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Fiscally Conservative Suburbia
Note: I am about to make an argument with no regard to human values. That's on purpose. I'm not talking about helping people, but saving money. I can make an argument based on helping people too, and it's easy, but that's not this argument.
Everyone complains about the suburbs - it's become so common that it has passed through one end of cliche and out the other again. Environmentalists complain about suburbs. Drivers complain about suburbs. Urban planners complain about suburbs. Civil rights activists complain about suburbs. Cultural elites turn up their noses at the thought of the suburban cultural wasteland. Hipsters complain about suburbs as a matter of course. Teens complain about there being nothing to do out there - seniors grumble about how things were better when they lived wherever they did.
But one group that doesn't complain a great deal about suburbs is fiscal conservatives. This is because fiscal conservatives often seem to live in the suburbs, the bread and butter conservatives who fill the ranks of the Objectivist corps and the libertarian movement seem to prefer their nice house on a block full of identical houses, making suburbia the headquarters of the Independent American.
Which is odd, because there hasn't been a government social program that I can think of that has been funded at such a level for so long as the great suburban experiment. Of course there's no formal budget, but the US government spends an enormous amount of money on the suburbs.
How do they do that? Let's look at the ways:
They Pay For Your House: If you're a homeowner, you already know this one, but the US allows you to deduct the interest on your mortgage from your interest in order to lower your taxes. That means that if you are paying a monthly mortgage you get to subtract some of that amount from your income before calculating your income tax. And that means that, in effect, the US government subsidizes homeownership - possibly to the tune of $100 billion.
On the surface that seems fair - you might as well give some homeowners some help. But then why not give the tax break to renters as well? Or even just to everyone (everyone has to live somewhere)? The original, and somewhat obscure answer, is probably that they want to encourage home ownership. Home owners, it is assumed, participate more in the community than do renters since they have a solid investment in it. But there's no strong evidence that I've seen for this hypothesis - in fact with homeowners flipping houses like pancakes they may be suffering from the same detachment that renters are supposed to. Are renters really that undesirable? Does the original logic still stand?
But that's not going to stand in the way. The truth is that, having distorted the market by making houses a much more favorable investment, the mortgage tax deduction is necessary to keep home prices inflated. Having started subsidizing home prices, the government is now forced to keep subsidizing them lest prices fall, taxes rise, and a lot of middle class homeowners will vote the hell out of any attempt to let that happen. So the US is trapped keeping home prices high, at a cost to taxpayers greater than the budget of the Department of Education.
They Pay For Your Car: In theory, transportation is simple. The US has built a massive suburban transportation grid around one object, the automobile. To pay for that grid, all drivers should contribute, in some proportion to how much they use it. The easiest way to do that is to tax the one necessary ingredient that drives our whole suburban lifestyle - gasoline. So road transportation should be paid for from the gas tax, and everyone should be happy.
Except it doesn't work.
Texas claims that current transportation taxes only pay for 32% of their transportation budget, and that to cover the entire budget they will have to raise the tax to $1.40. The perennial trouble state of Minnesota (with its far northern climate and corresponding wear and tear on the roadways), claims that in 2008-2009 it was expecting $1.29 billion in gas and vehicle registration taxes to offset a cost of almost $4.8 billion. Even balmly California, back in the boom years, claimed that it received $3 billion from their gas tax, and $2.5 billion from the federal gas tax, to offset $15.5 billion in statewide transportation costs. This is a system that doesn't work - a system where drivers are only paying about a third of the costs of keeping them driving directly.
And guess where those roads are? What part of America has to have roads everywhere connecting every far-flung appendage that it has spread out?
Where does the other money come from? From the general funds. From the income tax. From loans that the states float. From loans that local governments float. From property taxes. Suburban drivers can relax, secure in the knowledge that the huge sprawling mess of highways, byways, freeways, boulevards, streets, roads, and cul-de-sacs that are a part of their everyday life will continue to be subsidized by city-dwellers who walk to work every day and don't even own a car. So why not build more roads? Why not spread the suburbs out more? After all, someone else is paying for it.
