Putin and the Current Russian Economy

In Search of Putin’s Russia – Part 2 Arising from the Ruble

Al Jazeera (2015)

Film Review

In the second episode of In Search of Putin’s Russia, Russian journalist filmmaker Andrei Nekrasov examines Russia’s 2014 economic crisis, which he blames on falling oil prices and US and EU sanctions.

Overall he feels the sanctions (and more importantly Russian counter sanctions) have helped strengthen Russia’s domestic food and industrial production. At the same time the sanctions have hurt many ordinary Russians, in part due to really low salaries. For example, the average Russian teacher earns $300 a month.

The drop in the value of the ruble has led to many home foreclosures. Ever since the Soviet collapse, Russian banks only issue mortgages in foreign currencies. Because Russians are paid in rubles, they could no longer keep up with payments when the value of the ruble dropped 40% in 2014.

Access to health care is also a major issue owing to the collapse of the state-run Soviet health care system. This is especially true in rural areas where people are too poor to pay privately for care.

Most health care funding seems to come from charities, which also raise funds to keep children out of orphanages when their parents are too poor to provide for them. Russia’s current economic crisis has placed a growing number of families in this predicament.

 

 

New Hope for Underwater Borrowers

 

One for Our Side

Anti-eviction activists were thrilled with a November 25 ruling by the Federal Housing Finance Administration (FHFA), which seems to reverse the position taken by the Obama administration in federal court. Prior to the new ruling, homeowners foreclosed by Fannie Mae or Freddie Mac (the Enterprises)* found themselves in the painful position of watching their foreclosed homes being sold for much less than they paid for them.

Deadbeat Homeowners vs Deadbeat Banks

As the 2008 economic collapse caused over inflated real estate values to plummet, more than a fifth of all mortgage holders (7.5 million) discovered that – through no fault of their own – they owned more on their mortgage than their property was worth. By December 2013, the percentage of underwater (aka negative equity) mortgages had decreased to 13% (6.4 million)  By December 4, 2014, thanks to an October “rally” in home prices (i.e. new real estate bubble) , this figure had dropped to 8% (4 million) .

Prior to the new ruling, both Fannie and Freddie (both owned by the taxpayer since they were nationalized** in September 2008) required homeowners who had been through foreclosure and wanted to buy their home back had to pay the entire amount owed on the mortgage. The Enterprises argued that allowing former home owners to repurchase their homes at the true (lower) market value created a “moral hazard” because it encouraged deadbeat home buyers to default on their mortgage to repurchase their property at its real value. I find this really rich, given that it was deadbeat banks and mortgage companies who caused the economic downturn to begin with.

Thanks to the new FHFA policy, both Fannie and Freddie must now permit the sale of existing real estate owned (REO) properties to any qualified purchaser (including the former owner) at the property’s fair-market value.

Old Policy Violated Massachusetts Law

A year ago, two Massachusetts residents filed suit against Freddie Mac, with the support of the Boston anti-eviction group City Life/Vida Urbana, for violating a Massachusetts consumer protection statute that explicitly forbids this type of refusal. On November 18, the Obama administration argued that state laws are non-binding on Fannie and Freddie while they’re under federal receivership. Extremely unfavorable publicity may partially explain the FHFA’s surprise ruling a week later. Now that the pressure of mid-term elections has passed, it’s quite a safe lame duck type decision.

City Life/Vida Urbana

City Life/Vida Urbana was first started (as the Jamaica Plain Tenants Action Group) in 1973 to pressure inner city slumlords to property maintain their buildings and to pressure the city of Boston to enact rent control. Since the 1980s, they have also campaigned against property speculation, gentrification and condominium conversion. Since 2008, defending against foreclosure and other evictions has been their primary focus. Joining forces with Occupy Our Homes, which grew out of Occupy Wall Street, they have employed a two prong approach. In addition to helping home owners fight fraudulent foreclosures legally in court, they also organize local activists to block evictions through mass occupation and civil disobedience in foreclosed homes. In many cases, the negative publicity this generates will pressure lenders to renegotiate more reasonable repayment terms.

