Monday, February 1, 2010

Will Making Everyone Poor Help the Poor?

More and more of us every day are losing the War on Poverty.

You might have heard of the $5000-range tax bills confronting the less-than-affluent owners of $40,000 shanties in neighborhoods like Englewood and Garfield Park, while Streeterville condos costing $1M or more pay no more than $5000 or $6000, or maybe $8000 at the most in property taxes. You have to wonder why there has been no outcry from the poor and near-poor homeowners who are being robbed of their last little bit of wealth, and who don't have the resources at their disposal to combat this assault.

The suburbs aren't any better. Last week, I was talking to one of our firm's clients, a nice Hoffman Estates man who occasionally makes a tiny stock trade in penny stocks he researches himself, as a hobby. He and his wife are solid in their jobs, have savings, and have had no problems making the payments on their $240K house. But they recently received their new tax bill for $8,500, which is more than double their previous bill, which itself had represented a massive increase over that of a year before. The house might now sell for $180K, which in itself is not a problem for my friend, for he bought it to keep and live in, not to "make money". But the new tax bill will mean an additional $400 a month in payments, which will force this man and his family of four out of their home, especially since his wife was recently laid off her job. My customer is protesting through the usual channels, even though he is so blindsided by this that he can barely cope. The reason for the draconian hike is that the Village is in a bad financial bind due to large mistakes in the allocation of revenues over the past few years, and many of their bets went badly. We can only ask how the village will cure its situation if my friend and about 1000 of his neighbors are forced to walk away from their houses for inability to pay these utterly unanticipated bills, and the city is forced to take possession of their houses, that are often worth less than the mortgages outstanding. There comes a point when people just cannot pay anymore, and the upward-trending line of expenses and taxes is now crossing the downsloping line of personal incomes and employment.

Against this backdrop, the taxpayers of Chicago are being forced to spend $447,000 per unit for "affordable" housing at Wilson Yards, to house 150 very select tenants. Given that there are hundreds of condos all over Uptown, Edgewater, and Rogers Park, many in "move-in" condition, languishing on the market for months on end at price points far lower than this, and many more hiding in the "shadow" inventory, whole developments nearly emptied and unsold, but not showing on the listings, you'd really think that our leaders could mate need with need, and purchase a couple of hundred of these orphaned units to offer as "affordable" housing. While many of these units have suffered from neglect and abuse and surely need substantial work in order to be habitable, an expenditure of $30k-$50K per unit to replace broken plumbing and missing fixtures is pretty small potatoes relative to the cost of the Wilson Yards project. Desperate sellers and foreclosing lenders would benefit, and the neighbors would be no worse off with a "low income" tenant than they are saddled with yet another "low income" housing development in the area, or with the liability for unpaid utilities and assements for neighboring units in their condo buildings that are in default or foreclosure, and are deteriorating into slums through sheer neglect as pipes break in unheated units, and departing foreclosure "victims" strip fixtures and inflict other damage on their units.

It's a good bet that the poor homeowners of Englewood and the middle-class dropouts of the suburbs won't be able to score an "affordable" apartment at Wilson Yards. They will just have to move in with relatives, or maybe find a box under a freeway somewhere. Somebody has to pay for projects like that, and these are the people who are doing the paying. Nobody has ever done a precise calculation on how many people have to sell their houses for inability to pay rapidly escalating taxes, for every "affordable" apartment built at the taxpayers expense.

Will taxing our poor and middle class homeowners into homelessness help house the poor? Why are we dispossessing our working poor of what few assets they possess, such as their little homes they struggled to buy, in order to build "affordable" housing, and destroying the struggling remains of our middle classes to subsidize evermore redundant Big Box retail in the name of "economic development"? The tax revenues lost to TIF districts, tax abatements, and other corporate "gimmes" must be offset by raising property taxes to confiscatory levels, and on the national level, the few trillion dollars committed to TARP, TARF, HAMP, and the rest of the alphabet soup of housing and financial bailout programs, as well as the immense subsidies committed to keeping housing prices levitated beyond affordability to a population whose incomes are falling, is taken from the taxpayers at large, and from other desperate needs. Someone out there remarked that the money committed to housing and financial bailouts as of the end of 2008 would pay for electrified rail service to every city and town with more that 5,000 inhabitants in the country. Aside from the sheer cost to the public treasury and the increasing danger of a treasury default, as the deficit swells and the tax revenues drop because of reduced incomes and business activity, there is the unbelievably twisted thinking of a president who believes that the best way to provide "affordable" housing is to spend our tax money to prop up housing prices at levels that are still above affordability.

