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Rent, Wealth and Want in the News

The newsmedia and internet are full of stories that relate to the issues you read about on the WealthandWant.com website.

Here are a few recent ones:

 

Thursday, June 15, Wall Street Journal

In Poverty Tactics, An Old Debate: Who Is at Fault? Today, the Pendulum Swings Away From Government To Small-Scale Projects; The Price of 'Dependency' By DAVID WESSEL

The Wall Street Journal article briefly touched on the right answer at the end of this paragraph ...

"Either you blame the poor -- 'the poverty is in the people' -- or you blame the system," says James T. Patterson, a Brown University historian. "It is a constant divide." If the poor are primarily responsible for their plight, then government ought to prod them to change their ways. If poverty is primarily the consequence of economic and social forces largely beyond their control, then government ought to give them money and change the rules of the economy.

That last phrase -- "and change the rules of the economy" -- is apt, but then they only talk about current proposals to increase the minimum wage, increase income taxes and spend more on "programs."

Wessel goes on to say,

Eradicating poverty in the U.S. is an old goal. In the frothy days of 1928, Herbert Hoover said, "We shall soon, with the help of God, be in sight of the day when poverty will be banished in the nation." Incomes did rise sharply in the 1920s; the working class did better; life expectancy grew. But he was wrong about poverty.

But the history of the effort to eradicate poverty needs to be examined in more depth. Fifty years earlier, Henry George laid out both the causes of poverty and the remedy in Progress and Poverty. The book was a bestseller, and some would say that it kicked off the Progressive movement. George identifed the economic laws and the related structural problem in our economy -- "the rules of the economy" that would need to be changed, in Wessel's words.

 

Wednesday, May 10

House passes tax cut bill: Measure extends capital gains cuts, trims taxes by $70 billion over 5 years

Updated: 6:26 p.m. ET May 10, 2006

WASHINGTON - The House Wednesday passed a bill sought by President Bush to deliver tax cuts worth $70 billion to investors and to keep 15 million taxpayers from being hit by the alternative minimum tax

The House passed the measure by a 244-185 vote. The Senate is expected to clear the bill Thursday.

The bill provides a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008.

Who benefits from this? Take a look at the ownership of "equity" in the 90-9-1 tables, and you'll see that nearly 37% of the ownership is in the hands of the top 1% of us, and another 42% belongs to the next 9% of us, leaving 21% for the other 90% of us! (That's based on the distribution of wealth.)

Based on the distribution of income, the top 1% of income recipients received 57.5% of capital income in 2003! The top 10% received 79.4%. See Who benefits when we reduce the taxes on capital gains and dividends?

 

It would also extend, for this year, recent changes to the alternative minimum tax — originally aimed at making sure the wealthy pay at least some taxes — to prevent it from hitting more upper middle-income families.

The debate divided starkly along partisan lines, with Republicans crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and surging tax revenues. Democrats countered that the deficit-financed tax cuts are tilted in favor of wealthy investors and that the economic benefits are not as great as advertised.

“Our tax relief sparked this economic growth,” said House Speaker Dennis Hastert, R-Ill. “And by extending key provisions of that tax relief, today’s legislation adds just another spark to the already booming economy.”

Added Treasury Secretary John Snow: “It sends a terrific message to the markets that we’re going to continue to have low rates on capital.”

Critics, including most Democrats, attacked the tax rate reductions on dividends and capital gains as being skewed in favor of the rich. They noted that is was the second half of a GOP budget package that began with $39 billion in benefit cuts over five years, many of which came from programs for the poor such as Medicaid.


Check out the May, 2006, issue of Harper's Magazine. The cover article, featured on the overleaf as "The House Trap: How the Mortgage Bubble will Bankrupt Americans in 20 Easy Steps" and titled The New Road to Serfdom: An Illustrated Guide to the Coming Real Estate Collapse, is written by Michael Hudson. (A couple of Michael's other articles appear here as Essential Documents.) The article is available from the Schalkenbach online bookstore

It speaks to issues closely related to some of WealthandWant's concerns: economic rent, boom-bust cycles, housing affordability, poverty's causes, the FIRE [Finance, Insurance and Real Estate] sector of the economy, wealth from land appreciation, wealth concentration, land different from capital, capital gains, depreciation, rentiers, land monopoly capitalism, land includes and slavery.


 

Alaskans See Bright Side to Soaring Pump Prices
By Sam Howe Verhovek, Times Staff Writer, May 7, 2006
http://www.latimes.com/news/nationworld/nation/la-na-oil7may07,0,3768.story

... But while Ginnis and other Alaskans are clearly irked by high prices at the pump, some also see an upside — a very big upside.

