LVTFan's Blog

Marjorie Kinnan Rawlings, Cross Creek

The final few pages of Marjorie Kinnan Rawlings' 1942 book Cross Creek, ring with the thought of Thomas Jefferson and Henry George:

I had a letter from a friend at this time, saying "I am a firm believer in property rights."

The statement disturbed me.  What is "property" and who are the legitimate owners?  I looked out from my veranda, across the acres of grove from which I had only recently been able to remove the mortgage.  The land was legally mine, and short of long tax delinquency, nothing and nobody could take it from me.  Yet if I did not take care of the land lovingly, did not nourish and cultivate it, it would revert to the jungle.  Was it mine to abuse or to neglect? I did not think so.

I thought of countless generations that had "owned" land.  Of what did that ownership consist? I thought of the great earth, whirling in space.  It was here ahead of men and could conceivably be here after them.  How should one man say that he "owned" any piece of parcel of it? If he worked with it, labored to bring it to fruition, it seemed to me that at most he held it in fief.  The individual man is transitory, but the pulse of life and of growth goes on after he is gone, buried under a wreath of magnolia leaves.  No man should have proprietary rights over land who does not use that land wisely and lovingly.  Steinbeck raised the same question in his Grapes of Wrath.  Men who had cultivated their land for generations were dispossessed because banks and industrialists believed they could make a greater profit by turning over the soil to mass, mechanized production.  But what will happen to that land when the industrialists themselves are gone?  The earth will survive bankers and any system of government, capitalistic, fascist or bolshevist.  The earth will even survive anarchy.

Bankrupt in California

Has no one in California figured out that when the calf is deprived of mother's milk, starvation is inevitable?

It has taken 34 years, but it is coming about.

Feeding calves grain, or seaweed, or sunflower seeds isn't as smart as letting it consume its natural food.

Taxing wages, sales and buildings isn't as smart as collecting the lion's share -- calf's share, if you will -- of the land rent for public purposes.

Proposition 13 was designed to make sure that the cows' milk was kept for the Irvines, the big landowners, the commercial property owners, and the longtime homeowners, while providing a diminishing fifth of it to the calf and supplementing with grain, seaweed and sunflower seeds.

The calf's digestive system has blown up because it was deprived of its proper food, and "nourished" with stolen fake food.

 

A Carbon Tax, Sensible for All - NYTimes.com

A Carbon Tax, Sensible for All - NYTimes.com.

ON Sunday, the best climate policy in the world got even better: British Columbia’s carbon tax — a tax on the carbon content of all fossil fuels burned in the province — increased from $25 to $30 per metric ton of carbon dioxide, making it more expensive to pollute.

This was good news not only for the environment but for nearly everyone who pays taxes in British Columbia, because the carbon tax is used to reduce taxes for individuals and businesses. Thanks to this tax swap, British Columbia has lowered its corporate income tax rate to 10 percent from 12 percent, a rate that is among the lowest in the Group of 8 wealthy nations. Personal income taxes for people earning less than $119,000 per year are now the lowest in Canada, and there are targeted rebates for low-income and rural households.

The only bad news is that this is the last increase scheduled in British Columbia. In our view, the reason is simple: the province is waiting for the rest of North America to catch up so that its tax system will not become unbalanced or put energy-intensive industries at a competitive disadvantage.

Over dinner tonight, Milton Friedman's name came up, and I commented that in about 1978 and again in 2006, a few weeks before his death, Milton Friedman called land value taxation the "least bad" tax, but never lifted a finger in the intervening years to help promote it.

The carbon tax is another good, and wise, and just, tax. 

How many economists will put their shoulder to getting it enacted? 

How many will simply hang out in their ivory towers?

Let’s start with the economics. Substituting a carbon tax for some of our current taxes — on payroll, on investment, on businesses and on workers — is a no-brainer. Why tax good things when you can tax bad things, like emissions? The idea has support from economists across the political spectrum, from Arthur B. Laffer and N. Gregory Mankiw on the right to Peter Orszag and Joseph E. Stiglitz on the left. That’s because economists know that a carbon tax swap can reduce the economic drag created by our current tax system and increase long-run growth by nudging the economy away from consumption and borrowing and toward saving and investment.

...

What would a British Columbia-style carbon tax look like in the United States? According to our calculations, a British Columbia-style $30 carbon tax would generate about $145 billion a year in the United States. That could be used to reduce individual and corporate income taxes by 10 percent, and afterward there would still be $35 billion left over.

Why on earth should the privilege to pollute OUR air be be given away for free, or for less than the social costs it imposes on us?  Who benefits from such a system?

A carbon tax makes sense whether you are a Republican or a Democrat, a climate change skeptic or a believer, a conservative or a conservationist (or both). We can move past the partisan fireworks over global warming by turning British Columbia’s carbon tax into a made-in-America solution.

The Rent of Land, and Government Expense

"The rent of land and government expenses are both caused by population. Let one pay the other."

--Henry Chase, M. D.

The Earth-for-All Calendar: June 13 -- Paine and Marmontel

Landed monopoly has dispossessed more than half the inhabitants of every nation of their natural inheritance.

— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 331.

In the country the more rich people there are, the less wealth there is.

— MARMONTEL, Address in Favor of the Peasants of the North (1757), Oeuvres, Vol. X., p. 70.

The Earth-for-All Calendar: April 29 -- Newman

Here is the fundamental error, the crude and monstrous assumption, that the land which God has given to our nation, is or can be the private property of anyone. It is a usurpation exactly similar to that of slavery.

— PROF. F. W. NEWMAN, Lectures on Political Economy (1851), Lecture VI., p. 533.

 

The Earth-for-All Calendar: April 1: Queen Elizabeth's Prayerbook

Thou, O Lord, providest enough for all men with Thy most liberal and bountiful hand, but whereas Thy gifts are, in respect of Thy goodness and free favour, made common to all men, we (through our naughtiness, niggardship and distrust), do make them private and peculiar. Correct Thou the thing which our inequity hath put out of order, and let Thy goodness supply that which our niggardliness hath plucked away.

— A Prayer for Them That Be in Poverty, from Queen Elizabeth's Private Prayer Book (1578).

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?

Facts & other stubborn things

Facts & other stubborn things: Don't you dare tell me economics can't solve the vexing problems faced by human society.

Facts & other stubborn things --  the blog of Daniel Kuehn

"Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence." - John Adams

"When the facts change I change my mind. What do you do, sir?
- John Maynard Keynes

I thought the two quotes quite wonderful, and spent some time reading the blog itself ... went back a few pages, and found this post with a link to a two-page journal article, which I commend to your attention. [Chickens, Eggs, Causality, or Which Came First?]

Back to the two quotes.  When Americans go to elect a President next November, one of the key considerations should be how the Supreme Court justices each candidate would offer to our senators for confirmation would respond to the latter quote.  I submit that our current group of "originalists" should not be expanded -- and that this issue transcends most or all of the other issues at hand, if our primary concern is the sort of society we leave for our grandchildren.

I commend to your attention Henry George's book of essays, "Social Problems," which speaks, among other things, to the changes which had taken place in the first 100 years of this country's history, and might lead one to re-examine closely-held assumptions about the eternal quality of the notions and accords of the Founding Fathers.

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.

Jefferson's Principles

JEFFERSON'S PRINCIPLES.

Reprinted in The San Jose Letter, May 2, 1896

Thomas Jefferson, founder of the Democratic party in America, was born in Virginia, April 2d, 1743. In 1769 he entered politics, and at once took rank in the progressive party destined soon to dominate American aflairs. At the first convention in Virginia, held independently of the British authorities, he was marked as a bold, radical, and a fearless tribune of the people.

Jefferson was one of the foremost leaders of the agitation against British taxation without representation, writing in 1774 an aggressive article entitled, "A Summary View of the Rights of America." This was so widely read, and so fired with the revolutionary spirit against England, that, as Jefferson said, "he had the honor of having his name inserted in a long list of prescriptions, enrolled in a bill of attainder, commenced in one of the two Houses of the English Parliament, but suppressed in embryo by the hasty course of events." This pamphlet was the forerunner of Jefferson's greatest achievement, the Declaration of Independence, which he wrote while a member of the American Congress.

Jeffersonians of today have read with amused interest of an incident illustrating the stupid conservatism which existed a century ago as well as now. A lady of Tory proclivities who lived in Philadelphia on Fifth street, opposite the State House, wrote in her diary under date of July 8, 1776: "A Declaration of Independence was read today in the State House yard, very few respectable people were present."

In 1779 Jefferson became Governor of his State, and shortly afterwards was appointed embassador to France. In 1790 he became Secretary of State for the United States. In 1796 he was a candidate for the Presidency, but was defeated, acting then as Vice President. In 1801 he was elected to the Presidency by a large majority. He died July 4, 1826.

One of his biographers speaks of him as "frank, earnest, cordial and sympathetic in his manner, full of confidence in men, and sanguine in his views of life, eschewing all pomp and ceremony."

The keynote of his principles was liberty. He asked that the inscription on his tombstone should be: "Here lies buried Thomas Jefferson, author of the Declaration of American Independence; of the Statute of Virginia for Religious Freedom; and Father of the University of Virginia."

In other words, he devoted his life to civil liberty, religious liberty, and education. Several times he attempted to pass laws emancipating the slaves. But such was the state of feeling against that measure at that time that it is but one of the many illustrations of Jefferson's grand courage in defense of what he thought right. As he said, "he never feared to follow truth and reason to whatever results they led, bearding every authority which stood in their way."

Jefferson's popularity with and influence over the people lay in the fact that he believed in them, trusted and respected them. Speaking of Gen. Washington he says: "The point on which he and I differed was that I had more confidence than he had in the natural integrity and discretion of the people."

Jefferson had no confidence in laws that were not based on the greatest freedom of the individual, in harmony with the true self-government of all. He was so fearful of tyranny of government, so zealous in maintaining the liberties of the people, that he was continually combating any increase of governmental functions, though there were moments due to the peculiar conditions of the times, when he had to ignore this idea.

"The basis of our government," said Jefferson, "being the opinion of the people, the very first object should be to keep that right."

Writing to James Madison on the moral limitations of a nation's right to contract debt, and realizing that all the wealth to pay that, all national debts, must come from the earth, Jefferson said:

"I set out on this ground, which I suppose to be self-evident, that the earth belongs in usufruct to the living; that the dead have neither powers nor rights over it. The portion occupied by any individual ceases to be his when he himself ceases to be, and reverts to the society. If the society had formed no rules for the appropriation of its lands in severality, it will be taken by the first occupants. These will generally be the wife and children of the decedent. . . . Then no man can by natural right oblige the lands he occupied, or the persons who succeed him in that occupation, to the payment of debts contracted by him. For, if he could, he might during his own life eat up the usufruct of the lands for several generations to come, and then the lands would belong to the dead, and not to the living, which would be the reverse of our principle.

"On similar ground it may be proved that no society can be made a perpetual constitution, or even a perpetual law. The earth belongs always to the living generation. They may manage it then, and what proceeds from it, as they please, during their usufruct. They are masters, too, of their own persons, and consequently may govern them as they please. Persons and property make the sum of the objects of government. . . .

"This principle, that the earth belongs to the living and not to the dead, is of very extensive application and consequences in every country. It enters into the resolutions of the questions whether the nation may change the descent of lands holden entail. Whether they may change the appropriation of lands given anciently to the church, to hospitals, colleges, orders of chivalry, and otherwise in perpetuity. Whether they may abolish the charges and privileges attached on lands, including the whole catalogue ecclesiastical and feudal. It goes to hereditary offices, authorities and jurisdictions; to hereditary orders, distinctions and appellations; to perpetual monopolies in commerce, the arts or science; with a long train of etceteras; and it renders the question of reimbursement a question of generosity and not of right. . . . . The present holders, even where they or their ancestors have purchased, are in the case of bona fide purchasers of what the seller had no right to convey."

Jefferson not only recognized the importance of the land question as effecting the welfare of the people, but his prophetic mind sounded this note of warning. "The people will remain virtuous so long as agriculture is our principal object, which will be the case while there remain vacant lands in America. When we get piled on one another in large cities, as in Europe, we shall go to eating one another as they do there."

—Justice, (Wilmington, Del.)

Charity or Justice: How We Treat the Poor

THE SOLID TRUTH OF IT.

And what is this lowest man who holds the fate of the world in his hands; whom we must lift or perish? He is landless, workless, poverty stricken, degraded, drunken, dishonest. In a word overflowing with plenty, he lacks everything. In a world of brightness, he and his cower in a cellar, or burrow in a sun-abandoned court. With abundance of pure air, they breathe only the foul.

Let us go to this man, whom we have thus painted in somberest hues; loveless, imbruted, dirty, lazy. What shall we do with him?

Let me rehearse some of the favorite processes of the philanthropic tread-mill so amiably worked by the well-meaning, though willfully blind, in their efforts to "raise the fallen":

• Preaching Jesus to his soul.
• Giving soap and water to his filth.
• Compelling him, willy-nilly, to work.
• Exhorting him to abstinence.
• Giving his children a taste of heaven on earth, with a treat of fresh air (sending them back again to hell of foul air).
• Building airy tenements for his occupation.
• Providing for his immediate wants in food, fuel, clothing and physic.

Although these do not exhaust the enumeration, they are typical and must suffice. But they are all wrong wrong, wrong.

What! Wrong to preach Jesus to the fallen? Yes, wrong to preach Jesus to them, until we practice Jesus ourselves.

What a mockery to preach Jesus to the fallen man, with the proceeds of his stolen rights in our pockets, in the suit of clothes we wear, and in the meal we enjoyed before we went forth to meet him. The first lesson in religion we can give him is an object lesson in the restoration of his lost inheritance in the earth. The first sermon he hears us preach should be one exhorting ourselves to repentance, confession, and restitution. Having obeyed and thus done the first duty in the premises, it remains for us to aid our fallen and defrauded brother in recovering the ground from which we have thrust him.

And this fallen man is not hurt harmlessly. He is the fly in the ointment of our wealth. He is the barrier to the realization of our social dreams. To secure ourselves we must secure him. The oneness of industry in its best conception is impossible until we have made this our brother one with ourselves. In some sad respects we trace evidences of our relationship. Is he sinful? So are we. Has he fallen? So have we. He was robbed and fell. We robbed and fell. Clearly our first duty is to "restore the pledge, given again that we have robbed." We can restore; he cannot recover; he is helpless; only we can help.

Until the lowest man and his rights are practically dealt with, and his opportunities to rise assured, we shall suffer; depressions, crashes, anxiety, overcompetition, aggravated covetousness, will mar all our industry.

We produce as individuals; we suffer as an organism. No man liveth to himself. The need of one is the calamity of all.

We have taken our brother's inheritance — the right to the use of the earth — and we make merchandise out of it. Let us agree to pay into the public treasury the whole annual value of the land we use in city or county, only retaining the proceeds of our own industry. Having agreed to and carried out this act of simple justice, no one will hold, can hold, land for profit. He must use or abandon it. The abandoned estates will then be available for our brother now landless, hopeless, degraded. Then, and only then, can we preach Jesus to him.

We are many members in one body. Which of us can be hurt and not bring hurt on the rest? In this sense, in the sense of sharing in suffering, the oneness of industry is perfect.

—James T. Barnard, in Hamilton Templar.

reprinted in The San Jose Letter, June 27, 1896

Things to Tax

Paul Krugman's column in the NYT Sunday was entitled "Things to Tax," and I thought it was a bit broad-brush. 

Krugman wrote,

"Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions."  

I don't disagree with either of those as a starting point, but neither goes to the root of the problem, which I believe to be the sorts of privileges we have given out, or somebody's ancestors put in place and we've not even thought about questioning.  They are so familiar to us that we don't question them any more than we think about breathing.  So (switching metaphors) we find ourselves barking loudly up the wrong tree -- while the critters in the other trees are smiling broadly!

The best answers I know to which tree we ought to be barking up come from the writings of Henry George.  Several speeches were what I was first inspired by:

• Thou Shalt Not Steal!
• The Crime of Poverty
• Thy Kingdom Come!
• Moses

Whether or not your own orientation is theological, I think you might appreciate these. 

We ought not to be taxing indiscriminately.  What we tax matters greatly.  Some provide Natural Public Revenue -- and we ought to socialize that revenue -- and other possible objects of taxation ought not to be taxed at all -- privatize them!

Here's the comment I posted to Krugman's column:

Which rich should we tax?

• Should we tax the ones who have bought or inherited or otherwise acquired our very choicest land -- that in our biggest cities, well-served by taxpayer-provided infrastructure and services?
• Should we tax the ones who, in effect, own our most valuable natural resources, or have access to resources we send our military to protect on our behalf?
• Should we tax those who benefit from monopolies of various kinds, such as owning our water companies, our electric utilities, our cable-tv companies, or monopolies of their own creation?
• Should we tax those who benefit from privileges of various kinds, such as the possession of our airwaves, landing/takeoff rights at busy constrained airports (think LGA at rush hour)?
• Should we tax those who benefit by taking some fraction of every financial transaction, even if that transaction doesn't create additional value for the economy as a whole?
• Should we tax those who benefit from the activity or inactivity of the FIRE sector, which Joe Stigitz says is creaming 40% of the profits made by the productive sectors of the economy?
• Or should we just tax all the high-income people, without going to the root of the privileges which produce undeserved wealth for some at the expense of the rest of us.

