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Victory! The Independent Institute’s Longtime Opposition to Inclusionary Housing Policies Lays Groundwork for Governor’s Veto

housing_america_1800On Sunday, Gov. Jerry Brown vetoed Assembly Bill 1229, a measure that would have authorized California cities and counties to establish inclusionary housing requirements as a condition of development, allowing them to force housing developers to set aside units for low-income residents. The Independent Institute, and especially its Senior Fellow Benjamin W. Powell, provided much of the intellectual groundwork to defeat the bill, dating back to when Brown was mayor of Oakland.

Mayor Brown called Institute president David Theroux when Brown was creating a City of Oakland Inclusionary Housing Blue Ribbon Commission to get Theroux’s recommendations for Commission members. Theroux suggested Benjamin Powell, who was appointed to the Commission and met with the group several times, making the case against inclusionary zoning.

The Commission recommended that builders provide 5 to 20 percent of their units at below-market rates. Powell, a longtime authority on the issue, challenged the Commission and argued that because builders pay the cost of providing the subsidized units, they must spread those costs over the remaining market-rate units. This acts as an “inclusionary tax” that in Oakland could be as high as $17,000 per unit in the initial years and $51,000 per unit in the later years. Powell showed the tax would reduce construction of housing, reduce the supply of land for residential construction, and make housing less affordable in Oakland.

The work of Powell and others on the negative effects of inclusionary housing shaped Brown’s views, as evidenced by his recent veto message on state bill AB 1229:

“As mayor of Oakland, I saw how difficult it can be to attract development to low and middle income communities,” Brown wrote. “Requiring developers to include below-market units in their projects can exacerbate these challenges, even while not meaningfully increasing the amount of affordable housing in a given community.”

The Independent Institute will continue to track this issue and educate the public, media, and lawmakers as to why inclusionary housing policies are the wrong approach to increase affordable housing for low-income people.

Here’s a list of some of the work against inclusionary policies by Senior Fellow Benjamin Powell:

The Independent Institute also published two Policy Reports against inclusionary policies:

And here is Powell’s excellent Independent Institute book on housing that features his in-depth critique with Edward Stringham of inclusionary policies:

Crisis Averted

I guess we’re supposed to feel grateful that the congressional leadership has come around to a deal to stop the shutdown and prevent a default. The details emerge as I write this, but it looks like the compromise essentially continues financing everything until after the holidays. As for Obamacare, over which the Republicans claimed they waged this fight, it is virtually untouched. It appears the only concession the GOP got was some means-testing mechanism for subsidies—which is a non-issue compared to the regulatory burdens, the individual and employer mandates, and the rest of the big reasons people actually dislike the Affordable Care Act.

This should disappoint anyone who saw in this whole episode, however disgracefully the politicians behaved, a hope that on the horizon perhaps politicians would actually spar over something important. Two years ago, when we were saved from the precipice of doom, when the Republicrats got together and found a way to avoid even the histrionic shutdown of parks and liquor licenses, the whole controversy had concerned an obscenely small margin of disagreement over the budget. The Democrats had wanted to spend a trillion Americans didn’t have, and Republicans wanted to cut that by a few dollars. At least Obamacare is a major government program worth fighting over.

Of course, the conservatives who stuck to defunding it somehow managed to get most of the public’s blame. Even though a majority of Americans have favored repealing the law fairly consistently for years, the Republicans manage, time and again, to lose the popularity contest to the president and his party, even on issues where the public agrees with them.

I would guess some of this has to do with the Republicans’ appearing to capture the worst of both worlds. Here we had them seem to want to put everything else on hold, all to stop Obamacare. But then they caved and gave everything away. At one moment, they decried the shutdown as a horror inflicted by the administration. Then they would brush it off as no big deal, ignoring those hurt when the government cuts the least damaging and most publicly appealing programs.

But really, the main problem the Republicans have is that no one who isn’t loyal to the party apparatus genuinely believes they favor fiscal restraint, true free enterprise, or individual liberty, much less seriousness on the issues. The core of Obamacare was cooked up by conservative operatives colluding with the medical industry, and its essence as a combination of mandates and subsidies was embraced as good policy by such Republican stalwarts as Mitt Romney, Rick Santorum, and, even after Obama’s inauguration in 2009, Newt Gingrich.