Thanks to trainings City Life/Vida Urbana conducts across the US, many communities are starting grassroots anti-eviction organizations.

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* Roughly half of all US mortgages are held by two government sponsored enterprises (GSEs), nicknamed Fannie Mae and Freddie Mac because federal bureaucrats kept getting the two confused. The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, was founded in 1938 under the New Deal. Its purpose was to expand the secondary mortgage market. The latter attracts new capital for mortgages by buying mortgage loans from banks and bundling them as securities to on-sell to pension funds, insurance companies and hedge funds. This allows lenders to reinvest their assets in more lending, theoretically increasing the supply of funding available for home purchases. Fannie was privatized in 1968 to become a publicly traded company. The Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, is a publicly traded GSE created in 1970 to further expand the secondary mortgage market.
**On September 7, 2008, George W Bush nationalized Fannie and Freddie by placing them under FHFA conservatorship and causing them to issue new senior preferred stock and common stock warrants to the US Treasury amounting to 79.9% of each GSE. In 2010 both were delisted from the New York Stock Exchange after Fannie’s stock traded below $1 a share for over 30 days. Since 2010 both stocks have continued to trade on the Over-the-Counter Bulletin Board.

photo credit: Mike Licht, NotionsCapital.com via photopin cc

Also published in Veterans Today

How to Stop a Foreclosure

Or Get a Cash Settlement Following Foreclosure

In 2014 most home foreclosures can be stopped, through a myriad of federal and state programs that have sprung up. Given that hundreds of thousands of families continue to lose their homes every month, it’s really sad how few Americans are aware of these programs. Clearly Wall Street banks and the corporate media don’t want struggling families to know about them.

Fix My Payment (www.fixmypayment.com) is a free website and advisory service for homeowners who have lost homes to foreclosure or who are currently struggling with mortgage payments.

Many of the mortgage relief programs listed on the Fix My Payment website stem from settlements the banking industry has made with the Department of Justice, the Federal Reserve, the Office of the Comptroller and various states following criminal indictment for predatory lending practices (i.e. banks sold subprime mortgages to low income borrowers they couldn’t possibly repay) and fraudulent so-called “robo-signing” foreclosures. Others are federal programs enacted in 2009 as part of the Obama administration’s recovery package.

Below are some specific programs:

1. Department of Justice Settlement with Ally/GMAC, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo in predatory lending indictment

Homeowners (and foreclosed homeowners) with mortgages issued by any of the above banks are eligible for mortgage relief under the following conditions:

• Financial hardship ($17 billion available for principal reduction)
• Upside down mortgages in which the property is worth less than the mortgage loan ($3 billion in refinancing relief)
• Borrowers lost property to foreclosure between January 1, 2008 and December 31, 2011

2. Federal Reserve and Office of Comptroller settlement with Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, Aurora Loan Services. MetLife Bank, PNC Financial Services Group, Sovereign Bank, SunTrust Banks and US Bancorp in wrongful “robo-signing” foreclosure indictment (i.e. banks foreclosed on homes without proof of legal title).

Borrowers with mortgages with the above banks are eligible for $3.3 billion in cash settlements if they have lost their home due to foreclosure and $5.2 billion in principal and/or interest reduction to existing mortgages (in cases of financial hardship).

3. Home Affordable Modification Program (HAMP)

Federal assistance the Obama administration enacted in 2009 providing financial incentives for banks and loan servicing companies to rewrite loan terms to help troubled borrowers (excludes mortgages owned or guaranteed by the government-sponsored enterprises Fannie Mae and Freddie Mac).

4. HAMP-VA, HAMP-FHA, HAMP-USDA

The above programs provide incentives for banks and loan servicing companies to write loan terms for mortgages guaranteed by the VA, the Federal Housing Administration or the US Department of Agriculture. (excludes mortgages owned or guaranteed by the government-sponsored enterprises Fannie Mae and Freddie Mac).

5. Housing Affordable Refinance Program (HARP)

Federal assistance the Obama administration enacted in 2009 providing financial incentives for banks and loan servicing companies to rewrite loan terms to help troubled borrowers with mortgages owned or guaranteed by the government-sponsored enterprises Fannie Mae and Freddie Mac.

