Special Privilege At Its Worst
The Seven Wonders of the Subsidy World
We are pleased to be the first to bring you this revolutionary article of wisdom from Jeff Smith. Highly recommended! Read carefully.
by Jeffery SmithItís worse than you think. Most people know that, even when subsidies help the needy, they do even more for special interests who maintain the system that keeps way too many people in chronic need. (Want names and numbers, see the Hall of Shame.) Many people know that, besides direct cash outlays, governments also give their lucrative business to campaign contributors, such as the weaponeers. Some people know that, besides grants and sweetheart deals, governments also deliver huge savings in the form of tax breaks to the well-connected while levying burdensome taxes on would-be competitors, such as tariffs that protect GM and Ford. But few people know that, besides subsidies, contracts, and tax bias, governments also enshrine in law seven privileges -- indirect subsides -- that bestow more dough than all others put together.
1) The corporate charterís salient feature is to limit the liability of those choosing to profit by putting others at risk. As if such protection were not enough, legislatures even raise this limit as the "need" arises shielding nuclear plants from meltdown (this oneís for you, GE), oil transporters from spills (say "thanks", Exxon), software designers from the Y2K bug (itís on the house, Microsoft), etc. Under ancient common law, victims of premeditated risky decisions could collect full compensation from the responsible parties; that's how it would be today were rights to a healthy planet now enshrined in modern constitutions. Charters, and their companion pieces of legislation, are worth to those corporations putting nature, labor, and consumer at risk however much that year the losses were to unsafe products, workplaces, and to pollution and depletion -- hundreds of billions annually.Land titles are the granddaddy of all indirect subsidies. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones -- grants, contracts, and tax favors. To undo and reverse this history, itís necessary to collect and share the natural rents from all seven inconspicuous privileges. Charging full market value for these seven valuable pieces of paper not only would make it possible to end taxes (the unfair collection of truly private values), it also makes possible a dividend to all citizens. This Citizens Dividend not only eliminates poverty, it also erases any rationale for subsidies -- to the poor or the privileged -- in the first place.
2) Pollution permits, performance waivers, land use exemptions -- whether granted by legislatures, bureaucracies, or courts -- are worth much more than however much government charges and business pays. The polluter saves by not having to invest in clean-up equipment, or in production methods that simply waste less. And once government permits any deviation from the rule, then the recipient is sheltered from any future charges of malfeasance and can save again on insurance. Itís hard to figure how much such leniency is worth, since if a company were to capture its pollutants, often it could sell them at a profit as a secondary line of business. [Publisher's note -- Smith is right. The book "Get a Life" by Wayne Roberts and Susan Brandum is full of examples of businesses that are profiting by recapturing their pollution.]
3) Patents protect the basement inventor, right? Wrong. Most basement inventors who manage to win a patent never see a penny of profit. What patents do is tie up good ideas, skew techno-progress (e.g., automotive engine design eschews all fuels but one), and enrich those few well-enough endowed to carry innovation to market. Were government to charge each year for the full market value of protecting intellectual property, basement inventors would still pay only token amounts while GM, DuPont, and Microsoft would have to spend billions - that is the annual market value of patents.
4) Utility franchises create monopolies in exchange for some public service, such as providing electricity, phone communication, etc. Yet are monopolies necessary? The power grid could be a public monopoly, for example, while the power suppliers could be private competitors, a model at last government is turning to. Government regulators are supposed to keep utility profits "fair", but do they? Some of the most lucrative investments are in Enron and AT&T. Unearned monopoly profits in the billions represent the annual market value of franchises.
5) Communication licenses for TV, radio, cell phones, and the like are given away for free or for far less than market value, turning recipients into "instant billionaires" (the business press gleefully notes). Why does government let such assets go for peanuts? Partly because the recipients contribute mightily to political campaigns but also because government can get the revenue it wants elsewhere -- it can always tax income, or sales, or borrow capital. What are communication licenses worth to Disney, Warner, and hopefully some day to us? Tally up how much TV charges for Superbowl Sunday and how much all stations charge for commercials or carriers charges to monthly subscribers -- how many hundreds of billions of dollars is that each year?
6) Resource leases for public oil, minerals, forests, and grazing land, are often let at "fire-sale" prices. If any private landlord squandered his own assets the way our public steward does ours, heíd go broke overnight. How much more could government collect from cattle ranchers, Chevron, Weyerhauser, and others leasing the public domain? At least as much as private landlords get per acre. Itís enough billions that the present beneficiaries spend fortunes on determining the outcome of elections, electing their water boys to Congress and state legislatures who keep the current largesse intact.
7) Land titles do protect the average homeowners but because they cost virtually nothing (a paltry filing fee often about $2.00), they also protect enormously wealthy absentee landlords. Were government to charge full annual value fees for deeds (and remember, the words "own" and "owe" were once one), then it could afford to forgo taxation. Such a shift in the revenue base would save a vast majority thousands of dollars each year -- and cost an elite some millions. Raising our land dues would lower landís price, making real estate far more affordable -- and a lot less lucrative to speculators and lenders. Whatís the value of todayís free deeds? Try a couple trillion or more dollars each year, the money we spend on the nature we use.
Alternatively, we could abolish privilege. Should government be in the business of granting favors, predominantly to powerful economic forces? Should government be in business at all? Get government out of business, monopoly will soon evaporate.
However, someone would still have to sort out competing claims to nature. Letís take business up on their offer. A lender or an insurance company does not charge a flat fee, even though they could. Instead they charge a rate geared to the value of the loan or insured property -- and keep it as high as the market will bear. Make sound business practice the model for government. Yes, letís run government like a business -- and charge business as much as the market will bear for these seven privileges. Weíll reap trillions and divide the surplus among ourselves, paying out a Citizens Dividend each month, OK?
Jeffery J. Smith is president of the Geonomy Society.
History buffs -- have the subsidy wonders of the world changed a lot? For a book that examines all forms of privilege as of 1905, click here.
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