China

[stone]

moda, "Do you see social programs seeing a cutback (like food stamps, welfare, unemployment, healthcare assistance, etc?)"

What I meant by a citizen's dividend would be a scaled up version of what they have in Alaska where everyone just gets a cash payout every month simply because they are an Alaskan citizen. I meant for it to be large enough that unemployment benefit, food stamps etc would be unneccessary. You could survive on it alone but anything extra you earned would not effect how much citizen's dividend you got. People in desperate poverty in India etc do actually often excersize great resourcefulness and entreprenuership. My guess is that if people had a citizen's dividend and no dis-incentive to earn (such as from potential loss of benefits) then you might get an amplification of that effect on top of the increase in aggregate demand.

[moda0306]

I see, stone, but would you eliminate programs to offset the cost, is my question.

[stone]

moda, sorry for missing the question. Yes I am meaning that unemployment benefit and foodstamps etc would be eliminated but people currently getting those would have enough citizen's dividend that they were not needed. Basically match the spending budget of the MMTers but instead of spending the money on government directed job creation schemes; instead distribute it as a citizens' dividend and leave the private sector to step up to the chalenge  of supplying whatever demands appeared as a result of people spending the citizen's dividend. Also free up unemployed people to start self directed enterprises. If people want to engage in social enterprises rather than things that earn money then they are free to do so and just live on the citizen's dividend. If people want to donate their citizen's dividend to support medical research or crop circle research or whatever then they are free to do so. The costs of such things would already be partly paid for by the researchers getting a citizen's dividend. I'm not against government doing things that are best done by governments. I just think that the MMTers are wrong in saying that governments should make up stuff to do to create jobs. Individuals are better able to do that productively IMO.
I'd favour paying for the citizen's dividend with an asset tax and a balanced budget- but that's a whole extra can of worms .

[KevinW]

I think Henry George had it right: small government, no entitlement programs, and a citizens dividend set around the poverty level.  The government and dividend are paid for by a land tax (aka ground rent) and no other taxes.

The dividend is nice because it lets each individual pick their own personal social program: they can use it to provide basic subsistence; or subsidize homeownership, children, health care, or education; or whatever.  Overhead is minimal and no one's choices infringe on anyone else's.

The arguments for a land tax are that, since land is inelastic, the tax doesn't create market dislocations the way other taxes do.  And that the surface of the earth is not man-made, ergo did not arise from anyone's labor, ergo is not private property but rather the collective property of the nation.  In the modern day the same argument could be made for the radio spectrum and satellite orbits.

http://en.wikipedia.org/wiki/Georgism

[moda0306]

Is that land taxed based on value or acreage... I'd imagine the former... how do you base the value of land vs the property built on it?

I like this... just trying to test it for weak spots.

[Lone Wolf]

I think Henry George had it right: small government, no entitlement programs, and a citizens dividend set around the poverty level.

It's a very interesting set of ideas.  How is the size of the citizens dividend determined?

It's unfortunate that Georgism nowadays would most likely invoke George Costanza.

[KevinW]

Is that land taxed based on value or acreage... I'd imagine the former... how do you base the value of land vs the property built on it?

The idea was to tax the market value of the raw land, not counting improvements such as structures or crops.  Improvements arise from labor, are property in the Lockean sense, and are untaxed.

Where I live the value of my land and improvements are assessed separately and taxed at different rates.  So we already have a working mechanism for collecting property taxes this way.  Though it would undoubtedly need streamlining if it got promoted from being a somewhat minor function to the sole revenue source for all levels of government.

How is the size of the citizens dividend determined?

I don't remember.  A balanced budget is part of the package, so either the tax rate is fixed and the dividend is an even share of whatever surplus is left over; or the dividend is fixed and the tax rate floats to whatever is needed to raise that revenue.  I don't recall which George advocated.

[stone]

Kevin W, do you really think a land value tax is preferable to a flat asset tax? My problem is that it muddies what makes sense from an economic point of view with the "justice" aspect of ground rent not reflecting labor. In so doing, the land rent idea creates massive loopholes that would not exist under a flat asset tax. I think that it is essential that cash, patents or whatever get an asset tax just as much as "unimproved land". The concept of "unimproved land" is impossibly nebulous. The Duke of Westminster (the richest UK person) gets his wealth from owning much of the most expensive land in London (the land not the buildings). The value of that land is purely down to the location. If you spend £1M building an office on a vacant lot in Mayfai,r then you will be able to get £1M per year in rent for that office. So the land is worth £30M or whatever. If you spend £1M on building an office in Burnley, then you will be able to get £1k per year in rent for that office. To me that shows that the concept of "unimproved land" is nonsense.

