History is Just Another Word for Land Speculation

It’s always good to know your roots, to know what you’re up against, to know what to keep and what to change.

The saying was, land speculators “produce more poverty than potatoes and consume more midnight oil in playing poker than of God’s sunshine in the game of raising wheat and corn.” —Prof. Benjamin Hibbard, the earliest land scholar, 1924 (or even earlier).

Ever wonder where those names for towns and downtown streets come from? The names of US universities? Even the names of some military bases?

The successful land dealer of one generation became the banker, the local political oracle and office holder, or the county squire of the next. Scarcely a city or country town in the West but had its first family whose fortune had been made by shrewd selection of lands and their subsequent sale or rental to later comers.”— 1942, Historian Paul W. Gates (1901–1999), widely considered to be the foremost authority on US land policy who wrote 10 books and 75 academic articles.

America has always been a nation of real estate speculatorsReal estate speculation was an integral part of the winning of the west, the construction of our cities, and the transformation of American home life, from tenements to mini-mansions.” — 2013, Economist Edward L. Glaeser of Harvard University and NBER

The original US Constitution, the Articles of Confederation, funded the new, federal US Government with a tax on land. About a decade later, some Founding Fathers met again, yet without Congressional authority and in secret, to replace the land tax with tariffs, at the behest of land speculators, which most of them were. Ben Franklin lost a bundle speculating in land— which may be what motivated him later in life to support the physiocrats, the thinkers who advocated a single tax on land value instead of on people’s labor or capital goods, like houses. (Daniel Friedenberg’s Life, Liberty, and the Pursuit of Land, 1992)

Soon after the colonies protested the taxes that the British levied on them, the farmers of western Pennsylvania protested the tax on their product — whiskey. As a replacement tax, the frontier sodbusters advocated a levy on land. Back then, people clearly saw that a tax on the value of land would collect much more revenue in cities like Philadelphia, where locations were very spendy (still are), than in the countryside like backwoods Pennsy, where land is dirt cheap. To quell the Whiskey Rebellion, president George Washington — the nation’s richest man and biggest landowner — put into the field four times as many soldiers as he ever led against the British (Nathan Miller’s Stealing From America, 1992).

For the first decades of its existence, the young US government supported itself not only with tariffs but also by selling western lands. Most of the sales of prime land were not to settlers but to speculators who eventually sold the fertile land to settlers. If the US had cut out the middle man, it could have directed all those sale proceeds into the public treasury. However, most often the employees of the government’s land office were in cahoots with the speculators; everybody knew what was going on (Everett Dick, The Lure of the Land, 1970). Further, the government did not have to sell the land but could have leased it, just as the modern state of Israel does today. Or, if selling, government could tax or otherwise levy land at its annual rental value (functionally, no different from leasing it).

One of the favorite places to found a city is by the mouth of a river: London on the Thames. New York on the Hudson. New Orleans on the Mississippi. On the Pacific Coast, the major river that drains the western half of North America is the Columbia. Near it’s mouth sits Portland, yet that city is not the region’s premier city. That title belongs to rival Seattle. How did that happen? Recognizing their natural advantage, the founders of Portland kept their prices for land high. The city fathers of Seattle undercut them—and soon outgrew the city to their south, by leaps and bounds. It’d be as if Philadelphia outgrew New York (which did not happen).

The hierarchy of cities was flipped again elsewhere by speculator greed. The natural pass thru the Rocky Mountains is by Cheyenne Wyoming. When railroads started extending westward, speculators figured the iron horse had no choice but to pass through Cheyenne so they kept the price for land high. To their south, the city fathers of Denver undercut them, attracted the railroad, and outgrew their rival to the north. Today, Cheyenne remains a town while Denver is a major American city.

Such is the counterproductive power of land speculation. Conversely, there is a potent, productive stimulant: the public recovery of land value. When Johannesburg South Africa was dying after the nearby mines played out, the city fathers shifted their property tax to fall only on land, not on buildings. So owners developed vacant lots and kept their parcels at highest and best use. Johannesburg grew to become the financial capital of Africa. Its rival city to the south, Cape Town, situated on one of the most strategic ports on the planet, lagged behind. It was as if Albany New York had eclipsed New York City—unfathomable.

“History is bunk,” Henry Ford said. Many Americans have expressed anti-intellectual sentiments. Yet it is good to know one’s roots, what one is up against, and what to keep and what to change. To his credit. Ford also said,“We ought to tax all idle land the way Henry George said—tax it heavily, so that its owners would have to make it productive.”

“We ought to tax all idle land the way Henry George said—tax it heavily, so that its owners would have to make it productive.”—Henry Ford

Will academia tell this tale? One of the major business schools in the US is Wharton’s at the University of Pennsylvania in Philadelphia. The Whartons were one of the early major land speculators. So were the Roosevelts. Later, so was Leland Stanford. And more recently James Irvine (University of California at Irvine). So don’t hold your breath. Instead, for more on the link between speculators and universities, see Dr. Mason Gaffney’s Corruption of EconomicsInformation such as this won’t be fed to you, You have to look for it.

