5%            25.5%
• Next 5%            5.5%            12.4%
• Next 40%         19.6%             6.0%
• Bottom 50%       1.5%             0.4%

Source: http://lvtfan.typepad.com/lvtfans_blog/americas-wealth-distribution-2007-wealth-concentration-part-1-of-3.html, lines 19 and 28

Consider, too, how much more of this value the Forbes 400 have!   These two categories represent 21.2% and 23.1% of aggregate net worth held by the rest of us -- a total of 44.3%.  Most of the 2.5% is likely in these two categories.  I'll leave the math to you.

Frances Willard, anti-poverty activist

I've not yet begun to watch the Ken Burns PBS series on Prohibition, other than a few snippets I've caught at odd times.  (I look forward to watching the programs in order and in quiet.) But in the first segment, I did hear the name Frances Willard and something that made me google her name along with that of Henry George, on the chance that there was some connection.  And I did find some interesting things.

Frances Willard, whose name we associate with the Womans Christian Temperance Union, was apparently also a Single Taxer.  She saw the Single Tax as the way to end poverty, which she saw as a key cause of inebriation.

A few quotes:

"We used to say intemperance was the cause of poverty; now we have completed the circle of truth by saying poverty causes intemperance, and that the underpaid, undersheltered, wage-earning teetotaler deserves a thousand times more credit than the teetotaler who is well paid, well fed and well sheltered.

"In the slums they drink to forget; we would make life something they would gladly remember; so would you.  Our objects are the same; let us clasp hands in the unity of spirit and the bond of peace."

source: NYT, 1895-06-20

from What Frances E. Willard Said:

May God crown with success the three great movements of our time which are fast passing out of the hands of philanthropists and into those of statesmen, viz., the temperance, the woman, and the labor questions, all of which are equal fractions of that one mighty whole — the human question.

and

The labor question is our question. Prostrate and crushed under the mountains of injustice that are piled upon the poor, lies the degraded woman to whom financial independence, equal pay for equal work, has often proved the lifting lever to a rehabilitated life.

quoted in "Land and Freedom" (volume 33):

'I SEE in Henry George's proposal an effort to establish a principle which, when established, will do more to lift humanity from the slough of poverty, crime and misery than all else; and in this I recognize it as one of the greatest forces working for temperance and morality.

from Miss Willard's address to the national WCTU convention in Baltimore, 1896:

In her address to the National W. C. T. U. convention held at Baltimore last week, Miss Willard said: -- We can no longer ignore the fact that, as the Scripture saith, 'the destruction of the poor is their poverty.'  White ribbon women must be the sworn foes of monopoly, of landlordism, and every other form of class legislation.  For one, I believe that the land belongs to the people, and while the farmer's domain should not be interfered with, since he turns it to a beneficent use, a propaganda of education should have devised whereby the single tax and the issue of all money by the Government itself should become two of the central planks in the platform of the party of the future.

Speaking at another meeting Miss Willard: -- Poverty is disease; it is disintegration; it has no right to be; and when men and women wake out of sleep, and see themselves as the criminals they are, nothing in the world will be so sure of actual extermination as the cursed thing called poverty -- the cradle of crime, the father of filth, the mother of misery.  In the past we have comforted ourselves with looking upon it as the effect of wrong-doing, but have now aroused ourselves to the study of its cause.  We are determined to burn to its last infectious atom the stench of the slums, and the temptation to lead a bad life with which poverty haunts the dream of boyhood, handicaps the purposes of youth, and enthralls the life of manhood.

For myself, twenty-one years of study and observation have convinced me that poverty is a prime cause of intemperance, and that misery is the mother, and hereditary appetite the father, of the drink hallucination.

We once said that intemperance was the cause of poverty; now we have completed the circle of truth by saying poverty causes intemperance, and the underpaid, underfed, undersheltered, wage-earning teetotaler deserves a thousand times more credit than the teetotaler who is well paid, well fed, and well cared for.

Ten years ago I could not have said it honestly; five years ago I could not have said it helpfully; but now I ceaselessly declare that I believe it to be the right and duty of the white-ribbon women to help abolish poverty in the larger sense of that great phrase.

This simple change in taxation would also force land at present held out of use for speculative profit into use, and thus prevent the monopolist from becoming rich at the expense of the public.  The value which attaches to the land on which any community lives, is created by that community from year to year, not by any individual, and is thus the legitimate fund from which all public revenue should come."

from an Australian newspaper, 1898, LTE, quoting Frances Willard:

"I believe the present economic condition of the country, the misery of millions of our people, the vast number of the unemployed, call for reforms which, if they could be brought about, would vastly diminish the tendency to drink, and that one of those reforms of far-reaching and unspeakable beneficence is the single tax, as set forth by its great apostle Henry George."

and finally, from the Oxford Observer, a two-parter from July, 1897:

The Oxford Observer. PUBLISHED WEEKLY. SATURDAY JULY 17th. 1897

AN UP-TO-DATE CATECHISM.
By Miss Frances E.Willard.

Who made the earth?
God.

For whom was it made?
For the use and sustenance of all his children, each one of whom has an equal right to its enjoyment.

How do we know that each has this equal right?
Without the use of the earth no human being can exist. As each has an equal right to existence, it follows that each has an equal right to the earth.

Some persons claim to 'own' land.  Where did they get their titles to it?
All such titles in this country were derived from foreign kings or queens who claimed to own "America."

How did these foreign governments get this alleged right?
Through open violence or fraud.

Have the people of one generation any right to give away or sell that which was made for all generations?
No; the earth belongs to the living; the dead have no right therein.: (Thomas Jefferson.)

If any man claims to "own" land, has he a moral title to it?
No; and it makes no difference whether he has purchased or inherited it, his title cannot be better than his from whom he derived. it.

To whom does the land of this country belong?
To all the people of this country and to unborn generations.

It is necessary that each should have an equal portion of land in order that the rights, of all may be secured?
No; that would be impracticable and unnecessary. The same end may be accomplished by taking the rent of land for public expenses.

To be continued.

---

Oxford Observer, Volume VIII, 24 July 1897

An Up-to-Date Catechism
by Miss Frances E. Willard

As the value of land is produced by the community it should go to the community.

Can this be done without disturbing existing social institutions?
Yes; by abolishing other forms of taxation and increasing the tax on land values.

How would this system compare with our present system of taxation?
It would decrease the cost and simply the functions of Government.  A tax on land values is the ideal system of taxation. -- (New York Times)

You would, then, remove all taxation from buildins and improvements?
Yes; the more improvements we have the better for the community.  Our present system of taxation checks production; a tax on land values would stimulate production by abolishing the tax on improvements.

How would the placing of all taxation upon land values affect the farmer?
It would reduce his taxes very largely.  The farmer is the worst taxed workingman in the country; he not only pays largely through indirect taxation on everything he consumes, but he is also heavily taxed on improvements.  A tax on land values would be very large in the cities, or where land values are high, and the tax on agricultural land would be very small. 

How would it affect the house owner?
He would gain greatly, for the greater part of tax which he now pays is based upon the value of his house which is usually much greater than the value of the land.  Of this, as well as of all indirect taxation, he would be relieved.

Would the placing of all taxation upon land values improve the condition of these who work?
Yes.  If land were taxed to its full rental value no one could afford to hold valuable land idle; the holder must either use it himself or allow others to use it.  This would create a great demand for labour, and all wages would rise.

How would it affect the temperance question?
Through abolition of poverty it would solve the temperance question; poverty and the vice which springs from poverty, are the great causes of intemperance.

This catechism was published along with something of Henry George's by the Darlington Single Tax League in the 1920s.  Google Books has a page for it, but does not provide the text.

For some other Single Tax catechisms, check out thesingletax.com, the shorter pieces.

Are Public Sector Jobs, by Definition, a Drain on the Economy?

Are public sector jobs by definition a drain on the economy?

Some would say that they are.  But I think there might be a false assumption in there -- one which comes from an unexamined assumption.

When a public sector job is funded via a tax on wages, or a tax on sales, or a tax on buildings -- things which are produced by human effort -- there is a burden to the economy. 

• Employers must pay far more than their employees receive in wages and benefits;
• purchasers must pay more for goods than the producers (including those in the distribution chain -- distribution is part of production) receive;
• owners of buildings and other improvements must pay an annual penalty in proportion to the value of those improvements.

All these taxes reduce the demand for what is taxed: work, goods (and, in some places, services), buildings.  Fewer jobs are created, fewer goods produced, fewer buildings built and maintained well, less expensive technologies are favored over more expensive ones.

And these are the taxes most of us think about when we think about how to finance public goods.

But suppose we got ourselves outside the smallish box of taxes we're used to thinking about -- those advocated by the neo-classical economists -- and looked more closely at the wisdom of the classical economists -- Adam Smith, David Ricardo, John Stuart Mill, Henry George.

Suppose we thought about the effect of our public spending: effective public spending on goods and services that people value increases land value.

Good schools.  Paved streets.  Well-maintained streets.  Lit streets.  Plowed and cleaned streets.  City water.  Sanitary sewers.  Stormwater runoff.  Police, with well-equipped cars.  Fire departments, with trained professionals and the best of equipment.  Ambulances (ditto).  Hospitals with life-saving equipment and professionals.  Other public-health services.  Courts and jails.  Libraries.  Public health services. Social services.  Parks.  Playgrounds.  Highways (ideally with maintenance taking place at night or at least not during rush hour).  Bridges, well-maintained.  Buses, subways, railroads (passenger and freight).  Airports.  Beaches.  Utilities (more commonly owned by shareholders, but quite realistically municipally provided). Preschools.  Community colleges.  Colleges and universities.  Perhaps after-school activities for children.  A social safety net.  This list is incomplete, but each item on it is a fair example of what makes communities good places to live and worth paying to live in and conduct business in. 

The presence of each of these things increases land values within the area served.  It increases what landlords can charge tenants; it increases what houses and commercial buildings will sell for, without the building owner improving the building or providing additional services.

So does it make any sense to finance these things via taxes on wages?  On sales? On buildings? On imports? On personal possessions?  On cars?  On trucks and business equipment?  On business inventory?    None of these things are increased in value by the provision of public services and goods.  

What increases in value is land -- as everyone can chant, the three most important things in real estate are location, location and location!  Much of that is the availability of publicly-funded services.  (The rest can be attributed to the presence of the community -- drawn in large part by those services, but also by the beauties of nature, the harbors and rivers, the climate, other favorable conditions; to opportunities seen by entrepreneurs and nonprofits to provide commercial ventures and cultural amenities; to advances in technology and science such as air conditioning, mosquito control, fiberglass pleasure boats, etc.)

 

A few weeks ago (8/30/11), David Cay Johnston's blogpost at Reuters, entitled "Budget Costs That Raise Costs," ended with this example:

How can raising taxes put more money in your pocket? By increasing efficiency.

This year we paid $210 in higher property taxes to finance trash collection and sidewalk snowplowing. Purchased retail, those services would cost about $600. So we spent $210 to save $390. That translates into a savings of $1.86 for every dollar of increased tax. As an added bonus we have just one garbage truck a week down our street, not a different company’s truck everyday, and garbage cans on the street only on Thursday mornings.

What matters in public finance is not how much government spends, so much as what it buys with our tax dollars. But don’t count on the new “Super Congress 12″ committee to undertake serious cost-benefit analysis because cutting spending has become dogma and reality-based policies would be economic heresy.

I don't think DCJ has yet seen the cat, but he's certainly recognizing whiskers.

Would you be willing to pay $210 more in property taxes each year to have these services delivered to you by your community?  I'd guess that you might be very willing to pay $210 more in property taxes AND be willing to pay the seller -- and for 30 or 15 years, a mortgage lender -- more for the privilege of living in a place where these things are provided by the community, rather than just outside of town.    (If we paid for this via a tax on land value, the selling price wouldn't rise; and the cost of living would be held down.  If we pay for it by taxing wages, or sales, or buildings, we do burden the economy, just as the "small government" people tell us.  But they don't seem to consider the possibility of taxes which don't burden the economy.)   

There are some who would complain that private trash collectors and the people who specialize in shoveling the sidewalks ought not to have competition from the public sector.   They should all live in communities which feel this way.   And they might concede that others might choose to live in communities which provide these amenities efficiently, with people paid from the public treasury.  

NYT: Whatever Happened to the American Left?

Whatever Happened to the American Left? - NYTimes.com. - Sunday NYTimes opinion piece
by Michael Kazin, of Georgetown University, author of “American Dreamers: How the Left Changed a Nation."

It begins:

SOMETIMES, attention should be paid to the absence of news. America’s economic miseries continue, with unemployment still high and home sales stagnant or dropping. The gap between the wealthiest Americans and their fellow citizens is wider than it has been since the 1920s.

And yet, except for the demonstrations and energetic recall campaigns that roiled Wisconsin this year, unionists and other stern critics of corporate power and government cutbacks have failed to organize a serious movement against the people and policies that bungled the United States into recession.

Instead, the Tea Party rebellion — led by veteran conservative activists and bankrolled by billionaires — has compelled politicians from both parties to slash federal spending and defeat proposals to tax the rich and hold financiers accountable for their misdeeds. Partly as a consequence, Barack Obama’s tenure is starting to look less like the second coming of F.D.R. and more like a re-run of Jimmy Carter — although last week the president did sound a bit Rooseveltian when he proposed that millionaires should “pay their fair share in taxes, or we’re going to have to ask seniors to pay more for Medicare.”

How do we account for the relative silence of the left? Perhaps what really matters about a movement’s strength is the years of building that came before it. In the 1930s, the growth of unions and the popularity of demands to share the wealth and establish “industrial democracy” were not simply responses to the economic debacle. In fact, unions bloomed only in the middle of the decade, when a modest recovery was under way. The liberal triumph of the 1930s was in fact rooted in decades of eloquent oratory and patient organizing by a variety of reformers and radicals against the evils of “monopoly” and “big money.”

excerpts:

THE seeds of the 1930s left were planted back in the Gilded Age by figures like the journalist Henry George. In 1886, George, the author of a best-selling book that condemned land speculation, ran for mayor of New York City as the nominee of the new Union Labor Party. He attracted a huge following with speeches indicting the officeholders of the Tammany Hall machine for engorging themselves on bribes and special privileges while “we have hordes of citizens living in want and in vice born of want, existing under conditions that would appall a heathen.”

George also brought his audiences a message of hope: “We are building a movement for the abolition of industrial slavery, and what we do on this side of the water will send its impulse across the land and over the sea, and give courage to all men to think and act.” Running against candidates from both major parties and the opposition of nearly every local employer and church, George would probably have been elected, if the 28-year-old Theodore Roosevelt, the Republican who finished third, had not split the anti-Tammany vote.

Despite George’s defeat, the pro-labor, anti-corporate movement that coalesced around him and others kept growing. As the turn of the century neared, wage earners mounted huge strikes for union recognition on the nation’s railroads and inside its coal mines and textile mills. In the 1890s, a mostly rural insurgency spawned the People’s Party, also known as the Populists, which quickly won control of several states and elected 22 congressmen. The party soon expired, but not before the Democrats, under William Jennings Bryan, had adopted important parts of its platform — the progressive income tax, a flexible currency and support for labor organizing.

During the early 20th century, a broader progressive coalition, including immigrant workers, middle-class urban reformers, muckraking journalists and Social Gospelers established a new common sense about the need for a government that would rein in corporate power and establish a limited welfare state. The unbridled free market and the ethic of individualism, they argued, had left too many Americans at the mercy of what Theodore Roosevelt called “malefactors of great wealth.” As Jane Addams put it, “the good we secure for ourselves is precarious and uncertain, is floating in mid-air, until it is secured for all of us and incorporated into our common life.”

and

IN the late 1970s, the grass-roots right was personified by a feisty, cigar-chomping businessman-activist named Howard Jarvis. Having toiled for conservative causes since Herbert Hoover’s campaign in 1932, Jarvis had run for office on several occasions in the past, but, like Henry George, he had never been elected. Blocked at the ballot box, he became an anti-tax organizer, working on the belief that the best way to fight big government was “not to give them the money in the first place.”

In 1978 he spearheaded the Proposition 13 campaign in California to roll back property taxes and make it exceedingly hard to raise them again. That fall, Proposition 13 won almost two-thirds of the vote, and conservatives have been vigorously echoing its anti-tax argument ever since. Just as the left was once able to pin the nation’s troubles on heartless big businessmen, the right honed a straightforward critique of a big government that took Americans’ money and gave them little or nothing useful in return.

I don't know whether Dr. Kazin has read Henry George's unnamed best-selling book recently -- I suspect he has read it at some point -- but he clearly didn't see the connection between George's central point and what Howard Jarvis did to the people of California via Proposition 13.  Prop 13 is the antithesis of what George told his readers -- some 6 million copies of Progress and Poverty were sold in the 20 or so years following its publication in 1879 -- was necessary if we were to create a society in which we all start off genuinely equal.  (My characterization, not George's.)  Those who have read P&P know exactly why California leads the nation in foreclosures, and know the necessary-if-not-sufficient route to solving many of that state's economic problems.

George proposed to eliminate all taxes other than a tax on the value of land -- that is, he proposed to collect for common purposes the lion's share of the annual rental value of land, and not to tax imports, sales, wages, buildings, personal property, etc.   Jarvis's Prop 13 put a low cap on how much could be collected in property taxes (in 1978, 1% of the 1975 value of the property, plus a maximum of 2% annual increase -- until the property was sold, at which point the assessed value would be reset at the selling price).  George's land value tax would have collected the annual rent (quick and dirty: 5% of the selling value of the land in the absence of any property tax; nothing on the value of any improvements to the land).

It is no wonder that California's schools, libraries, universities, etc., are underfunded and not serving their intended purposes; that its economy is suffering under the burden of sales and income taxes.   But all anyone writes about Prop 13 is "third rail of California politics" and "'populist' revolt." 

But, as my mother would have put it, our educations have been neglected.  Few of us have any basis for understanding that some taxes are actually good.  (Even Milton Friedman, arguably inspired by Lowell Harriss, recognized land value taxation as the "least bad tax," though he apparently never considered putting his shoulder to the effort to enact it.  One might wonder why -- and consider who buttered his bread, and why someone as brilliant as he never seemed to be conscious of it.)

George, incidentally, was neither left nor right, but represented a third way which appealed to a broad spectrum of Americans and others.

It has been suggested that part of why we celebrate Labor Day when we do is that George's birthday was September 2.  I don't know if that's so, but it would certainly make sense.  He advocated for ordinary people.  "I am for men!" 

If you'd like to know more -- in my mother's words, to fill in the gaps in your neglected education -- you might take a look at these pages, and the links from them:

• http://wealthandwant.com/George_P&P.html
• http://wealthandwant.com/#book

I'm not sure the left -- as well intended as they see themselves -- can help us.  They're no better educated in Georgist economics than the right is.  But each can educate himself, and therein lies hope.

Further reading:

• Mason Gaffney's "After the Crash: Designing a Depression-Free Economy"  and a related interview
• Walt Rybeck's "Re-solving the Economic Puzzle" 

Neither the left nor the right will claim these as their own -- but they ought to read and embrace them.

