What Would Henry George Say?
Still Relevant, Still Poignant
By Marty Rowland
Abstract – It is anticipated that Congress will approve a $2 Trillion stimulus package with five main elements focused on helping workers and firms survive the temporary loss of income because of layoffs or work stoppage on account of following local, State, and federal orders to shelter-in-place and implement social distancing to avoid spreading the coronavirus. The Henry George School of Social Science believes that George would have applauded this rescue package – but not if the federal money flows directly to the pockets of land owners/building owners who collect land values for which not a finger is lifted to earn it. Each element of the package is described below, followed by what George would have said about it, ending with a recommended policy all cities should enact immediately to avoid this wrong.
At the time of this writing, Congress is finalizing a $2 Trillion federal stimulus package that would ameliorate the financial consequences of the shutdown of the economy that was ordered to save as many people as possible from being exposed to the coronavirus. That package of direct payments, loans, grants, and subsidies has five elements that are described below. Each element is critiqued within the framework of what Henry George would have done to address the current pandemic and the economic fallout of our response to it were he alive today.
Element #1 – Postpone all mortgage payments for FHA-insured housing loans and stop evictions of 6.7 million people living in HUD-owned properties1, including public housing. This is an important measure as 3.6 million of those in HUD-owned properties are evicted every year. Although this order does include the more than 8 million holders (with a combined unpaid balance of $1.3 Trillion) of FHA-insured mortgages (i.e., approves suspension of payments), it does not include 80 million renters2 and it is not clear that it includes the 1.4 million people receiving HUD Section 8 vouchers.
What would George do? – George was not a neoclassical economist, so there would be no pretense to being emotionally removed from the subject of his profession. In the closing chapter of his Progress and Poverty (page 559) he said: “… want and injustice are not necessary … a social state is possible in which poverty (is) unknown …the better qualities and higher powers of human nature (should have) the opportunity for full development.”3 Without the emergency stimulus plan, there certainly would be widespread poverty and emotional distress from not being able to pay one’s bills. With that said, the stimulus must not exclude the 80 million renters or those receiving HUD housing vouchers. But, instead of a flow through of money from the federal government to a land owner (or building owner) for a tenant’s rent, the federal government should only cover the building owner’s operations and maintenance portion of a tenant’s rent bill; the land value portion of the tenant’s rent bill should be forgiven during the pandemic (up to four months). Private property in land is the cause of the inequitable
distribution of wealth, and this is about to become abundantly clear, especially if the federal government attempts to pay a land owner her/his unearned increment of land value that arises only due to what government and neighbors of the land owner do to make her/his land so valuable. Likewise, if the land owner (who has housing rental units upon her/his land) is obligated to make loan payments, then the portion of those payments related to land value should likewise be deferred (up to four months). In this way, nobody suffers (except the local government) for failure to pay or collect unearned (land value) income. The local government should be made whole by the federal government.
Element #2 – Direct payments of $1,200 to most American adults (earning less than $99,000 per year and $2,400 for a married couple earning less than $150,000) and $500 to most children4, over and above any federal or State unemployment benefit.
What would George do? – These payments are fair, but more would be welcome. What George would object to is the inequity of setting the bar at a $99,000 annual income, because of the higher cost of living in dense, vibrant cities such as New York City and San Francisco. Perhaps a city such as Pittsburgh should be the median upper range of middle-class income so that a cost-of-living multiplier could be used to increase or lower the value of the payment. It is acknowledged that after land value rents are properly directed to government (providing the myriad infrastructure services) and away from land owners, housing rents in those two cities would come down. This could be a factor for a future pandemic.
Element #3 – Federal unemployment benefit of $600 per week for four months. (Werner)
What would George do? – George would support the four-month period of support because health experts (e.g., Dr. Fauci of the US National Institute of Allergy and Infectious Diseases) are saying the current shelter-in-place order may need to extend beyond Easter Sunday (April 12, 2020, 18 days from today) to maybe mid-July5. If the economy comes back to life when people return to work before July, then some of the benefit would be left unused.
Element #4 – Four months of full salary for furloughed workers6
What would George do? – For the same reason as above, George would support the four-month payment to all workers at their regular salaries, but it is assumed that the same $99,000 annual salary cap applies and perhaps that should be modified.
Element #5 – A lending program ($500 Billion) for companies, States, and cities ($50 Billion of that going to passenger airlines, $8 Billion for cargo airlines, and $17 Billion to firms deemed important to national security), another lending program ($367 Billion) to help small companies deal with payroll problems, and a grant of $150 Billion to U.S. hospitals. (Werner)
What would George do? – George would find relief to these capitalist enterprises appropriate, and he would appreciate the oversight of the programs identified here that Senator Schumer
insisted on in the Democratic response to the original Republic stimulus plan. Also, George would support a plan similar to that of the World Economic Forum7 that advocates investment in infrastructure assets and systems of assets, perhaps in amounts greater than $2 Trillion.
Conclusion – On pages 142-143 of Progress and Poverty8 George says “… the greater the population, the greater the comfort with an equitable distribution of wealth would give each individual. In the state of equality, the natural increase of population would constantly tend to make every individual richer instead of poorer.” The challenge for every city, town, and metropolitan region is how and when to economically bounce back post-pandemic. George says more people = more prosperity. But there will be missteps on coming back too quickly, so measures must be fashioned so we can re-set after a premature business restart/shelter-in-place relaxation. For the Georgist movement it will be soon be clear who is worthy of payments, grants, and loans and who must be excluded. Our job is to be relentless on the non-payment of land rent (i.e., the land portion of property tax, and the land value portion of housing rent) during the pandemic (as an emergency measure) and in its aftermath (as an important policy change). This is an essential opportunity for clarity on how human progress can be advanced.
Bolton, Alexander. 2020. Schumer: Government will pay four months of full salary for furloughed workers in stimulus proposal. The Hill, found at https://thehill.com/homenews/senate/489219-schumer-government-will-pay-four-months-of-full-salary-for-furloughed-workers, March 24.
HUD. 2020 FHA active insurance numbers, found at https://www.hud.gov/program_offices/housing/fhahistory, on March 25.
Pengelly, Martin. 2020. Dr Anthony Fauci counters Trump claims amid crisis, ‘I just want to get the facts out;’ the public face of the US scientific community amid coronavirus outbreak is tasked with countering president’s false statements. The Guardian, found at https://www.theguardian.com/world/2020/mar/23/anthony-fauci-trump-claims-white-house-doctor-coronavirus-crisis, March 23.
Sher, Isaac. 2020. HUD is suspending evictions and foreclosures for people living on its properties amid the coronavirus pandemic. Business Insider, found at https://www.businessinsider.com/hud-halts-evictions-and-foreclosures-coronavirus-2020-3, March 18. Housing advocates and attorneys across the country are demanding a nationwide moratorium on evictions and foreclosures.
WEF. 2020. What would Roosevelt Do? How the US should respond to COVID-19. World Economic Forum, found at https://www.weforum.org/agenda/2020/03/what-would-roosevelt-do/, March 24.
Werner, Erica, et al. 2020. Congress, White House close in on $2 Trillion stimulus deal to blunt coronavirus fallout; McConnell, Schumer, Pelosi, Mnuchin all voice optimism that giant spending bill is within reach. Washington Post, found at https://www.washingtonpost.com/us-policy/2020/03/24/trump-coronavirus-congress-economic-stimulus/, March 24.
Stay caught up! Subscribe now and receive email updates of every new post.