GEONOMIST, #49 — 2006 Winter (Vol. 14, No. 4)
|December 26, 2005||Posted by Jeffery J. Smith under The Geonomist|
Now they tell us: housing bubble to loose air
Porous brains Titles lift families .…. page 2
China for justice? Movies’ tax break ….. page 3
Smog kills Iranis Free oil to MA poor .. page 3
Harvard buys trees Warmth kills sealife page 4
Black budget riches Wages still shrink ….. page 4
Housing, Q3 Housing, October … page 5
Homes overvalued Fannie & Freddie …. page 6
Gold gets surplus Indians love gold …. page 7
FROM OP-ED PAGES
The Guardian Scottish Greens …….. page 7
NY Times Cleveland Scene …….. page 8
FROM THE ARCHIVES
LA School Board persecutes Georgist ….….. page 8
Gar Alperovitz, America after capitalism … page 8
Los Angeles Times IT blogger P Murphy page 9
Own or rent? Peak Oil dealt with .. page 9
Is it politics or money in our way? ……….… page 10
Time to tighten belts?
While the media glorified housing prices when they were swelling, creating the illusion of wealth for many and unearned fortunes for few, now they sing a different tune. A headline predicts the bubble to pop. The UCLA researchers forecast 800,000 will lose jobs in construction and financing. Housing prices will next year start to decline nationwide and keep doing so for several years. The housing sector slowing down started eight of the last 10 recessions. This cycle, the report expected slower economic growth but no recession. (The Oregonian, Dec 8; for more on overvalued housing markets, see page 6.) We’ve been saying the decline won’t start until the year after next, that it’ll be steep (25%-50% post-inflation), and will accompany a recession. The bigger they are, the harder they fall, and this bubble has been titanic, so the correction should be deep. The inflation-eaten wages, the unemployment, the bankruptcies at the bottom coupled with the spectacular gains at the top, widen the gaps in income and wealth – the set up before the Great Depression of the ‘30s. Before it could get that bad, we do have a few years to set things right, to de-tax earnings, halt wasteful subsidies, and share the worth of Mother Earth.
Crime and war less popular
Since the disintegration of the Soviet Union, the ex-USSR and the US have quit staging wars via client states. Hence armed conflict on this planet has subsided by 40%; genocide and abuses of human rights have dropped even further. During the same time, terrorism has increased, yet it kills far fewer people than open warfare. Currently, 60 wars rage, waged by poorly trained and equipped small bands using light weapons who kill many civilians, but less than before. Wars killed over 100,000 in 1992 then 20,000 in 2002, (Cont’d p. 2)
Geonomics is …
an answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
FROM THIS PEN’S PERCH
Swiss cheese for brains
This winter issue gets the newsletter back on schedule (nearly). It’s coming out just a month after the tardy fall issue. November wasn’t too chilly here in Oregon, but who has time to go outside and play? Americans spend 90% of their time indoors, working. Me too, researching this, writing screenplays, traveling. Anyone want to pitch in? I could really use an editor:
Karry Skanda, phd economist (Nov 23): “Thanks for promoting me to ‘actor/model’ in your last newsletter. I have never acted in my life nor have I modeled. ‘Karry Skanda’ is my pen name as a writer/producer for TV documentaries. Actors & models mainly work with their bodies and other people’s brains and emotions. Writers/producers have to use their own brains.”
Editor: Of which you’ve plenty, much more than me, er, I. Sorry about that. Maybe some day we could co-write/produce my trilogy of Georgist movies?
Readers Wendy Rockwell (Nov 6) and Mario Cordero (Nov 17): “Your article, ‘Nicaragua to tax land’, had the politician introducing land-value taxation, José Francisco Salas Ramos, as a Deputado of the Assembly in Nicaragua but it’s the one in Costa Rica.”
To err is human. But to put it in a headline, that’s ballsy. The local paper claimed that a plan for a new building downtown shows the economy is fixed. Yet when the skyline sports the most construction cranes is when the latecomers rush to get in on the feeding frenzy before the boom fizzles. Another headline announced plans for a new tallest building in Portland. Ironically, record-setting buildings coincide with the end of the cycle (the Erection Index). As people arrive in Portland from more overvalued regions, they’ll delay the inevitable but not derail it. Our new skyscraper may bankrupt its original investors but afford others a great view of the Willamette River and Mount Hood.
Crime and war (cont’d)
the lowest amount since 1927. The US invasion of Iraq killed 8,300 people. In 2003, Africa had almost 11,000 battle deaths, the Middle East had more than 9,000, Asia had almost 6,000, and Europe and the Americas fewer than 1000. Attempted military coups have been in decline for 40 years. (The Oregonian, Oct 18) Meanwhile, the US spends more on war – multi-billions – than the rest of the civilized world put together.