6. Keep Your Home California (KYHC)

California residents are also eligible for four state programs:

• The Unemployment Mortgage Assistance Program – helps homeowners who are currently unemployed and receiving California EDD unemployment benefits.
• The Mortgage Reinstatement Assistance Program – helps homeowners who have fallen behind on their payments and need help in reinstating their loan.
• The Principal Reduction Program – helps homeowners who have experienced a financial hardship along with a drop in the home’s value.
• The Transition Assistance Program – provides relocation up to $5,000 in relocation funds to help eligible homeowners transition into a new housing situation after going through a deed-in-lieu or short sale.

Free Personal Assistance

In addition to the numerous options listed on their website, people can also phone (909) 937-2400  or visit a mortgage adviser (without charge) if they live in Los Angeles. In addition to recommending specific programs homeowerns can apply for, Fix My Payment customer service representatives seem to know exactly what documents to file to halt foreclosure proceedings.

The Non-Existent Recovery

Economists predict no end in sight to the present foreclosure crisis. Despite manipulation of the “official” unemployment rate by the Obama administration and the corporate media, the percentage of employed Americans of working age has flat lined. According to the Department of Labor’s own statistics, the percentage of American families in which no one has a job stands at 20%. The percentage of unemployed working age adults stands at 41%. Prior to the 2008 economic downturn, this figure had been stable at 35-37% for nearly a decade.

With the recent news that the US economy shrank by 2.9% in first quarter 2014, the potential for new job creation looks extremely bleak. The technical term for a shrinking economy is deflation. Deflation leads to a downward spiral. A shrinking economy means less money in circulation. Low demand forces retailers to reduce their prices, while consumers postpone purchases in anticipation prices will drop further. As sales continue to decline, companies lay off more workers, which makes finding new jobs even more difficult.

photo credit: JefferyTurner via photopin cc

In Defense of Smokers

As a doctor, I’m well aware of the negative health effects of smoking. Studies show a life time of smoking subtracts an average of ten years from your life expectancy. I’m also aware of the considerable health costs of treating smoking-related illnesses, such as chronic bronchitis, emphysema, heart disease and stroke. Other studies suggest that non-smokers actually generate higher health care costs because they live ten years longer. This research receives limited publicity. The Center for Disease Control prudently chooses not to promote the cost savings associated with premature death.

Owing to a chronic sinus condition, I’m also painfully aware of the effects of second hand smoke. Prior to the public ban on smoking, I had no choice but to avoid public areas (restaurants, bars, theaters and even airplanes) where smoking was likely to occur.

The Stigmatization of Smokers

However, as an organizer and civil libertarian, I’m also extremely wary the increasing stigmatization of smokers – especially when I read that employers are using “smoker status” as a justification for not hiring people. In this regard, I think the right wing may be justified in labeling liberals who lobby for smoking bans as “green fascists.” In an era were corporate and government interests are looking for every possible opportunity to pit working Americans against one another, it’s counterproductive to be hypercritical of lifestyle choices.

Most progressives know better than to stigmatize the unemployed and homeless. Yet many of us don’t give a second thought about villainizing smokers, alcoholics, fat people – and, might I add, gun owners. All four are popular targets right now. I blame this on liberals’ willingness to embrace what is essentially conservative ideology – the need to take “personal responsibility” for our lives.

The Cult of Personal Responsibility

Taking “personal responsibility” simply ain’t going to cut it right now. Not for millions of unemployed Americans, nor the million plus homeless, nor for thousands of families facing imminent foreclosure and/or eviction. And singling out designated groups for bad lifestyle choices distracts us from the real problem in the US – a concerted attack by Wall Street and our corporate-controlled President and Congress on working people.

Decades of epidemiological research (see prior blog on Dr Stephen Bezruchka) show that lifestyle choices account for only 10% of the causation of illness. If we’re really serious about improving Americans’ abysmal health status (near the bottom for industrial countries), it’s time to address the real cause of poor health. Study after study shows a direct link between their extreme income disparity and Americans’ high rate of both acute and chronic illness.