They Distribute Your Wealth Via Utilities: This is common knowledge in a lot of places, but there's a stealth way that local governments and utility districts can step in on this one. By flattening prices. Water districts, for instance, in an effort to be fair and non-partisan, often charge users based solely on how much they use, like in San Diego. But this hides a hidden subsidy.
The water that comes out of your tap has two costs associated with it. One is the cost of obtaining and purifying the water. The other is the cost of getting it from the plant to your house. A new housing subdivision which requires the maintenance of long stretches of pipe going off the main network, will cost more to deliver water to than someone who lives next door to the plant. To a certain extent leveling the prices makes sense - you can't control for distance from the plant all to well. But on a macro scale it has divorced developers from the increased cost incurred by new construction distant from the current grid. After all, if the maintenance costs of expanding the grid, be it power, water, gas, or sewage, is going to be born by all residents of the region, why not build out in the open where land is cheaper?
We Pay More Health Care Costs: This is an odd one, because the mental image of surbanites is of healthy, wealthy, and fit people playing outside, like the Kennedys on the White House lawn. But if anything defines the suburb it is the automobile, and if there's anything destroyed by the automobile, it's walking anywhere. Who walks somewhere in the suburbs? Even the closest of things is half-an-hour or more away.
But there's a cost to this. Although there is some hype in reporting on the "obesity epidemic" obesity rates, and their corresponding health costs, are rising in America. And part of this may be due to the complete lack of exercise in the lives of most Americans. Some studies indicate that walking to work reduces obesity rates in a statistically significant manner. This is anti-correlated with what was expected, given the well-known link between poverty and poor diet.
But walking isn't the main issue: driving is. A thirty minute commute a day can increase stress, increase blood pressure, and decrease activity. This is old news to anyone who has commuted before - getting out of that you're dead tired - but it still surprises people how substantial the costs are.
And what's worse as far as the government is concerned is that those little health problems don't become major health problems until later in life, when an individual is more likely to be covered by Medicare or some other government program. Now, I believe that people have the right to live however they want to live, but the fact that so many people have chosen lifestyles where they sit in cars for an hour a day or more means that the taxpayer is now paying for them well into retirement at a higher rate - and that's not good for either the taxpayer or the victim.
They Clean Up Your Mess:
This is the most insidious of the lot, and the hardest to study because the effects take decades to show up, but the government has to step in to clean up your mess when you decide it's too much of a bother. One of the bloggers I read (whom I can't find right now) referred to this as the Greenfield problem.
Let's say, having hit it rich in the lottery of life, you move to a brand new development in a brand new suburb. Houses are fairly cheap (well, as these things go), there aren't many obnoxious neighbors, and you can pile some extra money into that car you're going to spend three hours a day in. Most importantly, taxes are low.
Why are taxes low? Because everything's new. Maintenance costs are low because all the roads and sewers are new. Nobody's discovered the mismatched pension problem because nobody's retired from city government. The school roofs don't leak and their textbooks are modern, the lights turn on, and the streets don't have potholes. So taxes can be low.
After a few years though, costs go up. Infrastructure needs more maintenance, people are retiring, the school system needs renovation, and all those years of not spending enough are about to become a few years of needing to pay a lot more.
So what do you do? Well, what you should do is acknowledge that you got several years of free-riding on the back of the system and buckle down and pay for the repairs. But in reality you probably do what most normal Americans do, when the taxes go up you sell your house and move on to one even farther out.
It's not always taxes, but the speed at which houses change hands exacerbates the free rider problem. The key is to let things degrade just to the point where people start to notice, and then skip town. If the housing market is inflating in a boom, the newcomers might pay the price to fix up your mistakes, and if not, well, someone has to get stuck with the bill. But sometimes the bill keeps getting deferred, and if you've ever driven through a neighborhood that looks like it was built entirely in the 70s and never renovated since, well, you know what that looks like.
Of course, eventually the town decays completely. Roads collapse, bridges fall down and transportation grinds to a halt, drug gangs take over entire neighborhoods in the absence of effective police and set up distribution warehouses, abandoned industrial plants collapse into the ground releasing clouds of waste and possibly radioactivity into the air.
I kid of course.