Yet violence in America subsided. The murder rate fell to its lowest level in 40 years, to 5.5 homicides for every 100,000 people, dropping for the first time in four years. Violent crime in general fell to a 30 year low, 465.5 crimes per 100,000 people. The rates for property crime were also down, to 3,517.1 crimes per 100,000 people. These figures averaged widely disparate rates from around the country. What were the factors lowering crime in some places, the report did not guess. (The Oregonian, Oct 18)
With both crime and war reduced, Merry Solstice! So those rates don’t swing back up yet get lower than ever, let’s establish economic justice, fast. Axe taxes and charge user-fees for using Earth, and axe subsidies and pay ourselves dividends from all the recovered values of locations and privileges. To paraphrase Gandhi: There is no way to justice. Justice is the way.
Titles lift Latin families
In Latin America, about one-quarter of urban residents are either squatters or are living in unauthorized housing. In Buenos Aires Argentina, squatters who acquired title to their plots fixed up their homes, had smaller families (five members), sent their kids to school, and only 8% of their daughters got pregnant as teens, compared to squatters who failed to get titles. Those occupants didn’t improve their dwellings, had bigger families (six members), didn’t continue as far into school, and 20% of their daughters got pregnant as teens, eventho’ the income of both families was the same. (The Wall St Journal, Nov 9) Besides dishing out titles, another way to turn occupants into owners is to tax land. That spurs big owners to sell off their excess to squatters at prices that the new owners can afford. It’s a strategy that’s worked every time it’s been tried.
Taxes matter to filmmakers
Hollywood and the British film industry lobbied hard for major tax credits for films shot in the UK. The government offered credits of 6% for bigger-budget films and 17% for smaller pics. The movie producers wanted more. In a happy ending, the British government gave Hollywood and the UK film industry an early Christmas present: 16% tax credits for films with budgets above £20 million ($34.8 million) and 20% for films below that figure. In his annual pre-budget speech Chancellor Gordon Brown, the equivalent to the US treasury secretary, announced the new plan replaces the old scheme and takes effect April 1. At last, the UK Film Council claims, Britain can get back into the business of the big international productions. (Variety, Dec 5 via Skip Press) See, taxes do shape behavior.
Chinese want geo-justice
The former British colony and flagship geonomic, city Hong Kong, marched 250,000 strong to protest the slow pace of winning back their democracy that Beijing had rescinded after reunification. (LA Times, Dec 5)
In China, where traditional parents abort female fetuses to give themselves another chance for a boy, about 117 boys are born for every 100 girls. That means millions of young Chinese men will never marry. Known as guang guan or “bare branches”, many have drifted into the thug-for-hire trade. Corrupt officials and land speculators pay the men about $12 a day, plus bonuses for extra damage. By contrast, factory workers are fortunate to earn $5 a day. (USA Today, Nov 22) If only the Hong Kong model – public recovery of site values coupled with low taxes – could have instilled in the Chinese psyche the understanding that the value of land should not be an object of speculation but a bounty for all members of society to share. It’s a hard lesson for any society to grasp, but someone must embrace it first if civilization is to continue.
Car fumes kill Iranis
Over 1600 people were taken to hospitals in Tehran, ill from air pollution. The extent of deaths and casualties from smog were not less than those in the plane crash in the Irani capital in December which killed more than 100 people. While residents complained of fatigue and headaches, hospitals reported more cases of breathing problems and heart attacks. There was no wind or rain and the dirty air is trapped by the mountains surrounding the city. The sources of the poison are the capital’s three million cars, many of which lack exhaust filters. Trying to reduce traffic, authorities closed public offices and schools and are letting cars into the city centre on alternate days, depending on whether their number plates start with odd or even numbers. In Teheran, up to 5000 people die every year from air pollution. (BBC News, Dec 10) Besides polluting, cars also deplete resources and require huge swaths of land. For each of these three uses, geonomics would make cars pay their way. Charge dues for the atmosphere, the buried metals and oil, and the surface. Then manufacturers would switch to cleaner engines like hybrids, people getting around, especially in cities, would switch from driving to riding, and cities themselves would devote less space to streets and more to sidewalks and bike paths. Then a place so rich in oil would not be so buried in smog.
