The Geonomist Volume Fifteen Issue Four

Geonomics is …
a study of Earth's economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land's value and deserve compensation for keeping off ours, as they'd pay us for keeping off theirs. It's mutual compensation: we'd replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.

In order to avoid a possible market crash, China has tried again to dampen speculation in its sizzling real estate market. Starting from the first of 2007, the government no longer exempts foreign investors from its land taxes. Closing the loophole creates a more even playing field for domestic and overseas companies. Domestic companies by themselves have had to pay these taxes and fees for nearly two decades. Meanwhile, the Chinese government also tripled annual land-use tax rates, depending on the size of the city and types of land use. (Jang Group Online, Jan 8)

Like Einstein said, everything's relative. While in most major American metro regions, housing prices – actually, housing site prices (the homes themselves are older, more worn out) – are leveling, even falling, here in the Pacific NW, as economic refugees from the rest of the nation keep coming here, and some of them with big bucks after selling houses in California or Boston, land prices keep climbing up. Like, when a wave hits a beach, the whole front does not arrive at the same time, the end of it lags behind the center; same thing in the land price cycle. Here we watch our imminent fate played out by the rest of the country. Meanwhile, NW sellers still get to feel smart or lucky or greedy while buyers get to feel dumb or cursed or profligate. The only silver lining is since some are still buying homes, landlords can raise what they charge for apartments only so much – for now; change is in the air. This new weather we call “Junuary”, since nowadays flowers can bloom any warm week after MLK Day. That might mean global calamity some decade, but right now I got a tennis match to catch. See you on the court.

In Spain, the average price of an existing house is $282,000 – equal to nine years' salary. In Marinaleda, a small town in the Spanish province of Seville, the city gives away the land to anyone who needs a house, together with a grant, as long as the new owner helps work on its construction or pays for someone to do so. The attached cottages have 880 square feet distributed in two floors with three rooms, living room, bedroom, bathroom, kitchen and a small terrace plus 980 square feet of courtyard. Each costs the same price as two movie tickets with a big bag of popcorn. The same house, but with a courtyard half the size in Villaverde, the cheapest neighborhood in Madrid, would cost $557,000 and would take a monthly mortgage of about $2,688 lasting 30 years. Marinaleda buys or expropriates land. The mayor states, “The land to build is a necessity, a right, and it should be a common good as water or air. Land is about 60% of the final value of a house so by giving it away, its final price is already reduced by more than half.” Mayor Juan Manuel Sánchez Gordillo has won all seven municipal elections in Marinaleda since the reinstitution of democracy in 1979. (Town of Marinaleda's official website, via Caspar Davis) A couple years ago, small towns in mid-America did the same.

Strong equity markets combined with rising real estate values and commodity prices pushed up already huge fortunes. Forbes found 946 billionaires, 178 of them newcomers; 17 climbed back into the ranks after being absent for a year or more. The nouveau riche include 19 Russians, 14 Indians, 13 Chinese, 10 Spaniards – Spain's sizzling real estate market created nine of them – plus the first billionaires from Cyprus, Oman, Romania, and Serbia. In Europe, Russia's mostly young, self-made tycoons are catching up to Germany's often-aging heirs and heiresses. Russia now has 53 billionaires (2 shy of Germany's total), but they are worth $282 billion ($37 billion more than Germany's richest). After a 20-year reign, Japan is no longer Asia's top spot for billionaires: India has 36, worth a total of $191 billion, followed by Japan with 24, worth a combined $64 billion. The average billionaire is 62 years old, two years younger than in 2005. This year's new billionaires are seven years younger than that. Two-thirds of last year's billionaires are richer. Only 17% are poorer, including 32 who fell below the billion-dollar mark. The billionaires' combined net worth climbed by $900 billion to $3.5 trillion. They made money in everything from media and real estate to coffee, dumplings, and ethanol. Are there billionaires Forbes missed? They didn't uncover Ireland's Denis O'Brien, who pocketed $800 million in a junk bond offering, until 13 days after they'd locked in fortunes, so he is not reflected in the rankings. (Forbes website, March 8)

In 2000, the top 1% of the world's population – some 37 million adults with a net worth of at least $515,000 – accounted for about 40% of the world's total net worth. The bottom half of the population owned merely 1.1% of the globe's wealth. The net worth of the world's typical person – whose wealth was above that of half the world's population and below that of the other half – was under $2,200. The US accounted for 4.7% of the world's population but 32.6% of the world's wealth. Nearly 4 out of every 10 people in the wealthiest 1% of the global population were American. The average American had a net worth of nearly $144,000, ranking behind the average Japanese, who had $180,000, at market exchange rates; the average person in Luxembourg, who had $183,000; and the average Swiss, who had $171,000. Among Americans, wealth is distributed about as unequally as it is around the globe; the richest 1% of Americans held 32% of the nation's wealth in 2001 and rake in a higher share of the nation's income than at any time since the 1920s. (New York Times, December 6, via Ed Dodson)

