OpEdNews - Diary: Economic Reform Update June, 2011: Common Ground Meeting Info

Our new Common Ground meeting, as discussed briefly in the last send-out of what is quickly becoming an Economic Reform Newsletter, will take place on June 11, from 3:00 - 7:00pm, at the Vanderbilt Y, 224 E. 47, 5th floor. In this issue: Reforming Land Value Taxation, Monetary Reform; The Oceans and CO2 pollution; Greenbacking the currency; Japan; Is debt even a problem?; State Banks; Is the planet and externality?; Yes-men video; Is income tax constitutional? Land Values: Enough and to Spare; Petitions

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Common Ground-NY Logo by Common Ground-NYC

Hello fellow Economic Reformers (Names withheld by request):

Our new Common Ground meeting, as discussed briefly in the last send-out of what is quickly becoming an Economic Reform Newsletter, will take place on June 11, from 3:00 - 7:00pm, at the Vanderbilt Y, 224 E. 47, 5th floor. We have a full agenda, and as always, the meeting will be held "briskly and orderly" as required by CGUSA. Please be prompt. We will start precisely at 3:00!

Unfortunately, one of our two guest speakers, Andrew Mazzone, had to cancel due to business requirements. But we were running long anyway, and this way we will have time for the after-meeting movie: " A Sea Change " which explores the damage being done by the buildup of C02 to the greatest of the commons: the oceans. As Georgists, and just as citizens of the planet, we should consider how we can change the system to avoid the ultimate tragedy of the commons, the loss of life and biodiversity in the sea. This movie will give us something to think about as we head into summer, and to the beaches. See attached document for more details.

Traditionally, Common Ground NYC has not held meetings over the summer, when the HG school is out and people are on vacation. However, the subcommittees will continue to work and we will probably reconvene with new developments, late September or early October.

Please see attached agenda for more details on the upcoming meeting.

The minutes for the previous March meeting are on the CGNYC Google Group here. If you are not already a member of the Google Group, please consider joining in order to keep up with the latest in CGNYC activities, especially as we go on summer hiatus.

This newsletter, not all about CGNYC or Georgism, will continue as the need arises (when does the need for economic reform ever truly go away?).
Speaking of great things to read over the summer, take a look at long-time Georgist Dan Sullivan's article on Pittsburgh, and why its Real Estate market, and its economy, never suffered the kinds of collapses, and booms, that were common to every other city in the 20th century, here...that is, until recently, when they went off of Land Value Taxes, and paid the price. This well-documented article should be re, and re-read, by every serious economic reformer.

Is the Fed a Backdoor Greenbacker?

Ellen Brown, in her latest article on Huffington Post and elsewhere, Japan shows How to Defuse Debt Time Bomb, says that Japan, with debt levels of 226%, is nevertheless still the world's third largest economy, with such a strong Yen that there is actually still deflation - that is, the value of the currency is appreciating , allowing a Yen today to buy more than a Yen tomorrow. This may sound like an economy out of Alice in Wonderland, and certainly not anything Americans have been used to since the Great Depression, when a shortage of money caused the same thing here. But, this is what happens when money itself is in too short a supply, as it has been in Japan for a generation now, despite interest rates at zero, and the Japanese government pushing money into the economy with various sponsored projects. So far, the Japanese economy is absorbing all the money thrown at it, and without inflation. Deflation is an economy's way of "asking for more money, please."

Well, it turns out the Federal Reserve is doing much the same thing here, becoming a de facto Greenbacker, and...

Like the Bank of Japan, the Federal Reserve now returns the interest it receives to the government. With a rising interest tab on the federal debt no longer a problem, private interest rates could be allowed to rise to normal levels...We have been frightened into believing that government debt is a bad thing, but nearly all money today originates as debt. As Marriner Eccles observed in the 1930s, "That is what our money system is. If there were no debts in our money system, there wouldn't be any money."

So, as the debt-ceiling worriers and fiscal hawks try to shrink the deficit at all costs, remember that cost will end up being the soundness of the economy itself . As Brown points out, FDR tried listening to his own deficit hawks in 1937, reversing several years of economic gains. Even the pummeled stock market had increased, gaining from 30% - 60% annually in every year from 1933-1936, except 1934, when it lost just less than 10%. 1937, in contrast, was the second worst year on record...until 2008 (see attached chart).

Now, it is true that Japan's market, like their economy, has been stagnant since the bubble peak in 1989, but a whole generation has now grown up believing that future Yen will be more valuable than today's Yen. In that environment, who wants to spend? This only proves that, still , there is not enough money in the Japanese economy. Perhaps the solution to deflation is, as Stephen Zarlenga has said many times, to simply mail every man, woman and child a check for $10,000 (or some other amount) and tell them to go spend it!