Boston poor get Latin oil
They’re not citizens, but they are getting a dividend. Thanks to the president of oil-rich Venezuela, Hugo Chavez, 45,000 low-income families in Massachusetts are getting heating oil. It’s worth $9 million, enough to last about three weeks, a savings of about $184. This winter, higher oil prices should raise heating oil 30% to 50% in the chilly Northeast. Local charities will determine who’s poor and worthy and who’s not, another way the largesse is not a dividend to everyone. (Boston Globe, November 20, via Norie Huddle)
Cash socked away in trees
The doubting often claim that land no longer plays any role in the strategies of the wealthy. Yet with the stock market sliding sideways and so much surplus cash from the super rich flooding into bonds, driving down their returns, money managers turn to buying up millions of acres of forest land – not just in America but in Brazil, Uruguay, and New Zealand, where Harvard University is the second-largest holder of timberland. Forests let investors diversify; their performance historically is uncorrelated with those of stocks and bonds – when they zig, timberland may do nothing or even zag. Harvard University earmarks 10% of its nearly $26 billion endowment for timber, an unconventional asset class. Ten percent is the amount usually recommended for gold. An enormous transfer of land is under way. Investors buy from giant paper companies, which cash in to boost their profits. One funds manager, Grantham Mayo, oversees 2.6 million acres of timber worldwide. Last year, they bought more than 5% of Maine, an area bigger than Rhode Island. Today, nearly $30 billion of American forestland is in the hands of investors, six times what financial investors held in 1994. The recent buying has pushed up timber prices, in some cases doubling in five years, despite weakness in prices of lumber. Investors expect forest products and the forest itself to rise in price, then sell out later. Hence another land-like bubble could be in the making. (Wall St Journal, Nov 4)
Warm ocean kills sea life
We relayed this story before; now a precise tally is in. Last summer, record numbers of dead seabirds washed up on beaches along the Pacific Northwest coast from central California to British Columbia in Canada. There were up to 80 times more dead Brandt’s cormorants, a fishing bird, than in previous years. Tests showed the birds died of starvation. Ocean water temperatures had soared to 7C above normal, which delighted bathers but caused the whole delicate system to collapse. The rise in the temperature of the ocean reduced the difference with the temperature of the land. That weakened the offshore breezes, which used to push warm water out to sea and bring up cold water with its plankton. The amount of phytoplankton crashed to a quarter of its usual level. Less plankton meant fewer fish and less food. The population of seabirds, such as cormorants, auklets and murres, and fish, including salmon and rockfish, fell to record lows. (The UK’s Independent, Nov 13, via Alanna Hartzok)
Black budget rip-off
MZM Inc grew from a small-time Pentagon consulting firm into a booming business. How? Over 30 times, MZM’s employees or political action committee donated to two members of the House Appropriations Committee — Randy Cunningham, R-CA, and Rep. Virgil Goode, R-VA — in the days surrounding key votes or contract awards. Both lawmakers sit on the subcommittee overseeing the Pentagon’s spending and have acknowledged putting language in bills that created or expanded contracts that went to MZM. A company that MZM’s CEO, Mitchell Wade, controlled paid $1.675 million for the house of San Diego Rep. Cunningham, then sold it eight months later at a $700,000 loss, while Cunningham traded up to a more expensive house in Rancho Santa Fe CA. Headquartered in a town in Virginia, MZM refused any direct assistance from that state, which would have required it to repay the money if the company didn’t meet job-creation targets. Also, MZM insisted on paying only $400,000 for a building that had cost the town more than $1 million and demanded that it be exempt from property taxes for five years. At its peak, MZM had nearly $200 million in government contracts. Since 2001 September 11, secret Pentagon spending has increased by nearly 48% to about $27 billion a year, for which a small pool of companies qualify. (USA Today, Nov 9)
Wages at 30 year low
Wages have been rising nominally; average pay rose 8 cents in October to $16.27 an hour. In the 12 months ending in September, wages and salaries for private-sector workers rose 2.2%; it was the slowest rate since 1975. After inflation, American workers earned 2.4% less than they did a year ago. It was worse in 1979 when wages and salaries, adjusted for inflation, dropped more than 4%. Some of the sluggishness is because employers have been increasing payments for benefits, such as health care, at the expense of wages. International competition has led to a loss of union manufacturing jobs, which pay more on average. So the job market did not pick up after the 2001 recession. Still, the loss in salary is unusual, particularly given a relatively tight labor market and surging energy prices, which in the past fueled wage increases. The share of the economy going to labor’s wages has been declining, as the share going to corporate profits is on the rise. (USA Today, Nov 22) Another oddity is productivity rising from last quarter’s 2.1% to 4.7%, the fastest jump in two years (Oregonian, Dec 7). Before the 2001 restructuring of the economy, more wealth output from less labor input would let employers up wages. Not any more. (The Oregonian, Nov 4) All the more reason for us to pay ourselves a Citizens Dividend from society’s surplus, from the burgeoning values of sites, resources, ecosystem services, EM spectrum, corporate charters, and other government-granted privileges to the well-connected. Let’s not concentrate it in few pockets but spread our commonwealth around to everyone.