The answers to these questions matter.

Go to the root. Understand what is privilege, and what is an actual contribution to the economy. Understand what is someone's free lunch, paid for by the labor of others. Understand who reaps what they haven't sown. Correct these things.

An old idea. Look up Henry George's writings from the late 19th century, which kicked off the Progressive movement and still inspire many of us.

Short term, maybe, changing the income tax brackets is appropriate. But it doesn't get at the root of the problem.

Be radical. Go to the root.

For more information, see http://lvtfan.typepad.com/ or http://www.wealthandwant.com/, or look up Henry George's ideas.

As an afterthought, I'll add that you might want to check out Mason Gaffney's website, at http://www.masongaffney.org/; Fred Foldvary's writings, including "The Ultimate Tax Reform," and Walt Rybeck's book, "Re-Solving the Economic Puzzle."

What's an intact tire and your car's alignment worth to you, per year?

How much is it worth to you to have the potholes and cracks in the roads in your town promptly filled in?  Probably roughly what it costs you to have each of your cars fixed a couple of times a year. 

So is it better for the local economy to (1) keep the tire retailers and alignment shops in business; or (2) to pay city employees or contractors to maintain the roads in a condition that minimizes damage to cars and tires?

Fans of small government might opt for the first choice.  Fans of individuals having more money to spend on discretionary purchases or to invest toward their own futures might opt for the second one.

Some things ought to be done by the community, and financed by the community.  

So how should we pay for this sort of public works?

• Should we impose sales taxes on goods sold within the town providing services?
• Should we impose a wage tax on workers within the town providing services?
• Should we tax the buildings within the town?
• Should we throw an extra tax on tobacco, alcohol, cell phone use, cable TV subscriptions, electricity use in the town?
• Should we tax all the cars and trucks garaged within the city limits?
• Should we tax the gasoline and diesel sold within the city limits?
• Or should we finance this by taxing the land value within the town limits?

If you're new to this concept, all these may make equal sense to you. (Indeed, some people argue for "balance" in taxation, or for spreading taxes across many tax bases in order to "keep rates low."  But I think there is one option that is far better than the others. 

Who benefits when we make it less expensive to live within a particular community than it would otherwise be, as we do by improving road maintenance?  Isn't it ultimately those who own land within the city limits -- the landlords (residential and commercial), the homeowners, the business community -- who benefit, both as individuals and as property owners, when people are more prone to drive in their community than in one which does not maintain its roads to the same standards?  Even those who don't own cars benefit.

Some would say that this fails to collect from the tenants -- residential tenants, commercial tenants -- who also benefit, but I'd have to disagree with that argument.  Their landlords can charge them more in the presence of such services than they could charge in the absence of that road maintenance.  Should that benefit accrue to the landlords, or should it be passed through to the community whose spending created it?

I'll return to something a Tennessee business man wrote to his governor in 1873:

"Never tax anything
That would be of value to your State,
That could and would run away, or
That could and would come to you."

The same is true of individual towns, too.   Don't tax jobs, or workers, or buildings, or equipment, or products.

This is not a reason not to raise public revenue; rather, it is a reason to think carefully about what should be taxed -- and what should not be.  Charge for that which the community's presence and activity creates, and the privilege of using that which nature or community provides in limited supply, e.g., water, electromagnetic spectrum, geosynchronous orbits, minerals, oil, natural gas; privileges like franchises for monopolies; landing rights at congested airports; on-street parking; etc.

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.  

Shoppers' wisdom

What would you expect would be the better selling product size -- same brand, same everything?

• 24 ounces for $2.69
• 30 ounces for $2.89

Which one would you buy?

The product involved is store-brand eggs, by the dozen.   Where I shop, "large" eggs sell for $2.69, and "jumbo" for $2.89.   Jumbo eggs are 25% larger than large ones, and sell for only about 7% more.   

So much for our rationality when it comes to money.

40 years ago, the rule of thumb was something like "if the larger size is 10 cents or less more than the smaller size, buy the larger size."  (Extra large is 27 ounces per dozen.)   Now prices are much higher, but the differentials are still roughly what they were 40 years ago!

Yes, egg size may be critical in certain recipes, and "large" is standard.  Perhaps that's what causes us to pay more per ounce for the smaller sized product.

I wonder how the prices for various levels of octane in fuel work -- and how they should work.

Taxing work does not create ...

Inspired by the energy, rhythm and tune of Kristin Andreassen’s Crayola Doesn’t Make the Color of your Eyes or another version from Prairie Home Companion, my friend Joe Johnston wrote this song.  Watch one of the videos first!  The tune is infectious, and Joe's words communicate the message clearly.

Taxing work does not create....

I went to see the wise one
our town was such a mess
the longest lines to get in
were at the DSS

He said, I cannot cure your town
But here’s something you can do
write a list and flesh it out
Of why your town is in a stew

Well, we build roads; we run the bus,
We try to control crooks.
We build the parks and sidewalks
We give our streets good looks

To do these things, we need some wealth
And so we tax the things we see
We tax the buildings and what you earn
We tax merchants and sellers with a fee.

(refrain)
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

We tax the land, that helps ensure
that land is not a wager
It lowers the cost to those who use it
to create more jobs per acre

Collecting land rents means
That the things we as community do
are benefiting everyone and
go to all, not to the few.

And if a person wants to work
she reaps the results of her labor
The benefits of what she does,
Not the out-of-town land speculator

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

So maybe we’ll shift the taxes off
The labor you and I do, you see
And put it on the land so none
can squeeze the blood from you and me.

That way they’ll be  more jobs for those
who put their backs and brains to work
We wouldn’t have to work so long,
To put a roof and walls on God’s good dirt.

We wouldn’t need two jobs to feed
The mouths that we beget,
To house and clothe them and ourselves
And where we need to go, we’d get.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

A compact town means we could walk around
to get, to shops, to meet, to work for gain
And even walk to parks nearby
where quiet, joy, and beauty reign.

We wouldn’t need a big back yard,
or front ones with their lawns to mow.
We’d have a share in common land,
Where our souls, spirits, and bodies grow.

I think we’ve solved the problem of unemployment lines
of barely earning what we need.
We may not have the harvest yet,
But we have sown the seed.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

Play "Brer Fox an' Brer Rabbit," a UK version of "The Landlords Game" (Monopoly)

Pursuing some leads on Lizzie Magie (see the related posts, below this one, and in the Landlords Game links at left), I came across a December, 2010, paper by Frances Hutchinson, about the British version of the Landlords Game, called Brer Fox an' Brer Rabbit.  She makes some very interesting points, and I learned some things about the games. I commend the entire paper to your attention, and am taking the liberty of posting the last third here:

Brer Fox an’ Brer Rabbit

Georgists argued that a system of land taxation could be introduced gradually, following informed public debate on the issues involved. To that end, during the early decades of the twentieth century they devised a series of hand-made games designed to portray the evils of the selfish system of monopoly land holding, with a view to introducing socially responsible reforms of land holding based upon the Georgist Single Land Tax proposals. The games, which circulated throughout the USA and UK, often under the title The Landlord’s Game, were played in three phases. Phase 1, based upon the existing laws of land ownership, finance and taxation, demonstrates the effects of unchecked greed and self-interest in patterns of monopoly capitalism. In Phases 2 and 3 the rules are altered to eliminate the ability of powerful players to benefit from their greed.

The creators of the game held a profound faith in the human capacity for action based upon reasoned argument. The games were designed to be played co-operatively, providing a focus for discussion which took place at each of the three phases of the game. Monopoly was later developed from Phase 1, where powerful, self-interested individuals reign supreme. The later two phases, which each form games in themselves, demonstrate the potential for communities to regain ecologically and socially viable forms of access to land.

Brer Fox an’ Brer Rabbit is an early version of The Landlord’s Game which circulated in the UK. After some years of research we managed to bring together a copy of the original board with a matching set of rules. Despite the title, this is not a children’s game. However, we have found that a major obstacle to the successful use of this original version of the game as a teaching aid, is the almost universal pernicious influence of the selfish, zero-sum game of Monopoly. Phase 1 does not run as smoothly as the polished version of the commercial version, and it can be difficult to shift to the different mindset envisaged in Phases 2 and 3.

The thoughtful playing of Phases 2 and 3 of the Landlord’s Game raises some veryinteresting questions, such as the relationship between the ‘real’ and the ‘financial’ values of land, traditional patterns of common management of land, and the whole question of landless waged-labour. What emerges most forcefully, however, is the role of the Banker, the mysterious figure whose presence is not explained in the Georgist literature, but who is able to pay out ‘wages’ to the players to enable them to continue to participate in the game. This brings into focus the whole question of the wage/salary-slavery system that is corporate capitalism in the world economy of the twenty-first century.

Playing the Game

Monopoly was developed from Phase 1 of The Landlord’s Game, which demonstrates the effects of a greedy selfish pattern of monopoly land-holding. The object of Monopoly is to buy, rent and sell property with sufficiently focused and ruthless skill to bankrupt the other players and thereby force them out of the game. In real life, the Robber Barons of the American Golden Age dominated steel, oil and other essential resources not by creating wealth, but by dominating the field. Mirroring assumptions of economic orthodoxy, the number of houses and hotels in Monopoly are deliberately kept scarce. The game is so designed that all cannot improve their properties equally, and collaboration is prohibited. “Monopoly models the foundation assumption of economics: the principle of scarcity. Every opportunity you act on is thereby denied to another player.”11

To play a version of The Landlord’s Game it is necessary to step back in time, to forget the rush, bustle and constant worry of the twenty-first century and take time to imagine one is alive in the idyllic years before the First World War. Although the commercially designed Monopoly can be played out in a single playing session, several leisurely sessions need to be set aside for playing The Landlord’s Game. The specific uses of the sites laid out on the board would have been familiar to the players, and would have given rise to discussion of local examples. Thus the game offers a refreshing opportunity to reflect on the purposes of the various ‘money making’ institutions on the board, including the actual money-maker, the bank itself.

Devised over a hundred years ago as a DIY exercise, boards, cards and playing pieces were normally assembled from household materials. Playing tokens were buttons, badges, charms, or anything to hand. Brer Fox an’ Brer Rabbit, produced and patented by the Newbie Games Company of Dumfries, Scotland, in 1913, has been reproduced in the attached format* so that all three phases of the game can be played. The family resemblance to Monopoly is immediately obvious. Bearing in mind the history of Monopoly just described, the leisurely playing of all three phases is an excellent consciousness-raising exercise. The later two phases, which form games in themselves, demonstrate the potential for communities to regain access to land by regaining control over all forms of economic activity, including banking. Personally, I tend to agree with Karl Marx, that “in point of theory, the man [Henry George] is a back number”. The notion that an individual should have the right to buy a piece of land simply by right of landing on it when it is free, is original to the game. Equally, the Georgist game does not raise the question of money creation, the role of finance and banking in the economy or the whole question of wage-slavery upon which the edifice of global corporate capitalism rests. But that does not prevent twenty-first century players from using the sites and situations of Brer Fox an’ Brer Rabbit to review accepted assumptions about the institutions of society which govern access to wealth, property, income and power. The game offers at least as much of interest to present-day campaigners for peace, social justice, monetary reform and political sanity as it did a century ago. We look forward to opening a dialogue with groups who have played the games successfully.

Then go here: http://www.douglassocialcredit.com/resources/social-art/monopoly  to print out the rules, board, cards, and money to play this game yourself.

Jack Oliver, Who Proved Continental Drift, Dies at 87

Jack Oliver, Who Proved Continental Drift, Dies at 87 - NYTimes.com.

In his 1998 autobiography, “Shakespeare Got It Wrong: It’s Not ‘to Be,’ It’s ‘to Do,’ ” Dr. Oliver indulged in a fondness for limericks, interspersing them between chapters. Here is one:

The youth wondered what he should be.

His prof said, “You’re missing the key.

Life’s not to be, but to do.

Pick a task, follow through.

You’ll live ever after most happily.”

A Convention Prayer

This seems relevant with a new Congress taking their seats.

From The Public, July 14, 1900

A CONVENTION PRAYER.

The prayer offered by Rev. Herbert S. Bigelow, of Cincinnati, at the opening of the silver republican convention, Kansas City, Mo., July 4.

Our Father who art in heaven. May thy spirit of truth preside over this convention. If we have any claim upon thy favor or any right to call thee Father may it be because we have not knowingly trampled upon the rights of any of thy children.

Hallowed be thy name. May the reverent heart find thy presence everywhere and seek to work in harmony with the mighty forces that make for righteousness and peace.

Thy kingdom come. May we speed its coming by making the acts of our legislatures accord with the eternal laws of that moral government which is supreme above the nations.

Thy will be done on earth as in heaven. May we prove the sincerity of our faith by practicing in senate chambers the lofty precepts which we profess in the sanctuary.

Give us this day our daily bread. We do not ask for the bread of others. Give us the bread that is ours by right of useful labor. May the claims of justice be satisfied in the laws of the land that all may have bread, that the starving millions may be fed, not by the hand of charity, but by the labor that wears no chains and owns no master.

Forgive us our debts as we forgive our debtors. Save us from that egotism which magnifies the faults of others while blinded to our own. Grant us, in the name of eternal justice, grant us only that measure of liberty which we accord to the weakest of our neighbors.

Lead us not into temptation. Grant us the moral courage to turn our back upon the alluring visions of the kingdoms of this world and their glory, remembering that righteousness alone exalteth a nation.

Deliver us from evil. Now, when the chains are being forged and the golden padlocks are being fashioned for our lips; now, when men are forgetting the faith of the fathers and putting their trust in the might of armies and the majesty of fleets; now, ere the choice goes by forever, deliver us from the greed that takes refuge in the sanction of law, save us from the thrice accursed murder that kills in the name of the Prince of Peace.

On this day of freedom's birth we consecrate our hearts anew to the liberty which our fathers purchased with so great a price. Before the sacred altar of our fathers' God we pledge renewed devotion to the principles which have made the flag we love an emblem of hope to the oppressed of all the world. On that solemn day which comes to men and nations, when the seeds of our sowing shall have borne fruit in national character and the destiny shall be revealed which our hands are shaping, forbid that we shall then have to point for justification to thrones and altars founded upon the bodies and souls of our fellowmen; standing before the tribunal of history may we be able to point with confidence to the fact that we have followed the golden rule of justice.

May we never covet the gold that drips with the tears of bondmen. May we never feel strong enough to do wrong. May we do justly and love mercy and walk humbly with our God, and to Him shall be the Kingdom and the power and the glory, forever.

James Love's paragraph summary of Progress and Poverty

I had the pleasure of stumbling across a piece of writing from about 100 years ago.  It is in one of quite a large number of books written by enthusiastic admirers of the ideas of Henry George, put online by Google Books.  This is from a book by one James Love (written under a pseudonym).  I've reformatted it a bit to make it easier to read here.   It is a good summary of "Progress and Poverty," still the best book I know on political economy and economic justice -- why we suffer from wealth concentration, income concentration, poverty, sprawl, and a number of our other most serious social and environmental problems.   Here's the excerpt; read it slowly and consider its implications!

This man, who I believe to be the completest in thought and language that the world has seen, and his book the most precious ever given by man to men, concludes

• that the world (even more necessary to our existence than our own bodies are) is intended for all men of all generations, and not for some men alone.
• That every human being born into the world has a natural right in it equal to that of every other human being born into it.
• That as man by his nature seeks to gain his ends in the easiest way, some parts of the earth on which he can accomplish much become more desirable than other parts on which he can accomplish less.
• That this varying desirability, causing competition for the use of certain lands, shows itself in "rent," which is thus a communal product, and as clearly belongs to communities as the remainder of the produced wealth belongs to the individual producers.
• That it is as impolitic and unjust to take from the individual for the use of the community what has been produced by the individual as it is impolitic and unjust not to take for the use of all, or of the community, that which is produced in common by the community.
• That, in short, "rent" is the natural, God-intended fund for general public use. And
• that in denying this moral law of equal rights to land there is brought about a pitiful inequality of true wealth, and a sordid struggle for existence, destructive of human freedom and eventually bringing progress to a halt.
• And that we are at last learning that in setting up "vested rights" — based whether on ancient force or ancient law — developed into modern custom — and denying this equality, we rob men and deny the truly sacred right of every man to the product of his labor; deny the sacred right of property in "wealth."
• And that in treating private property in land as sacred (worse than treating property in man as sacred) "there never was a more degrading abasement of the human mind before a fetich."
• But that, on the contrary, "by conforming our institutions to this divine law of justice we will bring about conditions in which human nature can develop its best;
  
  • will permit such enormous production of wealth as we can now hardly conceive;
  • will secure an equitable distribution;
  • will solve the labor problem and dispel the darkening clouds now gathering over the horizon of European civilization.
  • We will make undeserved poverty an unknown thing;
  • will check the soul-destroying greed of gain, and
  • will enable men to be at least as honest, as true, as considerate and highminded as they would like to be.
  • We will open to all, even the poorest, the comforts and refinements and opportunities of an advanced civilization; and
  • we will thus, so we reverently believe, clear the way for the coming of that kingdom of right and justice, and consequently of abundance and peace and happiness, for which the Master told his disciples to pray and work."*

* "The strength of ' Progress and Poverty' is not that it restated fundamental truths which others had before stated. It is that it related these truths to all other truths. That it shattered the elaborate structure that under the name of 'Political Economy' had been built up to hide them, and restoring what had, indeed, been a dismal science to its own proper symmetry, made it the science of hope and of faith." —Reply to charge of plagiarism.—Henry George.