[MediumTex]

Did anyone see that NYT article about China's new program for dealing with political dissidents?

They just vanish.

Sometimes they re-appear months or years later...and sometimes they don't.

[KevinW]

stone, maybe you misunderstand.  Each parcel's value would be assessed separately.  So the assessor would know that a Mayfair parcel of land is worth 30M GBP and a Burnley parcel of the same acreage is only worth 100K (or whatever).  The parcels would be taxed proportional to their value, so the good Duke would end up paying quite a large sum.

I actually think this kind of system has few opportunities for loopholes since every enterprise uses physical space, either directly or indirectly.  And it's difficult to evade since physical space can't be hidden or sheltered the way financial assets can.

I like the anti-dynastic properties of the asset tax but I have two concerns with it.  First is double-taxation.  If I work hard to earn $200k and put it in the bank, it will get taxed down and worth less each year.  So the work that I did once is taxed every year in perpetuity.  This would seem to encourage wanton spending and discourage saving and economic mobility.  Second is the complexity and bureaucracy involved in taxing every asset.  How are volatile assets like precious metals assessed?  What about tangible assets that are expensive to assess, like fine art or purebred dogs?  What about intangible assets; is there a tax on MD and PhD degrees?  Celine Dion's voice?  Bill Gates' social network of business contacts?  Will there be forms to disclose all these things?  It seems like a morass which is why I'd prefer taxing something that's simple to measure and understand.

(Incidentally maybe we should take this into another thread since this one is labeled China.)

[doodle]

Chinese centralized government control seems to be one way to mitigate tragedy of commons type issues. It sounds like they are going to stick it to the car manufacturers to improve on their products fuel efficiency and cleanliness....and I bet they won't whine about it like they do over here. I guess in todays world it takes a Communist government to push the technology envelope.

http://www.nytimes.com/2011/09/05/busin ... sales.html

[MediumTex]

Chinese centralized government control seems to be one way to mitigate tragedy of commons type issues.

You mean like they have done with their air pollution problem?

[goldfinger]

Many people say it is China Inc, not China government. I agree with that on some levels, for example you do not choose CEO by popular vote.
And I really believe China should go for the electric car. The realtively short range on one battery charge is fine, since Chinese people stick to train or airplane for long distance traveling anyway.

Chinese centralized government control seems to be one way to mitigate tragedy of commons type issues. It sounds like they are going to stick it to the car manufacturers to improve on their products fuel efficiency and cleanliness....and I bet they won't whine about it like they do over here. I guess in todays world it takes a Communist government to push the technology envelope.

http://www.nytimes.com/2011/09/05/busin ... sales.html

[stone]

There is an interesting piece saying that China is going bust:
http://www.chrismartenson.com/blog/gord ... bust/65040
I can understand that the property bubble there is popping but does that constitute "China going bust"? If people bought homes at stupid prices with savings they had rather than with debt, then it is a anoying for them but I can't see how it leads to a debt deflation depression type scenario. The property market popping might actually cause people to invest in more sensible things and also allow average Joes to live near where they work?

"If you go about 25 miles south of where I live, and go to Princeton, New Jersey, you will see a lot of beautiful homes. I mean, they are all paid for, they have got a wife there, they have kids, and they have one or two Mercedes in the driveway. It is the perfect American family, except one thing is missing, and that is Dad. Dad is a senior official in Beijing and he is stealing as much money as he can. And at maybe not the first sign of trouble, but perhaps the second sign of trouble, he is on the United flight to New York, because he is not going to stay to defend a regime that is shaking. And that is one of the reasons why I think we have to be concerned about the way the Chinese economy is going, because the Chinese rich are starting to see the signs and are beginning to bail out."
"Last year there were, in about I guess it was April or May, the state grid in China reported there were 64.5 million apartments that showed no electricity usage for six consecutive months. That is enough housing for 200 million people, but yet Beijing was decreeing the building of 30 to 50 million more apartment units....
But at the end of the day, there has got to be a correction. And what goes up fast comes down fast. And what we are seeing is the down phase."

[Storm]

There is an interesting piece saying that China is going bust:
http://www.chrismartenson.com/blog/gord ... bust/65040

Great article.  Thanks for posting it.  When I was in China last summer I saw the huge apartment buildings that were completely empty, right next to a coal burning power plant.  I thought "who in their right mind would buy one of these?"  I think many Chinese people think the same thing.  This speaks of centrally planned building that doesn't always make sense.  Perhaps some government official's relatives own the land right next to the coal power plant and so they are able to sell it to the contractor building the apartments for an inflated price.  This type of corruption always leads to malinvestments, and when the malinvestments are being done by a central government that is printing more than $1 trillion in a single year, when the total size of the economy is only $4 trillion, they occur on a grand scale.