Ever wonder where those names for downtown streets come from? The names of US universities? Even the names of some military bases?

Speculators Are Us. This is a brief, partial History of the United States from the POV of those who benefited the most from it.

The Truth About Income Inequality

The census fails to account for taxes and most welfare payments, painting a distorted picture.

Never in American history has the debate over income inequality so dominated the public square, with Democratic presidential candidates and congressional leaders calling for massive tax increases and federal expenditures to redistribute the nation’s income. Unfortunately, official measures of income inequality, the numbers being debated, are profoundly distorted by what the Census Bureau chooses to count as household income.

The published census data for 2017 portray the top quintile of households as having almost 17 times as much income as the bottom quintile. But this picture is false. The measure fails to account for the one-third of all household income paid in federal, state and local taxes. Since households in the top income quintile pay almost two-thirds of all taxes, ignoring the earned income lost to taxes substantially overstates inequality.

Average earned and net income by quintile, 2017

$300,000

Earned income

250,000

200,000

Net transfers

Net taxes

150,000

100,000

Net income

Net income

50,000

Earned income

0

1

2

3

4

5

Source: Calculations by authors based on official government data

The Census Bureau also fails to count $1.9 trillion in annual public transfer payments to American households. The bureau ignores transfer payments from some 95 federal programs such as

  • Medicare,
  • Medicaid and
  • food stamps,

which make up more than 40% of federal spending, along with dozens of state and local programs. Government transfers provide 89% of all resources available to the bottom income quintile of households and more than half of the total resources available to the second quintile.

In all, leaving out taxes and most transfers overstates inequality by more than 300%, as measured by the ratio of the top quintile’s income to the bottom quintile’s. More than 80% of all taxes are paid by the top two quintiles, and more than 70% of all government transfer payments go to the bottom two quintiles.

America’s system of data collection is among the most sophisticated in the world, but the Census Bureau’s decision not to count taxes as lost income and transfers as gained income grossly distorts its measure of the income distribution. As a result, the raging national debate over income inequality, the outcome of which could alter the foundations of our economic and political system, is based on faulty information.

The average bottom-quintile household earns only $4,908, while the average top-quintile one earns $295,904, or 60 times as much. But using official government data sources on taxes and all transfer payments to compute net income produces the more complete comparison displayed in the nearby chart.

PHOTO: GETTY IMAGES/ISTOCKPHOTO

The average bottom-quintile household receives $45,389 in government transfers. Private transfers from charitable and family sources provide another $3,313. The average household in the bottom quintile pays $2,709 in taxes, mostly sales, property and excise taxes. The net result is that the average household in the bottom quintile has $50,901 of available resources.

Government transfers go mostly to low-income households. The average bottom-quintile household and the average second-quintile household receive government transfers of some $17 and $4 respectively for every dollar of taxes they pay. The average middle-income household receives $17,850 in government transfers and pays an almost identical $17,737 in taxes, while the fourth and top quintiles of households receive government transfers of only 29 cents and 6 cents respectively for every dollar paid in taxes. (In the chart, transfers received minus taxes paid are shown as net government transfers for low-income households and net taxes for high income households.)

The average top-quintile household pays on average $109,125 in taxes and is left, after taxes and transfer payments, with only 3.8 times as much as the bottom quintile: $194,906 compared with $50,901. No matter how much income you think government in a free society should redistribute, it is much harder to argue that the bottom quintile is getting too little or the top quintile is getting too much when the ratio of net resources available to them is 3.8 to 1 rather than 60 to 1 (the ratio of what they earn) or the Census number of 17 to 1 (which excludes taxes and most transfers).

Today government redistributes sufficient resources to elevate the average household in the bottom quintile to a net income, after transfers and taxes, of $50,901—well within the range of American middle-class earnings. The average household in the second quintile is only slightly better off than the average bottom-quintile household. The average second-quintile household receives only 9.4% more, even though it earns more than six times as much income, it has more than twice the proportion of its prime working-age individuals employed, and they work twice as many hours a week on average. The average middle-income household is only 32% better off than the average bottom-quintile households despite earning more than 13 times as much, having 2.5 times as many of prime working-age individuals employed and working more than twice as many hours a week.

Antipoverty spending in the past 50 years has not only raised most of the households in the bottom quintile of earners into the middle class, but has also induced many low-income earners to stop working. In 1967, when funding for the War on Poverty started to flow, almost 70% of prime working-age adults in bottom-quintile households were employed. Over the next 50 years, that share fell to 36%. The second quintile, which historically had the highest labor-force participation rate among prime work-age adults, saw its labor-force participation rate fall from 90% to 85%, while the top three income quintiles all increased their work effort.