But, of course, the People Of The Bank (POTB) would not like that, because they want to be paid before the American (or Japanese) people are...and not in depreciated (inflated) currency either. So, they promulgate lies like "We must live within our means" when they really mean their means - that is, how much money they are willing to put into the economy (not counting the hot money chasing commodities, driving up the cost of just being alive for everyone else ).
The POTB also tell us "Government is over-spending " when the truth is the private sector is under-spending , and right now only Government can make up the difference, and that it need not do so with debt-based money either. For more on what this means to unemployment, which is really closer to 20%, not 10%, according to the old method of measuring by the U6, not U3, indicator before 1994, and the Greenbacker monetary reforms that could correct it, see economics teacher Carl Herman's article here. Saddling economies with more debt to pay old debt, as banks are fond of doing, will not work. Recently, no less fiscally conservative voices like Jim Crammer have said "Greece should just default already" and Barron's has called for a restructuring of Greek debt to eliminate 50% of what's owed on bonds, warning:

the choice for Greece's bondholders, as we see it, is to accept 50 cents on the euro now -- or 30 cents or worse down the road.

Ellen Brown says, correctly, that a debt unpaid, or paid with interest going back to the government, is not a true debt, and this is true as far as goes. Steven Zarlenga would go the extra step and just have government produce its own money, in U.S. Notes (aka Greenbacks), eliminating the fiction that we will ever pay back the money we "owe" ourselves. That, of course, would roil all those who make a living buying and selling our debt, but the cat is out of the bag already, and China, our largest holder of treasury debt, has been a net seller since last October, figuring, correctly, that however it comes about, the money they are repaid in will be worth less than the money they bought the debt with originally, at least when offset against goosed-up commodity prices .
But, without commodity price inflation, would there actually be any inflation at all? Housing is still down, and continues to sink, and this is 40% of the CPI. Manufactured goods are generally cheaper, when factoring out commodity increases. There is inflation in education, healthcare and other things where the governments have withdrawn support (in belt-tightening madness), leaving the wage-frozen consumer to pick up more of the tab, eating up savings and going into more debt, or going without, or into bankruptcy.

Meanwhile, Tiffany's just reported a blowout quarter as the rich buy more baubles.

Sounds like time to put less money into POTB and more money into POTA (People Of The America).

Action Step: Sign the petition to create a State Bank in New York State from abundant CAFR and Pension funds.

But, inequity aside, as anyone who has even a casual interest in sustainability will attest, we cannot just go on spending and consuming nature's resources without repercussions, so how to check that and not have a depression? Well, that's what we have, or should have, a Land Value Tax for. Locally, this means....

Tax the Land, Governor Cuomo, not our improvements (or our kids)

A few months ago, Common Ground held a letter-writing campaign, to persuade Governor Cuomo not to impose California-like Proposition-13 type property tax caps in the state. As happened in California, a tax cap on the most sure and significant source of revenue would devastate the State, particularly the schools, as this NY Times Editorial lays out. What we need, both for relief of beleaguered homeowners, and to discourage land-hoarding and speculation by a tiny percentage of land-gobblers, is a Land Value Tax. In NYC alone, if we had an 8% LVT, we could get rid of every other municipal tax on productivity. For people who are land-rich, but cash-poor, we encourage deferral , putting off the tax until sale, or death, of the resident.
Action Step: Download the attached letter. Sign it. Mail it to Governor Cuomo. Now.

BTW, is it any coincidence this move to cap property taxes is coming just as the oil and gas industry is seeking to acquire huge swaths of land - from struggling small homeowners who can't get new mortgages? As in California, the greatest beneficiaries of a property tax cap would be those with the greatest amount of undeveloped land - that is, the oil & gas industry. What will they give us in return?

Is the Planet an "Externality?"

Award-winning independent journalist Johann Hari has a warning about the economic and ecological (ever notice how both words have the root 'eco,' meaning "house or household"? Indeed. And what happens when we spoil our house?) crossroads we find ourselves at, even if the muddled-thinking "leaders" in Government can't see it, here.
Ecuador is offering the world something close to Geoism, allowing the countries of the world to pay it 3.5 billion - half the value of its oil - not to drill it out, and to preserve its rainforests instead. So far, the world has not responded fully - Chile has offered $100,000. Spain has offered $1.4 million. Germany initially offered $50 million, then pulled out. Perhaps - the most biodiverse place on earth - are not considered as important as the next $7 billion (that's all ?!) in oil trapped beneath the lushness. In Ecuador, 13% of the country is near-starvation and president Rafael Correa warns they cannot wait forever. "Well," our short-sighted antagonists from the exploit ive class tells us "If Ecuador really had something to offer, they would not need the world's charity." Really? Nothing to offer? How about North America's greatest variety of trees and...

the world records for different species of amphibian, reptiles and bats. And -- more importantly still -- this rainforest is a crucial part of the planet's lungs, inhaling huge amounts of heat-trapping gases and keeping them out of the atmosphere(?)

Our deeply flawed economic system regards all this, to be replaced by a denuded moonscape of temporary oil wells and permanent destruction, as "externalities." We have a "price of everything and a value of nothing" as Oscar Wilde put it. Perhaps it is the oil which is an externality?
What is it about Central and South America that makes them see things North Americans can't? From Bolivia comes the world's first enshrinement of "Nature's Rights," not natural rights. Bolivia enshrines natural world's rights with equal status for Mother Earth. Time will tell if this will mean a curtailment, or at least just restitution, for Bolivia's extensive mining operations, but it is an intriguing model, worth watching.