Housing market, Q3
Third quarter, sales of existing home set another record; prices jumped nearly 15% from a year earlier. In the July-September quarter, sales of single-family homes and condos rose to a 7.24-million annual pace, up 6.5%. The median price of a single-family home climbed 14.7%, year-over-year, to $215,900. Median prices ranged from $72,800 in Danville IL to $721,900 in San Francisco. Elmira NY and Decatur IL were also among the least expensive markets, while Honolulu, Anaheim CA, and San Diego ranked with San Francisco as the priciest. Prices swelled most steeply in Phoenix, up 55.2% to $268,000. In Orlando, home prices rose 44.8% to a median $261,300, while Cape Coral-Fort Myers FL saw a 42.5% price gain to $277,600. Six areas had small price drops – they were lower-priced cities with large inventories of unsold homes, a weak job market, or both. (USA Today, Nov 15)
Average prices of all homes jumped 12% from the third quarter of 2004 to the same period in 2005, a historically rapid pace but a slowdown from the previous period as markets in the Pacific states and New England lost momentum. The increase was down from a 13.4% increase from the second quarter of 2004 to the same period this year, which was the biggest rise for a comparable span in more than a quarter-century. The rise in the cost of housing in general far outpaced the rise in prices of other goods and services included in the consumer price index — 12% vs. 4.5%. (AP, Dec 1)
Housing market, October
Sales of existing single-family homes, co-ops and condominiums declined 2.7% from September to a seasonally adjusted annual rate of 7.09 million units. The decline would have been larger if not for a spike in sales in such areas as Houston and Baton Rouge, the new hometowns of those displaced by recent Gulf Coast hurricanes. From a year ago, sales were up 3.7%. The national median price for existing homes sold soared to $218,000, a 16.6% gain from October 2004 — and the biggest annual jump since 1979, when inflation was raging at double-digit rates. (MarketWatch, Nov 28)
Sales of new homes were up 9% from a year ago, the biggest rise since 1993 April. Its annual rate of 1.42 million units set a record, smashing the previous record of 1.37 million set in July. Despite new home sales jumping by 13% in October (from September), prices tended to level out. The median price of a new home rose 1.6% to $231,300. Their median prices are up just 0.9% in the past year. (MarketWatch, Nov 29) Housing starts fell 5.6% from September, and 2.3% from a year ago, while permits for future building dropped at the fastest pace in six years. (The Oregonian, Nov 18)
As recently as October, Robert Toll, CEO Toll Brothers, one of the biggest builders of luxury homes, said housing market fundamentals looked strong through 2010. However, back in July, he and other home-builder insiders sold 4.8 million shares of their stock worth $333 million. That’s the most stock sold by home-builder insiders since 1990. On July 20, Toll stock peaked. Now its down $24.34, or 42%, erasing $3.8 billion in shareholder value. (USA Today, Nov 9)
Homes very overvalued
Did we take a step back from the brink? The number of cities where home prices are “extremely overvalued” – 30% higher than prices should be based on historical price data, incomes, mortgage rates, and population density – did dip slightly in the third quarter. However, the percentage of the country’s housing market ready for a price correction nudged higher, based on data from 299 metro areas that account for 80% of the single-family home market. While the number of significantly overvalued cities fell from 67 to 65 last quarter, the percentage of the market with out-of-whack home prices rose from 35% to 38%. For the second straight quarter, Naples FL topped the list, with homes 84% overvalued. The rest of the top five: Merced CA, 76.7%; Salinas CA, 74.8%; Port St. Lucie FL, 72.2%; and Stockton CA, 72.0%. Newcomers to the at-risk list include Phoenix, 34.8% overvalued; Pensacola FL, 33.2%; Orlando, 32.7%; and Honolulu, 31.3%. The study’s 30% threshold is based on the typical degree of frothiness that preceded 63 known price declines since 1985. Almost two thirds, 41 of the 65 significantly overvalued markets, were in California and Florida. Being overvalued 75% does not imply prices will collapse 75%; price corrections are generally about half the magnitude of the total overvaluation. Even declines of that size are unlikely unless an economic shock occurs. (USA Today, Dec 8) Is that a shock on the horizon? Some investors worry about the shakiness of Fannie Mae and Freddie Mac.