Any debate about further redistribution of income needs to be tethered to these facts. America already redistributes enough income to compress the income difference between the top and bottom quintiles from 60 to 1 in earned income down to 3.8 to 1 in income received. If 3.8 to 1 is too large an income differential, those who favor more redistribution need to explain to the bottom 60% of income-earning households why they should keep working when they could get almost as much from riding in the wagon as they get now from pulling it.

Sen. David Perdue: Mitt Romney makes the same mistake that cost him the White House

With his attempted character assassination of the president, a fellow Republican, Romney put self-interest ahead of the larger national interest: conservative Republican governance. The op-ed brought to mind 2012, when many Republicans chose to divide the party by continually bashing each other. Romney eventually discovered that many discouraged GOP voters decided to stay home on Election Day.

Like others who have run for president and failed, Romney has taken a stance that smacks of jealousy and resentment. It does nothing but serve the radical liberal left and further divides conservatives.

As the only former chief executive of a Fortune 500 company in Congress, I was initially thrilled by the prospect of welcoming another business guy to the Senate. But Romney’s behavior — before he was sworn in or cast his first vote as the new senator from Utah — was deeply disappointing.

He ran to the media instead of picking up the phone. That is exactly what is wrong with Washington. Too many career politicians focus on finger-pointing for their own self-interest rather than on getting results.

We have seen what a divided party means for Republicans. It means we help put Democrats in charge. It means we help them advance their radical liberal agenda, which has proven to fail the very people they claim to champion: the working women and men of America.

Conservatives know that bigger government, higher taxes and single-payer health care should not be the way forward. It’s fiscally and socially irresponsible.

The mainstream media and Democrats want to further divide Republicans, and now Romney has played right into their hands. Jeff Flake (Ariz.) filled that role before his retirement; the last thing we need now in the Senate is a Jeff Flake on steroids. We certainly don’t need more distractions. We need constructive leaders who want to get things done.

Like many other leaders in history, Trump is certainly an unusual president. He does not fit the typical mold of a Washington politician. That is exactly why the American people, fed up with business as usual, elected him.

The presidency is bigger than any one individual. It is about providing a vision and executing an agenda to advance all Americans. Criticism of the president or his policy decisions is, of course, not off-limits. But I believe it is much more productive to have candid conversations behind the scenes.

The Republican agenda is working. Just look at the results. As the news about employment and wages on Friday confirmed, over the past two years, the United States has undergone an astonishing economic turnaround. The economy is growing at twice the rate it did under President Barack Obama. More than 4.4 million new jobs were created in 2017 and 2018 . Middle-class income is at an all-time high. Overall unemployment is the lowest in 50 years, and African American, Hispanic and Asian American unemployment is at historically low levels.

Clearly, this president understands that his primary role is to protect Americans. He is strengthening the military and reasserting U.S. leadership around the world. These results would be absolutely celebrated if anyone else were president. Instead, “the resistance” has spread from the political extremes to the media and now to the Republican Party itself.

Imagine if Romney had been elected president and removed hundreds of regulations, passed a historic tax bill, made the United States’ NATO allies pay their fair share, negotiated a new trade deal with Mexico and Canada, and stood up to China. Would he have been met with this type of resistance? Of course not.

We are on track to change the nation’s direction for the better. We are on track to restore economic opportunity, fiscal responsibility, limited government and individual liberty. I hope Romney, who plans to caucus with Republicans, will reconsider continuing his harmful behavior as he begins his Senate career.

Instead, I hope he will join me as one of the few business-minded leaders who can stay focused on getting the job done.

Why Republicans Stick With Trump

It’s all the things he hasn’t done. On key issues, the president has come around to conservative positions.

it’s instructive to examine what Mr. Trump hasn’t done. Since the campaign, Mr. Trump has abandoned many of his previous positions and embraced traditional conservative views.

Spending and taxes. During the election, Mr. Trump promised a $1 trillion infrastructure plan. Some Republicans feared his first initiative on taking office would be a pork-laden spending package reminiscent of Barack Obama’s stimulus bill. They also worried he would cut a deal with Democrats to raise taxes. “I am willing to pay more,” Mr. Trump said in May 2016. “And do you know what? The wealthy are willing to pay more.” Instead, the reverse happened: There’s no infrastructure plan in sight, except for the border wall, and Mr. Trump signed a sweeping bill to reduce personal and corporate taxes.

• Court nominees. In 2015 candidate Trump said his sister, a liberal federal judge, would be a “phenomenal” Supreme Court justice, though he claimed he had been joking. After Justice Antonin Scalia died, Mr. Trump decided to release a list of potential replacements. This was a central reason many conservatives voted for him. In appointing Justice Neil Gorsuch, President Trump made good on his promise. Since then, constitutionalists have cheered the quality and sheer quantity of his appointments to all levels of the judiciary.