THE RIOTS

THE RIOTS.

Bryan Kavanagh, in Australia, writes,

The rioting in England is indefensible, but how to understand it?

I’ve mentioned several times throughout these blogs that the rent of land represents community.  However, although land and natural resource rent is community-generated, less and less of it has been captured back for public revenue over the last forty years.  Thereby, a sense of a community has been lost.

That’s because it has become fashionable to privatise the rent of land and natural resources in the misbegotten belief that ‘user pays’ and increased taxation is preferable to the public capture of publicly created resource rents. It is largely privatisers of our natural resource rents who’ve been able to put about this self-serving idea successfully. And they’ve sold it well to governments.

The cumulative effect of the process over forty years has been to widen the gap between rich and poor. This now vast divide is well documented, but the role of rent has been kept invisible.

Right wing shock jocks consider the private leeching of natural resource rents by private interests is respectable employment and, unable to think through the natural consequences, they’re flabbergasted by London’s street riots.

The rising of the hun in the city is obviously a function of poverty and dispossession. Feeling disenfranchised and disconnected, these predominantly lower class youth exhibit their hate for a system that keeps them down and often unemployed whilst bank CEOs receive their multi-millions.  Unlike many of us, the rioters see the game is rigged and their frustration has spilled over into aggression and excess.

This excellent article shows the rent-seeking process is alive and well in India.

Why they might hate us

As I listen to the accounts of what was on the computers in the compound where Osama bin Ladin was living, including ideas for attacking American commuter railroads, my mind turns to why people in other countries might have such hatred for America.

Perhaps it has something to do with the fact that we are using, month in and month out, such a disproportionate share of the world's finite natural resources, and our corporations (and multinational corporations, too) are profiting hugely from withdrawing those resources from land around the world without adequately compensating the peoples of those countries -- not the current leaders but also the future generations of peoples -- for what is being taken out.  In our name.

Then my mind turns to the distribution of those benefits in this country.  Ads from the Petroleum Institute remind us that half of us own stock, and suggest that if we own stock, we benefit from letting that industry have its way.  Well, sort of.  But it is worth noting that stock ownership in publicly held companies is rather concentrated in the top 5% of our population [data source: 2007 Survey of Consumer Finances, Federal Reserve Board], who own 66.5% of the value.  And just as important, the value of privately held companies is even more concentrated, with 88.1% residing in the top 5%.  The latter category is actually larger than the former, in terms of household wealth.  [Some might argue that pension funds hold stock for bottom 95%-ers -- but relatively few of us have defined benefit pensions any more, and we ought not to be swayed by that one!]

Why do they hate us, if they do?  Because we are consuming 2 to 4 times our per capita share of the world's resources, and there are others who can't get their per capita share as a result.  And maybe because some might have reason to suspect that the extremes of weather that many parts of the world seem to be experiencing are a result of our disproportionate pollution of the environment.

So how do we revise our incentives so that we structure things better? 

To the best of my knowledge, the answers lie in the ideas commonly associated with Henry George.  Explore this blog.  Explore wealthandwant.com.  Read George's books, "Progress and Poverty" and "Social Problems" (a collection of essays) online.  Explore Mason Gaffney's website.  See what you think.  Is there a better way?  Is there a way to better organize things to create a better, more peaceful, more just, more sustainable world, in which all of us can prosper, and none can reap what others sow?

Tax property, not people, for a fairer society

The UK Guardian had an article of this title today.

It begins,

Amid all the talk of rebalancing the economy, there is little mention of the most powerful lever the government could pull to generate growth, which involves a switch from taxing income to taxing wealth.

It is a subject that tends to get little coverage, mainly because its supporters are considered on the fringes of the political spectrum. Ultra-lefties support wealth taxes for obvious reasons. Ultra-capitalists support them because they understand that allowing the rich to ring-fence much of the nation's assets and protect the mechanisms that allow values to increase without any serious government interference robs their children, and everyone else's, of any incentive to work harder.

Skipping ahead,

What they are all talking about is the adoption of a land value tax. Purists would abolish all current taxes and replace them with an LVT that asked for a payment in line with the value of land under ownership.

Someone earning £40,000 a year would stop paying around £7,000 in income tax, £1,000 to £2,000 in VAT, £1,600 council tax and any of the transaction charges that fill the exchequer's coffers. No more capital gains tax or stamp duty on property sales or the sale of shares. Instead they would pay a fixed annual sum, to be paid monthly, on the value of their land, which could have a wide range, depending on how much the land is worth.

Move out of town and work locally, and your overall tax bill could be a fraction of its current total. Buy an expensive piece of real estate in the city centre and you would probably pay more.

and then,

Under the proper working of the council tax, increases in property values, as opposed to land values, lead to higher taxes, which is a disincentive to carry out those improvements in the first place.

Mark Wadsworth is an economist, blogger, sometime Tory Bow Group adviser and campaigner for land value taxes. He recently told Economic Voice website: "I'm an economist not a politician, and I can only repeat what all the great economists have said down the centuries: taxes on land values are the least bad taxes because they do not depress or distort economic activity, ie wealth creation. Land value tax is easy to assess, cheap to collect and impossible to evade.

"Not only that, LVT is an entirely voluntary tax: you decide how much you are willing to pay and you choose a house or a flat within that price range. Only, instead of handing over all the rent or purchase price to the current owner, the location value would go to the government."

What he means by this last sentence is that property prices would necessarily settle at a lower level because a buyer will deduct the location value, knowing they must send it to the exchequer in the form of a tax.

Yes!  Think about the ramifications of this: as a buyer, you'd be paying the seller only for the value of the house itself, not the site on which it sits, which he did not create.  A, say, 10% downpayment would be affordable to many more people, and, because one would not need to borrow from a mortgage lender to pay off the seller, that credit would be available for other purposes --- entrepreneurs could invest in the goods that would make their business work better.

The article goes on to report that the OECD wants to keep the VAT too, apparently in an attempt to influence consumer behavior -- I assume by discouraging it.  

What we tax, we get less of.   What do we want less of?  Land speculation, or jobs?

Who chooses?  Whose interests do they have at heart?

A Better Way to Do Housing

Although a few neighborhoods shine, Washington area condo market still struggles - The Washington Post.

This article describes how difficult it is for condo owners to sell, since most buyers need mortgages with high loan-to-value (LTV) ratios, and FHA, Fannie and Freddie aren't lending because of rule-making on building approvals.  And many buildings prohibit renting one's condo, a particular problem in a city where people rotate from one assignment to another, often in other countries.

It suggests that people with cash offers can get good deals.

Let's consider a different approach to housing.  Suppose that, instead of paying taxes on one's wages, sales and building, taxes were shifted over to the value of the land one occupies.  Were we to collect the full rental value of the land, in the form of a tax, reducing the selling price of the site to $0 or a token amount, a home, be it a high-rise condo unit or a single-family house, would sell for the depreciated value of the structure.   A 2-bedroom, 2 bath condo of 1200 square feet would sell for pretty much the same amount wherever it is, with the buyer taking over the land value tax just as buyers now pick up the responsibility for the conventional property tax.

Buyers would need to borrow a great deal less.  A 1200 square foot condo, at a generous $100 per square foot, would sell for $120,000.  A 10% down payment on that would be a manageable $12,000.  And the $108,000 mortgage could probably be paid off in far less than 30 years, incurring much less interest.

Relieved of taxation on wages and other income, one could afford to pay for the location one chooses, in the form of a monthly or quarterly payment to one's community.  One wouldn't expect appreciation of one's housing -- after all, it is a depreciating asset.  But assuming one's local government is providing services which others consider worth the price of the rental value of the land, one could expect to sell an attractive house or condo unit fairly quickly, and be able to relocated locally or cross-country in fairly short order.

Housing would no longer be regarded as an investment expected to appreciate.  Buyers would enter clear-eyed and realistic, and seek to find the housing that best fits their needs without trying to make an investment.

Perhaps best of all, it would free up capital.  We'd no longer be borrowing  anything to buy land, so those funds would be available for investment in buildings, equipment and other things that create jobs.   And many more of us, I think, would become investors, and would be accumulating resources to see ourselves through our retirement years.

Post Script: It occurs to me that among the first people to benefit from this measure, were it to be enacted in Washington, DC, would be our incoming congressmen, senators and their aides, who could afford housing, whether they were coming from a rich district or a poor one, whether they had tremendous fortune, or barely enough for a down payment.  They could afford their own home, without living with roommates on C Street, or sleeping on their congressional couch and showering down the hall, as some impecunious or loudly frugal members of Congress choose to.   And they would become conscious of how much of the cost of living in a city is payment for the location itself -- which should benefit all of their constituents, be they in blue counties or red ones.   (And it might be interesting to look at how many blue cities there are.) 

Thinking about taxes and jobs

AN IMPORTANT DIFFERENCE

Man cannot profit from owning capital without using it, which means to employ labor. Man can profit from owning land without using it, which means unemployed labor. A low tax on land will not add one foot to the State; a high tax will not drive one acre away. A low tax or no tax on capital will bring to the State the means of developing its resources and employing its labor; a high tax will drive capital away and leave unemployment.

Which is your town/city/county/state/nation going to do? Will she listen to the land speculators, and lower the taxes on vacant land? Or will she give heed to the business men and farmers, and lighten the taxes on industry? Much depends upon her decision.

 

adapted from Tax Facts, January, 1928.

Think about the unused and underused land within the borders of your town or city.  It is not neutral.  It is a drag on your economy and contributes nothing, whil the owner sits and waits for someone to meet his price.  It is held out of use to create an unearned windfall for its owner. 

We ought to examine our tax policies for the incentives which make it possible for some owners to put the land in their portfolio to little or no use.   I'm not concerned with land of genuinely little value, but with land served by infrastructure that we-the-people have taxed ourselves to provide and maintain.  We accord landholders a privilege in taxing them but lightly, month in and month out, on the value of their holdings.  (At the same time, we make a big mistake by taxing the improvements and "personal" property, including vehicles and business equipment, of those who have improved their land to make it useful and productive.  I am reminded of Enoch Ensley's important statement:

NEVER TAX ANY THING
THAT WOULD BE OF VALUE TO YOUR STATE,
THAT COULD AND WOULD RUN AWAY, OR
THAT COULD AND WOULD COME TO YOU.

Our elected representatives ought to be reminded of that, and then asked to ponder how to implement it.  I commend to their attention Fred Foldvary's article "The Ultimate Tax Reform."

What Tolstoy Taught: Human Rights

In a recent column in the NYT entitled "Description is Prescription", David Brooks made references to Tolstoy, and it sent me looking to see whether a book I remembered was available via Google Books.  The book was written in 1905 by Bolton Hall, and it is entitled "What Tolstoy Taught."  Its final chapter, "Human Rights," follows:

(Tolstoy proclaimed the law of love as enunciated by Christ; the political rights as enunciated by Thomas Jefferson; the economic rights as announced by Henry George: the two latter as amplifications of the first; all being essential to man's earthly welfare. Tolstoy's philosophy was progressive. At first he saw that the law of love was necessary; then he recognized the necessity of equal political rights; next he recognized that without economic justice these remedies were futile, and he accordingly embraced the philosophy of Henry George, as evidenced by the following article addressed to the Russian people.— Ed.)

A number of suggestions have been made as to how to divide, in the most just manner, all land among the workers, but of all these only the one made by the late Henry George appears to me to be practicable.

The property right, Henry George wrote in his book about the single tax, is founded not on human laws, but on the laws of God. It is undeniable and absolute, and everyone who violates It, be it an individual or a nation, commits a theft.

A man who catches a fish, who plants a tree, builds a house, constructs a machine, sews a dress or paints a picture, thereby becomes the owner of the results of his own efforts — he has the right to give them away, to sell them or to leave them to his heirs. As the land has not been created by us, and only serves as the temporary residence of changing generations of human beings, it is clear that nobody can own the exclusive right to possess land, and that the rights of all men to it are equal and inalienable.

The right to own land is limited by the equal rights of all others, and this imposes upon the temporary possessor of land the duty to remunerate society for the valuable privilege given him to use the land in his possession.

When we impose a tax upon houses, crops, or money in any form, we take from members of society something which by right belongs to them, we violate the property right and commit a theft in the name of the law; while when we impose a tax upon land we take from members of society something which does not belong to them, but to society, and which cannot be given to them except at a detriment to others. We thus violate the laws of justice when we place a tax on labor or the results of labor, and we also violate them if we do not levy a tax on land.

Let us, therefore, decide to stop levying all taxes except the tax on the value of land, regardless of the buildings erected or the improvements made on it, but only on the value which natural or social conditions give to it.

If we place this single tax on land the results will be these:

1. The tax will relieve us of the whole army of officials necessary to collect the present taxes, which will diminish the cost of government, at the same time making it more honest. It will rid us of all the taxes which lead to lying, to perjury, to frauds of all kinds. All land is visible, and cannot be hidden, and its value is fixed easier than that of any other property, and the single tax can be determined at less expense and less danger to public morals.

2. It will to a great extent increase the production of wealth, doing away with the discouraging tax upon labor and thrift, and it will make the land more accessible to those who want to work or improve, as the proprietors, who do not work themselves, but speculate in its increasing value, will find it difficult to keep up such expensive property. The tax on labor, on the other hand, leads to the accumulation of immense fortunes in a few hands, and the increasing poverty of the masses. This unjust division of wealth on one side leads to the creation of one class of people who are idle and corrupt, because they are too rich, and the creation of another class of people who are too poor, and thus doubly delays the production of wealth. This unjust division of wealth creates on one side terrible millionaires, and on the other side vagrants, beggars, thieves, gamblers and social parasites of various kinds, and necessitates an enormous expense for officials to watch these — policemen, judges, prisons and other means which society uses in self-defense.

The single tax is a remedy for all these evils.

I do not mean to say that this tax will transform human nature, for that is not within the power of man, but it will create conditions under which human nature will grow better instead of worse, as under the present conditions. It will make possible an increase of wealth, of which it is hardly possible to form an idea. It will make undeserved poverty impossible. It will do away with the demoralizing struggle for a living. It will make it possible for men to be honest, just, reasonable and noble, if they desire to be so. It will prepare the soil for the coming of the epoch of justice, abundance, peace and happiness, which Christ told His disciples of.

Let us suppose that in a certain place all land belongs to two owners — one very rich, who lives far away, and another, not rich, living and working at home — and to a hundred of small peasants owning a few acres each. Besides these, there live on that place some scores of people who own no land — mechanics, merchants, and officials.

Now let us suppose that the people of that community, having arrived at the conclusion that the land is common property, decide to dispose of the land according to their new conviction.

What would they do? Take all the land away from those who own it, and give everybody the right to take the land he desires? That could not be done, because there would be several people who would want the same ground, and this would lead to endless quarrels. To form one society and work all things in common would be difficult, because some have carts, wagons, horses and cattle, while others have none, and, besides, some people do not know how to till the soil, or are not strong enough.

To divide all the land in equal parts, according to its value, and allow one part to each is very difficult, and this would, besides, be impracticable, because the lazy and poor would lease their property to the rich for money, and these would soon again be in possession of it all.

The inhabitants of the community, therefore, decide to leave the land in the possession of those who own it, and to order each owner to pay into the common treasury money representing the revenue which had been decided on after appraising the value of the land, not according to the work or the improvements made on it, but to its quality and situation, and this money was to be divided equally among all.

But as it was difficult first to take this money from all those who held the land, and then divide it equally among all the members of the community, and as these members, besides, paid money toward the public needs — schools, fire departments, roads, etc.— and as this money was always needed, they decided to use all the money derived from those who had the use of the land, for public needs.

Having made this arrangement, the members of the community levied the tax for the use of land on the two large owners, and also on the small peasants, but no tax at all was imposed on those who held no land.

This caused the one landowner who lived far away, and who derived little income from his property, to realize that it did not pay to hold on to land thus taxed, and he gave it up. The other large owner gave up part of his land, and kept only that part which produced more than the amount of his tax. Those of the peasants who held small properties, and who had plenty of men, and not enough land, as well as some of those who held no land at all, but who desired to make a living by working the land, took up the land surrendered by its former owners.

After that all the members of the community could live on the land and make a living from it, and all land passed into the hands of or remained with those who loved to work it, and who made it produce the most. The public institutions flourished and the wealth of the community increased, for there was more money than before for public needs; and the most important fact was that this change in the ownership of land took place without any discussions, quarrels, or discord, by the voluntary surrender of the land by those who did not derive any profit from it.

This is the project of Henry George, which, if tried here, would make Russia wealthy and happy, and which is practicable all over the world.

 

Thy Kingdom Come!

I sang this hymn this morning, and the fourth and fifth verses made me wonder whether it might have been inspired by the ideas of Henry George. 

1 "Thy kingdom come!" on bended knee the passing ages pray; and faithful souls have yearned to see on earth that kingdom's day.

2 But the slow watches of the night not less to God belong; and for the everlasting right the silent stars are strong.

3 And lo, already on the hills the flags of dawn appear; gird up your loins, ye prophet souls, proclaim the day is near:

4 The day to whose clear shining light all wrong shall stand revealed, when justice shall be throned in might, and every heart be healed;

5 When knowledge, hand in hand with peace, shall walk the earth abroad; the day of perfect righteousness, the promised day of God.

Words: Frederick Lucian Hosmer, 1891       Music: Irish, St. Flavian

I also found a second related hymn Hosmer wrote in 1905, here: 

1 Thy Kingdom come, O Lord, Wide circling as the sun; Fulfill of old Thy Word And make the nations one.

2 One in the bond of peace, The service glad and free Of truth and righteousness, Of love and equity.

3 Speed, speed the longed for time Foretold by raptured seers— The prophecy sublime, The hope of all the years.

4 Till rise at last, to span Its firm foundations broad, The commonwealth of man, The city of our God.

Henry George delivered a sermon entitled "Thy Kingdom Come," in 1889 in Glasgow, Scotland.  Most likely he gave that speech many more times in other places.   It includes these paragraphs:

Nothing is clearer than that if we are all children of the universal Father, we are all entitled to the use of His bounty. No one dare deny that proposition. But the people who set their faces against its carrying out say, virtually: “Oh, yes! that is true; but it is impracticable to carry it into effect!” Just think of what this means. This is God’s world, and yet such people say that it is a world in which God’s justice, God’s will, cannot be carried into effect. What a monstrous absurdity, what a monstrous blasphemy!

If the loving God does reign, if His laws are the laws not merely of the physical, but of the moral universe, there must be a way of carrying His will into effect, there must be a way of doing equal justice to all of His creatures.

There is. The people who deny that there is any practical way of carrying into effect the perception that all human beings are equally children of the Creator shut their eyes to the plain and obvious way. It is, of course, impossible in a civilization like this of ours to divide land up into equal pieces. Such a system might have done in a primitive state of society. We have progressed in civilization beyond such rude devices, but we have not, nor can we, progress beyond God’s providence.