Fannie & Freddie in a fix
Government-sponsored mortgage buyer Freddie Mac said its earnings for the first half of 2005 were actually $220 million lower than originally reported. After the adjustment, the company earned $1.4 billion in the first six months of the year, instead of the $1.6 billion reported on Aug. 31. The company said it had miscalculated these amounts since 2001 because of an old computer system. (AP, Nov 8)
Fannie Mae said it has identified a problem related to hedge accounting that will lead to an estimated net cumulative after-tax loss of about $8.4 billion as of Dec. 31, 2004. Further, Fannie said it identified errors that will cost it $2.4 billion to remedy related to misapplied cash-flow hedge accounting for its mortgage commitments. The company also said it’s reviewing its accounting for certain insurance transactions and, to date, has “determined that one mortgage insurance policy did not transfer sufficient underlying risk of economic loss to the insurer, and therefore does not qualify for accounting as insurance.” The company also said it has booked a $257 million after-tax charge for the effects of Hurricane Rita and Hurricane Katrina. Fannie’s exposure to losses as a result of the hurricanes “arises from its guaranty of principal and interest payments due to holders of Fannie Mae MBS secured by property in the affected areas, its portfolio holdings of mortgages and mortgage-related securities secured by property in the affected areas, and real estate that it owns in the affected areas.” It also identified problems with its accounting for investments in low-income-housing tax credits and synthetic-fuel businesses. (MarketWatch, Nov 10)
Gold gathers up surplus
Last year at our community college, I gave a course on the business cycle: First, people invest in stocks and bonds so producers can grow the pie. Then, their added wealth pumps up land values, so some speculate, withholding some prime sites, underutilizing others, which is counterproductive. Next, that hampers output until the economy shrinks. Responding to these swings, the savvy investor moves his savings in then out of three sumps: out of stocks and bonds before they peak into real estate and REITs (locations, actually), then before that wave crests into Euros and all that glitters until the nadir passes, then back into stocks and bonds. (So, you wonder, why wasn’t Hegel rich?) Silly me, I was too busy geonomizing to follow my own advice.
After lagging so long, gold had to catch up some time. Since 2001 April, when you could buy an ounce for $255.95, gold has steadily risen. Gold closed above $500 for the first time since 1983. Gold for February delivery, at $533, hasn’t traded that high since 1981 April. Year to date, it’s up almost 18%, or $80 an ounce. The surge of the past months has come even as the dollar has strengthened and the Federal Reserve raised its lending rates, going against the typical pattern for the metal. (MarketWatch, Dec 9) Since the US quit the gold standard in 1971, central banks have been selling their reserve. Lately, some central banks, notably Russia, are stocking the metal. Bankers and others worry about the economy’s reaction to high oil prices and suspect it’s nearing the end of the cycle. Gold is more a port in a storm than a moneymaker; correcting for inflation, gold’s return over time is zero. (Chrs Sci Mntr, Dec 6)
Indians glom onto gold
Some buy gold because now they can afford to feed their craving. With a stockpile already worth $200 billion, Indian gold purchases jumped nearly 40% this year, making the country the world’s leading consumer of the precious metal. Rural women can wear it, keep it safe, in a form where it can’t be frittered away. The country’s growing middle class doesn’t trust company stocks and bank deposits, preferring physical assets like gold and land. Yet it would be better if the money locked up in shiny yellow metal went instead to finance new start-ups or better roads, boosting the Indian economy over the long term. Money spent on the precious metal could be cutting the country’s economic growth by 0.4% per year, which means billions of dollars in lost wealth annually. (Christian Science Monitor, Dec 7)
While some stockpile gold, others turn metal commodities into real goods. With Asia and the Americas growing, the global economy is craving metal. Silver is trading above $9 per ounce for the first time since 1987. Platinum reached its loftiest level in more than 25 years at $1,012 an ounce. March palladium hit a 20-month high of $300.50. Copper rose to a record $2.183 a pound before dropping 0.2 cent to $2.028 a pound. (MarketWatch, Dec 2) Over $2 a pound, copper has more than doubled since 2001. Zinc and lead prices are at five-year highs. Typically, bull markets in commodities can last for decades, or at least until supply overtakes demand. (USA Today, Dec 1)
FROM THE OP-ED PAGES
Across the pond
The Guardian (Dec 3): “After staggering economic and technological advance but still no end to poverty, we still need a mechanism to widen access to economic resources without threatening individual freedom. A neat solution was proposed more than a century ago by an American economist named Henry George. Instead of taxing effort and enterprise through taxes on incomes and profit, tax ownership and the exploitation of natural resources. His ideas promise an economy in which individual freedom and social justice become co-dependent rather than mutually exclusive.”
The Institute for Public Policy Research, the UK’s leading progressive think tank, on Dec 2 released the book, Time For Land Value Tax? edited by Dominic Maxwell and Anthony Vigor with contributors Iain McLean, John Muellbauer, Richard Brooks, and pal Karl Widerquist. “Land Value Tax could help in the reforms of Council Tax, local government finance, planning and housebuilding, as well as promote macroeconomic stability. Introducing changes will require long-term planning, detailed economic and distributional analysis and, above all, political courage. With vision and patience, a consensus is possible. Now’s the time to seek it.”
“The Scottish Greens at its annual conference narrowly agreed to bring in land value tax alongside more traditional forms of taxation by 31 votes to 30 with 21 abstentions. Critics of land value tax claim the move could lead to residents being forced to sell their homes.” (IC Dunbartshire, Nov 6, via Josh Vincent) Eventho’ critics are wrong logically and empirically – not taxing land lets speculators bid up prices, forcing young workers to rent for life or tempting older owners to borrow late in life and risk default – critics are right emotionally. To soothe people’s worries, proponents should never say “land dues” without saying “rent dividends”.