America likes building roads. And the key to that is that once a road is built, it stays built, no matter what happens to the people who were supposed to pay for it. Eventually the state steps in to keep major thoroughfares open. The DEA shows up to battle the crooks if the big gangs get a bit too comfortable. And the EPA and its partner agencies will clean up any really big messes if they endanger those other "bedroom" communities over your horizon.
And guess who pays for all that?
The problem is that, given the housing market, the US has effectively come up with a system where you can refuse to pay for necessary maintenance and upkeep costs and spread the cost around to anyone who was too much of a sucker to sell their house at the right time. Which means that the US has essentially accepted unlimited liability for bad decisions made at the local level to benefit the current landholders.
And when things get too bad? Well, then the city has to declare bankruptcy, like Stockton. And guess who gets to pay for that?
And This Is Really Bad: The problem is not that suburbs exist - people can live wherever they want - it's that the government subsidizes them in a "no-strings-attached" manner. People are encouraged to build in an unsustainable manner, buying new houses and laying transportation infrastructure out into the back of beyond, and are assured that if everything falls apart someone else will step up and take care of the bill. And that bill is then passed to the group of suckers who hasn't taken part in the great suburban land rush.
Where I came from, we had a name for those stuck with the bill. We called 'em "black people" because if any group has been frustrated in the general movement out of the crumbling cores of our cities and into the suburbs, it would be African-Americans. Now, every area has its minority of choice when it comes to getting the short end of the stick, but the point is that if you are stuck in a city or never have enough money to buy a proper house then you pay for benefits you never receive. And if that's not "government redistribution of wealth", I don't know what is.
So maybe there's something to be said for keeping "Big government" out of certain areas. There probably is for this one. Let's stop propping up the monster suburbia we've created. People chose to live there because they had that freedom - they probably should pay for it as well.
(Yes, I'm aware that simply cutting off every form of support would result in disaster, especially to those who budgeted for it. But I think it would be best if we at least started turning off the tap. Even if it slowly. From a purely economic standpoint, turning it off now is better. From a humanitarian standpoint, we better have some buffers in place for the people who live there. From a political standpoint all this is an impossible pipe dream - at least for now).
Everyone complains about the suburbs - it's become so common that it has passed through one end of cliche and out the other again. Environmentalists complain about suburbs. Drivers complain about suburbs. Urban planners complain about suburbs. Civil rights activists complain about suburbs. Cultural elites turn up their noses at the thought of the suburban cultural wasteland. Hipsters complain about suburbs as a matter of course. Teens complain about there being nothing to do out there - seniors grumble about how things were better when they lived wherever they did.
But one group that doesn't complain a great deal about suburbs is fiscal conservatives. This is because fiscal conservatives often seem to live in the suburbs, the bread and butter conservatives who fill the ranks of the Objectivist corps and the libertarian movement seem to prefer their nice house on a block full of identical houses, making suburbia the headquarters of the Independent American.
Which is odd, because there hasn't been a government social program that I can think of that has been funded at such a level for so long as the great suburban experiment. Of course there's no formal budget, but the US government spends an enormous amount of money on the suburbs.
How do they do that? Let's look at the ways:
They Pay For Your House: If you're a homeowner, you already know this one, but the US allows you to deduct the interest on your mortgage from your interest in order to lower your taxes. That means that if you are paying a monthly mortgage you get to subtract some of that amount from your income before calculating your income tax. And that means that, in effect, the US government subsidizes homeownership - possibly to the tune of $100 billion.
On the surface that seems fair - you might as well give some homeowners some help. But then why not give the tax break to renters as well? Or even just to everyone (everyone has to live somewhere)? The original, and somewhat obscure answer, is probably that they want to encourage home ownership. Home owners, it is assumed, participate more in the community than do renters since they have a solid investment in it. But there's no strong evidence that I've seen for this hypothesis - in fact with homeowners flipping houses like pancakes they may be suffering from the same detachment that renters are supposed to. Are renters really that undesirable? Does the original logic still stand?