There is a way of securing the equal rights of all, not by dividing land up into equal pieces, but by taking for the use of all that value which attaches to land, not as the result of individual labor upon it, but as the result of the increase in population, and the improvement of society. In that way everyone would be equally interested in the land of one’s native country. Here is the simple way. It is a way that impresses the person who really sees its beauty with a more vivid idea of the beneficence of the providence of the All-Father than, it seems to me, does anything else.

One cannot look, it seems to me, through nature — whether one looks at the stars through a telescope, or have the microscope reveal to one those worlds that we find in drops of water. Whether one considers the human frame, the adjustments of the animal kingdom, or any department of physical nature, one must see that there has been a contriver and adjuster, that there has been an intent. So strong is that feeling, so natural is it to our minds, that even people who deny the Creative Intelligence are forced, in spite of themselves, to talk of intent; the claws on one animal were intended, we say, to climb with, the fins of another to propel it through the water.

Yet, while in looking through the laws of physical nature, we find intelligence we do not so clearly find
beneficence. But in the great social fact that as population increases, and improvements are made, and men progress in civilization, the one thing that rises everywhere in value is land, and in this we may see a proof of the beneficence of the Creator.

Why, consider what it means! It means that the social laws are adapted to progressive humanity! In a rude state of society where there is no need for common expenditure, there is no value attaching to land. The only value which attaches there is to things produced by labor. But as civilization goes on, as a division of labor takes place, as people come into centers, so do the common wants increase, and so does the necessity for public revenue arise. And so in that value which attaches to land, not by reason of anything the individual does, but by reason of the growth of the community, is a provision intended — we may safely say intended — to meet that social want.

Just as society grows, so do the common needs grow, and so grows this value attaching to land — the provided fund from which they can be supplied. Here is a value that may be taken, without impairing the right of property, without taking anything from the producer, without lessening the natural rewards of industry and thrift. Nay, here is a value that must be taken if we would prevent the most monstrous of all monopolies. What does all this mean? It means that in the creative plan, the natural advance in civilization is an advance to a greater and greater equality instead of to a more and more monstrous inequality.

“Thy kingdom come!” It may be that we shall never see it. But to those people who realise that it may come, to those who realize that it is given to them to work for the coming of God’s kingdom on earth, there is for them, though they never see that kingdom here, an exceedingly great reward — the reward of feeling that they, little and insignificant though they may be, are doing something to help the coming of that kingdom, doing something on the side of that Good Power that shows all through the universe, doing something to tear this world from the devil’s grasp and make it the kingdom of righteousness.

Aye, and though it should never come, yet those who struggle for it know in the depths of their hearts that it must exist somewhere — they know that, somewhere, sometime, those who strive their best for the coming of the kingdom will be welcomed into the kingdom, and that to them, even to them, sometime, somewhere, the King shall say: “Well done, thou good and faithful servant, enter thou into the joy of thy Lord.”

I wonder if Henry George's words helped inspired Frederick Hosmer's hymn.  I commend the entire sermon to your attention; parts of it will make you smile.

Housing Choice - Help Today’s Owners or Future Buyers?

Housing Choice - Help Today’s Owners or Future Buyers - NYTimes.com.

Here are the opening paragraphs:

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

It seems as if the suggestion is that we ought to let the housing market crash, and then hope that we will pick up again where we left off, and experience this boom-bust cycle again.

There doesn't seem to be much discussion of the factors that produce the boom-bust cycle, or of the notion that we can actually prevent the next boom-bust cycle through wise policy.

What policy?  A tax shift.  Shift taxes off wages (starting at the bottom); off sales (starting with essential items); off buildings of all kinds and equipment.  What's left to tax?  

That which we should have been taxing all along: the value of land.   Henry George (b. Philadelphia, 1839; died NYC, 1897) introduced the idea in his 1879 book, Progress and Poverty, which remains 130 years later the best selling book ever on political economy.  It sold over 6 million copies by 1900, and George, Thomas Edison and Mark Twain were perhaps the three best-known public figures of their day.  George's "remedy" came to be known as the "Single Tax."  It was a recipe for small government -- right-sized government, funded by the only legitimate revenue source: value created by nature and by the community.  Land, to the classical economists -- Adam Smith, David Ricardo, John Stuart Mill, Henry George, etc. -- was distinctly different from capital. (The neoclassical economists -- and those who only know their sort of economics -- can't seem to see the difference, and conflate them, leading to all sorts of stupid -- and unnecessary -- messes!)  Land includes not just the value of locations (on earth, in water, in space) but also electromagnetic spectrum, water rights, non-renewable natural resource values, pollution "rights," and lots of other like things.  (Mason Gaffney provides some excellent lists.)   Those locations include urban land, land made valuable by favorable climate, water supply, access to ports, to transportation systems, to desirable views, to vibrant cities with jobs, cultural amenities, educational opportunities; geosynchronous orbits; congestion charges; parking privileges, etc.    Those of us who claim title to a piece of land ought to be required to compensate the community in proportion to the value of that land, for the right to exclude others from it.  That compensation should be paid month in and month out, to the community.

Our current system is perverse.  We must purchase the rights to the land from the previous holder at whatever price the market will bear, or what the seller's circumstances require him to accept.  Rich landholders can hold out for higher asking prices; poorer ones may be forced to accept lower prices.   Few of us enter the market with more than a few percent of the asking price in hand; we mortgage our future earnings in order to pay the seller's asking price. 

In most coastal cities, that price is predominately for the location, not for the building itself.  A May, 2006, Federal Reserve Board study found that land represented, on average, 51% of the value of single family housing in the top 46 metro markets in 2004; in the San Francisco metro, land represented 88.5% of the value, and in no metro in California did it represent less than 62%.  Boston metro was around 75%, NYC metro was about 70% (I'm doing this from memory), Oklahoma City about 20%; Buffalo about 28%.   Extrapolating from some of their tables, I found that the average value of a single-family structure across the 46 metros was about $112,000, with a range from perhaps $88,000 in the lowest metro to a high of perhaps $130,000 in the highest.  The range of average land values across the 46 metros, though, was much wider, from perhaps $25,000 to $750,000! 

Suppose we did let the housing market crash, and then shifted over to George's proposal, collecting our tax revenue first from land rent, and only after we'd collected the lion's share of the land rent, tapping other less desirable revenue sources such as wages, sales and buildings.  What would happen?

• The selling price of housing would drop to approximately the depreciated value of the structure in which one would live.  A large new house would be more valuable than an older house of the same size.  A large house would cost more than a smaller one.  But one would not pay the seller for value that related to the location of the home.
• One would pay, month in and month out, the rental value of the land on which the house sits.  Fabulous locations would require high monthly payments; less fabulous ones would have lower monthly payments.  Small lots would pay less than larger lots nearby.  Owners of condos in a 20-story building would share the cost of the land rent for the site, perhaps in proportion to the quality of their location within the building (fabulous views would pay more than ordinary ones; larger footprints and/or more floors occupied would pay in proportion to their share of the total space).
• That monthly payment would go to one's community, and would replace one's property tax, sales taxes, wage taxes.  A portion of the payment would be forwarded to one's state, and at the state level, a portion would be forwarded to the federal government.
• The selling price of housing would drop, requiring one to borrow far less.  The difference would be quite pronounced in San Francisco, Boston, NYC, etc.   One's monthly mortgage payment would be significantly lower.  
• Housing would no longer be an investment, in the sense that one expected to sell a property for more than one paid for it. 
• Housing would be more liquid; one could own a home, but have a reasonable expectation of being able to sell it if one wanted to move elsewhere.
• The credit not used to purchase homes would be available for businesses.  Businesses, too, would not be "investing" in land, but would have capital available to invest in equipment and to pay better wages to their employees.
• Land which under our current system is both well-located and underused would either be redeveloped by its owners, or come onto the market so that someone else could put it to use.  There would be no incentive to keep it underused, as there is today.   The redevelopment process itself would create jobs in construction-related businesses, and the resulting buildings would either provide housing or commercial venues -- or both: whatever the market was asking for.  And that housing would be at a wide range of points on the income spectrum and the ages-and-stages spectrum: young people starting out, families, retirees, singles, couples -- not just the luxury market.   And those newly-created homes would be closer in to the jobs which would support them, rather than separated by long commutes and drive-till-you-qualify.
• Land made valuable by public investment in infrastructure and services would provide a continuous revenue stream to the community, providing funding for next year's services, instead of funding for self-selected individuals' retirement.
• So if one can't hope to get rich from the appreciation of the land under one's home, how is one to have security?  How does one participate in the economy?   By investing in businesses that serve customer desires.  And when one's housing plus taxes are lower, one has more left over for that.  When there is enough housing for all, one isn't paying so much of one's income for it.  When no one expects to grow wealthy automatically, people can dream up the business which they will enjoy working in.  And with so many businesses competing for workers, wages will tend to rise.  With so many businesses competing for customers, services will improve, and specialization increase.

Back to the title of the article: "Grim Housing Choice: Help Today's Owners or Future Buyers?"    Maybe economics doesn't HAVE to be the dismal science.  Maybe our choices are not so grim after all.   Maybe we can put ourselves on a firmer footing, without the boom-bust cycles we've been experiencing so regularly.  (See Mason Gaffney's recent book, After the Crash: Designing a Depression-free Economy.  And while you're on that site, you might read "The Great Crash of 2008" and "How to Thaw Credit Now and Forever.")   Maybe we can leave our children a society in which all can prosper. 

Not too much to ask for, is it?

Or shall we leave them a society in which 10% of us are receiving 48% of the income, and 10% of us possessing 71.5% of the net worth.

Which side are YOU on? 

How to End the Great Recession

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.

via www.nytimes.com

I think Robert Reich sees part of the problem, but he doesn't see the solution.   How do we achieve more widely shared prosperity?  By a variation on Alaska's theme.  In Alaska, a significant share of the value of the state's natural resources is used to fund state government, and another significant share is placed each year into the Alaska Permanent Fund, which is invested in a broadly diversified portfolio and pays an annual dividend of $1000 to $2000 to every permanent resident of Alaska, of all ages.  [See http://www.nytimes.com/2010/09/04/us/politics/04alaska.html for an article mentioning this, and the Alaska Permanent Fund link, at the left of this page.]   Alaska has it half right: they collect a decent share of the value of the natural resources, but they don't tax their land value much.

How do we share the prosperity beyond the top 10%?  By shifting our incentives so that those who currently grow wealthy in their sleep by collecting economic rent find themselves sharing that rent with the rest of us.  Untax wages, starting with incomes under the median.  Untax sales.  Untax buildings.  Tax land value.  Tax the value of those things which the classical economists would have recognized as land -- water rights, "rights" to pollute, airport landing rights at congested airports, geosynchronous orbits (which prevent satellites from bumping into each other), electromagnetic spectrum (those airwaves which most people would say "belong to the American people" but which we have permitted corporations -- public and private -- to privatize), natural resources such as oil, natural gas, copper, coal, lithium, etc..   All these things are going into corporate portfolios (here and abroad -- and some of those corporations are families in power, despite attempts at nation-building), week in and week out, and their value accrues to the shareholders of the corporations.  Stock ownership is quite concentrated, and these benefits flow into the pockets of a relative few, who, as Reich rightly points out, may or may not spend or invest in America's products.  When they do invest, they often acquire our best land and resources, buying thereby the labor of thousands of Americans.  When an acre in Manhattan can be worth $400 million, the seller of that land didn't make it valuable.  WE did!  So why should an individual, or a corporation, or a trust, or a university, or a pension fund -- or any private entity -- get to pocket that value as if they did?   (The kindest thing I can say is that we have a bad habit!  Something like chattel slavery -- and look at how long it took us to end that.)

Pocketing that value has two sorts of effects: when they sell, they pocket that so-called "capital" gain.  It isn't capital!  It is land value!  Capital depreciates; what rises in value is land, and it rises for reasons which have nothing at all to do with the "fellow" who owns it.  

But even when they buy and hold, there are important effects of permitting that privatization.  The rich don't need to put the land to its highest and best use, because they can get by with something less while they wait for the community to cause it to grow.  (See The Taxpayer at 72nd and Madison.  Notice all the surface parking lots in Manhattan, Philadelphia, Hartford and many other cities.  See the 4.3 acre "hole in the ground" in Stamford, CT, right near the city's 100% location, vacant since the early 1980s.) They're patient!  They can afford to be.  The top 10% of us hold 71.5% of the chips, according to the 2007 Survey of Consumer Finances.)   Not using the land well reduces the supply of housing close to the center of things (adding to sprawl) and/or of jobs (which we say we want) and contributes to a wide range of our most serious social, economic, environmental and justice problems.

If we collected more of the annual rental value of our urban land, the holders of that land would turn into active users or sell it to someone who would put it to good use.  Good use creates jobs, and homes and other things that the market wants.  But when the market can't afford them, it does without.  People are priced out of housing in the places they'd prefer to live.  They lack jobs or are underemployed, and the rich keep getting richer.

Reich advocates extending the EITC, exempting the first $20,000 of wages from payroll taxes, improving and extending early childhood education, making public universities free in return for 10% of the first 10 years of full-time earnings, creating "earnings insurance."  He concludes,

Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.

Well, 130 years ago, Henry George spoke to some of the kinds of measures that have been proposed over the years for reducing poverty and promoting widely shared prosperity.  See "Part VI -- The Remedy" and particularly "Ineffective Remedies" and "The True Remedy"

"Ineffective Remedies" begins,

OUR CONCLUSIONS point to a solution. It is so radical that it will not be considered if we believe less drastic measures might work. Yet it is so simple that its effectiveness will be discounted until more elaborate measures are evaluated. Let us review current proposals to relieve social distress. For convenience, we may group them into six categories:

1. More efficient government
2. Better education and work habits
3. Unions or associations
4. Cooperation
5. Government regulation
6. Redistribution of land

That 10% of us who hold 71.5% of the net worth also received 41.3% of the current income. [Note that these percentages are understated, since the SCF purposely omits the Fortune 400 families.  They hold about 1% of the nation's net worth.] 

Picketty & Saez provide annual updates on income concentration.  For 2008, they report that the top 10% of us (sorted by income, not net worth) received 45.60% of the income when capital gains are excluded and 48.23% of income including capital gains.   (For 1988, the corresponding figures are 38.63% and 40.63%; in 1958, 32.11% and 33.56%.   Do we notice a trend here?  Do we like it or think it a healthy trend?)

We have permitted and supported a structure which funnels wealth and income into relatively few pockets.   We have to reform this structure, and we have to recognize that the current beneficiaries are not likely to be keen on reform -- conservatives have a lot to conserve for themselves -- and those who are dependent for their salaries on being popular with those beneficiaries are not likely to be particularly interested in looking at the underpinnings of the structure with an eye to removing some of the ladders (escalators!!) or  gentling the chutes.

Those who get to privatize the value of what ought to be common assets grow wealthy in their sleep.  Until enough of us understand the mechanism to constitute a majority, we aren't likely to correct it.

 

It is a bit disheartening to think how many well-regarded economists live in California, the land of Proposition 13, and haven't lifted a finger or opened their mouths to suggest that it is not in the best interests of California's people.   Milton Friedman acknowledged many times that the tax on land values was the "least bad" tax -- and didn't have anything to say about Proposition 13, which was the antithesis of what a wise person or society would do with that information.    So I guess I shouldn't be surprised that today's California economists, with very few exceptions, aren't all that concerned with the economic wellbeing of ordinary people any more than economists elsewhere are.  Or maybe, as my late mother would have expressed it, their educations have simply been neglected.  (At which point she would proceed to fill in my newly-identified knowledge gap.)    Economists can start with the links in this post, and then explore from there.

America's Biggest Jobs Program -- The U.S. Military | TPMCafe

America's Biggest Jobs Program -- The U.S. Military | TPMCafe.

America's biggest -- and only major -- jobs program is the U.S. military.

Over 1,400,000 Americans are now on active duty; another 833,000 are in the reserves, many full time. Another 1,600,000 Americans work in companies that supply the military with everything from weapons to utensils. (I'm not even including all the foreign contractors employing non-US citizens.)

If we didn't have this giant military jobs program, the U.S. unemployment rate would be over 11.5 percent today instead of 9.5 percent.

And without our military jobs program personal incomes would be dropping faster. The Commerce Department reported Monday the only major metro areas where both net earnings and personal incomes rose last year were San Antonio, Texas, Virginia Beach, Virginia, and Washington, D.C. -- because all three have high concentrations of military and federal jobs.

This isn't an argument for more military spending. Just the opposite. Having a giant undercover military jobs program is an insane way to keep Americans employed. It creates jobs we don't need but we keep anyway because there's no honest alternative. We don't have an overt jobs program based on what's really needed.  . . .

The Pentagon's budget -- and its giant undercover jobs program -- keeps expanding. The President has asked Congress to hike total defense spending next year 2.2 percent, to $708 billion. That's 6.1 percent higher than peak defense spending during the Bush administration.

This sum doesn't even include Homeland Security, Veterans Affairs, nuclear weapons management, and intelligence. Add these, and next year's national security budget totals about $950 billion.

That's a major chunk of the entire federal budget. But most deficit hawks don't dare cut it. National security is sacrosanct.

Yet what's really sacrosanct is the giant jobs program that's justified by national security. National security is a cover for job security.

This is nuts.

Wouldn't it be better to have a jobs program that created things we really need -- like light-rail trains, better school facilities, public parks, water and sewer systems, and non-carbon energy sources -- than things we don't, like obsolete weapons systems?

Historically some of America's biggest jobs programs that were critical to the nation's future have been justified by national defense, although they've borne almost no relation to it. The National Defense Education Act of the late 1950s trained a generation of math and science teachers. The National Defense Highway Act created millions of construction jobs turning the nation's two-lane highways into four- and six-lane Interstates.

Maybe this is the way to convince Republicans and blue-dog Democrats to spend more federal dollars putting Americans back, and working on things we genuinely need: Call it the National Defense Full Employment Act.

Suppose, just suppose, that we shifted our federal spending to create those things we really need -- nation building, if you will --  like light-rail trains, better school facilities, public parks, water and sewer systems, and non-carbon energy sources  -- but instead of letting the land value that such investment creates be privatized by whoever owns the land they serve, we collected the value WE created, and used it to fund next year's investment in public goods and services?

Sounds like a virtuous circle to me.

And one which we could recommend to the voters in resource-rich countries.

And collecting that value would have a lot of other highly desirable effects, including reversing urban and suburban sprawl, reducing the price of housing, increasing wages, reducing the concentrations of wealth and income, stabilizing our economy.   Pick one of those that you don't think would be good for America.

And it isn't pork if it creates value which is then recycled for public purposes.  It is pork when we permit it to be privatized

Egg Factory

Editorial Notebook - Egg Factory - NYTimes.com.

Verlyn Klinkenborg wrote a nice short piece about a factory farm in Clarion, Iowa.  "The factory — no point calling it a farm — called Wright County Egg, is the source of 380 million of the more than 500 million recalled eggs."

He continues,

When I was back a couple of years ago, I noted the most evident change, a significant population of Mexican workers. I hoped that they were able to love Clarion as much as I did. It’s unlikely, because I also saw where they worked.

