LVTFan's Blog

Spreading the Wealth

When we listen to one party complaining that the other's candidates want to "spread the wealth," it behooves us to pay attention to how concentrated wealth is.  In 2004, it looked like this:

• Top  1% of wealthholders:     33.38% of the net worth
• Next 9% of wealthholders:     36.12% of the net worth
• Other 90% of wealthholders: 30.50% of the net worth [source]

I'll venture the guess that most of those who turn out at the campaign rallies and boo when the words "spread the wealth" are said fall into the bottom 90%. We can split out the bottom 50% and the next 40%:

• Bottom 50% of wealthholders: 2.54% of the net worth
• Next  40% of wealthholders:  27.95% of the net worth [source]

We can look at income for the same groups (note that this is different from looking at a ranking of households by income level)

• Top 1% of wealthholders:      13.62% of the income
• Next 9% of wealthholders:     22.56% of the income
• Other 90% of wealthholders: 63.83% of the income

We can split out the bottom 50% and the next 40%:

• Bottom 50% of wealthholders: 23.80% of the income
• Next 40% of wealthholders:     40.03% of the income

The preceding data come from the Federal Reserve Board's triennial Survey of Consumer Finances. That study suggests that the concentration of wealth may actually be understated in their data.

You might look at the line in the tables (line 19) which reports "business equity," which represents privately held companies and what we fondly refer to as "small businesses." (it represents about 20% of aggregate net worth.)

• Bottom 50% of wealthholders: 0.3% of the business equity
• Next 40% of wealthholders:     9.2% of the business equity
• Next 5% of wealthholders:       5.7% of the business equity
• Next 4% of wealthholders:     22.4% of the business equity
• Top 1% of wealthholders:      62.3% of the business equity

The forces which have concentrated that wealth so narrowly are not the benign workings of free market capitalism, and those who turn out to loudly boo on cue the concept of spreading the wealth are not net beneficiaries of our current system. Wages are low, and most of us struggle.

It need not be this way, and I don't think that the party talking about spreading the wealth knows how to do it justly or well, and that the party deriding the idea has serious concern for the interests of the bottom 95% of us.  What wonders me is that so few of us and so few of our talking heads seem to know or care.

A bit of reading and study of Henry George's ideas about what is rightly private property and what is rightly the common property of the community as a whole would do wonders: start with Progress and Poverty or Social Problems.  Or explore wealthandwant.com.  We can have the society we say we are.

See also: Spreading the Wealth: Some kinds of wealth OUGHT to be spread!

When the rules are wrong, should we continue to play by them?

It appears that a lot of retired employees for the Long Island Railroad have managed to garner a windfall for themselves -- disability payments of as much as $250,000 per year each for people well enough to walk a golf course several times a week, at an aggregate cost of over $250 million since 2000.  This comes from the Railroad Retirement Board, and ultimately comes from taxes on railroads and their workers, but also from Social Security, which had to contribute $3.6 billion last year to cover RRB expenses.  A relatively small group of doctors have certified these disability claims, and the RRB only rejects about 2% of applications; versus the 45% which the Social Security Administration rejects. The NYT article suggests it will take Congressional action to change this.

Progress, and Poverty -- how do they relate?

I suspect that many people relate these two words, without quite knowing why.  A google alert on the two words brings me 4 to 6 items a day which mention the two words fairly close together.  In many the context is "We're making progress against poverty."  In others, the context is more like "we're making progress in many areas, but little progress against poverty." 

Putting those two words into the search field at Amazon yields these books:

• The Poverty of Progress: Latin America in the Nineteenth Century by E. Bradford Burns (1983)
• Progress, Poverty and Exclusion: An Economic History of Latin America in the Twentieth Century (Inter-American Development Bank) by Rosemary Thorp (1998)
• Poverty and Progress: Social Mobility in a Nineteenth Century City (Joint Center for Urban Studies) by Stephan Thernstrom (1981)
• Poverty, Progress, and Population by E. A. Wrigley (2004)
• Poverty and Economic Issues (Africa: Progress & Problems) by Tunde Obadina (2006)
• Progress and Poverty: An Economic and Social History of Britain 1700-1850 by Martin Daunton (1995)
• The Other Bostonians: Poverty and Progress in the American Metropolis, 1880-1970 by Harvard University Press (1999)
• Poverty and social progress, by Maurice Parmelee (1926)
• Poverty and Progress (Down to Earth) by Fred Martin and Aubrey Whittle (1990)
• Poverty and Progress in the Caribbean, 1800-1960 (Studies in Economic & Social History) by J.R. Ward (1985)
• Progress, Poverty and Population: Re-reading Condorcet, Godwin and Malthus by John Avery (1997)
• The Time Has Come: To Confront the Tragedy of World Poverty Through Centers of Village Progress by James Mayfield (2006)
• Poverty and Progress in the U.S. South since 1920 (European Contributions to American Studies) by Suzanne W. Jones and Mark Newman (2006)
• Profits, Progress and Poverty by Richard N. Farmer (1985)
• Poverty and progress;: An ecological perspective on economic development by Richard G Wilkinson (1973)
• Poverty Reduction and the World Bank: Progress in Operationalizing the Wdr 2000/2001 by World Bank (2002)
• The Developing Nations Poverty and Progress (Volume 41, Number 1) by Irwin (Editor) Isenberg (1969)
• Poverty and Progress in New Zealand by W. B. Sutch (1969)

All of these books together can not have come close to the sales of Henry George's 1879 book, Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth; the remedy.  By the turn of the century, over 6 million copies had been sold, it had been translated into 30 or so languages, serialized in newspapers in a number of countries. [6 million copies would be a large number today ... think of it in 1885!] Today, there are at least two foundations, created by industrialists of another era (using identical language), whose missions are to share Henry George's ideas, as expressed in Progress & Poverty -- the Robert Schalkenbach Foundation (based in NYC) and the Lincoln Foundation (with offices in Cambridge, MA), founded, respectively, by a printer and an electric utility magnate.  Joseph Fels, of the Fels Naptha soap company (and brother of the endower of the Fels Planetarium at Philadelphia's Franklin Institute) also devoted much of his mature years to promoting these ideas. 

George's Progress & Poverty was the #2 best seller of its decade, second only to the Bible, and the "progress" in its title helped inspire the Progressive movement.  Anyone in English-speaking countries who read at all was likely to be familiar with its ideas, and George was an effective speaker who traveled widely.  In NYC, he ran twice for mayor; the first time, he lost to Abram Hewitt (the Tammany Hall candidate) in 1886, but beat out the 29-year-old Theodore Roosevelt (whose Bull Moose Party platform about 25 years later looked remarkably Georgist; it is said TR learned his George at San Juan Hill, from a hero who died there); the second time, he died a few days before election day in 1897.  His funeral was among the largest ever in NYC.  (Search the NYT's free archives for articles.)

So what sets Henry George's Progress & Poverty apart from the other books which mention those two words in their titles?  Why did he choose that title?  What is the relationship between these two aspects of our society?  Is it a necessary relationship, ordained by immutable natural forces or laws of economics, or is it something created by human structures, and therefore something we can alter?

George saw clearly something that others had seen through a glass darkly.  He laid it out clearly in Progress & Poverty.  Extend your education by reading this book.  It will probably change your mind and your vision forever, and if enough of us understand the workings of the poverty machine, we will be able to retool it, and leave our children a better world, and a country which genuinely lives up to its ideals.

Progress and Poverty.  You might also want to go read the first essay in George's second book, Social Problems.  It is very timely.

I'm not thrilled with our choices in November

I hate the idea of voting for the lesser of two evils because the other candidate scares me more.  I like the rhetoric of one party better than that of the other, but I don't regard either one of the parties or the presidential slates as being good choices. 

I am unable to vote for the libertarian candidate because they pandered to the people who think they should be able to insert themselves into the relationship and decision-making between a woman and her doctor.  They aren't serious about what they claim to stand for.

When I cast my vote, it will because of the sort of Supreme Court nominations I think each is likely to make.   It will be because one candidate seems less likely to fly off the handle than the other.  It will be because I am far more comfortable with one VP nominee than the other, and with the sort of judgment that went into the choice.  It will be because I think one candidate is likely to be consulting people who mean somewhat better for the ordinary American's interests than does the other party, despite both being largely ignorant about how things actually work and how we might intervene to make things more just and more efficient.  It will be because one presidential candidate is a high-stakes gambler, a man who called his wife names he acknowledges are offensive (google "trollope" with his name for more detail), a man with little foresight or depth.  It will be because I prefer a president with a grasp of and respect for constitutional law, particularly after one who abused us with his signing statements.  It will be because one candidate may have some serious health problems which to date he has not considered the business of the voters.  It will be because I care about how the other 95% of the world regards us. It will because I think one slate is more likely to be reality-based than the other, even if neither of them have really good lenses through which to understand reality.