Great Lakes’ great ideas
Syndicated economist Hal R. Varian (NY Times, Nov 17): “Politics has ensured that the tax code is a giant subsidy for housing. There is the mortgage interest deduction, the deduction for property taxes, the capital gains exclusion, the deduction for points on mortgage loans, the deduction of up to $100,00 on home equity loans. And there are many more tax breaks, among them home office deductions. Housing is highly subsidized in this country. The most fundamental subsidy is that homeowners are not taxed on the implicit rent they receive from their housing investment. It would make a lot of sense to eliminate the housing mortgage deduction entirely. But the housing tax subsidy has been built into housing prices, and cutting back could lead to painful capital losses on home values. To make cutting housing subsidies less painful, reduce tax rates on other forms of investment.” While we say “housing”, actually it’s the location, the land, that’s so favored.
The Oakland Michigan Press (Nov 13, via Mark Monson): “The most important aspect of House Bill 4369 is its inherent recognition of the economic fact that property taxes on improvements as opposed to the land under them are unwarranted and destructive. Under land value taxation, the property tax is based on the value of the site – not of the site plus what’s on it. The latter is not taxed. In other words, a piece of property would pay the same tax, based on the value of its location, whether the owner parked cars on an asphalt lot or had built a 10-story parking garage. There is a moral case to be made for taxing locations – land – and not the buildings. The landowner rarely creates its value. Instead, that mainly comes from improvements made by the general public, such as adjacent roads.”
The Cleveland Scene (Spt 10, via Monson): “The property tax system effectively punishes property owners who improve their lots, be it with a high-rise or a screened-in porch. Slumlords and speculators, meanwhile, enjoy lower taxes for keeping their land idle and neglected. Henry George, a 19th-century populist, held that society made land valuable, so society should receive the benefit. He promoted a single tax on land and the elimination of all others. George greatly influenced the public life of Tom Johnson, the visionary businessman who was elected mayor of Cleveland in 1901. The Johnson statue on Public Square clasps a copy of George’s manifesto, Progress and Poverty.”
FROM THE ARCHIVES
Schools persecute Georgist
“Look at the record of school boards and administrators in this state before tenure offered a degree of protection to faculties. Their conduct demonstrates the need for permanent status for teachers once they pass a reasonable probationary period. In 1887, renowned San Francisco educator Kate Kennedy was dismissed by the local board primarily for her association with Henry George and the single-tax movement.” (LA Daily News, Oct 31, via Mark Monson)
America Beyond Capitalism
Ally Hanno Beck, more attuned than this editor, noted the original review a few issues back was too skimpy and asked that it be elaborated. So it is:
Subtitled “Reclaiming Our Wealth, Our Liberty, and Our Democracy” by Gar Alperovitz (2005), it details the problems of the country – income gap, time famine, sprawl, sexism, etc – and the response of American communities to them, which he dubs the Pluralist Commonwealth. A fan of democracy, Gar sees his beloved crumbling under the power of corporate lobbyists and stretched to the breaking point by the maldistribution of wealth. Gar identifies trends during the first years of the 21 c. – the disconnect between government and citizen, between corporation and Jane and Joe worker – that are impelling communities to adopt practical solutions without outside assistance. The major political parties either ignore these challenges or propose failed ideas. So things may get worse before they get better.
While many of the solutions that states and localities come up with are not new, they are embraced without ideology – people just find them fitting their needs. Gar, an organizer turned historian, identifies this popular response as a new phase in American politics. He covers the three previous major phases – major realignments of political sectors – characterizing them and identifying their turning points. When enough communities turn to themselves and in various ways share their own wealth, that will amount to a whole new system at the federal level – Gar’s Pluralist Commonwealth. Going beyond the usual litany of complaints about the abuses of political parties and corporations, Gar dwells on solutions, weaving them together into a new system. Yet readers need drama, as in Korten’s “When Corporations Rule the World”, a success Gar’s book probably won’t match.
Which is a pity. Gar’s ideas are hopeful, even visionary. Doing more of the cooperative projects that are already working, people can change the system. More than list all the progress heartwarming to the left – land trusts, nonprofits providing services, firms owned by workers and governments, and government as venture capitalist – Gar also moves beyond the left by acknowledging the disappearance of work, the possibility of shrinking the workweek, and the need for an income apart from labor, spilling ink over the Alaska oil dividend. He still assumes political participation trumps economic justice – that making it possible for people to speak at endless meetings is a blessing – but that’s forgivable, since he also insists upon time off from work. It’s a wealth of information and well written. Gar is also a new contributor to my geonomics college textbook to be published by Elgar, Inc.