Capitol Building The public looks at the GOP’s talk of laws being unconstitutional or debt ceilings being dangerous to raise or spending going out of control, then it remembers six years of George W. Bush and complacent Republicans in Congress. We all remember the budget rising under Bush even faster than it has risen under Obama—7% a year compared to 4% a year. Then Republicans talk about civility in political deliberation, but we all remember when mild critics of their foreign policy agenda were tarred as unpatriotic seditionists.

Obviously, the Obama Democrats have made matters much worse fiscally. They have continued the wars and increased spending. They have enacted in Obamacare an awful regulatory program that will cause massive collateral damage on the economy and labor market when it’s finally implemented. On civil liberties and presidential power, they have gone considerably beyond the last administration’s muscle-flexing.

So it’s important to have some kind of counterweight to this. The current Republican Party, influenced though it may be by the Tea Party, is not going to cut it. The public doesn’t like the Republicans, even when the Democrats are backing a less popular policy. And there’s good reason, since no reasonable observer can trust that all too much would improve simply by switching the party in charge of Washington.

Indeed, if the last few weeks taught us anything, it’s that the political ruling class has a firm grip on both parties and likely always will. The whole shutdown business only demonstrates what the rulers prioritize and what they’re willing to dispense with. And one wouldn’t be too suspicious to wonder if the last thing they want is for a default to come and for it not to be as bad as everyone fears. It would cause many problems, and the political class would be rather embarrassed, but sooner or later their house of cards is going to collapse, and they have to be losing some public confidence in their illusion that the feds can spend like this forever.

Instead of looking for hope in Washington, Americans concerned about profligacy and regulatory destruction probably need to look elsewhere, especially for anything other than marginal improvements. People will continue to find ways to evade the central plan, to fight back, to produce technologies that offset at least some of the state’s destruction. In the longer term, we need a culture that doesn’t look to DC as savior, that refuses to borrow from future generations to pay for ridiculous corporate-state entitlements today, that is willing to demand liberty across the board—a culture of people willing to turn their backs on any and all politicians who turn their backs on them.

If you look upon both parties with a fair share of cynical resentment today, you are probably helping to foster such a culture. It’s a very long-term approach, but the short-term ones in Washington simply don’t work. And we can take some comfort in how much scorn the public is heaping upon their would-be masters.

Why Do We Need a Health Insurance Mandate?

It is widely assumed that a health insurance mandate is necessary in any workable health care system and that it is especially needed if insurance companies are not allowed to price their premiums based on health status, as is the case under the Affordable Care Act. Yet most countries in the world do not have an individual mandate. And I can’t think of a single valid argument for one.

Let’s start with the traditional argument.

Suppose that I elect to be uninsured and that I spend all of my income on other consumption as it is earned. Then one day I get into an automobile accident and need expensive medical care. A humane society is not going to deny me care just because I don’t have the ability to pay for it. So the care I get will be paid for by others (through charitable gifts or taxes). Most of those paying for my care purchased health insurance for themselves. In doing so, they had to decrease their consumption of other goods. I, on the other hand, consumed all my income and used the generous nature of other people as my “insurance plan.”

As a result, I become a “free rider” on the generosity of others. Not only is this unfair, but if I get away with it, others will be tempted to do the same. The ability to free ride, therefore, potentially imposes significant cost on others and leads to less than the socially optimal amount of insurance.

One way to prevent free ridership is to require everyone to purchase health insurance. But this is actually a rather extreme remedy. Other remedies make much more sense.


The Ugly Beginning of Dodger Stadium Provides Important Property Rights Lesson

DodgerStadiumGame three of the National League Championship Series will be played tonight at Dodger Stadium in Los Angeles. TBS play-by-play announcer Ernie Johnson and others often interchangeably refer to Dodger Stadium as Chavez Ravine. But they don’t explain the stadium’s ugly beginnings.

Two miles from downtown Los Angeles, Chavez Ravine had been used in many ways over the centuries, but in the 1940s and 1950s it was a thriving Mexican-American community. Many of the residents’ parents had fled the 1910 Mexican Revolution. The people were poor but had a great sense of community and pride in their homes. The ravine became home to three neighborhoods, described by Don Normark as a “poor man’s Shangri-la” in his wonderful photographic chronicle of daily life in this close-knit community. Sadly, this idyllic scene did not last.

With the lure of a $110-million grant from the new National Housing Act in 1950, the Los Angeles Housing Authority began buying homes in the ravine to make room for a housing project. Most people sold and left when they were told to go. The homes of those who refused to leave were condemned as “urban blight,” and the city seized homes using eminent domain. Here the story takes an interesting twist.