It’s time to focus on the real problem – the corporate deregulation and tax cuts responsible for extreme income equality in the US. Instead of scapegoating smokers and fat people.

photo credit: cszar via photopin cc

Squatting 101

(Another post based on my research for A Rebel Comes of Age – with specific advice on how to stop your bank from foreclosing on you. A new ruling in US bankruptcy court means that roughly half the foreclosures which have occurred since 2008 are illegal.)

Squatting is becoming increasingly common with the worsening recession and continuing foreclosures and evictions. The foreclosure crisis has many US cities with whole blocks and neighborhoods of abandoned homes (which are quickly stripped of their plumbing and electrical fixtures). The problem turns out to be extremely expensive, both due to plummeting property values and tax take and higher crime rates and demand for (police and fire) services (see). Thus it’s no surprise that the city of San Diego recently sued Bank of America to stop foreclosures in their city. Prior to their recent bankruptcy proceedings, Detroit was paying people to move into abandoned homes.

The simplest form of squatting is remaining in your home when the bank or mortgage company tries to foreclose on your property. Owing to the recent scandal over illegal foreclosures, mortgagees who miss payments now have a range of legal options they can pursue (see * below).

Grassroots Remedies

Take Back the Land is a Miami-based social justice groups formed in 2006 with local action groups in New York, Boston, Chicago, Madison, Toledo, Portland, Rochester, Washington DC, Atlanta and other cities. Where they can use legal means, these local groups often organize “live-ins,” moving dozens of community activists into foreclosed homes to block evictions. In several cities, Take Back the Land activists work to rehouse homeless families in abandoned foreclosed homes. Volunteers break into the houses, clean, paint, make repairs and change the locks. Then they help move homeless families into them. More often than not, getting off the streets enables homeless parents to keep and find jobs, making it possible to pay rent and move into their own place.

Hands-Off Approach by Police and Banks

For the most part neither city police nor the banks that own the homes interfere. In Miami, for example, the city takes the position that it’s the responsibility of the bank to initiate eviction proceedings. The banks who own the homes seem even less keen to eject squatter than the police. In most states, this requires initiation of formal eviction proceedings in court. Moreover banks know full well that perpetually vacant homes eventually become worthless, due to vandalism, and have to be demolished (at additional cost to the owner).

Meanwhile neighbors concerned about their property values are ecstatic to see foreclosed homes occupied and fixed up (even by squatters), as abandoned property is a magnet  for vandalism, prostitution, drug and gang activity and fires (see and)

In addition to the good work of Take Back the Land and affiliate groups, in many places homeless families are occupying foreclosed properties on their own.

The Law of Adverse Position

Things get really interesting when homeless families occupy abandoned property for five years or more (longer in some states) and attempt to claim title (ownership) under Adverse Possession laws claim title (ownership) under Adverse Possession laws. It has also opened up a lucrative market for ambitious entrepreneurs who fix up abandoned properties and rent them out to tenants. In December 2010 Mark Guerette, the owner of Saving Florida Homes, Inc pleaded no contest second degree fraud for renting out 100 foreclosed properties.

It turns out that Gurette notified all the banks who owned the vacant the homes that he was claiming them under adverse possession – and only received a response from two of them. Owing to the banks’ disinterest, the state of Florida couldn’t really charge him with trespassing. They could only charge him with fraud by finding tenants willing to testify that he had misled them. All his rental agreements included an addendum explaining that he was occupying the property via “adverse possession.” So he ended up with a slap on the wrist – two years probation and a court order not to file any “adverse possession” claims for two years.

The 1862 Homestead Act

The legal principle of “adverse possession” – the origin of the expression “possession is nine tenths of the law” – is recognized in most cultures. In the US, its basis in law dates back to the Homestead Act Abraham Lincoln signed into law in May 1862. The Act stipulated that anyone “improving” unoccupied land could fill out an application and file for a deed of title after five years. The law was abolished in 1976, except in Alaska which continued a state version of the Homestead Act until 1986.