When I was young, I thought I grasped the immensity of the Iowa landscape. The immensity of the soybean and corn fields has only grown because so many smaller farms have vanished as a result of government farm policy, which rewards economic concentration. As I turned off Highway 3 east of town, I saw that there was a newer immensity, the egg factories — an endless row of faceless buildings, as bland as a compound of colossal storage units but with the air of a prison.

It wasn’t simply that the operation is out of scale with the Iowa landscape. It is out of scale with any landscape, except perhaps the industrial districts of Los Angeles County. What shocked me most was the thought that this is where the logic of industrial farming gets us. Instead of people on the land, committed to the welfare of the agricultural enterprise and the resources that make it possible, there was this horror — a place where millions of chickens are crowded in tiny cages and hundreds of laborers work in dire conditions.

It takes only a little investigation to learn how bad things have been inside those buildings. The list of offenses for which the DeCosters and their farms have been fined in Iowa and Maine only begins with hiring children and illegal immigrants.

In 2000, Jack DeCoster, the operations’ founder, was named a “habitual violator” of Iowa’s environmental laws. His egg factories have been cited by OSHA for deplorable working conditions. In 2003, Mr. DeCoster paid more than $1.5 million to settle an employment discrimination suit charging that 11 women working in the Clarion plants had been subject to sexual harassment, including rape and threats of retaliation. There have been nearly 1,500 illnesses as a result of the salmonella outbreak. Every one of the billions of eggs produced this way has been tainted.

I am led to wonder whether this is the sort of "family farm" which those who campaigned to get rid of the estate tax sought to protect.

Let's think about what incentives we need to shift in order to return to a situation in which more people can earn a decent living off the land without mistreating creatures, polluting the earth, exploiting workers or endangering their customers.   Or we can continue with the wealth-concentrating machine we've permitted.

What do we value?  Whose voices will get our legislators' attention?

"I believe in the division of labor. You send us to Congress; we pass laws  under which you make money ... and out of your profits, you further  contribute to our campaign funds to send us back again to pass more laws to enable you to make more money."

-- Senator Boies Penrose (R-Pa.), 1896, citing the relationship between his politics and big business.

It is all connected.

But it is not FUBAR.

The End of Poverty? Think Again!

"For decades, poverty reduction and development programs have failed to confront the different forms of power and the structural violence that hold more than two-thirds of the world in dire straits.  Our chosen economic model has created a global situation in which today less than 25% of the world's population uses more than 80% of the planet's resources while creating 70% of its pollution."

That's from the recent documentary "The End of Poverty? Think Again" (available at Amazon, Netflix and some Redbox locations).

So how do we reduce our demand for non-renewable natural resources?  (I don't see much long-term upside in increasing the supply of energy by using more of our soil -- or water or fuel -- to provide biofuel, though it may be a boon in dealing with the supply problem short-term.)

The right question, I submit, is how we do we adjust our incentives to produce a reduction in demand for oil, coal, natural gas, so as to leave a decent quantity of each for all the future generations and for the people of other nations.  (And, not so incidently, to reduce the pollution we produce which now shows signs of exceeding the ecosystem's ability to carry it.)

What is it that we do now that we can do differently?

Well, we can adopt measures that encourage people to

• live closer to their work
• use public transportation more
• use cars less
• live in modern homes constructed with energy-conserving technologies and design

We can adopt measures which make it affordable to live closer to their work -- if they choose that.  I'm not talking about subsidies, incidently.  More precisely, I'm not talking about adding subsidies. 

Some will say, as George H. W. Bush did in 1992 at the Earth Summit, that "The American way of life is not negotiable."  

Dick Cheney is quoted (May, 2001) as saying that "Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy."   As irritating as I found most of his pronouncements to be, I can see a germ of truth in this one.

I have friends who seek to reduce their water usage in order to save the environment.  They save the water in which they wash vegetables, and measure their use by the cupful.  It seems to me that while their efforts are admirable, in the absence of changes to the incentives which permit some people or other entities to continue to use water heedlessly to water lawns and rinse driveways, their efforts are pointless and maybe even counterproductive.  (Problem? What problem? Why do we large users need to change our ways?)  WE HAVE TO CORRECT THE INCENTIVES!

It seems to me that a carbon tax is a step in the right direction.  Establish it, announce it, implement it on some predictable schedule.  Industry will adjust.  Individuals will adjust.     And make sure that carbon tax applies to energy used in global commerce and travel, as well as domestically.

But the single reform which I think will make the biggest difference is a tax shift.  If we were to shift our taxes off buildings, and onto land value, here's what we could expect to happen:

• Urban land which now sits vacant or underused would be put to something approaching its highest and best use.  That might be more housing, or more commercial venues, or some combination thereof.
• Developers of well-located land would be competing with each other to provide what the market wants, be it housing or more grocery stores or more shops, or more office space.  Landlords competing for tenants would lower their asking rents and tune their offerings to meet the demand, at all levels on the income spectrum, not just the high end.
• The density this redevelopment would create would provide the platform for better public transportation -- more frequent buses, more subways, more commuter options.
• People who would prefer to live closer to their work or to the cultural or other amenities which larger cities can offer would be able to find housing they can afford.  Those who want to live in the suburbs on the 1-acre lot with the picket fence would have less competition for such homes, and be able to afford to buy one closer to the center of things for less of their income or a shorter mortgage.

I attend a liberal suburban church where every week the Prayers of the People include this statement:  "The world now has the means to end extreme poverty.  We pray that we have the will."  

We need to act locally -- through basic tax reform -- to shift the incentives which currently nudge us toward using cars more, polluting more, living in older houses which consume more energy and create more pollution -- and rewarding land speculators more than we encourage the sorts of entrepreneurs who create jobs.

IT is ALL INTER-RELATED.  But relatively few of us see the connectedness yet.  

Why were resources expunged from neo-classical economics? | Martin Wolf's Exchange

Why were resources expunged from neo-classical economics? | Martin Wolf's Exchange

Almost a month ago (7/12), Martin Wolf, the Financial Times' chief economics commentator, posted a piece to his blog under this title. The last time I looked, perhaps 10 days after his initial post, there were about 150 responses.  I circled back recently, and found that the comments count had risen to over 350.  

Here is his response, posted 7/23:

This ended up as a heated debate. Nobody will be surprised if I conclude that the result of the debate (often surprisingly ill-tempered) was pro-LVT 10, anti-LVT zero. I am surprised by some of what the anti-LVT proponents have said. I would have thought they would wish to open their minds a bit. I did and was persuaded of the case, as a result. Is not the purpose of such exchanges to learn from one another?

Some of the arguments addressed at the case for LVT are quite extraordinary.

The essential point is quite simple: the value of resources is created by the economic activity of other factors of production. The owners of these resources can become hugely wealthy and are often untaxed on that increase in wealth: the Duke of Westminster is the richest Englishman simply because he owns a large amount of land in a valuable part of London. So why should he have command over the labour of so many other people?

That wealth is, in the strictest sense, unearned. If that rise in wealth were taxed away, other taxes -- those on labour, capital and entrepreneurship -- could fall. This would be both efficient (because taxes on rent do not create distortions, as Ricardo showed) and also just, because the wealth was unearned. Now, surprisingly, the UK allows foreign landowners to enjoy the increase in value created by the British economy, entirely tax-free. This is utterly crazy.

Let me add four other points.

First, throughout history, the main source of wealth was land-ownership. The parasitic landowner became wealthy on the efforts of others -- peasants, tenants and even developers. Sometimes the parasite was also a farmer or developer, but that does not change the fact that these are two distinct economic roles. The parasite built fine castles and palaces and often sponsored music and culture. But he was still a parasite. The beauty of capitalism is that many of the wealthiest are no longer parasites. This is good. But many of the wealthy still are parasites. Moreover, now everybody wants to get rich by being a mini-landowner. That is a huge diversion of effort.

Second, the financial system's ills are the result of unchecked credit-creation. Yes. But unchecked credit-creation would be impossible without collateral. Land is always the principal form of collateral (buildings are a depreciating asset). That is why financial bubbles that do not create credit booms (like the dotcom bubble) are economically benign, while property bubbles are potentially catastrophic. When the value of collateral collapses, the financial system implodes.

Third, there is really nothing new about this understanding of the role of resource rents. They were central to the classical system, from which modern economics, in its various forms, derives. Ricardo's analysis of rent remains intellectually impeccable.

Finally, as Herman Daly has noted (http://steadystate.org/modernizing-henry-george/), today economically valuable resources are much more than just land (and what lies below it). They include all the services of the biosphere - those that are appropriated, those that are appropriable and those that are non-appropriable. If we do not think seriously and intelligently about how to price resources, we are likely to go seriously adrift, perhaps even into disaster. Here land is the least of our problems -- it is appropriable and, by and large, appropriated. So, at least, the price mechanism works, even though the distribution of the gain is grossly unjust. But, in other cases, no appropriation is possible, or at least it is not easy. Nobody can appropriate the atmosphere. It is nigh on impossible to appropriate the oceans. How do you own species diversity? These are serious challenges.

So, I conclude where I started: resources matter. It was a great mistake to exclude them from the canonical neo-classical model. It is also a great mistake not to tax their owners to the hilt.

In Weather Chaos, a Case for Global Warming - NYT

In Weather Chaos, a Case for Global Warming - NYTimes.com.

The floods battered New England, then Nashville, then Arkansas, then Oklahoma — and were followed by a deluge in Pakistan that has upended the lives of 20 million people.

The summer’s heat waves baked the eastern United States, parts of Africa and eastern Asia, and above all Russia, which lost millions of acres of wheat and thousands of lives in a drought worse than any other in the historical record.

Seemingly disconnected, these far-flung disasters are reviving the question of whether global warming is causing more weather extremes.

The collective answer of the scientific community can be boiled down to a single word: probably.

“The climate is changing,” said Jay Lawrimore, chief of climate analysis at the National Climatic Data Center in Asheville, N.C. “Extreme events are occurring with greater frequency, and in many cases with greater intensity.”

He described excessive heat, in particular, as “consistent with our understanding of how the climate responds to increasing greenhouse gases.”

Theory suggests that a world warming up because of those gases will feature heavier rainstorms in summer, bigger snowstorms in winter, more intense droughts in at least some places and more record-breaking heat waves. Scientists and government reports say the statistical evidence shows that much of this is starting to happen.  . . .

If the earth were not warming, random variations in the weather should cause about the same number of record-breaking high temperatures and record-breaking low temperatures over a given period. But climatologists have long theorized that in a warming world, the added heat would cause more record highs and fewer record lows.

The statistics suggest that is exactly what is happening. In the United States these days, about two record highs are being set for every record low, telltale evidence that amid all the random variation of weather, the trend is toward a warmer climate.

Recall that the US uses a disproportionate percentage of the world's oil and coal, and produces a disproportionate percentage of the world's greenhouse gases.

As poor people around the world -- and not-so-poor people, too -- contemplate America's place in the world, particularly when they are suffering from the effects of extremes of weather, are they likely to be willing to accept the notion that America is somehow special, and that it is the rest of the world that must adjust to us, or will they come to hold us accountable to the rest of the world's people?

When we wrap our minds around the implications of that question, we will come to the question of how we can reduce the demand for the kinds of energy which pollute the world's air.

Part of the answer will come from reducing, even reversing, urban sprawl, and setting our incentives so that our cities get re-developed more quickly and more effectively.  This will also be good for the economy, creating jobs in the ongoing redevelopment process and then again in the new buildings created by this redevelopment. 

What incentives?  Start with the incentives which promote intense use of land well-served by taxpayer-provided infrastructure (highway systems, rail and subway systems, bridges, tunnels, air travel, etc.; water, sanitary sewer, stormwater management, etc.); and services (schools, police, ambulance, firefighting, street-cleaning, trash removal, recycling, public health, courts and prisons; public parking, etc.)  Every one of those services serves to increase the value of land within the area served.  Most of them contribute more to the land value than they cost.   Yet we continue to fund them, in many places, with taxes not on land value but on wages or sales -- stupid taxes, to be blunt about it!  

We can settle down and study the problem, or we can continue to do what hasn't worked yet.  But not for long, and not for free.  Our neighbors in the other 94% of the world are going to start holding us accountable at some point.  Do we want to wait until it hits us, or do we want to get out in front of it?

And if we could, via a simple reform in the US, set an example that would contribute to prosperity in other countries, wouldn't we be wise to pursue it?

Learning To Get Out Of The Way « Aldous Huxley | This I Believe

Learning To Get Out Of The Way « Aldous Huxley | This I Believe.

In every one of the higher religions, there is a strain of infinite optimism on the one hand and on the other, a profound pessimism. In the depths of our being, they all teach there is an inner light, but an inner light which our egotism keeps, for most of the time, in a state of more or less complete eclipse. If, however, it so desires, the ego can get out of the way, so to speak, can dis-eclipse the light and become identified with its divine source, hence the unlimited optimism of the traditional religions. Their pessimism springs from the observed fact that though all are called, few are chosen for the sufficient reason that few choose to be chosen.

To me, this older conception of man’s nature and destiny seems more realistic, more nearly in accord with the given facts than any form of modern utopianism. In the Lord’s Prayer, we are taught to ask for the blessing, which consists in not being led into temptation. The reason is only too obvious. When temptations are very great or unduly prolonged, most persons succumb to them. To devise a perfect social order is probably beyond our powers, but I believe that it is perfectly possible for us to reduce the number of dangerous temptations to a level far below that which is tolerated at the present time. A society so arranged that there shall be a minimum of dangerous temptations — this is the end towards which, as a citizen, I have to strive.

In my efforts to achieve that end, I can make use of a great variety of means. Do good ends justify the use of intrinsically bad means? On the level of theity, the point can be argued indefinitely. In practice, meanwhile, I find that the means employed invariably determine the nature of the end achieved. Indeed, as Mahatma Gandhi was never tired of insisting, the means are the end in its preliminary stages.

Men have put forth enormous efforts to make their world a better place to live in. But except in regard to gadgets, plumbing, and hygiene, their success has been pathetically small. Hell, as the proverb has it, is paved with good intentions. And so long as we go on trying to realize our ideals by bad or merely inappropriate means, our good intentions will come to the same bad ends. In this consists the tragedy and the irony of history. Can I, as an individual, do anything to make future history a little less tragic and less ironic than history past, and present? I believe I can. As a citizen, I can use all my intelligence and all my goodwill to develop political means that shall be of the same kind and quality as the ideal ends which I am trying to achieve. And as a person, as a psychophysical organism, I can learn how to get out of the way so that the divine source of my life and consciousness can come out of eclipse and shine through me.

English novelist Aldous Huxley was born into a family of scientists and writers. He is best known for his books “Brave New World" (1932) and “Point Counter Point" (1928), but also wrote poetry, essays, screenplays and children’s books. Huxley died in 1963.

According to the closing words Bob Edwards added after listening to this essay, Aldous Huxley, C.S. Lewis and John F. Kennedy all died on the same day.   This radio series came from the 1950s, but I've not been able to tie down the date any closer than that.

My ears perked up when I heard Huxley's name mentioned.  In his forward to the 2nd edition of Brave New World, circa 1947, he says that were he to re-write the book, he would include the possibility of a third way.  Here's my abridgment:

In the meantime, however, it seems worth while at least to mention the most serious defect in the story, which is this. The Savage is offered only two alternatives, an insane life in Utopia, or the life of a primitive in an Indian village, a life more human in some respects, but in others hardly less queer and abnormal. ... Today I feel no wish to demonstrate that sanity is impossible. ...  If I were now to rewrite the book, I would offer the Savage a third alternative. Between the utopian and the primitive horns of his dilemma would lie the possibility of sanity -- a possibility already actualized, to some extent, in a community of exiles and refugees from the Brave New World, living within the borders of the Reservation. In this community economics would be decentralist and Henry-Georgian, politics Kropotkinesque cooperative. Science and technology would be used as though, like the Sabbath, they had been made for man, not (as at present and still more so in the Brave New World) as though man were to be adapted and enslaved to them. Religion would be the conscious and intelligent pursuit of man's Final End, the unitive knowledge of the immanent Tao or Logos, the transcendent Godhead or Brahman. And the prevailing philosophy of life would be a kind of Higher Utilitarianism, in which the Greatest Happiness principle would be secondary to the Final End principle -- the first question to be asked and answered in every contingency of life being: "How will this thought or action contribute to, or interfere with, the achievement, by me and the greatest possible number of other individuals, of man's Final End?"

Huxley was not the only person to find in Henry George's ideas a "third way."  Bob Andelson wrote an excellent essay called "Henry George and the Reconstruction of Capitalism."

To return to the excerpt from Huxley's "This I Believe" essay -- "To devise a perfect social order is probably beyond our powers, but I believe that it is perfectly possible for us to reduce the number of dangerous temptations to a level far below that which is tolerated at the present time" --  This brings to mind something that has run through my head from time to time, that there is huge individual temptation to support -- actively or passively -- the maintenance of an inequitable system, even one by which one is currently victimized, if one thinks one might be able to join the portion of society which benefits from that structure.   "I might win the lottery; therefore I should support measures that preserve the privileges of those with huge wealth!" -- or so the thought pattern goes -- and goodness knows the wealthy like that thought pattern just fine!   Particularly those whose fortunes have been made based on privileges like the ownership of land well-served by taxpayer-provided infrastructure, or scarce natural resources, or anything the classical economists would recognize as "land."

Henry George starts with the premise that "man seeks to satisfy his desires with the least effort" and it flows from this that there is certainly a tendency to exploit one's fellow human beings if structures permit one to, even if one doesn't understand the mechanism of that exploitation.

From there, my musing takes me to the thought that in that same prayer, perhaps the one most used by Christians of any prayer, we ask forgiveness for our trespasses and agree to forgive those who trespass against us.  I wonder how that phrase must have seemed to people enslaved in the American south (or north).

And then my musing leads me into one of my favorites of Henry George's speeches, "Thy Kingdom Come."  A lift:

“Our Father!” “Our Father!” Whose? Not my Father — that is not the prayer. “Our Father” — not the father of any sect, or any class, but the Father of all humanity. The All-Father, the equal Father, the loving Father. He it is we ask to bring the kingdom. Aye, we ask it with our lips! We call Him “Our Father,” the All, the Universal Father, when we kneel down to pray to Him.

But that He is the All-Father — that He is all people’s Father — we deny by our institutions. The All-Father who made the world, the All-Father who created us in His image, and put us upon the earth to draw subsistence from its bosom; to find in the earth all the materials that satisfy our wants, waiting only to be worked up by our labor! If He is the All-Father, then are not all human beings, all children of the Creator, equally entitled to the use of His bounty? And, yet, our laws say that this God’s earth is not here for the use of all His children, but only for the use of a privileged few!

There's that word again: privilege.

Back to George:

Why, consider: “Give us this day our daily bread.” I stopped in a hotel last week — a hydropathic establishment.  A hundred or more guests sat down to table together. Before they ate anything, a man stood up, and, thanking God, asked Him to make us all grateful for His bounty. And it is so at every mealtime — such an acknowledgement is made over well-filled boards. What do we mean by it?