In June 1953, Norris Poulson became mayor, running on a campaign to end “federal domination of the city.” He renegotiated the housing-authority contract to stop the Chavez Ravine housing project. In August 1953, the housing authority sold Chavez Ravine to the City of Los Angeles on the condition the land be used for “public purposes only.” At the same time, wealthy lawyer Walter O’Malley was in a fight with New York City officials to build a new stadium for his Brooklyn Dodgers baseball team.


Happy Birthday, Walter Grinder!

Yesterday was the 75th birthday of Walter Grinder. Several tributes have already appeared. Here is mine.

I first came into contact with Walter Grinder while I was a first-year graduate student at the University of Wisconsin at Madison in the early 1980s. While it was before P.C. had gained a stranglehold, and my (often Marxist/New Left) professors were generally open-minded, the history department could still a very lonely place for a young libertarian. Walter was instrumental in giving me the necessary self-confidence to navigate my way through. When I faced a historical or theoretical conundrum, or simply wanted some references to leading work in a field, I rang up Walter. I always felt better as a result. Few people were better able to shed new light on a question that many of my professors, and fellow graduates, considered settled. I remember fondly our long conversations about the role of overproduction, or lack thereof, as a cause of U.S. imperialism. So much new stuff! In his role of outside faculty mentor, Walter was the ultimate “network builder,” always trying to make us aware of others who shared our interests and passions.

After I received my Ph.D., it was Walter and Leonard Liggio who were responsible for the publication of my dissertation on tax revolts during the Great Depression. Both arranged a fellowship for me at the Institute for Humane Studies (IHS), which enabled me to revise the manuscript. Unbeknownst to me, Walter sent a copy of the manuscript to Lew Bateman of UNC Press. Bateman liked the book and got the ball rolling.

Later, after my position was not renewed at the University of Nevada, Walter and Leonard were the only ones who kept my head above water by cobbling together a combination fellowship and “make work” job supervising history students at IHS. Without this lifeline, I may well have dropped out of the profession. In that make work job, I did my best to mentor young history students via long distance in the same way that Walter had mentored me. One of those students was the brilliant Alan Petigny who died tragically last month. Walter was also key to turning me onto the vast role of mutual aid in history, which ultimately led to my book on fraternal societies and, then, my book on T.R.M. Howard.

I will always be grateful for Walter’s sage and thoughtful counsel, his passion for liberty, including a deep-seated hatred of war which I took to heart, lack of pretense, no nonsense sense of humor, and genuine concern about helping students survive in the profession and become better scholars. He has not only been a mentor for so many of us but a kind of super mentor. In this regard in particular, Walter’s retirement from the Institute for Humane Studies left a gap which nobody has come close to filling.

Nobel Peace Prize: FAIL

malala-yousafzai-The news that Malala Yousafzai missed out on the Nobel Peace Prize should not be a great surprise. Considering upon whom the committee has bestowed the honor in recent years, it would have been more surprising had they proven themselves able to recognize a peace monger when she’s right in front of them.

In the immediate aftermath of the news, Ms. Yousafzai was invited to the White House to meet with the most war-mongering Nobel Peace Laureate, Barack Obama, to whom she delivered the simple, poignant message:

I also expressed my concerns that drone attacks are fueling terrorism. Innocent victims are killed in these acts, and they lead to resentment among the Pakistani people.

For further evidence that this modest young woman, serene in the aftermath of the Taliban’s attempt on her life, truly deserved such recognition, see also her recent appearance on The Daily Show:

You must fight others, but through peace, and through dialogue, and through education.

The Defaults of 1933, 1862, ... and 2013?

12418809_SPundits tell us that the US government has “never” defaulted on its debts. However, this generalization overlooks the very significant defaults of 1933 and 1862.

Prior to 1933, US Treasury bonds were promises to pay gold at $20.67/oz. Yet one of the first acts of the Franklin D. Roosevelt administration was to revoke this promise. After 1935, foreigners were paid in paper dollars they could redeem for gold at $35 an ounce, but American creditors did not even get that diluted option.

The government did not just default on its own Treasury obligations, but took the entire US economy down with it by imposing a similar default on private borrowers and banks, including the Federal Reserve System. I’d argue that taking the dollar off gold at that point was pointless, misguided and disruptive, but however one feels about that, this was clearly a default on the part of the US government.

During the Civil War, the Federal government financed many of its expenses with “United States Notes,” or “Greenbacks” as they were known. These were, like private banknotes, promises to pay lawful money on demand, which initially meant gold at $20.67 an ounce or silver at $1.293 an ounce, at the government’s discretion. Since gold was a little cheaper at the time, in practice this meant gold.

