This weekend, Jesse Myerson advanced five economic reform ideas that he thinks millennials should champion, and various conservative readers’ heads exploded for reasons I don’t fully understand. Particularly, I don’t see what’s supposed to be “communist” about Myerson’s proposals.
His five big ideas are:
- Guaranteed jobs for everyone.
- A universal basic income.
- Imposing a land-value tax, or maybe having the government own a lot of land.
- “Make everybody own everything,” the specific proposal for which seems to be a sovereign wealth fund.
- State lending banks like North Dakota’s.
Conservatives dismiss this agenda at their peril. Myerson’s ideas are aimed at very real problems: Returns to labour are declining relative to returns to capital; America’s economy is vulnerable to shocks that sharply raise unemployment; returns to economic growth are accruing disproportionately out of the top, leaving most people out of their share of progress.
Not all of the ideas in Myerson’s piece are good approaches to these problems. And since Myerson describes his “political aspirations” as communist, he obviously has some bad ideas that aren’t contained in the piece. But the ideas in the piece aren’t crazy and should be evaluated on their merits.
The most promising of Myerson’s ideas is an unconditional basic income, which is a policy of sending checks to Americans simply for existing.
This policy would have several advantages; for one, it would lift people out of poverty. Unlike means-tested welfare programs, it wouldn’t act like a tax that penalizes poor people for working more. It might also reverse the sliding labour share of national income; by allowing people to exit the labour market, it would tighten labour supply and allow workers to bargain for higher wages.
On the other hand, by allowing people to exit the labour market, it might lower GDP. And it would be very expensive to finance. Despite these drawbacks, conservatives including Charles Murray and Milton Friedman have endorsed a UBI. The policy isn’t a slam dunk, but it’s definitely not communist.
Or consider a land value tax. Myerson frames this idea as “Take Back The Land,” but a tax on land doesn’t actually take it back. Such a tax would raise revenue in a way that is friendly to the economy; taxes discourage the creation of the thing that is taxed, but the amount of land can’t be increased or reduced. This tax would actually foster economic growth by making it harder for landowners to keep their land unproductive; you could expect to see a lot fewer vacant lots in New York City.
This idea has drawbacks, too. For one, federal property taxes sure look like unconstitutional “direct taxes” to me, though at least one Yale Law School professor disagrees. (States and localities could still impose such taxes, even if the federal government can’t.) Land is also illiquid; people who own valuable land and few other assets might be forced to sell it, which would be harmful to retirees and small farmers. Contrary to what I suspect are Myerson’s goals, such a tax might actually lead to the consolidation of land ownership in the hands of wealthy landlords with sufficient cash flow to pay the taxes.
Myerson’s idea for public land trusts seems like a worse idea. He introduces this idea by complaining that landlords “blow” because “They don’t really do anything to earn their money. They just claim ownership of buildings and charge people who actually work for a living the majority of our incomes for the privilege of staying in boxes that these owners often didn’t build and rarely if ever improve.”
That’s wrong — most of what landlords own isn’t land but improvements, which are a consumer product like any other except that they can’t be moved. Myerson at least implicitly understands this, since he calls for a tax specifically on land value, which is designed to encourage and reward the construction of improvements. Putting land in communal trusts would be harmful to the construction of improvements, because governments are not very good at being real estate developers — it’s the government that gives you unsafe, decaying housing projects and grim office developments like Empire State Plaza.
I’m also not keen on a public bank, though I don’t think it would be the end of the world. A lot of capitalist countries have institutions like this, including the U.S., where most home mortgage capital is provided by the federal government. State banks are also key parts of the financial system in Germany and Spain; you won’t be surprised to learn that system has worked out O.K. in Germany and pretty badly in Spain.
My view is that state banks would tend to become a vehicle for subsidizing borrowing, encouraging excessive leverage. (Non-government banks also often encourage excessive leverage when they’re regulated incorrectly, by the way.) They could also, as happened in Spain, become political slush funds. But I think they could be part of a well-functioning financial system, and they particularly might be useful for getting cash-management services to the underbanked.
Similarly, I don’t see the appeal of a sovereign wealth fund for the U.S. We’re already sort of in this business: state and local pension funds are like mini-sovereign wealth funds. The investment sides of those operations are mostly pretty satisfactory, but problems arise when governments count on high expected returns on equity as a justification to incur fixed multi-year obligations. I see lots of risks from the federal government getting into this game (what promises might it make on the back of expected stock returns?) and few benefits.
In general, countries establish such funds because they have huge public natural resource wealth which they want to diversify. They sell oil and buy stock. How would such a fund fit into the U.S. fiscal picture, since we’re not a petrostate?
And while I favour policies to tighten the labour market, I’m not sure how a job guarantee would work. What if you can’t do anything useful? What if you’re terrible at your guaranteed job? There are things the government could be doing to foster job creation in recessions — deficit spending, nominal GDP targeting, a higher default level of inflation, countercyclical infrastructure investment — that strike me as likely to be much more efficient than a job guarantee.
So, I’m not ready to sign up for Myerson’s agenda. But I’m not sure why people are treating it like it’s silly, or Soviet.
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