If Adam, when he got out of Eden, had sat down and commenced to pray, he might have prayed till this time without getting anything to eat unless he went to work for it. Yet food is God’s bounty. He does not bring meat and vegetables all prepared. What He gives are the opportunities of producing these things — of bringing them forth by labor. His mandate is — it is written in the Holy Word, it is graven on every fact in nature — that by labor we shall bring forth these things. Nature gives to labor and to nothing else.

What God gives are the natural elements that are indispensable to labor. He gives them, not to one, not to some, not to one generation, but to all. They are His gifts, His bounty to the whole human race. And yet in all our civilised countries what do we see? That a few people have appropriated these bounties, claiming them as theirs alone, while the great majority have no legal right to apply their labor to the reservoirs of Nature and draw from the Creator’s bounty.

Thus it happens that all over the civilized world that class that is called peculiarly ‘the laboring class’ is the poor class, and that people who do no labor, who pride themselves on never having done honest labor, and on being descended from fathers and grandfathers who never did a stroke of honest labor in their lives, revel in a superabundance of the things that labor brings forth.

and, skipping ahead,

Nothing is clearer than that if we are all children of the universal Father, we are all entitled to the use of His bounty. No one dare deny that proposition. But the people who set their faces against its carrying out say, virtually: “Oh, yes! that is true; but it is impracticable to carry it into effect!” Just think of what this means. This is God’s world, and yet such people say that it is a world in which God’s justice, God’s will, cannot be carried into effect. What a monstrous absurdity, what a monstrous blasphemy!

If the loving God does reign, if His laws are the laws not merely of the physical, but of the moral universe, there must be a way of carrying His will into effect, there must be a way of doing equal justice to all of His creatures.

There is. The people who deny that there is any practical way of carrying into effect the perception that all human beings are equally children of the Creator shut their eyes to the plain and obvious way. It is, of course, impossible in a civilization like this of ours to divide land up into equal pieces. Such a system might have done in a primitive state of society. We have progressed in civilization beyond such rude devices, but we have not, nor can we, progress beyond God’s providence.

There is a way of securing the equal rights of all, not by dividing land up into equal pieces, but by taking for the use of all that value which attaches to land, not as the result of individual labor upon it, but as the result of the increase in population, and the improvement of society. In that way everyone would be equally interested in the land of one’s native country. Here is the simple way. It is a way that impresses the person who really sees its beauty with a more vivid idea of the beneficence of the providence of the All-Father than, it seems to me, does anything else.

I've wandered a bit, but perhaps in a sense come full circle, back to Huxley's "This I Believe."

Public Wealth and Private Wealth

I'm taking the liberty of posting a few paragraphs from Keith Gardner's blog post, which popped up on a Google alert today.  He titles the post, Answering Criticism from Anarcho-Socialists « Liberty Revival.

Public wealth is unearned wealth, found wealth, wealth earned by the public rather than by an individual, or wealth held in common or shared by the public. Public wealth includes rent, monetary expansion, often necessary to prevent deflation caused by population growth or economic growth, and interest charged on rent or monetary expansion. Rent includes wealth found through land value and through the extraction and sale of natural resources. Land value destroyed through the extraction and consumption of non-renewable natural resources or waste disposal can also be considered negative rent.

Private wealth is wealth earned by an individual, either through labor, through the production and use of capital, such as tools, organization, technology, or education, or through interest charged through risking and loaning private wealth to another individual.

This struck me as a short and clear delineation between what is rightly our common treasure and what is rightly the private property of individuals and corporations.

It seems clear what we ought to be taxing -- collecting -- to fund education, to fund infrastructure, to fund all the services which are best funded by all of us.  Tax public wealth to the extent that policies give individuals and corporations title to it.  Stop taxing private wealth, until we have collected all the public wealth sitting in private pockets.  End that free lunch, that windfall.

Aging in Place

On one of the NYT blogs in the "New Old Age" series, someone ("been there" in Boston)  posted a very wise comment I thought worth passing along.  The original post was entitled "No Place Like Home."

Think about it with respect to public policy such as California's Proposition 13. 

I've added a bit of formatting to make it easier to read.

I understand the current sentiment for "growing old in place", but I really believe we need to rethink the idea of spending limited resources trying to keep elderly people living in the homes they raised their families in. This feel-good concept actually has several drawbacks in a variety of areas. As larger numbers of baby boomers move into retirement these issues will only get worse.

• First, with one or two elders living in a three or four bedroom home, young growing families have too few move-up houses available to them so they build new houses in the exurban ring which 30 years down the road will exacerbate the real estate pull back as the boomer generation passes and the baby bust can't replace their numbers.
• Second, as this article points out, access to services and health care is terribly expensive and inefficient when those needing a high level of health care are in single family homes.
• Third, the stress of owning a home that an elder cannot adequately repair or maintain becomes a constant low level of stress in their lives.
• Fourth, all too often, the elderly are stuck in a financial situation where the ongoing costs of their primary home are wrecking their budget. Reverse mortgages with their high fees and lousy financial terms are a terrible solution. We need to develop a wider array of 55+ housing solutions at a wider selection of price points and housing styles in the communities where elders live so they can maintain the relationships that nurture them while providing housing situations that allow them access to all the services they will need.

I couldn't have said it better!   Policies which significantly favor older homeowners over their younger fellow community members (e.g., California's Proposition 13 or Florida's Save Our Homes) drive up housing prices, monthly housing expenses, commuting expenses, pollution, sprawl, commuting time, profits for mortgage lenders.  They lead to the premature need for adding infrastructure, destroying farmland, spending public money to enrich private entity landholders.

If our incentives instead encouraged the prompt and ongoing redevelopment of choice sites, well-served by taxpayer-funded infrastructure and services, there would be affordable, appealing housing for people of all ages and stages, all places on the income spectrum.  It wouldn't be single-family houses downtown; it might be midrises or highrises, close to all the amenities which make downtown areas good places to live: medical care, restaurants, entertainment, libraries, emergency services, etc.  

We just need to rationalize -- make rational! -- our system of incentives and privileges.   We ought to align our incentives with where we want to go, and with what eliminates privilege for some which are funded by burdens on others.  (Some of our privileges are so things we're so used to that we don't see that they burden and victimize others.  Private collection of land rent and natural resource value is in that category.)

Why Do People Become Terrorists?

I heard an NPR story about this woman's work and have not yet tracked it down; in my search, I found this recent NYT article, which pretty well covers what I heard on the radio.  
Private Trauma Gives Jessica Stern Insights on Terrorism

Here are a few paragraphs -- please read the whole thing online, because I've omitted some important material!:

“I’ve really been studying perpetrators and violence all my life.”

How she came to this realization is the subject of her new book, “Denial: A Memoir of Terror,” which Ecco published last week. The book recounts how, in 1973, when Ms. Stern was 15, she and her younger sister were raped at gunpoint in their home in Concord, Mass. The police disbelieved the girls’ account and bungled the investigation; their father, in Europe at the time, didn’t think it necessary to cut his trip short and return. The whole community, she writes, seemed to be in denial.

The experience created in Ms. Stern a kind of emotional numbness — a calmness, even a fearlessness, that has proved oddly useful in her current work.

“I am fascinated by the secret motivations of violent men,” she writes in “Denial,” “and I’m good at ferreting them out.” She found that terrorists would talk openly to her, she said, because she could “go into a state where I almost tried to become that person, and where I felt that if I allowed myself even the tiniest judgmental thought, they could probably sense it.” ...

Not the least of her contributions, he went on to say, was that she was one of the very first terrorism scholars to realize that the way to discover what terrorists were thinking was to go and talk to them.

“She was asking the right questions of the right people,” he added, “and if some of that comes from her own experience of being terrorized, then the lessons were very fruitful.”   ...

She began to come to terms with what was a traumatic family history even before the rape: her mother died when she was 3; her father, a German émigré who had been persecuted by the Nazis, remarried but six years later divorced his second wife, leaving his daughters with her for almost two years while he lived on his own.

And with the help of an investigator, Ms. Stern even tracked down the story of her rapist, who served 18 years in prison and then hanged himself. He turns out to have been responsible for at least 44 rapes or attempted rapes between 1971 and 1973, all with a trademark methodology that the police somehow failed to pick up on. Among other things, he found most of his prey at girls’ boarding schools or at Radcliffe College, and many of his attacks involved two or more young women. ...

Ms. Stern interviewed friends or relatives of the rapist and uncovered a long and depressing history of parental abandonment (he was adopted, though he didn’t know it for years, and a woman he thought was his aunt was really his mother); confused sexual identity; drug use (he even dropped acid once with Timothy Leary); and possible childhood molestation (his parish church harbored a series of predatory priests). He had probably been traumatized himself, and then in the classic fashion went on to traumatize others.   ...

Writing the book, she added, taught her a lot about the effects of post-traumatic stress syndrome, of which she now considers herself a victim, and also helped refine her thinking about terrorism. Her researches have taught her that there is no common denominator in determining why people become terrorists, but she has identified a checklist of risk factors. These include alienation, coming from a society with a youthful population bulge or a high male-to-female ratio and, for the people who wind up being used as cannon fodder by the terrorists, poverty.

To the list she would now add sexual humiliation, and in January she published an article in Foreign Affairs in which she pointed out that sexual abuse of boys in the Islamic religious schools known as madrasas is not uncommon, and neither is the rape of boys in Afghanistan, especially on Thursday, known as “man-loving day,” because Friday prayers are thought to absolve a sinner of all his guilt.

“I’ve known about this for years,” Ms. Stern said, “but until I wrote this book, I didn’t make the connection. I’m not sure how you study it, but I do think it’s there. Humiliation is definitely a risk factor, and this may be a particular kind of it.”

She paused and added: “But why humiliation in some places and some people but not others? Harvard is a humiliation factory, and yet we don’t produce a lot of terrorists.”

Most of those at Harvard come from a lot of money, and/or can expect to earn a lot of money in this society, which probably cushions them greatly from the effects of any humiliation they might suffer at the hands of their classmates or teachers.  Who cushions the poor from what they suffer as ordinary humans in a society which is structured to concentrate income and wealth in relatively narrow slices of the spectrum?

Or is this an inconvenient thing we ought to continue to ignore?

Relatedly, one might think about how someone who is in the 20% of America which receives, say, 4% of America's income might feel about those who are in the 1% who receive about 20% of America's household income, and what their opportunities are to move up even a quintile or two.

See also the next post, about a neurologist looking at his own family history, and the difference that a secure and serene childhood can make in one's chances in life.  I heard these two stories within a couple days of each other -- what a juxtaposition!

A Neuroscientist, Nature and Nurture, and America's Children in Financial Distress

A Neuroscientist Uncovers A Dark Secret : NPR.

This is a fascinating story, and I commend it to your attention. The link takes you to the transcript and the option to listen to the story.  It describes a university neuroscientist who looks into his own family history and, with the cooperation of family members, brainscans and DNA of a number of others descended from the same line:

About four years ago, Fallon made a startling discovery. It happened during a conversation with his then 88-year-old mother, Jenny, at a family barbecue.

"I said, 'Jim, why don't you find out about your father's relatives?' " Jenny Fallon recalls. "I think there were some cuckoos back there."

Fallon investigated.

"There's a whole lineage of very violent people — killers," he says.

One of his direct great-grandfathers, Thomas Cornell, was hanged in 1667 for murdering his mother. That line of Cornells produced seven other alleged murderers, including Lizzy Borden. "Cousin Lizzy," as Fallon wryly calls her, was accused (and controversially acquitted) of killing her father and stepmother with an ax in Fall River, Mass., in 1882.

A little spooked by his ancestry, Fallon set out to see whether anyone in his family possesses the brain of a serial killer. Because he has studied the brains of dozens of psychopaths, he knew precisely what to look for. To demonstrate, he opened his laptop and called up an image of a brain on his computer screen.

The story is fascinating.  I'm sharing it here because of the final lines.  First, a bit more of the story:

After learning his violent family history, he examined the images and compared them with the brains of psychopaths. His wife's scan was normal. His mother: normal. His siblings: normal. His children: normal.

"And I took a look at my own PET scan and saw something disturbing that I did not talk about," he says.

What he didn't want to reveal was that his orbital cortex looks inactive.

"If you look at the PET scan, I look just like one of those killers."

Skipping ahead:

Still, he says the evidence is accumulating that some people's brains predispose them toward violence and that psychopathic tendencies may be passed down from one generation to another.

The Three Ingredients

And that brings us to the next part of Jim Fallon's family experiment. Along with brain scans, Fallon also tested each family member's DNA for genes that are associated with violence. He looked at 12 genes related to aggression and violence and zeroed in on the MAO-A gene (monoamine oxidase A). This gene, which has been the target of considerable research, is also known as the "warrior gene" because it regulates serotonin in the brain. Serotonin affects your mood — think Prozac — and many scientists believe that if you have a certain version of the warrior gene, your brain won't respond to the calming effects of serotonin.

Fallon calls up another slide on his computer. It has a list of family members' names, and next to them, the results of the genotyping. Everyone in his family has the low-aggression variant of the MAO-A gene, except for one person.

"You see that? I'm 100 percent. I have the pattern, the risky pattern," he says, then pauses. "In a sense, I'm a born killer."

Fallon was prompted to study his brain after his mother, Jenny, told him his ancestry was full of alleged murderers.

Fallon's being tongue-in-cheek — sort of. He doesn't believe his fate or anyone else's is entirely determined by genes. They merely tip you in one direction or another.

And yet: "When I put the two together, it was frankly a little disturbing," Fallon says with a laugh. "You start to look at yourself and you say, 'I may be a sociopath.' I don't think I am, but this looks exactly like [the brains of] the psychopaths, the sociopaths, that I've seen before."

I asked his wife, Diane, what she thought of the result.

"I wasn't too concerned," she says, laughing. "I mean, I've known him since I was 12."

Diane probably does not need to worry, according to scientists who study this area. They believe that brain patterns and genetic makeup are not enough to make anyone a psychopath. You need a third ingredient: abuse or violence in one's childhood.

That's why I'm sharing this one here.  35% to 40% of America's children live in families where the household income is insufficient to meet the most modestly defined needs of a family of that size and configuration in that location.  (See "Self-Sufficiency Standard" for more information.)   How many more live in families which have below-average income, little financial security, little in savings, shaky housing situations, unemployment or underemployment?

Our nation's concentration of income and concentration of wealth mean that about 80% of us are below average.  Every time you see a report about average wealth, or average income, please recognize that we live in Lake Wobegon in Reverse.  Most of our children live in families that are below average, particularly those who were born to young parents, to less educated parents, to single parents, or who made unfortunate choices of who their parents would be, or what pressures their parents' marriages would come under, particularly financial pressures.

We have a poverty machine.  The rich keep getting richer, and the rest -- including the families of a very large proportion of our children -- are struggling to keep their heads above water.

How do we fix this poverty machine?  How do we transform it into a rising prosperity-for-all machine?  For that, you'll have to do some reading.  Start with the works of Henry George --

• a speech or two at www.wealthandwant.com -- say, The Crime of Poverty, or Thou Shalt Not Steal;
• a reading of Progress and Poverty at progressandpoverty.org;
• your choice of chapters from Social Problems at wealthandwant.

Then, you might read Bob Andelson's Henry George and the Reconstruction of Capitalism at wealthandwant.

How do we reduce the chances that conditions in a child's life will cause them to become people who victimize others as adults?   By assuring that all get what they need as children, and are protected from victimization by adults and by other children.

Just a thought.

Tackling America's Drug Addiction

Tackling America's Drug Addiction : NPR.

I heard parts of this when it was initially broadcast, and hunted around for the text version.   It contains some statistics that surprised me.   Here's the first part of the interview:

MICHELE NORRIS, host:  Earlier this week, Mexican President Felipe Calderon defended Mexico's war against the drug cartels, and cast some blame on his neighbor to the north: the U.S. The origin of our violence problem begins with the fact that Mexico is located next to the country that has the highest level of drug consumption in the world, Calderon wrote in a newspaper editorial. It is as if our neighbor were the biggest drug addict in the world.

Harsh words, to be sure. It got us wondering about the appetite for drugs in the U.S., and whats being done to curb it.

For answers, we turn to Joseph Califano, the former secretary of Health, Education and Welfare, and now director of the National Center on Addiction and Substance Abuse at Columbia University.

Mr. Califano, welcome to the program.

Mr. JOSEPH CALIFANO (Director, National Center on Addiction and Substance Abuse, Columbia University): Nice to be here.

NORRIS: Now first, any truth in President Calderon's statement? Is it fair to characterize the U.S. as the biggest drug addict in the world?

Mr. CALIFANO: The U.S. is 5 percent of the world's population. We consume two-thirds of the world's illegal drugs. So there is a lot of truth...

NORRIS: Hmm.

Mr. CALIFANO: ...in what President Calderon said.

NORRIS: Let me ask you about the war on drugs right now. The current administration is trying to focus on a balance between interdiction and treatment: drug courts, for instance, followed by mandatory treatment, things like that.

Will that shrink the domestic market for drugs - since when you're talking about treatment, there are so many issues surrounding access to treatment?

Mr. CALIFANO: You're absolutely right. The rhetoric of the administration is good, but the dollars haven't changed. We're still putting roughly two-thirds into interdiction and enforcement, and one-third into treatment and prevention. Interestingly, when President Nixon started the war on drugs, his first budget was two-thirds for prevention and treatment, and one-third for interdiction.

NORRIS: Oh, so it's flipped.

Mr. CALIFANO: It's flipped totally. Now, we have to look at a lot of systems to really do something about this. The drug courts are great. We've analyzed them at our center. They work. And the prison population is important because 65 percent of the people in prison meet the medical criteria for drug or alcohol abuse and addiction. That's a wonderful - in a sense, captive audience. But we don't provide much treatment for them.

NORRIS: So it's just a wasted opportunity. They're not getting treatment.

Mr. CALIFANO: About one in 10 that need treatment gets some kind of treatment. But most of it is not good.

There's a Medicaid population: 30 percent of the beneficiaries of Medicare have drug and alcohol problems. We have to go after those populations. That's the short-run - in a sense - solution to this problem.

There's a longer-run solution. We know from our research that if you get a child through age 21 without getting into this stuff, that child is virtually certain to be home free for the rest of his or her life. And when you say a drug-free society - and there will always be drugs being used - what you're really talking about is that population of children - and that's parents, that's schools, that's people that are dealing with that. And they've got to get focused on it.

NORRIS: Is the U.S. serious enough about the war on drugs?

Mr. CALIFANO: No, we're not. I'll tell you - and we're not serious. The government is not serious enough. You can barely hear any of the leaders in the government talk about it. The medical profession is not serious enough. The public-health profession is not serious enough.

Think about it.  The richest nation in the world.  And our wealth is quite concentrated in a relatively small portion of our population: 1% of us have over one third of the net worth.  10% of us have over 71% of the net worth.

