I spent last evening working on a piece I hope to post later, and only got to yesterday's NYT "most emailed" this morning, too late to post on the NYT website my comment re: Robert Reich's article titled "Totally Spent" which begins,
WE’RE sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn’t a normal downturn.
and continues later ...
The first way was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 — to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs.
So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.
But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third way of spending beyond their wages. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. With the bursting of the housing bubble, the piggy banks are closing.
The binge seems to be over. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.
Here's what I put together ...
I'm with Mr. Reich, and many of the nearly 200 responders before me, part way. But I think they all are missing something vitally important. As wages rise, so do rents. Landlords with land to rent, be it for housing or for commercial uses, and Sellers with land to sell, be it for housing or commercial uses, can command higher rents as wages rise. So a large share of the gain in wages won't be available to workers for satisfying more of their wants and needs; it will go into the portfolios of landlords and sellers. (The buildings on the landlords' and sellers' properties are depreciating assets -- 1.5% annually; it is the land which increases in value in response to economic activity, technological progress and population growth.)
The implication of this truth is that until and unless we correct the structural situation which allows landlords and sellers to privatize the economic rent, raising wages is going to largely benefit the people who own our best land. We've already seen this as women entered the workplace in large numbers for longer parts of their lives; as men and women worked more hours; as people increased their borrowing from 80% to 90% to 95% to 103% of purchase prices; lengthened the mortgage terms; paid only interest on their mortgages; as buyers increased the share of their wages they spend on housing from 25% to closer to 40%; and buyers took on teaser-rate mortgages just to get into the market, driving up the portfolios of sellers.
How do we fix this? Just as our great-grandparents knew: through moving our tax base from wages and sales to land. Henry George laid it out most eloquently and clearly in Progress & Poverty, but he was not the first to recognize these truths, or the last to acknowledge their importance.
Talk about tweaking individual and corporate income tax brackets is akin to rearranging the deck chairs to hear the music better. If we can't open our minds to think outside the income tax box -- and that doesn't mean using any form of sales tax -- we're not going to improve things for the vast majority of our fellow members of society.
Land, in all its forms from urban and suburban sites, the value of
natural resources, electromagnetic spectrum, water rights, roads, to
airport congestion, etc., is a reliable and logical and just tax
base. If we close our eyes to that truth and to the logical
implications of allowing all that value to reside in private pockets,
we continue to create poverty. How much did Exxon pay in royalties, and to
whom did they pay them? How much in taxes? I'd argue that we're owed
royalties, at the federal level, without regard for what entity has
title to the land or oil rights. That oil value is ours, not individual
property. Jed Clampett is no more entitled to that revenue than the rest of us.
Mr. Reich, will you take a look at these ideas? You might start by searching for "quotable-Nobels" together with "quotable-notables" and exploring the site on which you find those two phrases.
Education is the key ... but education in land-based economics must be a large component, if our other problems are ever going to be solved.
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