Here's another great quote from the article:

You know, every market has to go to equilibrium. There are too many apartments in China and not enough buyers and occupiers. And it was going to go to equilibrium in some fashion. What is really surprising observers is that the rapidity at which we see this move to equilibrium. Last year there were, in about I guess it was April or May, the state grid in China reported there were 64.5 million apartments that showed no electricity usage for six consecutive months. That is enough housing for 200 million people, but yet Beijing was decreeing the building of 30 to 50 million more apartment units....

[stone]

Storm, its interesting to hear from someone like you who has actually been over there. The apartments next to the coal plant are clearly inane but is there any truth in the idea that in China there are people who will move into most apartments once the price falls enough and also that the apartments were not bought with debt? Here in the UK we also have empty tower blocks of flats and our government has just anounced plans to boost home building and has said that the government will backstop 95% mortgages Ireland is even worse.

[Storm]

Storm, its interesting to hear from someone like you who has actually been over there. The apartments next to the coal plant are clearly inane but is there any truth in the idea that in China there are people who will move into most apartments once the price falls enough and also that the apartments were not bought with debt? Here in the UK we also have empty tower blocks of flats and our government has just anounced plans to boost home building and has said that the government will backstop 95% mortgages Ireland is even worse.

Stone, you would think that in a normal market, prices would fall to equilibrium and buyers would move in, however, I think this market is anything but normal.  For example, in most large Chinese cities, the government has built these huge towers thinking that millions of rural farmers will move to the city, leave behind their farming jobs, and work in office buildings and live in apartments.  As much as most people in China idolize the western "white collar" office life and culture, you need jobs, education, and training before you can convert your workforce from an agrarian one to a modern one.  You don't just build a million apartments, snap your fingers, and move people from the farms to them.  It seems like first companies need to become established in the area, and create jobs and a demand for workers, before people will move to where the jobs are.

Also, this central planning ignores and tries to skip the very steps that made America great.  We didn't just go from agrarian to pushing papers in an office overnight.  There was the industrial revolution and many other steps in between.  China is trying to go from agrarian right to high tech and skipping everything in between.  I think they would be wiser to try to reproduce the steps that America took.  Go from agrarian to an industrial revolution (they are doing that in some areas).  Farmers can more easily be trained to work in factories than they can to do high tech desk jobs.  Over time a natural progression to a more educated workforce will happen.  The farmers can become factory workers, and their children will get a good education and work in offices.  Trying to skip that all important industrial revolution will just cause failure, imo.

[stone]

Storm, are there people who currently commute long distances to get to work who could live in those apartments? I thought that currently some migrant factory workers from the countryside live in almost barack like accomodation. Presumably it is simply cost that prevents them from living in a nice apartment. You've been there. I know nothing and I'm just curious.

[Storm]

Storm, are there people who currently commute long distances to get to work who could live in those apartments? I thought that currently some migrant factory workers from the countryside live in almost barack like accomodation. Presumably it is simply cost that prevents them from living in a nice apartment. You've been there. I know nothing and I'm just curious.

I never visited any of the factories there, so I honestly wouldn't know what their accommodations are like.  What struck me was that in the areas where they were building these massive high rise apartment buildings, there were no businesses around.  Unless you got a job at the power plant, I can't imagine where you would work living in those particular apartments.  Picture it like NYC, except with brown stone buildings everywhere and no skyscrapers or modern office towers to see.

I think most of the large factories already built their own (sub standard) housing for employees.  The apartment buildings in the middle of nowhere next to the coal power plant look more like this and there are no businesses around, therefore no jobs:

[dragoncar]

Hey guys, I hear china is the next big thing.  Invest now!

[stone]

Fascinating insight about China:
http://seekingalpha.com/article/334632- ... he-chinese

"The truth of the matter is that a class structure exists in Chinese society. Those at the top don't think that "little people" matter. The dirty little secret is the belief that human life is cheap."

......."Humvees or Ferraris – Driver Zhao says the only people arrogant enough to drive one of these on Beijing’s streets are the well-off children of top government officials. As evidence of that, I once saw a bright yellow Humvee rip the wrong way through traffic in Beijing’s busy Sanlitun bar district, before proceeding to drive through a red light without so much as tapping the brakes. At least three policemen witnessed the same scene, but seemed to conclude from the driver’s brazen behaviour that he was too powerful to be stopped."

[dualstow]

"At least three policemen witnessed the same scene, but seemed to conclude from the driver’s brazen behaviour that he was too powerful to be stopped."

Yup, that sounds about right. My wife dated the son of a police official when she was younger, and has some interesting stories about the family.