LA Times, Nov 29
“In the great sweeps of public land, said bestselling 19th century author Henry George, Americans would find strength to keep alive the ‘consciousness of freedom.’ Mountain peaks and sagebrush flats and willow bottoms would be ‘wellsprings of hope,’ even for those who never set foot on them. Then came the Sagebrush Rebels of the 1980s; government agencies started running the outback for profit. Which led to some memorable fits of lunacy, including a study that determined that a day in the wilderness is worth the price of a movie ticket. Even the environmental movement was willing to trade the landscapes for tourism dollars. For 30 years I’ve been thankful, as Aldo Leopold put it, to have never been young without wild country to be young in.” (via Mark Monson)
ZT Net Blogs, Paul Murphy
“Since the value of location is created by society, taxing that surplus or locational value is said to be fairer than taxing the value created by a land owner through agriculture or mining. Land speculators make money, so do market speculators – but the money they make doesn’t have anything to do with the real value of the land, or the stock: it’s based on the difference between earned valuation – market cap as a function of real or expected earnings – and the actual market cap. Google sells at $360 because their surplus is absurdly positive – they’re in a virtual Tokyo of their own – while Sun sells at less than $4.00 because their surplus is absurdly negative – they’re exiled to a virtual Saskatchewan.” (Paul’s an IT consultant; Nov 4, via Mark Monson)
Own or rent a home?
Mark D. Nedleman, Californian personal organizer (Nov 20): “Most everything in California is very inflated and unreachable. Coupled with a possible debt collapse, I don’t want to be stuck with a mortgage. Yet I find myself tiring of renting (since college days) and owning a part of the American Dream feels irresistible. I could get a condo/townhome in Portland, rent it out while I see what happens, as I feel somewhat attached to the Rose City. What’s your stand on homeownership?”
Editor: All for it. Everybody should have one. And each family could if the cost of the location were separated from the cost of the home. That is, we’d pay land dues for the land and thus a greatly shrunken mortgage for the building.
Peak oil accommodated?
Reed Wagner, Portland Metro researcher, (Nov 7): “Councilman Rex Burkholder will be in Denver for Peak Oil? Have you discussed this with him?”
Editor: Not til now. Life after Peak Oil can go on. Public recovery of land values, via shifting the property tax off buildings onto locations, would reduce urban demand for oil: One could (1) make buildings more energy efficient without incurring more tax liability. Owners of spendier downtown sites would infill cities; denser cities would save energy, twice: (2) contiguous buildings leak less heat, and (3) city dwellers drive less and ride more. Also, this tax shift sets the stage for others. After taxing land, tax oil and gas and coal, making their monolithic use less profitable and relatively, (4) alternatives more profitable. After de-taxing improvements, de-tax income. No tax on wages makes it easier to hire people to do labor-intensive work like (5) de-construction and recycling, saving energy in industry, and like (6) organic gardening, saving energy in agriculture. No tax on earned profits makes it (7) easier to invest in energy alternatives. And (8) rather than keep engorging energy corporations with myriad subsidies, if you earmark some of the recovered land value for a residential dividend, then you have a model, like the Alaska oil dividend, for spending the raised revenue on all citizens instead.
Money or politics stops us?
Richard, Green Party (Nov 30): “The basic problem is gaining access to the governing system.”
Editor: We got access. We don’t got victories. Victories go to those with money. Not just any money, but our money. Developers control local politics, spending local site values as contributions to local candidates. The “oiligarchy” control global politics, spending oil “rents” as contributions to national candidates. Again, it gets back to the money we spend on the nature we use, this immense flow of wealth and what’s done with it, and who should get it – the public themselves.
Richard (Dec 1): “You are right.”
In the media
The US Society for Ecological Economics Outreach list (Nov 11) announced the fall issue of this newsletter. The Coalition for a Livable Future (huge in Portland OR) in their INFO WEEKLY DIGEST (Nov 9) for the first time announced one of our events. It was our class on the housing bubble popping.
On the podium
November 12 in Portland, with Aussie forecaster Phil Anderson we hosted a class, “The Housing Bubble Pops: then what do you do?” The American economy for the next five years should repeat what it’s done for the last 300 years – follow the real estate cycle. The few paying customers who showed up learned how to redirect the value of land to benefit everyone and to prepare for the cycle’s next phase. November 18-20 in the nation’s capital at the Southern Economic Association Annual Meeting I addressed the need to deal with rent or forget sustaining anything. About 15 attended, and given the number of concurrent sessions, that was a flattering turnout. One number-cruncher showed that only 10% of the housing bubble was due to mortgage interest rates; 90% was do to “local factors”, things one might sum up as location or land.
Frank de Jong, Canadian Green Party candidate (Nov 14): “Jeff, do you have an electronic copy of your piece, Ecologizing our Cities?”
Editor: All yours. Anyone else want a copy?
Jon Dame, senior in economics at Bard College (Nov 15): “Have you recommendations for reading? I have been reading more and more of your on-line articles and find them very clear-eyed and informative. If you need an intern, research assistant, etc. I would be willing to do grunt work for the right cause. I would like to express again my admiration of your work.”