In any case, you have to pretty naive and deluded to believe that our local and federal governments have any solutions to the economic problems we're dealing with, or any help for any of us out here. So let's stop asking these people to come up with "solutions". Our authorities are the problem, not the solution. Any "solutions" will be of our own devising, with our own money and effort; and the more of our resources our parasitical and theiving authorites skim from us, the less we'll have to help us deal with the problems our authorities have created and that they're inflicting on us.


Nudge said...

Great post! :)

Unfortunately the sort of future we seem to be heading into is the one in which you probably want to rent instead of own, and in which you should probably have as few taxable assets as possible. Japan's government has done about 20 years of what our government has just begun. There have been a number of net effects of this basket of policies (war on savers, war on home owners, war on all but the very poorest and the very richest) such as:

* younger generations staying at home longer and marrying later in life (thanks to policies that tax the bejeebus out of RE in order to support humongous government bailouts)

* younger generations (as well as the rest) are trending toward keeping less money in savings (thanks to near-zero interest rate policies)

* also thanks to high taxation rates and near-zero interest rates, people across all generations are trending toward less owned property (that can be taxed), less savings (which are discouraged), and more money spent on portable personal property that's not taxed

Armed with the pure folly of Keynesian economic nonsense, there's almost no limit the amount of harm a government can do to its people. Mind you, Japan began this sad journey as a homogeneous, hard-working nation of savers. We're starting the same journey from a far less advantageous position.

We should all get used to being a happy renters, not bitter renters.

consultant said...

I'm always struck by the number of people who blame govt. for all of our problems. As if the govt. was some alien race from another planet that landed in our midst and forced us to submit to certain conditions.

Govt. is "us". Or more precisely, govt. has become those people (politicians) who mostly do the bidding of large, powerful corporations and rich people. The rich and powerful have bought the govt.

This "take over" of our govt. by the wealthy and powerful has happened periodically throughout our history. For the last 40 years we've been held captive by neocon ideology that embraces this philosophy without ANY reservations.

What's interesting is how neocons have successfully sold this to people (i.e. those who are not rich or powerful) as a strategy for providing everyone more freedom and opportunity.

When Reagan, the modern patron saint of all conservatives, said he was going to get the govt. off your back, he didn't tell you he was then going to let corporations climb on it.

Today's corporate state is bringing back feudalism. How long before debtor prisons return?

After the revolution was won, the primary struggle in creating our new govt. was around the issue of power. The novel solution was to distribute power-govt., individual, financial-with checks and balances so as to discourage the concentration of power. That was the great fear-concentrated power.

The rise of the corporate state started well before the current resurgence of radical conservative governance. But the concentration of corporate power converges with the Republican philosophy of basically no checks on that power. Throw in corruptible leaders like Blagojevich and weak opposition parties like my Democrats, and you have a recipe for our current disaster.

This is seriously big, deep, dangerous stuff. I agree with you that it's going to take a movement of a lot of people to change things. We obviously can't afford to wait on our failed leadership if we want things to change.

What most people don't realize is that it will take, if history is any guide, many years to change our direction (time which we no longer have).

In the meantime, no crony capitalistic state has ever fared well for long.

Nudge said...

Hi Consultant .. sorry, did not think it was necessary to identify the government as being the shape and form of the leather-and-velvet glove wrapped around the big invisible hand that's presently squeezing the economy to its own benefit. Perhaps the distinction is necessary only for avid MSM followers?

Either way, “the government” or something making use of the powers of “the government” is doing persactly those things.

Zimbabwe beckons ~ and we follow! :(