And 10% of us get nearly half of the pre-tax income, and 20% of us get 61%, and 40% of us get 80%, leaving not much for the rest.

The rest of us keep talking about our nation's ideals, as if we'd already achieved them and we should all be content.  But clearly our concentration of wealth and concentration of income are producing effects which burden a large number of us and then get transmitted to other parts of the world.  (Am I a master of understatement?)

Income Mobility and the Persistence Of Millionaires, 1999 to 2007

The Tax Foundation recently published a study which apparently seeks to comfort those of us who are concerned about the concentration of income in the US -- what they call "the rising gap between the rich and poor."  It suggests that "snapshots of income inequality" should be considered in light of "the mobility of people up and down the income ladder."

The first graph is from Piketty and Saez, and shows the percentage of income going to the top 1% of income recipients.  It shows the 1980 share as 10% and the 2007 share approaching 23.5%.   The text mentions that the share of income received by the top 10% has risen from 34.6% in 1980 to 49.7% in 2007, also sourced to P&S.

The paper then goes on to show, from IRS data, the extent to which people moved from one income quintile to another between 1999 and 2007:

Table 1  More than 50 Percent of Taxpayers Moved Out of the Bottom Quintile Between 1999 and 2007
	2007 Income Quintile/Percentile
1999 Income Quintile/Percentile	Lowest	Second	Third	Fourth	Fifth	Total	Top 10%	Top 5%	Top 1%
Lowest	42.5%	25.1%	16.3%	10.4%	5.7%	100.0%	2.2%	0.8%	0.1%
Second	32.2%	34.7%	17.3%	10.8%	5.0%	100.0%	1.7%	0.7%	0.1%
Third	14.4%	26.0%	32.8%	17.8%	8.9%	100.0%	3.4%	1.2%	0.1%
Fourth	7.7%	10.7%	25.7%	37.7%	18.3%	100.0%	6.2%	2.2%	0.3%
Fifth	3.1%	3.8%	7.5%	23.3%	62.3%	100.0%	36.5%	20.0%	4.3%
Top 10%	2.7%	2.4%	4.4%	13.3%	77.1%	100.0%	56.7%	34.8%	8.0%
Top 5%	2.4%	1.9%	3.0%	8.2%	84.5%	100.0%	72.7%	54.2%	14.7%
Top 1%	2.3%	1.4%	1.4%	4.5%	90.5%	100.0%	85.5%	78.3%	44.6%
Note: Computations by author from the 1999-2007 SOI Individual Tax Panel.

They cite the good news that only 43% of those in the bottom income quintile in 1999 remained in that quintile in 2007.  A similar percentage of those who were in the top 1% in 1999 were again in the top 1% in 2007.    Less than 10% of the 1999 Top 1%'ers had fallen out of the top quintile 8 years later.  It was far more likely that a top-quintile taxpayer would remain in the top quintile -- 62% -- than anyone else remain where they were. 

(Might I be forgiven for wishing that the study showed what percentage of income over the 9 years went to the people in each quantile in 1999, and then again for each quantile in 2007?  One might come away with a different understanding.)

The remaining tables/figures show, for three different measures of income, how many taxpayers were "millionaires" for 1, 2, 3, 4, 5, 6, 7, 8 or all 9 years.  (The appendix shows that the top 1% began at $339,600 in 1999, and $549,200 in 2007.)  

Working with Gross Income, 675,000 tax payers had income over $1,000,000 during at least one year between 1999 and 2007.  Of those, half were in that category for just one year, and only 6% -- 38,000 taxpayers -- were in the $1,000,000+ category for all 9 years.   This is apparently intended to demonstrate that many more of us have one fabulous year than have consistent reported income at that level, and that this must mean that there is opportunity for all.

Narrowing the definition of income to exclude capital gains, a similar table shows that 431,000 taxpayers fell into the $1,000,000+ category at least once, of whom 175,000 were only once.  So 36% of those who were "income millionaires" by the Gross Income definition were not "IM's" when capital gains were excluded.

Excluding (instead) "Business Income," the ever-an-income-millionaire universe drops to 555,000 taxpayers, and 55% of them were one-year-only income millionaires.

It would be interesting to see the aggregate income during the 9 years for each group.  The author clearly has the data.

Appendix B Persistence/Transience of Millionaires: Data Underlying Figures 2, 3 and 4
	Number of Years a Millionaire
	One	Two	Three	Four	Five	Six	Seven	Eight	Nine	Total
Gross Income
Returns (1,000s)	338	102	54	50	29	23	24	17	38	675
Percent	50%	15%	8%	7%	4%	3%	3%	3%	6%	100%
Gross Income Excluding Capital Gains
Returns (1,000s)	175	77	41	38	22	17	17	13	29	431
Percent	41%	18%	10%	9%	5%	4%	4%	3%	7%	100%
Gross Income Excluding Business Income
Returns (1,000s)	307	81	44	35	23	18	13	11	23	555
Percent	55%	15%	8%	6%	4%	3%	2%	2%	4%	100%
Source: Computations by author from the 1999-2007 SOI Individual Tax Panel.

I suppose their conclusion is that since so many more people have one year of $1,000,000+ income than have 9 years of it, we ought not to worry about the actual distribution of income, which, as I've previously reported, is as follows:

	Top income decile:	47.19% of the before-tax income
	Second income decile:	13.77% of the before-tax income
Top income quintile:		60.96% of the before-tax income
Second highest income quintile:		18.18% of the before-tax income
Middle income quintile:		11.23% of the before-tax income
Fourth highest income quintile:		6.72% of the before-tax income
Bottom income quintile:		2.92% of the before-tax income
[Source: SCF Chartbook, page 7 and my calculations]

Moving from the bottom quintile to the fourth highest quintile may be considered mobility by the Tax Foundation.  But when the top quintile receives 61% of the income, and 62% of those who were in the top quintile in 1999 are again in it in 2007, even a lot of mobility doesn't get one very far, in terms of economic security or return on one's labor.

Look at it this way:

• 67.6% of those in the lowest quintile in 1999 are still in the bottom 40% in 2007
• Of those in the second quintile in 1999, 66.9% are still in the bottom 40% in 2007.  More have moved down a quintile than have moved up a quintile (and almost as many have moved down as have moved up in total: 32.2% down, 33.1% up).
• Of those in the middle quintile in 1999, more have fallen into the bottom 40% than have moved into the top 40% in 2009
• Of those in the fourth quintile in 1999, only 56% are in the top 40% in 2007.  More have moved down a quintile than have moved up a quintile (25.7% vs 18.3%).
• Of those in the top quintile in 1999, 85.8% are in the top 40% in 2007
• Of those in the top 10% in 1999, only 23% are in the bottom 80% in 2007
• Of those in the top 5% in 1999, only 15% are in the bottom 80% in 2007
• Of those in the top 1% in 1999, only 10% are in the bottom 80% in 2007.

This is structural.  We have permitted the creation and maintenance of income- and wealth-funneling machines. 

You can read more about the nature of the machine, and how to harness it to make things better, in Henry George's books, including Progress and Poverty, and Social Problems (the latter is a book of essays, and the link will take you to some material which will help you choose one of interest).  Certain things in society rightly belong to all of us, and our failure to treat them accordingly is at the root of our income- and wealth concentration problems (and many others, including sprawl, joblessness, boom-bust cycles, pollution -- and I think most of us would be happy to see that there is a solution to any one of these, much less something that will lead to a solution of all of them).

Income mobility in a society where so few of us control so much is a salable proposition only to the gullible.  If every one of us could spend 3 months of our lives in the top 0.25% of income recipients, then maybe our top-20%-gets-61%, top-1%-gets-23% might be consistent with our ideals of equal liberty.  Maybe, kinda sorta.

Tax Foundation, look into the wisdom of Henry George.  Unless, of course, your funders' interests are not the interests of ordinary Americans. 

The Landlord's Prayer -- Archer's version

THE LANDLORD'S PRAYER OFFERING IN THE TEMPLE

O God, I thank Thee that I am not as other men. Thou art very wonderful and very kind — for Thou hast made me Thine own selected one!

All Thy works praise Thee — and yield their tribute to me! The earth, created Thou it — and gavest it to me!

The sea also is Thine, but Thou hast given me its bed for a long distance out from the shore — so that none may ride upon its waters without paying toll to me.

The firmament of the Heavens is Thine, and Thou hast set the sun therein to give light and warmth by day, likewise the moon and the stars whereby to radiate through the gloom and the darkness of the night, and these also enrich my exchequer.

Thou ridest Thy chariots in the clouds and causeth the winds to blow, and dost thereby still further increase my plenteousness.

Thou hast decreed that the non-elect of mankind shall live by labour, and hast conferred on me the power to make them hand over annual tribute to me and mine for the opportunity of so doing.

Thou hast ordained that the earth which Thou gavest me shall rise in value through the operation of natural laws and social factors, and hast appointed me to collect these enhanced values and to use them for myself and my house.

In further manifestation of Thy concern for me and mine, Thou hast commanded that the non-elect shall forge weapons for defending that which Thou hast given to me; that they — the non-elect — shall provide forces to use these weapons on my behalf, that they shall pay the capital costs thereof, and that they shall further provide out of their own common labors such funds as may be needed for feeding and clothing themselves and their dependents, and of providing compensation for the dependents of those who fall or are maimed and bruised whilst engaged in safeguarding Thy gifts to myself, in order that no toll shall be made upon Thy goodness to my house. Yea, Lord, I thank Thee that I am Thine own elect, and that Thy wonderful goodness is made plain in the tribute which Thy created handiwork brings to me and to my house. Amen, Amen, and yet again Amen.

—john Archer

This version was printed in Land and Freedom in 1917.

In another version, the final paragraphs read slightly differently:

The Larger Struggle - David Brooks

Op-Ed Columnist - The Larger Struggle - NYTimes.com.

On the one side are those who believe in democratic capitalism — ranging from the United States to Denmark to Japan. People in this camp generally believe that businesses are there to create wealth and raise living standards while governments are there to regulate when necessary and enforce a level playing field. Both government officials like President Obama and the private sector workers like the BP executives fall neatly into this camp.

On the other side are those that reject democratic capitalism, believing it leads to chaos, bubbles, exploitations and crashes. Instead, they embrace state capitalism. People in this camp run Russia, China, Saudi Arabia, Iran, Venezuela and many other countries.

Many scholars have begun to analyze state capitalism. One of the clearest and most comprehensive treatments is “The End of the Free Market” by Ian Bremmer.

Bremmer points out that under state capitalism, authoritarian governments use markets “to create wealth that can be directed as political officials see fit.” The ultimate motive, he continues, “is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).” Under state capitalism, market enterprises exist to earn money to finance the ruling class.

The contrast is clearest in the energy sector. In the democratic capitalist world we have oil companies, like Exxon Mobil, BP and Royal Dutch Shell, that make money for shareholders.

In the state capitalist world there are government-run enterprises like Gazprom, Petrobras, Saudi Aramco, Petronas, Petróleos de Venezuela, China National Petroleum Corporation and the National Iranian Oil Company. These companies create wealth for the political cliques, and they, in turn, have the power of the state behind them.

It might be worth looking at these assertions in light of how wealth is distributed ... concentrated might be a better description ... in America.  The 2007 Survey of Consumer Finances, from the Federal Reserve Board, reports the following distribution of "Equity," which includes individual stocks and equity mutual funds, whether held in retirement or non-retirement accounts:

Bottom 50%      1.5%
Next 40%        19.6%
Next 5%          12.4%
Next 4%          30.5%
Top 1%           36.0%

The SCF also reports the distribution of holdings of "BUS" -- the value of privately-held businesses:

Bottom 50%      0.4%
Next 40%          6.0%
Next 5%            5.5%
Next 4%          25.5%
Top 1%           62.7%

The two categories are of roughly equal size: Equity $13.7 trillion and BUS $14.9 trillion.   So one might reasonably estimate that the top 1% have roughly 50% of the aggregate value of these two categories, and the next 4% have about 28% -- leaving 22% for the bottom 95% of us.

If state capitalism puts, say, 80% of business in the hands of the top 5%, is it that much worse than what we've got?  In some ways, yes -- but the question is worth pondering.

Brooks closes with this:

We in the democratic world have no right to be sanguine. State capitalism taps into deep nationalist passions and offers psychic security for people who detest the hurly-burly of modern capitalism. So I hope that as they squabble, Obama and BP keep at least one eye on the larger picture.

We need healthy private energy companies. We also need to gradually move away from oil and gas — the products that have financed the rise of aggressive state capitalism.

More than "needing healthy private energy companies" we need to start collecting for the commons more of the value of the natural resources they draw from our common supply -- not to mention forcing them to privatize the environmental risks associated with drilling.  Remember what Henry George said about a well provisioned ship?  He who controls the hatches controls his fellow human beings.

And of course, we need to be undertaking the shift of incentives which will redirect sprawl into the underused sites in our cities.  Land value taxation -- untaxing buildings, and uptaxing land value -- will produce the urban density which will lead to walkable cities and populations which will support effective public transportation systems.  It will provide technologically modern housing affordable to people at all levels of the income spectrum, close to their work -- for those who want that.  The reduced pressure on the suburban markets will lower prices there, too, for those who want that.   That urban redevelopment will also create more commercial venues in the centrally located places where specialized businesses thrive.  And of course all that building activity creates jobs, and those new technologies will produce buildings which use less energy and produce less pollution.  And because untaxing buildings removes the penalties associated with things like solar power, all the incentives will be pointing in the same direction.

t

Is Our Tax System Helping Us Create Wealth?

tax.com: Featured Articles: Is Our Tax System Helping Us Create Wealth?.

This article, by David Cay Johnston, is at least a few months old, and I didn't see it when it first came out.  I did see a blog post which referred to it, and quoted some passages of it.  Here are the ones which caught my eye then: 

Without a doubt, the much lower tax rates at the top encouraged people to realize more income in the tax system. And if the only measure is that some people made more, then this would be a good.

But let’s ask the question that the classical economists would have asked back when they were known as moral philosophers and their leaders spoke of policies that benefited the majority. Let’s go back to a time before Vilfredo Pareto’s observations began what is the overwhelmingly dominant orthodoxy today, neoclassical economics with its focus on gain.

What is the social utility of creating a society whose rules generate a doubling of output per person but provide those at the top with 37 times the gain of the vast majority? ...

Is a ratio of gain of 37 to 1 from the top to the vast majority beneficial? Is it optimal? Does it provide the development, support, and initiative to maximize the nation’s gain? Are we to think that the gains of the top 398 or 400 taxpayers are proportionate to their economic contributions? Does anyone really think that heavily leveraged, offshore hedge fund investments are creating wealth, rather than just exploiting rules to concentrate wealth, while shifting risks to everyone else?

Under the overwhelmingly dominant economic theory of today, this is all good. Pareto argued that if no one was harmed, then all gain was good.

Carried to an extreme, neoclassical economics would say that if the bottom 99.9999997 percent had the same income in 1961 and 2006, and all of the gain went to the one other person in America, that would be a good. ...

Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?

Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families with children whose head is age 50 or younger, is smaller today than it was in 1983.

But the original has some other important things to say.  It begins,

Imagine that all you had to live on was the amount of tax you saved in your best year because of the many tax rate cuts Congress has put in place since 1964, when President Johnson signed into law the Kennedy tax cuts.

For most Americans, living off income tax savings would mean starvation. Their income tax savings have been minor, and when looked at over a long period, say since 1961, increases in payroll taxes have more than offset their slight income tax reductions.

But for the very few who have gained the most from living in the United States, the story is quite different. Their tax savings alone from a single year, invested to earn just 5 percent annually, would be enough to provide a lifetime income at nearly twice the income threshold for being in the top tenth of 1 percent.

That's a remarkable decrease for some very privileged folks!  Johnston goes on to compare what has happened with incomes at the very top of the scale between 1961 and 2006 with what has transpired for the bottom 90% of us.  The bottom 90% saw real income rise from $22,366 to $31,642 (both in 2006 dollars).  At the 90th percentile, wages rose from $60,404 to $104,440.  DCJ goes on to make some points which Elizabeth Warren and Amelia Tyagi made in "The Two Income Trap:"

That tiny increase in pay does not represent a real increase in wages, only total income. That is because in the middle of that 45-year era, a profound transformation took place in America.

In 1961 most families lived on one income, maybe supplemented by some part-time work by the wife for what was quaintly known back then as "pin money." Now two-income households are the norm.

The overall wealth of America grew and grew during this era. GDP, adjusted for inflation and increased population, was up 227 percent. But wages and fringe benefits did not grow with the economy. For most workers, they fell. Wages peaked way back in 1972-1973, were on a mostly flat trajectory for more than two decades, rose briefly in the late 1990s, and then fell sharply in the new century. Airline pilots have seen their 1990s income cut by more than half; some union factory workers have seen their pay slashed by two-thirds. Millions are out of work, and the jobs they once held are gone and are not coming back. And even if the Great Recession is coming to an end, we face years of jobs growing more slowly than the working-age population, which could radically transform America's culture, work ethic, and sense of progress.

In 2006 families worked on average about 900 more hours than families did in the 1960s and early 1970s. That is a roughly 45 percent increase in hours worked accompanied by a 41 percent increase in total income.

For many, the reality is that two jobs produce the same or a smaller after-tax income than just one job did three and four decades ago.

Compare that to the top 400 taxpayers:

The average income for the top 400 taxpayers rose over the 45 years from $13.7 million to $263.3 million. That is 19.3 times more.

The income tax bill went up too, but only 7.8 times as much because tax rates plunged. Income tax rates at the top fell 60 percent, three times the percentage rate drop for the vast majority. And at the top, the savings were not offset by higher payroll taxes, which are insignificant to top taxpayers.

The average income tax rate for those at the top in 1961 was 42.4 percent. By 2006 it was down to 17.17 percent. Add on payroll taxes, and the 2006 rate is 17.2 percent, the same as rounding the income tax figure alone.

Readers of this site will know that I have no use for income taxes.  But until we shift to smart and just taxes, a sharply progressive income tax seems to me to be a better-than-nothing way to fund our common spending.

Johnson ends with this:

Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?

Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families, with children, whose head is age 50 or younger, is smaller today than it was in 1983.

In my humble opinion, DCJ isn't looking quite deep enough.  Our tax system -- federal, state and local combined -- is permitting those who own our most valuable common assets (land value and nonrenewable natural resources) to privatize their value, year after year, generation after generation -- and grow hugely wealthy and powerful -- and then merely taxing some of the income from them. 

The alternative?  Tax the annual value of those resources -- which are rightly COMMON property, provided by the Creator and by the presence of all of us and the spending/investment of the entire Community, not by individuals or corporations -- heavily (say, 90% or 95% of the annual value)  and reduce or even eliminate -- starting at the bottom -- the wage and interest and sales taxes and taxes on manmade improvements to land.   Think about the ramifications of that reform.  They're profound, and point in the direction of a healthier, more stable and more just economy.   Will the revenue generated be sufficient to fund all of today's public spending?  Probably not.  But

1. that's no reason not to shift our taxes off bad taxes onto good ones; and

2. we may find that with good taxes, things change enough that we no longer need to spend large amounts on the social safety net, because a vibrant economy with opportunities for all and a somewhat more equal distribution of income and of wealth and power permits the vast majority of us to be self-sufficient and prosperous.