"Alaska is an oil state," said John Pearson, a pipe fitter filling up his Chevy Tahoe, his face creasing into a very slight smile. "No one likes high prices. But maybe high prices for oil are less bad for us than people 'outside.' "

"Outside" is the standard term Alaskans use for any place, well, outside Alaska.

Inside the Last Frontier, where every man, woman and child received a dividend check last year for $854.76 from the state's optimistically named "Permanent Fund" of oil-generated wealth, there is a sense that record-high oil prices might not be the worst thing that ever happened here.

In fact, legislators in Juneau, the state capital, say they are anticipating a windfall in the budget this year, leaving them with as much as $2.4 billion in unexpected revenue to spend on capital construction — including the state's share of two projects that critics describe as "bridges to nowhere" and which have become symbols of congressional pork-barrel spending run amok.

"While the rest of the country is squirming with high gas prices, we're laughing all the way through the capital budget," said Sue Libenson, an organizer with the Boreal Songbird Initiative, an environmental group critical of the bridge projects.

Alaska developers say the bridges are no laughing matter, but instead will be vital spurs to economic development, and they have persuaded state lawmakers to set aside more than $90 million for each project.

  • One bridge would cross over the waters of Knik Arm in Anchorage to a currently undeveloped stretch of peninsula nearby.
  • The other would connect Ketchikan, a city of about 9,000 at the very southeastern tip of Alaska, to an island, population 50, where its airport is located. The two have been linked for years by a six-minute ferry ride.

After specific federal earmarks for the bridges received the Taxpayers for Common Sense "Golden Fleece Award" last year for wasteful spending, Alaska's congressional delegation agreed to remove them — but then quickly secured such a large pot of federal highway money for the state that design and other planning for the bridges went right on ahead.

Many in Alaska are confident that oil- and gas-fueled prosperity will continue indefinitely, sustaining a tax structure in which there aren't a lot of taxes.

Alaskans pay no state income or sales taxes, for instance. Since the oil-fund payout plan was launched in 1982, residents have received more than $13.5 billion in such dividends.

How much does the Alaska Permanent Fund pay directly to Alaska's residents each year? Here's a recent article:

This fall’s PFD forecast at $1,000
By BILL WHITE, Anchorage Daily News Published: April 18, 2006
http://www.adn.com/money/story/7639736p-7551381c.html

This fall’s Permanent Fund dividend should total around $1,000, based on the Alaska Permanent Fund’s profits for the first nine months of its budget year, fund officials said Tuesday.

Through March 31, the $34 billion state oil-wealth savings account has posted a $2.1 billion profit, fund officials said. Profits for the year that runs through June 30 will be averaged with profits from the previous four years to calculate the size of this year’s dividend, which is to be paid in October. Last year’s dividend was $845.76.

In the January-March quarter, the Permanent Fund showed a 4.5 percent return on its portfolio of stock, bond and real estate investments, fund officials said. For the first nine months of its budget year, the investments grew by 11.9 percent, they said.

The state pays the dividend to all residents of at least a calendar year who apply by March 31 each year.

 

Sitting on a jackpot
Open land in Boulder City, Nevada, is worth enough to make all 15,000 residents millionaires.
Kathleen Hennessey, Associated Press | May 6, 2006
http://www.azcentral.com/news/articles/0506bouldercityA105060.html

a few excerpts:

No neon. No slots. No showgirls. This desert enclave, 25 miles southeast of Las Vegas, never has been interested in cashing in on its proximity to Sin City.

Until now, that is. Local activists say Boulder City, where gambling has been banned since its founding in 1931, is sitting on a jackpot: 167 square miles of undeveloped open land in one of the hottest real estate markets in the country.

They've developed a plan to cash in and make millionaires of every man, woman and child in this community of about 15,000. (It's too late to move. Only people living here as of March 31 qualify.) ...

One proposal would require the land to remain untouched, set aside for the preservation of the endangered desert tortoise, public recreation and development of solar power.

The other would force the council to sell the property to the highest bidder, with 10 percent of the money to pay off city debt, build a bypass highway and fund education. A tax-exempt trust of 90 percent would be doled out to residents.

An average vacant acre sold for $152,000 in the third quarter of 2001 and $700,000 in the same period in 2005, so the sale could yield $3.2 million for every "resident of record." ...

Rattner compares the arrangement to Alaska, where citizens get an annual check for their share of royalties from the trans-Alaska oil pipeline.

More fundamental, the city attorney said, the land doesn't belong to the residents of Boulder City in the first place.

"The deed that's on file in the County Recorder's Office says the city of Boulder City, not the people of Boulder City. Boulder City is a corporate entity that exists at the pleasure of the Nevada state Legislature," he said. ...

Copyright © 2006, azcentral.com. All rights reserved.

wealthandwant comments: We applaud the impulse that all should share in the bounty of something that no individual created, but have some issues about how they propose to do that.