After Hurricane Katrina, the government gave out nearly $5.3 billion in aid to rebuild New Orleans. Besides purchase food and construction materials, it was used to pay for guns, strippers, and tattoos. At least 162,750 homes that didn't exist before the storms may have received a total of more than $1 billion in illegal payments. Conversely, some deserving people were improperly denied aid. The Justice Department so far has prosecuted more than 400 people for storm-related fraud, and $18 million has been returned to FEMA or the American Red Cross. A block-by-block survey of flooded areas also shows that about 10,000 properties in New Orleans remain in a state of withering neglect. (Seattle Times, Feb 7) While cheating the government is wrong, is lobbying it any better?

Katrina and Rita turned 300 miles of coast into wasteland. Yet in response to wealthy owners of high-risk land along Florida's Gulf Coast and on Jekyll Island, a vacation spot off Georgia's coast, Congress agreed to include them in the federal subsidized insurance program. The federal flood portfolio carries 5.4 million policies and recently eclipsed $1 trillion in coverage. It takes in just $2 billion a year in premiums; more than a third of that – nearly $720 million a year – is eaten up by interest on debt; the program owes the US Treasury $20 billion. Subsidizing rich landowners makes it possible for them to build on sites that are environmentally sensitive and disaster-prone. Now rich owners of beachfront in Alabama, Texas, and elsewhere are lobbying Congress for their own cheap coverage. (Associated Press, 2006 Dec 29)

The Forest Service and Bureau of Land Management announced the new fee of $1.35 per cow/calf pair, per month, down from $1.56 last year. The new fee is as low as it can legally be. A small number of Western livestock operators, producing less than three percent of the beef we eat, pay less per month to feed their cows than it costs to feed a hamster. Meanwhile those cows are befouling our rivers, accelerating erosion, and driving rare species toward extinction on lands that belong to the American people. The federal grazing program operates at a deficit of at least $123 million annually. Independent economists have estimated that the costs may be closer to $500 million annually. It estimated that in order to cover costs, the Bureau of Land Management would have to charge $7.64 per animal-unit-month and the Forest Service would have to charge $12.26. (Center for Biological Diversity, February 05; via Paul Metz)

Some number of travelers will always be willing to pay a price to save several minutes, while others would rather save a few dollars and take the chance of being stuck in traffic. Addressing the preferences of the former, the administration's proposed $2.9 trillion fiscal 2008 budget allocates $130 million to build congestion-pricing systems. A few such experiments already operate in the US. On a portion of California Route 91 in Orange County, drivers can choose between the free road and the less-traveled pay-per-drive adjacent lanes, in which tolls vary throughout the day and throughout the week. Driving eastbound in the express lanes at 4 PM Thursday costs $9.25, compared with $1.85 at noon the same day. To the south in San Diego, on an eight-mile stretch of Interstate 15, motorists who pay fees that vary throughout the day depending on traffic conditions, can use the high-occupancy toll, or H.O.T., lanes. (NY Times, Feb 11, via Heather Remoff)

A study, which the Interior Department refused to release for more than a year, estimates that current tax breaks let oil companies drilling in the Gulf of Mexico dodge tens of billions of dollars in royalties. The US government's usual take – royalties plus corporate taxes – is about 40% of revenue from oil and gas extracted on federal property; worldwide, governments average about 60 to 65%; that figure excludes countries where government alone extracts oil. Starting this year, Britain raised its tax on petroleum revenue from the North Sea, pushing the government's share to 50%. Norway keeps at least 70% of revenues; as oil prices rise, the government share increases and tops out at 78%. Several Canadian provinces have adopted similar policies; Alaska's new tax system kicks in as oil prices climb above $55 a barrel. Given the nearly fourfold increase in oil prices from $15 a barrel in 1999 to more than $70 2006 summer, do oil companies really need tax breaks? (New York Times, Dec 22, via Alanna Hartzok)

In 2006, the world's largest oil company netted $39.5 billion, making it the most profitable year for any company ever. It tops the last record, also set by Exxon, in 2005 by 9.3%. Exxon's annual net income soared despite fourth-quarter earnings falling 4.3% from last year's record quarter. Exxon's profit equals roughly $132 for every US resident, more money generated per minute, $75,150, than 90% of the US population earned all year. Exxon raked in record profits even though the price of a barrel of oil ended 2006 at $61.05 where it started – $61.04 a barrel at the end of 2005. It benefited over the summer when oil prices spiked to a high of $77.03 a barrel. (USA Today, Feb 2)

