Inspired by the same 2/18 Krugman article that my post, below, refers to, a blog asked this question:
When you look at the challenges faced by the low-wage worker you interviewed, what policies would help them and their families move out of poverty?
I'm sure I need to learn about trackbacks and that sort of thing ... there is probably a better way to bring that post into this blog.
You might also look at the theme Fences and Small Bandages from the wealthandwant website.
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lvtfan
said...
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I returned later in the morning to add this comment.Policies and programs are not going to do it. What we need is to revise our system of what we tax and what we don't tax. Hundreds of years ago, a wise economist noted that landlords grow rich in their sleep. Every bit of pork spending, every bit of local public investment in schools, roads, bridges, libraries, fire and ambulance, good hospitals, water, sanitary and storm water management, etc., has the same effect: it increases property values.
(Other forces also work to increase property values: population growth and technological progress. None of these are bad things -- they are all desirable.)
But the effect, as we conduct ourselves now, is to enrich those who own the choice bits of land, at the expense of those who need land. Since none of us come with our own hover packs that allow us to float endlessly a bit above the ground, we must either pay a landlord each month for the use of a bit of "his" land, or save our pennies to buy our "own" bit of land, or spend decades paying off the lender who provides some large fraction of the purchase price to pay off a seller.
But that landlord and that seller didn't create the land value. We all did. So why should we permit, by our traditions and choices of what we tax and what we don't tax much, the landlord and the seller to grow richer in their sleep, while others must toil to pay them?
Meanwhile, many of us are paying 30%, 40%, and far more of our wages to pay for housing. I'm not talking about granite counters; I'm talking about mostly paying for location, not for landlord-provided amenities.
So what's the alternative? The tenant is still going to pay the landlord, yes. But instead of the landlord paying a small tax on his land and a small tax on his building, and a small income tax after accounting for interest and depreciation (and, by the way, most landlords have figured out how to depreciate land, and the same building gets depreciated over and over by a series of landlords, each starting from a higher figure!) and a small "capital" gains tax and some sales taxes, we should be asking the landlord to pay a much larger tax on the land value -- in effect, passing through to the commons the portion of the monthly rent paid by the tenant which reflects the land value of the property. In cities, this is a large percentage; on the fringe, not all that much.
Similarly, by collecting every month from all landholders the economic value of the land, when someone wants to buy a house, all they're buying is the house itself, which is a depreciating asset. That may be a small fraction of the current purchase price, particularly in cities. And by paying monthly to the community for land value, and paying to the mortgage lender only for the loan on the structure itself, one's monthly costs go way down.
That is how we fix poverty. A lot of other good things happen if we embrace this.
1. The owners of choice downtown land will be motivated to put it to better use, which will create jobs both in the construction phase and when the new structures are in place. Jobs will chase people, driving wages upward. Currently, people are chasing scarce jobs, driving wages downward.
2. Sprawl will slow, even reverse, because most businesses want to be downtown, in the center of activity, and by creating venues for them where they want to be, there won't be pressure at the edges. Similarly, housing will be created closer to where people work. Shorter commutes, less time in cars, less energy used, fewer dollars used commuting. That saves money, time, fuel, pollution.
3. The more dense downtown areas will provide the critical mass for effective and efficient public transportation. Also walkable cities, which leads to healthier people.
Let the land owners fend for themselves. The landed gentry of England held the land, and collected the rents from their grateful tenants, who knew their place in the system. The landed gentry of the post-civil war south collected "their" share of their tenants' crops for permitting the former slaves (and whoever else needed a place to live -- poor whites, Native Americans, etc.) to use some land. Generous, weren't they?
None of us created the land. None of us can create another acre, or another downtown building lot. We need to share what already exists, use the incentives which will cause it to be put to its highest and best use (downtown that might be housing or commercial; on the fringe, agriculture or open spaces). We mustn't let some monopolize it, even when they cry "property rights." Land is different from that which man can create. Property rights are legitimate when they relate to what man creates.
This is the sort of policy change it will take to end poverty.
Or shall we keep talking about bandaids? (Keep in mind that we're really good at bandaids, but they haven't worked yet!)
You can read more about these ideas at http://www.wealthandwant.com/, http://www.answersanswers.com/, http://www.henrygeorge.org/.
By the way ... I am very impressed with the Self-Sufficiency Standard as a way to put some real dimensions on the problem of poverty. You'll find a lot of data drawn from the SSS's on my website, http://www.wealthandwant.com/, linked from the front page, right-hand column:
How much does it cost a young family to live at the "all one's basic needs met" level? -- at
http://www.wealthandwant.com/issues/pov/sss/index.htm
How does that level compare to the Federal Poverty Guideline? at http://www.wealthandwant.com/issues/pov/sss/sss_more.htm
How many of us are living below that level? And how many of our children are living below that level? at http://www.wealthandwant.com/issues/pov/income-to-poverty-ratios.htm
What does life cost in America's lowest-cost counties? at http://www.wealthandwant.com/issues/pov/sss/low-cost_counties.htm
What sort of compromises do those with incomes below that level have to make? at http://www.wealthandwant.com/issues/pov/sss/life_below.htm
Last year, the people who did the SSS study for Connecticut also issued a report quantifying how many people (under age 65) are living below the Self-Sufficiency Standard level. I regard that as a step in the right direction. see http://www.cga.ct.gov/PCSW/Publication%20PDFs/2007/WCS%20Full%20Report.pdf
However, as you might guess from my previous post, I'm not optimistic that the programs proposed in the SSS studies are going to solve the problem.
We've got to get to the root of it, which is not a problem with individuals but with our basic economic structure, as I've detailed above. "Fixing" individuals may change which individuals are impoverished, but won't reduce poverty, given our structure. The landed will still be the ones getting richer, and those who need land -- all of us! -- will be the poorer.