Bankers, investors flee the debts from subsidies and foregone rents
Short-term help for a few equals long-term hurt for us all
| We trim and blend five ’06-’07 articles: (1) “Subsidies keep flights at small airports in the air” by Thomas Frank, USA Today (Dec); (2) “Muck well-raked, but to what effect?” by John Strawn in the Oregonian (Jan 6) about “Free Lunch”, the new book by David Cay Johnston, New York Times writer, Pulitzer Prize winner, and author of "Perfectly Legal"; (3) a factoid from the bulletin by William Buckler, The Privateer (Dec); (4) “Banks in bid to beat recession” by Marc Moncrief in The Age (Dec 14); and (5) “Gold hits record high, is far below inflation-adjusted peak” by the Associated Press (Jan 8). |
Frank: Each day, about 3,000 passengers enjoy flights in planes two-thirds empty, for fares as low as $46, as the government pays up to 93% of the cost of a flight. The Department of Transportation pays a few airlines $110 million a year so they can profitably carry as few as four passengers to nearby hubs -- luxury travel for people within driving distance of a larger airport. The subsidies come from fees and taxes paid by the nation's two million daily air travelers and airlines on non-subsidized flights whose fares tick upward and grow increasingly crowded.
Congress began the program as a stopgap to give small airlines time to adapt to deregulation. Like many temporary programs in Washington, it's approaching its 30th year. Urged by airlines and airports, Congress has expanded subsidies; now the program pays for flights between major airports and places that are neither rural nor isolated.
JJS: As long as we let politicians spend our money, we must expect waste. If towns in the countryside were to lose these flights, would rural folk stay isolated? Not really. Instead, buses would profit and trains would regain prominence, much to the environment’s benefit. If you got the money in the form of a Citizens Dividend, instead of the airlines getting it in the form of a subsidy, would you spend it on a pricey plane ride or an affordable train ride?
Even when a ride is packed with passengers, the fare box may still not cover all the costs. Buses and trains, like planes, may need another source of revenue. Rather than turn to the public treasury for a subsidy, transportation could turn to the land. Airports could recover some of the land value around itself, transit systems could recover site value around transit stops, and trains around train stations. As recovering locational values would up income, paying pollution charges would up outgo. Passing on those charges would push passengers aboard trains, the least polluting mode of transport.
Subsidies for flying is one free lunch. A Pulitzer winner writes about it and others.
Strawn: What we have now is capitalism for the poor and socialism for the rich, an unwarranted transfer of wealth from the bottom to the top.
* Tax loopholes underwrite the use of private jets flying business foursomes for golf into an Oregon airport -- where traffic has grown from three private jets in 1999 to 5,000 now.
* Team owners get local governments to pay for sports arenas; big-box retailers win freedom from local taxes even when the effect may be to destroy indigenous retailers.
* The burglar alarm industry charges hefty fees for a service that costs it very little. Then the industry dumps onto the taxpayers the real costs of responding to the alarm (most of which are false) -- the very service it sells.
Johnston concludes with a chapter on what to do.
JJS: Waste plus subsidies equal debt.
Buckler: US credit market debt (private) has exploded 20% in two years. Since the beginning of 2003, total debt (private plus public) has surged 50%, rising from 298% of GDP to 343%. This is the biggest credit inflation in human history.
JJS: Debt makes an economy top-heavy, liable to collapse.
Moncrief: Money has become increasingly difficult to borrow. To avoid recession, central banks across Europe and North America are lending an extra $100 billion to other banks cheaply with promises of more to come. The Federal Reserve is using an auction that’s unprecedented; banks will bid for rates they are willing to pay. Other central banks are accepting a wider range of securities as collateral.
It is the first time since September 11, 2001 that central banks have thus cooperated. The root cause of their concern is fundamental -- the housing market. Mounting and still uncounted exposure to failing loans given to borrowers in the US with bad credit has made banks reluctant to lend to one another. More than $60 billion has been lost by the world's banks in the crisis, and the worst may be yet to come. The sum total of US subprime loans is about $1.3 trillion.
JJS: While banks try to stave off the inevitable, investors run for cover -- gold. Investors buy gold as a hedge against inflation for safety in times of political uncertainty around the world.
AP: Gold futures surged to a new all-time high, hitting $883.10, as the dollar keeps shrinking, crude-oil prices keep soaring, the next recession approaches, and the United States and Iran become more belligerent. Gold surpassed its previous record of $875 set in 1980 on Jan. 21. Adjusted for inflation, $875 in 1980 would be worth $2,115 to $2,200 today, well above the new record.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Germany to Become World's Most Energy-Efficient Country
Review of Reinventing Cities for People and the Planet
Monopolies Falsely Collect Taxes and Keep Them |
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