Get Rich Quick Scheme

Invest in land or buildings?.

This is from Nicholas Rosen, writing in The Progress Report:

Some people think that land rents are not a significant percentage of GNP, or, when they hear "land reform," think only about agriculture, probably in the context of Third World latifundia.

If you believe that land rents don't matter in a modern economy, I have a wonderful get-rich-quick scheme for you! And I won't charge you a cent for my brilliant idea, so listen up!

I was looking at the real estate ads in the Washington Post (October 2, 2010, p. F1), and I observed that for just $271,000, you can buy a four bedroom, three bath contemporary chalet in Basye/Bryce Resort, Virginia, with screened porch and hot tub. It looks pretty nice, it has trees in the yard, and it was built in 2005. I'm not sure just where Bryce Resort is, so it must not be too close to DC, or I'd know more.

Other houses are more expensive. There's a three bedroom townhome (what used to be called a row house) in Alexandria, less than a mile from the Huntingdon Metro, for $579,000, more than twice as much, $308,000 more. Alexandria is on the Potomac, across from Washington DC.

What else can you buy? There's a three bedroom townhouse in Alexandria, for $642,800. There's also a white house, described as a 1920's classic, with the number of bedrooms unspecified, but a yard and landscaping of its own, for $1,250,000, nearly a million dollars more than the chalet in Bryce Resort. It looks attractive, but it's not a huge mansion. When I was a child, say in 1975, I think you could have bought a house like that in my home town for under $50,000, $60,000 at most.

So how do you get rich quickly? You buy houses in Bryce Resort, of course, and sell them in Alexandria at a $300,000 markup! Even after the costs of cutting up houses and moving them on flatbed trucks, you should come out way ahead. Buying and selling one house a year should give you a middleclass income, and if you work faster than that, you'll soon be set to retire rich.

Can anyone consider the obvious flaw in this scheme, and not realize that land prices matter? Land prices in Alexandria must be at least $300,000 for the land under a decent townhouse, more for the land portion of a home with a nice yard. Annual land rents must be about $10,000 or more for modest lots, several times that for bigger ones. This is not a trivial percentage of homeowners' incomes, or of GNP.

As a 19th century Georgist put it, instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?

Every week when I scan the NYT's "What You Get" column, which showcases three homes currently on the market in various parts of the country, I wonder why the column doesn't provide the answers to the important questions?

• How far is each home from a vital job market?
• What share of the children in the local school district graduate from high school? attend 4-year colleges?  graduate from college?
• What sort of public goods and services and cultural amenities does the community offer?
• Must those who live there have a car for every working adult? 

I think Nicholas Rosen nailed it when he quoted a 19th century Georgist: instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?

How to Increase America's Saving Rate: Rich Americans Save Tax Cuts Instead of Spending

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg.

Well, from time to time, we hear that Americans aren't saving enough, and sometimes columnists ask for suggestions of how we might increase America's savings rate.

Moody's has provided the answer: cut federal income taxes on the highest income people, and they will save a significant portion of it.   (The question arose because some say that in order to facilitate job creation, we ought to avoid increasing federal income taxes on the portion of taxable income over $250,000 per year.)

If the goal is to produce savings at the median, or at the 25th or 75th percentiles, or at the 10th or 90th percentiles, reducing taxes on the highest-income 2% or so is not going to serve the purpose.   But it will satisfy the "increase America's saving rate" goal.

Before we went into this recent "bust" portion of our 18-year boom-bust cycle, a shocking proportion of Americans lacked sufficient savings to provide even a poverty-line existence for their families for as short a period as 3 months.  (Edward Wolff of NYU wrote the study on this.)   Most of us live paycheck to paycheck.

The notion of saving for a "rainy day," or even of saving to buy one's next car for cash, seems quaint and of-another-era, with so many of us paying more than 40% of our income for housing.  (Yet we don't complain about owing our soul to the company store.  Now it is the FIRE sector we owe.)    And look at the measures we've used to substitute for people's inability to save a 20% down payment on a starter home!

But the best-off among us -- both those who have large amounts of wealth and many of those who receive high wages or high profits on their "labor" (even if their labor consists of reaping that which other people sowed, they do regard it as labor, and sometimes the IRS does, too -- unless they run hedge funds, in which case it gets treated just as if they'd actually invested their own capital in a way a corporation could use to enhance its operations!) -- can and do save and invest.   And clearly this is an aspect of the wedge driven through society which Henry George described 130 years ago, driving some up and the vast majority down.

The wealthiest among us own, and take opportunities increase their holdings of, the corporations -- public and private -- which hold our best land (urban, oil-laden, etc.) and our non-renewable and/or otherwise finite natural resources.  (See "stock ownership" in the tag cloud at left for the data.)  We praise them as if they are somehow self-made, and let them parade about as such, and we gratefully accept their charity -- tulips and swimming holes on Park Avenue -- as if it made up for what they and their ancestors stole from us and ours, and what their children will reap from the labor of our children.   We don't see the structures by which they do it -- we're so used to them that they are, like the air we breathe, invisible to us.   But 120 years ago, most Americans did understand them.  (Explore the free NYT archives, 1880 to 1900, for the name of Henry George, and do some reading.  I suspect even the American history and American Studies majors will be surprised.)

 

Earned Income: Public and Private

I came across a pamphlet published in 1949 by a foundation on whose board I sit, and while there are some things that I might emphasize differently 70 years later, I thought it worth sharing.   It speaks to a category I've just added to the "cloud" at left: Natural Public Revenue.

Today we see some additional privileges which corporations (and individuals) are taking advantage of -- the privilege of polluting the world's finite supply of air and water beyond its carrying capacity and ability to heal itself; the privilege of claiming as their own the supply of various other natural resources: e.g., oil, natural gas, lithium, copper.   The privatization by corporations of what ought to be revenue sources for common spending should not go unremarked.   And trivializing monopoly, as I think the author does, seems odd in light of what we've seen in the intervening years.

Earned Income: Public and Private
by Joseph S. Thompson
President, Pacific Electric Manufacturing Corp.

THE FATES of America and Europe are inextricably one. A depression here could ruin us and would ruin Europe. We dread a depression; yet we have done nothing salient or radical to prevent it. The Soviet Politburo eagerly predicts and awaits it.

The basic reason why there are depressions and why prosperity is not normal, general, and constant is that we do not distinguish between TRIBUTE TO PRIVILEGE and RECOMPENSE TO SERVICE, and are indifferent to their diametrically opposite effects.

The fault is not in our political system, the freest and best yet devised. It is not in our industrial system which, based on service, saved the world from German domination and will continue to serve us well unless stifled by "Planned Economy," as planned economy has stifled industry elsewhere.

But when we study our taxation system we find a cancerous growth, developed in the last few years, that threatens to destroy all that makes America great, fostering privilege and hampering industry and service. We take for granted the principles underlying our present taxation system; yet adherence to those principles means national disaster.

The full breadth and importance of Chief Justice Marshall's statement that "The power to tax is the power to destroy" seems never to have been wholly grasped or emphatically enough expressed. Taxation destroys good things as well as bad. The power to tax is the power to control a destructive force and, when used, becomes equivalent to a fine. A fine represses, and a tax represses. Simple reasoning develops the fact that a tax is automatically and undeniably a fine. It is an arbitrary seizure of private earnings or acquirements, based on arbitrary opinion, and the fact that the money is used for public purposes does not justify its imposition.

But since money is required for public purposes, how else is it to be provided? The answer is simple: through earned public income.

We are all familiar with earned private income, earned through labor, service, or investment, but few have inquired as to whether there might be a true, just earned public income -- an income that we all, as the public, create and earn jointly as a common wealth just as the individual creates and earns his income as private wealth -- an income that can be measured by fact and not by opinion, forming the basis for, and fixing the limit of, responsible public budgeting -- A PUBLIC INCOME PUBLICLY EARNED AND TO PUBLICLY COLLECTED.

Those who have inquired have been answered by the Physiocrats, by Thomas Carlyle, by Patrick Dove, by Herbert Spencer, by John Stuart Mill, and, in full and complete analysis, by Henry George in his great book, Progress and Poverty. These men have shown that the public income is closely measured by, and reflected in, and therefore should logically, justly, and intelligently be, the rental value of the land.

The rental value of the land, which is the amount that individuals will pay for its exclusive use, if collected or "taxed" by the public, would provide and define the rightful earned income of the public, to which the budget should conform.

Land costs nothing in human effort or creativeness and gets its value only from the presence of people; so, land rental value might better be called location value; and since location value means land in a desirable place among people, land value and location value are really people value. The landlord's title to the land is a legally created privilege. It represents no contribution on his part but gives him an unearned tribute (and it is unearned even though it was bought with money that was earned). Solely by their presence the people create this value, and it is theirs. The people should collect it and nothing else. Arbitrary assessment might have to be resorted to in time of emergency, but, as it is now understood and imposed, taxation should be reserved as a regulative or repressive curb on acts counter to the public interest.

It sounds like quibbling to speak of abolishing taxes while advocating the public collection of land rent; and, since the assessor would define and impose it, and the tax collector would collect it, it does look like a tax on land. But it is not a tax on land. It is payment for the privilege of an advantageous location among people.

It is easy to "capitalize" such an amount. Figure the capital that would earn interest equal to the rent offered. The value of the land is thus set by the rent. Assess it at that value, tax it at the current interest rate, and the public would then collect the value it creates. Taxes would no longer raise the cost of living.

The public collection of land rental simply means a charge by the public for a choice location in the midst of the public. The parking meter is a perfect example of this principle. If you want to use a desirable part of a public street, you pay the current value into a public fund. The parking meter principle should apply to all land. The simple mechanism to correct our revenue system would use present methods, equipment, and personnel, arriving by the test of the market at the desirability of all parcels and periodically adjusting appraisal and taxation to absorb the rent offered by the occupants. There is nothing of arbitrary opinion in this, nor would the rent be created by enactment. It would be a straight business matter, and little change would be needed in our laws.

Our failure to discern the difference between PRIVILEGE and SERVICE is stupid enough in its direct impact on our revenue policy, but it also creates a by-product, land speculation, which terribly hinders our progress and security. There is nothing spectacular about the land speculator. Quietly and conservatively he comes into possession of the title deed to a location, an area, for the purpose of (1) using it, (2) charging someone else for its use, or (3) selling his title at an increased price. If he uses it, he retains a public revenue. If he charges others for its use, he collects a public revenue. IN NEITHER CASE IS HIS MONEY USEFULLY INVESTED, and in both he hopes that the third purpose will be served. He hopes that more people will need the land, increasing its rental value.

When he buys it for the third purpose, straight speculation, to sell it later at a higher price, he becomes an obstructionist. He serves no good purpose. He does nothing useful. He is a legalized holdup man. He makes building, living, and working more expensive.

He could say to himself and to the community, "Someone will need this location in the near future; the growing population will make it more and more desirable; so, since the people will not collect what they create here, I will. I will get in this someone's way and prevent him from using this place until he pays me to get out of his way. I will not have to perform any service for him; the people will do that. He will not even get 'value received' from me because as soon as he begins to use the place, the people will fine him with 'taxes' for improving it. They fine anyone who builds a home or brings a business or service to their community. But they will not fine me; they are already letting me usurp a part of their wealth. I levy a tribute on progress. I capitalize other men's energies. The more they fine those who produce or render service, the more unearned value I gain." This is the unconscious soliloquy of the land speculator.

You may question this sweeping and positive singling out of land rents. What about Corporations? Monopolies? Bonds and Stocks? Capital?

Corporations are formed to perform service or to exploit through privilege, or frequently, to combine the two. To the extent that they perform service, they should retain their earnings, however great. To the extent that they exploit through privilege, they should not be supported by the law.

Monopolies, other than land, are simply opportunities for someone to get a little more than he deserves for what he gives, until competition or buyer resistance checks him.

Bonds and stocks are simply evidence of ownership in corporations that may be good and useful or evil and leechlike. Remove privilege, and they will adjust with the change.

Capital is a tool, and the man who creates it should retain what he earns from its use. The difference which sharply and cleanly separates land rental from payment for the use of buildings, tools, stocks in trade -- in short, from capital -- is that land costs nothing in human effort. Everything else is humanly produced. Money invested in the privilege of exacting tribute in the form of land rent is not capital. It is not usefully invested. "Capital is wealth used to create more wealth."

Resentment against big corporations is purely habit or label thinking. Most corporations spend fabulous sums in research seeking new products, processes, and economies, and you buy from them, not because you have to, but because you want their product. You can buy something else or do without. But you DO HAVE to have a little space on earth. That is a monopoly you cannot escape.

It would seem to be beyond dispute that the threat of depression would be remotely distant if the imbalance of our stupid taxation and the stifling barrier to our progress, land speculation, were both removed by recognition of this simple fact: THE RENTAL WHICH USERS WILL PAY FOR LAND IS THE TRUE EARNED PUBLIC INCOME. IT IS A VALUE CREATED BY THE PUBLIC. TAXATION OF INDUSTRY AND THE HOME IS UNJUST, ARBITRARY, AND DESTRUCTIVE. IT SEIZES PRIVATE PROPERTY.

When we learn this and adopt it for ourselves, we will be fitted to lead the world to prosperous peace.

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.

Greater Fools

The dangers of financial illiteracy in America : The New Yorker.

This is a good article, by James Surowieki, on the prevalence of financial ignorance in America.   I'm going to take the liberty of including the entire article here, but want to preface it with the thought that the problem is deeper and broader than he suggests.  Remember that Case and Shiller (2003, if I recall correctly) found that people buying homes expected them to appreciate significantly; this expectation likely caused them to take on amounts of debt that in the absence of such an expectation would have made absolutely no sense.

How many people realize that houses depreciate?  Houses depreciate. (A May, 2006, Federal Reserve Board study cited 1.5% as an annual depreciation for single-family housing stock.)  What rises in value is land.  It rises in value for reasons which have nothing at all to do with the activity or inactivity, presence or absence of any individual landholder.  It rises because of increased in population (general and local); because of public investment in infrastructure and services which appeal to buyers and tenants (residential and commercial); because of advances in technology (e.g., elevators, air conditioning, even fiberglass boats!).  It is also influenced by interest rates and by loan underwriting rules, and by pent-up demand for a place to live, and a willingness to commit a huge portion of one's savings (if any) and present and future income to paying a seller for value he didn't create, on the basis that this is a better choice than paying a landlord for value he didn't create.

(The alternative, of course, is to reform our taxes, and place more of the burden onto the value of land, not a square foot of which will disappear or be hidden, and less on buildings, wages, purchases and other standardly-used tax bases which behave badly when taxed.  But our financial ignorance goes far beyond ignorance of personal finance.   Very few of us have a realistic understanding of political economy, the science which deals with the natural laws governing the production and distribution of wealth and services.  Very hard to make sense of the micro if you have an unrealistic or limited understanding of the macro!)

Individuals buying their first homes hoped to supplement their meager wages with significant unearned increases in land value.  But they failed to note what Leona Helmsley laid out: it is the little people who pay the taxes, and the little people who support the public spending which enriches those who hold our best-located land (be they individuals or corporations, domestic or otherwise).   Details, details. 

Here's the article:

GREATER FOOLS

by James Surowiecki July 5, 2010

Halfway through his Presidency, George W. Bush called on the country to build “an ownership society.” He trumpeted the soaring rate of U.S. homeownership, and extolled the virtues of giving individuals more control over their own financial lives. It was a comforting vision, but, as we now know, behind it was a bleak reality—bad subprime loans, mountains of credit-card debt, and shrinking pensions—reflecting a simple fact: when it comes to financial matters, many Americans have been left without a clue.

The depth of our financial ignorance is startling. In recent years, Annamaria Lusardi, an economist at Dartmouth and the head of the Financial Literacy Center, has conducted extensive studies of what Americans know about finance. It’s depressing work. Almost half of those surveyed couldn’t answer two questions about inflation and interest rates correctly, and slightly more sophisticated topics baffle a majority of people. Many people don’t know the terms of their mortgage or the interest rate they’re paying. And, at a time when we’re borrowing more than ever, most Americans can’t explain what compound interest is.