Nevertheless common law and most states provide for a person to obtain land through use. For example, your neighbor puts a driveway between your homes to enable him to get to the rear of his property. In doing so he takes a strip of your property six feet wide. If you do nothing, your neighbor could end up owning that part of your property. In failing to challenge your neighbor with a lawsuit, you technically abandon the rights to your property. This is the foundation of adverse possession. One feature that makes squatting on foreclosure home so attractive is that it falls under civil law, rather than criminal, law. Unless you break in or damage the property in some way, the police can’t file criminal charges. Moreover the rightful homeowner has to go through a formal eviction, which can be very expensive, to get rid of squatters.

In Florida, Take Back the Land and individual squatters are utilizing an 1869 statute that says if a person takes a property (and pays property tax) and the owner does not claim the property for seven years, the squatter gets to keep the property. With the damage done to vacant homes by vandals, improving the property usually means fixing the fences, cutting the grass and repairing broken windows and doors. Requirements differ in other states, although all require you to occupy the property openly and make improvements to it. California, Nevada and Iowa are the most favorable states for squatting as they only require you to occupy property (and pay property tax) for five years before applying for a deed of title.

* Legal remedies against foreclosure:

1. MERS foreclosures

A US bankruptcy court and many states have ruled that roughly half of US mortgages are illegal and that tens of thousands of foreclosures have been fraudulently executed by Wells Fargo, J P Morgan Chase, Bank of America (and other banks), Fannie Mae.

Prior to the 2008 meltdown, mortgages were traded and changed hands so frequently that banks simply registered them with the Mortgage Electronic Recording Service (MERS), rather than executing a title transfer. State lending laws specify that only that actual owner of a mortgage can initiate foreclosure action. In many cases banks are filing fraudulent court documents alleging that they own the loans, when they are merely servicing them on behalf of the lender.

Home owners threatened with foreclosure need to immediately do a Securitization Audit to determine who actually owns the mortgage and deed (and is legally entitled to foreclose).

2. Predatory mortgage loans

Mortgagees victimized by predatory mortgage loans (tricked into accepting mortgages they can’t possibly repay) can request Forensic Loan Document Review. There are federal laws that protect against predatory lending, which you can use to force the bank to negotiate.

3. Fraudulent mortgage charges

Also Bank of America was caught in a related scam in which they were adding backdated insurance charges to mortgage payments to push mortgagees who missed payments into foreclosure. This means it’s essential to check your mortgage statement for unexplained charges.

4. Chapter 13 bankruptcy

Families may be able to save their homes from foreclosure by filing for Chapter 13 bankruptcy.

photo credit: gruntzooki via photopin cc

***

In A Rebel Comes of Age, seventeen-year-old Angela Jones and four other homeless teenagers occupy a vacant commercial building owned by Bank of America. The adventure turns deadly serious when the bank obtains a court order evicting them. Ange faces the most serious crisis of her life when the other residents decide to use firearms against the police SWAT team.

$3.99 ebook available (in all formats) from Smashwords:

https://www.smashwords.com/books/view/361351

What Really Happened in Detroit

Guest post by Steven Miller

(This is the 4^th of 6 posts in which Miller describes how Detroit residents and auto industry pensioners were deliberately swindled by Wall Street, with the help of the state and federal government.)

What Really Happened in Detroit

With Detroit’s financial difficulties, the banksters recognized the opportunity to take the next step forward. At its peak in the Industrial Era, the city’s auto plants produced half of the world’s cars with 350,000 workers. Today the few factories that remain produce even more cars with a workforce of only 20,000. Their job is to mind the robots that actually do the manufacturing.

Wall Street and the state apparatus combined to push the city into bankruptcy so they could go after public worker pensions nationally. Across the US there are more than 22 million public workers, about half of them teachers. (10) The financial industry quickly ensnared public worker pensions in predatory debt. Then their political agents loudly proclaimed that local government could no longer function due to these debts. Detroit, like all city governments also owes huge amounts to the banks, the result of various predatory loans. However, there is never a discussion about not paying these contractual obligations, even though there is abundant evidence that they are grounded in criminality. (11)

From 2004 to 2006, 75 percent of mortgages issued in Detroit were subprime. By 2012, banks had foreclosed on 100,000 homes. This trashed the city’s real estate by 30 percent and caused the flight of almost a quarter million people. These two factors drove the tax base severely downward.