SEC Chairman Christopher Cox said the timing of stock option awards to executives “appears to be a pandemic of crooked accounting.” Companies had to erase more than $5 billion in earnings and fire more than 60 senior officers and directors – including 18 Cheat Executive Officers. The founder and CEO of the company that popularized the graphic “Grand Theft Auto” video games, Ryan A. Brant, pleaded guilty. A former top executive of the company that runs another popular feature of American culture, the Monster job search Web site, admitted he backdated millions of dollars in stock option grants. They were the sixth and seventh executives to be criminally charged in the wave of government investigations. The Justice Department and the Securities and Exchange Commission have 130 or so companies under investigation. Some critics want prosecutors to pick up the pace of enforcement actions in corporate America's biggest fraud of 2006. (Associated Press, Feb 16)

Along with back-dating, there's trading-ahead. The Financial Times (Feb 15, via Phil Anderson) highlighted several examples of the length some stock traders go to, to disguise their knowledge and then trading of non-public information. Which will still affect price, of course, diluting returns to those not in the know. Federal prosecutors at the Securities and Exchange Commission charged that an inside trading ring at three "top tier" Wall Street firms – UBS, Morgan Stanley and Bear Stearns – operated for five years, involving hundreds of tips and thousands of relatively small trades, netting the insiders $8 million. (USA Today, Mar 1)

The top five Wall Street firms (Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley) were expected to award from $36 billion to $44 billion worth of bonuses to their 173,000 employees. That averages between $208,000 and $254,000, with the bulk going to the 1,000 or so highest-paid managers. An amount less than half of the combined bonuses awarded by the five Wall Street firms for one year, $15.4 billion, is how much the combined annual earnings of the 93 million production and nonsupervisory workers (exclusive of farmworkers) rose from 2000 to 2006. That's $3.20 a week, an increase of 1%. Yet those workers' productivity, the amount of output per hour of work, from 2000 to 2006 rose by 18%. They earned bigger rewards, but the bonuses went instead to the tiptop. Meanwhile, the US savings rate has dropped to below zero, and more Americans file for bankruptcy than for divorce. (NY Times, Jan 8, via Heather Remoff)

In 2006, productivity slowed to its lowest rate in nine years – in 1997 the gain was 1.6%. Since hitting 4.1% in 2002, productivity has declined: in 2005 it was 2.3%, last year it was 2.1%. But that was still nearly a full percentage point above average annual gains from 1973-93 when oil price shocks made doing business more costly. Then high-tech tools such as computers began to boost worker efficiency. Labor's wages for each unit of output rose 3.2% for all 2006, up from 2% in 2005 and the fastest rise in wages and benefits since a 4.2% increase in 2000. Following a 3.2% rate of increase in the third quarter, for the fourth quarter wages fell back to just 1.7%. (AP, USA Today, Feb 7)

American overwhelmingly see the growing gap between rich and poor as a serious national problem; in an LA Times poll, three quarters worried about the yawning income/wealth gap. Among people earning less than $40k annually, 84% called the disparity a major challenge; almost as many among the $40-$60k/yr group felt the same way; among those making over $100k/yr, it was three in five. Even a majority of Republicans – 55% – called the situation serious. Even an ex-vice chair of the Federal Reserve – which wields enormous power, creating so much new money which investors use to bid up assets, making the rich richer – expressed concern (Ms. Alice Rivlin by name) about the inequality. The portion of national income claimed by the top quintile topped 50%, up from 45.6% 20 years ago; the bottom three quintiles earned 26.6%, down from 29.9% in 1985. Average pay for CEOs rose to 369 times that of the average worker last year, up from 131 times in 1993 and 36 times in 1976. While we slide into a two-class society, there is nevertheless some head-in-the sand; about two thirds of Americans called their own finances secure and expected housing values in their neighborhood to stay up in the first half of 2007. (Seattle Post-Intelligencer, Dec 14; via Meta Heller)

In cities like New York, LA, Boston, and San Francisco, less than 10% of households can afford a median-priced home. Nationally the average is about 50%. In the star cities, many homes are kept empty much of the year by rich owners who live in multiple dwellings. (Wall Street Journal, Feb 13) After a lull between 2001 and 2004, robberies and murders in America rose in the first half of 2006, from big urban areas to small cities. At 3.7%, the violent crime rate was on pace for a second straight annual increase; in 2005, violent crime rose 2.2%. Some of the biggest jumps were in robberies at 9.7% and in arson at 6.8%. (The Oregonian, Dec 19)