Financial illiteracy isn’t new, but the consequences have become more severe, because people now have to take so much responsibility for their financial lives. Pensions have been replaced with 401(k)s; many workers have to buy their own health insurance; and so on. The financial marketplace, meanwhile, has become a dizzying emporium of choice and easy credit. The decisions are more numerous and complex than ever before. As Lusardi puts it, “It’s like we’ve opened a faucet, and told people they can draw as much water as they want, and it’s up to them to decide when they’ve had enough. But we haven’t given people the tools to decide how much is too much.”

Unsurprisingly, the less people know, the more they run into trouble. Gary Rivlin’s blistering new examination of the subprime economy, “Broke, U.S.A.,” is full of stories of financially ignorant people bamboozled into making bad decisions — refinancing out of low-interest mortgages, say, or buying overpriced credit insurance — by a consumer finance industry adept at creating confusing products. Such stories are backed up by the numbers. A study by economists at the Atlanta Fed found that thirty per cent of people in the lowest quartile of financial literacy thought they had a fixed-rate mortgage when in fact they had an adjustable-rate one. A study of subprime borrowers in the Northeast found that, of the people who scored in the bottom quartile on a very basic test of calculation skills, a full twenty per cent had been foreclosed on, compared with just five per cent of those in the top quartile.

What can be done? One solution is regulation: the financial-reform bill now before Congress will create a consumer financial-protection agency that should help curb the finance industry’s most predatory excesses. Another solution is to tinker with “choice architecture” — doing things like enrolling people in 401(k)s automatically — in order to “nudge” them toward better decisions. Both of these strategies are necessary, but they’re not enough on their own, because financially illiterate consumers are always going to be easy victims. We also urgently need proper financial education.

This seems obvious, but it’s surprisingly controversial. Some suggest that financial illiteracy is an example of what economists call “rational ignorance” — inattention that is justified because the costs of paying attention outweigh the benefits. But few decisions affect us more directly than the ones we make about our money. Critics also argue that financial education may make people overconfident, and therefore more likely to make bad decisions. In fact, the reverse is true: the less people know, the more overconfident in their abilities they tend to be. In a German study, eighty per cent of those surveyed described themselves as confident in their answers on a questionnaire, yet only forty-two per cent got even half the questions right. This is known as the Dunning-Kruger effect: people who don’t know much tend not to recognize their ignorance, and so fail to seek better information. No wonder, then, that the least knowledgeable people in the Atlanta Fed study were also the least likely to do research before getting a mortgage. By contrast, well-informed people are more likely to ask others for help. If financial education taught people only how little they actually know, it would accomplish quite a lot.

The government’s new consumer-protection agency has the authority to “review and streamline” financial literacy programs, but that’s not enough. We really need something more like a financial equivalent of drivers’ ed. There’s evidence that just improving basic calculation skills and inculcating a few key concepts could make a significant difference. One study of the few states that have mandated financial education in schools found that it had a surprisingly large impact on savings rates. And the Center for American Progress has found that, across the country, education and counselling by nonprofit organizations, like the Massachusetts Affordable Housing Alliance, have helped low-income families buy and hold onto homes, even during the housing bubble. The point isn’t to turn the average American into Warren Buffett but to help people avoid disasters and day-to-day choices that eat away at their bank accounts. The difference between knowing a little about your finances and knowing nothing can amount to hundreds of thousands of dollars over a lifetime. And, as the past ten years have shown us, the cost to society can be far greater than that. ♦

 

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. 

Education and Democracy

I came across this longish piece in the November, 1886, edition of a British monthly called The Democrat, and I think it is a keeper:

EDUCATION AND DEMOCRACY.

Within the last ten years Britain has awakened to an important fact. She has seen that her workmanship is being outdone by Continental workmen. She has still unbounded ambition, energy, and talent, but she has only a limited training. The schools of the Continent endeavour to prepare their scholars for the world's work, to train them in eye and hand to a cunning mastery over materials, and to teach them the deep scientific principles that underlie the rightful doing of the simplest task.

Compulsory education implies free education. It is most unreasonable and unfair to compel a father to send his children to school and then to compel him to pay for their education. The child is educated not for his own benefit or his father's benefit, but for the benefit of the State. It is found more and more year by year that we must have education. Had those obstructionists who opposed education because they saw in the word only another way of spelling revolution been able to carry out their policy of making ignorance national, Britain would speedily have fallen to the intellectual and commercial unimportance of Spain. But they failed. The country was great, and to make it greater national education was resolved. It should have been free, thorough, and unsectarian. We should not have to go to a needy washerwoman, who toils day and night to give her children a morsel of bread and a rag of clothing, and say to her, "My good woman, it is needful for the greatness, the glory, and the prosperity of this happy country in order that her princes may inhabit palaces and her landholders continue to receive their countless millions, that your children shall be educated. Therefore each of them must come to school, and see, at your peril, that they bring coppers with them to pay for their teaching." And so she has to toil and pay for the greatness of her country, which, after all, never did anything for her, but allowed her no more pleasure of living in it than if she had marked upon her brow some brand of infamy.

And after school, what? Whither go these children who, year by year, leave our national schools, what becomes of them, how much good have they got from their education? They have got much good, and yet much less good than they might have got. The simple power of being able to read is a blessing past all eloquence to describe. There is a greater difference between the man who can read and the man who cannot than there is between a king and a peasant. In this age how narrow, how contracted, how futile, and how feeble must be the ideas of those who do not possess the magic power of letters! On the other hand, the commonest workman who can tell the meaning of printed characters may possess a greater and a happier soul than any within the circle of the peerage. But ordinary minds, that is to say, the immense majority, are in need of more. They have the rudiments of education, they want training in the methods of application. It is said by those who have large means of knowing that many children leave the Board Schools who at once proceed to forget their education, and that within a vеrу few years they can hardly write their names or read a simple sentence. Be this true or false it at least is certain that many use their education only to read that gutter literature of which we have so constant and appalling a growth. The difference between the ordinary circulation of a newspaper and its circulation when it records one of those high-class infamies that give so constant an employment to our courts of law is a curious comment upon national education. And while thus we leave all who will to sink as they may, we refuse our help to those who with talent, energy, and success are struggling to the higher knowledge. Technical education is dear and scarce, and that upon which the future of our country so largely depends is regarded with indifference. Had it not been for the private energy and generosity that in the northern and midland towns of England has founded great schools of the arts and manufactures, we would at this day have been, from a trading point of view, very little better for Mr. Forster's scheme of national education.

A true Democracy looks upon such a state of things with discontent and disapproval. Democracy springs from an educated public feeling, education is the weapon with which it cuts its way to power, and its end and aim is to educate all men to their rights and duties. Were every man in this country really educated, that is to say, really aware of the few and simple facts that make up social life, and really able to think upon these facts, we should have at once a bloodless revolution. To wealth would be set its limits, upon rank would be imposed its duties, idleness and poverty would disappear together, the landlord and the publican would pass away to one common obscurity. It is because of the dense and wide-spread ignorance, and because of those who impose upon that ignorance, that our advance is so tardy and so difficult. Therefore, all teaching is really with us, even although it may seem against us. The political leader who, from some platform, hurls against us his powerful and burning words, calls us fanatics and knaves, seeks to confound us with his marshalled facts and ordered figures, and raises in his audience a whirlwind of hatred against us, even he from a higher point of view, and a larger knowledge, is our friend, and does us service. Through him men become acquainted with our teachings, and when the fervour of denunciation is over, and the fever of debate has ceased, the calm reasonableness begins to speak to his mind, and he finds that we are only saying what often his own heart has whispered to himself. In a true Democratic state the schoolmaster, who at present is treated by the upper and middle classes half with intolerance, half with contempt, would be held in the utmost importance, and would receive the utmost honour.

Those who oppose free education often ask us in their pleasant, sarcastic way why, if we teach children for nothing, we should not also feed and clothe them? To this we answer, "Why not?" As a State, it is not only our duty, but our interest to bring up for the future service of the country a generation of men and women as able for every duty as our efforts can make them. You cannot properly educate a child who has an empty stomach, and whose clothes will not exclude the winter's cold. The poor infant is numbed and stupified; knowledge can make no way through his starved and frozen intellect. First feed and clothe, then teach the children. To do this would be neither difficult nor expensive. All public school children should be provided with a warm and comfortable uniform. This would be in no danger of being taken away and pawned by depraved relations, for no one would buy that which was stamped with the Government mark. I would also lengthen the school hours. At present a child only comes to school to repeat lessons that he has learned at home. These lessons should not only be repeated, but should be learned within the school buildings, where he would have the aid of books and maps, with the kind assistance of teachers. Even if these school hours extended from nine to six, they would not be too long, for they would not be wholly passed in book-work. They should include musical drill, gymnastics, training in some simple handicraft, and at least two hours of such play as pleased the children best. And above all things they should begin with a good meal, a good meal should pleasantly divide their hours into two, and a third good meal should conclude their working day. In our scheme of education we put almost as much importance upon the dining table, the gymnasium the swimming bath, the playground, and the drill-ground, as we do upon the spelling-book and the copy-book.

We want to make men; and to this end the Democracy will spare neither toil nor money. A school must of itself be a palace of health and beauty; its teacher must be the best and the ablest of men; the teaching must have as its object the development and improvement of the race.

Nor will the duty of the State be done when it turns out into the working world a well developed lad of thirteen or fourteen years. Every boy will be told that he must learn a trade or profession, and that he must apprentice himself to it. But the lad will not be allowed to work all the working hours of the week. At certain fixed times he will have to attend classes, and there to study what higher learning may be directly useful to his profession. This will be distinctly apart from the culture of the evening schools. These, too, will be helped and developed, so that every student eager to improve his mind and to extend his knowledge will have every opportunity freely opened. But culture must be allowed to depend upon a man's own wishes, for we cannot force it, and we would not if we could. Technical education is different; every lad, every child, born rich or born poor, has a right to demand of his country that he shall be taught to do what share of the world's work has been allotted to him in the best and most scientific manner, with most credit to himself and most satisfaction to his employers; and on the other hand, the State has a right to see that every lad is trained so as to be most useful to his country. Thus we would have technical schools in every town, and agricultural schools in every county. Among the throngs that yearly passed through the various schools there would always be found a small proportion marked out from the crowd by superior zeal and ability. For these should be provided the Free University, and not only should the teaching be free, but free board should be given also. Their purpose should be to develop the talent of the nation, and they would make no distinction between the son of the poorest man and the son of the richest man in all the land, for the light of learning should shine as impartially as the light of heaven. Nor would we limit national education to schools and colleges. It is to view learning narrowly to think that it must be confined to academic walls. Scattered through all our land in surprising numbers are men of humble rank who never passed the infant school, and perhaps have not even had the advantage of that, who yet possess a culture large and deep. Nay, there are some upon whose minds literature has produced happier results than upon many whose trade is learning and whose profession is culture. These are what they are from the powerful influence of the Free Library and the Mechanics' Institute. Their minds have grown to strength and beauty amidst the pure airs and the copious sunshine of our English literature. Shakespeare has taught to them — man; Shelley has trained their senses to every fine and lovely influence; Milton and Burns have made them pure and strong. The daily papers, which are half read and half ignored by the listless loungers of the aristocratic club, are fully read, considered, and debated by thousands of intellectual working men. Thus in every town is a band of humble workers who know more, think more, and understand more than any equal body of their self-titled superiors. These should be multiplied. In every quarter of every town should be halls, baths, libraries, reading-rooms, gymnasiums, all that would make higher living attractive, and aid those who struggled to the higher life.

All this, the critic will say, if the critic thinks it worth his while, is a dream and a delusion. A dream it may be, but delusion it is not. And to say that it is a dream is to saу that civilisation is governed by selfishness and is hastening to corruption. For we have done no more than to make a declaration of simple human rights. If we are to have a civilisation at all we must recognise our duty towards every child that is born into the land. We do this partly, feebly, and irresolutely. But not thus can we satisfy justice. If we owe a man a pound we have not fulfilled the law of honesty by throwing him a shilling. We owe to every child a complete education, a training that will make him a useful and a worthy citizen; we do not fulfil that obligation by starving his body and cramming his mind with odds and ends of knowledge. Learning is useless, nay, infinitely worse than useless, to make a man abler and better unless it stimulate the individual and improve the race.

And the cost of it? This is the very first burden that we would place upon ground-rental. For all that is spent upon national education goes to make the land more valuable. Your schoolmaster is the greatest builder up of land values. The more intelligent, industrious, and honest the teacher makes the people, the higher is rent. Did the schoolmaster give to our landholders an annual present of golden millions, he could not more infallibly increase their incomes than he does by raising the standard of the people who labour upon the land. Thus, in asking that the land shall pay for the teaching of the new generation, we only ask that it shall pay for value about to be received, for vast and material benefits about to be conferred. We make an inflexible stand for free education and complete education, and we demand that payment for it shall be made, not from the paltry earnings of the poor, but from the inexhaustible fund created in the land by the labour of all who have ever lived, and being daily augmented by the labour of all who pass from the school to the workshop.

A Scottish Pressman.

Contrast this to California's Proposition 13, which for over 30 years has limited the tax on land value to a small -- and diminishing -- and uneven! -- fraction of the annual rental value of California's land.

47 percent

That figure has been in the news and opinion columns a great deal in the past couple of weeks.  It is the percentage of Americans who pay nothing in federal income taxes (as distinct from federal withholding for social insurance).

Some of the articles and related comments have focused on the concept that everyone should be paying something, so that they "have some skin in the game" so that there is an incentive not to vote for spending that others will have to pay for.  Some have approached the 47% as "freeloaders."

It is funny that in our largest state, where, for 30+ years, Proposition 13 has put a ceiling on property taxes, so that landholders, who are the primary beneficiary of the effects of state and local spending (and federal funding of state and local projects) can expect their tenants to contribute mightily to the projects they vote for -- and no one has made an impression by pointing this out. 

And none of the articles I've seen about the 47% figure -- which went viral after an article by Bob Williams in the WaPo -- have spent much time exploring the policy decisions behind this.

I am reminded that according to our official Federal Poverty Guideline, about 13% of us live "in poverty."  And that even the Census Bureau, which collects and reports the data on who lives below the Federal Poverty Threshold (a retrospective figure which relates closely to the FPG) willingly recognizes that the Federal Poverty threshold and guideline are merely a statistical yardstick, with no particular logical relationship to the cost of living anywhere in America.

I am reminded that for the states for which a Self-Sufficiency Standard Study has been published (about 35 in all), the bare-bones cost of living for a young working family typically runs from 180% of the Federal Poverty Guideline -- in the least expensive counties (where very few people live) to perhaps 210% in the major cities of our smaller states to 300% or 400% in the major cities in our larger states.

Should the incomes -- mostly wages -- of our working people whose incomes are insufficient or barely sufficient to meet their own and their families' most modestly defined needs, be taxed?

I am reminded of the Overlooked and Undercounted studies, which typically follow a Self-Sufficiency Standard Study, and seek to quantify the number and percentage of working-age families whose incomes are insufficient to cover their bare-bones cost of living.  Significant percentages of these families are at these income levels.  30% to 35% sticks in my mind -- and a larger percentage of America's children.

I am reminded that a large percentage of today's seniors are hugely reliant on their income from Social Security, and that the level of Social Security income is established upon retirement and thereafter only rises to keep up with the CPI-U; our oldest retirees are receiving Social Security incomes which are a function of their wages 30 years ago -- roughly as logical as California property taxes for long-time owners being based on the selling price of California housing 30 years ago!

I am reminded that many people get to deduct their mortgage interest and real estate taxes from their taxable income (they're typically in the coastal states; in the heartland states, the standard deduction often turns out to be higher, since taxes and interest payments tend to be lower ... which may correlate to the percentage of children who attend 4 year colleges).

And I am reminded that state and local taxes fall more heavily on low-income people than they do on high income people. (See "Who Pays?  A Distributional Analysis of the Tax Systems in All 50 States", particularly the "Averages for All States" table on page 124 of 130), which shows that, on average, the bottom quintile of us pay 10.9% of our income in state and taxes, while the fourth quintile pays 8.5% and the top 1% pays just 5.2%, on average.

I am reminded of our concentration of income:

• 10% of us receive 47.19% of the before-tax income
• 20% of us receive 60.96% of the before-tax income
• 40% of us receive 79.14% of the before-tax income
• 60% of us receive 90.37% of the before-tax income [see middle-class agenda, on the next page of this blog]

So the bottom 40% of us receive less than 10% of the before-tax income.  And those who think they don't pay enough in taxes would like them to pay more into the system than they already do?   The problem is one of low wages, unemployment and underemployment.  The best solution to these problems I've come across lies in the ideas of Henry George.  The law of wages is something like the law of gravity: we operate in ignorance at our own risk.

Crosby: God's Gift (a poem)

I came across a poem I thought worth sharing.  It comes from a book of poetry entitled "Broadcast", by Ernest Howard Crosby.

God's Gift

WHERE is my gift," said God, "that I gave to men—
The sun-wed, fruitful earth, with her freight of good
For all their wants? What mean these prayers for food?
Are there poor in a world which bursts with its golden stores?
Who are the few that dare to withhold from all My gift to all of the fruitful, sun-wed earth?"