The bottom 70% or so of us CAN'T save.  Large shares of our incomes are devoted to housing and transportation, and to all sorts of FIXED costs.   We can't increase our spending on other goods, and we can't save.   We have to fix that.  We have to do things which distribute the value of that which SHOULD be common, and end the privatization of value which ought to be common. 

So how do we reduce our reliance on oil?

I've not heard any really good answers to this question yet.  Which is not to say that I don't think there are answers; they just aren't being widely discussed yet.

The answer lies deeper than the analyses which are commonly discussed.  We need to shift our incentive system at a deeper level than what is currently being discussed.  

We spend a lot of money heating and cooling older homes many miles from where people actually work.  People commute long distances -- most of them via private cars because there aren't viable alternatives.  Why do they live so far from their work?  Usually because they can't afford to live closer.

The selling price of most housing within a commutable distance of any vibrant city is mostly land value.  And most people don't know it. 

Let me say that again.

The selling price of most housing within a commutable distance of any vibrant city is mostly land value.  And most people don't know it.

And they don't know why this is so, or realize that there is an alternative which would be desirable from virtually every point of view, or realize the far-ranging ramifications of this reality.  And this is as true of people who hold graduate degrees in economics from our best universities as it is of people whose formal education ended with high school. 

And the fact that the selling price of a home in a metropolitan area is mostly land value -- not value associated with the current structure -- seems to be invisible to most of us.  As are the ramifications of the fact that houses -- like nearly everything else which is manmade -- depreciate!   What appreciates is land value -- locational value -- and it appreciates for reasons which have nothing to do with the landholder himself.

The ramifications?  I'll list a few here, but the list is very long.

• As population grows and more jobs are in cities, population density in the city itself and the closest surrounding suburban rings needs to increase.  What might once have served as large-lot single-family housing ought to give way to multi-family housing -- townhouses, low-rises, mid-rises.  Vacant lots ought not to remain vacant for long.  Low-rise commercial ought to give way to mid-rise commercial, or high-rise mixed use, with retail on the street level and housing or offices above.
• More people living in walkable communities, with public transportation to move them to their work, reduces our reliance on cars.
• More people living in technologically modern housing reduces the per-person fuel to heat and cool their living spaces.
• Incentives which discourage redevelopment of underused sites are counterproductive
• Incentives with encourage the prompt redevelopment of well-located sites to their highest and best use will reduce our reliance on oil and other non-renewable natural resources as well as the pollution associated with those fuels. 
• When we tax land value, we don't take from anyone value which they created.
• When we tax land value, we reduce our reliance on income taxes and sales taxes.
• When we tax land value, we can reduce our taxation of buildings and other improvements, which reduces the disincentives to redevelopment, to using modern techologies -- both of which create jobs. 
• When we tax land value, we reduce the selling price of housing, making it more affordable to ordinary people, and requiring them to borrow less.  This frees up credit for activity which creates jobs. 
• When we tax land value, we stabilize our economy, reducing or eliminating the boom-bust cycles which afflict us roughly every 18 years.

That's enough for starters.

The Labour Problem ... population? or something else?

Here's another interesting article from the January 1, 1887 edition of The Democrat.  It speaks to some very 21st-century issues: wealth concentration, population growth, access and ownership of land and natural resources, and equality of opportunity -- to name a few.  I've Americanized the spellings to make it an easier read for US readers.   "Labor" refers to us, ordinary folks who need to work for a living -- not to organized labor specifically.

THE LABOR PROBLEM.

By An American.

The signs of dissatisfaction on the part of the laboring classes are clearly apparent everywhere. Labor organizations, strikes, boycotts, labor journals -- all these mean something, and what that something is we cannot find out too soon.

Is the dissatisfaction of labor simply the result of human perverseness, the envy and jealousy of idleness and carelessness at the better success of industry and thrift, or are there unjust forces operating on society producing vicious inequalities?

Has every man the same chance? Can all men attain to the same fortune if all are equally industrious and thrifty? Is there a fair field and no favor?

Certainly there is, cries a host of respondents. Is not each man the architect of his own fortune? And they quote case after case of men who began at the foot of the ladder, but who with indomitable pluck gained step after step until they conquered fortune, while others who began at the same point, neglected their opportunities and are still toiling in poverty, where they are destined to stay to the end of the chapter.

Is society so constructed that to all there is the same chance? Can all by exercising the same industry and thrift become equally wealthy? This question goes directly to the core of the labor problem. If there is the same chance to all, then what reason has the laborer to complain? A little consideration answers this question.

In how many years could society with its utmost exertions and greatest economy accumulate enough so that toil would be no longer necessary, and forever after all succeeding generations could live in idleness. No more plowing in spring, no reaping in harvest, no toiling in the mine, no sailing on the ocean — a huge, everlasting pic-nic!

Never! Toil, to restore the faded or to replace the worn out, must be as lasting as the race. Toil, toil, toil, is the inevitable.

"Men may come and men may go,
But toil goes on for ever."

Note that as fact number one and put fact number two alongside it.

And fact number two is this: Certain families now have the power of living for ever without toil. They organize no industry, invent no machine, do nothing to furnish supplies for themselves or their fellows — drones in the human hive, and yet their cruse of oil never fails.

Now, put these two facts together:

1st. Toil must be lasting as the race;

2nd. Some are now eternally exempt from toil;

Therefore, as certain as any therefore can be, some are endowed with privileges from which the rest of the race must be by an inexorable physical law for ever excluded.

Wealth Concentration, Income Concentration and the Economy

I came across an interesting paragraph in the January, 1887, issue of The Democrat, a British publication, which speaks to our 21st century economy:

The Rothschilds all over Europe are calculated to possess a yearly income of at least six millions. Suppose they spend only one million, laying aside five, what does this really mean? It means that they demand from the producers a tribute of six millions a year, not in goods, but in money; to raise this tribute-money, the producers have to sell six million pounds' worth of their productions in a market in which the Rothschilds purchase only one million's worth, having no requirements for more goods, their spending capacity, viz., their demand: for necessities and luxuries, not having increased so fast as their income. The producers — the people at large — cannot fill the gap by purchasing these remaining five million pounds' worth of goods, much as they need them, because they have to pay the proceeds of their labour as a tribute to the Rothschilds to the tune of £6,000,000 a year. Here, then, is the solution of the great problem, why goods are not saleable, why labour can find no employment, though the greatest need for goods exists.

It is attributed to Michael Flurscheim, a manufacturer in the Grand Duchy of Baden.

America's FIRE sector -- Finance, Insurance, Real Estate -- continues to harvest huge amounts of the production of American workers who are fussy enough to want a place to live.  They don't have sufficient cash to buy the land and structure outright, and 15-year mortgages have given way to 30-year mortgages, fixed rates to adjustable rates, 20% downpayments to 10% and 5% and less -- with private mortgage insurance -- and $8,000 tax credits often are the equity in a newly purchased home.    And the top few hundred employees of each behemoth pay themselves and each other awesomely high bonuses, on top of salaries which would alone place them in the top 1% of our income spectrum.  Our best and brightest students are drawn, not to medicine, or scientific research, or engineering, or production management, or any of a number of fields in which they could make a positive impact on the lives of their fellow human beings (and be comfortably compensated with opportunities for leaving their children well-situated as well), but into Finance and Consulting, where the goal is to suck the vitality out of productive companies and out of wage-earning individuals. 

The alternative?  It is remarkably simple.  So simple that "smart" people scoff at it.  It is also wise, and just, and efficient, and conducive to solving many of our most pressing -- and supposedly intractable -- social, economic, environmental and justice problems.

When 2+3=6, who is entitled to the "extra" 1?

When there is a benefit to be gained by people congregating in one area rather than spreading themselves out evenly over the entire area of a country such as America, who is entitled to that benefit?

Two people working together produce more than the sum of what they produce separately.  How should that surplus be divided? 

Should it be divided equally among the workers?  Should it be divided in proportion to the contributions of the labor of each worker?  Should it all go to the more able of the two workers?  Should it go to the fellow who owns the land on which they work?  Should it go to those who lent someone money to buy the land?  Should it be spent on things which make life more pleasant or work easier where they work?

Mine! All Mine!

When I started reading this piece, from The Single Tax Review of 1914, I thought it was going to be a retelling of The Savannah, one of many memorable passages in Henry George's book, Progress and Poverty.  But it turned out to be something a little different, and struck me as very topical nearly 100 years later, as we see joblessness and tremendous concentration of wealth in America, this "smartest" of countries, with supposedly expert economists trying to steer us back into something resembling prosperity.  Wages tending to a minimum, and jobs disappearing.  Individuals and large shareholders in companies who claim ownership of our best land and our natural resources growing rich, while the rest of us struggle to sip from the trickle-down we are told will be ours if we consent to this structure.   Those who have read P&P know why the flow is in the other direction.

IT'S MINE—ALL MINE.

(For the Review.)

By BENJAMIN F. LINDAS.

The sun had just slipped behind a few wisps of clouds that hung above the western horizon, as a 'prairie schooner' came to a stop in the fertile bottom lands on the banks of a mighty river of the mid-west. A few trees growing in scattered clusters were all that broke the monotony of the plains that stretched in every direction as far as eye could see. The only vegetation was a high, thick, tangled grass that grew in luxuriant abundance from the rich black soil.

"Guess we had better stop here," said the driver, a harsh-voiced squatty man of middle age, whose shifty gray eyes peered out from under his heavy brows. "Soil looks good—no pestering neighbors," and he tugged at the heavy mustache that hid his tightly pressed lips.

"All right," was the tired response from his wife, who was slightly younger than her husband, with traces of beauty still visible in the clear-cut profile and large, dark, but now lusterless eyes. "But it's dreadfully lonesome, Jim."

The man was busy unhitching the horses and made no response. He was a man of few words; morose, hot-tempered and selfish. He had, by the strictest kind of economy and frugality hoarded together a few hundred dollars, and, ignorant though he was, he had left the little village in which he had been reared in answer to an inner voice that kept prompting him to "Get some land! Get some land!"

America's Wealth Distribution -- 2007 -- Wealth Concentration, Part 2 of 3

America's Wealth Distribution, Part 2: Middle Class: Trends in Net Worth Distribution by Income Quantile.

This is the first of a pair of pages which show trends in how America's household Net Worth is distributed.  The data source is the Survey of Consumer Finances Chartbook 2007.

They follow Part 1, which shows detail on Net Worth distribution in 2007.   Part 3, by Net Worth Quantile, is here.

While the distribution of wealth and the distribution of income are both rather concentrated, they are different distributions.  That is, a young high-earning couple with two jobs on Wall Street may not yet have accumulated much in the way of Net Worth, but their income could place them in the top 5% or 1% of the income distribution.  People with a lot of assets may not need or want to earn a great deal of income in order to live comfortably; even if their assets produce few dividends, they can sell off some each year to meet their needs. Also, assets which appreciate year to year, such as urban land and natural resources produce so-called "capital" gains which the owners do not "recognize" until they sell.  Many of the highest income families in any particular year are people who have cashed in on an asset which has been quietly appreciating for a number of years, not incurring any taxes or notice from the IRS; such gains are taxed at 15%.  (If you are interested in the relationship between income and wealth distributions, you might appreciate some of the graphics contained in Ponds and Streams: Wealth and Income in the United States, 1989 to 2007.) 

This page shows, by quantile of income, how NETWORTH is distributed, and what has happened to this distribution between 1989 and 2007.  Part 3 shows the distribution of NETWORTH according to quantiles of NETWORTH.   As with Parts 1 and 3, the concentration of NETWORTH is likely understated, because the SCF omits the Fortune 400 families from the study.  Their aggregate wealth and income is equal to the aggregate holdings of a large segment of America.

This page was inspired, in part, by my puzzlement about why Tea Party enthusiasts are so incensed about redistribution of income to those below them on the income spectrum.   A comment I read online recently made some sense to me:

"If you are “middle class” and you already feel taxed to the hilt. And someone comes along saying they want “rich” people to pay more taxes, well, it isn’t rocket science for the “rich” people to come along and tell the “middle class” hey! they’re robbing “us” blind!!!!"

The Chartbook, page 43, provides the mean value of net worth, by income quantile, for each of the 7 triennial studies. From that, I've computed the aggregate holdings for each quantile in order to calculate the share of aggregate holdings for each quantile.  My calculations overstate the holdings of the bottom quintile somewhat, because they are based on the mean holdings for those with holdings, and not all households actually have holdings.  But we'll put that aside.  (All are in 2007 dollars.)

Table 1: Mean value of net worth for families with holdings, by income quantile [000's of 2007 dollars)
	Quantile of Income
SCF Year	Bottom Quintile [20%]	Second Quintile [20%]	Middle Quintile [20%]	Fourth Quintile [20%]	Second Decile [10%]	Top Decile [10%]
1989	$ 39.7	$ 105.8	$ 163.1	$ 219.0	$ 358.0	$ 1,579.6
1992	47.6	92.9	146.4	203.8	327.6	1,390.5
1995	60.1	106.9	138.3	218.1	348.1	1,471.6
1998	60.8	122.4	161.0	262.7	415.0	1,971.9
2001	61.8	134.8	190.3	344.3	534.8	2,650.7
2004	79.8	133.5	213.8	375.1	538.0	2,792.0
2007	105.2	135.0	210.4	375.8	609.1	3,315.6
source: SCF Chartbook, page 43 Note: these are the mean holdings for families with holdings

The average NETWORTH among families in the middle income quintile in 2007 was $210,400. That is not the same as the median, which was $88,100.  (That is, half of families in the middle income quintile had NETWORTH higher than $88,100, half had less.  The average is always higher than the median, which means that most of us are below average.  In fact, according to the Chartbook, the median NW in the fourth income quintile was $205,800.)  

Multiplying the average holdings in each quantile by the percentage of households in that quantile, I get this.  Notice that this does not account for the increase in population from one period to another -- but every quantile grew by the same amount.   Keeping in mind that the first four quantiles are all of equal sizes -- and the last two together the same size as the others, the differences are striking:

Table 2: Aggregate Net Worth Dollars by Income Quantile
	Quantile of Income						Total
SCF Year	Bottom Quintile	Second Quintile	Middle Quintile	Fourth Quintile	Second Decile	Top Decile
1989	794	2,116	3,262	4,380	3,580	15,796	29,928
1992	952	1,858	2,928	4,076	3,276	13,905	26,995
1995	1,202	2,138	2,766	4,362	3,481	14,716	28,665
1998	1,216	2,448	3,220	5,254	4,150	19,719	36,007
2001	1,236	2,696	3,806	6,886	5,348	26,507	46,479
2004	1,596	2,670	4,276	7,502	5,380	27,920	49,344
2007	2,104	2,700	4,208	7,516	6,091	33,156	55,775
source: SCF Chartbook, 2007, page 43, and my calculations.  Note that these are calculated from Table 1, multiplying by the percentage of households in that quantile. This does not account for population growth, but does reflect the shares each holds.  It overstates holdings in the bottom income quintile, since not all households have positive net worth, and, as noted elsewhere, understates holdings for the top quantile due to the omission of the Forbes 400 families from the SCF sample.

Next, we calculate the shares of Net Worth held by each income quantile:

Table 3: Shares of Net Worth by Income Quantile
	Quantile of Income						Total
SCF Year	Bottom Quintile	Second Quintile	Middle Quintile	Fourth Quintile	Second Decile	Top Decile
1989	2.7%	7.1%	10.9%	14.6%	12.0%	52.8%	100.0%
1992	3.5%	6.9%	10.8%	15.1%	12.1%	51.5%	100.0%
1995	4.2%	7.5%	9.6%	15.2%	12.1%	51.3%	100.0%
1998	3.4%	6.8%	8.9%	14.6%	11.5%	54.8%	100.0%
2001	2.7%	5.8%	8.2%	14.8%	11.5%	57.0%	100.0%
2004	3.2%	5.4%	8.7%	15.2%	10.9%	56.6%	100.0%
2007	3.8%	4.8%	7.5%	13.5%	10.9%	59.4%	100.0%
point change, 1989 to 2007	+ 1.1 pts	- 3.3 pts	- 3.4 pts	- 1.1 pts	- 1.1 pts	+ 6.6 pts
Source: SCF Chartbook 2007 and my calculations.  See Notes for Table 2.

If you explore Table 3, it becomes evident that since 1989, the top 10% of Income recipients have increased their share of America's Net Worth from 52.8% in 1989 to 59.4% in 2007.  Depending on how you define "Middle Class," here's what you get:

1. If the Middle Class is the middle 60% of the income distribution, the Middle Class has seen its share of the Net Worth drop from 32.6% to 25.9%.  But of the 6.7 percentage points they've lost, 1.1 was picked up by the bottom 20% of the income distribution, and 5.7 points went to the top 20%.  So it seems a bit puzzling that the Tea Party enthusiasts are complaining about "wealth redistribution to the poorest."   It seems misdirected.   (What was it the bank robber said about why he robbed banks?)

Table 4: Shares of Net Worth, by Income Quantile
SCF Year	Income Quantile
	Bottom 20%	Middle 60%	Top 20%
1989	2.7%	32.6%	64.7%
1992	3.5%	32.8%	63.6%
1995	4.2%	32.3%	63.5%
1998	3.4%	30.3%	66.3%
2001	2.7%	28.8%	68.5%
2004	3.2%	29.3%	67.5%
2007	3.8%	25.9%	70.4%
pt chg 1989-2007	+ 1.1 pts	- 6.6 pts	+ 5.7 pts

The Tea Party folks seem to have little curiosity about how wealth that was in the middle class in 1989 has slid into the top 20%.

2. If one defines the Middle Class as the 50% of us between the 40th percentile and the 90th, here's how the same data looks:

Table 5: Shares of Net Worth by Income Quantile
SCF Year	Income Quantile
	Bottom 40%	Next 50%	Top 10%
1989	9.7%	37.5%	52.8%
1992	10.4%	38.1%	51.5%
1995	11.7%	37.0%	51.3%
1998	10.2%	35.1%	54.8%
2001	8.5%	34.5%	57.0%
2004	8.6%	34.8%	56.6%
2007	8.6%	31.9%	59.4%
pt chg 1989-2007	- 1.1 pts	- 5.6 pts	+ 6.6 pts

3. Finally, if one defines the Middle Class as the 30% of us between the 60th and 90th percentiles, here's how the Net Worth distribution looks:

Table 6: Shares of Net Worth by Income Quantile
SCF Year	Income Quantile
	Bottom 60%	Next 30%	Top 10%
1989	20.6%	26.6%	52.8%
1992	21.3%	27.2%	51.5%
1995	21.3%	27.4%	51.3%
1998	19.1%	26.1%	54.8%
2001	16.6%	26.3%	57.0%
2004	17.3%	26.1%	56.6%
2007	16.2%	24.4%	59.4%
pt chg 1989-2007	- 4.2 pts	- 2.2 pts	+ 6.6 pts

Is this progress?  As time goes on, and technological progress continues, and public investment in effective infrastructure continues, and we invest in education and public health, and all sorts of public goods which should elevate us all, the NETWORTH share of the highest income portion of our society grows by leaps and bounds, and the share going to the remainder of us falls. 