Paul Metz, Euro energy consultant to the LandCafe e-list (Nov 10): “Great info! I forwarded to a number of African contacts.”
Howard Kronish, Portland entreprenuer, in his letter to 1000 Friends of Oregon (Oct 18): “You will note Jeff Smith is listed as an Advisor to Common Ground – USA and as a local resource.” Then to us (Nov 12): “Great issue. Don’t know how you do such an exhaustive and comprehensive job. You are a miracle worker for the cause. I’ll send you a check for the subscription.”
Stephen Bezruchka, MD, Washington prof (Nov16): “In the Health Olympics, the US fell from 27th to 29th, behind Chile and Ireland and just ahead of Cuba. I’ve given quite a few more talks since we met in late April, and one was broadcast on Alternative Radio and another in October. Package your ideas in a 53-minute talk. I’m espousing economic justice as good medicine, and what you talk about is good medicine. Today, your paper arrived, and I ripped it open and read it, much more energized by the layout as well as the cartoons. The Commentaryettes were great, as was the monopoly bit. I’m going to send you money to be a sustainer so I can continue to receive these.”
Marion Sapiro, California retiree (Nov 22): “Thanks for your phenomenal work. You are a one-man army. Call on me for special projects as needed. Much love.”
Editor: Wow. Such a tangible way to show love. Watch out. I may just keep the phone lines jangling.
Newcomers, old stayers
The Sierra Club made it possible for me to attend the Oregon Land Use and Affordable Housing annual confab in Metro Portland Council Chambers on November 4. Organizers let me place our info on the registration table. Metro paid for the copies. The presenters did advocate abating taxes on improvements and taxing land when it’s rezoned or its title changes hands (not quite geonomics, but inch by inch). One speaker said the Property Tax Shift is “one of those things that every economist agrees with but nobody seems able to advance.” The Lincoln Institute for Land Policy granted me and a guest two scholarships to attend their all-day workshop November 14 at a fancy downtown hotel on “Land Use and Property Rights in America”. The Robert Schalkenbach Foundation made it possible for me to attend conferences out-of-town and follow up with contacts made. Our autumn Geonomist elicited enough renewals and newals from patron Marion Sapiro (California leader), stalwarts Ernie Kahn (Massachusetts activist) and Mel Leasure (Virginian leader), sustainer John Morales (Missourian retired from the Panama Canal), and subscriber Sue Walton, and others to cover the costs of copying and postage. Big thanks to all for re/joining, donating, and granting. If you don’t see your name above and know it belongs there, just send a check. We’ll know what to do with it.
WHERE FROM HERE?
December 30th, there’s an informal symposium with cohort Nic Tideman, ex Reedie, Chicagoan, Harvarder, now at VPI (and once a senior staff economist for a presidential commission), if you’d like to join us.
January 6-8 in the country, the Bus Project Conference to Engage Oregon, “Rebooting Democracy”, is where to meet allies.
January 10 in Portland, celebrate MLK’s birthday at our class, sorting out racial reparations vs. Citizens Dividends, at the Belmont Library on Tuesday at 6:45 PM.
February 24-26, Philadelphia, the annual conference of the Eastern Economics Assoc includes a track sponsored by the US Basic Income Group. BIG asked for the argument why the funding for an extra income for all must come from our spending on nature, not from our earnings for our efforts.
What you can do I: Order
Our new T-shirt above is ready in time for Chrassmis. Wear it on your midwinter vacation to the tropics and all thru summer. Plus it tucks in nicely under your tux or wedding gown. It’s black ink on white cotton, in all sizes. At $10 per, how many would you like?
What you can do II: PayPal
Clayton Berling, California soccer leader (Nov 23): “I understand we can send you $ via PayPal. How do I do it? I can’t see a link for that on your web site.”
Editor: The link’s not there but at the Pay Pal Site: http://www.paypal.com/cgi-bin/webscr?cmd=p/ema/index-outside Go there and follow their easy instructions. They’ll ask you to open an account for yourself then to send to my e-address, email@example.com. If you have any trouble at all, let me know and I’ll resolve it.
What else you can do, III
Where society jumped the track is at rent, its own surplus – people overlooking all the money they spend on the nature they use. Help us point that out. Win geonomics, so sharing society’s surplus is the norm, and that’ll make the world work right for everyone.
What else you can do, IV
Judge a fair
share not by
one being a
by the color
Celebrate MLK’s birthday at our class, sorting out racial reparations vs. Citizens Dividends, in Portland at the Belmont Library (on SE 39th) January 10 Tues, 6:45 PM.
May your Solstice be Merry.
Dear Forum on Geonomics (an educational IRS 501[c]3);
Here’s my tax-deductible yearly donation:
Bottom line: Secure Earnings, Share Earth