Throughout 1861, the Treasury kept its promise to pay gold on demand. However, at the end of 1861, it announced it would suspend redemption effective Jan. 1, 1862. Greenbacks began to circulate at a discount relative to gold, and were made legal tender for private debts the following month. Government bonds continued to be paid in gold, but holders of greenbacks never got their promised specie until 1879.


Are Patients Too Dumb to Make Good Choices?

Austin Frakt refers us to this statement from a study of complexity in various markets:

The idea of consumer-directed health care, however, is going in the opposite direction in that it increases complexity for consumers, and possibly for clinicians. Using other markets as benchmarks, we would expect this push to fail, or at least to have limited success. Thus the goal should be to increase the complexity of health care where it can be managed in order to reduce complexity for patients, their families, physicians, nurses, and other clinicians.

He then piles on with an observation of his own:

One additional consideration is the cost of a complexity-induced mistake in each sector. The cost of a consumer making a poor choice of cellphone or plan is of a different order of that of making a poor choice of health care treatment. One way we manage telecom’s complexity is learning from experience. There’s a good chance you won’t make the same bad choice twice. How many times do you get to choose where to have heart surgery?

Can you spot what’s missing in all this? Remember what is happening in health care. We pit bureaucratic payers against bureaucratic providers. At least that’s the way we used to describe it. Now it’s software against software. On the physician side alone, there are 7,500 tasks Medicare pays doctors to perform and the number is expanding to many thousand more. So providers buy computer programs to help them maximize against the payment formulas. Then the payers buy programs to help defend against the provider programs. Then we get another iteration, with better programs and better defenses, etc. How could this not be complicated?


New York Times Wrong about Government Childcare Delivery

5774491_SWhen it comes to government-run childcare and preschool, the delivery is worth all the labor pains—so says University of Massachusetts, Amherst, economics professor emerita Nancy Folbre in her recent New York Times article.

Folbre’s sentiment reflects that of House Democratic Leader Nancy Pelosi, who insists America has an early childcare and education “crisis” that threatens our economy. The solution, according to Pelosi and Folbre, is to adopt President Obama’s universal government-run preschool and childcare plan for all three- and four-year-olds.

Yet there’s scant evidence that expanding government would improve the quality of care, student learning, or affordability—much less the economy.

Three out of five mothers with preschool age children are employed, the vast majority of full-time. Almost half of all young children with employed mothers are cared for by relatives—a consistent pattern for decades. But is this situation a “crisis,” as Pelosi suggests, or a choice?

Parents from all walks of life choose child care based on their desire for nurturing providers, safe environments, convenient locations, and educational activities. Not surprisingly, employed mothers actively choose family members to watch their young children—especially in light of research indicating that children who spend extended periods in day care are more likely to display aggression and other problem behaviors.

The Democrats’ plan also ignores the preschool preferences of employed mothers. Fully 68 percent of preschoolers with employed mothers are in programs already, and most (64 percent) are enrolled full time. There’s no evidence to suggest that the rest of employed mothers even want their children in school at such a young age.


All I Really Need to Know I Learned from Reading Higgs

“CRISIS AND LEVIATHAN is an important, powerful, and profoundly disturbing book.” —James M. Buchanan, Nobel Laureate in Economic SciencesFurther to Bob Higgs’s earlier post, Thinking Is Research, Too!, down in Texas, the Chairman of the Dallas Fed has the odd practice of looking beyond government stats and actually (gasp!) asking real people how they think the economy is going.

From a profile of the President and CEO of the Dallas Fed, Richard Fisher, “Money Makes the World Go Round:”

Every few months, Fisher calls a couple dozen CEOs to ask them how things are going. He told me that when he asks this informal focus group why they haven’t been hiring more quickly, they tell him that they want more clarity from Washington, about what their tax rates will be, about what federal spending will look like, and about what it will cost to implement new laws like the Affordable Care Act. And so the problem, in Fisher’s view, is with Congress and the president, who haven’t done enough to mitigate the uncertainty constraining the private sector.

Now, go to the little box in the upper right headed “Search,” and type in “regime uncertainty.” Read a few of the items returned, and you, too, will come to the realization that Higgs told us so, 16 years ago. Until we get Washington to listen, we can’t expect to see any change from the dismal record of the long-drawn-out Great Depression—which did not end until after World War II—now being repeated in the current Great Recession.