To share profit with investors at year-end, fewer US companies, particularly big-name ones, raised dividend payments to shareholders in December than in the same month a year earlier. Some small and midsize companies chose another route: one-time, or extra, dividend payments. A total of 221 companies, the highest since 1978, declared extra dividends in December, up 13% from the 196 companies that paid them a year earlier. Companies typically pay extra dividends when they want to reward shareholders but don't want to commit to paying the same amount each year. The number of companies that raised their regular dividends in December was 154, down from 166 a year earlier. For the full year, 1,969 companies raised their regular dividends, up 1% from 1,949 in 2005. Many companies used excess cash to buy back stock last year rather than raise dividend payments. (LA Times, January 5)

Only 37 companies in the Standard & Poor's 500 index split their stock last year. That's almost 40% below the average number of yearly splits since 1979 and 60% below the 91 that split in 1999 as the last bull market was peaking. Companies split their stock in half to keep their per-share price low. Small investors like the idea that they own twice as many shares and that they can purchase stock at a lower per-share price. Data show splits are meaningless; stocks that split from 1988 to 2005 had nearly identical 12-month performance to those that didn't. Some guesses for last year's drought of splits: The Google effect. Having a high per-share price is a status symbol. Some investors see Google at $500 and Berkshire Hathaway at $100,000 as a badge of honor.

Fear of a market correction. It's been 51 months since the market corrected 10% or more. That makes companies nervous. If their share price falls after a split, it may be lower than management wanted.

The get-even factor. While the Dow Jones industrial average was near a high, many stocks were still lower than were they were five years ago. The S&P 500 was still 6.3% below its high. (USA Today, Jan 22)

“In all the developed countries put together, real estate prices have risen by more than $30trn over the past five years. That's equivalent to 100% of their combined annual GDPs. This eclipses the 1990s stock market bubble (an increase over five years of 80% of GDP), and Wall Street's bubble of the late 1920s (55%).” (Fred Harrison, author of Boom, Bust: House Prices, Banking and the Depression of 2010 in Money Week, Jan 30)

By last year, a median-priced American home cost nearly eight times average annual earnings, up from about five times earnings in 1980. The number of unoccupied homes for sale has reached a record 2.7% of all homes that are normally owner occupied. (Christian Science Monitor, Feb 7)

The S&P/Case-Shiller method showed that home prices rose 0.4% in the fourth quarter of 2006 compared with the same period a year earlier. It was their smallest gain since 1993 Q2. (USA Today, Mar 1)

In December, home prices in the top 10 metro areas fell 0.8%, the largest monthly drop since 1991. (CBS MarketWatch, Feb 27)

In January, sales of new homes fell by double digits, the sharpest in 13 years, since January 1994. New homes account for 15% of the market. The median price of an existing home fell to $210,600, a decline of 3.1% from a year ago, the third-biggest drop in history and the sixth straight month of decline. (CBS MarketWatch, Feb 16)

Of 55 economists polled Jan. 18-24, 9% said the housing decline ended in 2006, 42% said the downturn will end in the first half of 2007, and 45% said it will bottom out in the second half. (USA Today, Feb 5)

In the final quarter of 2006, as borrowers with meager means faltered, late mortgage payments shot up to a 3 1/2-year high and foreclosures surged to a record high. The percentage of payments that were 30 or more days past due for all loans tracked jumped to a seasonally adjusted 4.95% rate in the October-to-December quarter. That marked a sharp rise from the third-quarter's delinquency rate of 4.67% and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97%. The percentage of mortgages that started the foreclosure process rose to 0.54%, a record high. The previous high, 0.50%, occurred in the second quarter of 2002 as the economy was recovering from the blows of the 2001 recession. The late-payment rate for all subprime loans jumped to 13.33% in Q4, from 12.56% in the prior period and the highest in four years. The delinquency rate for subprime borrowers with adjustable-rate mortgages was even higher – 14.44%, also the highest in four years. The Mortgage Bankers Association, the source of the data, altered its December forecast of when housing prices would turnaround, from 2007's middle to this year's end. (USA Today, March 13) Not only did poor borrowers overextend, so did their lenders, and the lenders to their lenders. Next, some banks should fail, followed by some businesses who needed their poor customers. How far it spreads depends on how rational voters and government react; expect the bankruptcies to spread widely.