But that's not going to stand in the way. The truth is that, having distorted the market by making houses a much more favorable investment, the mortgage tax deduction is necessary to keep home prices inflated. Having started subsidizing home prices, the government is now forced to keep subsidizing them lest prices fall, taxes rise, and a lot of middle class homeowners will vote the hell out of any attempt to let that happen. So the US is trapped keeping home prices high, at a cost to taxpayers greater than the budget of the Department of Education.
They Pay For Your Car: In theory, transportation is simple. The US has built a massive suburban transportation grid around one object, the automobile. To pay for that grid, all drivers should contribute, in some proportion to how much they use it. The easiest way to do that is to tax the one necessary ingredient that drives our whole suburban lifestyle - gasoline. So road transportation should be paid for from the gas tax, and everyone should be happy.
Except it doesn't work.
Texas claims that current transportation taxes only pay for 32% of their transportation budget, and that to cover the entire budget they will have to raise the tax to $1.40. The perennial trouble state of Minnesota (with its far northern climate and corresponding wear and tear on the roadways), claims that in 2008-2009 it was expecting $1.29 billion in gas and vehicle registration taxes to offset a cost of almost $4.8 billion. Even balmly California, back in the boom years, claimed that it received $3 billion from their gas tax, and $2.5 billion from the federal gas tax, to offset $15.5 billion in statewide transportation costs. This is a system that doesn't work - a system where drivers are only paying about a third of the costs of keeping them driving directly.
And guess where those roads are? What part of America has to have roads everywhere connecting every far-flung appendage that it has spread out?
Where does the other money come from? From the general funds. From the income tax. From loans that the states float. From loans that local governments float. From property taxes. Suburban drivers can relax, secure in the knowledge that the huge sprawling mess of highways, byways, freeways, boulevards, streets, roads, and cul-de-sacs that are a part of their everyday life will continue to be subsidized by city-dwellers who walk to work every day and don't even own a car. So why not build more roads? Why not spread the suburbs out more? After all, someone else is paying for it.
They Distribute Your Wealth Via Utilities: This is common knowledge in a lot of places, but there's a stealth way that local governments and utility districts can step in on this one. By flattening prices. Water districts, for instance, in an effort to be fair and non-partisan, often charge users based solely on how much they use, like in San Diego. But this hides a hidden subsidy.
The water that comes out of your tap has two costs associated with it. One is the cost of obtaining and purifying the water. The other is the cost of getting it from the plant to your house. A new housing subdivision which requires the maintenance of long stretches of pipe going off the main network, will cost more to deliver water to than someone who lives next door to the plant. To a certain extent leveling the prices makes sense - you can't control for distance from the plant all to well. But on a macro scale it has divorced developers from the increased cost incurred by new construction distant from the current grid. After all, if the maintenance costs of expanding the grid, be it power, water, gas, or sewage, is going to be born by all residents of the region, why not build out in the open where land is cheaper?
We Pay More Health Care Costs: This is an odd one, because the mental image of surbanites is of healthy, wealthy, and fit people playing outside, like the Kennedys on the White House lawn. But if anything defines the suburb it is the automobile, and if there's anything destroyed by the automobile, it's walking anywhere. Who walks somewhere in the suburbs? Even the closest of things is half-an-hour or more away.
But there's a cost to this. Although there is some hype in reporting on the "obesity epidemic" obesity rates, and their corresponding health costs, are rising in America. And part of this may be due to the complete lack of exercise in the lives of most Americans. Some studies indicate that walking to work reduces obesity rates in a statistically significant manner. This is anti-correlated with what was expected, given the well-known link between poverty and poor diet.
But walking isn't the main issue: driving is. A thirty minute commute a day can increase stress, increase blood pressure, and decrease activity. This is old news to anyone who has commuted before - getting out of that you're dead tired - but it still surprises people how substantial the costs are.
And what's worse as far as the government is concerned is that those little health problems don't become major health problems until later in life, when an individual is more likely to be covered by Medicare or some other government program. Now, I believe that people have the right to live however they want to live, but the fact that so many people have chosen lifestyles where they sit in cars for an hour a day or more means that the taxpayer is now paying for them well into retirement at a higher rate - and that's not good for either the taxpayer or the victim.