What about the next child born in Boulder City, to a Boulder City resident who qualifies? Is that child somehow unequal to his or her siblings? How about the next child adopted there? How about the next person to move in?

A better way, just to everyone: Acknowledge that the economic value of Boulder City's land — all its land, not just the acres owned by the city itself — is the common property of all who live there, and collect its economic value as the common treasure. Don't tax buildings: they represent human effort. Don't tax sales (ditto). Don't tax incomes (ditto). At 25 miles from Las Vegas, it will become a desirable place to live, and will attract residents. Use some of that revenue to provide efficient public transportation to Las Vegas. Use some to make an attractive downtown, with good schools and good services. They might think about these issues before selling any of the commons to some other private entity.

Take a look at these themes: citizen dividend, Alaska, land as common property, created equal, sprawl, rent as provisioning for all, windfall, free lunch


Global WarmingGet ahold of the May issue of Vanity Fair magazine, which will be going off the newsstands shortly, or check out the articles on their website. It is the Green Issue, and the lead article — one among several on environmental topics — is entitled "A Threat Graver Than Terrorism: Global Warming — How much of New York, Washington and other cities will be underwater?"

Perhaps you're wondering why Wealthandwant is featuring this story. What does global warming have to do with wealth and want?

Everything! Check out a few of these themes to get a feel for why: sprawl ... perverse incentives ... externalities ... wealth concentration ... density ... infrastructure ... environment ... ecological economics ... privatization ... fences and small bandages ... green taxes ... population growth ... pollution ... polluter pays

s soon as you move beyond the question of "what can I do, in my individual life, to help save the planet?" — obviously an important question — you get to "how do we align the incentives so that we all — individuals, countries, corporations — tend to act in ways that will help save the planet?" Wealthandwant has a framework for exploring the questions, and some answers.

And if you are curious about who is benefiting financially from our current state of affairs, go up and look at the wealth distribution data, particularly as it pertains to STOCK, BUS, NMMF and RETQLIQ. It isn't as big a group as you might be led to believe. Wealthandwant's tables provide you evidence from the Federal Reserve Board's Survey of Consumer Finances.


There was a wonderful quote in a syndicated column by Paul Campos, law professor at the University of Colorado, about the late John Kenneth Galbraith (find it in the Sacramento Bee, 5/2/06):

Ask Professor Pangloss of the University of Chicago what we ought to do about capital gains or the inheritance tax or unions, and he will dazzle you with equations supposedly demonstrating that the political outcomes sought by the wealthiest Americans are also best for society as a whole.

Referring to Galbraith, the article ends,

That so many of his academic colleagues ended up arguing that the increasingly vast gulf between America's rich and everyone else is actually a desirable state of affairs, did not, I suspect, surprise him.

Why is wealthandwant interested in this? Take a look at warping of economics , and special interests.


 

April 28, 2006 — Atlantic City May Lose in New Monopoly http://www.nytimes.com/2006/04/28/nyregion/28monopoly.html

wealthandwant comments: The game of Monopoly has a very different history from what the New York Times reported:

When Monopoly was devised in the 1930's, Atlantic City was chosen because it epitomized the kind of glittering tourist destination that many Depression-era Americans could only fantasize about visiting.

Charles B. Darrow, an unemployed salesman, sketched the prototype board game on a tablecloth at his home in the Germantown neighborhood of Philadelphia, using 21 street names from Atlantic City. (The final space, Marvin Gardens, was a name taken from the neighboring community of Margate City, where it is spelled Marvyn.)

The Parker Brothers game company rejected Mr. Darrow's proposal, so he went to a printer and began selling it himself. It caught on so quickly that Parker Brothers eventually reversed itself. It began mass-marketing Monopoly in 1935, and that year it became the world's best-selling board game. Pat Riso, a Hasbro spokeswoman, said it decided last year to poll fans to see how they might recast the game if it were to be developed today. So the "here and now" version will replace railroads with airlines. Utilities will be updated (Ms. Riso would not say with what, but allowed that Internet providers is a good guess.) Rents will rise, along with the cost of bail and the $200 payment for passing "Go."

In one uncharacteristic bow to the past, free parking will remain free. ...

Well, they've got a lot of facts wrong. For starters,

  • First, Monopoly was not "devised" in the 1930s.
  • Nor was it created by Charles Darrow. Rather, it was created by Elizabeth Magie before 1903, in order to teach the ideas that the wealthandwant website seeks to share. Her game was called The Landlord's Game.
  • Third, Marvin Gardens is a misspelling of the conjunction of the first syllables of Margate and Ventnor.

If you'd like to read the whole story — and it is a good one — check out the website for the Henry George School and birthplace in Philadelphia, which tells the story.

 

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themes:

Alaska

citizen's dividend

land different from capital

pork

created equal

privatization

is this socialism?

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