US debt enjoys demand. Despite war abroad, oil exporters increased their holding of Treasuries to $97.1 at the end of November, up from $79.3 billion a year ago; China went from $303.9 billion a year before to $347 billion. As demand for US bonds rises, their yields fall. Normally, the yield of a 30-year bond stays 1.5 percentage points above the Fed funds rate. But to slow growth, the Fed has raised their basic rate 16 times since 2004 (still well below their 1981 rate of 19%). That has pushed up the yield of short-term bonds, as demand lowered the yield of long-termers. When short-terms pay more than long, watch out; since 1960, such inversion has preceded a recession, the lone exception being 1966. Lately the 30-year bond yield has dipped below the fed funds rate, and the 10-year Treasury note, often used as a benchmark for 30-year fixed-rate mortgages, has kept below six-month Treasury bills for eight-straight months, the longest such period since 1981. Yields have been inverted 11 of the past 13 months. Yet does an inversion still matter? US companies can borrow overseas at lower rates; while the Fed's funds rate is 5.25%, the European Central Bank rate is 3.5%. (USA Today, Feb 13) Yet cheap loans can't buoy business when their customers go broke.

Meanwhile, high-end office space rents are higher in Moscow than in New York City, $21 per square foot higher, at $95 per square foot. To capture those rents, investors are building a 93-story office tower, which will be Europe's tallest building. (Parade Magazine, Dec 24) If it's darkest before down, it's also brightest before sunset. It's at the end, the peak, of the land price cycle when investors put up the newest, tallest building.

“A split-rate tax would benefit many upstate New York cities and villages with aging infrastructure and high property taxes that have resulted from diminishing tax bases. Nearly all of the Pennsylvania cities using the split-rate tax experienced an increase in development after the split-rate tax was implemented.” (In ex-Governor Pataki's Report on Quality Communities, page 95, November 2006)

By taxing land more than buildings, cities can encourage valuable sites to be used productively, rather than banked by investors hoping for even higher prices. (Rich Nymoen et al, St. Paul Pioneer Press, Nov 27, linked to Planetizen: Urban Planning and Development Network, the popular website of planners)

Lower taxes on buildings would encourage renovation and new construction, because there'd be less of a penalty for doing the work. Also, there would be a greater incentive for people to replace abandoned buildings and parking lots with useful structures such as affordable housing. (Jeffrey P. Cohen, Barney School of Business, U of Hartford; The Hartford Courant, 2006 December 17)

The New York Observer, March 12, by Tom Acitelli: “It's more than a century since Henry George's Progress and Poverty was a best-seller, but his memory lingers on.”

Scrapping Kansas City's 1% tax on workers' earnings and replacing it with a land tax would help the city compete more successfully with other metropolitan areas and slow the migration of businesses and workers to distant suburbs. Henry George, a social reformer in the 19th century, campaigned to replace all other taxes with a single tax on land. Haslag's model suggests a 10% tax on land value, in addition to the current 1.44% tax on land and building. (Joseph Haslag, U of Missouri at Columbia, published by the Show-Me Institute; St. Louis Post-Dispatch, Jan 24, Kansas City Business Journal, Jan 25, The Kansas City Star, Jan 26)

Henry George knew that state ownership of land would never be tolerated, so he proposed that the state confiscate all unearned increment of land values as a single tax. (Charleston Gazette, Feb 9; Huntington News Network, Feb. 12)

How to shift to alternative energy and oil conservation: how to pay for it? One way would be serious tax reform, not only by eliminating the Bush tax cuts, but also by heavily taxing non-productive asset transactions through restoration of higher capital gains taxes, shutting down offshore tax havens, a universal land-use tax on rents and mineral rights, or higher taxes on earnings from privatized public utilities and interest. (Richard C. Cook, who worked in the Carter White House and NASA before spending 21 years as an analyst with the US Treasury Department. He is the author of Challenger Revealed, called by Publisher's Weekly, "easily the most informative and important book on the disaster." Dissident Voice, Feb 18. He spoke in the Basic Income Group track at the Eastern Econ. Assoc. annual)

The Christian Science Monitor (March 14): “An increasing number of liberals, such as Al Gore, and conservatives, such as Texas oil billionaire T. Boone Pickens, are publicly supporting the idea of taxing energy more and work less. All across Europe – where energy taxes are already much higher than in the US – governments are already cutting payroll taxes. Payroll taxes increase the costs of hiring workers.”

“We do not get richer as a society from rising house prices. We merely transfer a burden to future generations who have to pay more for their houses. We shut out the have-nots who cannot tap their parents for a deposit. We lock in a permanent underclass who have no hope of ever getting on to the property ladder. Need this have happened? No. Residential property in Britain jumped by Ł410bn in value last year. Only about 2% of that gain was taxed by stamp duty or inheritance tax. Would prices have risen so far so fast if land values were taxed more? No. The discussion of land value tax, which has been around since the days of Adam Smith and David Ricardo, is gaining ground again as people reflect on the absurdities of the housing boom. Next week sees the launch of an edited and abridged version of the classic 1879 work by the American economist Henry George, Progress and Poverty by Bob Drake. George is widely seen as the father of land value taxation and his ideas are as relevant today as they were in the aftermath of the US civil war.” (One of several recent endorsements in The Guardian, this in their e-Unlimited by Ashley Seager Feb 19, via Mark Monson)

