Poverty and Inequality: Caused by Government Favoritism

Friday, September 4th, 2015

The major cause of much poverty and extreme inequality is government favoritism to special interests, such as corporate subsidies and other government-granted privileges, which distort the entire economy. That results in higher prices  for products and services, and less job creation, so that with more unemployed people chasing fewer jobs, wages are  also bid down – the result is extreme inequality and unnecessary poverty.

The crucial issue of government favoritism needs to be addressed, instead of focusing on bandaids and distractions that only treat the symptoms instead of  dealing with the major root cause of  much poverty, extreme inequality, and other economic problems.

Government favoritism and special privileges given to special interests include such things as:

– giving direct subsidies to corporations;

– laws that favor some companies over others; and laws that restrict the supply of products or services in order to raise the price;

– tax favoritism for privileged companies, instead of giving others the same deal;

– subsidies to polluters, by allowing them to dump their emissions into the air and water;

– giving big agribusiness major subsidies, which hurts more efficient farmers, and raises the cost of food; etc.

– subsidies to fossil fuel industries and the nuclear industry;

– the biggest and most harmful example of government favoritism is subsidizing land speculators and major owners of land and natural resources, by funding  infrastructure that raises their land values and thereby brings unearned profits to those special interests. They can then use that unearned income to buy more land, or buy up other parts of the economy. As  a result, this distorts the whole economy.

Instead of that government subsidy to land speculators and major owners of land and natural resources, they should be required to reimburse the government based on how their increased land values were subsidized.

For example, one approach, as applied in several cities in the U.S., is that they could be required to pay an annual tax for the value of the locations they are speculating on or hoarding, while we can then lower taxes on buildings, products, and services, as much as possible, which would lower the cost of housing, products, and services, because those are produced by labor and human effort, whereas locations were not produced by any person.

A location value tax along those lines would put a limit on land speculation and land hoarding, and the revenue could be used to fund public services, including a general social safety net; perhaps part of it could be used to fund land vouchers to help pay for rent or a mortgage – either way would serve as compensation for being excluded from access to locations and natural resources.

– favoritism to privileged TV and radio broadcasters, who use the airwaves, which travel through the air, another natural resource; that subsidy has led to a handful of companies now controlling over half of the total broadcast market, thereby limiting the range of opinions heard by citizens.

There are thousands of other such examples of corporate subsidies and favoritism to special interests – that distorts the entire economy, and is the major cause of much poverty and extreme inequality.

The Democratic Party originally saw corporate subsidies and government favoritism as one of its major issues (early Democrats used other words for it, such as monopolies caused by government-granted privileges to special interests, instead of promoting the public interest).

If Democrats would pick up that ball again, and speak out against corporate subsidies and other favoritism to special interests, then Democratic candidates could easily beat Republicans, who tend to promote a misleading version of what economic freedom means, while quietly continuing to allow billions in government favoritism every year, along with various other legislation that favors special interests instead of the public interest, and distorts the whole economy.

During the Clinton administration, there was a brief period during which Labor Secretary Robert Reich spoke about cutting corporate favopritism.  But soon after Reich raised the issue, it dropped out of sight.

If we find more Democratic Party candidates who will take a clear stand on moving toward getting rid of corporate subsidies and favoritism as much as possible, such candidates who will address that important issue would be ones we would want to consider endorsing, if their other views are reasonably compatible with the DFC; or in any case, they might be allies, by helping to promote that crucial issue, which is related to most economic problems.

Addressing the major issue of corporate favoritism in a prominent way could have great potential, for the DFC and Democratic Party candidates – it would offer an alternative to the Republican Party’s misleading views about what is meant by economic freedom.

The corporate favoritism issue is included in the DFC’s Principles and Platform

Land and Market Power

Monday, February 7th, 2011

As described in Mason Gaffney’s essay below, the current system of land markets is very distorted, which distorts the rest of the entire economy, resulting in job shortages, lower wages, homelessness, less affordable housing, less affordable products and services, and unnecessary poverty for many.

Since every product and service requires inputs of natural resources and use of a location, that means producing any product and service involves paying for the use of land. So, by owning land, even if the owner doesn’t produce anything, that enables income which can then we used for buying more land, or buying up other parts of the economy.

Markets only work if the distinction between the two kinds of property is addressed: products made by human effort, versus land and its natural resources, which no person produced.

That is why property in land needs to be treated somewhat differently from products made by human effort, so that there need to be clear limits on the power of landowners, as advocated in the DFC’s Principles and Platform.