Can I suggest lenses that will clarify their understanding of reality?

Absolutely.  Start with some of Henry George's speeches ... The Crime of Poverty, Thou Shalt Not Steal and Thy Kingdom Come.   Move next to Bob Andelson's essay, "Henry George and the Reconstruction of Capitalism."  Then read Progress and Poverty and Social Problems, a collection of essays.

Am I sufficiently indifferent between the two major party candidates that I will write in the sort of candidate I want?  No.  For me there is enough difference that I must vote for one of them, and continue working to promote my best understanding of how we can transform America into the country we say it is and is meant to be.    

Democracy is not enough to produce widely-shared prosperity.  And our current form of capitalism, which might reasonably be termed land monopoly capitalism, is a poverty machine, a wealth concentration machine -- but a machine which can be very easily transformed into a machine to produce broadly shared prosperity.  All we need is an understanding of the mechanics of that machine, and we'll be on our way to retooling it.  We need to understand which sorts of wealth ought to be socialized, and which ought to be privatized, and then to act on that understanding.

Bob Herbert: A Fool’s Paradise

A Fool’s Paradise - NYTimes.com.

The article describes the fact that wages have stagnated for most of us, and that a series of events, including the entrance of wives and mothers into the workplace, and the increasing tolerance for debt, have been what has kept the bottom three quarters of the income spectrum afloat.  It ends,

The economy won’t be saved by bailing out Wall Street and waiting for that day that never comes when the benefits trickle down to ordinary Americans. It won’t be saved until we get serious about putting vast numbers of Americans back to work in jobs that are reasonably secure and pay a sustaining wage.

And that won’t begin to happen until we roll up our sleeves and begin the immensely hard and expensive work of rebuilding a nation that unconscionably was allowed to slip into a precipitous state of decline. We’ll end up spending trillions for the wars in Iraq and Afghanistan and another trillion, at least, to clean up after the madmen on Wall Street.

Now we need to find the money and the will to put Americans to work rebuilding the nation’s deteriorating infrastructure, revitalizing its public school system, creating a new dawn of energy self-sufficiency and rethinking our approach to an economy that remains tilted wildly in favor of the rich.

So how do we do that?   Herbert's answer is "That's what the presidential campaign should be about."

But I'll submit that neither of the major party candidates, and, likely, none of the third party candidates, have the answer.   That isn't to say there isn't an answer.  We just haven't heard anything about it yet from any of these candidates.

I think the answer lies in the observations of Henry George, and that the Remedy he laid out in his landmark book, Progress and Poverty (1879).  The subtitle to that book, An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy," seems pretty timely.

Spreading the Wealth: Some kinds of wealth OUGHT to be spread!

One candidate speaks of spreading the wealth.  The other derides the notion as socialism.  But I suspect that neither of them have read, or thought deeply, or discussed in any context what sorts of wealth OUGHT to be spread around, and what sorts OUGHT NOT to be spread?

Not all wealth is the same.  We can divide it first into that which is created by individual or corporate human effort and that which is provided by nature or by the workings of the community as a whole. The former can rightly be privatized.  The latter must not be.

NYS leasing out its assets to private sector?

A recent AP article says that New York state's Governor Paterson is considering leasing some state assets to private contractors to "trim costs and provide long-term, steady revenue."

Under consideration for leasing could be everything from state highways and bridges to the lottery, golf courses, parks and beaches.

Let's  think about the economics of the situation for those who bid on such projects, assuming there are multiple serious bidders.  They are willing to give some up front concessions, because they believe that things will turn their way within a few years.  By that time, today's governor and legislator will have moved onto other pursuits, and the people of NYS will be receiving a small fraction of what they should be getting for scarce rights of way (highways, bridges, beaches, golf courses, parks) or monopolistic privileges (lottery).  Yes, the current governor and current legislature will have solved their current problems, but they will have effectively turned parts of the commons and special privileges over to special interests, likely on long-term leases that effectively turn over to private entities an increasing amount of economic rent.