“Greens support a land value tax. The land value of a location is community-created. Land value is not created by property owners who should therefore not benefit from it when it becomes incorporated in higher capital or rental values.” (Mark Ballard MSP for Lothians since 2003, Green speaker on Finance and Public Services, and Rector of Edinburgh University, and Peter McColl, researcher for Mark Ballard, Scottish Left Review, Issue 38)

The Australian, the daily national broadsheet, published a prize-winning essay, here extracted: "There is the economic opportunity cost of all the investment going into property. Unlike investment in shares or loans to business, investments in land ownership generate no increase in productivity or output. They simply rely on population increase and general increases in societal wealth to increase demand for, and thus the price of, land. In this respect, untaxed land ownership steals income from those involved in production: in 1911 land owners received only 8% of national income with workers and entrepreneurs getting 85%. Today it is 27% and 41% respectively. Ultimately, land monopolies act as a constraint on continued economic growth as more income passes from businesses and their employees to landlords.” (Tony Healy, Dec 18)

Punjab News (Jan 28): “Pay for what you take, not for what you make. Businesses should not be taxed for hiring people or for earning a profit, but should be charged for using resources and polluting the planet. People should not be taxed for earning an income or purchasing products but should be charged for the value of land they own and the resources used in the products they buy. Taxing unearned income (resources, land) and not earned income (jobs, profits) will reduce the rich-poor gap since the rich are always in a better position to capture unearned or windfall income by their ability to hold assets that they do not have to consume.” (G.S.Bhalla, Commerce and Business Management, Guru Nanak Dev University, Amritsar, India; via Ed Dodson)

His name was Henry George, and he was perhaps the most original economic theorist this nation has produced. In his own day he was as well known as, say, Ralph Nader is today. He had something to say still worth listening to, and he put it all down in a book called Progress and Poverty, published in 1879 as the pinnacle of what might be called an intellectual success story by Horatio Alger. As he himself once observed, “… if I have been enabled to emancipate myself from ideas which have fettered far abler men, it is, doubtless, due to the fact that I was led to think a good deal before I had a chance to do much reading.” (American Heritage Magazine, 1978 April-May, and their website)

In Capitalism 3.0: A Guide to Reclaiming the Commons, (Berrett-Koehler), Peter Barnes, founder of Working Assets, argues in 166 pages that each stage of capitalism spawns its own operating system. In Capitalism 1.0, a time of shortages and scarcity, people survived on the land until the enclosure movement shrank the commons; then they moved into cities where they became a reluctant and restive industrial workforce. Capitalism 2.0, from the late 19th century to the late 20th century, is characterized by surplus. The challenge was to persuade people to want output and extend them the credit to buy it. The costs are inequality, stressful lives, and corporate revenues and power that exceed those of many nations. In Capitalism 3.0, the Commons is no longer simply a pasture but the gifts we inherit or create together. The land as Commons is an idea from the earliest days of the American Republic. Tom Paine proposed paying citizens compensation for their loss of "natural inheritance, by the introduction of the system of landed property." In the late 19th century, Henry George and his followers advocated a tax on land, to compensate the public for its investment that created the land's market value. Even a cursory investigation suggests that the level of givings in this country is 100, perhaps even 1000 times greater than the level of takings. Rather than relying on government to protect the Commons, Barnes argues for a trust to disburse revenue gained from creating a property right in the Commons, which could ameliorate poverty. (David Morris, co-founder and VP of the Inst. for Local Self Reliance in Minneapolis; AlterNet, Independent Media Inst, Jan 5)

A new book by Fred Harrison brings into sharp focus the root cause of our continuing failure to address poverty and the growing gap between rich and poor. Ricardo's Law takes its title from a much neglected piece of economic theory, David Ricardo's Law of Rent, which explains how much of the wealth generated through economic activity ends up in increased land values, enhancing the wealth and wellbeing of those who own land, and doing little for those who contribute most to its creation. (Guardian Unlimited, by Mark Braund, Feb 22)

In Ricardo's Law, journalist Fred Harrison adds his voice to the moral crusade to which Tom Paine and Henry George devoted themselves. Paine had joined the best of his age's moral philosophers in calling for the public collection of “ground rents” to cover the costs of government and provide an income supplement to many citizens. George described how market dynamics determine the amount of ground rents available for public collection. Paine's efforts helped secure republican governance and democratic processes. George and his supporters formed the Progressive vanguard fighting for an end to monopoly privilege. Tragically, they failed. Armed with data produced by government and other experts, Harrison's analysis challenges a long list of conventional wisdoms. (Ed Dodson continues his review of 2006 November on his webiste, the School of Cooperative Individualism.)