_____

Land is a Major Basis of Market Power

(excerpts from Mason Gaffney’s essay: “Land as a Distinctive Factor of Production)

“Land” in economics means all natural resources and agents, with their sites (locations and extensions in space). Land is not just the matter occupying space: it is space. …

Land is indispensable to life, hence to economic activity. The same is generally true of labor and capital, but less “absolutely”. Land can exist perfectly well without labor or capital, and support timber and wildlife, but labor and capital cannot exist at all without at least some land, and often a great deal of land. Substitution is limited. It will not do just to have 57 varieties of labor, or of capital. There must be at least some land. Remember, land includes space itself, and a time-slot in it. It includes air and water, the environment and the ecology and all original matter itself. Without land there is nothing. Coupling this with the non-reproduceability of land, and its fixity, land is distinctive.

An old limerick puts it well.

“A captious economist planned
to live without access to land.
He nearly succeeded,
but found that he needed
food, water, and somewhere to stand.”

Massed control of land is the most natural base for monopolizing markets because land is limited. Buying land always does double duty: when A expands he ipso facto preempts opportunities from B. For example, a chain of service stations with most of the best corners in a town has market power, the more so if it also holds a large share of oil sources, of refinery sites, of “offset rights” to pollute air, transmission rights of way, harbor sites, and other such limited lands.

Preemption is not always just a by-product of expansion; it may be the main point. For example, in 1993 Builders’ Emporium, a large chain of California hardware stores with large parking lots in good locations, closed down and sold out. The sites were bought up by the largest grocery chain in southern California, Vons Company. According to news reports, this is “a shut-out strategy against competitors.” Vons will convert 6-8 Emporium stores to Vons’ markets, and “hold onto the others until commercial rents rebound — then market them to non-rivals.”

Salomon Bros. analyst Jonathan Ziegler, far from being shocked, praises this as “ingenious.” “You’re controlling who’s in your market area.” Ralphs, another grocery chain, had been looking for sites and is now shut out.

Land uses that stint on labor spell unemployment. The land-surfeit of some, when unconstrained, spells homelessness for others.

Land as a Distinctive Factor of Production

What’s Your Position?

https://www.democraticfreedomcaucus.org/principles-of-the-dfc/
https://www.democraticfreedomcaucus.org/dfc-platform

Healthcare Reform

Friday, July 21st, 2017

Our healthcare system is fragmented and costly. We need to adopt a sustainable consumer-based system responsive to the diverse needs of patients, but this requires looking beyond today’s partisan politics.

Healthcare costs are rising due to laws that favor special interests and restrict people’s choices, and also because of the kinds of taxes that fall on the production of goods and services, which increase the cost of medical products and services.

We need to end laws that restrict the availability of doctors, end tax subsidies that favor employer based insurance, adopt an insurance voucher based program for people who cannot afford to purchase healthcare on their own, develop more responsive healthcare delivery systems that cover preexisting conditions, and allow more consumer choice in order to improve quality and allow lower costs.

(1) One approach that deserves to be considered for universal health insurance coverage would be a system of health insurance vouchers, where everyone would have healthcare insurance, because people who can’t afford it by themselves would receive a health insurance voucher, so that they can then choose their own health insurance, and pre-existing conditions would also be covered.

That kind of approach would have some similarity to the Netherlands system. It can also include using the health insurance voucher for non-profit health insurance organizations.

Allowing those choices is a better alternative than a single-payer, government-run monopoly – a compulsory monopoly is never the best system. In fact, few countries actually have a national single-payer system.

Among the countries that have a single-payer system, they tend to have it at a more local level, similar to the state level in the U.S. And among the few countries which have had a single-payer system at the national level, England has taken some steps away from a single-payer system, such as by allowing people to pay a doctor separately if they don’t want such a long wait. Canada has also been considering some similar steps.

A health insurance voucher system could be introduced by Congress, or any state or group of states could adopt it – for example, states could cooperate to form a regional or national-level system of that kind even if Congress didn’t act.

In order to facilitate the adoption of a health insurance voucher system, we need to end special tax subsidies for employer based health insurance. Employer based health insurance limits consumer choice because it anchors a person to the job they currently have, and also limits a person to the insurance choices offered by that company, rather than having portable health insurance.

Eliminating employer based health insurance programs may be equivalent to giving workers a pay raise without new regulations because a consumer based system can foster more competition as insurance providers work to keep their customers by providing high quality care that meets the needs of the patients who are directly paying for such services.

With the resulting lower costs, governments would not need to find additional revenue sources for healthcare expenditures if employer based subsidies were phased out in favor of health insurance vouchers.

States need to reform laws to make it easier for doctors to introduce innovative approaches if they wish, such as, for example, to form direct primary care models whereby patients pay a flat monthly subscription fee for a specified set of services. This type of model may reduce the strain on hospitals while giving patients the right to purchase the best type of healthcare that meets their needs.