Under both Republican and Democratic governors, the Michigan state government cut $700 million in state revenue sharing. Michigan, however, boasts the largest corporate subsidies per capita in the country – a total of $6.2 billion. (12) Detroit also gives more than $20 million a year in subsidies to local corporations for elite downtown projects.

Then the state jumped in to employ coercion against the people. This took the form of an Emergency Manager, imposed by the Michigan governor, with complete powers over the city’s government, including breaking contracts at will and selling off public property. In 2013, the EM closed over 30 schools as “too expensive”, and then he used the money to build a new ice rink for the Detroit Redwings hockey team. The EM is a modern form of fascism; his dictatorial policies are backed up by the police. Detroit residents lost the civil right to vote.

While city operating expenses fell, the financial costs of debt servicing shot up. The public policy organization, Demos, wrote in 2013, “Detroit’s financial expenses have increased significantly, and that is a direct result of the complex financial deals Wall Street banks urged on the city over the last several years, even though its precarious cash flow position meant these deals posed a great threat to the city.” (13)

The Financial Times reports that Detroit will eventually pay nearly double the principal — in other words, Detroit is effectively paying 100 percent interest. (14) So we see that predatory lending against homeowners begets predatory lending against cities. The city’s, debt servicing could rise from 28% to 65% of the city’s annual budget, effectively making it an ATM for the financial industry.

In December, a federal judge ruled the pension rights, guaranteed by Michigan’s state constitution, were simply a “contractual relation”, rather than a right, and held that federal bankruptcy law, as applied to corporations, determines city bankruptcies, even though few US cities have ever gone bankrupt. This means that the interests of hedge funds and banks have priority over the interests of retired city workers, who must already make due with pensions that average only $19,000.

The betting is that city workers’ pensions will be cut by 84%. At the height of the economic Meltdown, alpha financier and speculator, Lawrence Summers, was asked why the banks used public money to pay exorbitant executive salaries. “A contract is a contract”, he bellowed. Obviously this rule of law no longer applies to public worker contracts.

Just as international banks are demanding that Greece sells off its ports, transport systems, tourist attractions, beaches and other assets in the public domain, so Detroit is now planning to sell the bridge and tunnels to Canada, the Joe Louis Boxing Arena, and the tremendous collection of art in the Detroit Institute of Art. This crime is not too different from the Nazi rape of art from across Europe, nor the US organized destruction of the Iraq Museum after they took Baghdad in 2003.

But it’s all so legit! These items will be bought by billionaires and banks with credit, which the city will then send to the banks to pay off the debt. Detroit becomes a simple pass-through account. This is naked expropriation of the wealth of the public. These are the worst of times.

References and Resources

10)  “How Many Government Employees Are There?”

http://www.freerepublic.com/focus/news/2466363/posts

 11)  Matt Taibbi. “The Scam Wall Street Learned From the Mafia”. 6-21-12

 12)  http://systemicdisorder.wordpress.com/2013/08/07/wall-street-plunders-detroit/

 13)  Wallace Turbeville. “The Detroit Bankruptcy. 11-20-2013

 14)  Sender and Foley. “Details of Detroit’s Troubles Come to Light”, Financial Times, 7-25-2013

To be continued.

photo credit: Thomas Hawk via photopin cc

***

Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

Originally posted at Daily Censored

A Novel Bipartisan Solution to the Economic Crisis

Re-Solving the Economic Puzzle

Walter Rybeck 2011

Book Review

What if there were a single, simple solution to the current credit/debt crisis? What if mere tax reform could end the recession, repay public debt, and reverse growing income inequality? What if this tax could also end real estate bubbles and speculation and reverse urban decay and sprawl? What if it could also make cities and states more financially self-reliant, thus reducing their reliance on federal subsidies and the size of federal government?