Before he became Federal Reserve Chair, Ben Bernanke told the National Economists Club (2002 Nov 21): "Government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many dollars as it wishes. By increasing the number of dollars in circulation, government can reduce the value of a dollar in terms of goods and services, which is equivalent to raising prices."

Mason Gaffney, UC-Riverside (Feb 4): “As for inflation, the main cause is the failure of governments to collect enough taxes, so they resort to deficits, financed by central banks issuing new money.”

The federal deficit for the four months, Oct. 1 to Jan 30, totaled $42.2 billion. From the same period in fiscal 2006, it was down 57.2%, since revenues were up 9.7%, climbing to $834.1 billion, a record for the period. Government spending was up 2.1% to $876.3 billion, also a record for the period. (USA Today, Feb 13)

Consumer prices in 2006 rose 2.5%, the slowest rise since 1.9% in 2003. Core inflation, which excludes volatile energy and food costs, rose 2.6%, the fastest increase since 2.7% in 2001 (2.7% for 27 years will double prices). (LA Times, Jan 18) In January, consumer prices rose 0.2% while core prices rose 0.3%, largest gain in seven months. Medical costs – prescription drugs and doctor services – rose 0.8%, steepest rise since 1991 August. (USA Today, Feb 21)

Since prices for copper and zinc have inflated, some people melt down pennies and sell the metal. In 2006 the US Mint made melting down pennies and nickels illegal. No one has yet made it illegal for the US to over-issue new money, making possible inflation in the first place.

The Los Angeles Times on farm subsidies (Feb 4): “Why should Americans care? First, because other nations retaliate against US exports. Second, because subsidies kill competition with foreign growers that would ultimately lower prices on some produce in this country. Third, because taxpayers are shelling out roughly $20 billion a year to an agribusiness juggernaut that neither needs nor deserves the money at a time of ballooning deficits. And fourth, because the poor countries most harmed by our trade policies are the ones most likely to become failed states, embittered by our hypocritical preaching on the merits of 'free trade'."

In recent years, ever more Americans don't trust government to spend their money wisely. On Medicare, most surveyed sided with Democrats' desire to have the government negotiate drug prices with manufacturers. On Social Security, a more narrow majority sided with President Bush in his effort to make individual accounts part of the government retirement program. The findings are from public policy groups, both left- and right-leaning: the Heritage Foundation, a conservative think tank, and Public Agenda and Viewpoint Learning, two liberal groups. All three favor deficit reduction and have spent the past year working to educate the public and seek feedback about the nation's fiscal condition. (USA Today, 2006 Dec 12)

To skirt the waste inherent in spending OPM (Other People's Money), let's shift discretionary spending from politician and bureaucrat to the citizenry, paying ourselves a dividend rather than more subsidized “services”.

M. Jastifer, ex-Michigan assessor now advising remodelers on real estate and property tax matters (Feb 21): “The ad valorem property tax is the most fair tax in America. Everyone in America can get a house if they just work. What do you want to do? Give all the land to the people and everyone has to be equal?”

Editor: The property tax is fair in part because part of it falls on the socially-generated value of land. But the part that falls on the building is not fair; that value is generated by somebody's labor and capital. And there's many people working hard who lack homes, so work by itself is no solution. Left up to me, I'd not give land to anyone, just leave land titles in the hands of whoever pays the land dues. What I'd give is the land value to everyone, since it's everyone who generates it and nobody creates the land. Then people could enjoy equal rights.

Hollywood Writer: “Why should somebody who paid for land once have to pay again?”

Editor: They paid the wrong person. They paid neither whoever made land nor who makes land value. While your neighbors did not create land either, they do create its value. Your paying them compensates them for keeping off your land, a portion of our common heritage, as their paying you compensates you for same. And you keep paying them as long as you want them to respect your property, provide police patrols, maintain roads, teach your kids, etc, as they'll keep paying you for the same, each paying land dues in and everyone getting “rent” dividends back.

John Kromkowski, Baltimore lawyer (Mar 13): “In some states, a constitutional uniformity clause has been written or interpreted in such a way as to require any tax on property to fall on both land value and improvement value equally. To skirt this clause and tax a kind of personal property – cars – lawmakers called their tax on automobiles/vehicles a title tax. Currently, property title fees are a just flat filing fee, relating not at all to the value of the real estate. A geoist legislature could raise it to the value of the land. Of course, just as some people try to drive without registrations, some would skip paying the land title fee. What to do about such a landowner? Such a risk-taker could not defend his land against adverse possession in court. Rather than confiscation, a state could create a cloud on his title, making mortgages and the sale of the property complicated. To avoid that and to use state courts, almost all owners would pay up.”

