Loudoun County Class Struggle

It’s not bourgeoisie versus proletariat, it’s more like homeowner versus renter. Obviously there is an overlap between higher income and owners, relative to lower income and renters. The racial implications here should be obvious too. Also relevant to what follows, renters are usually aspiring homeowners.

I’ve written about this before. The spur for this post is a proposal that passed our county Board of Supervisors — the primary provider of public services here in Virginia other than the state government — for a guaranteed income.

How could the super-liberal MaxSpeak be against such a thing? I’ll tell you!

My basic principle of Government is that the role of the Democratic Party is to find and deliver services that families can only obtain on their own at greater costs to their individual households, or cannot obtain at all. Otherwise individuals are the best judge of how to spend their after-tax dollars. (The role of the Republican Party is to die of shame.)

The most basic question about delivering cash assistance is what the alternatives might be. A second is how such assistance should be provided, especially by whom (meaning by charitable organizations or by which government).

On the first count, what cries out for greater attention here in Loudoun County is housing costs. My former employer the Economic Policy Institute calculated a median cost of living for the county at $113,000 in 2017, compared to a D.C. regional average of $105,000. As of April of this year, the median listing price for a house in the county was $800,000.

Higher house prices mean higher rents, and vice versa. I have a son-in-law who had a devil of a time finding a place to live. High housing costs mean increasingly that those who deliver basic services to county residents cannot afford to live here. Instead they are subjected to onerous commutes, a clear and significant detraction from their well-being. Cash assistance in the current environment risks being sucked away in higher rents. We need more housing.

Meanwhile, both political parties are set against in-migration. Loudoun County is the fastest growing area of Virginia. It is also the beneficiary of a gusher of tax revenue from our data centers (also called “server farms”). It’s as if we were sitting on an oil field, though instead of the environmental damage from drilling or fracking we get elevated electricity rates. The data centers are huge consumers of electricity.

The opposition to population growth is sometimes couched in environmental terms, preserving green space or the “rural way of life.” The so-called rural way of life means huge lots zoned for single-family housing. Trust me, if farming in Loudoun shuts down, nobody on that account will be going hungry. Neglect of housing pressure on renters, of obstacles to home ownership, in favor of cash assistance to the poor, is a liberal evasion. For the Democratic Party, I’d also say it is short-sighted. Relying on well-off suburban homeowners is a slender, unstable political reed.

Me, I like new people. The usual bias, when it is not perversely racial or otherwise bigoted, is that population growth increases traffic congestion (more cars) and education costs (more kids). This is not necessarily true, nor is it inescapable if it is true. On the traffic front, we could alleviate traffic with expanded public transportation and higher gas taxes. (Revenue from the tax could be rebated.) As far as education goes, more people mean more commerce and more tax revenue, not just higher costs.

I am certainly not against free money. In fact, most of my career was devoted to how to do it. Way back in 2000, I worked up a proposal to radically expand the Earned Income Tax Credit (EITC). This proposal actually was introduced as legislation in the U.S. Congress. I have also spent a good deal of time on Federal cash grants to state and local governments.

On the second question, a basic principle of public finance going back to the godfather, Professor Richard Musgrave, is that redistribution via cash assistance — taxing those with more, giving to those with less — should be the responsibility of the national government. Otherwise we abandon those who need assistance to the vagaries of where they happen to, or need to, reside. This is a huge problem in public school finance, which is mostly local in the U.S.

We could justify a state or local government taking up redistribution if the national government resolutely abandons such initiatives. To the contrary, with Democratic majorities we have recently observed serious programs to deliver cash to the needy, thanks particularly to Joe Biden. One such was the extension of the Child Tax Credit, alas a temporary extension. Another was beefing up extended unemployment insurance benefits. In times of economic distress, these were serious efforts to bolster household finances. In fact, outside of military spending, the major activity of the Federal government is mailing checks, to retirees, to the poor, and to their health care providers. Of course, expanding this field of endeavor would be worthwhile.

My proposal for a new tax credit came when the Federal budget was looking at huge surpluses. It did get a flurry of interest, but it was overshadowed by a stupid proposal from Senator Bernie Sanders to give a cash grant to every individual in the U.S. I’ve been inveighing against such ideas for a “Universal Basic Income (UBI)” for years so I won’t unpack them here.

The proposal was dumb because it was doomed from the outset. It was far short of a basic income, and it would have been temporary. More generally, UBI proposals are snake oil. If they are universal, the amounts won’t be adequate. If they are adequate, the cost would be too high for them to be universal. We have over 300 million persons in the U.S. $10K for each would be three trillion bucks. The entire Federal budget is nearly seven trillion. Three trillion added on to that or displacing an equal amount are pipedreams. And $10K is not very “basic” an income for one person. End of story.

In contrast, better crafted ideas for “Baby Bonds” or a “stake” for the young upon reaching adulthood make more sense, both conceptually and fiscally. There has also been a commendable new scheme for a negative income tax. Folks need cash, no question about it, but they need things they can’t buy, even if they have cash. Here in Loudoun, they need housing. Some people are onto this.