Writing in Counterpunch, Michael Hudson explains how Obama’s new bail-out plan still manages to benefit the wealthy over the ordinary Joe. A Site Value Tax is in the Irish Programme for Government but there are no signs of any move to do the basic work for implementation. It appears that big landowners and developers are still in the Fianna Fail tent.
…The Obama transport plan is like a Fannie Mae for bankers, based on the President’s guiding mantra: “Let’s help Wall Street put Americans back to work.” The theory is that giving public guarantees and bailouts will enable financial managers to use some of the money to fund some projects that employ people – with newly created, non-unionized companies, presumably.
Here’s the problem. Transportation projects will make real estate speculators, the construction industry and their bankers very rich unless the government recovers its public spending through windfall site-value gains on property along the right-of-way.
What’s the point of a party having a constituency, after all, if not to sell it out? Is not the Democratic Party’s role to deliver labor, the minorities and the large cities hog-tied to Wall Street?
Hollywood surely has made enough movies along these faux-populist lines. The banker of a Western town manages to grab property along the railroad tracks coming through, to make a killing. The local mobster pays off a state legislator to build a highway by his property, making his land much more valuable. Mortgages will be refinanced in much larger sums. At least, this seems to be President Obama’s hope as he positions himself to become America’s Tony Blair. The role of Britain’s New Labor, after all, was to ram through economic programs so far to the right than no Conservative government could get away with them. In the United States it falls to Obama’s New Democrats to shepherd through proposals that Democrats would vote down if the Bush-Cheney Republicans had tried to enact them.
What President Obama did not acknowledge is a basic principle that every transportation economist is taught: Transport investment normally can pay for itself, simply by a windfall-gains tax enabling cities or other jurisdictions to recapture the higher rent-of-location and site value along the right-of-way.
London’s extension of the Jubilee Tube Line to the city’s financial district in Canary Wharf recently demonstrated this principle. The line’s extension cost £3.5 billion but increased property values by an estimated £13 billion along the route. A political protest movement arose over London’s failure to finance its transport system by taxing the higher rent-of-location and site values it created. Failure to do so gave landlords a windfall – one that the city could have recaptured by a windfall tax to cover the cost of what it spent. For instance, it could have issued bonds secured by a windfall property-rent tax. (link to article)