 

(2) Politicians and the major media continue to promote the false choice that the only way to fund universal healthcare is by taxing labor, production, or sales – but any kind of tax that falls on labor, production, or sales raises the cost of products and services, hinders job creation, causes unemployment, and further contributes to poverty.

Instead, for funding universal healthcare, the only tax that does not hinder job creation or raise costs is a tax on the location value of land, because no person produced any locations, so it is the only kind of tax that does not punish job creation or raise the cost of products and services.

That approach actually leads to more job creation and more affordable housing, products, and services, because it puts a limit on land speculation and land hoarding, so it makes land much more affordable, for job creation, housing, etc. With lower taxes on products and services, that will further lower the cost of physician services and drugs, as would the other reforms described in this essay.

 

(3) As a further alternative to a monopoly or cartel over health insurance, allow people to have the choice of buying affordable health insurance across state lines, as long as there are some uniform basic standards.

That could include non-profit health insurance organizations. Currently, state laws forbid people from buying insurance from other states, even if the other insurance meets the same standards. Those laws raise the cost of health insurance. Instead, allow consumers to buy health insurance from other states, as long as the other insurance meets the same basic standards as insurance offered in their own state.

States could save money by promoting the individual health insurance marketplace through the adoption of policies that make it easier for consumers to select an insurance plan that is transferable from job to job.

States can collaborate to set minimum standards that would make it easier for those who relocate to keep their insurance or transfer their policies to a new provider that meets the same standards in the consumer’s previous state of residence at the same or lower monthly premium.

Additionally, the cost of drugs can be reduced if patients were allowed to purchase drugs from some other countries, such as Canada.

Managing chronic health problems through preventative care and consistent application of state standards would lead to a healthier workforce.

 

(4) Another reform that is needed is to change the laws that currently place arbitrary, artificial limits on the availability of doctors and paramedics, which raises the cost of medical care. For example, current government laws allow the American Medical Association to arbitrarily limit the number of medical students, regardless of the number of excellent students who wish to be trained as doctors. With an artificially lower number of doctors available, that raises he price of doctors.

Another example is that in most states dental hygienists have not been allowed to have their own offices, so they can only work within dentists’ offices, which raises the cost to patients. Some states have reformed those laws, and other states need to do so.

Those four reforms would offer an alternative to the false choice between a state government-created health insurance cartel, and a single-payer government-run monopoly over health insurance. The four reforms would allow lower costs for medical services and drugs, and provide universal healthcare.

Any meaningful approach to healthcare reform needs to go beyond the false choice between left and right.

Rebecca Skipper

 

Each policy essay is based on an interpretation of a way to apply the DFC Principles. Except where indicated by the author’s name, the policy essays are written by representatives of the Democratic Freedom Caucus

Immigration

Friday, July 21st, 2017

The Democratic Party has recognized the benefits of diversity and the contributions immigrants make to American society.  The goal should be to promote just policies that reward the entrepreneurial spirit of immigrants while acknowledging the hardship many have endured due to repressive regimes and poverty.

To address immigration reform in a more humane and practical manner, we must stop interfering in the affairs of sovereign nations and agree to work with countries that protect economic and civil liberties.

We should be the first country to adopt the land value tax shift to lower taxes on labor, production, and sales so that immigrants can buy and create goods and services.

We should make no laws that favor one group or religion over another and should not base immigration policies on special interests.

When we choose a side in a conflict, it usually leads to a massive displacement of population because people are fleeing war zones. We should only intervene to provide humanitarian aid upon the request of a particular country and only in partnership with other countries.

The best way to reduce poverty,  suffering, and terrorism is to stop supporting dictatorships and end policies that subject people to violence caused by U.S. foreign policies that involve either occupying a country, acting as the world’s policeman, subsidizing multinational corporations, or seeking regime change, rather than being for defending our own country. Otherwise it creates more enemies of the U.S.

Humanitarian aid should be given to non-sectarian Non-governmental Organizations, NGO’s, that are dedicated to promoting economic and personal liberties.  Assistance to NGO’s should cease once the organizations are assisted through the crisis.

We need to respect the creative and entrepreneurial drive present in all countries.  Subject to reasonable laws and regulations for the safety of third parties, a country should not deny its members the freedom to house, employ, or otherwise interact with any consenting adult they wish on their own land.  Not being the product of human effort, a nation’s territory is subject to the same restrictions on ownership as any other natural resource.

Immigrants who arrive to the US should be welcomed if they pose no danger to the general public provided that they meet certain conditions.  We need to determine whether a person immigrating has a criminal record, is a foreign enemy or a spy, or has a contagious disease.

Promoting personal responsibility and individual freedoms are important components of an effective immigration policy.

Government welfare should be primarily for refugees and emergency situations.  The goal should be to help immigrants get through the emergency situation.  This is consistent with welfare policies outlined for US citizens.  Meanwhile , Non-governmental Organizations should be encouraged to assist immigrants as they begin the process of helping themselves.