By this time, I suspect someone is going to point out that over the course of 18 years, some people who were in the bottom income group, by whatever quantile definition you choose, are likely to have advanced into a higher income group, so what's the problem?   Our low-income 18 year old becomes a 36 year old; our 36 year old a 54 year old -- and our 54 year old a 72 year old. (You can find the age-related income and net worth data in the Chartbook.) But relatively few of us ever make it into the top 10%, where the bulk of the goodies go.

The kinds of assets held by our highest-income people seem to be appreciating faster than those of the rest of us.  (They're also more likely to have spare cash and borrowing power for down payment and mortgages on same, at favorable terms.)  This is consistent with the notion that part of what we're seeing is the appreciation of well-located land -- the kind that sits under Manhattan condos and office buildings and suburban single-family homes.  And it is consistent with the notion that ownership of corporate stock and privately held businesses often includes the ownership of such assets and of nonrenewable natural resources -- oil, water rights, airport landing slots, geosynchronous orbits, electromagnetic spectrum, and a host of other such assets.  All these things collect economic rent from the rest of us.  Few of us understand much about it; even college and graduate-level economics majors don't learn much about it at most colleges and universities.

In Progress and Poverty, Henry George wrote of "an immense wedge . . . being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down."  If you'd like to understand why wealth concentrates, I commend Progress and Poverty to your attention.  And that book provides a simple, logical, just, efficient and economy-invigorating remedy, which can put us well on the road to solving some of our supposedly-intractable social, economic, climate and energy problems.

Moses

A piece today on Huffington Post about Passover and Moses caught my attention.  I learned a few things.  It gives "talking points" about Moses; I've omitted the supporting material from all but one:

1. A quote from Moses appears on the Liberty Bell.  ...

2. The Founding Fathers proposed that Moses appear on the U.S. seal. ...

3. Moses was the national hero for slaves.  ...

4. The Statue of Liberty was modeled on Moses. ...

5. Superman was a modern-day Moses. ... 

6. Cecil B. DeMille turned Moses into a Cold War icon. The 1956 epic The Ten Commandments, which is the fifth highest grossing movie of all time, opened with DeMille appearing onscreen. "The theme of this picture is whether men ought to be ruled by God's law or whether they are to be ruled by the whims of a dictator," he said. "The same battle continues throughout the world today." To drive home his point, DeMille cast mostly Americans as Israelites and Europeans as Egyptians. And in the film's final shot, Charlton Heston adopts the pose of the Statue of Liberty and quotes the line from the third book of Moses -- Leviticus -- inscribed on the Liberty Bell: "Proclaim liberty throughout all the land unto all the inhabitants thereof."

7. Moses is the Patron Saint of Washington. ... 

Cecil B. DeMille's Moses was, at least in part, inspired by his connection via his brother's marriage, to Henry George, the author of Progress and Poverty (1879), and a speech George gave the year before about Moses, and probably made repeatedly over the following years, on lecture tours around the world.  (Cecil B. DeMille was born in 1881, and died in 1959.  His older brother, William, married Henry George's daughter Anna George, a few years after George's death; their daughter was the choreographer Agnes de Mille (1905-1993.)

George's ideas provide a modern way to achieve a stable and just middle class society and economy in which all can prosper -- a modern version of the OT land laws. 

Here's a short excerpt from "Moses":

Trace to its roots the cause that is producing want in the midst of plenty, ignorance in the midst of intelligence, aristocracy in democracy, weakness in strength –- that is giving to our civilisation a one-sided and unstable development –- and you will find it something which this Hebrew statesman three thousand years ago perceived and guarded against. ...

Everywhere in the Mosaic institutions is the land treated as the gift of the Creator to His common creatures, which no one has the right to monopolise. Everywhere it is, not your estate, or your property, not the land which you bought, or the land which you conquered, but "the land which the Lord thy God giveth thee" –- "the land which the Lord lendeth thee".

Read "Moses" and see what you think.

Mason Gaffney: Corporations, Democracy and the US Supreme Court

 Mason Gaffney has written an interesting piece entitled Corporations, Democracy, and the U. S. Supreme Court at http://www.masongaffney.org/essays/Corporations_Democracy_and_the_US_Supreme_Court.pdf about the recent Supreme Court ruling which said that a corporation can contribute unlimited funds for promoting its views for and against candidates.

He begins:

On Jan 21 2010 our High Court shocked Americans by ruling in Citizens United v. Federal Elections Commission that a corporation may contribute unlimited funds advertising its views for and against political candidates of its choice –- in practice, the choice of its CEO or Directors. The ideas behind this are that a corporation is a “legal person,” with all the rights (if not all the duties) of a human being; that as such it has a right of free speech; and that donating money is a form of speech. Already K&L Gates, a top Washington lobbying firm, is advising its clients how to funnel money through lobbying groups or “trade associations.” This culminates a long series of actions and reactions (decisions, legislative acts, and electoral results) that bit by bit have raised the power of corporations in American economic and public life. Herein I will take the fall of the corporate income tax as a simple metric of the power of corporations. Nothing about corporations is that simple, however, so I must also touch on other aspects of power.

Skipping ahead,

This writer does not applaud either sunsetting the tax, or this step. I agree with Joseph Stiglitz that the corporate income tax is mainly a tax on economic rent. That means that a high tax rate does not destroy the tax base. Martin Feldstein, an economist who is as conservative as Stiglitz is liberal, also sees the corporate income tax as a tax on economic rent (JPE 85(2); April 1977, p. 357). It is not the ideal form of such a tax, but it beats any tax on work, or sales of the necessities of the poor, or value-added, or gross sales. Both Vickrey and Stiglitz rate high in the profession and garnered Nobels, so we cannot simply appeal to “authorities.” To prepare our minds, let us review some milestones in the history of corporations, especially in America.

This is not a paper on the theory of tax incidence. Such a paper is needed, but would take a heavy tome, most of it devoted to fine-spun and pretentious theories that appear in academic journals, and which fail to convince because the authors are weak on distinguishing land from capital. My own postulates here, in brief, are

1) that corporations own a large fraction of the wealth in the country;
2) much of that wealth is land;
3) taxes that do fall on capital are in part shifted to land;
4) pure land taxes would be better but are not the subject here; and
5) payroll taxes are worse and must bear most of the burdens that are shifted off corporations.

I'll skip over a lot of interesting and useful historical material -- which I commend to your attention -- and share the final section:

All along, though, an accumulation of small actions was helping corporations at the expense of labor. The Warren Court, 1953-69, did many notable deeds for the common man and woman, but it did not stop the decremental fall of the share of corporate income tax revenues in Federal finance. 1968 was the milestone year when the payroll tax quietly surpassed the corporate tax as the second biggest source of Federal Revenue. Just think: the corporate income tax of 1907 antedated the payroll tax of 1935 by 28 years, and it was another 33 years, 1935-68, before the payroll tax took in more money than the corporate tax did. That was a revolution indeed, but so quiet and gradual that most people never noticed. Nor was that the end of it: by 2008 the corporate tax raised just 11% of Federal revenues, compared with 38% for the payroll tax, nearly 4 times as much. That is a measure of the growing power of corporations in politics.

On top of that, personal income taxes on corporate dividends and capital gains have been singled out for preferentially low rates. In 2003 President Bush and his Congress lowered the tax rate on both dividends and capital gains to 15%, so that a smaller share of the personal income tax now comes from corporate  shareholders. As late as in the Tax Reform Act of 1986, dividends were taxed like other “ordinary” income. So, briefly, were capital gains. President George H. W. Bush then devoted most of his presidency, and sacrificed a second term, to get a token cut in the capital gains rate. It was the thin end of a wedge, leading soon to the present cap of 15%. “Capital gains,” so-called by Congress, derive from many sources, but one of the biggest is sales of corporate stock.

And so things stood until January 21, 2010, when the High Court authorized corporate leaders to contribute unlimited amounts of their shareholders’ cash to political causes. This poses a challenge to our tabloid-and-TV-numbed generation. Will “ordinary” taxpayers rebel, as they did in the American Revolution, Emancipation, the Progressive Age of Reform, and the New Deal; or will corporate power wax unchecked until it replaces democracy altogether? Cyclical theory says we will have another anti-corporate reaction, but history also records tipping points in the decline of nations from which they do not recover for generations, if ever. This one may be a squeaker.

Here is a summary from that brief history of the problems with treating corporations as “legal persons.”

1. Corporations never die, never pay estate taxes, never divide their wealth among succeeding generations. In this they resemble medieval Churches that agglomerated over many years so much land they threatened the state itself -– resulting often in massive confiscations, as by Henry VIII.

2. Besides not dying, corporations merge with or otherwise acquire other corporations, progressing, if unchecked, from competition to cartel to oligopoly to monopoly.

3. A corporation is by nature a combination in restraint of trade -– that is, a union of many individuals with their wealth to act as a unit, dealing with customers, suppliers, and workers. It took Thorstein Veblen, a thinking man, to bring out this fact that should be so obvious. The courts, historically, have borne down on labor unions as illegal combinations while, as a matter of course, treating this combination of lands and capitals as an individual.

4. Corporations enjoy the legal privilege of limited liability.

5. The ownership of corporations is, or may be made, secret. Many stocks are recorded in “street names” -– a favorite being “Cede and Co.” Hugo Chavez is one such owner whose name has been revealed: others might be Al Qaeda, the Nazi Party, the heirs of Mao tse-Tung, La Cosa Nostra, or anyone. No citizenship is required for a corporation to sway American government more than almost any citizen.

6. No person is easily held responsible for corporate acts. The first duty of CEO’s is to the shareholders, so they say, to dodge guilt for any outrage against others. Most shareholders, in turn, have little idea what their CEO’s are doing.

7. The internal governance of most corporations is intensely undemocratic

8. The corporation cannot be jailed, and its officers seldom are, as they have great opportunities to pass the buck

9. The corporation has no spiritual counselor or confessor to prick its conscience.

10. Before January 21 the attitude, as expressed by Justices White and Rehnquist in the 1970s, has been that corporations are “creatures of the law,” not equal to natural persons in their civil rights. Suddenly to reverse this now is to upset many expectations that relied on the previous rule.

Finally, what can we do about the High Court’s marriage to corporate power? I first list what I consider ineffective remedies, and then those that can work, and work quickly.

1. Ineffective remedies

a. Justices may be impeached. This has succeeded only once, to my knowledge, in 1804, when a justice was obviously insane.

b. Within a State a Justice may be recalled, as Rose Bird was. There is no such provision for Federal judges.

c. A President can appoint anti-corporate judges as vacancies occur. This will happen at best over a long time-span, but it needs to happen fast because with their newfound pecuniary “free speech” corporations will soon control both Congress and the Executive even more than they do now.

d. Congress can tighten restrictions on foreign corporations contributing through American subsidiaries. This is better than nothing, but does not affect American-chartered corporations, whoever actually owns them.

e. Congress might ban political advertising by any non-citizen, including any group that includes a non-citizen. This would entail forcing corporations to identify their shareholders. This proposal may entail too many steps to be implemented quickly, if at all. As a layperson I would refer that point to learned counsel.

2. Effective remedies

a. The Executive and the Congress can play hardball by drafting new legislation to curb corporate contributions, and threatening covertly to raise the corporate income tax as a bargaining chip -– a big chip! This calls for a leader who sees the imminent danger, and is willing and able to act firmly and decisively, and communicate credible threats covertly without breaking any rules, a la FDR. Washingtonians are skilled and experienced in this sort of thing.

b. The Executive can introduce legislation modeled on the 1937 Reorganization of Judiciary Act. This act would have given the President power to appoint six new justices. It was a credible threat that worked by turning FDR’s 4-5 minority into a 5-4 majority, in spite of a great outcry against it. It is what we need today. It is radical, yes; but the Court’s ruling is radical, and calls for a remedy equally strong or stronger.

c. Could a simple act of Congress declare that a corporation is not a legal person? Perhaps so, perhaps no, we need learned counsel to tell the odds. However, a straight line is the shortest distance between two points, and this action would bring the issue quickly to a head.

In summary, we have seen that the United States was born in rebellion against corporations. The U. S. Supreme Court soon began restoring their power. When it overreached, strong executives and popular movements set it back: under Andrew Jackson, Abraham Lincoln, Teddy Roosevelt, and FDR. Today it has overreached again; it remains to see if a new movement or leader will arise to set it back again..

 

The only thing I can add to this is to provide the data on the concentration of wealth in America, specifically four items reported in the Survey of Consumer Finances:

• BUS (privately held businesses, including "small business;" 
• STOCKS,
• NMMF (non-money market mutual funds) and
• RETQLIQ (retirement assets such as IRAs and 401(k)s). 

(The latter two categories could include bonds as well as equities.)  I'll also report "all other, net of debt."  (For most of us, that's cars and houses.)  The data is from the 2007 SCF, and somewhat understates the concentration, since the holdings of the Fortune 400 are omitted from both numerator and denominator. Quick and dirty, add 1% to numerator and denominator.

	BUS	STOCKS	NMMF	RETQLIQ	combined	All other, net of DEBT	NET WORTH
percentage of aggregate NETWORTH (row percent)	23.1%	7.1%	6.3%	13.8%	50.3%	49.7%	100.0%
Distribution of Holdings: (column percent; sums to 100.0%)
Top 1% of wealthholders	62.7%	51.9%	46.7%	14.5%	45.9%	21.6%	33.8%
Next 4%	25.5%	30.5%	30.9%	28.0%	27.6%	25.6%	26.6%
Top 5%	88.2%	82.4%	77.6%	42.5%	73.5%	47.2%	60.4%
Next 5%	5.5%	8.0%	10.3%	16.9%	9.6%	12.6%	11.1%
Top 10%	93.7%	90.4%	87.9%	59.4%	83.1%	59.8%	71.5%
Next 40%	6.0%	9.0%	11.6%	36.7%	15.5%	36.6%	26.0%
Bottom 50%	0.4%	0.6%	0.4%	3.8%	1.3%	3.7%	2.5%
source: 2007 Survey of Consumer Finances

So what SHOULD we tax?  Urban land value, and the value of natural resources are a fine start.  That is value which ought to be socialized, treated as our COMMON property, not as the private treasure and asset of rich individuals; of family trusts of people living -- or people dead 10, 20, 30, 50, 100 or more years for the benefit of their heirs or pet causes; of corporations of any kind (no matter how much free speech they are now entitled to); of foreign landholders; of private "equity" funds; of real estate investment trusts; of pension funds (public or private sector); of foreign or domestic churches; of insurance companies; of universities or other "philanthropic" entities; or anyone else. [See, for example, the blog posts below on Stuyvesant Town, on the NYC Roosevelt Hotel, including links to earlier related stories.]

The way to make that real is to place significant taxes on the annual rental value of the bare land, and the value of those natural resources, and other things the classical economists would recognize as "land" even if they never heard a radio or cell phone, saw an airplane, thought of a satellite, or imagined that fresh air or clean water could be scarce.   

Treat that value as the revenue source for our common spending.  Lighten up on taxes on wages, on sales, on buildings, on equipment.

Taxing urban land value will not cause a single acre to move offshore, or a single land speculator to "invest" in another property; rather it will encourage the better use of sites in choice locations, creating jobs and housing and venues for carrying on business where it is most efficient to do so: in the center of town, not at the fringe.

Doing this would reduce the tremendous wealth concentration in America.  The economic value of certain kinds of assets which currently line the pockets of rich individuals as business owners or as holders of corporate stock or as salaries, bonuses and golden parachutes to top management, would be pre-distributed back to the commons, recycled locally or nationally, for public purposes.   Those owners would still have the use of the assets each year, AFTER they had paid society for what they were privatizing that year. 

If you've gotten this far, you might want to read Bob Andelson's fine essay, "Henry George and the Reconstruction of Capitalism, linked from the front page of Wealth and Want, as an "essential document."

A thought about Glenn Beck, churches and social justice

Glenn Beck, a cable TV personality, urged Christians to leave their churches if the words "social justice" were used.  He is quoted as saying,

I'm begging you, your right to religion and freedom to exercise religion and read all of the passages of the Bible as you want to read them and as your church wants to preach them . . . are going to come under the ropes in the next year. If it lasts that long it will be the next year. I beg you, look for the words 'social justice' or 'economic justice' on your church Web site. If you find it, run as fast as you can. Social justice and economic justice, they are code words. Now, am I advising people to leave their church? Yes.

This makes me think about some of what went on in Alabama a few years ago -- the notion that churches should be dispensers of charity, and that they should not be campaigning for social justice because if there were social justice, there would be no need for charity! 

As I read some of the comments on a NYT blog, 

"Lord, when was it that we saw you hungry and gave you food, or thirsty and gave you something to drink? And when was it that we saw you a stranger and welcomed you, or naked and gave you clothing? And when was it that we saw you sick or in prison and visited you?' And the king will answer them, 'Truly I tell you, just as you did it to one of the least of these who are members of my family, you did it to me." (Matthew 25)

I am led to wonder whether people understand the difference between charity and justice.  To me, Matthew 25 merely describes charity.  Helping an individual in difficult circumstances, without seeking to correct the structures which put him into those circumstances and will put the next person in those circumstances.  If he is hungry because he has no job and no skills, feeding him will keep him alive another day, and training him will aid him if a job is available -- but if there is no available land for him to labor on, you've not moved a step toward justice. Welcome, and clothing, and visits are all wonderful -- but they don't change the structure which makes it impossible for some people to provide for their own needs and the needs of their families.

Susan Pace Hamill, the University of Alabama law professor who has made extensive studies of Alabama's tax system and the federal tax system and is now running for the state legislature in Alabama, said of the churches a few years ago -- I'm paraphrasing -- that even if they deserve an "A" for charity, if they earn an "F" in justice, that does not come out to a "C"; it is failure.   If I recall correctly, the Alabama chapter of the Christian Coalition was opposed to tax reform (reducing sales taxes on groceries, raising the state income tax threshold to approximately the poverty line -- no one was even talking about reforming the perversely low property tax) on the basis that churches would no longer have as many objects for their charity if Alabama moved in the direction of economic justice.   They'd be depriving the churches of poor people to serve!

I wonder whether Mr. Beck considers our current society to already be perfectly socially just and economically just, and, if not, what entity(s) he considers should seek to move us in that direction if he specifically excludes the Christian churches from having a concern for these issues.

To me, social justice and economic justice start with treating that which nature -- God, if you prefer -- provides, and that which the community creates -- as our common treasure, and treating that which individuals and organizations create as their private treasure.  Glenn Beck, Dick Armey and Grover Norquist may be very focused on that second portion, but if they fail to get the first half right -- first! -- they will not create a stable -- or just -- economy or society.