And the few replied: "O, Lord, we give Thee thanks.
Thou gavest the earth to all, it is true, but lo!
Thy angels, Law and Order, who rule the world
When Thou art far away, have learned our worth,
And rightly bestowed on us Thine inheritance."

"I know them not," said God; "they are fiends from hell
That juggle thus with the gift that I gave to man.
I am never far away from the world I gave.
And now once more and forevermore I give
This fruitful earth anew to the sons of men.
Woe to the fiends who shall dare usurp my place!
Woe to the few who say that my gift is theirs!
Woe to the man who grasps his neighbour's land!"

It brings to mind several things I've read.  First, this passage from "Progress and Poverty" by Henry George:

We sail through space as if on a well-provisioned ship. If food above deck seems to grow scarce, we simply open a hatch -- and there is a new supply. And a very great command over others comes to those who, as the hatches are opened, are permitted to say: "This is mine!"

Second, two different versions of "The Landlord's Prayer" which I posted on this blog earlier:

from the Anglican Book of Common Prayer

A Prayer For Landlords

"The earth is thine, O Lord, and all that is contained therein; notwithstanding thou hast given the possession thereof to the children of men, to pass over the time of their short pilgrimage in this vale of misery.  We heartily pray thee to send thy holy spirit into the hearts of those that possess the grounds, pastures and dwelling places of the earth, that they, remembering themselves to be thy tenants, may not rack or stretch out the rents of their houses or lands; not yet take unreasonable fines and incomes, after the manner of covetous worldlings; but, so let them out to others that the inhabitants thereof may be able both to pay  their rents, and also honestly to live, to nourish their family and to relieve the poor.  Give them grace also to consider that they are but strangers and pilgrims in this world, having here no dwelling-place, but seeking one to come; that they, remembering the short continuance of their lives, may be content with what is sufficient, and not join house to house, nor couple land to land, to the impoverishment of others; but so behave themselves in letting out their tenements, lands and pastures, that after this life they may be received into everlasting dwelling-places, through Jesus Christ our Lord."

and from Henry George's newspaper, The Standard:

Lord, keep us rich and free from toil,
For we
Are honored holders of Thy soil,
Which democrats would now despoil
With glee.
O! Lord, our fathers got the land
For serving those whom Thy right hand
Had chosen to be great and grand
As kings.
Tho' ta'en by force, we're not to blame,
Thou know'st, O! Lord, it is a shame
To say to us - of titled name,
Such things.

Lord, let us live in wealth's content,
And peace!
Lord, we are by Thy mercy meant
To rule mankind, and make our rent
Increase.
The birds that haunt the moors and hills,
The fish that swim in streams and rills,
The beasts that roam as Nature wills,
We own;
E'en Lord, the minerals that lie
Beneath the earth's periphery
Belong to us! Thou knowest why

Alone.

And third, of a book entitled "Thy Neighbor's Landmark" which is online at http://www.whatwouldjesustax.com.

Crosby's poem is wonderful.   Perhaps we can explain a significant portion of the concentrations of wealth and income in the hands of a few:

And the few replied: "O, Lord, we give Thee thanks.
Thou gavest the earth to all, it is true, but lo!
Thy angels, Law and Order, who rule the world
When Thou art far away, have learned our worth,
And rightly bestowed on us Thine inheritance."

"I know them not," said God; "they are fiends from hell
That juggle thus with the gift that I gave to man.

Monopoly History

Monopoly History

This is one of a number of sites which describes the history of the board game Monopoly.  It doesn't get it quite right, but is directionally correct.  I'll share my corrections here:

1. "Goal" is actually "Gaol" -- what we know as Jail.
2. The "Prosperity" rules were not similar to the rules of the Monopoly game as we know it.  Rather, they were similar to the original rules, which produced a VERY dull game.  No big winners, no losers.  Just a sustainable situation in which all could prosper.  Not much fun on a Sunday afternoon, but a good model for real life.  The OTHER rules are similar to the Monopoly game we know today.

The point of "The Landlord's Game" -- Lizzie Magie's original 1903 game -- was to teach the ideas of Henry George (1839-1897), and show by a simulation why they produced a just, logical, sustainable economy and community, in which all could live as equals.  George saw that the economic rent -- the annual rental value of the land within a community's borders -- ought to be collected by the community and used to fund goods and services which would benefit the community, while that which individuals and corporations create should be the private property of those individuals and corporations.  The game demonstrated how things would work under this scenario.  (Think about SimCity as a teaching tool.) 

This website is missing the richest part of the story!

You might appreciate these two pages:

The Landlord's Game and Prosperity, at https://docs.google.com/fileview?id=0B5SHdsI4Ysi_ODQ4Y2FjZWMtNGFkMS00ZjZkLWFhNzYtMjNkNjFjMDJiZGE3&hl=en_GB

and the 1923 patent application, at http://www.google.com/patents?pg=PA1&zoom=4&id=lD1cAAAAEBAJ#v=onepage&q=&f=false

I'll post more on the subject over time.

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.

Is "chasing the bad guys" the highest good?

I heard part of a radio interview with Harry Markopolos today.  He's the fellow who saw through Bernard Madoff's "investment" scheme, and made every effort to get the SEC to pursue it.   I have tremendous respect for Markopolos, and hope he will continue to use his talents for public good.

He was talking about "chasing the bad guys," and it got me thinking that while "chasing the bad guys" -- the ones who abuse the rules, who flout them completely, who betray trust others put in them -- is important, there is something else that also needs to occupy our attention.

We have a structure, which few of us are conscious of, which funnels our nation's wealth into the pockets of a particular class of us, and until we -- a large proportion of ordinary people -- become conscious of the particulars of that structure, we are simply putting our attention in the wrong place. 

The theft by Bernard Madoff from some of our wealthiest folks -- I'm guessing that few of his victims were below the top 5% of the net worth distribution, counting just the dollars they sent to Madoff and their other holdings, not the assumed increase in the Madoff "investments" -- may simply serve to divert our attention from noticing that major structural matter to chasing a bad guy.

I discovered an interesting book online this weekend.  Hardcopy sits in my library -- from my late grandparents' collection -- but I'd been put off by the title, and never bothered opening it.   The title is "The Story of My Dictatorship." It turns out to be funny and interesting -- a telling of a dream, a bit along the line of "A Connecticut Yankee in King Arthur's Courts." 

We need people who will play whistleblower on our system, our structure.  And we need to listen to them.

How should we-the-people pay for ... snow removal?

As I watch the mid-Atlantic states dig out from heavier snows than they are accustomed to dealing with (or budgeting for), the question of how we ought to finance such costs comes to mind. 

Let's review the choices.

• We could tax wages. 
• We could tax capital income (dividends, interest, appreciation of capital - a/k/a capital gains). 
• We could tax sales of goods.
• We could tax services.
• We could tax corporate profits. 
• We could tax specific kinds of transactions: e.g., stock sales, property transfers, tobacco sales, luxury goods, imported goods. 
• We could tax pollution. 
• We could tax buildings. 
• We could tax land value. 
• We could impose user fees.

It is very tempting, of course, to recommend that We tax whatever I have the least of.  That's the "don't tax you, don't tax me; tax the guy behind the tree" approach, and many people never move beyond it in their thinking about taxation.  It is one of the factors that causes us to rely on taxes which fall on people who have relatively little.  (Remember Leona Helmsley's statement -- "WE don't pay taxes; the little people pay taxes." -- I don't think she was talking about tax evasion; she was describing how we've structured things.)

When we tax wages, we take from people that which they create.  We discourage them from working, from producing, from contributing.

When we tax dividends or interest, we discourage savings and investment.  Our corporations need capital.  (Notice, however, that when one buys an existing share of stock from another investor, the corporation is not getting a new infusion of capital; what is changing hands is the entitlement to an actual or potential stream of dividends, and to a payment of some size if management decides to sell the corporation to another corporation or some private entity.)  

When we tax capital gains, what we are taxing is a mixed bag. Capital does not appreciate.  As anyone who has left a home unoccupied for a few months knows, as anyone who has owned a car knows, buildings and machines and the like do not appreciate.   They depreciate, even with the best of maintenance.  Most "capital" gains are actually either appreciation of land, or relate to the extraction of scarce -- nonrenewable -- natural resources.   (Much of what is taxed by the estate tax, too, relates to one of these kinds of gains, which have NOT already been taxed elsewhere in our system.  Taxing them once per generation, particularly when there are huge concentrations, is better than not taxing it at all.) 

When we tax sales of goods, or sales of services, we impose both on the purchaser and on the buyer; by raising the price of goods or services, we lower the demand for them.   

When we tax corporate profits, we encourage corporations to move those dollars to another country.   And they are happy to oblige.

When we tax transactions of various kinds, we discourage those transactions.  That can be a good thing or a bad thing.  If we are discouraging hedge funds from skimming profit away from the market, many would argue this is desirable.  If we are discouraging the flipping of houses by making it less profitable, many would argue this is desirable.  Some would argue that discouraging liquor, or tobacco, or recreational drug transactions is desirable.  Some would argue that discouraging trade with other countries is desirable.  (Others would take the position that Henry George took: that it is doing to ourselves in peacetime what other countries might seek to do to us in war!)

When we tax pollution, we should get less pollution.

When we tax buildings, we should expect to have slower redevelopment, poorer maintenance, less investment in energy-conserving technologies and renovations, fewer highrises and less vibrant cities.  We will certainly have fewer people employed in these activities or in spaces created by them.

When we tax land value, what happens?  To quote the eminent economist Lowell Harriss,

Land as area is fixed in quantity. Tax it heavily, and it will not move to some other place, or decide to take a vacation, or leave the inventory of productive resources by going out of existence. Tax land lightly, and the favorable tax situation will not create more space in the community.

But we don't have to figure this out over and over.  Adam Smith, in The Wealth of Nations, provided us with the canons of taxation -- the criteria by which to judge the various options.  You might take a look at these two pages on the subject: 

• Taxes: What Are They Good For? at http://www.henrygeorge.org/canons.htm
• Canons of Taxation at http://www.wealthandwant.com/themes/Canons.html

All those goods and services whose effect is to maintain or increase property values -- land values, since buildings depreciate -- should be financed via taxes on land value.  We should avoid taxing any of the other possible tax bases at all until we have fully taxed land value.  (At this point, you might be wondering what it means to "fully tax land value."  Generally, it means to collect something approaching 100% of the annual rental value of the land itself.  Quick and dirty, that's about 5% of what the selling price of the land would be in the complete absence of a tax on it.  So if a lot would currently sell for $100,000, while bearing no annual tax on land value, the annual land rent would be about $5,000.  Land value taxes up to that amount do not place a burden on the landholder.  Collecting 100% of that amount would reduce the selling price of the land to a token level, but would not reduce its annual rental value by a penny.)

If you tend to think that "balance in taxation" is a good idea, you might take a look at The Fallacy of the 'Three-Legged Stool' Metaphor, by Bill Batt.  You might see it differently.

Looking Forward

Looking for the phrase "I am for men" (see an earlier post, below) I came across a 1906 book by August Cirkel (circa 1870-1946), of Chicago, entitled "Looking Forward."  His prefatory note is as follows:

An apology is, peradventure, due the memory of Edward Bellamy for the semi-plagiarism in the title of this book.  It is true that "Looking Backward" suggested the name I have given it. The ideally happy condition of all the people, that Mr. Bellamy pictured as resulting from socialism, I look forward to as a result of a higher development of individualism.

The variety of topics considered may make the work seem presumptuous.  But though the subjects are various, the same strain runs through all.   Like the Irishman with his shillalah at the county fair, wherever I have seen a monopoly head, I have taken a whack at it.  If there are any sore pates or broken craniums on account of my impartial and promiscuous blows, I shall know that I have not labored in vain.

A.C.

A passage in the middle of "Looking Forward" caught my eye, and I added the preceding ones for setting the scene.  In this age of "too big to fail" and 10% of our households having over 70% of the aggregate net worth, a lot still rings true after 100 years:

We have one concern controlling far more than half the oil, another more than half the iron, another half the coal, another forming to control much more than half the copper, a few combinations working towards ownership of all the railroads and steamship lines; another, meat; in our large cities, the public service corporations are one by one being gobbled up by the same group of capitalists who control these other companies. It is probably safe to say that the so-called trust crowd now controls at least forty percent of the business and wealth of the country; moreover, the portion so controlled is organized on such a basis that the profits exacted each year reach the public with almost the directness of a tax. Without exception each one of these gigantic monopolies makes millions in the way of earnings disbursed to pay interest on bonds and dividends on stocks.

The profits of the Standard Oil Company have averaged forty percent per annum for many years; others of these companies are nearly as successful. In ordinary business only the very few after a period of twenty or thirty years can show a larger capital than they had at starting, and many fall by the wayside; but each, and every one, of these giant corporations makes tremendous gains. The public seems to have acquiesced in their right to fix the tribute that they will levy each year, and has grown so accustomed to their demands as not to analyze this right.

A few years ago Henry George tried to stir the people to a realization of the wrongs contained in the private ownership of land; but excepting the few Single-tax Leaguers who still try to keep alive the fires he kindled, few have given serious consideration to this matter, and many think him to be a vain dreamer of impossible conditions.

His theory as to the manner of applying a remedy has doubtless estranged many who accede to the correctness of his views as to existing wrongs. His argument as to the natural right of all mankind to the earth, the air, and the waters on the earth or underneath it, cannot well be refuted.

Let us suppose ten families occupy an island, and that this island constitutes all the land on the earth. Now, assume that they organize a regular government, the rights of each and all being fully considered and agreed to by every one, and, further, that every individual is perfectly satisfied that justice has been done him. Suppose that they agree to divide the island into ten equal parts, giving each family an equal portion, for which a patent is issued by the government, each soul on the island being satisfied that the division is fair and also satisfied with his allotment. There being no one on earth except the ten families, and as they are all content and happy, at first blush it might appear that they had a right to make this apportionment, and that there is no element of wrong concealed anywhere in the transaction. In doing this they certainly would be doing no more than has been done by nearly every people in history, and on a much more equitable basis. They overlooked, however, the changes to be wrought by time. After the apportionment, let us say that the islanders, being ordinary human men and women, went about their vocations in the usual manner, and led their lives as humankind generally does; let us say that there existed among them the same differences in capacity and temperament and habit of life that commonly prevail among people — some being thrifty and industrious, others improvident and idle, as men have been, are now, and perhaps always will be. What would probably happen? In a short space of time possibly fifty percent of the population would sell their share in the island to the provident class, and in the course of time twenty-five percent might come to hold absolute title to all the land. In consequence, the children born of the families that sold their holdings would have no land. The children born to the twenty-five percent would own it all.

If the laws of the island were based on the same principles as now obtain in the laws of the United States, it would be perfectly lawful for the twenty-five percent to say to the seventy-five percent that they might work the land on shares, giving the landlords half of the product of their labor. As there would be no possibility of procuring a livelihood otherwise, this offer would have to be accepted, if the laws were obeyed.

Normally, it is hard enough for a laborer to gain his living by the sweat of his brow, though he gets the full product of his labor. How much more difficult the situation when half of all he produces must be handed to another! In Ireland the situation was parallel to this; the poor Irish tenants tilled the soil of their native land, but instead of getting the full product of their labor, a large portion was pitilessly exacted by alien landlords. In lesser degree in nearly every country on earth the situation is comparable to this, the burden being disguised in various ways.

We, then, have seventy-five percent of the islanders giving up to the twenty-five percent one half of the product of their labor. Assuming that the original ten families that organized the government and apportioned the island have all died, by what God-given principle should the seventy-five percent of the population be required to give half of the fruits of their efforts to the twenty-five percent? Yet under our own laws would this not be possible, yea, natural? Without doing anything whatever, the twenty-five percent would be getting a revenue one and a half times as great as they could produce if working on an equal basis with the others. Because their fathers had got possession of the island, these few without toil get half again as much as they could produce if toiling, while the rest, though constantly laboring, get only half of the results of their labor. There are doubtless those who will say that the thrift of the original provident islanders should entitle them to transmit their gain to their children. Very good, but how about the thrift of the seventy-five percent now? The twenty-five percent may be compared with the original spendthrifts, as they squander without toiling, and by a just continuance of the rule, the children of the thrifty toilers should get back the island. On the face of the proposition this would manifestly be impossible. Let us go a step farther. Suppose the twenty-five percent, grown haughty with power, exercise it so arbitrarily that the others object, would it not be possible under laws like the laws of the United States, for the minority to refuse the majority employment except on the terms of the minority? What must be the consequence? Either submission to slavery by the seventy-five percent or starvation, if the laws are obeyed, or revolution and rebellion, if they are not. It cannot be an answer to the argument to hold that the ordinary principles of morality would restrain the minority in their exactions. History has not demonstrated that those who grow great with power never grow greedy. Then, if there is no justice in requiring the seventy-five percent to give up half their labor, is there justice in a situation or in laws which compel this result?