One of our globe-trotting colleagues will present us with a research project at the next CG meeting, to look up the use of radio spectrum and other forms of Land throughout American history, in hopes of changing the lie-spewing media-monopolization and outright criminal use of Land without compensation currently going on. She says the international representatives she encounters are outright seething at Americans about now. Wonder why. We are such a gentle people, kind to plants and animals and humans everywhere.
Or, perhaps we are the most fearful, distrustful of even our allies, let alone our myriad and ever-expanding list of enemies.
Bullies are often the most afraid.
Yet, we have a love/hate relationship with the world's "other" peoples, since they are the source for ever-cheaper labor. See this only slightly ironic 6-minute presentation by the Yes-men on the "evolution of slavery," or this much more sobering look at how the race to the bottom in outsourcing will make the us a member of the Third World, eventually: A Nobel Economist Says Globalism Is Costly For Americans.

Speaking of things which are wrongly interpreted...

Is the Federal Income Tax Constitutional?

Now, I've been hearing for some time from the far fringes, so far that they don't exist in either the Right or Left part of the erst-worn political spectrum , that the Federal Income Tax is not even constitutional. I've generally dismissed these claims as self-serving statements made by people who simply didn't want to pay their taxes. And the author of the site I'm about to present to you suffers from that same predilection, and has been ruled against summarily, so nothing I say here should in any way be taken to say that you should not pay your taxes! Nevertheless, let's leave the ad hominem arguments aside for the moment (what, doesn't the Government also have a self-serving interest in getting people to pay their taxes?). Let's briefly review the arguments.

Self-styled researcher Bill Benson says that of the 48 states in the Union in 1913, when the 16th Amendment was supposedly passed (or 47, if you take his claim that Ohio wasn't let into the union until 1953, retroactive to 1803, confirmed on Wikipedia), " we would still have only 2 states which successfully ratified (the 16th Amendment)." Benson cites a number of reasons why most of the required 3/4 majority - 36 states - failed to validly ratify the Amendment, ranging from mistakes to outright opposition counted fraudulently as favorable votes by the then Secretary-of-State, despite the Solicitor of the Department of State saying otherwise. You can read more details on Benson's site here, though you might be forgiven for thinking the case would be strengthened by more objective research from someone not trying to sell his own book and CDs. But, again, let's not delve into ad hominem arguments.

Now, progressives might be having their hair stand on end about now, thinking, "Well, if we abolish income taxes, how will Government pay for the things we need and want, from Medicare to National Defense?!" Leaving aside for the moment the arguments made here, and elsewhere, that Government is paying for many things we don't need or want (including "foreign entanglements" from Iraq, now deteriorating ala post-war Vietnam to Libya, Syria...?), is there "enough and to spare" (scroll about 1/3 down the page) from other sources, as Henry George tells us, and Professor Mason Gaffney spells out in great detail here ( economics.ucr.edu/papers/papers08/ 08-12old.pdf) using tools unavailable to George?

Perhaps if we had a national resources tax - a fee for resources use and locational values - somewhat modeled along the 8th of the original Articles of Confederation:

Article VIII. All charges of war, and all other expenses that shall be incurred for the common defense or general welfare, and allowed by the united States in congress assembled, shall be defrayed out of a common treasury, which shall be supplied by the several States in proportion to the value of all land within each State, granted or surveyed for any person, as such land and the buildings and improvements thereon shall be estimated according to such mode as the united States in congress assembled, shall from time to time direct and appoint.

The taxes for paying that proportion shall be laid and levied by the authority and direction of the legislatures of the several States within the time agreed upon by the united States in congress assembled.

...and leaving out the taxes on "buildings and improvements," (because we want more of those), it would be enough and to spare?

We tap into resources that were unimagined in George's day, like radio spectrum, all improperly taxed currently. Most estimates from the Henry George School's own Andrew Mazzone (to speak at the next CGNYC meeting) to Mason Gaffney, place the percent of GDP represented by resource and locational values somewhere between 30%-40%. If a government can't survive on that percentage of national wealth, even taking out first for the states and municipalities, perhaps it needs to go on a diet! Besides, we know from both George and Zarlenga, that there is an option of printing U.S. Notes, as Lincoln did to fight the Civil War, as is our given-away Sovereign right , stipulated in Article 1, section 8 of the U.S. Constitution to "coin Money" (note lower case 'c' and capital 'M'). When credit, which converts into money, is tight, as it is now, the government can step in to fill the need, and prevent deflation (i.e. depression). Sounds like there is more than "enough and to spare" without taxing the productive capacity of the citizenry.

But OK, say you still want to see how hard it is to balance the federal budget yourself. See my article, "Honey, I Balanced the Federal Budget! (And You Can, Too)" and click on the embedded link to take the NY Times' 40-question survey yourself. I managed to accrue a 2 trillion surplus by 2030. See how you do. I can almost guarantee that, absent self-defeating political paralysis, you will do much, much , better than Washington. Perhaps the budget should be left to the citizens in this way, all the time. Nah, that would be, um, democratic .

As Benson says, " Learning is the beginning of responsibility! "