Likely the folks negotiating such deals on our behalf don't even know what economic rent is.

It would be bad enough if these things were being turned over to America's corporations and entrepreneurs for privatization into their already significant stores of wealth.  But the article goes on to mention, quite casually, that it is an Australian-Spanish partnership which paid $3.8 billion to lease the Indiana Toll Road, and $1.83 billion to lease the 8-mile Chicago Skyway, and an Australian company that bought the 99 year lease on a parkway in Virginia, and a Spanish-American partnership which is building and running for 50 years a toll road from Austin to Seguin.

Guess what America's investment banks were up to?  (I wonder whether this is still on their list.)

Nationally, Wall Street investment houses have courted more than a dozen states to lease state lotteries to private investors. The Illinois House last month approved a plan to raise $10 billion for building roads and schools by privatizing its state-run lottery for half a century, with the Senate scheduled to vote on the measure this fall.

And while this article doesn't address it, some of America's ports are also privately owned or leased long term, by foreign entities.  See also: wealth transfer overseas!

Not Everyone Should Own a Home - WSJ.com

Not Everyone Should Own a Home

It begins,

Maybe only a friendly foreigner could say this. But America needs to realize that not everyone can own a home. The American Dream of home ownership for all is a fraud. Politicians who pimped this dream created an unsustainable mortgage industry whose collapse is only surprising because it didn't happen earlier. America's mortgage industry will not recover, nor deserve to recover, unless it is prepared to challenge this politically unpalatable reality.

I agree.  Not everyone can or should own a home.  For all sorts of reasons.  But that doesn't mean that those who don't own homes aren't entitled to their per capita share of America's growth, or that one's share of America's growth should go disproportionately to those who own our choices sites -- be they residential or commercial, one home or 10 properties or 50 properties.

We need to examine this with a megapixel lens.  Most of us have not acquired the necessary lens yet -- even many college-educated and even PhD economists.

We ought to have affordable housing for all, but that isn't the same thing as homeownership, as recent events have clearly shown.

Pew study: Inside the Middle Class: Bad Times Hit the Good Life

MC-Middle-class-report.pdf (application/pdf Object).

I came across a link to this study, published in April, 2008.  It focuses on the middle class in America, and contains a number of interesting factoids.  But the reason I'm posting about it is that it seems to me that it ignores perhaps the most important reality -- one which should have underlaid the design of the questionnaire and the selection of additional data sources.

The study defines middle class in two ways.  First, it accepts respondents' own assessment of which class they belong to.  Second, it sorts people into three groups as a function of family income: those whose income is below 75% of the national median, those whose income is between 75% and 150% of the median, and those whose income is over 150% of the median.

While that 75% to 150% definition might be meaningful at the local level, it is ridiculous at the national level.  Local median incomes vary widely, and while those who are at 75% to 150% of the local median are probably middle class there, a family at 100% of the median for, say, Birmingham, would be in a very different situation from the person who is at that same level of income, in dollars, in New York City or its metropolitan area.  Omitting local realities from the analysis doesn't work!

Henry George was right ...

That's the headline on a flyer put out by the Henry George School of Chicago.  It shows a graph with a dropping trend line and goes on to say,

This financial meltdown, like the previous ones, could have been avoided by intelligent public policy.  How can we recover now?  How can we prevent the next one?

Henry George School of Chicago
Free programs on topics of current interest
Cheap classes on economic fundamentals.
www.hgchicago.org/go          312-362-9302

And not only do they have classes, they also have -- new this week -- the 2006 modern-language abridgment of Henry George's landmark book, Progress & Poverty, in MP3 format, read by Bob Drake, who edited it.  You can download it to your computer or your MP3 player or ipod, and listen as you commute or exercise.  Download at http://www.hgchicago.org/audio/.   Read the book online at progressandpoverty.org or henrygeorge.org.  Order it in paperback from schalkenbach.org or amazon.com.  (Check out the reviews there and here.)

We've made a secular religion of homeownership

I heard this phrase from a guest on Diane Rehm's NPR program today.  And I think it is essentially a correct statement, and reflects our lack of understanding of the underlying dynamics.

We see that homeowners fare better than renters, and think that the answer to wealth distribution might be to make more renters into homeowners as a way to help them fare better.