In the United States we have not even been as fair as the islanders, no equal division ever having been made, nor has every person been satisfied that his share is just; yet most of the land has been passed to the possession of private owners by patent from the government, and the average man has always thought, and the average man now thinks, that as a general proposition this was just, although knowing and admitting the possibility of minor wrongs. People have had the notion of private ownership of land so thoroughly grounded by long custom, that it seems the natural, rather than the artificial, manner of holding. Community of interest is repugnant to most minds. Socialism is believed to be a theory that might answer the requirements of angels, but finds small space for application among the wingless crowd on earth. Yet if the principle of private ownership is wrong as applied to the island, is it not equally wrong with us?

A few years back, owing to financial stress in the business world, vast numbers of men were idle from inability to find employment. Coxey gathered together a tatterdemalion army of the riffraff, tramps, and bums of the country, and marched them to Washington to emphasize to Congress the hardship of the situation, and to beg relief. He was derided and jeered at every hand. The public looked upon the idea as one of a crank, laughed at it, and dismissed it from their minds. Yet out of this army of thousands, how many possibly were sincerely desirous of a chance to earn an honest livelihood? The country at that time was infested with tramps, but since times improved the majority of them have gone to work again, and Coxey is forgotten. But way down deep, unperceived by the casual thinker and busy every-day man, some elemental principle had been violated, and in consequence the deplorable condition resulted. These men had a right to live. They had a right to labor. They had as good a right as any one of us to use God's soil, and to breathe God's air, and pity for them on our part by no means fulfilled our duty towards them. Somehow, little they knew how; somewhere, little they knew where; some time, little they knew when,— they had been cheated of the rights that are due to every human being that comes upon this earth.

The Declaration of Independence holds it to be a self-evident truth, that all men are entitled to life, liberty, and the pursuit of happiness. What a grim sardonic joke this would be, if read some Fourth of July to a ragged army of a hundred thousand starving men, women, and children, willing to labor, but with naught to lay their hands to! Hollow, indeed, would it sound, and the mockery would be so apparent to the multitude that I doubt not they would feel that somehow a terrible injustice had been done them.

When the ten families divided the island they allotted what belonged to God, and not to themselves, except as a blessing flowing from Him. They had no right to alienate the title from the whole community. The island belongs to every child who is born upon it, and each has as good a right to its benefits as every other. The ten families deeded away what they had no right to. Posterity was not considered, but the child then unborn owed no duty to the agreements made adverse to his interests by incompetent, reckless, luckless, or improvident ancestors, who bartered away his birthright. It was not theirs to give.

We must all, high and low, rich and poor, young and old, somehow or other, directly or indirectly, get our living from the earth. Necessity compels every one to eat to live. How fulfill this necessity except by application to Nature? What right has any government so to shape its laws that one single human being is debarred from his God-given right to labor in order to sustain his life? Organize society as you will, if provision is not fully made to protect the unborn souls to come, an injury is done, a seed is planted that will grow and bear suffering.

Henry George's theory is correct. The land belongs to all, the air and the water belong to all. If we are on earth for a purpose, and the God of chance is not ruling our destiny, as no man who thinks deeply can believe, it behooves us to conform to Nature's laws. The rules of conduct prescribed by people hundreds of years ago should have no binding force upon us today against our reason. Because people have always divided the land, it is not proof positive that their methods have been correct. Humanity has not reached the acme of advancement by any means. Some things are done vastly better today than ever before in history. It seems as if progress is being made. The world seems to be growing better. Yet how would this be possible but by the correction of previous wrong conceptions? Progress can never be made contrary to Nature's law; the decay of the nations of history proves the inexorableness of her workings. Conformity to her decrees, through principles of justice, of liberty, of equality, has ever led to advancement at a tremendous pace; but selfish interests have always injected into the laws of the nations the virus of destruction; decay ensues, the people become enfeebled, corruption reigns, and dissolution follows through the onslaughts of vigorous, lusty races that have grown strong through meting out the justice which the older nations had forgotten.

No government is good that does not give the greatest consideration to its lowliest citizens.

Let's talk about "our lowliest citizens."  Recall that 10% of us have title to 71.5% of the aggregate net worth. The bottom 75% of us have an amazing 12.7% of the aggregate net worth.  A slightly different 10% of us receive 47.2% of the before-tax income, and 20% of us get 61.0% of the pre-tax income.  The bottom 60% of us share --  are you ready? -- 20.9% of the pretax income -- and most economists agree that we're paying 15% of that in social insurance taxes on our wages, plus federal and state income taxes, sales taxes, taxes on our buildings and on our land (if we own any).  (Remember Leona Helmsley's observation about who pays taxes.)

Looking forward ... to more of the same?  To a society which doesn't automatically enrich a small segment of us at the expense of the rest, who, most of us would agree, work equally hard, even if we're not in privileged categories of the real estate, finance, insurance or natural resources sectors, or otherwise endowed with a monopoly which feeds them so abundantly at the expense of others.

In many fast examinations of the Gilded Age, Edward Bellamy's book on socialism, "Looking Backward" is mentioned in the same sentence with Henry George's book best-selling "Progress & Poverty."  The former book seems to be more widely assigned reading, in courses which bring in original sources.  This is a shame.

The Monkeys Disgrace

A friend sent me this poem, which seems a complement to Uncivilized, by Edmund Vance Cooke (1866-1932).  I first heard Uncivilized at a CGO meeting in Alburquerque perhaps 5 or 7 years ago, when Everett Gross recited it from memory.  The third verse of this one seems to me to be a direct reference to Uncivilized.

The Monkeys Disgrace

Three monkeys sat in a coconut tree
Discussing things as they're said to be.
Said one to another, "Now listen, you two,
There's a certain rumor that cannot be true,
That man descends from our noble race -
The very idea is a disgrace.

No monkey ever deserted his wife,
Starved her babies and ruined her life;
And you've never known a mother monk
To leave her babies with others to bunk,
Or pass them on from one to another
Til they scarcely know who is their mother.

And another thing you'll never see -
A monk build a fence around a coconut tree
And let the coconuts go to waste,
Forbidding all other monks to taste.
Why, if I put a fence around this tree,
Starvation would force you to steal from me.

Here's another thing a monk won't do -
Go out at night and get on a stew,
Or use a gun or club or knife
To take some other monkey's life;

Yes, Man Descended - That ornery cuss -
But, brother, he didn't descend from us!"

     - anonymous

Uncivilized begins,

An ancient ape, once on a time,
Disliked exceedingly to climb,
And so he picked him out a tree
And said, "Now this belongs to me.
I have a hunch that monks are mutts
And I can make them gather nuts
And bring the bulk of them to me,
By claiming title to this tree." 

[read the entire poem here]

One source attributes The Monkeys Disgrace poem to Nettie Bates Thomas, another to Ogden Nash.   Yet another compares it to a 1950s Broadway show tune, which you can hear here.

But I've also found a lot of other attributions for it, some which date it back to within Cooke's lifetime: 

Which part of a house is unaffordable?

I'm going to take the liberty of quoting a blog post from another site in full.  Here it is:

http://www.landvaluetax.org/the-lvtc-blog-by-henry-law/which-part-of-a-house-is-unaffordable.html
http://www.landvaluetax.org/pdf/the-lvtc-blog-by-henry-law/which-part-of-a-house-is-unaffordable.pdf

Which part of a house is unaffordable?

Is it the roof, the bricks or the drains?

"Unaffordable housing" The term still keeps cropping up. Which part of a house is not affordable? The roof? The bricks? The drains? The roofing tiles? The plumbing system? The amount builders have to be paid to put it all together?

Go into any builders' merchant and check the prices. They are all very affordable. It costs, at most, £100k to build a decent house. Which is very affordable when spread over 40 years - £50 a week. So what is going on to make houses unaffordable? I have asked this question many times over the past 30 years. Usually, the response is a yawn, so the resulting problems, are in a sense a richly deserved reward.

Too many have stood aside, not watched what is going on in the world and failed to try and make sense of it. Hence the talk about "unaffordable house prices" Anyone who uses the phrase "unaffordable house prices" without further explanation is guilty of extreme mental laziness. Which is most of us, and now we are living with the consequences of our neglect.

This of course includes the Nationwide Building Society, which would do everyone a good turn if they scrapped their so-called House Price Index and replaced it with a housing land price index.

I don't think I need to add anything to this one!

The House of Tranquillity: A "Middle Class Agenda"

Op-Ed Columnist - The House of Tranquillity - NYTimes.com. Finally, Biden was asked to come up with a middle-class agenda. This is a surprisingly difficult job because many of these programs — credits for college affordability and child care — fairly reek of Clintonism. This is an administration that is staffed by Clintonites but does not want to appear Clintonian in any way.

Let's talk about America's middle class.  How should we define the middle class?  If we define it in terms of income, we find that the middle quintile of households in 2007 had median net worth of $88,100.  That is, of the middle 20% of us, half had household net worth of less than $88,100, and half had more.  That's not a whole lot of money to fall back on, particularly when one considers that much of that is home equity.

The same middle-income quintile had a median before-tax family income of $47,300.  That is, half had more, half had less.

That middle income quintile accounted for 10.9%  -- no!  that was the the 1989 figure.  By 2007, it was 7.54% -- of America's net worth in 2007. 

Here's how the net worth was distributed across the income quantiles in 2007:

• 	Top income decile:	59.45% of the net worth
  	Second income decile:	10.92% of the net worth
  Top income quintile:		70.37% of the net worth
  Second highest income quintile:		13.48% of the net worth
  Middle income quintile:		7.54% of the net worth
  Fourth highest income quintile:		4.84% of the net worth
  Bottom income quintile:		3.77% of the net worth

    [source: SCF chartbook, p. 43, and my calculations]

If we define the middle class more broadly -- as the middle 60% of the income distribution -- our "middle class" has 25.86% of the net worth.

And here's how the before-tax income was distributed across the same income quantiles:

	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]

Using the broader definition of middle class -- again, the middle 60% of the income distribution -- our "middle class" has 36.13% of the before-tax income.

(Think of this quantile data as you read Bob Herbert's recent column "The Worst of the Pain.")

Alternatively, if we define the middle class in terms of net worth -- erase the above income-based definitions from your mind for the moment! -- here's the corresponding data:

The median household arranged according to net worth had net worth of $120,600 [source: SCF Chartbook, p. 39]  That doesn't sound so bad, does it?

Let's look at the net worth quantiles:

	Top net worth decile:	71.46% of aggregate net worth
	Second 15% of net worth holders:	15.83% of aggregate net worth
Top net worth quartile:		87.29% of aggregate net worth
Second highest net worth quartile:		10.21% of aggregate net worth
Third highest net worth quartile:		2.60% of aggregate net worth
Bottom net worth quartile:		-0.10% of aggregate net worth
[Source: SCF Chartbook, 2007, page 73]

The middle 50% of us, arranged according to net worth have 12.81% of the net worth.

If you define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class owns 26.04% of the net worth.

How is the income distributed across those same net worth quantiles?

	Top net worth decile:	41.25% of before-tax income
	Second 15% of net worth holders:	16.56% of before-tax income
Top net worth quartile:		57.81% of before-tax income
Second highest net worth quartile:		19.76% of before-tax income
Third highest net worth quartile:		13.80% of before-tax income
Bottom net worth quartile:		8.63% of before-tax income

The middle 50% of us, arranged according to net worth, have 33.56% of before-tax income

If you want to define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class is getting 36.32% of the before-tax income.  35% of us getting 36% of the income.  That's middle, I guess.

If you've gotten this far, I'll bet that you will think that we might want to tax income more heavily at the upper end of the income spectrum, or tax large estates more heavily.

I'm going to propose something different.  Something which digs deeper, and seeks the source, the cause of the problem, rather than trying to redistribute the income or net worth after the fact.

Henry David Thoreau, in Walden, wrote this:

There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. It is the pious slave-breeder devoting the proceeds of every tenth slave to buy a Sunday's liberty for the rest. Some show their kindness to the poor by employing them in their kitchens. Would they not be kinder if they employed themselves there? You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it. Society recovers only a tenth part of the property then. Is this owing to the generosity of him in whose possession it is found, or to the remissness of the officers of justice?

Henry George wrote this, in the opening chapter ("The Problem") of Progress & Poverty (1879), describing the first 100 years of America's existence as a nation:

It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share. I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in no wise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is to still further depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and believed, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were 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.

Now go back and look at the distributions of income and of net worth in America in 2007.  I've not provided the trend data here, but the 2007 snapshot tells the story well enough.

"I Am For Men"

That's the slogan on the two-story high advertising mural found recently on a building in Galesburg, Illinois.  (Photo here.)  It is an ad for Henry George 5 cent cigars.  (See also this page of cigar ads.)

The "I am for men" slogan was on a pin I found on ebay a few years ago.  The seller made some comment about it being anti-feminist.  Well, she or he didn't know much about George.

When I googled the phrase, I found some interesting things.  Here's one:

Henry George, a nineteenth-century American author and political economist, was nominated for the office of mayor of New York in 1886. He was called to a meeting at the Cooper Institute to speak to working men. The chairman of the meeting gave him a flowery introduction with the customary political rhetoric. The chairman concluded by saying, "Henry George is the friend of the working men." As soon as Mr. George rose to his feet, slowly and emphatically he said, "I would like to announce that I am not the friend of the working man." Stunned silence ensued -- a strange kind of bewilderment. He went on, "Nor am I the friend of capital. I am for men simply as men, regardless of any accidental or superfluous distinctions of race, creed, color, class, function, or employment."  [source.]

I found a front-page article in the Scranton (PA) Tribune and Kansas City Journal (among others) of October 30, 1897, the day after Henry George's death, which reported some of the campaign speeches George had given on his last day, a few days before the 1897 mayoral election.  Here is one of them:

At College Point there were 1,200 common laborers, a rough crowd, closely packed in the hall.  Mr. George was introduced as the friend of the working man.

He began: "I have never claimed to be a friend of the workingmen.  I do not now make any such claim (there was a pause of dead silence).  I have not and do not intend to advocate anything in the special interest of the laboring man (another dead pause; Mr. George walked the full length of the platform and let out his full voice in a shout:).  I am for men! (The crowd set up such a cheering and stamping that the room was filled with a choking dust).  I am for men! -- the equal rights of all men.  Let us be done with asking privileges for the laboring men."

I also found a 1906 book called "Looking Forward," by August Cirkel, which has a chapter by that title which starts with these paragraphs:

"I am for men." This famous expression, uttered by Henry George, sounds the keynote of the true spirit in which every public policy should be tested. Does it make men? Does it make them stronger, or wiser, or better? These are the all-important questions to be asked, when the effect of any system is to be noted. If the answer cannot be made affirmatively, sophistical must be the arguments that support it.

The kind of laws and institutions any people lives under is the kind of laws and institutions that that people deserves to live under. Every thing of life builds the body that it inhabits, and what kind of abode it constructs for itself, that is the kind of abode it must dwell in. Every people makes its own government. Where a race is ruled by tyrants, craven fear smites the hearts of the masses, and rather than endure the dangers of asserting their divine prerogative of freedom, they shuffle through life in cowardly submission to a few men no stronger than themselves.

I found a 1910 speech by Theodore Roosevelt, entitled "New Nationalism" which contains these paragraphs:

I believe in shaping the ends of government to protect property as well as human welfare. Normally, and in the long run, the ends are the same; but whenever the alternative must be faced, I am for men and not for property, as you were in the Civil War. I am far from underestimating the importance of dividends; but I rank dividends below human character. Again, I do not have any sympathy with the reformer who says he does not care for dividends. Of course, economic welfare is necessary, for a man must pull his own weight and be able to support his family. I know well that the reformers must not bring upon the people economic ruin, or the reforms themselves will go down in the ruin. But we must be ready to face temporary disaster, whether or not brought on by those who will war against us to the knife. Those who oppose reform will do well to remember that ruin in its worst form is inevitable if our national life brings us nothing better than swollen fortunes for the few and the triumph in both politics and business of a sordid and selfish materialism.

Near the end of the same speech, TR says this:

One of the fundamental necessities in a representative government such as ours is to make certain that the men to whom the people delegate their power shall serve the people by whom they are elected, and not the special interests. I believe that every national officer, elected or appointed, should be forbidden to perform any service or receive any compensation, directly or indirectly, from interstate corporations; and a similar provision could not fail to be useful within the States.

The object of government is the welfare of the people. The material progress and prosperity of a nation are desirable chiefly so long as they lead to the moral and material welfare of all good citizens. Just in proportion as the average man and woman are honest, capable of sound judgment and high ideals, active in public affairs; but, first of all, sound in their home, and the father and mother of healthy children whom they bring up well; just so far, and no farther, we may count our civilization a success.

(TR by that time had become quite comfortable with Henry George's ideas. See his party's 1912 platform "A Confession of Faith.")

In 1917, Luke North (James Hartness Griffes) published a book of poetry entitled "Songs of the Great Adventure" which included this:

"I AM FOR MEN"

He stood for Men —
Not for parties, sections, classes;
Not for dogmas, doctrines, isms —
Nor all the minutiae of over-elaborated plans for the future,
Nor for craven caution, dissimulation, equivocation —
Patience that now outrages virtue —
Program'd ways and means which if not followed
The world may stay in hell.