They Clean Up Your Mess:
This is the most insidious of the lot, and the hardest to study because the effects take decades to show up, but the government has to step in to clean up your mess when you decide it's too much of a bother. One of the bloggers I read (whom I can't find right now) referred to this as the Greenfield problem.
Let's say, having hit it rich in the lottery of life, you move to a brand new development in a brand new suburb. Houses are fairly cheap (well, as these things go), there aren't many obnoxious neighbors, and you can pile some extra money into that car you're going to spend three hours a day in. Most importantly, taxes are low.
Why are taxes low? Because everything's new. Maintenance costs are low because all the roads and sewers are new. Nobody's discovered the mismatched pension problem because nobody's retired from city government. The school roofs don't leak and their textbooks are modern, the lights turn on, and the streets don't have potholes. So taxes can be low.
After a few years though, costs go up. Infrastructure needs more maintenance, people are retiring, the school system needs renovation, and all those years of not spending enough are about to become a few years of needing to pay a lot more.
So what do you do? Well, what you should do is acknowledge that you got several years of free-riding on the back of the system and buckle down and pay for the repairs. But in reality you probably do what most normal Americans do, when the taxes go up you sell your house and move on to one even farther out.
It's not always taxes, but the speed at which houses change hands exacerbates the free rider problem. The key is to let things degrade just to the point where people start to notice, and then skip town. If the housing market is inflating in a boom, the newcomers might pay the price to fix up your mistakes, and if not, well, someone has to get stuck with the bill. But sometimes the bill keeps getting deferred, and if you've ever driven through a neighborhood that looks like it was built entirely in the 70s and never renovated since, well, you know what that looks like.
Of course, eventually the town decays completely. Roads collapse, bridges fall down and transportation grinds to a halt, drug gangs take over entire neighborhoods in the absence of effective police and set up distribution warehouses, abandoned industrial plants collapse into the ground releasing clouds of waste and possibly radioactivity into the air.
I kid of course.
America likes building roads. And the key to that is that once a road is built, it stays built, no matter what happens to the people who were supposed to pay for it. Eventually the state steps in to keep major thoroughfares open. The DEA shows up to battle the crooks if the big gangs get a bit too comfortable. And the EPA and its partner agencies will clean up any really big messes if they endanger those other "bedroom" communities over your horizon.
And guess who pays for all that?
The problem is that, given the housing market, the US has effectively come up with a system where you can refuse to pay for necessary maintenance and upkeep costs and spread the cost around to anyone who was too much of a sucker to sell their house at the right time. Which means that the US has essentially accepted unlimited liability for bad decisions made at the local level to benefit the current landholders.
And when things get too bad? Well, then the city has to declare bankruptcy, like Stockton. And guess who gets to pay for that?
And This Is Really Bad: The problem is not that suburbs exist - people can live wherever they want - it's that the government subsidizes them in a "no-strings-attached" manner. People are encouraged to build in an unsustainable manner, buying new houses and laying transportation infrastructure out into the back of beyond, and are assured that if everything falls apart someone else will step up and take care of the bill. And that bill is then passed to the group of suckers who hasn't taken part in the great suburban land rush.
Where I came from, we had a name for those stuck with the bill. We called 'em "black people" because if any group has been frustrated in the general movement out of the crumbling cores of our cities and into the suburbs, it would be African-Americans. Now, every area has its minority of choice when it comes to getting the short end of the stick, but the point is that if you are stuck in a city or never have enough money to buy a proper house then you pay for benefits you never receive. And if that's not "government redistribution of wealth", I don't know what is.
So maybe there's something to be said for keeping "Big government" out of certain areas. There probably is for this one. Let's stop propping up the monster suburbia we've created. People chose to live there because they had that freedom - they probably should pay for it as well.
(Yes, I'm aware that simply cutting off every form of support would result in disaster, especially to those who budgeted for it. But I think it would be best if we at least started turning off the tap. Even if it slowly. From a purely economic standpoint, turning it off now is better. From a humanitarian standpoint, we better have some buffers in place for the people who live there. From a political standpoint all this is an impossible pipe dream - at least for now).