Editor: If compliance wouldn't be a problem, then eventually deed fees might morph into real land dues.

I extended an invitation to our local network to a Winter Solstice celebration, which drew some who demonstrated that knowledge, too, can be bliss – as long as there's good company to laugh about it with. A couple weeks later, Jan 7, presented to Portland's Humanists, about 80 strong. The lively discussion recruited volunteers and spun off a restaurant dinner to further discuss geonomics and how Humanists might help the cause. With Salemite Richard Reid we emailed and visited a dozen elected representatives at the start of Oregon's biennial legislative session; we brought around some new leaders, especially Republican Rep. John Dallum who had read our stuff in advance was enthused to move forward. We got a bill into Legislative Council for official drafting but not back in time to meet a new deadline self-imposed by lawmakers. Our bill might get incorporated into someone else's, but at this point that's our only chance.

In February, thanks to support from the Henry George School and the Robert Schalkenbach Foundation, in New York City I spoke in the Basic Income Track within the annual conference of the Eastern Economic Association. Their new president, Nobel laureate Joseph Stiglitz, fired from being Chief Economist at the World Bank for articulating inconvenient truths, drew a bigger audience than yours truly! Stanley Aronowitz, unionist now at the City University of New York, from the podium agreed with recovering site values, but thought taxes on other values would be necessary, too. Senator Eduardo Suplicy, Brazilian Federal Senate, who may be the next mayor of Sao Paulo, liked the idea of recovering site values in order to fund housing assistance for all residents, a bit like Aspen CO does. The reception at the Henry George School was the highlight of the week. There I met many old friends and Nibaldo Aguilera, new advisor to the new president of Chile; we brainstormed ways we might catalyze geonomics in Latin America. Returning to Portland, the cabbie from the airport liked my report on my trip so much, he halved my fare!

The fall Geonomist elicited enough renewals and newals to cover the costs of copying and postage: from patron Marion Sapiro (ret. CA prof); super stalwarts Hanno Beck (MD computer consultant), Richard Biddle (ret. Philly teacher), Jake Himmelstein (Philly accountant), stalwarts Polly Cleveland (NY economist), Michael Cykana (TX computerician), Wendell Fitzgerald (new groom and ret. CA oil manager), Everett Gross (ret. Nebraskan), Mel Leasure (ret. VA communitarian), Michael Neil (CA healer), Mark Sullivan (NY manager), Nic Tideman (VA prof); sustainer Jeff Strang (Portland bldg. inspector); super supporter Paul Justus (AR planner), supporters Gil Herman (CT activist), Greg Young (MO caregiver); and subscribers Trevor Acorn (Democratic Freedom Caucus), Christopher Thacker (MO student), the Robert Schalkenbach Fdn itself (NY), among others. 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.

The Robert Schalkenbach Foundation has contracted with us to produce the monthly e-newsletter, The Georgist News. It's free, fact-packed, and timely. If you'd like a sample copy, let me know.

Attend the Exploring Innovation Conference, May 2-4, St. Louis MO, hosted by the Federal Reserve Bank. See their invitation online. The early bird fee, $275, lasts til March 29. Dr. Tom Gihring and I will speak and network with locals Al Katzenberger and friends.

Prof Hovhanness I Pilikian (Dec 20): “I forward your communication to over fifty of the choicest on my mailing-list; I included you to let you have a copy!”

Editor: Big thanks. Knowledge is power. If anyone else has a list, tell them about this knowledge source.

Edward Clarke, ret., OMB (January 5: “I'm embarrassed that I didn't get you my usual year-end donation. Will correct that ASAP. Keep up the great work.”

Scott, the Roots (Jan 2): “I've been using PayPal and it's been great; instant payment makes it so easy to donate. If I had to take the time to make out a check for a small amount I probably wouldn't. Is PayPal on your website? I'll head over there to donate $5.”

Michael A. Neil, California health provider (Jan 15): “Your web site needs, right at the top, a button, 'Make a Contribution'. Thought I'd re-up there but it's still the paper way I guess. Your check is in the mail.”

Editor: Big thanks, fellows. Our webmaster is a volunteer who's so busy. We are enrolled at Pay Pal. At their site, they ask you to open an account for yourself then to send to my e-address. If you have any trouble, I'll resolve it. Visit: http://www.paypal.com/cgi-bin/webscr?cmd=p/ema/index-outside

THE GEONOMIST

Vol. 15, No. 4
Editor: Jeffery Johnson Smith

THE GEONOMIST

Vol. 15, No. 4 Editor: Jeffery Johnson Smith

Vol. 15, No. 4
Editor: Jeffery Johnson Smith