He stood for Men —
For in his soul he knew the line of cleavage
Was not between the robber and the robbed —
Was not marked by external difference,
By rank or class or occupation or wealth or poverty.
He knew that poor men could be very cruel and rich men kind.
He knew the line of cleavage was in the heart — those who care and those who don't —
This Henry George who wrote "Progress and Poverty."

He stood for Men —
And was he wrong to yield no tithe to classes?
What has now become of all the appeals
To class interest, class consciousness, class solidarity?
The human heart will not respond to them — in every class are tyrants.
The human mass forgets its every interest,
Flings to the wind all self and class advantage
And goes out to die for a word.

He stood for Men —
And showed the world how to unshackle the chains that bind men.
He showed how poverty begins,
Where modern slavery has its roots,
And how to tear them up.
The earth is for all men, he said —
And his word has gone around the world —
And now it's time to act!

He stood for Men —
Not creeds and doctrines, nor all the lesser details of future contingencies.
He bared the earth to man.
It is for us to take it.
He tried to gain it, and was beaten back to his death.
Now we will gain it —
At whatever cost!

Check out this fine book of poetry -- and if you know of a songwriter looking for inspiration, send them to this starting page.

It is ironic that Henry George's name became associated with cigars.  He smoked, and that likely contributed to his premature death at age 58.   He wrote about cigar-making and taxation as follows, in Chapter 8 of "Protection or Free Trade?"

It is no wonder that princes and ministers anxious to make their revenues as large as possible should prefer a method that enables them to "pluck the goose without making it cry," nor is it wonderful that this preference should be shared by those who get control of popular governments; but the reason which renders indirect taxes so agreeable to those who levy taxes is a sufficient reason why a people jealous of their liberties should insist that taxes levied for revenue only should be direct, not indirect.

It is not merely the ease with which indirect taxes can be collected that urges to their adoption. Indirect taxes always enlist active private interests in their favor. The first rude device for making the collection of taxes easier to the governing power is to let them out to farm. Under this system, which existed in France up to the Revolution, and still exists in such countries as Turkey, persons called farmers of the revenue buy the privilege of collecting certain taxes and make their profits, frequently very large, out of the greater amount which their vigilance and extortion enable them to collect. The system of indirect taxation is essentially of the same nature.

The tendency of the restrictions and regulations necessary for the collection of indirect taxes is to concentrate business and give large capital an advantage. For instance, with a board, a knife, a kettle of paste and a few dollars' worth of tobacco, a competent cigar maker could set up in business for himself, were it not for the revenue regulations. As it is, in the United States, the stock of tobacco which he must procure is not only increased in value some two or three times by a tax upon it; but before the cigar maker can go to work he must buy a manufacturer's license and find bonds in the sum of five hundred dollars. Before he can sell the cigars he has made, he must furthermore pay a tax on them, and even then if he would sell cigars in less quantities than by the box he must buy a second license. The effect of all this is to give capital a great advantage, and to concentrate in the hands of large manufacturers a business in which, if free, workmen could easily set up for themselves.

But even in the absence of such regulations indirect taxation tends to concentration. Indirect taxes add to the price of goods not only the tax itself but also the profit upon the tax. If on goods costing a dollar a manufacturer or merchant has paid fifty cents in taxation, he will now expect profit on a dollar and fifty cents instead of upon a dollar. As, in the course of trade, these taxed goods pass from hand to hand, the amount which each successive purchaser pays on account of the tax is constantly augmenting. It is not merely inevitable that consumers have to pay considerably more than a dollar for every dollar the government receives, but larger capital is required by dealers. The need of larger capital for dealing in goods that have been enhanced in cost by taxation, the restrictions imposed on trade to secure the collection of the tax, and the better opportunities which those who do business on a large scale have of managing the payment or evading the tax, tend to concentrate business, and, by checking competition, to permit large profits, which must ultimately be paid by consumers. Thus the first payers of indirect taxes are generally not merely indifferent to the tax, but regard it with favor.

The other passage about cigars which I recalled turned out to be not from Henry George, but from his friend Louis F. Post, who went on to be President Wilson's Secretary of Labor:

Though land value has no effect upon the price of good, it is easier to sell goods in some locations than in others. Therefore, though the price and the profit of each sale be the same, or even less, in good locations than in poorer ones, aggregate receipts and aggregate profits are much greater at the good location. And it is out of his aggregate, and not out of each profit, that rent is paid, For example: A cigar store on a thoroughfare supplies a certain quality of cigar for fifteen cents. On a side street the same quality of cigar can be bought no cheaper. Indeed, the cigars there are likely to be poorer, and therefore really dearer. Yet ground rent on the thoroughfare is very high compared with ground rent on the sidestreet. How, then, can the first dealer, he who pays the high ground rent, afford to sell as good or better cigars for fifteen cents than his competitor of the low priced location? Simply because he is able to make so many more sales with a given outlay of labor and capital in a given time that his aggregate profit is greater. This is due to the advantage of his location, and for that advantage he pays a premium in higher ground rent. But that premium is not charged to smokers; the competing dealer of the side street protects them. It represents the greater ease, the lower cost, of doing a given volume of business upon the site for which it is paid; and if the state should take any of it, even the whole of it, in taxation, the loss would be finally borne by the owner of the advantage which attaches to that site — by the landlord. Any attempt to shift it to tenant or buyer would be promptly checked by the competition of neighboring but cheaper land.

Location, location, location!  Or, as a friend in the advertising business put it when I told him about George's ideas, Location, Location, Taxation!

Do We Really Have to Create Man-made Misery to Supplement What Nature Provides?

As I read and listen to and watch the news -- earthquake, ice storms -- and think about the past year -- floods, fires, mudslides, hurricanes, nor'easters, more earthquakes -- it seems to me that nature provides us plenty of opportunities to exercise our compassion and charity, individually and as a nation, and plenty of spending opportunities for maintaining necessary infrastructure.

We don't need to maintain economic structures which create additional human misery.  There is enough without them.

We can't control nature. But we CAN correct man-made structures which victimize our fellow human beings.

We don't need poverty in the world.  We could manage just fine without it.

It is time to delve into those structures, and get to the root of them.

When we get to the root, we'll recognize it and know what to do about it. 

When we've done that, our safety nets will be there for those who have health problems, or accidents, or are victims of nature's whims.  We'll be able to devote our energies and funds to things which can't be avoided -- acts of nature -- instead of trying to patch up the victims of our economic system.

Here and abroad.

Go to the root of the problem.

Where do you start?  Read Henry George.  Start with the speeches linked from the front page of http://www.wealthandwant.com/, and then, if something in his thought resonates, move on to Social Problems (ditto) and then "Progress & Poverty, at http://www.progressandpoverty.org

The good news is that economics need not be a dismal science.  When viewed through the lenses of the classical economists, a lot more things look a lot more fixable.

Poverty is a structural problem.  Nothing we try to do for or with individuals is going to make the least bit of difference in the structures which are producing poverty.   While I applaud the hearts and efforts of those who seek to improve the lives of individuals afflicted with poverty through charity, through education, through aid, even through job creation, none of these things is going to end poverty until we correct the structures which take for some that which others create.  You might move one person from being a sower to being a reaper, but you aren't going to reduce the problem of some being permitted to reap what others sow until you attack the structures which permit it!

And isn't it government's job to create and promote structures which protect all of us from exploitation by others?

Remembering Howard Zinn

Howard Zinn died a few days ago, at 87.  I think my first awareness of him might have been via Marian Wright Edelman's writings; he was among her college professors and mentors.

I found Bob Herbert's tribute, titled "A Radical Treasure," very moving and relevant.  It got into the significance of, if not the relevance, of "radical."

I always wondered why Howard Zinn was considered a radical. (He called himself a radical.) He was an unbelievably decent man who felt obliged to challenge injustice and unfairness wherever he found it. What was so radical about believing that workers should get a fair shake on the job, that corporations have too much power over our lives and much too much influence with the government, that wars are so murderously destructive that alternatives to warfare should be found, that blacks and other racial and ethnic minorities should have the same rights as whites, that the interests of powerful political leaders and corporate elites are not the same as those of ordinary people who are struggling from week to week to make ends meet?

Mr. Zinn was often taken to task for peeling back the rosy veneer of much of American history to reveal sordid realities that had remained hidden for too long. When writing about Andrew Jackson in his most famous book, “A People’s History of the United States,” published in 1980, Mr. Zinn said:

“If you look through high school textbooks and elementary school textbooks in American history, you will find Jackson the frontiersman, soldier, democrat, man of the people — not Jackson the slaveholder, land speculator, executioner of dissident soldiers, exterminator of Indians.”

Radical? Hardly. ...

Herbert concludes:

He was a treasure and an inspiration. That he was considered radical says way more about this society than it does about him.

Radical.  Do you know the root of the word?  Pun intended, of course.  Radix -- root -- as in radish.  It brings to mind the words of Henry David Thoreau:

There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. It is the pious slave-breeder devoting the proceeds of every tenth slave to buy a Sunday's liberty for the rest. Some show their kindness to the poor by employing them in their kitchens. Would they not be kinder if they employed themselves there? You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it. Society recovers only a tenth part of the property then. Is this owing to the generosity of him in whose possession it is found, or to the remissness of the officers of justice?

Find the root, and strike at it.  Be radical.

Reading Lowell Harriss

As I've noted in an earlier post, Lowell Harriss died a few weeks ago.  I've been reading some things he wrote during his long and productive career.

The first is a piece he wrote in 1978, a few months after Proposition 13, California's taxpayer initiative which lowered property taxes and "protected" property owners from paying for services through property taxes, was passed.  It is entitled "Property Taxation After the California Vote." 

He starts with this: What approach to property taxation would be most in our interest and that of our children?

He provides some history of the property tax, in general and then specifically in California.

Keep in mind that, in California more than in most of the country, assessments on homes rather promptly reflect market conditions -- in an environment in which house and land prices have been rising rapidly. Often, however, local officials did not use the increases in tax base to finance offsetting reductions in tax rates. Homeowners faced rising tax bills; cash income, especially for retired persons, did not always go up correspondingly.

California's colleges and universities were, however, among the best in the US, and surely some significant portion of the public spending was to provide the very services which caused California's property values to rise.

Lowell went on to say,

The full results of Proposition 13 will not appear at once. Only time will reveal whether new jobs develop now as property owners use the addition to their disposable income; whether extensive declines will occur in state-local employment; and how much more erosion of local authority will result from expansion of state payments to replace revenues lost by the sweeping changes in real estate taxes.

He continued,

Present owners of property have voted themselves capital gain "windfalls." The reduction in property taxes will tend to raise real estate prices. Today's owners, in voting essentially permanent reductions in annual property taxes, have enlarged the stream of net benefits (income) to be capitalized in valuing real estate. This one-time capital gain in effect absorbs much of the future benefit from the tax cut. In this respect, the specific results of Proposition 13 are difficult to judge because assessments (but not the tax rate) will rise after a sale. Future buyers will pay a higher price -- higher by enough, in general, to offset the tax benefit.  "No election will ever be lost by votes in the future," runs the conventional wisdom. And certainly California voters did not have future property owners (or voters) in mind when they rallied to the support of Proposition 13.

Lowering the tax reduces the cash required to hold on to underdeveloped land. "Speculative underutilization" becomes less expensive. Waiting for population growth and inflation to boost prices will cost less. The current offerings of land will decline -- and thereby prices will be raised -- because owners face lower cash pressure to sell or develop.  Income tax considerations, of course, complicate individual decisions and require some caution in generalization, but the net effect on land use will be some -- or much -- distortion away from the direction of free-market forces.

Will the California economy get a boost from Proposition 13? Of course it will. Other things being the same, tax something, and there will be less of it (land being an exception). The 50- to 60-percent cut in taxes on man-made capital will alter favorably the "arithmetic" of construction projects in California. How much so is difficult to say. This cost reduction will interact with many other factors, including the forces tending to raise land prices. The change in prospective net returns at the margin may be more modest than impressive. But one conclusion is clear: More capital will flow where tax reduction improves the prospects for investment.

He continues,

The once widely accepted criticism that property taxes are regressive does not survive modern economic analysis. In fact, a persuasive argument in favor of property taxation for local services can be made on grounds of equity. Especially important, it seems to me, is the fact that in effect this tax enables localities to capture some of the fruits of forces raising prices of land, including public outlays on streets, schools, sewers, and other facilities.

He concludes,

Finally, and probably of greatest potential, there is a real opportunity in the wake of Proposition 13 for restructuring fundamentally the way we tax property. We can reduce burdens on man-made capital and make up the revenue from higher taxes on site values, a procedure which seems to me eminently desirable on several grounds. This possibility should be part of the broader public discussion of the role of property taxation stimulated by the vote in California.

One change may be politically tempting -- to reduce burdens on residential property while maintaining or even raising burdens on business and public utility property. Such moves would not only add to concealment of costs of government in the form of hidden burdens on consumers and investors. In addition, the productive portions of the economy would suffer. Building better communities will not come from boosting taxes on business.

Americans should be "up in arms" -- or at least doing something -- about restricting and effectively controlling the growth of government. "Revolt" seems to me too strong a term; it also seems misleading, implying as it does that a single, dramatic action will do the job. Patient, informed, continuing efforts are required. Among them will be the reform of property taxation to develop its potential as a high-quality revenue producer.

Another, earlier paper entitled "Equity of Heavier Reliance on Land Taxation (Location Value) and Less on Improvements" (1970), starts with this:

    Greater fairness in sharing the costs of local government constitutes a prime -- but not the only -- reason for shifting much of the tax from improvements to land. This country will be around for a long time. So also, I hope, will meaningful local government. Effective freedom requires financial independence, including ability and responsibility for raising revenue.

    One of the biggest legacies we leave our children will be the tax system. We want to make it as good as possible. Equity is one (again, not the only) element of "goodness" of a tax system.

He proposes a shift to a structure where the millage rate on land is about 4 times that on buildings.  He talks about transition issues, and issues of equity during and after the transition:

    Two markedly different sets of equity issues command attention. The one of dominant concern ought to be the situation in which we (and our children) would carry on our affairs after generally full adjustment as contrasted with conditions then if present practices were to continue. The long run in which "we" are not all dead! The other concern involves the transition. The shift itself would produce results distinguishable from those to prevail after the economy had settled down to the new system.

Writing of long-term equity issues -- remember that this was 1970 when you consider the dollar figures --

    Community Use of Values Created by Social Development and Local Government Spending

    Over the longer run, landowners would get less of the increment in the values of location. The general public would get more in the form of a larger flow of the rising yields of the worth of location (land) to finance local services. On this score, the equity results commend themselves very strongly indeed. Socially created values would go for governmental, rather than for private uses -- and locally. The absorption of the increments for local, rather for state or national, governmental use would channel these funds on a benefit basis geographically.

    The localities doing most to make themselves attractive would have most of this revenue source. In major cities $10,000 to $15,000 (now often considerably more) of governmental outlay is frequently needed for each new dwelling unit -- schools, streets, fire and police, sanitation and health, park and prison, facilities. Under present arrangements much benefit from such outlays in developing areas accrues to the owner of locations being "ripened" for more lucrative use; his payment in taxes (and special assessments) toward the cost will generally be only a modest portion of the total.

He describes this as a "burdensomeless" tax:

    As for the future, the tax on values of location above their present levels would be almost burdensomeless, except as owners of land and their heirs get less of the "unearned increment" of rising values over the decades. Much of the element of true economic surplus would be used for public purposes. For those parcels of land whose values drop, the annual tax would also decline. Then, because tax rates on land would be higher than today, local government would share more fully in the loss of worth. For landowners the proposal would not be a one-way affair which assumes that land always rises in price.

    No other revenue source seems to me to compare so favorably on this score of fairness. Future users of land would be no worse off for the much heavier tax they would pay on the value of location. The purchase price of land would be correspondingly less. Of the total flow of yield of location value, interest (explicit or implicit) would be smaller, taxes higher. Who would be less well off? The landowners and their heirs who would have gotten the (unearned) increments!

    More of the rise in land value which results from (1) governmental investment in community facilities and (2) the general rise in demand due to the growth of population and income would go to pay for the costs of local government. Such a tax on a pure economic surplus seems to me about as fair as any imaginable source of funds for financing community services. The National (Douglas) Commission on Urban Problems estimated that in the 10 years to 1966, and despite rising interest and tax rates, land prices rose by over $5,000 per American family -- $250,000 million.  Even a modest fraction of this amount if used for local government would have permitted quite a reduction of burden on buildings. The estimated rise in land prices was over four times the total growth of state-local debt and was greater than all of the property tax paid in the 10-year period.

And

    Land as area is fixed in quantity. Tax it heavily, and it will not move to some other place, or decide to take a vacation, or leave the inventory of productive resources by going out of existence. Tax land lightly, and the favorable tax situation will not create more space in the community.