But as a society, we could do a lot better if we all -- owners and tenants alike -- shared in the appreciation of land value, which currently accrues only to owners.  If you've never thought about it before, this will sound very odd to you.  But consider that
(1) houses, like cars and machinery, do not appreciate.  They depreciate.
(2) land appreciates, for reasons which have nothing to do with the individual landholder.  It appreciates because of public spending on infrastructure and services (schools, libraries, roads, highways, bridges, public health, emergency response at both the individual and community level, police, courts, jails, prisons, social workers, food stamps,  It appreciates because of natural amenities like great views.  It appreciates because of the presence of a healthy local and/or national economy.  It appreciates because of increases in population, whether from increased fertility, decreased mortality because of better health care or fewer accidents or disabilities, immigration or migration. It appreciates because of advances in technology -- faster trains, air conditioning, elevators, earthmoving equipment advances, subways, bridge design.

Why on earth should landholders -- residential or, far more significantly, commercial -- be the beneficiaries of this appreciation?  Why shouldn't we treat this value as our common treasure, since we're all equally responsible for it?  Shouldn't we use this as our natural revenue base, to benefit all of us -- those who consider ourselves owners, those who are residential tenants, and those whose work is on land owned by others? 

The way we do it now, tenants get nothing (and get to pay for some of that public spending, which raises next year's rent to their landlord), residential owners do pretty well, and commercial property owners, who own our best-served-by-valuable-infrastructure downtown sites (like that block in Manhattan) make out magnificently.  That "magnificent" doesn't come out of thin air. It comes from the labor of all of us, often at wages well below what they should be.

Another benefit of civilization and government

A recent Boston Globe article about a small town in Alaska (also described elsewhere as the state's 4th or 6th largest city, depending on whether one accepted a population figure of something like 6,000 or another estimate of 8,000) mentioned that as recently as the past decade, it had no building codes, and that its mayor seemed to be quite proud of that during her tenure. 

It seems to me that building codes and their enforcement by inspectors during the construction process are one of the very worthwhile protections that increasing population density and civilization brings us.  If I am thinking about buying an improved property, I want assurance that it was properly built, that it was built to reasonable standards at the time.  I want it to be built to withstand earthquakes, if those are a known issue in the area, and hurricanes, if those are a real possibility locally.  I don't want to have to research the reputation and finances of the builder at the time he built the building, or take it on faith that all was done properly. 

DIvision of labor is a fine thing, and it seems worthwhile to me to have such services be part of what one pays for through user fees and local taxes on land value.

Rich in Natural Resources

But what if our natural resources are in private hands?  Are we rich in natural resources if the Jed Clampetts own the land under which our natural resources reside?

Or are we rich in privileged people, whose trickling down the rest of us must be content with?

A significant share of Alaska's oil revenue flows to the state and to the Alaska Permanent Fund because the oil sits under state-owned land.  But in the lower 48, our oil is on privately owned property, or under corporate property, and the revenues flow not to the American people, or to the people of one of our states, but to private portfolios.

Is this consistent with the notion that we hold it to be self-evident that all men are created equal?   Discuss.

Pulitzer Prize Winner Stresses Ethical Taxation

Pulitzer Prize Winner Stresses Ethical Taxation. Pulitzer Prize Winner Stresses Ethical Taxation September 29th, 2008 · Events · Posted by Behnaz Abolmaali

The fundamental starting point for democratic government began with taxation, said David Cay Johnston, a Pulitzer Prize-winning author and former New York Times investigative journalist, during a speech to McCombs accounting students Sept. 24.

Johnston, who came to UT as part of the Lyceum Speaker Series, told students that the ideas about taxation and society that have prevailed since Ronald Reagan’s time favor a system in which money is systematically funneled from the poor to benefit the rich.

“People who think that taxes are a cost will do virtually anything to eliminate that cost,” Johnson said. “Taxes are not a cost. Taxes are a moral obligation.”

The ancient Athenians, he said, developed democracy by instilling a guiding moral principle in tax laws: that the greater the wealth one has built up, the greater their moral obligation to helping society continue.

As readers of this blog know, I am a great admirer of David Cay Johnston.  I generally think he is on the right track, and/but (shifting metaphors and transportation systems) think he has some blinders on.

In the quote in the preceding paragraph, I think he is bringing up a vitally important matter, but he hasn't followed it to its logical root, and is thereby missing perhaps the most vital aspect of the subject.