After a specified period of time, immigrants should be eligible for other forms of assistance using the same criteria used to evaluate citizens applying for such aid.

If the U.S. takes the lead in promoting economic freedom, then products and services will become readily available which creates more jobs and eases the financial burden on immigrants and taxpayers.  The creation of more jobs means that it should be easier to acquire work visas while meeting the demands of various sectors experiencing labor shortages due to lack of qualified workers.

Since the land value tax shift makes products and services cheaper, more jobs can be created and filled by these immigrants, reducing the need for welfare assistance. As more jobs with higher wages are created, people should become less fearful of losing jobs to immigrants.

Rebecca Skipper

I wish to thank Dan Sullivan for his insightful contributions to this essay. The author is responsible for decisions regarding the points included in the essay.

Each policy essay is based on an interpretation of a way to apply the DFC Principles. Except where indicated by the author’s name, the policy essays are written by representatives of the Democratic Freedom Caucus.

The Proper Role of Police

Monday, June 29th, 2020

Over the past decade, we have seen a decline in trust of law enforcement in certain communities, especially in minority communities. A society needs a way to defend and uphold all people’s rights including protecting people against murder, injury, robbery, vandalism, or fraud, whether committed by individuals or organizations. However, Author Alex Vitale argues that we should not use the police to address every social issue in our society and explains why that approach leads to more violence:

“Part of our misunderstanding about the nature of policing is we keep imagining that we can turn police into social workers. That we can make them nice, friendly community outreach workers. But police are violence workers. That’s what distinguishes them from all other government functions. … They have the legal capacity to use violence in situations where the average citizen would be arrested.

“So when we turn a problem over to the police to manage, there will be violence, because those are ultimately the tools that they are most equipped to utilize: handcuffs, threats, guns, arrests. That’s what really is at the root of policing. So if we don’t want violence, we should try to figure out how to not get the police involved.”

Essentially, the job of the police is supposed to be to protect and serve the people by stopping crimes of the kinds listed above. The police are victims of a system that is asking them to address all the social ills that politicians fail to address, and they are not trained to be social workers or counselors. This creates unnecessary stress and puts the lives of officers and members of the public at risk.

 

When there are underlying social problems which can be factors resulting in crime and violence, the job of legislators is to address the root causes of those social problems – that’s not the job of the police. The legislature needs to reform government policies that cause social problems, such as many laws that favor special interests, including government favors to various corporations (corporate welfare), and government subsidies to major owners of land and natural resources – such government favoritism distorts the entire economy, resulting in poverty and conflict. (See the DFC essay on Poverty and Inequality). Legislation and policing] are separate functions, and it is a natural division of labor between those two aspects of government.

Even when the police are called to stop a crime of one of the kinds listed above, the goal should be to only use enough force to stop the crime – it should not exceed that amount of force. There can be high pressure situations, but the aim should be to uphold that principle.

 

As part of achieving police reform, we can redefine the definition of crime and limit the role of police. The Democratic Freedom Caucus distinguishes between victimless crimes and crimes in which there is a victim:

“One of the basic functions of government is to stop crime. In order to use police resources wisely, the government should distinguish between victimless crimes and crimes in which there is a victim. Murder, bodily attack, kidnapping, vandalism, robbery, and fraud all involve victims. However, gambling, pornography, and use of tobacco, alcohol, or marijuana in private are victimless crimes, if no one is forced to participate. Police resources should focus on crimes that involve victims. It is usually impractical to enforce victimless crime laws.”

Adopting this approach to police reform should reduce the amount of violent confrontation between police and the public at large and restore trust between law enforcement and the communities they are sworn to protect. Community organizations, such as Neighborhood Watch, can also play a role by cooperating with and supplementing some aspects of policing.

It’s also important to emphasize civilian oversight of the police function, including accountability. We should reform the legal doctrine of “qualified immunity”, which is a judge-made doctrine that protects police officers from civil rights lawsuits, so it has the side of effect of reducing the police incentive not to engage in civil rights violations. As a further reminder of civilian oversight of policing, when someone graduates from the police academy, instead of the badge being pinned on by the police chief, it could be by a civilian official such as the city manager or mayor.

Sources:

DFC Platform – Democratic Freedom Caucus

Author Alex S. Vitale Talks ‘The End of Policing’ After Floyd Death : Code Switch : NPR

https://www.npr.org/sections/codeswitch/2020/06/03/457251670/how-much-do-we-need-the-police

 

 

Rebecca Skipper

 

Each policy essay is based on an interpretation of a way to apply the DFC Principles. Except where indicated by the author’s name, the policy essays are written by representatives of the Democratic Freedom Caucus