• Abortion. In a successful effort to win the Iowa caucuses, Sen. Ted Cruz attacked Mr. Trump’s “New York values.” A Cruz TV ad showed Mr. Trump years earlier calling himself “pro-choice in every respect.” Yet President Trump has reinstated Reagan’s “Mexico City policy,” which prohibits federal funds from going to international groups that provide or promote abortions. Mr. Trump is also moving to require a hard division between abortion providers and clinics that take federal Title X funds, which would be a significant hit to Planned Parenthood.

• Israel. In February 2016, Mr. Trump claimed he would not take sides between Israel and the Palestinians, saying he would be “sort of a neutral guy.” Sen. Marco Rubio labeled this “an anti-Israel position.” Yet in December 2016, when the United Nations considered a resolution calling for an end to Israeli settlements, including in East Jerusalem, Mr. Trump said it was “extremely unfair to all Israelis” and pressed the Obama administration to veto it. Then this year Mr. Trump made good on his promise to recognize Jerusalem as Israel’s capital and move the U.S. Embassy there. Time and again, he has proved to be a reliable ally for Israel.

• Guns. In a 2000 book, Mr. Trump wrote: “I support the ban on assault weapons and I support a slightly longer waiting period to purchase a gun.” After the school shooting in Parkland, Fla., earlier this year, President Trump did briefly suggest expanding background checks and raising the age limit to buy certain guns. But he quickly reverted to strong Second Amendment rhetoric, while saying that massacres could be prevented by fixing mental-health services and arming teachers.

 Health care. In 2015, candidate Trump told “60 Minutes” that his plan would provide universal health coverage paid for by the government. “I am going to take care of everybody,” he said. Campaigning in New Hampshire a few months later, he said Medicare could save an unrealistic $300 billion if the government negotiated with drug companies to lower prices. But as president, Mr. Trump has pursued more-conventional Republican policies, such as adding work requirements to Medicaid, expanding short-term insurance plans, and broadening association health plans.

• Defense. In a 2013 interview, Mr. Trump seemingly supported the sequestration cuts to defense spending—only complaining that, as “a very small percentage of the cuts that should be made,” sequestration wasn’t big enough. In 2015 he suggested, unworkably, that by eliminating waste he could strengthen the military while still reducing spending. Yet in his first address to Congress as president, he proposed a 10% increase to the Pentagon’s budget, which he later called “historic.”

It isn’t unusual for a politician to change positions. Unsurprisingly, voters tend to be more forgiving of flip-flops when they agree with the final result. This explains why Mr. Trump is forgiven for abandoning Republican orthodoxy on free trade and entitlement reform: those convictions were always held more by donors than voters. The same is true of support for “comprehensive immigration reform.” If he were to cross his party on issues like taxes, abortion or guns, it would be quite another story. But in the meantime, begging Republicans to ditch Mr. Trump is a waste of time.

 

 

Our socialist president

Protectionism, and the promiscuous and capricious government interventions that inevitably accompany it, is , always and everywhere, crony capitalism. But he is spot on about the incompatibility of America’s new darker system and the rule of law:

“Everyone depends on the whim of the administration. Who gets tariff protection? On whim. But then you can apply for a waiver. Who gets those, on what basis? Now you can get subsidies. Who gets the subsidies? There is no law, no rule, no basis for any of this. If you think you deserve a waiver, on what basis do you sue to get one? Well, it sure can’t hurt not to be an outspoken critic of the administration when the tariffs, waivers and subsidies are being handed out on whim. This is a bipartisan danger. I was critical of the ACA (Obamacare) since so many businesses were asking for and getting waivers. I was critical of the Dodd-Frank Act since so much regulation and enforcement is discretionary. Keep your mouth shut and support the administration is good advice in both cases.”

.. Protectionism — government coercion supplanting the voluntary transactions of markets in the allocation of wealth and opportunity — is socialism for the well connected. But, then, all socialism favors those adept at manipulating the state. As government expands its lawless power to reward and punish, the sphere of freedom contracts. People become wary and reticent lest they annoy those who wield the administrative state as a blunt instrument.

.. Tariffs are taxes, and presidents have the anti-constitutional power to unilaterally raise these taxes because Congress, in its last gasps as a legislature, gave away this power.

.. Noting that some Trump protectionism is rationalized as essential for “national security,” Cochrane, who clings to the quaint fiction that Congress still legislates, suggests a new law stipulating that such tariffs must be requested — and paid for — by the Defense Department: “Do we need steel mills so we can re-fight WWII? If so, put subsidized steel mills on the defense budget. If defense prefers to use the money for a new aircraft carrier rather than a steel mill, well, that’s their choice.”