It all sounds highly improbable, doesn’t it? But Walter Rybeck, a former urban affairs official in the Johnson, Nixon and Carter administration, claims that widespread adoption of a  Land Value Tax (LVT) would accomplish all these objectives. What’s more, political thinkers across the political spectrum (e.g. Patrick Buchanan, Milton Friedman, Michael Hudson, Martin Luther King, Paul Krugman and Joseph Stigliz) have all spoken in favor of this type of tax reform.The LVT, which taxes unimproved land, dates from pre-revolutionary times. Prior to the enactment of the Federal Income tax in 1913, most public services were financed locally via an LVT. Progressives like it because it shifts the tax burden from small business and low and moderate income families to real estate developers and speculators. Conservatives like it because it shrinks the size and role of federal government, as well as leading to a reduction in company and income tax.

Here is what conservative free market economist Milton Friedman had to say about Land Value Tax (The Times Herald, Norristown, Pennsylvania; Friday, 1 December, 1978): “We need taxes. So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.”

Ending the Monopoly on Land Ownership

Like Henry George, author of the 1879 Progress and Poverty, Rybeck proposes to end the ruling elite’s monopoly on land and natural resources through tax reform – by gradually replacing income, company, sales, and property taxes with a tax on unimproved land and resources. As he explains in Re-Solving the Economic Puzzle, land is the ultimate source of all wealth. In the US 3% of the population own 95% of private land. Ted Turner alone owns two million acres, equivalent to nearly two Rhode Islands. In many cities, a few wealthy families own all the prime downtown sites.

Rybeck’s definition of land includes all the natural resources accompanying it – soil, forests, game, grazing rights, water, oil, gas, minerals and the electromagnetic waves (broadcast, cellphone, and wi-fi spectrum) above it. Like Henry George and modern Georgists, he argues that land and resources should be public property. Because no one produced any of this stuff, no one has a right to claim an exclusive monopoly over it.

According to Rybeck, our current system of taxing labor and productivity is grossly unfair to all but the top 1% of Americans. Besides being more equitable, the LVT also ends curbs the real estate speculation that leaves vast areas of American cities vacant. Setting land taxes too low inadvertently rewards landowners for keeping land vacant or turning it into parking lots.

High land vacancy rates were already a major problem during the Nixon administration. In 1970, cities with a population of 100,000 had a 22% vacancy rate, and those over 250,000 a 13% vacancy rate. Thanks to the 2008 economic crisis, an epidemic of vacant foreclosed homes has massively increased this urban blight. Worse still, low land taxes reward middle class families for moving to the suburbs. In doing so, they abandon expensive infrastructure (water, sewage, lighting, schools, etc) that was created to accommodate them. As they spread out into sprawling suburbs, taxpayers must fund new infrastructure.   

Cities and Countries Successfully Adopting an LVT

The final third of Re-Solving the Economic Puzzle relates the success stories of the 25 cities and five countries that have spared themselves economic disaster by adopting an LVT. The communities Rybeck singles out include

• California Irrigation Districts (1887)
• Fairhope Alabama (1894)
• Arden Delaware (1890)
• Cleveland (1901)
• Pittsburgh (1913, 1979)
• New York City (1918)
• Miami (Ohio) Conservancy (1929)
• Rosslyn Virginia (1950)
• Southfield Michigan (1960)\Harrisburg and 15 other Pennsylvania cities (1980-1990)

Sadly many of these communities subsequently caved in to special interests and began taxing capital improvements, rather than land values. Those who did so are confronting a major debt crisis, as well as decaying schools and infrastructure.

Pittsburgh, one of the backsliders, saw the error of their ways in 1979 and instituted a gradual return to what Rybeck refers to as a two-tier land tax. At present, Pittsburgh taxes unimproved land six times as heavily as improvements. The resulting revival of their central city is referred to as Renaissance II. Thanks to their Land Value Tax, Pittsburgh didn’t experience the same real estate bubble as other US cities. Thus their housing market didn’t collapse in 2008. In addition, their current foreclosure rate is the lowest in the country.

Countries which have adopted an LVT include Hong Kong (1843), New Zealand (1878), Denmark (1912), South Africa (1916) and Taiwan (1949).

To learn more about Land Value Tax, check out the LVT Facebook page.

Reprinted from Veterans Today