    Our ethos apparently ties economic justice -- equity -- to rewards based on "accomplishment." This principle does not lead to justification of large rewards because of the ownership of land. Differences, big ones, in payments for human services or for the use of capital can rest on what the recipients have done. But for the owners of urban locations such justification can rarely be found; when there have been private inputs for community development, to the extent feasible administratively, they belong on the tax rolls as improvements rather than as land.

And just before he concludes, he writes,

    What an owner can get in the form of land price increases in and around cities has made rich men out of owners of farmland, vegetable plots, and waste areas. More than one owner of a few acres of potato land on Long Island or farms on the outskirts of many a city in the United States, of a small plot of rice land near Tokyo or Bangkok or Taipei, has reaped handsome gains because of the pressure of population. In America, North and South, in Europe and Australia and Africa, private enrichment has come to the passive owner of land who has done little or nothing to enlarge its worth as part of the city whose growth has brought his good fortune. In fact he may have paid no more than an infinitesimal fraction of the taxes which have financed the streets and other governmental facilities that have helped to elevate the value of his land.

Next, I moved on to a longer piece, from the same time, and containing some of the same material.  I ended up feeling that it is perhaps the best piece I've read in a long time on Land Value Taxation.  It is titled "Property Tax Reform: More Progress, Less Poverty" and it is a lecture he delivered at DePauw University in 1970.   I commend it to your attention.

Finally, I note a book from the TRED -- Committee on Taxation, Resources and Economic Development -- series (#6) entitled Government Spending & Land Values: Public Money & Private Gain edited by C. Lowell Harriss (1973).  Each book in this series came out of a 2- or 3-day conference, held at the University of Wisconsin-Milwaukee.  Lowell organized this conference, and wrote the book's introduction.  Here's the dust jacket material:

Billions of tax dollars are spent annually on government subsidy programs which are designed to help certain groups, areas, and industries, and contribute to the general welfare. Despite the good intentions of legislators, however, analysts point to evidence that the programs are not only burdensome for the taxpayer but often fail to do their intended jobs. Critics find that major benefits go not to those whom the programs are designed to help, but to others who can "capitalize" on them.

One major feature of the subsidy benefit pattern -- unintended but predictable -- is the capitalization of land values. The value of land will increase when the benefits, chiefly money income, are enhanced by government subsidization. When the land is sold, the benefit of a subsidy which seems likely to continue will be captured by the seller. Thereafter, tax funds that continue to subsidize a program will not fully benefit those for whom they were presumably intended, but the seller will have made a capital gain.

A classic example can be drawn from the experience of federal farm programs. Taxpayers and consumers have been spending billions annual to aid some farmers. In practice, of course, these programs have often -- and intentionally -- reduced farm output and raised consumer prices. The consumer-taxpayer is thus dealt a double blow, in effect subsidizing an increase in his own food prices. Yet the operating farmer, burdened with a higher land price, fails to get the full benefits of the programs established for his welfare.

In farm programs, as in some other subsidy programs, the expected annual benefits are capitalized into higher land prices. Then, after land prices have gone up to reflect these benefits, the annual payments to farm operators in effect support the higher land prices. In effect, the seller of land realizes the benefits of government subsidy into perpetuity. A somewhat similar pattern is to be expected in other public spending programs, including those concerned with urban renewal, where benefits are localized. The pattern shows that farm programs do not raise wages of low-paid farm labor, that urban projects do not rid cities of slums, and that the taxpayer-consumer bears the burden of both.

This volume explores, and at least attempts to define, the extent to which land values tend to capture the benefits of subsidies and other government spending through capitalization. It includes papers by proponents as well as critics. The contributors, who include some of the nation's leading economists, discuss the nature and effects of farm and housing programs, commodity price supports, transportation outlays, land preservation projects, water resource development, and urban renewal programs. Their work will be of more than routine interest to economists, political scientists, lawyers, political officeholders and government officials, planners, and all others who seek to unravel the complex fabric of multi-billion-dollar government spending programs.

Lowell made contributions in many parts of economics; I am probably familiar with only a small portion of his work, but I am grateful for it.

Thinking Great Thoughts

The birth of the first of the next generation in my family this week -- our great niece -- got me thinking.  I think of a friend who said of herself "I don't think I'd be a good mother, but I'm a wonderful aunt."  I think of my own great-aunts and great-uncles.  My paternal grandmother's sister, who was a lovely, gentle, elegant woman, and a sweet reminder of my own grandmother after her early death.  My paternal grandfather's sister, who I didn't meet until his 75th birthday (families are complicated!), but whose correspondence with him as they rediscovered each other was a treasure.  My maternal grandfather's brother and his wife, and her siblings, who lived very differently from anyone else I knew, but always gave me a sense of 'rootedness" when I visited their small town. (I remember my shock -- and youthful disillusionment -- when I realized this "plain" lady made her cakes using cake mixes!)

The world they lived in, and the world my new great niece is coming into, are so different from each other.  I think about my high hopes that we can make her world a better place, in part through sharing a set of ideas which were well-known at roughly the time my great-aunts and uncles were born (1885-1905), and are today relatively unknown, but no less important and full of potential for good -- the common good.  

5 generations. 

And we are reminded, as we plan, to think about the seventh generation.  What are the effects of our actions on those who will follow us?  What do we owe them?  And of course, what do we owe each other?

The Great 18-year Real Estate Cycle

http://forums.wallstreetexaminer.com/index.php?act=Attach&type=post&id=1308

This short article by Steve Hanke, of Johns Hopkins and Cato, begins,

On January 3rd, US Federal Reserve Chairman Ben S. Bernanke delivered a major speech at the annual meeting of the American Economic Association. In his formal paper, “Monetary Policy and the Housing Bubble,” Chairman Bernanke argues that the Fed’s monetary policy was not responsible for the U.S. housing bubble. He claims that faulty regulation was the primary culprit.

Chairman Bernanke’s claim is a great canard. The Fed is a serial bubble blower. Let’s first consider the Fed-generated demand bubbles. The easiest way to do this is to measure the trend rate of growth in nominal final sales to U.S. purchasers and then examine the deviations from that trend. As the accompanying chart shows, nominal final sales grew at a 5.4% annual rate from the first quarter of 1987 through the third quarter of 2009. This reflects a combination of real sales growth of 3% and inflation of 2.4%.

It ends,  

These data talk, and the most interesting thing they say is that every 18 years we can expect the culmination of a credit-fueled real estate and ensuing business cycle. This, of course, doesn’t imply that all recessions are preceded by a real estate cycle. It only says that all real estate cycles have spawned economic downturns.

This knowledge has allowed for some prescient forecasts. The prize in that department goes to Prof. Fred Foldvary who wrote in 1997: “the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.”

For a full treatment of the 18-year real estate cycle, I recommend the following items:

• Fred E. Foldvary. “The Business Cycle: A Georgist-Austrian Synthesis.” American Journal of Economics and Sociology Vol. 56, No. 4, 1997: 521-41.
• Mason Gaffney. After the Crash: Designing a Depression-Free Economy. Ed. Clifford W. Cobb. Chichester, U.K.: Wiley-Blackwell, 2009.
• Phillip J. Anderson. The Secret Life of Real Estate and Banking. London: Shepheard-Walwyn, 2009.

You can read a book-related interview with Mason Gaffney at http://www.masongaffney.org/essays/GAffney_interview_in_Canada_Sun_Life_Financial.pdf.  The book is available here.  Fred's paper is here.  Mason's review of Phil's book is here.

2024.

Why I Bother

The reader might wonder why there are several hundred posts on this blog, and rather few comments.  Why do I keep on writing?

This blog comes out of an experience which Georgists -- people who are persuaded that Henry George (b. 1839, Philadelphia; d. 1897, NYC) largely got it right -- call "seeing the cat."  The phrase refers to an AHA!!! moment once described as follows:

I was one day walking along Kearney Street in San Francisco when I noticed a crowd in front of the show window of a store. They were looking at something inside. I took a glance myself, but saw only a poor picture of an uninteresting landscape. As I was turning away my eye caught these words underneath the picture: "Do you see the cat?" I looked again and more closely, but I saw no cat. Then I spoke to the crowd. "Gentlemen," I said, "I do not see a cat in that picture; is there a cat there?" Some one in the crowd replied: "Naw, there ain't no cat there. Here's a crank who says he sees a cat in it, but none of the rest of us can." Then the crank spoke up. "I tell you," he said, "there is a cat there. The picture is all cat. What you fellows take for a landscape is nothing more than a cat's outlines. And you needn't call a man a crank either because he can see more with his eyes than you can with yours."

Well, I looked again very closely at the picture, and then I said to the man they were calling a crank, "Really, sir, I cannot make out a cat in that picture. I can see nothing but a poor drawing of a commonplace landscape." "Why, Judge," the crank exclaimed, "just you look at that bird in the air. That's the cat's ear." I looked but was obliged to say: "I am sorry to be so stupid but I really cannot make a cat's ear of that bird. It's a poor bird, but not a cat's ear." "Well, then," the crank persisted, "look at that twig twirled around in a circle; that's the cat's eye." But I couldn't make out an eye. "Oh, well," returned the crank a bit impatiently, "look at those sprouts at the foot of the tree, and the grass; they make the cat's claws." After a rather deliberate examination, I reported that they did look a little like claws, but I couldn't connect them with a cat. Once more the crank came back at me as cranks will. "Don't you see that limb off there? and that other limb just under it? and that white space between?" he asked. "Well, that white space is the cat's tail." I looked again and was just on the point of replying that there was no cat's tail there that I could see, when suddenly the whole cat stood out before me.

There it was, sure enough, just as the crank had said; and the only reason the rest of us couldn't see it was that we hadn't got the right angle of view. but now that I saw the cat, I could see nothing else in the picture. The poor landscape had disappeared and a fine looking cat had taken its place. And do you know, I was never afterwards able, upon looking at that picture, to see anything in it *but* the cat.

To which Nic Tideman added, "In my view, 'the cat' is the possibility of a world without privilege."

The goal of this website is to help others see what Georgists see.  We look around and see dozens -- hundreds -- thousands -- of social problems which ultimately, if you go to the root, are offshoots of our -- America's, the world's -- failure to recognize that the value of land, non-renewable natural resources and other like things (that which the classical economists would recognize as "land" even if they never saw an airplane [prime landing rights at LaGuardia] or heard a radio or TV [electromagnetic spectrum] or imagined a satellite in geosynchronous orbit, or lived in a place where water wasn't in seemingly infinite supply, or a time when clean air wasn't a given) ought to be socialized -- treated as our common treasure through taxation -- while things which individuals and corporations create ought to be privatized (not taxed).

There!  I've written a sentence of a length that only a few can parse.  But perhaps it will give you a sense of the Georgist vision and reform.

I write this blog in the hope that a curious journalist, or legislative aide, or reformer, or foundation board member, or simply another person who thinks that there has to be another, better way than what we are currently doing, will find this body of posts, and explore it long enough to start to see the cat, too, and then share it with others who are willing to work for a better country and better world. 

I'll close with a quote from Henry George's book, Social Problems, in an essay called "What We Must Do."

"I do not say that in the recognition of the equal and unalienable right of each human being to the natural elements from which life must be supported and wants satisfied, lies the solution of all social problems. I fully recognize that even after we do this, much will remain to do. We might recognize the equal right to land, and yet tyranny and spoilation be continued.

But whatever else we do, as along as we fail to recognize the equal right to the elements of nature, nothing will avail to remedy that unnatural inequality in the distribution of wealth which is fraught with so much evil and danger. Reform as we may, until we make this fundamental reform, our material progress can but tend to differentiate our people into the monstrously rich and frightfully poor. Whatever be the increase of wealth, the masses will still be ground toward the point of bare subsistence — we must still have our great criminal classes, our paupers and our tramps, men and women driven to degradation and desperation from inability to make an honest living."

Middle Class Wealth

One of my google alerts, for the words "wealth distribution," took me to a blog post about the tragedy which has occurred in Haiti, which referred to America being different because it had a large middle class.  Since I'd recently posted on this blog some new data about the distribution of wealth, I took a look at that data with the "middle class" in mind.

Here's the data on the distribution of Net Worth, copied from the post below:

	Top 1%:		34.6%
	Next 4%:		26.4%		Top 5%:		61.0%
	Next 5%:		10.8%		Top 10%:		71.8%
	Next 10%:		13.3%		Top 20%:		85.1%
	Next 30%:		12.4%		Top 50%:		97.5%
	Bottom 50%:		2.5%

Do we define as "middle class" the people who hold the middle third of our wealth?  That's the 9% of us who hold 37.2% of our wealth.   Those below that cutoff must be "lower middle class" or "poor."

Do we define as "middle class" the people between the 50th and 80th percentiles of the wealth distribution?  That 30% has a mere 12.4% of our wealth.  The 50% below them only have 2.5% of the net worth.

Do we define as "middle class" the people between the 50th and 90th percentiles? They hold 25.7% of the wealth.

If America's strength is its broad middle class, they certainly aren't reaping much of a reward.  The Chartbook for the Survey of Consumer Finances, page 42, shows this:

Median Value of Net Worth for Families with Holdings, 1989, 1998 and 2007, by Income Quantile in thousands of 2007 dollars: Income Quantile: 1989 1998 2007 1989 to 2007 Bottom Quintile (20%) 2.9 7.4 8.1 +5.2 Second Quintile (20%) 38.8 42.2 38.1 -0.7 Middle Quintile (20%) 67.1 68.0 88.1 +21.0 Fourth Quintile (20%) 107.0 143.0 205.8 +98.8    Second Decile (10%) 211.2 240.0 356.2 +155.0    Top Decile (10%) 625.4 575.9 1,119.0 +493.6

From the following chart in the Chartbook, Mean Value of Net Worth for Families With Holdings, I calculate the following shares of Net Worth:

Share of Holdings, 1989, 1998 and 2007 -- by Income Quantile
Income Quantile:			1989		1998		2007		1989 to 2007
Bottom Quintile	(20%)		2.65%		3.38%		3.77%		+ 1.12 percentage points
Second Quintile	(20%)		7.07%		6.80%		4.84%		- 2.23 percentage points
Middle Quintile	(20%)		10.90%		8.94%		7.54%		- 3.36 percentage points
Fourth Quintile	(20%)		14.64%		14.59%		13.48%		- 1.16 percentage points
Second Decile	(10%)		11.96%		11.53%		10.92%		- 1.04 percentage points
Top Decile	(10%)		52.78%		54.76%		59.45%		+ 6.67 percentage points

   

By this standard, who is our middle class? 

• The 20% of us between the 40th and 60th percentiles, who have  7.54% of the net worth? 
• The 60% of us between the 20th and 80th percentiles, who have 25.86% of the net worth?   
• The 70% of us between the 20th and 90th percentiles, who have 36.78% of the net worth?
• The 50% of us between the 40th and 90th percentiles, who have 31.94% of the net worth?

The top 10% of us, sorted by income, have 59.45% of the net worth -- $6 out of every $10 of net worth in America!!

What does this suggest to you about how we might tax ourselves?

What does this suggest to you about who we might ask to support the aid to Haiti after its tragedy?  

What does this suggest to you about the notion that the strength of America is its large healthy middle class?

What does this suggest to you about the notion that our taxes ought to be based on income?

Does it put Leona Helmsley's comment -- "WE don't pay taxes.  The little people pay taxes." -- in a different light?

A caution about the data: This post shows two different distributions of net worth: according to net worth in the first part, and according to income in the second part.  Don't confuse them -- it is easy to do.  But all the data is based ultimately on the Federal Reserve Board's Survey of Consumer Finances, and I've never heard anyone claim that the SCF overstates the concentration of wealth.    If you need help differentiating, post a question, and I'll try to help.

So is the Woodstock Generation going to fix America's most serious problems?

I was a rising senior in high school when Woodstock took place. A fellow waitress in the local deli in which I worked -- Max for Snacks, in King of Prussia, PA -- took off for Woodstock, and the rest of us dreamed of doing so. 

We thought we could change the world.  Many had a vision of a society in which all could prosper, all could succeed.  We sang, we danced, we applauded, we protested.  Gradually we worked our way up.  We educated ourselves, we bought homes, we had children -- not always in that order -- and we became part of the establishment.  We bent the establishment, a bit, perhaps, to our advantage.

But we didn't correct the problems, and arguably, we let them grow worse.  We watched as the benefits of public investment -- local, muncipal, county, state, federal -- accrued not to all of us but to those who own our land and claim title to our natural resources.  We permitted corporations and individuals to lay claim to our common resources, we who grew up hearing about Jed Clampett being somehow entitled to the oil revenue, to the exclusion of the rest of us.

We're so used to the way this aspect of the world was handed to us that few of us think to question it.  And yet the privatization of the economic value of urban land and the privilege of collecting the revenue on non-renewable natural resources on which all of us are dependent together produce some of our most serious social, economic, environmental, poverty and justice problems.  Most wars are fought over these two things.

And until we come to recognize this, all we can do is put bandaids on those problems -- locally, nationally and globally.

These two things are what someone wisely referred to as "Natural Public Revenue" sources.  Yet we largely ignore them, and use taxes which set up perverse incentives -- and wonder why we can't seem to solve any of our biggest problems.