Unused solutions can frustrate one
Our author is a United Airlines flight attendant and an actor who in the 1970's took a class on Progress and Poverty and has become frustrated that a proven solution is not even discussed in the mainstream media, much less employed in our economy. When American Public Radio put out its call for "citizen journalists" to participate in its news gathering, he sent the below.
by Bill GentesThe most fervent topic of discussion among my family and coworkers lately is our being driven inexorably from the middle to the lower middle class, through no fault of our own. Yet my society is unable to face the root cause.
The mainstream press reports on the current sub-prime and credit mess from a sellers’ bias. When the cost of housing rises and more homes are sold, the market is "booming". But that boom is for the owners, the sellers. The increase in "value" is actually a cost to everyone else. Much of that cost is the speculated cost of land, inflated beyond its value due to the growth of the surrounding community.
As a native Californian, I have witnessed the proverbial Bay Area shack purchased for $10,000 in 1970, sold for $300,000 in 1999, currently worth about $800,000, even with the real estate slide. (Most of the "value" is not in the shack, but in the land below the shack.)
When the owner cashed in, what did the owner do with all those empty inflated dollars he didn't earn? Speculate some more? Intensify the speculation with a subprime loan? That is what he did, and we all went along with it -- we thought we eventually would get our just rewards.
Our consumer economy is addicted to the speculative rise in real estate costs. Thus, our homes become ATMs. But they put homeowners in debt.
Who, then, truly gets rich? Our real estate system is a pyramid scam, in which the “owners” must rely on the next poor slob’s desperation and gullibility, and his willingness to shell out the inflated cost created by the madness, so that he can soak the next poor slob, who will soak the next poor slob, ad infinitum.
The economic powers-that-be know this and continue to prey upon us with their bundled derivatives and usurious credit lines, until those very derivatives shatter, and the credit dries up, leaving the whole rotten edifice to collapse on us. Why is such speculation and manipulation -- a substantial core of the real estate industry -- rewarded over productivity?
Must we pass along the cost of the economic lunacy to subsequent generations, in the form of crushing debt, empty promissory notes, and tottering markets that inevitably drive whole economies into the next and then the next, and then yet the next recession or depression?
Why do those who call themselves conservatives then intervene to prop up the system, which is the fundamental cause of the distress and volatility in the first place? In my state of California, who will have the guts to challenge Proposition 13, and the selfish, mean-spirited philosophy behind it?
The received wisdom we have become accustomed to is just leading us further down the abyss. Through the years, I have seen my real wages fall, and social services crumble. I have studied these issues extensively through various schools of thought and come to some conclusions.
Regressive taxation, dumping an ever-greater burden of the cost of social services and infrastructure on the middle class, the poor, and future generations, has severe long-term consequences for everyone, even the rich. The bad taxation is capitalized as inflated rent.
Some are ready to move past tired, shop-worn, self-destructive assumptions. The City of Philadelphia has been studying solutions to urban problems. Various environmental organizations have looked into land costs and urban sprawl. The Urban Land Institute has studied the issue, along with the American Institute for Economic Research.
So here is the story I’m pitching, the biggest story never told in our mainstream media: "Who owns and controls the land, the natural resources? How much is it worth? Who is collecting the rent? What effect is this having on our economy and our society?”
Some places use the antidote -- land value taxation -- and does it work. Can we readjust taxation, compensation, and private market mechanisms to create economic justice? Can all political stripes join together to move toward necessary reforms?
Local Tax Reform in Scotland
Digging Into Land Ownership
Real Estate Cycle on Schedule as Manufacturing Falls
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